lloyd edge discusses the new plan to build 1.2 million homes
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  • The plan sets out to build 1.2 million homes over the next five years.
  • The move was broadly welcomed by industry, but concerns were raised over how the building and construction industry will be able to deliver homes.
  • Property investors are likely to avoid or use considerable caution in areas where there are affordable housing developments and large land releases.

The Albanese government announced on 16 August improvements on their plan to combat the housing affordability crisis which attempts to increase housing supply. Their ambition is to build 1.2 million homes over the next 5 years but the policy has its flaws.

The biggest issue that has not been addressed is how they are going to tackle the heavy reliance on the construction industry. There is no real incentive provided for the construction industry to take on the additional work and no answers to where the builders are going to come from to complete these jobs in an industry that already has profit margins tightly squeezed and builders going out of business left, right, and centre.

The ins and outs of the plan

  1. An increase in affordable housing supply by 1.2 million homes over five years.
  2. $3.5 billion in the budget for additional infrastructure (roads, schools, hospitals, transport).
  3. Social housing. A one-off $2 billion grant to refurbish social and affordable housing.

To accelerate the process, a further $3 billion grant was given to the states to accelerate land releases, planning and approvals process to build ‘well located’ homes. This is a $15,000 ‘incentive payment’ for each new home the states and territories build in addition to their share of the 1 million well-located homes.

There is a mandatory requirement for 30% of homes built on surplus government land to be set aside for social, affordable and universal housing.

On initial review, this plan appears to be bringing hope back to property buyers and renters who are struggling with housing affordability and the rental crisis. With an increased supply aimed at improving housing affordability, anyone who has been struggling to purchase a property would be rejoicing at this announcement.

However, when you look into the finer details of the plan, the timing may prove to be the failing point of the plan.

The housing affordability crisis also coincides with a shortage of builders and tradies who are grappling with the rising cost of materials. This plan is heavily reliant on private builders who will be tasked with their own private (more profitable) projects alongside reports of builders going broke across the country, leaving projects uncompleted.

The $3.5 billion pledge in the budget to support infrastructure does not seem enough to support the infrastructure requirements of new roads, bridges, transport, schools, hospitals, etc. to support the growing population. The cost of this additional infrastructure is sure to be falling onto the local councils and state governments to deal with the shortfalls.

There are many doubts that this target will be reached, especially within the five-year time frame.

How will property investors be impacted?

Property investors are likely to avoid or take a lot of caution when investing in areas where there are affordable housing developments and large land releases. This is because in order to secure the potential capital growth of their investments, investors are likely to look elsewhere where land releases are more scarce and supply is low.

There has been no announcement of incentives given to investors to supply more properties into the rental markets and with rising interest rates, investors are more likely to sell and retract their investments from the rental market rather than increase supply.

This is because it is getting more and more expensive to own property, and some properties that were previously positively geared may now have become too expensive for landlords to hold.

The lack of supply of rental accommodation has not been addressed, as property investors are the ones who are holding onto the immediately available rental supply. There have been no favours or incentives given to landlords to provoke more rental properties to be brought back onto the rental market.

Winners and Losers

The real winners in this policy are the States, who are monetarily incentivised to fast-track approvals, change zoning to accommodate higher-density builds, and cut down on red tape.

But on the flip side of the coin, the local and state governments are likely the ones who are going to have to pick up the bill when there is a shortfall in costs for new infrastructure to support these new builds.

The losers will unfortunately be those in need of affordable housing if the plan is not successful.

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