Business leaders demand urgent action on housing

With the rental crisis, spiralling construction costs and a lack of land supply, property industry leaders want wide-ranging reforms.

Australian business leaders have called on the federal and state governments to fast-track a wide-ranging reform agenda to address the chronic shortage of land and housing, planning and tax issues, and soaring construction costs.

Julie Coates, chief executive of building products giant CSR, said while there was strong underlying demand for housing, commercial projects and social infrastructure, there were significant supply-side constraints – from zoning, planning and approvals processes to land supply, labour availability and infrastructure provision.

“Reform is required across these areas to unlock the housing supply Australia needs,” she told The Australian’s 2024 CEO Survey.

Ms Coates said housing affordability, the national housing shortage and the incidence of homelessness were critical issues.

“Government has a role in building houses to help remedy the housing shortage, but it’s housing affordability that is a potential disrupter for our business,” she said.

“Land release bottlenecks, lengthy approval processes, trade labour shortages and population growth all play into the housing affordability equation and government policy is integral to the solution here too.”

CSR chief executive Julie Coates.

With the rental vacancy rate across Australia hovering around 1 per cent, Mirvac chief executive Campbell Hanan said there was an urgent need in Australia to unlock much-needed supply.

“Projected new apartment starts (in 2024) are at the lowest on record at a time when we need housing the most,” he said.

Australia’s $360bn building sector is bracing for another horror year, with insolvencies predicted to spike in 2024 due to the lagging impact of the Covid-19 pandemic.

According to ASIC, construction-related company collapses made up about 27 per cent of insolvencies for the year to December 3, 2023, and Mr Hanan said the construction sector would continue to feel the pressure.

“A tight construction labour market is putting pressure on costs and the rising number of insolvencies is putting pressure on tier 1 and 2 subcontractor availability,” he said.

Australian Bureau of Statistics data showed immigration added 518,000 people to Australia’s population in 2022-23.

Scentre chief executive Elliott Rusanow, who operates some of Australia’s largest shopping centres under the Westfield brand, is a supporter of population growth but said governments needed to act “to solve housing needs”.

The chief executive of online real estate advertising company REA Group, Owen Wilson, said delivering affordable housing was the key to the wellbeing and future prosperity of Australians.

“Inadequate supply is showing up throughout the property sector, but nowhere is it more apparent than in the rental market, where vacancies are at historical lows and rents are increasing rapidly,” he said.

“We must make owning rental properties attractive for investors. Landlords are continuing to leave the market and are not being replaced by enough new investors.

“Governments need to ensure that property investment is an attractive proposition for Mum and Dad investors as well institutional investors. And they need to avoid knee-jerk reactions to the rental crisis, such as rental freezes and higher land taxes, which only drive landlords out of the market.”

REA chief executive Owen Wilson.

Mr Wilson called on governments to take another look at stamp duty and deliver tax reform that encouraged both mobility and new supply in the housing sector.

He said the Reserve Bank needed to be careful that higher interest rates targeting inflation didn’t increase mortgage stress or deter investment in new rental properties.

“Both federal and state governments should be mindful that large-scale infrastructure investment will make it harder to keep inflation in check in the housing sector,” he said.

“Infrastructure spending needs to be targeted to areas of greatest need, and ultimately curtailed, so that inflationary impacts are reduced.

“We need to prevent construction costs spiralling as the country tries to increase the number of homes being built.”

Patrick Houlihan, the chief executive of paints company DuluxGroup, said housing supply constraint issues were a source of concern.

“Tight labour markets, including access to skilled tradespeople, continue to be a constraint on construction activity,” he said.

Lendlease chief executive Tony Lombardo said a key issue facing the property industry was the time it took to secure approvals for new projects.

“If we want to increase housing, we need to do significantly more to streamline the nation’s permitting and approvals processes and get builders to the start line faster,” he said.

“Australia’s ability to attract global investment capital – and fund the nation’s growth – relies on us having a regulatory process that’s commensurate with that of other advanced economies.

“In other markets, we achieve approvals in less than half the time it takes in Australian cities.”

Mr Lombardo said the shortage of construction workers was a significant problem.

“Federal and state governments need to spread the timing of infrastructure spend over a longer duration which, in turn, would allow the housing sector to access labour currently diverted to other projects,” Mr Lombardo said.

Dexus chief executive Darren Steinberg said Australia needed foreign capital for growth, so it was important the right incentives were in place to give investors the confidence to invest.

“We fundamentally need overseas capital to fund the necessary infrastructure investments,” he said.