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“On Time and On Budget” simply not enough to solve housing crisis

The National Housing Target presents an opportunity to reform the way we approach housing in Australia.

Across the next decade, our national infrastructure pipeline is practically overflowing. From new international airports to the plethora of renewable energy capacity needed to hit our emissions reduction targets, it's no surprise that Treasurer Jim Chalmers has flagged the need to make some “tough decisions” about our infrastructure spend.

There is a lot we do right in building national infrastructure, but there are also areas where we can continue to improve. According to Deloitte’s Infrastructure for Good index, Australia lags behind its global counterparts in specific areas including the environmental sustainability and resilience of some projects and, as Dr Chalmers is very aware, project cost and schedule delays.

We must hold these shortcomings in mind when looking at one of our most important Infrastructure goals: The National Housing Accord’s stated goal of building 1.2 million new, well-located homes between 2024 and 2029. 

With rental and housing stress hitting record highs, Australians expect governments to meaningfully add to the housing supply. But at the same time, that doesn’t mean we should take the traditional “on time and on budget” approach. That’s how you end up with sprawling, poorly serviced neighbourhoods filled with low-quality and defect-ridden homes.

The National Housing Target presents a terrific opportunity to reform the way we approach housing as a nation. We must aim to synchronise planning, zoning, and financing standards across Australia – and create a housing ecosystem that can produce a larger number of well-located higher-quality homes built to high environmental and sustainability standards over time and respond to the affordability needs of people from different walks and stages of life.

The first leg of the challenge is to bolster our capacity to build homes. To meet the National Housing Target, we must deliver 60,000 new dwellings per quarter for five years. Australia has not delivered that many houses in a quarter in this century, averaging 45,000 per quarter pre-Covid.

Detached dwelling constructions per capita are now half what it was at its peak in the 1970s, with high-density dwellings failing to fill the gap. Higher interest rates mean the dwelling investment outlook looks weak; one in three large builders have cashflow problems due to staff constraints and materials inflation, and immigration looks set to remain around record highs.

The federal and state governments have recognised the problem and the recently passed Housing Australia Future Fund as well as other funding programs contain incentives that will help sub-national governments contribute their share of the housing target. Collectively, Australian governments have recently committed around $33bn to housing.

But from an administrative perspective, responsibility for meeting this goal is diffused across several different ministers, departments, and datasets. From the outset, Commonwealth, state, and territory governments should establish single points of ministerial accountability for all housing policy, funding, and delivery levers, such as a National Housing Accord subcommittee of Cabinet.

This administrative alignment could then help us improve the efficiency of the various Commonwealth, state and local incentives across the housing system designed to leverage private investment.

States and territories also need to agree to a consistent set of planning reforms to drive predictability across zoning rules and building regulations like assessment timeframes and sustainable and climate-resilient development outcomes, with Federal funding tied to their implementation.

We should prioritise using sustainable, low-emissions materials for construction and make sure these houses are electric-only, when possible. Policymakers should not be afraid of examining non-conventional, quick-build and low-impact styles of construction, like modular building. All of this will also make it easier to attract green financing from ESG-conscious lenders.

As this newspaper has been saying for quite some time, these reforms should include simplifying medium-density rezoning rules, particularly around transport hubs in our cities, and ensuring that rapid development assessment pathways for social and affordable housing are also available to the community housing and private sectors.

On the community and social housing point – we badly need to look at new ways to attract private investment to the sector to deliver the 614,000 additional affordable dwellings Treasury estimates we need to build over the next 20 years.

This can involve expanding and linking different financing models like build to rent, rent to buy, and shared equity schemes with cohort-based asset classes like essential worker housing or special disability accommodation supported by the NDIS.

Finally, to ensure a dearth of homes does not occur again, Australian governments must produce publicly available, rolling 20–30-year housing supply programs that are in alignment with long-term infrastructure plans, skills development, and backed by mandated housing targets.

As we begin to tackle the noble National Housing Target goal, we must remember that quantity can’t take precedence over quality. Prioritising both will be key to developing a stronger housing ecosystem that will ensure we can build the houses we need beyond 2029 and never again end up in a situation where we need to play catch-up. 

Luke Houghton

Global Lead Partner, Infrastructure and Capital Projects

Luke is the Global Leader of Deloitte's Infrastructure and Capital Projects and the National Leader of Deloitte's Infrastructure Sector. He has over twenty years consulting experience with major transport, finance, strategy and infrastructure projects. This has included extensive experience in structuring project financing, transaction management and project management across a range of industries, determining procurement strategies, and helping to develop risk management and mitigation strategies. Luke specialises in advising Government and Public Sector Agencies on large scale transactions.