Plans for Australia to build its way out of a housing crisis with 1.2 million new homes are already out of date, according to a powerful building group. Picture: Toby Zerna.
Australia’s plan to fix the nation’s housing affordability crisis by building 1.2 million new homes has been blown out of the water by surging population growth and demand.
The Housing Industry Association has revealed they no longer believe the target set out in the National Housing Accord by the Albanese government in 2023 is enough to even stop the home price crisis getting worse, let alone to result in better affordability.
It means that even if the nation were to hit the lofty target, which it’s likely to come up close to 200,000 homes short on, the nations most powerful building group believes the housing crisis would get worse.
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It comes as new analysis by HIA has revealed the nation is already at a 1.9 million home shortfall if it wants to get housing affordability to a level where the average single-wage earner can afford a home.
HIA senior economist Tom Devitt said their projections showed the nation would likely only just top 1 million home builds by the 2029 deadline, six figures short of the goal — which has already been extended from an initial estimate of 1 million homes outlined in 2022.
While it was still worth pursuing, Mr Devitt said it was becoming increasingly clear it should be reviewed if the nation wanted to give young Australians the best chance to own a home.
In a National Outlook report released this week, Mr Devitt analysed the nation’s $773,803 median house price and, factoring in a 6.13 per cent home loan rate, has calculated it takes 1.7 times the nation’s $2032 average wage to cover the cost of the mortgage for such a home.
Building more homes is a key way to reduce home price growth, but boosting supply is facing major hurdles.
The economist used Centre for Independent Studies chief economist Peter Tulip’s research that shows a 1 per cent increase in Australia’s housing supply would lead to a 2.5 per cent reduction in housing costs, to estimate that the nation needs an extra 1.9 million homes built to make prices affordable today — via a 40 per cent reduction in home prices.
Proportionally, in order to effectively reduce home prices broadly, the research suggests Sydney would need almost 440,000 new homes, Melbourne a further 289,000, Brisbane about 204,000 and Adelaide 107,000 more.
But it does not factor in any further population growth, and only covers the current shortfall.
“I remember when the (1.2 million homes) estimate first came out, we were running population assumptions that just to keep affordability from getting worse, we needed 200,000 homes a year,” Mr Devitt said.
“But that was before population growth really surprised everyone over the past few years, and it’s remained more elevated than what anyone, including government, thought.”
HIA senior economist Tom Devitt says population growth has pushed Australia past the point of 240,000 new homes a year being enough to even stop housing affordability getting worse.
Latest Australian Bureau of Statistics data shows the nation’s population grew by 423,000 in the year to March 31, 2025. The figure was 615,300 in the prior 12 months, and more than 563,000 in the year to March, 2023.
He said the current goal of 240,000 homes a year under the Housing Accord was now not even enough to stop housing affordability getting worse.
HIA chief economist Tim Reardon said it was worth pursuing the 1.2 million homes target, but at this stage it only appeared the nation would be able to achieve that in a five year timeline from 2030-2035, ending six years after the end of the current timeline set out by government.
Mr Reardon added that there were now some meaningful policy changes coming through, with NSW in particular taking steps to boost supply by effectively guaranteeing sales for certain apartment complex projects.
While Victoria had effectively limited home price growth in the established market with a combination of surplus new builds and its population stalling during the pandemic, he said it now needed to significantly increase its rate of construction or risk a “bull whip” scenario where prices would surge if the surplus wasn’t maintained.
To reduce housing costs to a level the average Aussie wage earner could afford, we’d need 1.9 million more homes available today.
He also noted that population growth wasn’t the only thing spurring housing demand.
In a separate HIA report they have also ranked the Aussie states doing the best to housing construction goals, with Western Australia the current front runner.
It’s followed by South Australia and Queensland, with NSW and Victoria in the middle of the list — despite the size of their new housing markets giving them an outsized influence over the success of the nation’s building goals.
Mr Reardon said both Sydney and Melbourne were lagging the rest of the nation, with the former still waiting to recover activity after softer conditions had yet to fully be shaken off.
The Victorian capital’s slump related to its recent oversupply effectively limiting established house price growth, meaning many buyers were opting to purchase an existing home rather than build a new one.
Real Estate Buyer’s Agents Association of Australia president Melinda Jennison said the nation was “deep in the trenches” of its housing affordability crisis and the growing risk it faced was of a population being divided between those who could afford a home and those who could not.
There are growing concerns that addressing demand-side issues will exacerbate the nation’s housing crisis, while fixing the supply-side problem is falling short.
“It will take some major policy changes to fix supply chain issues to resolve the housing crisis,” Ms Jennison said.
“But right now a lot of the government policies are focused on demand side stimulus and that’s exacerbating the problems that we have.”
She said ramifications to failing to get more homes built to improve affordability could include increasing pressure on regional areas where housing is more affordable, but infrastructure might not be able to accommodate significant population growth, or even for more crowded living in certain scenarios of cities.
Ms Jennison it was now at a point where the government might need to reconsider how certain regulatory and tax imposts impacted the new housing construction sector, noting that land tax, stamp duty, and even things like payroll tax were all impacting the cost of building a new home at a time when minimising this could have significant benefits.
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