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Can Australia’s government improve housing supply and affordability?

November 23, 2021
Categories: Residential

The housing supply crisis in Australia is only worsening. Prices are catapulting well out of reach for the majority of Australians, and the Property Council of Australia says these values will only continue to defy gravity. Can the federal government really help? The PCA thinks so.

The Property Council of Australia (PCA) is outlining a proposal to the federal government for a housing supply deal in post-pandemic Australia. The proposal looks at the bottlenecks inhibiting each state’s housing supply. And for many, it sparks the question: What can the federal government actually do to address housing supply and affordability issues in the country?

Ask most real estate professionals about government intervention in the property market and I’d assume the overwhelming majority would say it’s usually a bad idea.

For example, even first home owners grants can negatively influence a property market, creating artificial demand and leaving property stakeholders confused as to the state of the property market when these initiatives end.

So why would the PCA, Australia’s leading advocate for the country’s property industry, prepare a proposal to the federal government to alleviate supply and affordability issues in the property market?

The PCA’s federal housing supply proposal

housing supply crisis

The Property Council of Australia (PCA) is outlining a proposal to the federal government for a housing supply deal in post-pandemic Australia. Without reducing supply constraints, homes like this in Sydney’s Summer Hill remain well out of reach for the majority of Australians.

“You can’t tackle housing affordability in Australia without dealing with supply,” says Property Council Chief Executive Ken Morrison. Mr Morrison is, as his title would suggest, the primary driver for the proposal, who told real estate publication The Urban Developer early in November the federal government isn’t directly responsible for planning on-the-ground infrastructure provision.

But Mr Morrison also says the fed can come up with a bilateral agreement with each of the states and territories to supercharge housing supply. It can do this by identifying all those gaps and blockages that exist in key housing corridors – and getting those issues solved.

Currently, housing affordability is a huge issue and is the result of major housing supply bottlenecks in several of our cities. With COVID-19 finally letting up (or at least the travel restrictions in relation to it) net overseas migration will soon recommence, meaning population growth pressure will emerge in the coming years.

The PCA’s proposed policy would get ahead of that. It would mean the federal government can supercharge that supply framework, address supply bottlenecks before they occur, and do something substantial to alleviate housing affordability.

What are the bottlenecks in Australia’s housing supply chain?

These bottlenecks aren’t consistent across each state, so there’s no one-size-fits-all solution for each territory.

Take southeast Queensland, which has had a huge population shift since the pandemic; the highest population growth in the country according to The high population growth of course means the swelling populace has sucked up multiple years of housing supply in key corridors. Mr Morrison projects some corridors have gone from ten years’ worth of supply to just two years, with huge shortages yet to come.

“The blockages there [southeast Queensland] are around getting the land rezoned but also getting the funding in place for that supportive, on-the-ground infrastructure that’s necessary to make housing happen,” Mr Morrison said.

housing supply bottlnecks

Housing supply bottlenecks aren’t consistent across each state, so there’s no one-size-fits-all solution for each territory.

“We’re going to need that quick smart. If we take two years to do that, we’re going to be out of land supply in key southeast Queensland corridors.”

Sydney has a ‘same but different’ problem, in that housing affordability is ruining the chance for future generations to enter the market. According to Mr Morrison, Sydney’s property industry has a complex planning system, inhibiting the ability to free up space and allow new development. The state government, despite good intentions, has been unable to simplify this system.

The solution likely lies in a supercharged focus from the state government with the support of the federal government.

Here we have two very different precincts with two very different potential solutions. Both require the support from the federal government.

What would the federal government’s assistance look like? How would they help speedily unlock supply?

The PCA’s chief executive suggests a multi-stage approach from the federal government:

  1. Establish a budget to resolve housing supply issues;
  2. Announce a bilateral agreement with each state to tackle their individual challenges and bottlenecks involved in speedily increasing housing supply;
  3. Have a team that goes to work with each state government to help identify those challenges and create tailored solutions.

Mr Morrison suggests this plan could be rolled out within six months, with a tangible outcome expected to unlock a substantial amount of usable land.

The PCA’s chief executive suggests a multi-stage approach from the federal government to resolve housing affordability issues, including setting a budget with each state to focus on supply bottlenecks.

The timing of the proposal perhaps could not be better, with the current government entering an election year in 2022. Accepting the proposal, or ensuring swift action on a fast-deteriorating issue, would allow them to boast that they’re doing something very substantial about the housing supply crisis, while recognising that population growth pressures are about to reemerge.

What has the response been from the federal government?

Mr Morrison says that the government is listening. And that, given the national level priority that housing affordability is, it makes sense there should be a federal government focus on smashing through some of these housing supply barriers.

“One thing we know about housing affordability is that the fundamental thing we need to address is housing supply. Interest rates will do their own thing. Hopefully employment stays up, so that will do its own thing. We know population growth will reemerge. So what can we do? What can policy makers implement? It’s housing supply.”

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