Budget Resources

Laura Schatz and Matthew Thomas

House prices reached record highs in April 2024, according to the most recent PropTrack data. While PropTrack notes the pace of growth is slowing, the median house price in Australia is now 6.6% higher than in April 2023. Based on April 2024 CoreLogic figures, at $627 per week, national median market rents are also at record high levels, having averaged a growth rate of 9.1% a year for the past 3 calendar years.

As a complex issue with no simple solutions, Australia’s housing crisis has become a ‘wicked problem’ for policy-makers. Riley Flanigan illustrates the multiple drivers of and responses to the housing crisis (Figure 1):

Figure 1       Housing affordability as a ‘wicked problem’

 

 

Source: Riley Flanigan, ‘The Housing Crisis is a Wicked Problem’, The Emergent City (blog), 23 May 2023.

Adding to this complex picture is the fact that, as Myers et al explain, there are both obvious and hidden impacts of housing affordability :

Western housing shortages do not just prevent many from ever affording their own home. They also drive inequality, climate change, low productivity growth, obesity, and even falling fertility rates.

Governments at all levels are attempting—in one manner or another—to address Australia’s housing crisis. At the federal level, the Budget builds on previous Labor Government measures aimed primarily at increasing the supply of social housing, and new housing more broadly.

The government’s approach to addressing the housing crisis

In Budget strategy and outlook: budget paper no. 1: 2024–25, the government attributes the housing affordability crisis to an undersupply of houses, stating that ‘Australia has a housing shortage. There are not enough homes being built in the right areas to meet the needs of our communities’ (p. 121). The government asserts that, by OECD standards, the supply of housing in Australia is low (however, it is important to note that population and housing demand pressures vary greatly across the OECD).

Budget paper no. 1 ascribes Australia’s housing supply issues to 3 main factors (p. 121):

• planning and land release practices that ‘are often slow and are not effectively factoring in urgent need for housing in suburban areas’
• industry capacity that has been hampered by ‘a lack of essential infrastructure in greenfield developments, a critical shortage of skilled labour and falling productivity in the sector’
• long-term, chronic under-investment in social housing.

The government’s plan is to ‘build more homes for Australia’ (p. 121). It claims its plan will require ‘concerted, cooperative and substantive efforts from all levels of government’, with the Commonwealth providing leadership through measures such as the National Housing Accord (the Accord) and the Housing Australia Future Fund (HAFF).

The notion of the Commonwealth providing leadership is important, because housing is not mentioned in the Commonwealth Constitution, with responsibility largely resting with the state and territory governments. And as Ruming et al note, the states have been ‘careful to maintain’ their authority in this area (p. 110).

In the lead up to the 2022 Federal Election, the Labor Party signalled its intention to establish a framework for tackling housing affordability problems over the longer term and play a greater role in housing policy than the previous government (pp. 67–72).

According to the government, the Budget offers new initiatives totalling $6.2 billion, bringing total Federal Labor Government investment in housing to $32.0 billion.

This claim is contested. For example, spokesperson for Everybody’s Home Maiy Azize has insisted that HAFF funding of $10 billion is off-budget, and thus cost-neutral. Similarly, the figure includes increases to the cap on how much Housing Australia can lend to providers of social and affordable housing, which Azize claims is ‘not real money’.

New National Agreement on Housing and Homelessness

Subject to the states and territories agreeing to a new National Agreement on Social Housing and Homelessness, the government will provide an additional $423.1 million over 5 years from 2024–25 towards social housing and homelessness services under the agreement (Budget measures: budget paper no. 2: 2024–25, p. 74).

The government has claimed that the additional funding would increase annual funding allocated under the current National Housing and Homelessness Agreement (NHHA) to around $1.8 billion from 2024–25. This would amount to just under $9.3 billion over the life of the new agreement (Budget paper no. 2, p. 74).

The NHHA is the main means through which the Australian Government provides ongoing funding for social housing and homelessness services to the states and territories. It is the latest in a long line of housing and homelessness agreements that started with the Commonwealth State Housing Agreement in 1945.

The NHHA commenced on 1 July 2018, replacing the National Affordable Housing Agreement. The NHHA was due to expire no later than 30 June 2023 but was extended for one year as part of the October 2022–23 Budget to allow for consultation with the newly formed National Housing Supply and Affordability Council and the states and territories (p. 183). The Australian Government has advised the states and territories of its intention to terminate the NHHA from 30 June 2024.

Following a meeting of the National Cabinet on 10 May 2024, the government announced several housing measures to be included in the Budget, including the new agreement. In its announcement, the government stated that Commonwealth funding for homelessness services would be doubled to $400.0 million a year, matched by the states and territories. The Greens have argued that, if this is the case, this will be at the expense of funding for social housing, given that when indexation is considered, the new agreement provides essentially the same amount allocated under the NHHA. The Australian Council of Social Service (ACOSS) has argued that funding levels under the proposed new agreement are ‘inadequate’.

Housing experts have for some time criticised Australian governments for furnishing insufficient funding under housing agreements to cover the costs of providing and maintaining social housing stock, given the gap between subsidised rental revenues and operating costs. This funding gap is likely to have been ameliorated, to some extent, by the HAFF and Affordable Housing Bond Aggregator (AHBA) financing mechanisms.

The Budget has provided for increased access to cheaper, longer-tenor finance for community housing providers under the AHBA by increasing the cap on the government’s guarantee of Housing Australia’s liabilities by $2.5 billion to $10.0 billion. The Budget also makes available a further $1.9 billion in concessional loans for community housing providers under the HAFF and the Accord (Budget paper no. 2, pp. 74–75).

The government has provided $1.0 billion towards the delivery of crisis and transitional accommodation for women and children fleeing domestic violence, and youth, through the National Housing Infrastructure Facility (NHIF). The NHIF provides finance to infrastructure developments which support housing development—in this case, social housing. This funding was allocated as part of the Mid‑Year Economic and Fiscal Outlook 2023–24 (p. 295).

Commonwealth Rent Assistance increase

The Budget provides $1.9 billion over 5 years from 2023–24 (and $0.5 billion per year ongoing from 2028–29) to increase all Commonwealth Rent Assistance (CRA) maximum rates by 10% from 20 September 2024 (Budget paper no. 2, p. 167). This builds on a 15% increase in the maximum rates provided at the last Budget.

Many of Australia’s welfare organisations, such as ACOSS, are dissatisfied with the size of the increase. This is to be expected given that in their pre-budget submissions organisations like Everybody’s Home and National Shelter argued that the maximum rates needed to be increased by 50% or more, with Mission Australia, Homelessness Australia and ACOSS recommending changes that would increase maximum rates by 80–95%.

The CRA helps to reduce the number of private renters in housing stress and could provide better assistance to more renters were the supplement increased, extended beyond income support recipients, and, indexed to the rental component of CPI. However, some commentators have argued that improving CRA ‘should be considered a temporary step towards easing housing stress’:

It needs to be implemented alongside long-term measures that tackle the root causes of the housing crisis. The best systemic solution is a sustained reinvestment in public housing on a scale that matches the hundreds of thousands who need it.

In its recently released State of the Housing System report, the National Housing Supply and Affordability Council observed:

… levels of non-market housing are forecast to remain low relative to history and in comparison to other advanced economies, and lower than demand. (p. 8)

Measures to bolster housing construction workforce

The Budget provides funding aimed at boosting Australia’s housing construction workforce (Budget paper no. 2, pp. 74–75), including:

• $88.8 million over 3 years from 2024–25 to support 20,000 new fee-free training places in courses relevant to the construction sector
• $7.0 million over 3 years from 2023–24 to provide targeted assistance to residential builders seeking to obtain accreditation under the Work Health and Safety Accreditation Scheme
• $6.2 million over 2 years from 2024–25 to support building industry peak employer associations to assist residential builders in obtaining these accreditations
• $1.8 million over 2 years from 2024–25 for the Department of Employment and Workplace Relations to deliver streamlined skills assessments for migrants from comparable countries who wish to work in Australia’s housing construction industry.

The government asserts that addressing skills and labour shortages is essential to overcoming ‘structural barriers’ to new home construction (Budget paper no. 1, p. 151). In a 16 May 2024 speech, RBA Assistant Governor Sarah Hunter explains the current imbalance between the supply and demand for new dwellings is largely because of COVID-related supply chain disruptions (p. 3):

In the early days of the pandemic, COVID-related supply chain disruptions significantly limited the sector’s ability to respond to increasing demand, which was partly linked to the HomeBuilder program. Materials, fixtures and fittings, and skilled labour were in short supply, and shipping delays significantly extended build timelines.

While much of the supply chain disruption has been resolved, the pipeline of projects remains elevated and some capacity constraints are still binding. Businesses in our liaison program are reporting that finishing trades are currently in short supply, as the bulge of projects (particularly detached houses, … ) started during the pandemic proceed towards completion. (p. 5)

The question arises as to whether the Budget measures will sufficiently address housing supply issues, and in what timeframe. Hunter cautioned that while measures such as streamlining approvals processes will help, there is no ‘quick fix’ for housing undersupply (p. 8).

In a post-budget review, CoreLogic argues that while measures to ‘beef up the construction workforce’ are welcome, it is ‘not clear when the additional workers would be added, with those just embarking on the start of training certificates and apprenticeships potentially taking years to become fully qualified’ (p. 5). CoreLogic suggested a focus on qualified migrant labour would provide a quicker way to boost capacity. Property Council CEO Mike Zorbas has similarly stated that while the funding for skills and training in the Budget is welcome, more is needed to ‘turn out the construction workforce … at the speed we need’ (p. 5).

Measures to limit impact of international students on rental market

The Budget provides $2.1 million over 4 years from 2024–25 (and an additional $3.7 million from 2028–29 to 2034–35) for the Department of Education to:

… develop and implement regulation to require universities to establish new supply of purpose-built student accommodation to support any increase in international student enrolments over an initial international student allocation, to be set in consultation with the sector. The accommodation would be available to both domestic and international students. (p. 63)

In his budget speech, the Treasurer stated that increased numbers of international students were placing pressure on rents and prices, to the detriment of ‘everyone’. The government will develop regulations to ‘limit how many international students can be enrolled by each university based on a formula, including how much housing they build’. Legislation providing for this measure was introduced on 16 May 2024.

In 2023, the Institute of Public Affairs (IPA) released a report which concluded that, in the last financial year, international students took up the vast majority of new housing units. The IPA has also suggested that international student numbers were causing rents to increase.

The Property Council has directly criticised the IPA research, arguing the IPA has unfairly blamed international students for rental shortages. In a recent report aimed at ‘myth busting’ the role of international students in the housing crisis, the Council concluded that international students have limited impact on the rental market, only accounting for 4% of renters (p. 9). Academics Soon and Mu have concluded that international students are being ‘unfairly blamed’ for the housing crisis, particularly since the largest proportion are already living in purpose-built student accommodation.

See the ‘Australian Universities Accord’ Budget review article for further discussion of this measure.

 

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