Big home build kicks off but shortfall likely

Housing industry experts expect have welcomed day one of the Albanese government’s plan to build 1.2m homes in the next five years but are anticipating a significant shortfall

Monday marked the first day of the Albanese government’s big five-year build of 1.2m homes. Picture Lachie Millard

The federal government is set to fall short of its plan to build 1.2 million new homes in the next five years by 64,000 properties in the first 12 months, as the big build kicks off.

Monday marked the first day of the Albanese government’s plan to free up land to increase the national homebuilding output after striking a national housing accord with states and territories in October 2022.

With new building levels in the doldrums at near decade low levels, the Housing Industry Association estimates the government will see a shortfall of 64,000 homes in the 2024-25 fin­ancial year because of a combination of costs and labour shortages.

The shortfall is expected to shrink in coming years to 40,000 next financial year, 25,000 in the subsequent two years and 33,000 in the final year .

To reach the half-decade target by the end of June 2029, an average of 240,000 homes need to be built each year.

However, only 963,064 total new homes were completed over the past five years despite the pandemic HomeBuilder stimulus, which sent building levels to record highs.

HIA chief economist Tim Reardon said the big build “absolutely can be done” but only if changes are made to tax and policy settings. At the current trajectory, an extra year will be needed to reach 1.2 million homes, with the total shortfall to hit 188,000 dwellings.

“It is an ambitious and worthy goal that needs to be achieved,” Mr Reardon said.

“(But) we don’t have the industry getting to that 240,000 rate of build required within the next 10 years.

“There will need to be policy changes in the form of investment in apartment building and fewer tax increases on new homes.”

Federal Housing Minister Julie Collins said all levels of government were aligned to hit the target. “It is ambitious because we need to be ambitious as a country,” she said.

“We inherited significant housing challenges after a decade of inaction by the former Liberal government.

“Turning that around will take a co-ordinated approach by all tiers of government, the construction sector and community housing providers.”

Master Builders Australia chief executive Denita Wawn said the government had squandered the more than 600-day lead time to help align all policy levers and put the industry in the best possible position to build enough new homes. She added “investment in new home building does not stack up”.

“Industrial relations laws, worker shortages, slow planning approvals, a lack of critical infrastructure, high developer taxes and charges, and licensing delays all add to the cost and time it takes to build,” Ms Wawn said.

“We need to build a significant amount of higher density homes, particularly to relieve the pressure on the rental market, but the builders who are relied upon to deliver these projects are now hamstrung by restrictive CFMEU pattern EBAs.”

Mr Reardon said foreign investment needed to be unlocked to deliver more homes, with states increasing taxes like NSW and Queensland kicking “own goals … Foreign investors build homes in Australia, they don’t live in them and can’t take them home with them,” he said. “They are just the pool of money we want to build a large volume of apartments and metropolitan areas for Australians to rent.”