Chair of the National Housing Supply and Affordability Council – Ms Susan Lloyd-Hurwitz
Thank you Minister Collins and good morning to all.
I’d like to acknowledge the traditional custodians of the land on which we’re meeting this morning, the Gadigal people of the Eora nation, and pay my respects to elders past and present, and extend my respect to any First Nations people here today.
Thank you Minister Collins for leading the government’s significant efforts to make a positive difference to the state of the housing system, including providing funding through multiple programmes, and developing the Housing Accord with the states and territories. Having 3 levels of government involved in the housing system – federal, state and local – is complex. But we are very encouraged by the Australian Government’s concerted efforts to engage with policies and programmes, when in the past housing has often been left to the states and territories as well as local governments. And we are equally encouraged by the raft of reforms announced by the states and territories, particularly around planning and are hopeful that the implementation of these reforms will lead to a better outcome than the current forecasts indicate.
Late last year the Australian Government established the National Housing Supply and Affordability Council. Our role, as defined by legislation, is, among other things, to provide analysis underpinned by evidence to support policy making aimed at improving housing outcomes for Australians. Thank you to the Council members and the Council Secretariat for the significant amount of work undertaken to bring this report to life. I’d also like to thank the many stakeholders who generously gave us their time in a series of consultations.
On behalf of the Council, I am pleased to deliver to the Minister our first annual State of the Housing System report. This report seeks to set a baseline of understanding how the housing system is functioning and to forecast supply and demand, to help inform government policy deliberations.
Fundamentally, this work is about what sort of an Australia we want to be – one where these is a fair go for all, where communities are strong, where young people can see a positive path ahead, where sustainability is embraced, and where we provide a safe and prosperous place to live for people from all around the world.
And that vision is under threat with the housing market – one of the most important ecosystems in our economy and our society – in such an unhealthy state.
Putting our collective effort into developing a more healthy housing market matters.
It matters to the women and children fleeing domestic and family violence who face homelessness, with crisis accommodation at capacity.
It matters to families living in insecure rental accommodation.
It matters to those who commute hours each day from where they can afford to live to where they work.
And it matters to millions of young people who realise home ownership is increasingly out of reach.
There is no denying the housing crisis we are in. This is a long standing crisis, fundamentally driven by failure to deliver enough housing of all types – from social housing right through to market home ownership.
We have an environment in which prices and rents are growing significantly faster than wages, low‑income households can only afford one per cent of homes sold each year, 170,000 households are on public housing waiting lists, 122,000 people are experiencing homelessness and projected housing supply is startlingly low.
This crisis has been decades in the making.
As I was preparing for today, I came across an article entitled ‘The Challenge of Housing the Nation’. It started with the sentence ‘housing supply has not kept up with underlying demand’ and made some very familiar observations about housing stress. It went on to diagnose the supply problem as being caused by lack of land supply, poor planning and approvals processes, lack of enabling infrastructure and skills shortages. Sound familiar? The article was written 15 years ago. And very little has changed. We are still here talking about the same problems, and more and more households are in housing stress.
What we’re talking about here isn’t an abstract or theoretical topic. We’re talking about homes for Australian families. Access to shelter is a fundamental human right and a basic need.
And the problem we are trying to solve is multi‑dimensional. The ability to afford a home is clearly important, but so is security of tenure, proximity to jobs and access to amenity.
Although this crisis is at its heart one about insufficient supply, there are many other contributing factors, particularly currently, which are driving a more acute crisis – including the resumption of immigration at some pace, planning system weaknesses, rising interest rates, skills shortages, elevated construction company insolvencies, weak consumer confidence, cost inflation and low productivity in the construction sector.
We should resist the temptation to see any one of these factors as the driving force, for example migration. While it is true that migration has recently been elevated, with an annual net inflow of 549,000 migrants to Australia in the year ending 30 September 2023, this should be seen as a catch up after the COVID period of negative net migration. It is also true that we have had a housing affordability challenge across periods of low, moderate and higher migration over decades. Migration itself is not the issue.
In 2023, housing affordability worsened, from already challenging levels. In fact, the share of income Australian households spent on housing costs reached its highest on record in 2023.
Housing prices have increased by over 35 per cent since the start of the decade.
Rising mortgage rates have meant that the minimum scheduled repayments for borrowers have increased by as much as 60 per cent, and the average prospective homeowner now needs around 10 years to save the deposit for the average home. More alarmingly, even for those who can raise the deposit, the median‑income household could only afford 13 per cent of the homes sold in 2022–2023.
Renting is no easier. Even finding rental accommodation can be challenging, with the vacancy rate at 1.6 per cent, well below the 3 to 4 per cent considered to reflect a balanced market. Rents have increased by more than 35 per cent since the start of the decade.
In this report, the Council has particularly focused on vulnerable groups in our community including people at risk of homelessness, in need of social or affordable housing and many First Nations people.
Low investment in social housing has meant that social housing now represents just 3.8 per cent of housing, down from 5.6 per cent in 1991. And at the same time, demand has grown significantly. Waitlists for public housing have increased by 9 per cent since 2020, and homelessness has increased by 36 per cent since 2006. The social and economic costs are high – total spending on homelessness services has increased by 22 per cent since 2018.
Our housing system is particularly failing many First Nations people.
First Nations households are half as likely to own their own home (with or without a mortgage), 6 times more likely to live in social housing, 3 times more likely to live in overcrowded dwellings and almost 9 times more likely to be experiencing homelessness than non‑Indigenous Australians.
Access to appropriate housing is critical to empowering First Nations individuals, families, and communities to improve health and wellbeing; improve employment opportunities and access to education; and provide connection to community and a sense of home.
While individual programmes centred around self determination have had some success, without further targeted action, housing targets under the National Agreement for Closing the Gap will not be met.
The problems in our housing market are deep seated and there is no easy fix.
Indeed, the modelling done by the Council shows that the undersupply will worsen in the near term.
Australia is experiencing a period of elevated demand for housing, and supply is not keeping up. We estimate that 244,000 households were formed in the 2022–23 financial year with another 208,000 to form in the 2023–24 financial year, before returning to more normal levels. This rate of household formation is well above the 173,000 dwellings delivered in 2022–23 and the expected 178,000 new dwellings in 2023–24. As well as population growth, the size of households and consumer preferences for housing types are also important and do have an impact on demand. That’s too much detail to get into here but our analysis is in the Report.
Over the 6‑year period, from July 2023 to June 2029, we estimate there will be a shortfall of new market supply relative to new demand of 40,000 homes. This will add to the already significant undersupply in the system, meaning that affordability is expected to continue to deteriorate.
Adding to the affordability challenge, economic, climatic and demographic trends will add further pressure. Ensuring homes are sustainable and resilient to climate risks will add to already high construction costs, though this will be at least partly recouped by lower ongoing energy costs. An ageing population and an increasing number of people living with disability will require the provision of new and refurbished homes that meet their needs.
The Council is also tasked with considering the suitability of the national 1.2 million homes target. It is unlikely this target will be met without further significant effort. Under current settings, we expect just under one million homes will be delivered in the 5 year period. However, we believe it remains a suitably ambitious target which can focus us all on improving this outcome.
Australia needs a better housing system, one where shelter is affordable, secure and sustainable and lives up to our Australian ideal of a fair go. Building a better system requires focused, coordinated and consistent effort over the long run, across all jurisdictions.
Given the significance of the challenges, it would be easy to despair, but I prefer to think of it as call to action that requires bold measures and innovative solutions.
There are several foundational areas that require immediate focus to move us towards that better housing system.
We need to have adequate investment in social housing, reduced homelessness, stronger tenants’ rights, better zoning and planning systems, more capacity in the construction sector, more available and consistent data, and a taxation system that supports supply and affordability. The Council’s future work will focus on providing analysis on these areas and the final chapter in our report provides more detail on each of these important areas.
Our housing crisis is a collective problem in need of collective solutions – harnessing all levels of government, the private sector and the not‑for‑profit sector. It’s not an academic topic, it truly matters.
And I fervently hope we won’t be here in another 15 years talking about Australia’s housing crisis.