Chair of the National Housing Supply and Affordability Council – Ms Susan Lloyd-Hurwitz
Firstly, I acknowledge the traditional custodians of the land we’re meeting on today, the Ngunnawal people, pay my respects to elders past and present, and extend that respect to any First Nations people here today.
This land has been nurtured by First Nations communities for over 60,000 years, and in return this land has provided shelter. But today – access to secure shelter, a place to call home – is increasingly challenging for millions of Australians. And in turn, that is profoundly harmful to our society.
Fixing our housing system isn’t a theoretical exercise. This is about homes, not assets.
Putting our collective effort into developing a more healthy housing market really matters.
It matters to the women and children fleeing domestic and family violence who face homelessness with crisis accommodation at capacity.
It matters to those living in insecure rental accommodation, who fear eviction in such a competitive rental market.
It matters to those who commute hours each day from where they can afford to live to where they work.
It matters to the young people who see home ownership as increasingly out of reach.
And while it matters deeply to individuals and households, there is perhaps an even more fundamental reason why having a healthy housing system matters for the entire nation.
Access to safe, affordable and secure housing is a human rights issue, and one that is essential for an inclusive and prosperous society. As the Australian Human Rights Commission says ‘the right to housing is more than simply a right to shelter. It is a right to have somewhere to live that is adequate.’
Failure to provide access to adequate housing is linked to adverse social, health, educational, justice and wellbeing outcomes.
Having that access would mean that governments would need to spend less on services linked to those poor outcomes, enabling greater investment in other critical infrastructure.
Having access to affordable, well‑located housing would improve economic productivity by supporting labour mobility, and boost workforce participation.
And home ownership is a pillar of our retirement system. Housing status is a strong determinant of what your life might be like in retirement. In 2018, more than 60 per cent of single renter retiree households were living in poverty, compared to 12 per cent of single homeowner retirees.
Alan Kohler, writing in the Quarterly Essay, contends that Australia is being divided into those who own a house and those who don’t, and those whose families have housing wealth to pass on to their children and those who don’t. This has profound implications for geographic and generational inequity that is deepening.
There is no denying the housing crisis we are in. It’s a crisis that has been decades in the making through our persistent failure to deliver enough housing of all types – from crisis accommodation to social and affordable homes right through to the private market.
Our housing system is simply not working. Prices and rents are growing significantly faster than wages, 170,000 households are on public housing waiting lists and over 120,000 people are experiencing homelessness.
The pressure on households is considerable. Since January 2020, house prices have risen by over 30 per cent in capital cities and over 50 per cent in regional areas. The median house price has reached 7.7 times median household income, close to historic highs. Since interest rates started to rise, repayments for borrowers have increased by as much as 60 per cent.
Home ownership rates are falling, particularly for younger households. In 2001, the year my daughter was born, 51 per cent of 24 to 35 year olds owned their home. Today, just 43 per cent do. She’s now 24 and we can clearly see the challenges presented to her generation in terms of accessing home ownership where there isn’t housing wealth to pass on.
Renting is no easier. Renters in the private market have experienced a sharp rise in rents of almost 40 per cent since January 2020. Paying the rent now consumes a record 32 per cent of household income on average. Imagine the stress, maybe you’re experiencing it yourself, of coping with the rising cost of living and wondering where the rent is going to come from.
Housing choice is diminishing. Recent analysis of 2021 census data by The Sydney Morning Herald showed that there are 33 suburbs in inner Sydney in which not a single resident works as a police officer, firefighter or paramedic. Not one. Thirty-six per cent of police and 39 per cent of firefighters commute more than 30 kilometres to work in Sydney – only 16 per cent of all workers commute that far. And no local council area in Sydney has a median apartment price which is affordable to an early career registered nurse.
Our housing system is failing many First Nations People.
First Nations households are half as likely to own their own home, 3‑times more likely to live in overcrowded dwellings, 6‑times more likely to live in social housing, and almost 9‑times more likely to be experiencing homelessness than non‑Indigenous Australians.
The fact is, we need to supply more housing, close to jobs, transport and amenity. And of course this takes us straight into the heartland of the debate between the 'Not in My Backyard' and 'Yes in My Backyard' tribes. What should we build, where, and how dense should our cities be?
Actually, I’m not fond of the phrase ‘density done well’, which implies that density is a bad thing which we need to do as well as possible. When in fact, better use of space in our cities can foster amenity, vibrancy and walkability.
This is not a new debate – back in 1929 one newspaper lamented ‘flats rear their heads over some of Sydney’s noblest headlands. They are invading suburbs which for years have been the pride of peaceful home‑lovers, where the happy laughter of children resounded in the streets’.
The National Housing Supply and Affordability Council was established by the Australian Government last year and its members include academics, planners, experts in crisis accommodation, First Nations housing and social and affordable housing, as well as practitioners. Many of them are here today. Each of us cares deeply about finding a pathway to unwinding this crisis and contributing to the national debate. Our role in the housing eco‑system is to provide advice underpinned by evidence.
As for me, I was delighted to accept the invitation to chair this Council though not without some trepidation. As many of you know, for a decade I held the role of CEO of listed property company Mirvac. And during that decade, the team built over 28,000 dwellings, all around the country. I know first hand how challenging that can be, how hard it is to deliver new homes. I also know first hand the joy that comes from creating a quality home that makes a difference in someone’s life. A home that is affordable to our key workers, that is suitable for someone with a disability, that is well designed and sustainable, that allows people to enter the housing market for the first time, and to downsize at the right time.
Housing is important to everyone in this room, to our families and our children. It is clear that the community, including government, now recognises that this is one of the most important issues of our time and that we all have a role to play. Indeed, there is no time to waste.
But we know, as does almost everyone else, that there is no quick fix, no silver bullet. It’s going to take consistent, patient and often confronting actions, year in and year out, with all levels of government, the for‑purpose sector and the private sector engaging in true partnership.
It is puzzling to me why, given the acute situation we are in, that we don’t prioritise the housing system more than we do.
A functioning housing market should be seen as critical infrastructure – and prioritised accordingly.
So for the next 10 minutes or so, let’s unpack some of the causes of this crisis, the outlook for the next 5 years, and explore 5 areas that can take us forward.
The Council recently released our first State of the Housing System Report, and as you would expect, it paints a grim picture, driven by long term structural and cyclical factors.
Beneath the ebbs and flows of cyclical challenges there are numerous entrenched structural constraints that limit housing supply and reduce affordability. I’m going to briefly call out just 7.
First. There is a limited supply of suitable land for housing. Where land is available, sites can be highly fragmented or have limited enabling infrastructure, such as water, sewerage, power, roads and rail connections, or suffer from restrictions that limit the optimal use of land.
Second. Our planning approval systems are too complex and too slow. Arrangements vary across states and territories and across the more than 500 local governments that provide planning consent authority.
The frameworks and processes that dictate what gets built, and where, are hugely biased against change. This is largely because the people who already live in an area where more housing is proposed are the ones who get a voice in supporting or opposing development. The people who may enjoy living there in the future, they get no say.
Third. We have under invested in social housing. Social housing as a proportion of all housing has fallen over recent decades, while demand has soared – wait lists for greatest need households are up 52 per cent since 2018. Given Australia’s remarkable and unparalleled record of 31 years of economic growth with only one short COVID induced recession, how can that be a fair and just outcome for our country?
Fourth. How we finance new homes is a major constraint. We rely on households to provide financing for new homes through off‑the‑plan pre‑sales, or committed construction contracts, and we put plenty of barriers in the way of foreign investment. Both of these serve to reduce the sector’s capacity to respond quickly with supply to meet demand.
Fifth. Various features of our housing system, notably stamp duty, mean that we don’t use the housing stock we already have as efficiently as possible. Almost 4 million dwellings had 2 or more spare bedrooms on the night of the 2021 Census. And the growth of the short term rental market through platforms such as AirBNB and Stayz has removed existing stock from the long term rental market.
Sixth. We’ve had decades of weak or even negative productivity growth in the construction sector, reflecting the fragmented nature of the sector and low levels of innovation. The ABS estimates that Australia’s construction labour productivity rose by just 0.2 per cent per annum in the 30 years to 2023, compared to 1.3 per cent in manufacturing. Since 2014, construction productivity has been on a downwards trend.
And seventh. It’s abundantly clear that even if we solved all the other problems in the system, we don’t actually have enough construction capacity to deliver the homes we need.
Cost increases have led to an elevated level of insolvencies in the sector which are running at almost 90 per cent above the average of the past 10 years.
House construction prices are over 40 per cent higher today than in March 2020 – inflation was just below 18 per cent over the same period.
The construction workforce is aging and of those that do enter apprenticeship training, only half complete their course.
There is significant competition for labour coming from major infrastructure builds in New South Wales and Victoria and from the resources sector in Western Australia and Queensland. For example, if you’re an electrician, you can earn $1,000 more per week working in heavy and civil engineering compared to providing your services to the building sector. That’s a fairly easy choice to make.
Put all those factors together, and the stage is set for housing affordability to deteriorate further over the next few years, and this from already challenging levels.
Our report projected that, under current policy settings, we are likely to fall 260,000 dwellings short of the target of 1.2 million new homes within 5 years.
Both rents and house prices are forecast to continue to outpace inflation over the next several years.
The median income household now needs around 10 years to save the deposit for the median home. More alarmingly, even those median income households who can raise a 20 per cent deposit could only afford 13 per cent of the homes sold in 2022–23 due to mortgage serviceability. Lowest income households could afford only one per cent of homes sold.
Australia deserves a better housing system. It’s an economic and social imperative in so many ways.
Fundamentally, this is about what sort of an Australia we want to be. One where there is a fair go for all, where communities are strong, where young people can see a positive path ahead, where sustainability and climate resilience are embraced, and where we can provide a safe and prosperous place to live for people who come here from all over the world.
Given the significance of the challenges we’ve been discussing today, it would be easy to despair, but I prefer to think of it as a call to action that requires bold measures and innovative solutions.
I think we can all agree that we need a housing system in which adequate shelter is affordable and secure for households no matter what their financial circumstances or where they live.
Let me highlight 5 areas that require immediate focus to move us towards that better housing system.
Firstly, we need to have adequate investment in social housing.
Investing in social and affordable housing, whether that’s by government directly, or by the for purpose and private sectors, makes good economic sense, especially where it offers good access to employment and amenity.
It alleviates the insecurity associated with private rental housing.
It reduces homelessness and the incidence of poverty, which in turn generates savings for all taxpayers. In fact, SGS economics estimates that for every dollar invested to bring about the supply of social and affordable housing, the Australian community saves $2.
Ongoing and predictable investment in social and affordable housing also provides a stable base level of construction activity, which reduces the challenges that arise from an inherently cyclical sector.
And it makes for better cities, towns and suburbs by fostering socially integrated neighbourhoods and diverse and sustainable communities.
The Council believes that a firm target for social and affordable housing as a proportion of total stock should be established. An initial target of 6 per cent would be closer to estimated demand and consistent with the current OECD average of around 7 per cent.
We are encouraged by recent policy measures and programmes such as the Housing Australia Future Fund as well as new public housing commitments by state and territory governments. More social and affordable housing will get built in the coming years. And for those on the wait list, or living in housing stress, this can’t come soon enough.
Secondly, we must commit to best practice zoning and planning systems across the country.
We need to remove politics from the assessment process, digitise our systems, and move towards performance based systems and away from open discretion.
There is already some traction in this space, with states and territories committing to a slew of reforms. But they need to be implemented and embedded, and that’s not always easy when at the same time we need to bring communities along to understand the importance of providing significantly more housing, particularly around transport infrastructure and existing amenity while at the same time honouring the character of places.
Thirdly, we need to build more capacity in the construction sector. The key to this is encouraging more workers into the sector including through support for training, and skilled migration channels. Government can partner with industry to promote trade careers and attract more people from under‑represented demographics, including women and migrant workers.
We need to improve productivity by supporting innovation including finding new construction techniques.
We should focus on upskilling the construction industry in advanced technologies and processes. This could be supported by increased use of advanced manufacturing techniques in social housing projects and other government procurement, and accommodating innovation in building codes and regulations.
Fourthly, we need a better system for renters.
More than 30 per cent of Australians rent their home.
The number of renters is increasing , and those who are renting are doing so for longer.
Renting is the only viable option for an increasing share of the population.
But in many ways our system does not work for renters. Housing quality and maintenance are variable – ranging from excellent to utterly inadequate. Security of tenure can be fragile.
We need regulatory frameworks that better support renters. As agreed by National Cabinet last year, this framework could include things such as having a nationally consistent policy regarding reasonable grounds for eviction, no more than one rent increase per year and requiring minimum standards for rental property. The Council does not support rent freezes. They only serve to inhibit supply – the very thing we are trying to have more of.
More institutional investment in housing – known as build‑to‑rent – would benefit both investors and tenants.
Institutional investors need long‑term assets with stable income streams, particularly if those assets are less well correlated with other large, well established asset classes.
Institutional investment can drive innovation in design and construction, as well as efficiencies in energy consumption and maintenance.
For renters, build‑to‑rent could improve affordability through increased supply, improve security of tenure, the quality of rental housing and the provision of services.
Imagine having a rental home where you could inspect the property when it suits you rather than in the company of 20 other people in the 15 minutes that the real estate agent allows. Imagine – you can live there as long as you like, the concierge knows your name and your pet’s name, you can paint the walls, and repairs are done by the onsite team with no inconvenience to you. And this doesn’t need to just be confined to the medium and high end segments of the market.
Vibrant, mature and at scale build‑to‑rent markets exist in other countries, notably the US, UK and Japan. But in Australia, the vast majority of rental housing is supplied by individual landlords.
In July last year, the Council released a report on Barriers to Institutional Investment in Housing. Why is it that our institutions invest in this asset class internationally, but not here?
It’s largely a nascency problem. Because there is virtually no market, and no track record, institutions, rightly or wrongly, require a significant risk premium which makes the economics challenging. And because there is no market in which to buy and sell, institutions need to create these assets through development, bringing a whole different level of complexity, and an increase in time and capability required.
Our report made 11 recommendations that would serve to accelerate the establishment of institutional investment. I don’t propose to unpack them here, but they include defining build‑to‑rent as a separate development type subject to faster planning and development assessment, and ensuring that superannuation regulations do not inadvertently disincentivise investment in housing.
Fifthly, we need to work towards policy settings that are well co‑ordinated across all levels of government. One of the challenges in our housing system is just how many parts of government are critical to the provision of housing – Commonwealth, states and territories and local governments. And within these levels of government, multiple departments and agencies have responsibility for different parts of the system including Planning, Transport, Social Services, Treasury, Education and Skills, Infrastructure, and Regional Development. A spaghetti web, if you like.
As former RBA Governor Phil Lowe noted in his farewell address ‘the reason that Australia has some of the highest housing prices in the world is the outcome of the choices we have made as a society: choices about where we live , how we design our cities, and zone and regulate urban land, how we invest in and design transport systems and how we tax land and housing investment’.
We are seeing welcome steps towards a more holistic housing policy approach within which these choices can be made. There is once again a federal minister for housing and homelessness. Under the umbrella of National Cabinet, Commonwealth‑state housing forums have been established. The Commonwealth, states and territories have committed to a range of measures under the National Housing Accord.
So, I’ve tried to imagine a world in which we have done all the things we need to do to create a healthy housing market.
That would be an Australia in which adequate housing can be accessed by households on all budgets, where there is frictionless transition to appropriate housing that suits the different stages of life.
Renting would no longer be a stressful and insecure experience.
Generations of families would be able to find appropriate housing near each other, and lifelong community connections could be preserved.
Our health budgets could be spent on preventing poor outcomes rather than remedying the effects of housing insecurity.
That would be an Australia in which our housing system would no longer fail many First Nations people.
That would be an Australia where those of us who work in our stores, educate our children, serve our coffee, protect us and look after us when we are sick could afford to live in the suburbs where they work, and our cities would be devoid of excessive commutes.
That’s an Australia that I would really like to see, and I’d really like to see it in my lifetime.
Thank you.
Q&A
Tom Connell:
Thank you, Susan. A lot to unpack there, but what a big issue it is. I might start on the 3 tiers of government. Two here in the ACT, but 3 around most of the country. Is there something inherently unworkable about that system, that you have 3 involved as you outline there?
Susan Lloyd‑Hurwitz:
I don’t think it’s inherently unworkable. It just needs a lot of coordination and some level of trust between different levels of government, and some level of coordination.
I was very encouraged during the COVID years, which I don’t know about you, they seem like a dim, distant memory, although it’s actually not. There were taskforces all over the country that were designed specifically to get things out of the planning system that were stuck. And not to cut any corners or make bad outcomes, but just the water people weren’t talking to the fire people, so let’s make them talk to each other. And things got out of the system. We really accelerated how we were able to deal with planning and zoning by those taskforces. Of course, everything’s gone back to normal post‑COVID, but it is possible.
Tom Connell:
Is there an element as well, governments are more scared of, say, decisions on density, than the reality of the kickback that might happen? So perhaps their fear of approving things, whatever level of government it is, is not commensurate to how much overall voter kickback there would be? You mentioned the people affected are the ones giving feedback, not the ones that might be able to move in. Are they not measuring the net sentiment, if you like?
Susan Lloyd‑Hurwitz:
Well, I think because often it’s a political process, and as in my remarks, I said we need to decouple the planning and approval process from politics. It needs to be assessed on merit, not on politics, for this very reason that you’re raising.
I think, as I also said in my remarks, I do think there is a greater appreciation by communities and government that we have to do something different here, because our children aren’t going to be able to afford housing, and the lifelong consequences of that are considerable.
As I was talking about the impact on poverty in retirement households, it depends greatly on whether you rent or own your home. Our whole superannuation system is predicated on you owning your home. So, I think there is a greater community willingness to accept that we need to use the land we’ve got more efficiently than we do, to stop the 39 kilometre commutes that the firefighters and the police people have to do, and make sure that we make better use of the considerable amount of funding we’ve put into transport infrastructure already.
Tom Connell:
Is there a shift generationally? So maybe 10 years ago the concern from a couple approaching retirement that are 10 kilometres from the city is, I don’t want my house devalued, I don’t want the density, whatever it might be. And now they’re thinking, how are my children going to get in? And if the whole transaction means their children are better, they’re okay with less wealth in their asset eventually? Is that something that’s sort of coming to the forefront of that generation, if you like?
Susan Lloyd‑Hurwitz:
I don’t think we’ve seen any research that would give us any great insights into that, but the logic is sound, that when people start to look at the next generation, that the statistic is quite stark. I mentioned the figure of the median house price is now 7.7 times the median income of a household. Now, that’s mostly 2 people working now. In the 1950s and ’60s, for a long time, that number was 3.3 times one income. So it’s a considerable change in the affordability that we’ve seen in that period, that requires now mostly 2 people to work in a household just to pay the costs that people have to pay, of which housing is the largest component.
Tom Connell:
You mentioned renting as well, I suppose, the big difference in Australia. I wonder how much of this is to do with the fact that in current settings in Australia, you are much better off if you retire with a home. What the system’s telling you is, if you can, buy a home. That’s what parents tell their children, because that’s the best thing to do. Until, unless there’s a shift there, won’t that always be the case? And whilst you want more build‑to‑rent, people, if they can afford it, will buy a house. Isn’t that sort of system geared towards that?
Susan Lloyd‑Hurwitz:
I think there’s a couple of things to say to that. Firstly, we are highly incentivised where we can to maximise the amount we invest in home ownership. And that’s for a number of reasons. People perceive it as a good investment, and also zero capital gains tax on your primary residence. There is a very strong tax incentive to optimise that investment.
However, the reality is that for an increasing number of Australians, renting is the only option. And it seems inequitable to me that the amount of tax you pay over your lifetime should be determined by your housing tenure.
There’s something not quite right with how that works and the incentives that it provides to us. And so the solution is to actually provide more housing of all types. More institutionally owned build‑ to‑rent, more individually owned rentals, more houses for sale, more social and affordable housing. The whole system has to shift up, to give ourselves a chance of curbing the increase in prices in rents that we’ve seen so dramatically over the last little while.
Tom Connell:
Because you mentioned the census, and by my rough calculation, at least 8 million bedrooms were sitting unused on census night. Now Phil Lowe got in trouble for saying this, so I’ll be cautious, but the stats show rental properties are better utilised if you want, or more utilised, maybe better is not the right word all the time. B there are more people per rental property than a property someone owns. So if you fix that cultural issue or tax issue, whatever it might be around rental, then actually supply is eased at the same time? Or is that just, am I just like Phil Lowe and saying, hey, we need 5 people in a share house, that’ll fix it.
Susan Lloyd‑Hurwitz:
No, I think that’s a very complicated question, actually, around household formation and how many people live in a house. It is a very strong determinant of outcomes around how far we’re going to fall short of the targets that we need over the next several years. And it goes up and down depending on economic circumstances and so forth.
I think the answer isn’t as simple as we need more people in each house, it is part of an answer. There’s another great stat that in Melbourne City at the moment there are 100,000 empty homes, totally empty. And there’s sometimes a good reason for that; it’s between moves, or it’s waiting for renovation. But there are some that are just a land speculation without the inconvenience of a tenant. That’s 100,000 homes that we have that we’re not using.
So it’s one part of the puzzle, but as with all things housing, there is, as I said in my remarks, there’s no silver bullet, there’s no quick fix, there’s no one thing; oh, if we just did this, everything would be fine. There are multiple, multiple things that we need to do at the same time for a long period to make a dent in this.
Tom Connell:
I will go down the aisle though of the easy answers, maybe there are some here. Commercial property in cities. I know there’s some push that some of these could be hundreds of homes. Do people want to live in there I guess is always one question, but there are pretty big vacancies in particular in Melbourne. We seem to be at this maybe permanent cultural shift around, not working from home 5 days a week, but a lot of people are at least doing it one, 2 or 3 days. Is that part of the solution?
Susan Lloyd‑Hurwitz:
Possibly part of the solution. But I can tell you from practical experience that changing an office building into a residential building is not easy, from an architectural or structural point of view. The floor to ceiling heights aren’t right, the distance to the core isn’t right. It’s very challenging, unless you demolish and rebuild, which is possible, if they’re devalued sufficiently, but we’re certainly not at that point yet. On the margin maybe we will see some conversions, but that is not a silver bullet, that’s possible on the margin.
Tom Connell:
On the margin. And you mentioned technological advances. Prefab has always been an ugly word, but how much better is that getting, when you’re talking about solutions there? Because this is about speed and also cost, 2 of the huge issues for us.
Susan Lloyd‑Hurwitz:
I think this actually is one thing that could make a difference to speed and cost. And you say prefabrication or modular construction is a dirty word –
Tom Connell:
I saw you respond to that, I thought, I’ve said the wrong thing here.
Susan Lloyd‑Hurwitz:
No, you said the right thing. Because it’s good to debunk that myth. The quality that you can achieve now in modular construction, a customer cannot see the difference at all between construction built how we have done it for the last however many decades, and construction that’s done in a factory, and then craned into a development. Pod bathrooms for example. If you went to look at any modern apartment building, most likely it will have a pod bathroom; you wouldn’t know. The quality is as good, if not better, more controlled, in a safer environment, less trades on site.
In my previous life we did a controlled experiment where we built 11 townhouses in a traditional method, and 11 townhouses right next door, using largely prefabricated modular construction that was a bit like Meccano, built in a factory and then just bolted together on site, and measured everything. We measured trucks on site, we measured truck movements in communities, we measured emails, we measured trades on site, we measured cost, we measured speed. Hands down, the modular was better in all respects.
And then the supply went broke. Because we haven’t got scale in this country yet around modular, which is why the suggestion of, if the government really encouraged modular construction in the procurement chain that it controls, that maybe could provide enough scale for the industry to be efficient and encourage investment.
Tom Connell:
We’ve even seen videos of brick walls being built by machines, but I never know what’s real online anymore. What about when we’re talking about the response you’re getting around political halls? Are the major parties, you don’t have to name names, you’re allowed to, you’re always allowed to, but are they going, yep, give us some good ideas, or are you finding ideological lines on things are pretty firm?
Susan Lloyd‑Hurwitz:
I think there is, I’m very encouraged by the cooperation that is emerging and has been in place for a little while now between the federal government and the States and Territories. That is actually getting Planning and Housing Ministers in a room together for a regular meeting. That’s a great thing to do, to be able to talk about best practice across the country. A bit of competitive federalism is always a good thing.
I think there are clearly ideologies around this. People have very firm views on what is right for renters’ rights, what is right about the ideology around home ownership versus renting, there are very strong ideological views in this space. And housing is one of those things where every single person in this country has a view about what should be done around housing, and politicians are no different.
Tom Connell:
Building standards. I’ll try not to bring my own life into it having dealt with a builder that went bust and all the joys that went there. Do we have an issue do you think? There’s been obviously major apartment buildings, I know there’s very different rules around builders’ warranty insurance, not just the amounts, but in some places you go up above 2 storeys, you get nothing, which seems extraordinary. Are building standards an issue, or is this a headline versus reality?
Susan Lloyd‑Hurwitz:
No, I think it is an issue in large parts of the market. There are of course very many reputable developers and equally very many not reputable developers, who build and put their company into receivership so they can escape liability. We’ve seen the very public cases in Sydney at least with Mascot Towers and Opal Towers. And that is a tragedy for people who have invested their life savings, and on Christmas Eve they have to move out because the building is cracked, which should not happen.
And I think the idea of a Building Commissioner as we’ve had in New South Wales and other places around the country has really shifted up the standards. Because there’s a real name and shame going on there, and as someone hard‑nosed going in to inspect quality, and making sure that certifications aren’t – you can’t buy your certifications, it’s actually got to be done by someone qualified.
Because it reduces confidence in the sector. If you think, I might buy this apartment off the plan, which we need to induce supply, you need pre‑sales, because the pre‑sales are the way that you get your financing, so if we don’t have pre‑sales, we don’t get financing. And we don’t have confidence if we don’t get pre‑sales. And if you think, I’ve saved for 10 years now, I’m going to put everything I have into this apartment that isn’t yet built, and you are not confident that quality is going to be there, or that the builder or the developer is going to be there if something goes wrong, that’s a significant structural constraint in the system.
Tom Connell:
And particularly a discouragement towards apartments, where we want people to have that mindset, if you like it, move into one. They’re a lot of the buildings where they’re getting attention. With that insurance issue, they’re having to just hope the government might write a cheque or otherwise. We’ve seen some people as well, particularly investors in that scenario, and one of them got nothing, because the government said, you’re the rich ones. Is that a problem too, the lack of insurance and people just having to rely on governments? If you make the insurance more expensive, maybe the builder does a better job?
Susan Lloyd‑Hurwitz:
I think firstly we need to get better standards and hold people accountable to it. Insurance is helpful, but that’s insurance for when something has gone wrong, and it would be far better not to have the problem in the first place.
Tom Connell:
All right, I might start throwing it around to the rest of the room. First question from the floor comes from Andrew Brown from AAP.
Andrew Brown:
Thanks so much for your address. I was just looking to get your thoughts on recent data we got from the ABS during the week about building approvals. They went up about 10 per cent, correcting a bit of a downturn. And while there was about 14,000, 15,000 new dwellings approved in July, it’s still well down on the number that is needed for the government’s housing accord targets of 1.2 million homes to be built in the next 5 years.
Obviously, it’s still very early days in terms of the accords, but at what point do you think, if the numbers continue like this, at what point would we have to reassess and think that these target numbers are too big, and that the housing accord targets might not be met? It’s still early days now, but is there a point where we might have to reassess those numbers?
And just going back on renting as well, earlier this week we saw the Greens put out their plan for a rental watchdog, basically, so landlords who don’t necessarily fix mouldy ceilings, for example, can be fined, for example. Is that a viable solution, or just a pie in the sky argument from the crossbench?
Susan Lloyd‑Hurwitz:
So I’ll take those in turn. In terms of the approvals numbers that came out recently, yes, they are a slight improvement. The previous 2 reads had not been so good, so that is a step in the right direction.
One of the things that the Council is tasked to do by the legislation that governs the Council is actually opine on the 1.2 million target every year. And we believe that currently, while we forecast we’re not going to meet it unless something changes, and we’re forecasting in our report, as I said, 260,000 homes short of that 1.2 million target, it’s still a galvanising target to ensure that we are doing everything possible as a system that we have. We shouldn’t let go of it and say, oh, that’s too hard, let’s just change the number. We should make that number happen. I think keeping an ambitious target to galvanise all parts of the system into providing the homes that we need, and not giving up on it, I think is an important thing to do.
In terms of a rental watchdog, I think that could possibly be a good idea, because the stories of when I was talking about the rental experience can be fantastic. You’ve got great landlords in this country, and you’ve got some absolutely, utterly inadequate experiences where there’s mould, and where people don’t want to ask for repairs because they might get evicted or the rent might go up. That is not a great system for renters, and it affects disproportionately lower income households. And so there’s a sort of a double whammy there. They’re lower income households to start, but they’re also living in the most inadequate housing with fear of evictions and the repairs not being made and so forth.
So in the same way that a Building Commissioner is a good idea, similar scrutiny on landlords ensuring that they are held to account for treating renters with respect, and providing that secure housing that they need in an adequate quality, is something that could be useful.
Tom Connell:
The other question on investment actually and to do with renting, so the other Greens policy out there, the CGT discount would go on property investment and negative gearing would go as well. It is grandfathered. But in terms of new investment, would that mean lower end stock, more affordable stock? People that previously invested in that, they wouldn’t invest would they? They’d get shares, you’d still get a CGT discount there. Would that dry up rental stock, or at least private rental stock?
Susan Lloyd‑Hurwitz:
So the whole tax question is a very complicated, multifaceted question, and in reaching for the solution to the housing crisis, we shouldn’t be picking off one tax over another. But put the whole system together, there definitely is, and we say in our report, we should look at the tax system to look at what incentives is it putting into the system, could it be fairer, could it be more supportive of new supply?
For example, one of the challenges that negative gearing and the combination with concessional capital gains tax, those 2 things go together, is that it creates a cost of capital imbalance between individual investors who are highly incentivised to invest for capital gain, and institutional investors who want to invest for income. And so that is one of the reasons why institutional investors look at current residential yields and they say, well, that’s unacceptably too low. And part of the cause of that, not the whole cause, but part of the cause is individual investors shooting for capital gain because of the combination of those 2 things.
But this needs to be a job done by tax experts, not by property people. And it needs to pay attention to unintended consequences and transitional arrangements and how the whole system hangs together. But the Council has clearly said in our report that we think that we would welcome a tax review of this country, specifically in how it is supporting greater supply of housing.
Tom Connell:
You kept it broad as a review, because you’re wary there’s some sacred cows making some noise out there otherwise?
Susan Lloyd‑Hurwitz:
Absolutely not a question about sacred cows, more a question of this is a very complicated technical area, that has consequences that you need to think really carefully through. But we would call for a good hard look at the whole tax system and what it’s doing in various incentives, and pulling people in different ways, which are often contradictory as well. So you can find a study that says negative gearing is neutral, it’s bad or it’s good. There’s evidence out there to support all 3 of those. So it is definitely something that needs an expert opinion.
Tom Connell:
We do get a lot of those studies in our inbox. Next question from Angelica Waite from SBS.
Angelica Waite:
Hi Angelica Waite, SBS World News. The government has announced caps on international students at universities to reduce the number of students coming into the country. Can you comment on what impact that policy is likely to have on housing supply?
Susan Lloyd‑Hurwitz:
It’s a very interesting question, because [international] students are only 4 per cent of renters. A number of them live in designated student housing, or indeed rent those spare bedrooms from individual households. It’s really hard for us to see how capping international student numbers could make very much of a dent at all on the housing system.
Now, there may be other reasons why it is a good or bad idea to cap student enrolments from overseas, but it would seem to be fairly damaging to our second biggest export industry, and probably has very little effects on freeing up housing. It is not the case that international students are crowding out renters in our cities, it’s just simply not true.
Tom Connell:
Next question, Maurice Riley, the CEO here.
Maurice Riley:
Thanks Tom. I’d like to talk about superannuation. The role for superannuation funds to invest in social housing, or housing generally, and also the role for being able to use your superannuation to invest in housing. What’s the pros and cons here?
Susan Lloyd‑Hurwitz:
So there’s 2 very separate things going on there. As I was talking about in my remarks, it would be I think a good addition to the housing choices that we have in this country, should our superannuation funds seriously invest in build‑to‑rent, long‑term ownership in rental housing.
And to have that happen, we have to solve some of those nascency problems that I was thinking about. There definitely is a path forward into that. In the UK for example, they went from almost zero build‑to‑ rent to a very significant mature industry, which our institutions from Australia invest in with partners in the UK, through some fairly simple things really, in terms of a debt fund that was put together by the UK government that people could access during the construction phase; a guarantee that was put in place for the operational phase, which I am very sure will never get called upon, because the experience is that these things are let quickly, and downtime is very low, vacancy is very low.
Operationally once they’re built, the hard part’s done, there is huge demand for this type of housing from customers. So I think there are really some things we can do to encourage our institutional investors to invest in this space. Some do already, but it is very early days in the development of that industry.
The second point about is it a good idea to use superannuation, allow people to draw down on the superannuation to buy a home; that is a demand side measure. And as we all know, the demand side measures that we’ve seen, and we’ve seen it again and again and again, including some COVID measures, or first home buyer grants, anything of that nature does one thing; pushes prices up. It does nothing to stimulate demand.
So this is not something that we’ve produced a bit of work around, around superannuation, so I will give it as my opinion as the Chair of the Council. I think it’s a very dangerous policy to allow people to diminish their superannuation, which they will need in retirement, to only serve to make the problem we’re trying to solve worse.
Tom Connell:
Is part of that a micro versus macro? So if you could literally allow one friend of yours who was in their 40s to buy a house, and you could tell that they were a pretty diligent saver, and weren’t going to get there otherwise, given our retirement settings, which I alluded to before, that would be a good decision. Allowing everyone to do it, does the price element, and if that’s the case, would a staggered approach, could that work better if this is going to be something the Coalition will pursue, as something where you’re not letting everyone do it at the same time, at least going to ameliorate the price increase concerns?
Susan Lloyd‑Hurwitz:
I think we get to the price concerns in the end anyway, because you get to a position, even if you stagger it, which I think would be deeply inequitable as well, who would you choose is allowed to access? The people who need it the most have probably got the least of it, so it’s hard to see a mechanism whereby that could work, and you end up with the price impact anyway. The answer is supply, not stimulating more demand.
Maurice Riley:
Tom, just on indulgence Tom, you referred to the UK situation. Our problem is not unique in the OECD. I’m just wondering what you’re seeing, what other countries are doing? Is our problem more acute than others? Where do we sit in this particular problem, and are there any lessons to be learnt from the international experiences?
Susan Lloyd‑Hurwitz:
We’re certainly not alone. There are many countries that are experiencing the same problems that we’ve had, and are having, and will continue to have. But a couple of examples that I would call out from international case studies that have actually made a difference. In Auckland, for example, they introduced a change to planning which allowed people to build 2 homes effectively in the place of one home. Now, it’s not without its detractors, and it’s not without consequences. But the result has been that rent increases in Auckland are like 2 per cent, and they’re 18 per cent in Wellington. I might not have got those numbers right, but the magnitude is certainly there.
And it had an immediate effect, people immediately responded to how they could more efficiently use the land that they already owned, and it had a positive effect on the rental market. Would that work here? We’d have to study and get to the evidence.
The US is a great example. For 30 years the US has had ability to finance social and affordable housing. So even in very expensive housing markets like Manhattan, there is a very thriving social and affordable sector, supported by concessions that the government has had in place in terms of debt access for decades and decades. And it’s produced millions of homes. So there definitely are case studies we could learn from around the world.
Tom Connell:
Part of the argument for or against superannuation getting heavily involved in build‑to‑rent has been about returns. But you’re saying we’re doing that in the UK, so our super money is helping alleviate the UK housing crisis and not our own?
Susan Lloyd‑Hurwitz:
It is, it is, absolutely.
Tom Connell:
That’s pretty stark isn’t it? All right, Mike Zorbas, the next question, Property Council of Australia.
Mike Zorbas:
Thank you. Sue, great speech, and I think the work that you and the Council have done has really improved the quality of our debate, the data, certainly the pro‑investment mindset around how do we get more money into building our cities, and the compassion as well around social housing I think is very important.
I think we can agree, 1.2 million homes is a great target. I’m an optimist about that, notwithstanding the quite sobering updates that we get in terms of ABS approvals. One of the things that would make your big 5 solutions come alive, is I think a realisation in the Federal Parliament at least that more money needs to be applied to the problem. And of course that’s a natural refrain for any solution to a thorny and complex issue. But the fact is here over the next 5 years of this housing accord we’re going to spend something like $3.25 trillion in the life of the Parliament on a bunch of measures, and of that, only $30 billion will be applied to housing.
So this crisis which every parliamentarian talks about on a regular basis, is having a very tiny amount of money applied to last mile infrastructure, applied to resourcing of Local Councils, and the pinch points that really matter to delivering of housing supply. Your thoughts?
Susan Lloyd‑Hurwitz:
I absolutely would agree, and I said in my remarks, that given the crisis that we’re in, we don’t prioritise housing how we should. We don’t prioritise it as essential infrastructure. And part of the contributing factor to this problem is that no one has accountability for it. There’s no single home for where does our housing policy as a nation sit? That spaghetti web that we have to coordinate, this massive system of agencies and levels of government and communities, in order to make practical difference on the ground.
Your point around enabling infrastructure is a good one. I think that there is a very strong case that where you can demonstrate clearly that if we had sewerage, roads, rail connections, this bit of land would be viable for development. It would have to be proven and not just a, hand over some money and hope that it would actually stimulate housing. But there has to be a way to assess that forensically, to work out if you did spend the money, the return that you would get is X for that amount of infrastructure spend.
One of the complexities I think we would all recognise in this room is that most of the levers around supply are held by State and Territory governments. And the Commonwealth can play a role, but that really is getting the States and Territory governments to do the heavy lifting that they need to do, yes, of course supported by funding, to actually deliver the homes on the ground. The Commonwealth government doesn’t have the levers to do that.
So I think you’re right, it is a small amount of money; $32 billion in the scheme of things is not an enormous amount of money. But it’s a start, and it’s more than it was. I think that investment, particularly around social and affordable housing, is a good start, but more needs to be done. And it’s not just money. It’s all the other things that we talked about as well, in terms of how we work, and how we relate, and how we coordinate, and attitudes we have towards renting and home ownership. But funding is the perpetual challenge for every system in this country and housing is no different.
Tom Connell:
Next question from Amanda Lynch, Council of Capital Lord Mayors.
Amanda Lynch:
Hello, thanks for your presentation. I think we all agree that local governments are a very important part of the equation to unlock all those homes, and actually deliver supply as an important partner. So I’d like to make a bit of a bold pitch for Local government to be an even more integral part of this Housing Supply Council. Maybe a seat on the Council would be good.
We’ve got the Ministerial Housing Homelessness Ministers Council consulting with State and federal governments. Local government just is looking like an adjunct a bit sometimes, so it would be good to actually be at the centre stage, have a seat at the table.
And also my second question is actually about the private rental market. It’s such an important component as well. And how do we actually encourage more private rentals in – there’s a lot of focus on owning a home, as we discussed, and you so eloquently put it, that there’s been a bit of a less of a lens on the private housing market, and encouraging people to actually be renting houses in the private market to renters, yeah.
Susan Lloyd‑Hurwitz:
Well, thank you for your comment about Local Councils. They absolutely are critical in the delivery of new houses. And it’s very well established that the larger the area that a Local Council looks after in terms of planning, the better the outcomes are. There’s a reason why Brisbane has relatively better planning systems, because the Brisbane City Council has a very large remit to look at it, and they can make important decisions. If you’re a smaller Council, listening to the people that live in your Council area, you need to get re‑elected. It’s easy to say, well, not here, we’ll have that more over there.
So that absolutely is an important part, and an under‑resourced part of the system as well. Many Councils will, with the best way in the world, they’ll say, we would really love to be faster at this, but we just don’t have the people who can assess these development approvals in a speedy fashion. So there’s a whole host of things that could be done around that system.
The reality is more and more people will rent, whether we encourage them to or not, because people are getting priced out of owning homes. But if more supply isn’t created, there won’t be more houses for them to rent. The supply has to be created to give the choice of people being able to rent. So we need to support individual landlords to invest. We need to support institutions to invest. We need to encourage foreign investment into housing in this country. And that’s something that in 2016/17, there were very significant impediments put in place to deter foreign investment. Those should be repealed, so that we can get more investment into building more supply, because if we don’t build more supply, there won’t be homes for people to rent.
Tom Connell:
There is a lot of food for thought, and it’s going to be a huge election at the issue – at the election, I should say. I know our political parties and leaders watch this, so they’ll maybe be giving you a call after this. But Susan Lloyd‑Hurwitz, I appreciate your time today.
Susan Lloyd‑Hurwitz:
Thank you very much.
Tom Connell:
Ladies and gentlemen, please thank Susan Lloyd‑Hurwitz.