It was meant to transform the housing affordability issues facing Australia, but does Labor’s policy promises live up to the hype?

Labor’s bold housing policy was designed to put a roof over the head of all Australians in what was the biggest investment in new social and affordable housing in a decade.

The $10 billion Housing Australia Future Fund promised to build 30,000 affordable homes within its first five years.

The commitment included 20,000 new social housing homes, 10,000 affordable rentals for frontline workers like police, nurses and cleaners, and a further $200 million to repair, maintain and improve remote Indigenous housing.

A further $100 million for crisis and transitional housing and $30 million to build housing and fund specialists services for veterans in need was also put on the table.

Big vision

In September this year, Labor announced an initial pipeline of 185 projects that would potentially deliver more than 13,700 social and affordable homes was announced. Approximately 700 of the homes are due for completion this financial year, ready for tenants to move in.

Labor’s hope is that the commitment will help the nation build 1.2 million homes by 2029, but independent reports suggest that the target will be missed if Labor stays on the current path.

Prime minister Anthony Albanese will face a federal election next year. Picture: Matt Jelonek/Getty Images

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The policy stepped in to address an explosion short term accommodation transforming the rental market, a global pandemic and a lack of international students entering the university sector due to border closures have contributed to a dire need for more housing across the country.

But there have been a number of roadblocks that have impacted the delivery of the promise.

The National Housing Supply and Affordability Council points out that there are 170,000 on wait lists for public housing, another 122,000 people experiencing homelessness, and significant housing stress for many.

It says Australia will miss its target of building 1.2 million homes, blaming state planning reforms and construction sector barriers for holding Labor’s commitment back from being achieved. 

Time blowouts

The time it takes to bring a home to market is partly to blame.

New analysis of government statistics by Master Builders Australia shows detached home and apartment building times continue to blow out. Fifteen years ago, it took an average nine months to build a stand-along house. Fast forward to today and it now takes 12.7 months – an increase of 40%.

New build houses in Australia are currently taking an average of 12.7 months to construct from start to finish. Picture: Getty

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Apartments once took around 18.5 months from approval to completion, but now take 33.3 months – an increase of 80%.

Chief executive Denita Wawn says these extended construction timeframes are impacting the industry’s ability to meet housing demand and tackle the housing crisis.

“With advancements in technology and construction methods, we should be building homes faster, not slower,” she said.

Ms Wawn blamed labour shortages, declining productivity, supply chain disruptions, complex regulatory requirements and critical infrastructure delays for the slowdown.

“Productivity is more than an economic buzzword,” she says. “This data proves what happens in a construction environment without meaningful reform.”

She wants to see the government streamline regulatory approval processes, encourage adoption of digital solutions, introduce incentives to grow the workforce through domestic and international means and strengthen the domestic supply chain.

The promise

Australia is currently tracking well below the target of 1.2 million homes by 2029, REA Group senior economist Eleanor Creagh says.

The residential construction industry has been challenged by capacity constraints and higher costs, and the consequent tight housing supply is exacerbating already high rents and prices amid a pre-existing chronic housing shortage.

“The focus on the housing crisis is warranted and necessary. Housing supply is a key constraint in the long run that no government has sought to meaningfully rectify,” she tells Mortgage Choice.

Housing sector commentators point to the need to reform planning and zoning restrictions to unlock more housing supply and fast track approvals. This is certainly part of the problem, but labour and skills shortages and higher building materials and financing costs are also presenting an acute challenge.

Creagh Wawns that reforms alone won’t address the acute challenges that are contributing to the chronic undersupply if housing.

“Unless we can ease construction labour shortages and persistent cost pressures, delivering enough new houses or apartments will be difficult,” she says.

“Higher labour, materials and financing costs compress margins, resulting in a potentially lower return on investment, which has delayed many projects. Though growth has eased, the surge in labour, construction and financing costs has also pushed up prices of new builds,” Creagh says.  

REA Group senior economist Eleanor Creagh calls focus on the housing crisis both "warranted and necessary". Picture: Supplied

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But not everyone is convinced. Despite the Federal Budget proving for more housing and calls to use superannuation to pay for home deposits, the fundamental problem remains that many younger Australians simply won’t be able to afford to enter their own home,” founder and chief executive of lease to own company, Ownlea, James Alexander-Hatziplis says.

He wants to see action, Wawning that without it, this societal issue will cement the wealth gap between those who own their own home, and those who never will never be able to afford to.

“Even if there are hundreds of thousands of more dwellings are built, there are hundreds of thousands of young Aussies that still won’t be able to save the deposit required. We need to develop new financial ways for them to have access,” Mr Alexander-Hatziplis says.

Ms Creagh says the real measure of success will be in the effective implementation and tangible outcomes of the policies Labor has put in place.

“Whether these efforts are sufficient to meet the growing demand and complexity of Australia’s housing needs is unlikely at this stage, and as such, more needs to be done at all levels of government, in collaboration with the construction industry to ensure adequate access to appropriate housing, whether to own or rent, for current and future generations.”