National Target Ramped Up to 1.2m Homes

The blueprint to remedy Australia’s worst housing supply shortage in generations has been rejigged with a new target to build 1.2 million homes over five years.

Critical to the plan is a raft of reforms agreed by state and territory leaders at the national cabinet meeting with Prime Minister Anthony Albanese in Brisbane.

The clincher? A $3-billion carrot to incentivise the implementation of the reforms to bolster housing stocks and increase affordability.

States and territories that build more than their share of the one million well-located home target under the National Housing Accord will get a slice of the performance-based funding—amounting to $15,000 per extra residence.

“All governments recognise the best way to ensure that more Australians have a safe and affordable place to call home is to boost housing supply," Albanese said after Wednesday’s national cabinet meeting.

That is why, he said, the national cabinet had agreed to an “ambitious” new national target to build 1.2 million new, well-located homes over five years from July 1,  2024—an increase of 200,000 on the Accord target set last year.

But is the delivery of 240,000 homes a year too ambitious and will it be enough?

Well, it is all we have got at the moment.

By and large, however, the property development sector thinks the blueprint is a step in the right direction and, if embraced and implemented successfully, will do the trick of helping resolve Australia's housing woes problems.

Property Council chief executive Mike Zorbas welcomed the national cabinet’s commitment to “tackling our housing supply deficit in a co-ordinated way for the first time in a long time”.

“National cabinet has taken a big-picture approach to housing supply improvements that, if successful, will boost access to housing for all Australians,” he said.

Zorbas said the blueprint struck “a sensible balance in progressing toward affordable new housing supply”.

He said the Property Council had long-championed national competition-style payments for states that succeed at city planning and housing supply performance.

▲ Property Council chief executive Mike Zorbas: a sensible balance in progressing toward affordable new housing supply.

“Decades of strategic failure by governments has left us an unacceptably land-rich, housing poor nation. There is a deficit of supply in social, key worker and at market housing across the country.

“Hopefully today marks the first day of a strategic and accountable system for delivering the housing Australians need.”

Other key measures agreed upon at the national cabinet meeting related to the supply “pinch points” of planning, zoning and land release to improve the delivery of more secure and affordable housing as well as new modelling to better co-ordinate migration settings.

It was also agreed states and territories would move towards limiting rent increases to once a year, develop nationally consistent policy relating to genuine reasonable grounds for eviction and the phasing in of minimum rental standards.

“These changes will make a tangible impact for the almost one-third of Australian households who rent,” Albanese said.

Master Builders Australia chief executive Denita Wawn said the national cabinet had “thankfully resisted the temptation of rental caps and freezes, which is a harmful intervention the rental market”.

The peak body has forecast that Australia needs at least 200,000 homes constructed a year to meet demand.

“The revised new national target of building 1.2 million well-located homes over five years is welcome news and shows commitment to go above the baseline requirement,” Wawn said.

She said all levels of government now must implement the agreed measures “as a matter of urgency”.

“We need to go to the root of the supply problem, getting projects off the ground which are lagging due to a combination of high costs, a declining investment appetite from rising interest rates, and delays in approvals.”

Housing Industry Association deputy managing director Jocelyn Martin said the outcome of the national cabinet meeting was “a significant step towards reforming the planning system and committing to build more homes” and “hits right at the heart of the issues which need to be addressed”.

“These plans are ambitious,” she said. “Local councils will need to be prepared to deliver shovel ready land at an affordable price. This is not something that has been easy to achieve in the past.

“All the economic indicators are pointing to a slowdown in the commencement of new homes. Since the first increase in the cash rate, sales of new homes have fallen sharply and are 41.8 percent lower than at the same time last year and 26.2 per cent lower than at the same time in 2019.”

HIA’s latest Economic and Industry Outlook showed detached housing starts were forecast to fall to just 95,370 in 2024—the lowest number since 2012—from a peak of 149,300 in June 2021. Multi-unit commencements have only risen modestly to 69,680 from a decade low of 63,510 last year.

▲ Australian Constructors Association head of policy Rob Sobyra said the injection of new housing would be a welcome addition.

Australian Constructors Association head of policy Rob Sobyra said the amount of work in the pipeline to be done by residential builders was “still really elevated because of the delays in building out all those approvals through the pandemic”.

“We’re still in a very busy period for house building, but you know, that's all going to come to a crashing halt as soon as we wash out this existing pipeline,” he said.

“So, this injection of new housing will definitely be a welcome addition to the house builders to fill the front end of the pipeline back up again.

“But it all depends on how realistic this is, how much of this will actually find its way into the market and how they propose to get into the market. That will dictate how much of an impact it has on the construction industry and whether we can absorb it.”

The Australian Institute of Architects national president Stuart Tanner commended national cabinet for its collaborative approach to the critical issue of housing.

“If these homes are delivered within the five-year timeline, it will help our housing supply issues considerably,” he said.

“We are, however, concerned about the ongoing inadequacy of social housing supply and Australia’s capacity to realistically deliver this volume of housing in the time available, given construction material and labour shortages. 

“Affordable housing shouldn’t be a luxury, it should be a necessity. The rates of housing stress and unaffordability in Australia are alarming and demand immediate attention,” Tanner said.

“This is also a great opportunity to get the settings right for density and sustainability in our towns and cities, as well as addressing supply.”

According to the Institute of Public Affairs deputy executive director Daniel Wild, the national cabinet’s measures would not be enough to meet demand.

“The cold hard reality is, on the federal government’s own figures, Australia faces a deficit of more than 252,000 houses over the next five years,” he said.