investigation
Will Federal Government’s promise to build an extra million homes really help struggling Australian families?

The Federal Government’s new housing Accord has been labelled everything from a gabfest to a game-changer but one thing is agreed — it will not boost the rate of construction. Touted by Federal Housing Minister Julie Collins as “the most significant housing reform agenda in a generation,” the policy has set an aspirational target of one million new homes around Australia between 2024 and 2029. Only problem is Australia built one million homes over the last five years so this “aspirational target” is a commitment to keep doing what, in essence, the nation has been already. Also industry stakeholders have raised concerns over how affordable these news homes will be anyway. But Ms Collins insists the Federal Government is facilitating “meaningful, life-changing investments to help build new homes for those who need them most.” Treasurer Jim Chalmers continued the chest-beating on Friday, claiming the scheme would bring together investors, the building industry and all three levels of government to do “something meaningful about affordable housing.” “The lack of affordable rental properties is one of the big challenges that we have in our economy,” he said. “What we’ve done here is bring people together to try and find solutions, bring people together from all different sides of politics, and all different parts of the economy to try and shift the needle when it comes to our housing supply issues. So I’m really proud of the Housing Accord.” If Australia hits the targetted 200,000 new homes each year, it will maintain the rate of construction in the five years to March. And while the construction sector treads water — in a best case scenario — the population is set to jump. Net migration will increase from 41,000 this financial year to 180,000 in the next, 213,000 in the following year, and 235,000 annually thereafter. Property analyst Gavin Hegney said the Accord’s commencement in 2024 will come too late to save WA from its current crisis. Perth’s 0.8 per cent rental vacancy rate has forced families to live in their cars. Some are forced to live with domestic violence because the shelters are full. Others are forking out $400 a week just to rent a single room in a share house. “If you think the crisis is bad now, wait 12 months,” Mr Hegney said. “By the time the game-changer bites, the game will have already changed.” By Mr Hegney’s analysis, Perth could currently accommodate fewer than 10,000 extra people, and even then, only if every single rental or listed property was taken off the market and occupied. Mr Hegney said the Accord misses opportunities for immediate relief, such as the removal of tax and welfare penalties from pensioners who rent out bedrooms, or disincentives for Airbnb properties. Nonetheless, he is not dismissive of it, claiming its ultimate success depends on how it is executed. He said if it does manage to remove some of the taxes and costs involved in bringing land to market, prices will drop and property should become more affordable. So how does the new Future Fund and Housing Accord intend to do this? Firstly, the Federal Government is not proposing to build one million homes itself. But it is putting $10 billion into a Future Fund, which will finance new housing in the same way the Federal Government finances public servants’ superannuation. The capital will remain in the fund in perpetuity, and the income it makes — about $500 million a year from 2024 — will be used to issue bonds to private investors, like superannuation funds, who invest in social and affordable housing. It is expected to cover the cost of 30,000 new social and affordable homes in the fund’s first five years. The intention is that the bonds are a guarantee, ensuring investors eventually get their capital back, plus a certain amount of interest. Plenty of pundits have been quick to point out that superannuation funds must invest in the best financial interests of their members. Given that, which fund in its right mind would invest in residential housing, which currently has returns of about 3 per cent, compared to 5 to 7 per cent in commercial property? Chief executive of the Master Builders Association, Denita Wawn, who also sits on the board of a superannuation fund, agrees the current returns on social and affordable housing simply do not stack up. But she said the broader intent of the Accord is for all three levels of governments to work together to address the bottlenecks that make development more costly than it needs to be. That includes policies to ensure adequate land release, an adequate flow of titles and reductions in the time it takes to get planning approvals, among other things. She said that once these issues are addressed, costs should reduce enough to make investing in social and affordable housing a low-risk and worthwhile investment. “Superannuation funds already invest directly or indirectly in bonds, but in a way, they would be investing in bonds through community housing.” The only major part of the Accord’s new housing supply which does not involve private investment is an additional 10,000 affordable homes financed through a $350 million investment in the Housing Accord. Ms Wawn said the Accord had its challenges — such as maintaining the construction rate amid the labour shortage — but she was optimistic it would be a success. “I think it’s a gamechanger,” Ms Wawn said. “For the first time, all levels of government, in every State and Territory, are looking ahead to solve the long-term problem of our housing shortage.” Prime Minister Anthony Albanese acknowledged on Friday that the aspirational target of one million homes was not an increase. But he said it was a boost on what had previously been projected for the next five years. “What we’re doing with this Housing Accord is we’re bridging the gap between what we expect under business as usual, and something closer to 200,000 a year from 2024,” he said. “So this is an ambitious target, we have built a lot of homes in the past, we are projected at the moment not to build anywhere near 200,000 a year.” Staying on message, he reiterated the Treasurer’s comment that it was an attempt to “shift the needle when it comes to vacancy rates and rents.” But Greens housing and homelessness spokesperson Max Chandler-Mather, was scathing of the policy, claiming Australia will go backwards under the plan. He said it was essentially a business-as-usual approach, in the midst of one of the country’s worst-ever housing crisis. “For them to take credit for one million new homes over five years would be as ridiculous as the Liberal Government taking credit for the past five years of residential construction,” he said. Mr Chandler-Mather points out that it does not do enough to address affordability, with the plan committing the Federal Government to building only 40,000 social, community or affordable homes. With the remainder to be built and financed by private enterprise, there is nothing to stop those 960,000 homes from being decidedly unaffordable. “Right now Australians need at least an extra 520,000 public and community homes, and that need increases by 14,000 homes every year. “So Labor’s plan to build 8000 public, community and affordable homes a year won’t even match the yearly increase in need, let alone tackle the crisis. “At the end of Labor’s five year plan, we will see more people waiting for public and community housing, more people struggling to pay the rent, and the lowest levels of public and community housing since World War Two.” Chair Nicola McDougall, chair of the Property Investment Professionals of Australia, said the policy was a “sound start” but she felt it had been misrepresented, as if the Federal Government alone would deliver the one million homes. “The term ‘smoke and mirrors’ does come to mind,” she said. Ms McDougall also believed it was highly unlikely that the one million dwelling goal would be attained, given the labour shortage. “The scheme seems to have an over-reliance on the private sector and superannuation funds to supply affordable homes when there also needs to be a profit for them somewhere along the line,” she said. “I’m not sure how that will work in practice. “I was also disappointed that mum and dad investors were ignored again, when they continue to be the number one provider of rental accommodation in the country. Local reaction to the Accord has been more supportive, though there is a widespread acknowledgement of the challenges. Tanya Steinbeck, who heads up the Urban Development Institute of Australia (WA), said it was a sensible approach given the number of homes needed, and the Government’s limited capacity to deliver them. Ms Steinbeck said the National Housing Financial Investment Corporation Review in 2021 revealed that Australia needed 45,000 affordable and social houses each year to maintain the existing huge shortfalls in housing. “Unfortunately, AHURI research shows that we are only building about 3000 (net) new affordable and social Houses each year,” she said. “UDIA National’s research also shows that Government and Community Housing Providers currently only have total capacity to deliver on average about 8,500 social and affordable dwellings — gross — a year. “Government and CHPs alone cannot provide enough affordable housing without enlisting the help of the broader development sector. “That is why enlisting the help of the private sector is so important and encouraging investment in the residential housing market is so important to ensure that we are able to deliver on these targets.” She said a major challenge in meeting the target was the skilled labour shortage, but claimed there were signs it was easing. Cath Hart, chief executive of the Real Estate Institute of WA, said while there was no silver bullet to addressing the housing shortage, the Accord was a step in the right direction, even it did nothing to relieve the current shortages. Given the Treasurer’s Budget night speech had highlighted that most of the supply must come from private enterprise, she said it was time for a serious discussion on stamp duty reform and other matters that affected investor appetite. Property Council of WA Executive Director Sandra Brewer also welcomed the Accord, but noted the challenges and the work that needs to be done to bring the goal to fruition. “The strain of labour shortages and escalated costs that the industry is already facing will add to the challenge, but the WA government’s focus on migration and attracting people to WA will enable targets can be met,” she said. But the cautious optimism of a better housing market on the horizon will be cold comfort for those sleeping rough tonight.

investigationWill Federal Government’s promise to build an extra million homes really help struggling Australian families?

investigation
Will Federal Government’s promise to build an extra million homes really help struggling Australian families?