Leaked document confirmed what we already knew. The housing accord is dead

A treasury leak revealed Labor’s goal of 1.2 million homes in five years was doomed. The truth is, it was never going to succeed.

Construction faces too many headwinds for the housing accord to be achieved: Picture: Getty

ANALYSIS

Talk about worst kept secrets.

Earlier this week, federal treasury accidentally let slip what should have been a doozy … the much spoken of housing accord was on track to fail.

That key Labor policy of delivering 1.2 million homes over five years was going to fall short.

“Stop press and clear the front page!” Said no one.

This kind of leak is like me accidentally revealing I’m not on track to qualify for the 100 metre sprint at the next Olympics.

Treasurer Jim Chalmers didn’t seem too worried about it. Although he did concede “more effort” would be required to make the target.

The housing accord covers a period from 1 July, 2024, until end of June 2029. So, it’s just completed its first year.

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Each year, 240,000 homes need to be completed in order to be on track for the target. In the first year, around 170,000 homes were completed. If this pace continues, we’ll end the five years 350,000 homes behind target.

Dark clouds hang over our construction targets. Picture: Getty

Let’s break it down to quarters, because all the economics boffins love quarterly data. We need 60,000 homes completed each quarter. In the first two quarters of the financial year, there were about 45,000 completions each. That then dropped to 43,500 in the third quarter. Completion data for the most recent quarter is yet to be released, but the ABS reported just over 42,000 building commencements, so we’re getting further away.

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Meanwhile, building, borrowing and earning conditions aren’t really getting any better.

Economist Cameron Kusher from Oz Property Insights commented on the Australian Bureau of Statistics’ Building Activity Data this week, noting “While apartments are typically more expensive to build than houses, the average build cost of a new house in Australia has increased by almost $100,000 in the most recent two years”.

When you consider the national house median price is at $888,000 according to recent PropTrack data, that’s an increase of more than 10 per cent of the overall value in just two years.

Cameron Kusher from Oz Property Insights says ABS data shows average building costs have blown out over the past two years.

Then there are the shortages of skilled workers in the construction industry, the struggle that borrowers are facing as the RBA drags the chain on lowering interest rates and the fact that wages are moving about as slowly as the continents are drifting apart.

And finally, what for many is the biggest hurdle of all, comes the last layer of government involved in the process: your local council.

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Because housing is a case of big picture to backyard. The Federal Government announces an initiative and invests some money in incentives, then it’s over to the state governments to put in place their own policies and investments, including infrastructure that needs to be built around new housing.

And if you are lucky enough to endure all of this and still be ready to invest in a new build, it’s over to the local council for approval, but not before they ask residents if it’s OK with them if something is built nearby that may create an inconvenience for them. And wouldn’t you know it, those residents are often a fair bit more worried about what is happening in their own street than whether the nation is reaching its overarching housing targets.

The housing accord should not be an impossible target, but it is. It won’t be achieved and it never was going to be achieved. And as a result, housing will keep getting further out of reach for future generations of Australians.

Originally published as Leaked document confirmed what we already knew. The housing accord is dead