Housing to be front and centre in Budget 2024

The Albanese Labor government will put housing front and centre in this week’s national budget, as it seeks to assure Australians it’s working hard to ease the chronic shortage of homes and soaring rents.

More than $11 billion in funding is being set aside for new housing programs.

The details

The bulk of the money is aimed at bolstering social housing, with the Commonwealth agreeing to a new $9.3 billion deal with the states and territories to build more social housing and tackle homelessness over the next 5 years.

$1 billion will be directed towards crisis and transitional accommodation for women and children fleeing domestic violence and for homeless youth.

“Labor will always look after our most vulnerable Australians,” Prime Minister Anthony Albanese said, unveiling the new funding.

“That’s why we’re making the biggest investment in social housing in over a decade.

“And we’re doubling funding to address homelessness.”

Speaking after a meeting of the National Cabinet where the new funding was agreed with the states and territories, the Prime Minister declared this “isn’t about one suburb or one city or one state.”

“It’s a challenge facing Australians everywhere, and it needs action from every level of government.”

In a bid to free up some of the bottlenecks that are slowing down new housing developments and land releases by state governments, the Commonwealth is also offering an extra $1 billion in funding to build roads, sewers, energy, water and community infrastructure needed to bring more new housing supply online faster.

And in a bid to ease some of the pressure on the private rental market, which has seen rents soar and the national rental vacancy rate collapse to 0.7%—a record low, the government has flagged it will introduce new rules to compel universities to increase their supply of student accommodation.

According to the Nine newspapers, the Albanese government is also preparing a new law to set a cap on the number of international student places Australian universities can offer each year.

With the housing crisis exacerbated by a dramatic easing of border controls after COVID-19, Nine is reporting the budget papers will contain new population forecasts, showing the net migration intake will fall from 518,000 last year to about 260,000 next year.

The reaction

The Property Council of Australia has welcomed the extra housing funding, saying it will support reaching the national target of building 1.2 million new homes by 2029.

Chief Executive Mike Zorbas highlighted the importance of the $1 billion in extra funding to develop infrastructure.

“Hitting the housing targets now hinges on concerted federal, state, and industry partnership on rezoning, faster approvals, more skilled workers, and last-mile infrastructure,” he said.

"This additional $1 billion means new homes will get built faster.

“We also welcome the historic recognition of purpose-built student accommodation as a critical asset class supporting Australia's housing needs.

“These projects are the fastest way to add housing choice for young people and take pressure off the broader rental market,” Mr Zorbas said.

Master Builders Australia said the extra funding would give “new home building across the housing spectrum a much-needed funding boost.”

However, the lobby group’s CEO, Denita Wawn, said governments now needed to “turn their minds to reducing the other barriers to housing supply.”

“Workforce shortages, low productivity, industrial relations, and planning reforms all continue to drag down our capacity to deliver the 1.2 million homes over the next five years,” Ms Wawn said.

1.2 million homes in 5 years? Maybe…

In an interview with The Australian newspaper after the housing package was revealed, Treasurer Jim Chalmers was surprisingly frank about the national plan to build 1.2 million homes from 1st July.

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“It will be difficult, but it is achievable and possible, but only if we continue to invest, the states and territories continue to do their bit, and we continue to invest in the workforce that’s going to build these homes.

“It’s about making sure we’re getting maximum value out of the $25bn we’re investing in 17 different ways already, combined with some new initiatives which recognise that we won’t get that 1.2 million homes unless the Commonwealth plays a big role, and we’re prepared to,” he said.

“And we need to have the workforce too and that’s why we announced those 20,000 fee-free (TAFE) opportunities because we need the builders and construction workers to get this job done.”

Long-time housing industry analyst Harley Dale welcomed the new Federal funding but said, “There are still way too many roadblocks in the way of driving an acceleration in new home building.”

He says his current forecasts are for around 162,200 dwelling commencements in 2024/25 and 193,400 in 2025/26.

“That gives us 357,600 homes, leaving 842,200 dwellings to construct over three years,” Mr Dale said.

With the current challenges facing the building industry, and given that just 161,500 homes were approved over the past year, I’d suggest any hope of building what amounts to just under 281,000 homes a year for three years is extremely optimistic.

Let’s see exactly what the government reveals on Tuesday night, but my assessment is that Australia’s housing shortage will continue, driving up home prices and rents for the foreseeable future.