‘Worse before it gets better’: housing targets in doubt

“The housing crisis will get much worse before it gets better,” Deloitte says. “House prices will need to increase before the necessary boost to supply can be delivered profitably.”

Worse still for Labor, new Housing Industry Association research has found the target for 1.2 million new homes within five years would require a 50 per cent increase on current construction levels.

To meet its promise, Labor needs an average of 240,000 new homes need to be built each year. But Australia has only ever come close to that level twice, in 2016 and in 2021. Last year only 173,000 homes were completed.

Housing is set to dominate the federal election campaign, with a growing fight over supply and renters’ rights. Faced with a Greens legislative blockade, Labor agreed with the states to fast-track construction of 1.2 million homes.

But the HIA report says the industry does not have the required workforce capacity to get close, finding about 30 per cent more tradies are needed.

“The housing shortage that is driving up housing costs for Australian households can only be reduced through the efficient delivery of new housing in greater quantities than has been achieved in the past,” it says.

“The workforce of housing industry must grow if this is to occur.”

Opposition Leader Peter Dutton last week pledged expedited construction of 500,000 homes within five years, with a policy to spend $5 billion on water, sewage and other enabling infrastructure to speed up shovel-ready developments.

The Coalition would also block additional changes to the National Construction Code for 10 years, to reduce compliance costs and delays.

Deloitte partner Stephen Smith said the lack of skilled construction workers was a key driver of the housing shortage. BuildSkills Australia, the federal government’s jobs and skills agency, estimates 90,000 workers are required.

“With permanently higher construction costs, the sector will be both unwilling and unable to lift supply unless property prices also lift,” he said. “That is, housing affordability will get worse before it has a hope of getting better.”

Deloitte revised down its forecast of dwelling activity, forecasting fewer than a million new dwellings will be built over the next five years.

HIA senior economist Matt King said the workforce shortages were dogging capital cities and regional areas.

“The new-home building industry is in stiff competition for workers with buoyant non-residential construction activity and a historic Commonwealth government-funded engineering construction project pipeline,” he said.

Mr Dutton said his plan was very realistic and had been designed in consultation with groups including the HIA , the Property Council and Master Builders Association.

“All of them have fully endorsed the policy, and every economist will tell us that we need to get more supply into the housing market, given the demands that are there, given the population growth, and I believe it’s entirely possible,” he told ABC radio.

Housing Minister Clare O’Neil blamed the former Coalition government for the housing crisis.

And Labor’s $32 billion housing policy was being significantly delayed by roadblocks from the Greens and the Coalition in parliament.

Ms O’Neil said more houses were needed in greenfield developments and through increased density in existing areas.

“We need to assist with greenfields development, as our government is doing. We also need state governments to step up a bit on planning reform that will enable us to do infill in existing suburbs,” she said.