Bold Budget Must Deliver Housing Supply to Succeed says UDIA
The Urban Development Institute of Australia (UDIA) National congratulates the Federal Government on the 2023-2024 Budget’s continued focus on housing supply as an essential strategy to support vital population growth and economic repair.
“It’s hugely positive to see the May Budget take further steps to bolster housing attainability, ownership, affordable and social housing, as well as removing some of the inhibitors to Build to Rent,” said Max Shifman, UDIA National President.
Key measures welcomed by UDIA in the lead up to and announced in tonight’s May Budget have targeted access to housing and boosting supply. These include a further increase of $2bn in affordable and social housing debt through the National Housing Finance and Investment Corporation (NHFIC), Housing Affordability Future Fund to provide at least 1,200 affordable and social houses in each state and territory, halving Managed Investment Trust Withholding Tax to encourage institutional funding of Build to Rent at-scale housing, boosting Commonwealth Rental Assistance and broadening access to the three major Housing Guarantee Schemes.
These initiatives are a great start and reflect many of UDIA’s key advocacy areas, but there is substantially more work to be done to boost housing supply and keep downward pressure on prices given high net migration projections and the low forecasts on new dwelling supply in the coming period.
Critically, the May Budget has forecast Net Migration at 400,000 in 2022–23 (against the previous projection of 235,000 for 2022-2023) and 315,000 in 2023–24. The increases in net migration are vital to catch up on the pre-pandemic shortfalls and repair our economic capability, but this highlights the need for Australia to redouble its efforts to boost housing supply across the spectrum.
The success of Government’s economic strategy swings on the ability of Australia to take pressure off housing rental and ownership which are vital factors impacting cost of living, transport, city building, health, infrastructure, access to jobs, immigration and productivity.
There are major challenges ahead to overcome the housing supply imbalance and to ensure the success of the May Budget. UDIA National analysis shows that with greenfield and apartment costs rising and approvals dropping, the powerful impact of scarce housing supply, rising cost of living, interest rates and tighter financial lending, means any initiatives to improve the economy and housing access need to be coordinated with expanded supply measures across the spectrum.
Immediate actions needed include boosting enabling infrastructure, streamlining planning, and expanding development ready land supply.
UDIA National is also encouraged to see a heightened focus on better, more effective infrastructure investment to ensure Government gets the biggest “bang for buck”, and it is critical that this investment is coordinated with expanded the availability of development ready land for greater housing supply.”
UDIA is keen to see the Housing Australia Future Fund (HAFF) pass through parliament, together with a broader housing plan that harnesses private housing providers, CHP’s and investors through incentives that build on their capability and capital, to stretch government funds further.
“UDIA National looks forward to working with Government to continue delivering initiatives that boost land, and accelerate delivery of all types of housing, that help underwrite the success of the Government’s economic strategy,” said Mr Shifman.
- Net overseas migration is now expected to be 400,000 in 2022–23 (against the previous projection of 235,000 2022-2023) and 315,000 in 2023–24, reflecting the one-off catch up from the pandemic. It is critical that Australia ramp up efforts to build greater supply to house the population that is vital for economic growth.
- The Budget housing measures build on the Housing Accord which aims to deliver one million new homes over the 5 years from 2023-24. The scheme needs to maintain an annual delivery of 200,000 houses a year against a background of declining supply and viability. To succeed, this plan needs strong support from local and State governments, with supporting measures from the Commonwealth to drive change in planning regulations, speed up release of land supply and ensure private investment in long-term housing.
- UDIA National’s research also shows that Government and Community Housing Providers (CHPs) currently only have total capacity to deliver on average about 8,500 social and affordable dwellings (gross) a year. AHURI research shows that we are only building about 3,000 (net) new affordable and Social Houses a year, after demolition and sale. This is stark given the National Housing Financial Investment Corporation (NHFIC), Review in 2021, revealed the need for about 45,000 affordable and social houses each year. Making matters worse, NHFIC’s latest report shows that at-market housing is currently falling behind by 21,260 each year. Government and CHPs alone cannot provide enough affordable housing without enlisting the help of the broader development sector.
- Managed Investment Trust (MIT) withholding tax for Build to Rent to be reduced from 30% to 15% after 1 July 2024- aligning with our call to create a level investment playing field by lowering the rate to attract at-scale international investors, familiar with funding large investments in housing.
- $2bn NHFIC funding for affordable and social housing – increasing total investment funding in the Bond Aggregator to $7.5bn, with a further $2bn to combat the chronic lack of affordable housing across the nation.
- First Home Guarantee and the Regional First Home Buyer Guarantee changes will enable friends, siblings, and other family members to make joint applications under these schemes, as well as now also including Australians who have not owned a home for the last 10 years. These new rules will apply from 1 July 2023.
- Family Home Guarantee will be expanded from single natural or adoptive parents with dependents to eligible borrowers who are single legal guardians of children such as aunts, uncles, and grandparents.
- National Housing and Homelessness Agreement increase funding of $67.5 million to states and territories, through the National Housing and Homelessness Agreement in 2023-24, to help tackle homelessness. This funding will assist homelessness services as the Government works to develop a new National Housing and Homelessness Plan.
- Commonwealth Rental Assistance (CRA) increased by 15% to boost rental of affordable and social housing, helping around 1.1 million Australians with the rising cost of rent at a cost of $2.7 billion over five years.
- Prioritising Infrastructure that gives the biggest “bang for buck” – States and territories will work with the Commonwealth to support a more sustainable infrastructure pipeline, in the short term, at around $120 billion over 10 years that provides certainty to the market and delivers the highest priority projects for growing communities.
- Promote City building – by ensuring growth in cities is sustainable in partnership with state and territory governments via the National Urban Policy. This is directly in line with UDIA National recommendations.