Housing targets ‘unachievable under new IR’

Australia’s target of building 1.2m new homes is falling further out of reach, as new modelling shows 80 per cent of projected new dwellings will never see a shovel hit the ground.

Master Builders Australia chief executive Denita Wawn. Picture: AAP

Four out of five new homes that could have been built under Labor’s housing policies will never see a shovel hit the ground, with fresh modelling showing that productivity-sapping industrial relations changes and volatile conditions will erode 80 per cent of the gains in projected housing stock.

The modelling by the Centre for International Economics shows the economic benefits ­from the suite of Labor’s housing measures will be neutralised or cancelled out over a five-year period, blowing further off-course Anthony Albanese’s ambitious target of building 1.2 million new homes by mid-2029.

About 240,000 new homes will need to be delivered each year to meet the target, but the sector says it is already struggling amid falling productivity rates, increasing construction costs and blowouts in average build times.

The new CIE research, commissioned by Master Builders Australia, is the first in a series that will be produced annually over the next three years to assess the capacity of the sector to meet the 1.2 million new homes target.

It highlights what MBA chief executive Denita Wawn describes as a “productivity maelstrom” and the need to abandon workplace laws holding back the construction sector.

There is also hope the upcoming budget will contain measures to address damaging labour shortages, including financial incentives for apprentices and measures to help migrants into construction jobs.

“For the building and construction sector to prosper, and if the ambition to deliver more housing is to be met, addressing productivity constraints is a must,” Ms Wawn said. “We have heard a lot of talk from the government about lifting productivity, but it is now time for action.

“Make no mistake, the recent industrial relations reforms and the abolition of an industry-specific regulator increase uncertainty, legal risk and costs for businesses and consumers,” she said.

The new CIE modelling shows that Labor’s housing measures would deliver 42,882 new homes, increase construction output by $19.6bn, create 27,140 new jobs and contribute $8.2bn to Australia’s GDP over a five-year period.

But it also shows that nearly all these benefits are forecast to be wiped-out by a combination of the government’s changes to workplace laws, labour shortages and a resurgence of raw materials inflation.

Once these factors are accounted for, new home building starts under Labor’s suite of policy measures would be slashed to just 8655 – a reduction of more than 34,220 homes over five years or about 80 per cent.

They would also overwhelm the positive impacts of Labor’s housing policies to deliver an $8.3bn hit to construction output, the loss of 27,828 jobs and a $414.7bn reduction in economic activity over five years.

Ms Wawn said this was a “best-case scenario” and such an outcome would “likely worsen when the full package of industrial relations reforms and current union-led pattern EBA negotiations have been finalised.”

The CIE modelling showed that over the next five years, Labor’s IR changes would have the biggest negative affect on new home starts, reducing them by 15,340 homes, when compared with the impact of labour shortages and materials price growth, which would slash new homes starts by 13,175 and 5712, respectively.

Labor’s contentious shake-up of workplace laws would also be responsible for overseeing the largest reduction in building and construction output at $15.9bn over the five-year period.

This compares with a reduction in construction output of $7.7bn caused by labour supply shortages and of $4.3bn caused by raw materials inflation.

Amid a cost-of-living crunch, Labor is coming under increasing pressure over its suite of housing policies, including from the Greens, with Adam Bandt having declared he will increasingly fight Labor on economic issues leading into the next election.

Since winning the 2022 election, the government’s key housing initiatives have included its $10bn Housing Australia Future Fund (HAFF); $2bn social housing accelerator; $2bn increase to Housing Australia’s liability cap; $1.6bn extension of the National Housing and Homelessness Agreement (NHHA); $1bn boost to the National Housing Infrastructure Facility (NHIF); 15 per cent increase to the maximum rates of Commonwealth Rent Assistance; reform of tax incentives for the build-to-rent sector; expansion of the Home Guarantee Scheme; negotiation of a national planing reform blueprint with the states; and promotion of a new Help-to-Buy equity scheme for first-home buyers.

The latest forecasts from the MBA released in April suggested that between July 2024 and July 2029, there would be 1,087,325 new home starts – meaning that the nation would fall short of the 1.2 million target by more than 110,000 homes.