Ah, the housing accord. The policy that rears its head at budget time and at budget time only. It got good billing in the treasurer’s speech again this year, with Chalmers reminding us that it “aims” to build 1 million new homes in the five years after 2024.
With housing at the forefront of the cost-of-living issues Australians are facing, the government is contending with an extreme dilemma. How to solve the problem? The housing market is such a behemoth, with trillions upon trillions of dollars’ worth of land and buildings, that to shift it materially would cost a fortune. The federal budget might seem big, at $680 billion a year, but it is dwarfed by the value of the housing stock.
So the government continues to merely nibble around the edges, trying to create the conditions where the housing market will solve itself, and at the same time handing out cash to the people most horrifically disadvantaged by the high costs.
The newest ideas in the housing accord include a tax break for build-to-rent projects and extra backing for the National Housing and Finance Investment Corporation (NHFIC). It is supposed to build at least 1200 houses in each state over five years. Actually, scrap that, it doesn’t build them itself. Instead, the budget says it will “require NHFIC to take reasonable steps to allocate a minimum of 1200 homes to be delivered in each state and territory”. More weaselly words are hard to imagine.
People, people everywhere
An additional 1200 homes over five years sounds like a welcome addition to Australia’s housing stock. But we need to keep it in perspective. Because the budget also reveals that Australia’s population has been upgraded by 1.5% since the last budget. That’s an increase of about 325,000 people since last October. Net overseas migration in 2022-223 is expected to be 400,000 and 315,000 next year. Even 1 million homes will be soaked up quite quickly at this rate.
No wonder CoreLogic is reporting “the strongest annual rental increase on record for Australia’s capitals. Rents are driving CPI higher and causing household budgets to collapse under their own weight. The government is pushing back on that rent hike with an increase to rent assistance. The government is giving up to $31 a fortnight extra to renters to help them.
A cynic might say that in the tightest rental markets seen in generations, this subsidy will be passed entirely to landlords, but cooler analysis suggests it will probably only be mostly passed through. (After all, there is some extent to which the supply of rental properties will increase as renters can afford to pay more.)
Now, we might expect that if rents are soaring, property prices are rising and so is the population, that the construction sector will get busy building. That’s how markets work, right?
Unfortunately the budget predicts the exact opposite. Dwelling investment is predicted to fall even as net overseas migration is strong. We can only hope this is one of the predictions the budget gets egregiously wrong. The alternative would mean a housing market where rental properties become like toilet paper in the pandemic, and you can’t get one at any price.
Forget the budget deficit. We have a deficit of homes and this budget does nothing to address it let alone fix it. Don’t expect the coalition to do anything other than make things worse. Hell, they don’t even support rising Jobseeker. They want to move the unemployed ‘Pol Pot’ style, out to rural areas where there are shortages of labour according to their comical deposed leader Michael MacCormack. Housing will be the Achilles heel of this Labor Government. They won’t spend the $10 billion. They want the sharemarket to do the work and spend a small portion of this on public housing but really they should spend the lot over the forward estimates. This is the only way. With the increase in overseas migration, many really expats coming back home, there is the real risk of putting more arrivals into poverty, not just through lack of income support by governments, but through the market failure in housing making it a real catastrophe.
We don’t have a deficit now, MG, we have a Surplus AKA the Holy Grail, at least in Australia – no other country plays this ridiculous political game of surplus chasing, certainly not in the OECD.
Listen to Labor crow about their Surplus. Fact is, it’s purely due to inflation. Inflation has some good points and paying down debt faster is one of them, including public debt.
The Federal ALP Government is still wedded to the notion of laissez-faire economics in housing and finance. They don’t want to spend money much on public housing because they think it will end up a disaster like Pink Batts. True! They are petrified. Where are you going to put them? What social and economic supports and opportunities are there in place where you do? Community opposition is large possibly. I think also most importantly the Federal Government does not want a boom in public housing construction, (I support strongly public housing construction incidentally), because they are worried about job vacancies, rising labour costs and skill shortages in this industry. Where are you going to find the carpenters, electricians, brick layers, plumbers, draughtmen, planners, engineers, labourers, etc to work in this industry, plan to deliver x amount of homes and hope to God they are built on time and on budget. It’s bad enough for this stuff to go wrong in the private sector but Government-led housing initiatives?! This is me making hopefully an educated guess or playing Devil’s Advocate but I think the government should take the risk and get in there and build homes for people through public housing.
As someone else observed recently, the ever upwards march of real estate values is the problem. In other words, housing people is less important compared with protecting asset prices. The only thing that will make housing more affordable is lower house prices or if you like, dramatically higher wages across the board not just for high income earners. Neither is a possibility given the politics of both solutions.
Why don’t we embrace pre-frabrication or modular construction techniques which are on the rise around the world. Certainly would reduce cost, reduce time and hopefully, improve quality.
The housing shortage seems to extend to Crikey’s photo library. I’ll swear those houses aren’t in Australia.
No, they are from Brazil, 2013 as pointed out last time they ran the shot.
No shame at all, as when constantly using that ‘fake tradie‘ shot of a fashionably stubbled hunk in full builder’s utility belt, looking intent as he pointlessly measured the distance between the drill’s pressure hose spread across the floor (screw OH&S) to nowhere in particular.
Image is from ‘Africa’ apparently… https://www.shutterstock.com/image-photo/aerial-photography-africa-1191391981
One has seen these FIRE media led housing crises regularly popping up before, but if it’s so obvious, where is the granular or grassroots evidence including all housing types for different cohorts; house is simply one type while e.g. single retired women are another, where’s the analysis?
Latter should read or better example e.g. houses for families, but that is only two components of a more complex whole?