Federal budget promises 1 million affordable homes – but is supply the answer?

Treasurer Jim Chalmers has delivered Labor’s federal budget for 2022, offering a plan for the severe housing pressures and lack of affordable housing across the country. 

An “aspirational” target of 1 million affordable homes has been announced – but how do we actually get there? And will supply solve the crisis?

Let’s break it down

The 1 million homes goal has been earmarked as “aspirational” because the government itself is only locked in for 10,000 homes from mid-2024.

The $10 billion Housing Australia Future Fund will be bolstered by a new national Housing Accord – which relies on superannuation funds and institutional investment to deliver affordable housing.

But the federal government has to make its plan commercially attractive in order to attract investments. 

There’s questions of the planning overhaul required to get there, and whether supply will necessarily unlock quality, affordable, sustainable housing for the community. 

Here are the key points: 

• a $350 million investment under the accord over five years, with ongoing availability payments over the longer term, to deliver an additional 10,000 affordable homes
• states and territories will also deliver an additional 10,000 affordable homes
• returns from the Housing Australia Future Fund will be used to build 30,000 new social and affordable dwellings over five years
• early disbursements of $330 million will be used to address acute housing needs
• a National Housing and Homelessness Plan will be developed
• the Regional First Home Buyer Guarantee will guarantee up to 15 per cent of the purchase price for 10,000 eligible first home buyers a year in regional Australia
• a $46.2 million expansion of the Defence Home Ownership Assistance Scheme to support veterans and Australian Defence Force members to purchase a home
• eligible home buyers will have access to an equity contribution to buy a home with a smaller deposit and a smaller mortgage under Help to Buy
• an extension of the exemption of home sale proceeds from pension asset testing by 12 months and expanding access to make downsizer contributions to superannuation for people aged 55 to 59

All this looks good, but is supply the solution?

Property Council chief executive Ken Morrison said the commitment is “bold and sorely needed”.

“We commend the government for making housing supply and affordability a centrepiece of this budget and for striking an agreement with the states and territories,” Mr Morrison said.

“Australia is facing a housing affordability crisis and as the Productivity Commission found last month, greater housing supply needs to be a key solution.”

Mr Morrison commended the establishment of the National Housing Supply and Affordability Council to review the policy settings for institutional investment into housing, with specific mention of build-to-rent housing. 

The target to create one million “new, well-located” homes over five years from 2024 will mostly come from the private sector. This is at least 100,000 more than otherwise forecast through normal market activity,” he said. 

However, others were not so hopeful that supply would be a solution. 

John Brockhoff, national policy manager for the Planning Institute of Australia said there will still be an ongoing shortfall in social and affordable housing. 

“It’s not just about the volume of housing supply, because housing supply alone doesn’t make housing more affordable,” he told The Fifth Estate. 

“It needs to be well located and well planned, it needs to be fit for purpose.”

He noted that according to previous forecasts, a big part of that target would have been delivered anyway. 

“Even with the commitment they’ve made, there is still an ongoing shortfall. We applaud the commitment, but it needs to be delivered at scale.

“No amount of new housing supply makes much of a difference on price while investment advantages for housing are so great.”

Better planning, or deregulation?

Denita Wawn, chief executive of Master Builders Australia echoed the sentiment on Sky News on Wednesday saying that the accord was “imperative” if industry is to meet targets of 200,000 homes a year. 

“We’re dealing with labour shortages, we’re dealing with massive material costs and battling lots of changes to regulation in the building industry,” she said. 

“We must build 200,000 homes each year, basically for the next 10 years, to ensure we can house enough Australians. And our forecasts show that we’re going to fall significantly below that margin.”

She called for loosening planning regulations in order to attract investment from superannuation funds. 

“We need changes within the system, mainly in that planning stage, the delays in development, land access and of course planning with zoning requirements… it’s not a simple solution. 

On RN Breakfast on Wednesday she said: “We’re talking about problems with insufficient land that is titled, we’re talking about delays in building approvals, development approvals and occupancy certificates, and also development charges. And the most important one is around planning restrictions. And so we needed a comprehensive agreement at all levels of government to resolve those issues.”

Developer Patrick Elias, Urban Property Group CEO also commented that planning regulations needed to be made more efficient and build-to-rent developments should be made more attractive through tax concessions and other means. 

However, while loosening planning regulations may free up volume, it won’t necessarily deliver good outcomes.

Wait – are we throwing the baby out with the bathwater?

John Brockhoff said that it was important planning regulations not be removed. 

“If you remove regulations and don’t hit goals, what’s the point of deregulation? 

“Planning is not in the business of being a barrier, it’s in the business of being a lane marker… It always keeps its eyes on great strategic outcomes, better communities, better sustainability and environmental outcomes.”

He said that the wording of the budget held the promise of better quality, sustainable housing. 

“There is a stipulation in the budget that affordable housing must be well located and energy efficient,” he explained. 

“We see that as a hook for good planning – particularly combined with a wellbeing budget. We need housing where communities function, environmental performance of housing is good, it is climate-ready, and builds community rather than just building housing.

“Do we support the call for planning deregulation? Sure, as long as it hits goals and enables us to get better outcomes. 

“Planning must have the lightest regulatory touch to deliver good outcomes – we don’t want them to be removed so much that they result in poor housing. We must ensure that needs are met.” 

MR Brockhoff said the housing plan needed more integration, and supported calls for a wellbeing budget, saying that there was a need for a national settlement strategy to better integrate housing and infrastructure commitments to deliver a wellbeing dividend. 

Calls for quality and community 

Executive director of non-profit Better Renting, Joel Dignam, said that there needs to be a fundamental shift around the way we view housing. 

“Instead of fulfilling this responsibility [to deliver affordable housing], this budget dodges it and tries to shift it to the private sector – the same financial institutions that were complicit in creating this problem and that have shown no appetite for doing something meaningful about it.

“Our problem is a commodified housing system. Housing has been turned into assets that are bought and sold not for their value as a home, but their value just as an investment. 

“We need a shift in our values, our rhetoric, and our policy, that makes the housing system actually about people and making sure they have good homes. Instead we see the government continue to shirk its responsibility, cross its fingers and hope that the private sector will do more.”