Anthony Albanese’s housing promise cannot be met: Treasury

Modelling indicates the government will miss its target by roughly 300,000 dwellings unless it induces a historic and sustained uplift in construction activity across the country.

Anthony Albanese has promised to supply 1.2m homes by 2029, Picture: Jason Edwards / NewsWire

Treasury officials working to solve the nation’s housing crisis warned the Albanese government that it could not meet its commitment of supplying 1.2m homes by 2029, proposing that major infrastructure projects might be placed on hold in order for workers to be diverted to the task of home building.

The drastic measure is one of several options floated in a confidential Treasury document that states the government’s long-held promise of building 1.2m new homes, repeated often during the election campaign, would be unachievable without an unprecedented uptick in construction trends.

Treasury modelling indicates the government will miss that target by roughly 300,000 dwellings unless it induces a historic and sustained uplift in construction activity across the country, currently constrained by a raft of barriers including labour supply shortages, land availability, interest rates and lagging productivity.

The majority of the shortfall is slated to come from NSW, Queensland and Western Australia, with Victoria and the ACT on track to meet their target.

“The window of government intervention to address these constraints is short,” the document says. “Reaching 1.2m homes target would require a significant ramp up in housing construction activity, well above historic levels.”

Treasury officials also floated the option of direct financial subsidies to pay for land, equipment, material, services and permits, in order to lower input costs and increase the financial feasibility of development projects.

It warned that intervening in this way to build 300,000 homes would likely cause the Reserve Bank to increase interest rates by “over 125bps”, which would dampen private sector completions and consequently result in the government’s 1.2m targets still being missed.

Anthony Albanese visiting a soon to be completed housing project in Brisbane with Griffith candidate Renee Coffey and Treasurer, Jim Chalmers. Picture: Jason Edwards / NewsWire

Across pages of sobering data, graphics and modelling, officials laid out the extent of the crisis on the supply-side of housing, noting that an additional 7000 hectares of land was needed in NSW, Queensland and Western Australia. Another $22bn in infrastructure is currently required at greenfield sites and existing parcels of land earmarked for development.

These are not what the government has rushed to announce during the lifespan of the election campaign, although it has routinely cited its commitment to building 1.2 million homes by 2029 as a key plank of its solution to the national housing affordability crisis. The commitment was signed in 2023 under a compact known as the National Housing Accord.

Ahead of Saturday’s vote, Labor has opted for housing announcements that modestly address the supply shortage highlighted by Treasury while emphasising sweeteners for first-home buyers to enter the market. The homes they seek may not exist for years.

The Coalition has announced similar sweeteners but it has not had access to the same Treasury advice raising the alarm on supply. A spokesman for Treasurer Jim Chalmers said these were always “ambitious targets”.

“Our plan is for more homes, more tradies and lower deposits,” the spokesman said. “The Coalition’s policy is for cuts to housing, cuts to training and higher prices. We are a much better chance of hitting that ambitious target than our opponents are.”

Labor’s announcements have included a $10bn partnership with the states to build 100,000 homes exclusively for first-home buyers over the next eight years, although Treasury’s analysis indicates that this still falls short of what the modelling requires.

For the government to reach its target, about 240,000 new dwellings would need to be constructed every year for the next five years, a figure 40 per cent higher than what the country achieved during the peak “apartment boom” of 2016-17.

“If jurisdictions individually, and consistently, average close to their annual historic best, there is a path to achieving the targets,” it says.

“However this requires conditions to be right across multiple markets at the same time, for five consecutive years, which is a difficult needle to thread.”

To reach the goal, Treasury floated not only pausing infrastructure projects and direct market intervention but also structural reforms to ease the crisis of supply once “market conditions improve”.

However, it pointed to reporting from multiple agencies to indicate an adjacent workforce being soaked up in government projects.

“A strong public infrastructure pipeline could be impacting housing construction labour, however transferability between the sectors is currently limited,” it said.

“Infrastructure Australia has undertaken analysis which suggests a large, potential adjacent market of transferable labour.

“The NSW PC (Productivity Commission) also found that public infrastructure projects in NSW diverted resources away from homebuilding (but did not quantify the direct labour market implications).”

Treasury modelling indicates the government will miss that target by roughly 300,000 dwellings unless it induces a historic and sustained uplift in construction activity across the country. Picture: NewsWire / Flavio Brancaleone

Treasury’s only firm recommendation across the report called for “structural interventions” which were slower to take effect, such as the fast-tracking of housing developments, cutting red tape to speed up delivery, and addressing labour shortages and attrition.

Construction workers, it said, were not being trained fast enough, with the nation currently facing a shortfall of 94,000 workers by 2029 and skilled migration unlikely to be sufficient to meet the gap.

“Advice from Home Affairs indicates there does not appear to be pent-up demand for the relevant skills in visa applications, and the quantum required would significantly exceed historic levels for these skills classes,” the officials wrote.

One of the only recommendations cited in the Treasury document – and taken up by the government – related to the use of Modern Methods of Construction, a reference to prefabricated materials, off-site manufacturing, 3D printing, robotics and artificial intelligence.

Officials calculated that deploying these methods could accelerate project timelines by up to 50 per cent while also reducing costs.

The government announced $49.3m for states and territories in support of the growth of this nascent industry.