New $3.5 billion incentive for states to lift housing target

National cabinet has backed a deal on housing that sets a new target to build 1.2 million homes over five years, with the promise of $3 billion in federal incentives for states and territories that help meet the higher goal.

The federal government will also pay $500 million for essential services such as basic amenities in new housing projects in a competitive fund that aims to encourage states and territories to quicken the pace of building approvals and housing construction.

Prime Minister Anthony Albanese, with NSW Premier Chris Minns (left) and NT Chief Minister Natasha Fyles, announcing plans to encourage states to get more homes built through a $3 billion incentive package.Credit: Alex Ellinghausen

Prime Minister Anthony Albanese struck the agreement with premiers and chief ministers in a discussion that side-stepped the idea of a national public holiday if the Matildas won the FIFA Women’s World Cup, canvassed health funding but focused on fears of housing shortages and rising rents.

While the meeting also agreed to set national principles on renters’ rights, it put no deadline on the plan and left it to each state and territory to harmonise laws so landlords could increase rents only once a year and could not force “no-grounds” evictions.

The new incentive payment overhauls the National Housing Accord agreed last year, increasing its target from 1 million to 1.2 million homes over five years and promising a “reward” for the states and territories that do the most work.

Sources close to the discussions, who were not authorised to speak publicly about the agreement, said premiers and chief ministers urged Albanese to offer more than the $2 billion originally on the table.

The new $3 billion incentive, called the New Home Bonus, is calculated as a $15,000 payment from Canberra for each home a state and territory brings to the housing accord above the earlier target, in the hope of adding the 200,000 dwellings.

But the payment will not start until 2028, which means it will operate as a reward rather than an up-front subsidy. Because the states and territories had already committed to the 1 million homes in the initial accord, the incentive is not paid on a per-capita basis to the states and instead goes to those who add the 200,000 homes to the overall total.

The new policy is separate from the $2 billion Social Housing Accelerator announced in June to help the states and territories build more affordable homes, with that money flowing already.

The commitment to 1.2 million homes is being described as a “stretch goal” that goes beyond the initial National Housing Accord revealed in the mid-year budget last October and which is aimed at encouraging private investors into more housing projects.

Treasurer Jim Chalmers has been discussing the accord with superannuation fund managers and other investors in the hope of adding billions of dollars to housing construction. The accord plans the 1.2 million homes over the five years from 2024.

The separate $500 million competitive fund, called the Housing Support Program, puts new funding behind the prime minister’s long-stated desire for governments to encourage more construction near transport hubs and employment centres, a concept vocally backed by most premiers.

Victorian Premier Daniel Andrews has pointed to the state’s $5.3 billion Big Housing Build to assure voters he has a plan to increase housing supply, while also promising $1 billion for a Regional Housing Fund.

NSW Premier Chris Minns is also promising faster work to build more homes, including ambitions for greater density and higher buildings near the new metro stations planned for Sydney.

The national cabinet meeting agreed to a national planning reform blueprint that promotes medium-density and high-density housing in locations close to transport, while also promising to streamline approval pathways for new projects.

The agreement also commits all governments to fix gaps in housing design and certification to lift the quality of new construction, especially with apartments.

Asked about the principles on renters’ rights and whether Australians needed tougher protections in law, Albanese said national cabinet was not in a position to “flick the switch” and change laws across the country immediately.

“The key to addressing these issues is supply, and that’s why we’ve focused our attention on supply,” he said.

Asked when the new principles for renters would be applied, Albanese said: “As soon as we can.”

He added that the federal government had “zero” power when rent controls were up to the states and territories.

The Greens, which have called for a national rent freeze and more spending on social housing, described the announcement as “smoke and mirrors”.

“Labor has just locked in yearly astronomical rent increases and tried to handball the heavy lifting on fixing the housing crisis to the same property developers who created the crisis in the first place,” Greens housing spokesman Max Chandler-Mather said.

“This is a smoke and mirrors announcement designed to make it look like Labor has done something meaningful for renters, when in fact they have basically enshrined the status quo.”

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