[+] The ‘Million Homes’ Question: Will Accord Action Match Words?

The devil will be in the detail. That’s the overriding consensus from the property industry on the federal government’s landmark national housing accord struck to combat Australia’s worsening supply and affordability crisis. Described as the “rabbit out of the hat” by one peak industry body, the initiative was announced on Tuesday as the centrepiece of federal Labor’s first budget since 2013, setting a target of creating a million new homes by the end of the decade. And while widely welcomed after considerable lobbying, the success of the accord struck with the states and territories as well as the private sector—significantly, superannuation funds—will hinge on a raft of changes to investment and development policy settings. “The devil’s in the detail,” Urban Taskforce Australia chief executive Tom Forrest told The Urban Developer . “And the detail that has always frustrated housing supply is the state jurisdiction responsibility for planning. “They say ‘yes, let’s all get on board, let’s invite superannuation in to help with the funding of affordable and social housing’. Tremendous, but unless it actually manifests itself in additional supply over and above what was already planned and anticipated, all you’re doing is crowding out the market. “What we want to see is a planning system, particularly here in New South Wales, that actually looks to increase height, increase density or new greenfield locations. “And that's the sort of conundrum we face when it gets to the detail. Where are the million houses going to go? We’re all for the policy. We think it’s great … it’s the first time that the commonwealth has ever taken direct responsibility for housing supply beyond social housing and the National Rental Assistance Scheme. ▲ Federal treasurer Jim Chalmers has delivered the ALP’s first federal budget since the Rudd administration. “But the rubber really hits the road at the state planning level, not the federal level. We need to see them putting policies in place that realise the dream.” Under the accord, federal funding totalling $350 million will be allocated to deliver 10,000 affordable homes over a five-year period from 2024. Additionally, a $10-billion Housing Australians Future Fund promised in the lead-up to the election in May aims to create 30,000 social and affordable rental homes. However, treasurer Jim Chalmers clearly indicated the supply needed to come from the market with the government simply playing “a key role in enabling and kick-starting investment”. The bulk of the heavy lifting in alleviating the chronic shortage of affordable housing across the nation will be put on the shoulders of the private sector with the carrot being dangled firmly in front of institutional investors and the $3.3-trillion investment firepower of superannuation funds to get involved—with an increased focus on the build-to-rent sector. “Super funds have been under-investing in housing supply in Australia,” Forrest says. “And, ironically, some of them have actually invested quite a lot of money in build-to-rent projects in other jurisdictions, in Europe and North America. “Some of them have now started to put their toe in the water and have moved into the space, particularly in Melbourne and Brisbane. “But what you are seeing here now is the idea that effectively the super funds will go in with the support of the commonwealth to top up the investment return … saying to the developer we will take this many apartments off-the-plan from you. “That gives the confidence to the builder and the banks to go and build the entire project because they’ve already got the underwrite. ▲ Substantial private sector investment is critical to the million new homes plan. “This is a clever way of using a relatively small amount of commonwealth money to work with the superannuation sector, to then secure the commencement of construction on some quite large building sites. “It’s exactly the sort of thing that we needed to see. “But it won’t really happen unless they change some of those things I talked about, like the slowness of the planning system and the willingness of the planning system to increase the heights and densities in the existing built-up areas. “Unless that happens, then it’ll all be a bit of a wheel spin and we’ll end up going nowhere.” Master Builders Australia chief executive Denita Wawn says the accord is something the building and construction industry has been crying out for. “Struggles around housing affordability have persisted over many decades,” she says. “These difficulties have arisen because the supply of homes has not been able to fully keep up with growth in housing demand. “Over the next three years, Master Builders Australia forecasts that new home building starts will fall significantly short of 200,000 per year, the volume of output that will be needed to meet demand. Our forecasts indicate this threshold will not be exceeded until 2026. ▲ The budget measure is designed to over come the prediction that demand will massively outstrip supply for new homes in Australia in coming years. “As a signatory to the accord, Master Builders Australia will work constructively with governments and industry to deliver the joint housing target of one million new, well-located homes over five years from 2024. “Master Builders has long advocated for the obstacles faced by the building and construction industry that prevent many of the homes we need from getting built to be addressed. This includes lengthy delays in approvals for land title, development and building applications, occupation certificates, shortage of land in the right places, high developer charges, and inflexible planning laws. “The RBA has recently identified the capacity constraints limiting the rate of housing growth and the level of dwelling investment with increases in labour and materials costs expected to compress margins and increase the risk of insolvencies, as such, this accord is timely.” Property Council of Australia chief executive Ken Morrison says the accord’s intention is “bold and sorely needed” and on Budget night called it “the rabbit out of the hat that is of most interest to the property industry”. “Enlisting the states and territories in the solution is necessary and welcome,” he says. “But there will need to be more tangible measures overlaid on these plans if the government’s objectives are to be met. “Importantly, the government has commissioned the soon-to-be established National Housing Supply and Affordability Council to review the policy settings for institutional investment into housing, with specific mention of build-to-rent housing.” National Affordable Housing Consortium founder Mike Myers agrees the overall target of the accord won’t be the challenge. In fact, with data from the Australian Bureau of Statistics showing that 985,000 new homes were built in Australia in the five years to March 2022, he describes it as “a fairly modest target”. ▲ The million homes target isn’t the challenge, according to National Affordable Housing Consortium founder Mike Myers. “The challenge will be getting the structural changes in place that will enable us to go way beyond the million homes. “So, it’s more the systemic changes, the really deliberate attempt to get a whole-of-government approach led by the Commonwealth, which will look at issues like planning—where a lot of the bottleneck is—as well as land release … and urban footprints. “But I really think that getting improvements in the planning system and delivering and certainly moving the private rental market from a mum and dad market to an institutional holding are really significant structural reforms that are long, long overdue. “I've been on record over the last decade reminding everybody that 95 per cent of all housing in Australia is private sector. “And if you're going to fix the housing system, you have to work with the private sector and you have to address some of the issues that hold back the supply of housing as well as the positioning of housing in terms of affordability, location, diversity and I think those things are going to now be more liberated. “I’m also pleased that we’re moving beyond a simple but important focus on social housing. I think on a policy level, it's been to the detriment of Australia that we have welfare-ised the social and affordable housing system and effectively turned it into a human services system instead of a housing system. “This accord brings all the critical players to the table and it says ‘you’re all part of the solution and, if you’re not, you’re part of the problem. And we’ll get on with it without you’. “But I think most developers will be looking both at the opportunities to partner around the provision of social and affordable housing and, through their industry bodies, to influence what the government is doing and making sure that their voices are heard on planning reform.” You are currently experiencing The Urban Developer Plus (TUD+), our premium membership for property professionals. Click here to learn more.

[+] The ‘Million Homes’ Question: Will Accord Action Match Words?

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