Housing Reforms on Right Track Despite Supply Gap

Australia’s housing reform agenda is showing promising signs of progress, despite being likely to fall short by 262,000 homes.

The National Housing Supply and Affordability Council’s (NHSAC) State of the Housing System 2025 report indicates more work is needed to meet ambitious targets, but that reforms already under way could help close the gap towards the Government’s 1.2-million target.

The report forecasts 938,000 homes will be built during the five years to June of 2029, which, after accounting for about 113,000 demolitions, will deliver a net addition of 825,000 homes.

This falls well short of the projected demand for 904,000 new homes during the same period.

Housing supply fell to near-decade lows in 2024, with just 177,000 homes completed against an estimated demand of 223,000.

Property Council of Australia chief executive Mike Zorbas said the report highlighted the urgent need to address housing shortfalls.

“The alarm bell continues to sound on national housing supply,” he said.

The shortfall is projected to be most acute in the next two financial years, and consequences will include household formation delays, overcrowding and increased homelessness.

NHSAC chair Susan Lloyd-Hurwitz said the Australian housing system continued to experience immense pressure.

But positive momentum is building, particularly in NSW where planning approvals are now 15 per cent faster than under the previous state government administration.

Applications lodged have increased by 28 per cent compared with the same period last year, and more than 70,000 homes are under construction in the state.

The report said NSW could meet its share of the target if it fully rolled out its new housing policies and if market conditions improved.

▲ NHSAC chair Susan Lloyd-Hurwitz. “Still very much in a housing crisis.”

The report outlined several opportunities for the housing sector, including Modern Methods of Construction (MMC) as a key fix that could reduce build times by 20 to 50 per cent and boost efficiency.

It said governments should back prefabricated housing by providing investment and stable, long-term procurement pipelines, creating new business opportunities for innovative builders and developers.

Zorbas said despite progress in government co-ordination, significant barriers remained.

“Our skills and planning systems are not yet match-fit for this century,” Zorbas said.

“More than 30 per cent of the cost of a new home is government taxes and charges” and that “the least cost answer for indebted states is to modernise our planning systems and put measures in place to boost the proportion of skilled workers coming into the country.”

Lloyd-Hurwitz said the deterioration of housing affordability and low levels of new housing supply in 2024 are “stark reminders that Australia is still very much in a housing crisis that has been decades in the making” but remained optimistic about policy directions despite ongoing challenges.

“It’s great to have policy going in the right direction,” she was reported as saying. “We need lower interest rates and construction cost to come down, we need pre-sales to pick up.”

Recent rate cuts should help the market, making projects more viable and boosting buyer interest. The report expects further gains as borrowing costs drop and the building sector grows.

“There are signs of slight improvement in parts of the housing system. Growth in housing prices and advertised rents slowed over 2024 and construction costs have stabilised. This is promising news,” Lloyd-Hurwitz said.

Several strategic opportunities have been outlined for developers, including opportunities to work with governments on planning reform, employ new building methods, move into build-to-rent and affordable housing and address climate resilience through sustainable design.

▲ More than 70,000 homes are under construction across NSW.

The report calls for planning systems with firm deadlines, zoning changes to allow denser housing in good locations, and for governments to help assemble land.

Tax reform is seen as a key to more housing activity, with a shift from stamp duty to land tax helping people move homes more easily and making the market work better.

Federal housing minister Clare O’Neil stressed the Government’s focus on “planning reform, supercharging construction worker training, [and] direct investment in building more social and affordable homes”.

The report reveals that high financing and building costs have made new housing projects harder to fund in 2024 but suggests that, as the economy improves and reforms take effect, the building sector will be ready to boost output.

NSW planning minister Paul Scully said the report “shows us that we have our work cut out for us, but … we’ve got our priorities right”.

Lloyd-Hurwitz, too, remained cautiously optimistic.

“The policies put in place, particularly around the supply side, the one that matters, will take time,” she was reported as saying. “We are seeing things go in the right direction. It will just take time.”