For more than a year, I’ve been pointing out that the re-elected Albanese government has no chance of meeting its ambitious housing target of building 1.2 million homes by mid-2029.
As monthly, quarterly and yearly home approvals, building starts, and completions data have rolled in, I’ve begun to feel like a bit of a broken record, pointing out again and again that we are simply not building homes fast enough in Australia to meet this target.
Research by Mandala Partners for the Property Council of Australia recently predicted the nation could fall a massive 462,000 homes short of the target by the end of the 5-year National Housing Accord period.
The latest building approvals data confirms this trend.
Given that a continued housing shortfall inevitably means higher home prices, this is obviously depressing news for those who aspire to get into the property market.
However, if you already own property, this means what’s probably your most important asset - your home - is continuing to increase in value.
If you are an investor, this means that there will be no shortage of tenants for the foreseeable future, and rents are unlikely to go backwards.
The 1.2 million homes target
Let’s just rewind a bit and look at how we arrived at this point.
In 2022, the Federal government agreed the National Housing Accord with the states, the Australian Local Government Association, big industry super funds like CBUS and HESTA, two big institutional investors - BlackRock and IFM Investors - and with the Housing Industry Association, Master Builders Australia and the Property Council of Australia.
The original idea was that the Commonwealth would pay billions of dollars in a mixture of direct funding, incentive payments, and grants to state governments, councils and community housing providers to help the construction industry achieve a target of building one million new “well-located” homes between the 1st of July 2024 and the 30th of June 2029.
At the time, if you looked at reasonably conservative population projections, this target made sense.
Australia’s population was set to increase by roughly 1 ⅔ million people between 2024 and 2029.
If you work out that each dwelling houses an average of 2.5 people, you need just under 700,000 homes.
If you then add the existing shortfall of around 300,000 homes, you can see how the nice round figure of a million extra dwellings came about.
However, faced with a soaring inward migration intake after Australia’s borders reopened after the Covid-19 pandemic, the Albanese government realised that an extra 1 million homes would not be enough.
So, in August 2023, the Federal government got agreement from the states to upgrade this target by 200,000, in return for an extra $3.5 billion in payments to support the delivery of more homes towards this new 1.2 million target.
The latest building approvals figures
Data from the Australian Bureau of Statistics for March 2025 shows that there were 15,220 dwellings approved over the month.
This is 8.8% down compared to the previous month’s numbers, led by a 14.6% plunge in the “unit” segment, which includes higher-density projects like apartments - the very type of housing all levels of government say they want to see more of.
“March saw a fall in approvals across all housing types, with a particularly stark fall in apartment approvals reflecting the challenges faced to hit our national housing target,” says Matthew Kandelaars, the Property Council of Australia’s Group Executive for Policy and Advocacy.
“Apartment approval data is volatile, but their long project timelines need stable tax and planning policies.”
Mr Kandelaars says continuing labour shortages, elevated construction costs and “state-based development-killing taxes” are all putting pressure on new housing starts.
Nevertheless, he sees some hope.
“The past three years have established the strong foundations for Australia to build more homes, and with the election behind us, now it is time to shift to the delivery phase.”
There’s no doubt that despite the latest disappointing figures, total building approvals are still up on a year ago, with Westpac Bank economist Matthew Hassan noting that “even with the March fall, approvals are still tracking above where we expect them to land for 2025 as a whole.”
But the ongoing problem is probably best illustrated in the graph below from independent housing economist Cameron Kusher.
It shows how, as time goes on, the actual dwelling approvals figure (the teal blue line) is diverging more and more from the minimum monthly number of approvals that would be needed to meet the Housing Accord target.
“We are now nine months into the Housing Accord target period, which translates to 1.2 million completions over five years or 240,000 completions a year,” Mr Kusher says.
“In order to complete these dwellings, they need to be approved and completed.
“The reality is you need to approve and commence more dwellings than what is required to be completed.”
However, he says if you look at the “bare minimum number” of dwelling approvals required, you would need to approve 20,000 new homes a month for five years.
“Just nine months into the (National Housing Accord) period, the cumulative shortfall of dwelling approvals sits at 40,648 dwellings,” he says.
“This represents an average monthly shortfall of dwelling approvals of 4,516 dwellings.”
In simple terms, to have any hope of meeting the National Housing Accord target, there would need to be a major spike in the teal blue line in Cameron Kusher’s graph, taking it above the black line for a sustained period.
Another way of considering the challenge Australia faces to meet the National Housing Accord is to look at how the building industry has performed in the past.
The chart above from Macrobusiness shows that the building industry has only once come vaguely near the level of construction activity that would be required to meet the National Housing Accord targets, and that was at the height of the foreign-investment fuelled “apartment boom”.
A lot has changed since then, including curbs on foreign investment and planning regulations, which mean a lot of the small, airless, “boxy” apartments that were built then wouldn’t be approved now.
The team at Macrobusiness, led by Chief Economist Leith Van Onselen, argues that since it’s clear that the National Housing Accord targets won’t be met, the only way to ease the housing crisis in Australia is to drastically curb migration.
“The only viable solution to the housing shortage is to bring demand back into line with supply by cutting net overseas migration,” Leith Van Onselen says.
“Policymakers cannot expect to solve the housing shortage by importing hundreds of thousands of extra demand into the market every single year.”
The Albanese government has pledged to slow temporary migration (which includes international students), but it has already admitted its targets for 2024/25 are unlikely to be met.
Not only will the National Housing Accord targets not be met, but the aims to curb migration appear to be failing as well.
The housing crisis looks set to get a lot worse before it gets better.