Housing was a major focus of the 2024 federal budget, with a 42 page statement devoted to ‘Meeting Australia’s Housing Challenge’.
So what are the new policy announcements, and crucially, will they help to ease the housing crisis?
The Government faces a difficult housing challenge, with record-low housing and rental affordability, combined with cost-of-living pressures.
Here's what to make of the housing measures in the 2024-25 federal budget.
Low income renters received much of the new benefits announced in Tuesday's budget.
A 10% increase in the maximum Commonwealth Rent Assistance payment, a supplemental payment for renters receiving government benefits, was announced.
This builds on the 15% increase announced last year. In total this payment has increased by more than $70 a fortnight, depending on family circumstances, and will benefit nearly one million households.
This additional support will be welcomed. Since 2020, typical rents have increased by around $200 per week, pushing many low-income renters into rental stress.
More money has been promised to support access to secure and affordable housing through the National Housing and Homelessness Agreement, with both the Federal and State governments increasing funding by $200 million a year, as well as $1.9 million in concessional loans to community housing providers to support new social and affordable housing.
The social and affordable housing sector has been struggling with a blow-out in wait times to access services, so it is hoped this further funding will provide some easing to a sector facing a challenging conditions.
To reduce housing costs for other Australians, the government’s focus is on expanding the housing supply.
In this budget, more spending has been directed at alleviating current constraints to building new homes.
First, an additional $1 billion - on top of $500 million previously promised - is being made available for states and territories through the Housing Support Program to build “enabling infrastructure” for new housing. This includes things like water, power, sewerage and roads.
Second, to address skills shortages in the construction sector, the government has provided $88.8 million to fund 20,000 fee-free TAFE places. In addition, the government is fast-tracking 1,900 skilled visas to jump-start housing construction.
While these numbers are small - more than 1.3 million Australians are employed in the broader construction sector - given availability of trades has been a key constraint on construction since the pandemic, this will work to improve the speed and cost of construction.
These new budget policies build on the government’s broader approach to lowering housing costs, which has three main pillars.
The first pillar is by building more homes.
In conjunction with the states through the National Cabinet, funding has been provided to support the commitment to build 1.2 million new well-located homes over the next five years.
The second pillar is providing direct support to vulnerable renters, since it will take time for construction to lower housing costs.
Most evidently, this has been through higher Commonwealth Rent Assistance payments as well as other cost-of-living support.
But it also includes significant increases in funding for social and affordable housing, including through the recently passed Housing Australia Future Fund which the government expects to provide $500 million a year, along with other support.
All up, the government expects to support the building of 55,000 new social and affordable homes by 2029 – representing a 12% increase in the total number of available homes across the country.
The third pillar, helping first-home buyers crack into the market at a time of record-high prices, remains mostly missing.
The government announced the Help to Buy scheme as part of their election campaign in 2022.
It would allow the government to contribute up to 40% of the equity for first-home buyers’ purchases, allowing purchases with as little as a 2% deposit. This would let up to 10,000 first-home buyers get into the market much faster than otherwise.
But Help to Buy remains locked up in parliament without support from the Coalition or the Greens. The government is left with the Home Guarantee Scheme – a vestige of the previous government – which lets first-home buyers and single parents buy with small deposits and not have to pay Lenders Mortgage Insurance.
Many aspiring first-home buyers struggling to save a deposit will understandably be frustrated by continued difficulties cracking into home ownership.
The housing focus of the budget, which builds on previous policies of the Albanese government, targets the most important issues.
First, by directly easing the burden for low-income renters and funding more social and affordable housing the government is helping those most feeling the impact of the housing crisis.
While the additional funding in the budget is welcome, it will not significantly change the picture for low-income renters. Renters in the bottom third of the income distribution can currently not afford any new rental properties without being in a position of rental stress, that is, spending more than 30% of their income on rent.
The second focus, building more homes to reduce housing costs for all Australians over the longer-term is the right approach.
But more needs to be done.
Current data on construction rates and building approvals suggests Australia will fall well-short of the National Cabinet’s 1.2 million home target.
The National Housing Accord should be revisited.
Currently, federal funding is provided based on states’ ability to meet and exceed housing targets. For some, such as New South Wales, this has inspired significant zoning and planning reform. That has unlocked developable land which is the key way governments can lower development costs quickly.
But it isn’t working everywhere. More incentives – or even penalties – should be considered to nudge recalcitrant regions towards better housing outcomes.
The Housing Accord should also be broadened as well. It is the perfect forum to coordinate a switch from stamp duty to land tax, which has the potential to unlock enormous spare housing capacity in existing homes. Using the current dwelling stock more efficiently should be a key housing goal.
Removing stamp duty would be transformative in improving productivity across the economy by opening up the ability for people to move where opportunities arise.
Given the time it takes to approve and build new housing, there is no time to waste in tweaking these policies to unlock housing supply if it is to have an impact on housing costs over the coming years.
