Victorian home building approvals crash to decade-low mark despite Labor promise

The number of houses approved for construction in Victoria has crashed to the lowest level for more than a decade, casting further doubt on the state government’s promise to tackle housing affordability with 80,000 new dwellings a year.

Victorian councils granted approvals to build just 2370 detached houses in January – the lowest monthly total since October 2013, according to new data released by the Australian Bureau of Statistics (ABS) on Monday.

Over the year to January, a total 51,068 houses, flats and townhouses were given the green light across the state – down 17.6 per cent on the same 12-month period a year earlier, and well short of the average needed to deliver the government’s average target of 80,000 homes a year.

The figures follow similarly grim construction figures released by the ABS last week which showed Victorian builders completed $5.2 billion worth of residential work during the final three months of 2023 – but that figure was down 5.4 per cent from a year earlier, and at the lowest level for more than eight years.

Opposition planning spokesman James Newbury said the government’s housing target of 800,000 new homes over a decade was “a con that simply cannot be achieved”.

“With housing approvals almost grinding to a half, the highest property taxes in the nation and a mismanaged residential construction sector, is it any wonder that Labor will not deliver for those dreaming of owning their first home,” Newbury said.

Planning Minister Sonya Kilkenny.Credit: Paul Jeffers

Planning Minister Sonya Kilkenny said the construction industry faced challenges, but insisted the government was pulling the right levers to deliver on its target.

“We’ve seen workforce shortages, we’re seeing increased costs across the supply chain and we’re seeing interest rates increases,” she said.

“What we’re doing is creating that real pipeline of work to give certainty to the industry about building more homes.

“We’re making sure we’re pulling all the levers that we can as a government to ensure we’ve got the conditions right to facilitate the delivery of those 800,000 homes [over the decade to 2034].”

The rate of home building has dropped in Victoria.Credit: Paul Rovere

The Allan government on Monday announced it had finished setting up a new case management team within the Department of Transport and Planning to help councils resolve planning issues to prevent them going to court.

The department has identified 41 permits across 26 councils worth $1.6 billion which are currently held up and which could create 4500 homes if they proceed.

The team will provide extra resources for councils which may not have the capacity to quickly handle the issues holding up these applications.

A new consultation process has also begun for the state’s Plan Victoria document, which will spell out housing targets for each local government area.

According to the government’s housing statement, released in September, Victoria will need to build about 57,000 homes each year merely to keep up with expected population growth.

Opposition planning spokesman James Newbury.Credit: Scott McNaughton.

But it suggested the state would need an average of about 80,000 homes a year to relieve “acute” pressure. Victoria’s population is expected to swell by about half to 10.3 million by 2051, up from the current 6.8 million.

Victoria has never completed 80,000 homes in a single year. For the 2022-23 financial year, builders began work on 54,097 homes, above the long-term annual average of 46,140 homes a year since 1990, but well below the all-time high of 75,572 reached in 2017-18, before the state economy was hit by the pandemic.

KPMG economist Terry Rawnsley said it was still possible to achieve the aspiration of 800,000 homes over a decade, although every year of lower approvals would require an even bigger future effort.

“The run rate required means … every year we fall behind we have to pick up the pace in the later years,” Rawnsley said.

“This is probably the low point for approvals. Construction prices have levelled off, interest rates have levelled off and are coming off the boil – you’d hope to see approvals start to climb the mountain towards that 80,000 annual number moving forward.”

Housing Industry Association Victorian executive director Keith Ryan said the drop in approvals was “not really a surprise”, with consumers confidence shaky after 13 interest rate increases and cost pressures for builders still filtering through. He said the target of 80,000 homes would not be met this year.

“From our perspective, the current government’s expectations over-rely on multi-dwelling units,” Ryan said. “To get the numbers they want they still need a healthy detached home building market and that is something they haven’t given as much attention to as we would like them to.”

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