Labor’s latest bid to fix housing crisis: $2 billion for states to build more homes

State governments will be offered $2 billion over the next four years to boost housing supply with the help of federal concessional loans in a Labor pledge to counter Coalition claims that the government will miss a crucial target to build more homes.

Labor will escalate its campaign on housing on Tuesday by revealing new details of its housing supply plan and promising more social homes after years of attacks from the Greens about help for Australians on low incomes.

The Coalition is warning that the government will fall short of its target to build 1.2 million homes over five years, prompting Labor to blame the Coalition and the Greens for delaying its policies in parliament.

Albanese spruiking Labor’s housing policy in the electorate of Deakin earlier this month. Credit: Alex Ellinghausen

The concessional loans would be negotiated with state and territory governments over the coming year if Labor holds office at the election, in the first stage of a broader plan to develop 100,000 homes for first home buyers over eight years.

While the loans do not fund all the construction, they are intended to overcome obstacles to new developments that are in planning at state level but need more finance to become viable.

The Labor policy costings, released on Monday, also show the government would, if it holds power, spend $600 million on grants and other outlays to boost supply. About $100 million of this would cover interest payments on the loans.

Prime Minister Anthony Albanese will make housing one of his key messages on Tuesday by campaigning on the issue in a target seat.

Housing Minister Clare O’Neil said the loans would help construction of 100,000 homes over the eight years so they could be set aside for first home buyers.

“It is a huge undertaking and a pretty radical move,” she said. “But if the government doesn’t step up, nothing about housing is going to change.”

Opposition Leader Peter Dutton visited a housing development site in Cairns last week. Credit: James Brickwood

Coalition housing spokesman Michael Sukkar has promised $5 billion to help states and others add 500,000 homes.

While the Labor policy offers $100,000 per home on average in grants and loans to the states to overcome financial barriers, the Coalition promises $10,000 per home for infrastructure such as water and power.

“We’ll build more homes than Labor, I think, there’s no doubt about that,” Sukkar said last week.

Curtin University professor Steven Rowley said the government plan for the 100,000 homes was a positive step if the funding went to those who would build the housing.

“We have seen many attempts within jurisdictions to fast-track land supply and speed up the planning process, but ultimately these fail if the private sector cannot deliver a profit from such sites,” he said.

“There still remains a feasibility gap in much of the country following the very strong cost increases post-COVID, and this continues to put a handbrake on supply.”

University of NSW professor Hal Pawson questioned the Coalition’s claim that it could “unlock” 500,000 homes with $5 billion.

“I don’t think they’ve revealed anything that justifies the striking claim that it will result in 500,000 more homes,” he said.

Pawson, who has researched housing policy since the 1980s, said the 100,000 homes for first home buyers would add to 45,000 homes under other Labor policies, such as the Housing Australia Future Fund and the Social Housing Accelerator. The government’s tax break for major housing projects – called Build to Rent – could add another 80,000 home units, he said.

“Taking all of the above into account, I think there is not much of a contest when it comes to which of the major parties has the strongest set of policies on housing supply,” he said.

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