Labour shortages to test plans to turbocharge housing projects
The government has pledged a big cash splash on new housing, but labour shortages that have crippled the building sector loom as a critical test for its ambitious targets.
Developers, builders and materials suppliers appear to be the big winners from the federal government’s plans to turbocharge new housing projects, but labour shortages that have crippled the industry are looming as a critical test for the ambitious targets set to ease Australia’s housing crisis.
The federal government is pledging a $32bn cash splash on new housing for buyers and renters, with $6.2bn in new investments announced in Tuesday’s budget.
The new measures detailed in the budget papers include a $1bn boost for states and territories to deliver infrastructure for new housing developments, up to $1.9bn in concessional finance for community housing providers to deliver more social and affordable homes, and incentives for universities to support the development of more student accommodation.
Materials suppliers like Boral, Adbri and Brickworks are likely to benefit from the construction boom that’s likely to emerge in the coming years as the federal government targets 1.2 million new homes over the next five years, in its attempts to ease existing shortages while also keeping up with the stronger demand that’s likely to result from an influx of migrants into the country.
Developers like Mirvac, which has been among the most aggressive players in the fledgling build-to-rent segment, will also benefit from tax incentives designed to encourage the development of long-term rental accommodation in Australia’s capital cities.
The tax incentives, which include a halving of the managed investment trust withholding tax rate from 30 per cent to 15 per cent, and an increase to the depreciation rate from 2.5 to 4 per cent a year for newly constructed build-to-rent properties, will cost the federal government $34.3m over five years.
Analysis commissioned by the Property Council of Australia suggests the measures could unlock 150,000 apartments over the next decade.
To further stimulate build-to-rent developments, the government has also lowered fees for foreign investors looking to develop or acquire build-to-rent projects in Australia.
However, residential builders remain locked in a battle for workers as major infrastructure projects across Australia also ramp up.
While the pandemic-era materials shortages that have crimped the housing industry have eased, labour shortages remain a handbrake on new projects.
Tuesday’s budget provides $9.5bn for major infrastructure projects across the country over the forward estimates, and $16.5bn over the next 10 years, with $4.6bn allocated across 69 new projects, including $1.9bn for Western Sydney road and rail infrastructure, $300m for the METRONET signalling program in Western Australia and $177m for bridge and intersection upgrades along the Warrego Highway in Queensland.
The budget papers estimate the 10-year infrastructure pipeline could be worth more than $120bn.
Housing industry groups including the Housing Industry Association and Master Builders Association have warned workers will be in hot demand to deliver major infrastructure projects across the country, resulting in shortages in the housing sector which could leave the federal government short of its ambitious targets.
Addressing those concerns, Tuesday’s budget promises $88.8m to deliver 20,000 new fee-free TAFE places and pre-apprenticeship programs in construction-related courses, and $1.8m to deliver streamlined skills assessments for around 1900 migrants from “comparable counties” to work in Australia’s housing construction industry.
“Capacity constraints in the construction sector are a key impediment to faster delivery of new homes,” the budget papers say.
“According to industry, there has been a significant shortage of construction workers in recent years, driven by a drop off in rates of skilled migration during the Covid-19 pandemic and competition from infrastructure projects.
“This has slowed the ability of builders to build more homes quickly and driven up the price of labour.”
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