On first blush, Tuesday’s federal budget looked positive on the housing front. First, there was the previously flagged Build to Rent tax break for foreign investors, which has motivated Brookfield to announce projects in Brisbane within 48 hours of the announcement. Next up, increased rent assistance for those receiving other welfare payments.
Then there was the suite of energy efficiency policies, including $1 billion for the Clean Energy Finance Corporation to offer solar, storage and electric upgrade finance, $300 million for electrification and energy performance upgrades for social housing, and $36 million to expand the Nationwide House Energy Rating Scheme (NatHERS). This will go a long way towards empowering consumers to manage their energy consumption that is critical in lowering one’s carbon footprint.
However, the budget missed the opportunity to provide any meaningful reform of the housing sector to boost supply or improve affordability. Without policy intervention, these issues will be exacerbated in future years by the expected boom in overseas migration to Australia coupled with high inflation and the spiralling cost of living that is pushing more and more people closer to poverty and homelessness.
The rent assistance increase, while welcome, is just $30 more a fortnight for the highest category, which translates to a little over $2 a day, which is not enough to move the needle.
Our migration challenge
Net overseas migration is expected to bring a further 1.5 million people to our shores by 2027, which peaks at 400,000 next year, the budget projections show. Population growth is expected to increase by two per cent in 2022-23 and 1.7 per cent in 2023-24, up from the previously estimated 1.4 per cent.
Meanwhile, Treasury forecasts a 3.5 per cent decline in new dwelling investment in 2023-24. “We’re heading into a perfect storm where the supply of new dwellings is shrinking at the same time when people are going to be contributing to our job markets and learning in our universities,” Property Council of Australia chief executive Mike Zorbas tells The Fifth Estate.
Zorbas says the only way to fix this imbalance is for state and territory governments to have housing targets for all major capital cities and towns that are expected to house the new arrivals.
“This is not rocket science – there are four large cities in Australia, which will remain the largest and the magnets for educational and social activities. We need a productive planning system that is geared up to make the most of infrastructure, transport and employment corridors that should be dense,” Zorbas adds.
At the end of last year, the government quietly set up an interim National Housing Supply and Affordability Council, chaired by Mirvac chief executive Susan Lloyd-Hurwitz. The body’s role is to provide expert advice on ways to increase supply and improve affordability. The government intends to make the body permanent after passing legislation.
The body, which includes a raft of property, housing and planning experts, is ideally positioned to define housing targets based on the number and location of expected arrivals.
Solving the affordability puzzle
Boosting housing supply is one thing, but it will do nothing to address the affordability issue unless specific policy is implemented on this front. This is an important criticism of build to rent – it generally results in the construction of apartments that cost 10-15 per cent more to rent than comparable privately-owned dwellings, according to recent research from EY.
None of Australia’s jurisdictions mandate any kind of target for affordable housing in new developments, as occurs in the UK. One issue is that due to the price of land, affordable housing does not generate sufficient returns for developers.
One solution is for local authorities to purchase land and then mandate developers to build a certain number of affordable housing units, as many European cities such as Amsterdam do. The Brisbane City Council has had limited success with this model too.
It would be a step change for authorities like state governments or the City of Sydney or City of Melbourne to become landholders to stimulate developments. But solving the housing crisis is not going to be achieved in baby steps.