Federal budget
One million homes to be built under agreement with states and investors
Treasurer Jim Chalmers will on Tuesday reveal a joint government-private sector accord to build up to one million homes across the country.
A scheme to build one million new houses will be unveiled in Treasurer Jim Chalmers’ first budget in a historic accord between the federal government, the states and private investors including the superannuation sector.
Chalmers will use the budget to outline the government’s plans to bring together states and the investment community to increase housing supply with a particular focus on new affordable homes.
Multiple sources on Monday confirmed elements of the accord would be unveiled in the budget, paving the way for a massive private and public investment in new housing across the country.
The government declined to comment.
Despite a recent fall in property prices in capital cities and regional areas, Australian housing is among the most expensive in the developed world with the median house price in Sydney, Canberra and Melbourne above $900,000.
The recent rise in official interest rates has sharply pushed up mortgage repayment levels, while the rental vacancy rate is at an all-time low of 1.1 per cent.
This month, the Productivity Commission said the country had a “housing affordability problem”. Australians – particularly those on low incomes – are spending more on housing than they did at the turn of the century.
It found the current national housing and homelessness agreement ineffective as it failed to foster collaboration between governments or hold governments to account. It recommended state and territory governments commit to firm targets for new housing supply, including changes to planning laws and better coordination of infrastructure.
Every year, between 150,000 and 200,000 homes are built. In some of these cases, the new builds simply replace existing stock.
The housing accord will attempt to drive changes in planning regulations, the release of greenfield and brownfield land for housing and encourage private investment in long-term property plays.
Earlier this month, Chalmers revealed an investor roundtable involving the government, the CEOs of the nation’s big four banks and the heads of the largest superannuation and investment funds would be held in November with a focus on social and affordable housing.
Representatives from state governments, local councils and the construction sector would also be at the meeting, which Chalmers revealed would set “a mix of short and long-term actions to address the supply problems in Australia’s housing market”.
Chalmers said at the time the focus would be on issues including planning processes, access to land and ensuring affordable housing was energy efficient.
A key aim would be to find “creative” ways to bring in institutional investments into the sector while delivering good returns to investors.
“In the world we’re in – with growing social need and tightening fiscal constraints – there’s a call for all of us to develop more creative solutions – which is why part of our contribution is exploring and expanding opportunities to collaborate and pursue co‑investment,” he said.
“Again, creating partnerships that can provide an investment dividend and a national dividend.”
Last month’s jobs and skills summit backed a plan to widen the remit of the $1 billion National Housing Infrastructure Facility which under existing rules can only sink money into infrastructure that “unlocks” housing supply.
The summit recommended up to $575 million should come from the facility to invest in social and affordable housing, noting it could be used to partner with governments and social housing providers to attract private investors including superannuation funds.
A source in the housing industry who spoke on the condition of anonymity said they expected commitments from the states as part of the deal, as well as superannuation and private industry funding.
They said the $10 billion Housing Australia Future Fund, promised by Labor ahead of this year’s election as a way to build 30,000 new social and affordable housing properties in five years, may be accelerated. Investment returns on the fund were to be transferred to the National Housing Finance and Investment Corporation each year, to be used to pay for social and affordable housing over the long run.
Instead of having the $10 billion added over three years as planned, it would be introduced in the first year, with potentially more than $10 billion committed to the fund.
Internal Reserve Bank documents released under Freedom of Information laws at the weekend revealed the institution expects its sharp increases in official interest rates to contribute to a fall of up to 20 per cent in house prices.
Despite the fall, median house prices would still be well above where they were before the advent of the COVID pandemic. The bank believes housing capacity constraints could send some builders to the wall.
“Binding capacity constraints, which are expected to last until mid-2023, are now expected to limit the rate of growth and the level of dwelling investment,” one document noted.
“Strong growth in labour and materials costs are expected to compress margins and increase the risk of insolvencies.”
