Australia’s Housing Crisis: It’s Time To Act
By George Tadrosse, ALAND CEO
When does a housing crisis start to affect the stability of a whole society? I believe that Australia is dangerously close to that tipping point – a place that I never thought we would reach in my lifetime.
Recent analysis suggests that the federal government’s target of building 1.2 million new homes in the next five years is hopelessly optimistic – and we are likely to fall short by least 300,000 new dwellings. [1]
According to the National Housing Supply and Affordability Council the chronic shortage of new housing will have a catastrophic impact on the poorest and most vulnerable people in our society.
Property ownership is not a lifestyle aspiration, but helps to build a stable, open and tolerant society. People who own their own homes are more likely to raise kids, put down roots and build strong communities.
Studies have found that home ownership results in better wealth distribution, reduces inequality and even fosters greater tolerance – homeowners are more likely to volunteer and engage in social enterprises than those who rent. [2]
Many commentators blame Australia’s housing crisis on high interest rates, labour shortages or problems with the supply chain, but I am convinced that its origins can be found in the arrival of COVID-19, which induced a housing policy-paralysis that we are seeing played out today.
Initiatives such as the federal government’s $10 billion Housing Australia Future Fund, aimed at developing more social and affordable housing, and proposals by the Minns Government to fast-track new housing along transport corridors, are struggling to gain momentum.
I believe that unless we solve this housing crisis in Sydney we are going to end up with a broken economy and grossly unfair society of haves and have-nots – robbing future generations of the chance to own a home.
Whether we’re talking about people in their 20s, young families struggling to pay the bills or hard-working Aussies nearing retirement, homelessness is a blight that affects the whole community. Instead of building more homes, we are building fewer – and the gap keeps widening.
Home building approvals are falling across Australia. In the 12 months to December 2023 Sydney added just 32,600 new homes to its inventory – 42% lower than for 2018, a peak year for building activity in the city. [3]
Like other Sydney developers, ALAND has had to juggle increased construction costs, rising statutory costs and the high cost of borrowing money – and we’re about to be hit by a new housing and productivity contribution scheme which is designed to fund regional infrastructure.
On average our construction costs across all our developments are increasing by 10% a year. At Schofield Gardens, for example, our total cost inputs (excluding land) have increased consistently since 2020, adding a further $98,400 to the base cost of each apartment.
The only effective way of solving Australia’s housing crisis is to build more housing where it is needed most – increasing housing stock will also help to relieve the pressure on the rental market in cities like Sydney.
A 2021 study found that upscale apartment development in the centre of Helsinki, Finland, had a positive impact on low-income earners looking for property in other parts of the city.
Closer to home, Auckland changed its rezoning policies allowing more five- to seven-storey apartment buildings near public transport hubs – this has slowed down price rises and reduced rents in the city. [4]
Rather than tinkering with the existing planning regulations, the NSW government needs to radically overhaul the entire system, fast-tracking new construction, sidelining those who defend the status quo.
First up, we need to dramatically increase the number of new apartments and houses that we build each year. This will ease the pressure on existing housing stock – and moderate cost of living increases; research by the Reserve Bank of Australia shows that every 1% increase in the supply of dwellings lowers the cost of housing by 2.5%.
Planning uncertainty, the lack of clear goals and constant policy backflips from our politicians are creating a climate where good developers struggle to deliver much-needed housing across Greater Sydney.
A new Savills report, commissioned by The Property Council, clearly shows that the NSW Government’s current tax regime is crippling the industry’s ability to build new homes. The report says the building industry is burdened by a swathe of state taxes and contribution charges, including new Sydney Water charges and Housing Productivity charges
The Property Council is calling on the Minns Government to suspend all increases in taxes and charges and to introduce a faster approvals process – saying this will result in 185,000 extra new homes by 2029.
In order to create new, affordable housing on the scale required for those who want to enter the property market we need to escape the three-year federal parliamentary cycle and plan for sustained, long-term growth.
Property consultant Richard Temlett, from Charter Keck Cramer, says it is precisely this lack of planning certainty that makes it almost impossible for developers to access the finance they need from banks.
“Getting certainty on planning, in terms of timing and what sort of building they can get [approved], is absolutely critical and will bring a lot of projects to market,” he said. [5]
I am not alone in arguing that Australia desperately needs a more streamlined, rational and effective planning system. Tony Richards, a former Reserve Bank of Australia economist, advocates a radical overhaul of our zoning, planning and approvals processes.
“Our current arrangements introduce barriers to entry and add significantly to the cost of home building relative to a more open process,” he says.
“We need a system that allows the construction of a housing stock that suits today’s needs and future needs and is not largely set in stone based on building or planning decisions made 10, 20, 50 or 100 years ago.” [6]
Sources:
[1] Australian Financial Review, May 5, 2024
[2] Australian Financial Review, June 6, 2023
[3] The Sydney Morning Herald, January 2024
[4] Australian Financial Review, May 31, 2023
[5] The Urban Developer, December 6, 2023
[6] Australian Financial Review, May 29, 2023