Housing crisis: more of the same in 2025?

 You have to wonder about some (not all) of our nation’s political leaders. They express heartfelt concerns about “the housing crisis” and clasp their hands preaching affordability at every media opportunity they can find. But at the same time, they quietly bring on new taxes or regulatory costs which ONLY impact the new housing sector – the very one favoured by young families getting started in life. Or they spruik urban policies which they claim will address the problem but which almost anyone who has ever laid a brick in their life will tell them simply do not work. Some (also not all) of the bureaucrats they employ likewise mouth the words ‘housing crisis’ but in terms of doing much about it, it’s business as usual. No pressing sense of urgency, or of time running out. Little evident willingness to explore radical policy change. No burning thirst to listen to what the people who work in this market are telling them, or to recognise that the very policy morass they manage is the cause of the worsening situation.

Weeks become months and months become years in this real-life version of the Utopia TV series.

It's hard to be upbeat about the outlook when, for example, just before the Queensland state election, the Miles Government introduced changes to union agreements with Energy Queensland which - according to media reports - will add $10,000 to the cost of a new home. That was after earlier in the year signing off on changes to national construction codes which added an estimated $30,000 to the cost of a new home for environmental efficiency and disabled access enhancements. Remember, this ONLY applies to new homes. For it to have any real impact, it would need to apply to ALL housing no matter when it was built. But that would be political suicide. Much better to bury an additional cost in the price of a new home. Who’s going to know? They get their moment in front of the cameras trying to look good for activists and marginal seats, and new homebuyers get another shit sandwich.

Do the sums on what that extra $40,000 added to the cost structure of a new home did for a young homebuyer’s mortgage. It equates to another $317 per month. All those young homebuyers looking hopefully for an interest rate cut should understand that if rates fell by a full percent from 6.5% to 5.5% (highly unlikely) they will only save what the former Queensland Government added quietly to the cost of their mortgage on their new home.

Neither is it encouraging to hear the comment by Federal Housing Minister Clare O’Neill: "We're not trying to bring down house prices," she told ABC's Triple J in December. "That may be the view of young people, [but] it's not the view of our government," she said.

For a further look behind the curtains for the current Federal Government’s attitude to housing, look no further than the Minister for Emergency Management and Cities. Yep, they lumped cities and emergency management together. Wow. That department last year released a “National Urban Policy: A vision for the sustainable growth of our cities and suburbs.” It’s over 40 pages of nice graphics and a meaningless word salad of motherhood statements, cobbled together without economic rigour or much understanding of what has driven the market to this point. If you can get more than a few pages into it without several eye rolls, you’ve done better than me. Have try – the link is here: https://www.infrastructure.gov.au/sites/default/files/documents/national-urban-policy.pdf Thank you Canberra, your ability to demonstrate how oblivious you are to the real world never ceases to amaze.

In Victoria – where they seem intent on wrecking the entire economy to bring house prices down – they’ve announced plans for 50 “activity centres” of high-density housing in and around train and tram stations. “Building more homes around 50 inner-suburban train stations means young people have more opportunity to rent or buy a place that’s directly connected to public transport,” the Victorian Premier Jacinta Allen said in October.

Which is laudable except for one inescapable problem: high density equals high cost. This is the most expensive form of housing you can build. Pinning your hopes on density-led housing affordability is a fantasy. A two-bed apartment now needs to sell for maybe $1.2 million or more for a project to be viable. Only high-end apartment projects stack up financially. As Max Shiffman, CEO of Melbourne based developers Intrapac said at the time: “Apartments would be great if they were an inexpensive housing product. But they are not - and nothing proposed will reduce the prices to a point where they become attractive and attainable to the broader housing market.” That is hardly going to help the young people the Victorian Premier claims this policy is going to help.

In fairness, the Victorians have been more amenable than some other states to allowing and approving new lower cost suburban development, but on the other hand their approach to taxing the property sector (which includes housing) is eroding margins and confidence. Investors are reportedly abandoning the Victorian market with 22,000 fewer rental properties in the last financial year – battle scarred by high land taxes and rental market policies which are imbalanced in favour of tenants.

The Sydney-Melbourne rivalry means an idea in one place must be matched in the other. Often the squabble is only about whose idea it was first. So the NSW Government late last year announced a new scheme to boost housing in and around transit nodes. The move was headlined by the ABC as: “Higher towers, smaller homes, fewer car spaces recommended to solve NSW housing crisis.”  How appealing. Was the ABC being sarcastic? The aim is to deliver 170,000 “well-located, well-designed and well-built homes” but there’s little insight into how this will happen.

Ironically, while there is good logic to support development around transit nodes, the evidence says this can be even harder than developing density away from transit. I made the observation last year that “rail authorities tend to have their own views about how much development should take place next to their rail lines. They don’t want residents moving into these new developments then complaining about noise, dust or vibrations. They can prove obstructive if their approval is required for development to proceed.”  Plus, like elsewhere in the country, density now equals dollars, and many more of them. It has become an upscale product and it’s hard to see how this will change.

Presiding over this mess of unhelpful policy, regulatory tangles and taxes is Prime Minister Anthony Albanese. His contribution? Despite saying when in Opposition that he wanted a “mature debate” on population growth, he has instead flooded the country with record levels of immigration which has seen latest population growth exceed 552,000 people in one year – the most ever and well above historic trends. It seems it’s no longer a subject he wants to debate.

To accelerate population growth via immigration (which is a deliberate policy decision, not an accident) at a time of housing shortages might seem reckless. But that’s OK – he has a plan - an “ambitious” target of building 1.2 million more houses over five years. That equates to 240,000 new dwellings each year. We are currently delivering nowhere near that level and only got close, briefly, back in 2017 when a massive surge in apartment projects took supply to 223,600 new dwellings. Many have observed the legacy of this 2017 boom are many thousands of poorly designed shoebox apartments with no cross ventilation, balconies, or other design amenity but instead “riddled with flammable cladding, structural defects, and leaks.” Remember Sydney’s Opal Tower?

These two charts from the team at Macrobusiness succinctly describe why more pain most probably lies ahead. I wish I am proven woefully wrong, but I cannot see how either affordability will improve or the housing shortage turn to abundance without some very fundamental changes of policy direction – both of the demand and supply side. Are we even ready for that, or will the situation need to deteriorate even further before we are?