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What are the barriers to building more homes?

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Prime Minister Anthony Albanese says more supply of homes is "key" to housing affordability. So how many more houses does Australia need, and what are the barriers to building them?
barriers to building new homes

During the week, National Cabinet agreed to a new target of 1.2 million new homes built by mid-2029.

Prime Minister Anthony Albanese says more supply of homes is “key” to housing affordability.

So how many more houses does Australia need, and what are the barriers to building them?

Do we need more?

The main argument for increasing housing supply is that it can meet Australia’s demand for housing (both to buy and to rent) at lower prices.

However, it’s often pointed out that Australia already has one million ‘vacant’ homes, which could be filled first without new homes being built.

That one million figure comes from the Census, but it doesn’t tell the whole story.

The Census asks Australians where they are on the Census night.

If somebody is away on holiday for the night or staying at a partner’s house, the Census counts their house as vacant.

The same is true for a house that is up for sale, in between tenants, under renovation or set for demolition.

The 2021 Census did not ask why homes were vacant, but results from older censuses suggest around 90% of ‘vacant’ houses have a reason for being empty.

‘Missing houses’

Meanwhile, the growth in new houses has failed to keep pace with population changes over a long period.

If house construction rates in the 2000s and 2010s had matched the levels seen in the 1980s and 1990s, we would have 1.3 million more houses today than we do.

As a result, Australia today has fewer homes per person than most developed countries. Surveys indicate there is a particular shortage of medium-density housing in urban locations, relative to what people say they would like.

So what are the barriers to building new homes?

Planning decisions made by local councils are one commonly-identified barrier to building more housing. Councils decide which land will be ‘zoned’ to allow higher-density development, and approve or reject individual development proposals.

A recent report by the government housing agency NHFIC found council opposition to development is a major obstacle to additional supply. The NSW and Victorian governments have both recently announced plans to take some decision-making power away from councils.

Social housing

The decline in social (government-funded) housing availability over time is another major barrier.

Australia’s social housing levels have barely changed since 2006, despite significant population growth over this period.

Official figures show nearly 200,000 families are currently on the waiting list for social housing, although NHFIC warns this is likely an underestimate of the total unmet need.

Construction

The construction industry is also struggling after years of disruptions, including COVID-related and rain-related delays to projects and higher costs for building materials.

In the 2022-23 financial year, 2,213 Australian construction companies became insolvent – by far the most of any industry.

National Cabinet

The National Cabinet target agreed earlier this week is to see 1.2 million homes built over five years, starting in mid-2024.

The target includes both private and social housing, and does not specify what type of housing.

The Federal Government has promised up to $3 billion to reward state and territory governments who exceed their share of the target, which the PM says is to encourage them to pursue laws to
free up more supply.

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