ALP’s new homes aim ‘is missing its target’

The Albanese government is set to fall 200,000 short of its ambitious target to build 1.2m homes by 2029, according to new analysis from the Housing Industry Association.

More apartment building will fill the gap between housing demand and supply.

The Albanese government is set to fall 200,000 short of its target to build 1.2 million homes by 2029, with analysis from the Housing Industry Association underlining an urgent need to ease regulatory and tax burdens to drive more supply.

After Reserve Bank governor Michele Bullock said the construction industry would struggle to deliver what would be the highest sustained building effort on record, HIA chief economist Tim Reardon said the housing goal was equivalent to J.F. Kennedy’s pledge to put a man on the moon by the end of the decade – a dream that was achieved but only because of extraordinary effort and ingenuity.

Mr Reardon applauded the target embedded in Labor’s Nat­ional Housing Accord, struck with the states and territories in August, saying it was integral to plugging the yawning gap between demand and supply, and eventually to addressing the ­nation’s calamitous housing affordability issues.

“But all signs are we are falling short – and the main reason we are not going to achieve the target is the rise in the cash rate, and it’s very hard for the government to fight against that,” he said.

In an updated analysis following the Reserve Bank’s rate hike on Melbourne Cup Day, HIA’s latest forecast was that 995,500 new dwellings would commence construction between now and 2029. This was a shortfall of more than 200,000 on the government’s 1.2 million homes target over that period, according to the estimates.

Aside from the recent sharp cyclical lift in borrowing costs, Mr Reardon said structural issues needed to be addressed by government policy at the commonwealth, state and local levels.

“It has taken 20 years to get to this situation where tax imposts and planning constraints have added significantly to the cost of delivering new homes, and it will take time to overcome those problems,” Mr Reardon said.

In September, the commonwealth committed $3.5bn in “bonus payments” for states and local authorities that accelerated land release, planning and approvals processes.

Business groups say Labor’s proposed industrial relations reforms will add to labour costs and drag on productivity.

Builders are also being hampered by a shortage of materials.

As house prices returned to their pandemic highs, Mr Reardon said resolving these capacity issues would take “a number of years”.

He said removing tax imposts such as the additional levies on foreign investors – which had sunk apartment building – and reducing stamp duties on property transactions were part of the solution to stimulating more supply.

Echoing comments from ANZ chief executive Shayne Elliott that only rich people were now able to borrow, Mr Reardon recommended easing restraints on bank lending.

“If all goes well, by 2030 we should see an industry that is able to deliver adequate supply to meet that year’s housing demand,” he said.

The grim forecasts came after Ms Bullock said there was “no easy answer” to the nation’s housing crisis, and cast doubt on a stretched industry’s capacity to deliver the targeted 1.2 million homes, especially in the context of fierce competition for material and labour amid a government-led infrastructure boom.

“We do have a bit of an issue in Australia, with being able to build housing,” Ms Bullock said after delivering a speech on Wednesday night.

“And certainly the targets set by the government: it’s great that they’re focusing on it, but they’re much higher targets than we’ve ever managed to hit before, so it’s no easy answer,” she said.

With building approvals for new homes running at around 10-year lows – outside the national pandemic lockdown – Ms Bullock said the bank was hearing via its business liaison program that homebuilding activity was running off, and “there’s not much left after the pipeline finishes”.

The national affordability crisis intensified through the pandemic, spurred by the lowest mortgage interest rates in history, but house prices have been climbing much more quickly than incomes since the turn of the millennium

In 2000, the median-priced Sydney home sold for about 6½ times a mid-career teacher’s salary.

By 2022, that same property cost 14 times that wage, according to the Grattan Institute.