The Australian housing system is likely to get worse for years to come unless the government fulfils all of its housing promises and is able to meet the high level of demand, according to a new report.
The National Housing Supply and Affordability Council’s ‘Housing System report’ found that lagging construction times, unaffordable mortgages and rents, as well as a dramatically rising population, are all pressuring a housing market that is grossly undersupplied.
The report found that the supply of housing is not keeping pace with demand and the government will not be able to achieve its goal of building 1.2 million new homes by 2029.
Council Chairwoman Sarah Lloyd-Hurwitz said that if governments stumbled on the implementation of new housing policies, they would not reach their housing supply targets.
“So currently we are looking at a shortfall of new demand versus new supply, a shortfall of 40,000 over that period,” Ms Lloyd-Hurwitz said.
“Of course that does not go to address the undersupply that’s already in the system.”
The Real Estate Institute of Australia (REIA) President, Leanne Pilkington, said the shortfall projections are being too generous based on the current rate of completions.
“Feedback from the marketplace suggests that that is optimistic at best and more extreme support measures will be needed,” Ms Pilkington said.
“Indeed, last week’s ABS building approvals reflected only 12,947 private sector approvals Australia-wide in March 2024.”
The report found that most of the demand for housing was coming from overseas immigration, which has dramatically increased in the past 20 years.
“Net overseas migration accounted for around 40 per cent of Australia’s population growth in the last 3 decades of the 20th century,” the report said.
“However, with lower fertility and rising migration levels, this has increased as a share of growth to almost 60 per cent over the past 20 years.”
At the same time, the report found that the levels of social housing were also far too low.
“There are 170,000 on wait lists for public housing, another 122,000 people experiencing homelessness, and very significant housing stress particularly for vulnerable cohorts of the community is simply unacceptable for a country with the resources of Australia,” Ms Lloyd-Hurwitz said.
The report suggested a number of measures to help address the situation, including increasing social housing.
The report said more institutional investment in affordable housing was needed to expand options for tenants and bolster supply.
Establishing a national target for non-market housing could also provide a roadmap for achieving this goal, fostering a stronger pipeline of new non-market housing, the report said.
Improving rental market outcomes was also imperative, given the increasing number of long-term renters.
Collaborative efforts through initiatives like the Better Deal for Renters were needed to enhance regulatory frameworks and provide better tenure security for renters the report said.
On top of that, reforms in land use and planning systems are essential to increase the housing supply.
The report also said streamlining approval processes and addressing barriers like lot fragmentation and land withholding could boost efficiency.
Boosting capacity in the construction sector, enhancing data availability, addressing regional-specific challenges, and enhancing First Nations housing outcomes are other critical areas requiring attention.
The report also calls for a review of Australia’s taxation system to ensure it supports both supply and affordability, considering potential reforms without destabilising the market.
Ms Pilkington said it was important that the tax system supported investors.
“It is pleasing to see a holistic analysis of taxation treatments in housing presented, informed by evidence,” she said.
“This recognises the integral role negative gearing plays in housing supply by not disparaging negative gearing.”
Ms Lloyd-Hurwitz said given the significance of the challenges, it would be easy to despair.
“I prefer to think of it as call to action that requires bold measures and innovative solutions,” she said.
“Our housing crisis is a collective problem in need of collective solutions – harnessing all levels of government, the private sector and the not‑for‑profit sector. It’s not an academic topic, it truly matters.”
