Housing is hard. There’s no magic bullet.
The AFR did a deep-dive on the weekend into the five barriers preventing Australia from building more houses.
You could probably cut this up any number of ways, but it’s worth taking stock of the points they make here because I think it does give you a sense of how intractable the housing crisis actually is.
First up, they note that to hit our current housing targets, we need to build 240,000 homes a year.
That’s a noble goal, but one that literally nobody in the industry thinks is realistic.
They show a chart of forecasts from Master Builders Australia. On their projections, we’re going to undershoot the target every year until FY28, at which point, we’re going to touch it… just.
Even then I expect that might be the MBA fudging their numbers a little so they don’t completely embarrass the government.
From there they note that the problem with national level targets is that they still need to move through State and Local Government processes before they can become actual houses people can live in.
And since Local Governments are more interested in looking after the people who vote for them, rather than helping out the Feds with their housing targets, there’s often a fair bit of push-back.
The AFR note that the average waiting time for development approvals has blown out, even though the number of plans submitted has actually fallen.
Data from the NSW government shows that councils are taking an average of 111 days to make a decision on development applications, compared to 107 days in 2022-23 and 83 days in 2021-22.
Partly that’s about community opposition and local politics, but it’s also about the complexity of large-scale projects. With all of the low hanging fruit already gone, the next stage involves creating greater density. It naturally takes longer to consider all of the implications.
At any rate, it does suggest there might be room here to speed up this process somehow (adding more staff?), but until that happens, supply growth will continue to fall.
The AFR also note that the building industry itself is facing its fair share of challenges.
Construction material costs exploded during Covid, and on current projections, are not expected to come back down any time soon.
And the inflation numbers are kind of staggering. Labour wages are up 13%, but overall construction costs are up 40%!
With all that going on, completion times (from approval to completion) have blown out:
All of this underscores the point – there’s just no easy fix for the housing crisis.
Bringing housing on line at scale, into built up areas, is expensive and complex work. There’s no silver bullet.
It’s why this boom will take years to play out.
JG.