The Federal Government has opened the door to immigrants, and they are flooding in with over 400,000 anticipated this year and 900,000 over three years.

Prior to Covid, Australia’s annual net overseas migration was only about 160,000.

The return of migrants has been welcomed by the business community, and the return of international students been welcomed by the tertiary education sector.  But young people, who have struggled to pay rent, let alone purchase a new home, have been let down by those responsible for urban planning across the nation, and competition from newly arriving migrants is not good news for them.

Housing supply is way too low.  Too low to meet the Housing Accord commitments and too low to stop house and apartment prices rising over time (interest rates rises notwithstanding). With the cash interest rate now at 3.85%, and household variable mortgage rates now over 6%, the Commonwealth is struggling with the practicalities of housing supply.

The latest National Cabinet meeting acknowledged the blockages manifest in the State planning systems as a major obstacle for the first time.  Planning Ministers have been tasked with developing a suite of options for reform over the next months. While progress is welcome, this really does little more than kick the can down the road.

In light of the current political focus on housing affordability and supply, it would be unwise to limit the scope of the debate reform of the planning system to a meagre review of planning codes.  The change that is needed to make up for years of housing under-supply requires root and branch changes to the culture of planning leadership. It’s time for the Commonwealth to recognise that planning controls and culture are holding back economic growth, holding back much-needed taxation revenue and thus holding back expansion of services and support for those that need it most.

States typically fund infrastructure while the Commonwealth rakes in the tax revenue

The Commonwealth also needs to look at their own role in supporting the growth in housing supply. The delivery of infrastructure is critical to accommodating new housing supply, but the burden of this task falls unfairly on state governments.  The Commonwealth bears little cost from allowing skilled, educated migrants to flood into our cities and regions.  It is all upside for them.  Healthy young, educated talent driving the economy forward, generating income tax revenue and supporting company tax growth.

It’s the states that cop a disproportionate cost of population growth.  It’s called vertical fiscal imbalance for Jim Chalmers and his Treasury team; and a simple duck-shove for the rest of us!  The delivery of new suburbs, new roads and transport options, new water supply and sewerage treatment systems, new schools, police stations and hospitals – all these are state government responsibilities.  Federal infrastructure funding must consider the constraints on the national economy posed by housing supply shortages.

Further. the allocation of the GST pool between the States must consider the impact of a boom in immigration for each state.  For example, in 2021/2, NSW settled 36.4% of the National intake of Net overseas migrants. In contrast, NSW received only 30.3% of national GST revenue in the same year.  No wonder NSW is struggling with infrastructure delivery.

Increasing density and building height is critical to solving the housing supply crisis

So how do we prioritise increased housing supply without compromising building quality, design and urban amenity?  The answer is we must make better use of the limited, and expensive, areas of land which are serviced by infrastructure and community facilities.

We have to overcome the planning systems’ bias in favour of existing residents over the interests of the economy more generally and the future residents who will drive that growth.

The problems we face are not unique.  Indeed, they beset many western nations and particularly those with an ageing population and thus the need to boost the number of taxpayers to support the growing non-tax generating cohort of citizens.

NIMBYs vs YIMBYs

Increasingly, a debate is emerging between NIMBYs and YIMBYs (Yes In My Back Yard) – the latter representing those who have been locked out of affordable housing in many suburbs and who support increased height and density – in short – those who support an affordable option close to their workplace.

Urban Taskforce welcomes the emerging voice of predominantly younger members of the community who support increased development.  They clearly had an impact of the recent NSW election where housing supply, rental costs and affordability were big issues, particularly in the battleground seats of Western Sydney.

Populist opposition to housing has supply dominated development politics for too long and has resulted in a crisis in housing supply.  Millennials, key workers, immigrants and new entrants to the housing market have been the victims of the traditional NIMBY approach. The planning system has protected some groups of existing residents, particularly in wealthy communities, as though they were in gated communities, always looking upon change or at what is outside as if it were a threat.

The YIMBY movement is nascent but is growing and as more and more of our younger generation realise, they are being thrown to the wolves when it comes to housing, we can only hope this voice gets stronger in the community and local politics.

Federal Budget – a chance to drive reform

As we approach the second Albanese Government’s Budget on May 9^th, the need for Commonwealth support for housing supply through targeted city growth supporting infrastructure funding is critical.

If housing affordability is to be improved, we need to play catch up on the years where we failed to deliver the number of dwellings required, as well as meeting increased demand generated by higher immigration intake and the returning international students.

All of this within an increasingly challenging commercial environment of high interest rates, increased holding costs (exacerbating planning delays and indecision) ongoing construction industry labour shortages and the legacy of bushfires, floods, Covid and the war in the Ukraine on the supply chain.

The mainstream media is increasingly running stories juxtaposing the plight of those frozen out of the housing market by the entrenched and selfish opposition of NIMBYs. The government will do what it can with social and affordable housing, but the only answer is increased supply across all markets and that requires urgent planning reform.

With variable interest repayments for those with a loan now at 6% and representing a similar proportion of average household income to those being paid in the 1990s “recession we had to have” (due to the massive rise in new home prices and the relative stagnation in real wage growth), the political pressure is sure to grow.

Acknowledging a problem is the first step towards solving it.  Implementing the solutions will take leadership at all levels of Government – but momentum is gathering.

Let’s hope the Federal Budget builds on this.

Tom Forrest is CEO of Urban Taskforce Australia

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