A $3bn incentive scheme for new home builds announced by the Albanese government is on track to pay out just $584m. Picture: NewsWire / Martin Ollman
A $3bn federal government incentive scheme intended to boost the coffers of states creating the most new homes is set to pay out less than $584m.
Building approvals data released yesterday by the Australian Bureau of Statistics shows the nation had its weakest monthly result since mid-2024, with just 14,565 homes given the nod by planners.
And with numbers still well below national targets, the only regions forecast to earn a payment from federal coffers offered by the Albanese government in 2022 are Victoria, $391.545m, Western Australia, $163.965m, and the ACT, $28.395m.
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And that is only if the government honours payments on the National Housing Accord’s original one million homes proposal.
The analysis by Oxford Economics shows that even these three are unlikely to reach their share of the revised 1.2m homes target, with their forecasts showing just 947,500 homes to be built around the country in the five years from mid 2024 to mid 2029.
The Accord’s goal is to improve housing affordability around the country by increasing the supply of homes.
Even those numbers are likely to slide if there’s more than one interest rate hike this year, or conflict in the middle east escalates significantly.
Housing construction is well short of levels needed to address Australia’s affordability crisis.
Oxford Economics lead economist Maree Kilroy said NSW was so far behind that it was almost impossible for it to earn a payment at this point, while positive signs in Queensland and South Australia might be able to raise their chances.
However, Ms Kilroy warned that even the roughly $584m on the cards for pay outs could be eroded if there is more than one interest rate hike this year, particularly if they come in quick succession, or if the conflict in the middle east escalates significantly.
“These forecasts assume another rate hike, likely in May, then holding steady until the beginning of 2028 — if we get more hikes this year, that could change the profile of the residential upturn,” Ms Kilroy said.
“And we aren’t factoring in a significant escalation (in Iran) in our baseline … but that might be a very big downside risk to the outlook for housing construction.”
Australia is aiming to build 1.2 million new homes by mid-2029.
On current trajectories, less than 20 per cent of the $3bn New Homes Bonus fund announced by the Albanese government in 2022 will be spent, which Ms Kilroy said would leave the government with an interesting question of what to do with the remaining funds that had been earmarked to assist further housing creation.
Payments are not slated to begin until 2028, with Oxford Economics basing each state and territories share of new builds under the targets on their relative share of national population.
Housing Industry Association chief economist Tim Reardon said any spare funding from the $3bn would be well spent on infrastructure which could help deliver homes more affordably, and lead to more being built through private funding.
The economist added that interest rates would have a significantly bigger bearing on new home builds than any oil shock likely to emerge from the US and Israeli attacks on Iran.
Housing All Australians director Robert Pradolin said excess funding should be directed towards encouraging developers to provide affordable housing, largely for key workers with critical roles in society but lower wages.
Robert Pradolin, founder of Housing All Australians, believes any spare funds should be considered to support affordable housing for key workers.
Mr Pradolin said while this would need to be done accountably, such as following the Progressive Residential Affordability Development Solution he had outlined that would include a register of affordable homes.
He said this was the best way to get in front of a housing crisis that had been building for a long time and now needed 33,000 affordable and social housing homes made available to meet demand.
Property Council of Australia policy and advocacy group executive Matthew Kandelaars said the nation’s developers and builders were the right parties to get more homes built, and governments at all levels to do what was necessary to improve “broken planning and approval systems” and also to scrap “housing killing taxes and charges”.
“Housing enabling, last-mile infrastructure like power, sewerage and water connections aren’t politically sexy spends, but are critical to the delivery of new communities,” Mr Kandelaars said.
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