Lifting housing supply now a critical aim for both Labor and the Coalition budgets

Increasing the supply of housing in Australia is at the heart of the latest economic policies unveiled by the Federal Labor Government and the Coalition Liberal and National parties.

The major political parties have also committed to reducing pressure on renters, who have faced rent price increases in the past year that are twice the rate of national inflation growth. However, Labor and the Coalition are taking very different approaches to try reign in rental increases and boost the supply of apartments and houses.

Treasurer Jim Chalmers released details of a broad range of housing initiatives in the 2024-2025 Federal Budget. These include:

  • An additional $423.1 million for the National Housing and Homelessness Agreement (taking total funding to $9.3 billion over five years) to deliver public housing and homelessness strategies. This also includes a doubling in funding for homelessness services at $400 million per year to be matched by the states and territories.
  • A second-consecutive increase in Commonwealth Rental Assistance (CRA). This $1.9 billion investment over five years will increase the maximum rate of CRA by a further 10 per cent, following a 15 per cent increase last year.
  • Additional concessional financing of up to $1.9 billion for community housing providers and other charities to support the delivery of new homes.
  • An additional $1 billion targeted toward crisis and transitional accommodation for women and children fleeing domestic violence, and youth.
  • An additional $1 billion for the states and territories to help speed up construction on infrastructure to support new housing (i.e., sewers, roads, energy and water infrastructure).
  • Around $90 million for training and education to boost the construction workforce.
  • A better-targeted migration program, with student visa grants tied to the delivery of purpose-built accommodation.

Low income renters will get up to $31 extra a fortnight to help manage the costs of rents in what will be the biggest increase in Commonwealth Rent Assistance in 30 years.

The 15 per cent rent assistance increase will cost $2.7 billion over five years and will support around 1.1 million Australians, including the “most vulnerable”, Budget papers say.

Mr Chalmers told Federal Parliament an additional “part of the solution to pressures in the housing market” was “more homes for more Australians”.

According to PropTrack’s rental report for the March quarter, the rental crisis has deepened in the capital cities, with total stock at historic lows and demand surging.

Included in the Budget were plans to address critical housing supply shortages that have helped drive record increases in rents and home prices across the country.

An additional $2 billion will be allocated for investment in more social and affordable rental housing, effective July 1.

This support will see the liability cap of the National Housing Finance and Investment Corporation increase from $5.5 billion to $7.5 billion, allowing it to support more lending to community housing providers.

Tax breaks were also announced for build-to-rent projects as part of the federal government’s ongoing National Housing Accord aimed at building one million, new, well-located homes over five years, starting from 2024.

Housing supply has been a key issue across much of Australia, with Master Builders data showing approvals for new dwellings hit a decade low over the first three months of 2024.

Some long-standing apartment developers say they are building fewer apartments now compared to 30 years ago due to red tape issues like slow council planning approval processes.

Housing shortages have put unparalleled pressure on rents. PropTrack data shows that capital city rents increased by an average of 13 per cent – roughly double the rate of inflation – over the past year.

Opposition Leader Peter Dutton began his 2024 Budget reply speech by saying Australians are “genuinely hurting” under a Labor government.

“Today, millions of Australians are struggling to pay their bills – even going to the supermarket and petrol station has become stressful for many,” Mr Dutton recently told Parliament.

“Interest rates have gone up on 12 occasions under Labor and a typical Australian household with a mortgage is $35,000 worse off.

“Under this Prime Minister, the great Australian dream of home-ownership has turned into a nightmare – even finding somewhere to rent is near-impossible.”

Mr Dutton has vowed to cut migration to ease housing pressures.

The Opposition Leader promised to reduce immigration to Australia by 25 per cent over two years in his budget reply.

Mr Dutton claims his proposal would free up around 40,000 homes in its first year and 100,000 homes over the next five years.

Mr Chalmers’ third Budget has attracted criticism from some housing experts.

CoreLogic Head of Research Eliza Owen argues the Federal Budget’s property moves are wanting in several areas.

Ms Owen says the Budget failed to optimise Commonwealth Rental Assistance payments by making them better targeted.

“CRA payments vary depending on circumstances, but the maximum rate of around $125 per week means the biggest increase under the budget will be $12.50 per week,” she notes.

“As noted in our budget analysis last year, CRA increases offered by the government are very modest in dollar terms compared to actual rent increases in the private rental market.”

Ms Owen also questioned whether current construction capacity would be able to deliver the forecast number of new houses and units projected in the budget.

She says Australia’s construction sector is “overheated”, with too many projects stuck in the pipeline, and not enough feasibly-priced labour and materials to deliver them.

The Cordell Construction Cost Index shows new house build costs are up 27.6 per cent since the pandemic through to March 2024, and the new dwelling purchase component of CPI is up 36.1 per cent in the same period.

“Our construction sector is so woefully stretched, we are unable to deliver homes at historic average volumes, let alone a stretch target of 1.2 million homes in a five-year period,” Ms Owen says.

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