Opinion
Can Australia rise to the challenge and deliver 1.2 million new homes?
Alan Duncan
Director of the Bankwest Curtin Economics CentreAustralia needs to build its way out of the current housing crisis. This will not only deliver much-needed homes and ease the overheated property market, but a strong, efficient and innovative construction industry is integral to Australia’s economic and social progress.
Yet at current completion rates, the National Housing Accord target of 240,000 new dwelling units each year is quite simply out of reach.
Less new homes would be needed if it were easier for owners to downsize.Credit: Paul Rovere
Australia’s construction industry will fall at least 60,000 properties short of its target next year, based on average completions over the past five years, according to the Building the Dream report released Wednesday by the Bankwest Curtin Economics Centre.
Rising construction costs, a financially precarious contracting model, and sustained leakage of skilled construction trades workers to other sectors have all conspired to erode the productive capacity of Australia’s building and construction industry – and drive a significant number of property developers out of business for good measure.
The problem has been building for some time. Housing supply needs to shift away from the current concentration of larger detached dwellings towards a more diverse set of options at a range of price points: smaller and more affordable dwellings rather than the premium end of the market.
Government incentives to support greater housing diversity are a way to assist the construction industry in overcoming the lack of financial viability of new property development projects due to high materials costs and a scarcity of construction workers.
A thorough review of building contracting methods is needed to deliver a solution that protects both consumers and builders. It should consider contracting, pricing and risk allocation models that balance the relative benefits of cost certainty for consumers with financial viability for builders.
Commonwealth and state governments should lead by example, and pilot alternative contracting approaches for public sector construction projects.
The homes we have are underutilised
In all the conversations about national housing targets and increasing the number of dwelling completions, not enough has been said about how efficiently we use our existing housing stock.
There are parallels with the national debate on how Australia should respond to skills shortages.
Much of the debate’s focus is directed towards raised migration caps and more training, but far less attention is devoted to how efficiently we use our existing skills base by lowering underemployment and removing barriers to participation.
The same is true for housing.
There were 6.9 million properties in Australia with unused bedrooms in 2021. If we add together every spare bedroom across the country, the count comes to a remarkable 12.2 million spare bedrooms.
Even if every dwelling with at least one unused bedroom were to use one of those rooms for another purpose, that would leave 5.3 million spare bedrooms as vacant capacity.
The extraordinary rate of vacant capacity in Australia’s housing stock raises two issues.
We don’t use our housing stock as efficiently as we should and the housing mix appears not to meet the demands of a diverse and changing population.
Reducing transactions costs from stamp duty and improving the diversity of available housing options will encourage more “right-sizing” among homeowners.
This would help release vacant housing capacity and improve the efficiency with which Australia’s current dwelling stock is being used.
Social housing provides essential security to those in greatest need, but diversity in the supply of affordable housing options is also essential to help social housing tenants transition to the housing market, and to provide ongoing shelter to households on low incomes.
Adding to Australia’s housing stock is not the only challenge facing the building and construction sector.
Property developers also have an important role to play in reducing Australia’s carbon emissions, through sustainable construction processes and delivering environmentally sustainable housing and infrastructure assets.
But property developers and homebuyers should not be left to shoulder the cost burden of achieving net-zero.
The government needs to provide financial subsidies and encourage investment in low and zero-carbon building processes and incentivise reduced carbon and recycling materials.
Training the workforce in sustainable construction methods is essential for meeting climate goals. Strengthening local procurement and supply chains to help local businesses compete effectively for contracts is also part of the solution.
An efficient, well-functioning housing system is essential to Australia’s economic, social and environmental future.
The future starts now. We need to roll up our sleeves, grab a shovel and break some new policy ground to bring housing dreams to reality.
Start the day with a summary of the day’s most important and interesting stories, analysis and insights. Sign up for our Morning Edition newsletter.