State governments have started unveiling their home building plans to play their part in the Australian government's ambitious Housing Accord target to build 1.2 million new, well-located homes by mid-2029.
The Housing Accord's target kicked off on July 1 this year, prompting the states and territories to stimulate more home building over the next five years.
The NSW government announced the release of three land parcels for nearly 700 affordable and social housing units recently.
In its recent budget, the state government committed to constructing up to 30,000 well-located homes, close to infrastructure and transport over the next four years.
The first land parcel in North Eveleigh will accommodate 500 properties, half of which will be social and affordable homes. The other sites in Kellyville, Campden, and Camperdown have not yet been given firm project commencement dates.
Other states also have significant housing goals. The Victorian government plans to build 2.5 million homes by 2051, including 140,000 in Geelong and 134,000 just in the Melbourne City Council area.
The Queensland government aims to build one million quality homes by 2026, with 95% of these delivered by the private sector.
Despite these plans, the number of new developments approved monthly over the past year falls short of what's needed to meet the Housing Accord target.
Over the 12 months to May 2024, there were 164,000 total dwelling approvals, far below the 240,000 required annually. At this rate, only 820,000 new dwellings would be built by 2029.
There was a 16.3% increase in apartment approvals during the month, which is crucial for boosting housing stock nationwide. New house approvals also rose but only by 2.1%.
Multiple factors are slowing down new home construction, including industrial relations laws, a lack of critical infrastructure, and high developer taxes and charges. However, the most significant challenge is the shortage of skilled labor.
Build Skills Australia estimates an immediate need for 90,000 new tradespeople, with an additional 500,000 required over the next five years to meet the Housing Accord target.
Jobs and Skills Australia highlights a shortage of tradespeople in all occupations. This skilled labor shortage, along with soaring construction material prices, hampers new home construction.
Construction has already slowed due to huge infrastructure projects employing large numbers of skilled workers.
Even with streamlined approval processes, the release of unused government land, and improvements to industrial relations laws, there aren't enough workers to initiate projects.
New dwelling commencements have been decreasing since June 2021, dropping about 15% in the December quarter of 2023 compared to the same period in 2022.
Additionally, there are fewer construction companies now, with nearly 3,000 fewer this financial year due to a record number of insolvencies, as reported by the Australian Securities and Investment Commission (ASIC). Many of these companies left projects unfinished.
According to the Australian Bureau of Statistics, there were 226,000 dwellings under construction as of December 2023, a 23% increase from the low of 184,000 in September 2020.
Whether new dwelling approvals will quickly translate into building commencements to meet the government's target remains a challenge.
Currently, the construction industry cannot meet the demand for new dwellings necessary to achieve the Housing Accord's goal.
The ongoing skilled labour shortage, high material costs, and industry insolvencies pose significant challenges.
It remains to be seen if the target is realistic given the difficult conditions the industry has faced in recent years.
