Australia will have to build housing at a significantly faster rate than it has in the last couple of decades to meet the government’s target of 1.2m new homes between June 2024 and 2029.
To hit the target we need about 240,000 new dwellings every year, and new data shows we are already falling behind. The most recent State of the Housing System report predicts we will fall short of the target by more than 260,000 homes, an even bigger miss than was predicted the year before.
For decades, Australia built approximately 700,000 to 800,000 new dwellings every five years on average. This increased in the past decade – to more than 1m new dwellings constructed in 2014-2019, and just under 900,000 in 2019-2024. But to meet the 1.2m target, Australia would have to construct 20% more than in either of these five-year windows.
There are ups and downs in housing construction for many reasons. But Prof Christian Nygaard from Swinburne University notes that Australia has built at a fairly consistent rate of about 25,000 detached houses and 10,000-15,000 dwellings of other types (apartments etc) a quarter since the 1980s, despite huge changes and economic disruptions.
These include big swings in interest rates, the mining boom, introduction of the GST, changes to capital gains and negative gearing, the global financial crisis and even the Covid-19 pandemic.
One reason these haven’t had huge impacts is because housing construction is determined by the business models and needs of developers, landowners and other stakeholders, who aren’t always responsive to price signals. “If we ignore the internal logic of developers’ business models/plans we end up quite substantially overestimating what can be achieved with planning reform and cutting red tape,” Nygaard says.
Nygaard also questions whether the 1.2m dwellings target will significantly impact affordability. “The housing affordability challenges is the greatest for young and newly establishing households, for migrants, low and moderate income households, and First Nations Australians.
“These are also the households that are least likely to be able to compete for new supply.”
