Building our way out of the housing crisis

And while others may blame rising interest rates, high immigration or unrealistic construction costs, it all comes down to one fundamental economic tenet – supply is simply not keeping up with demand.

As such, increasing the amount of housing we produce will be the solution to alleviating the issue. Of course, that’s far easier said than done.

For example, this year the federal government shepherded in the National Housing Accord which sets an aspirational national target of delivering 1 million new, well-located homes over five years from 2024.

While that sounds good in theory, the reality of hitting that lofty target will be damn near impossible because building new homes in modern-day Australia is expensive and takes time.

So, boosting supply is going to require a multipronged, heavily coordinated approach that must be initiated immediately to yield sustainable long-term benefits.

Here are five areas where there must be instant action to help this nation produce more housing.

Construction innovation

From a macro perspective, innovation in the way Australia builds its homes has been entrenched in a decades-old process.

Yes, we have seen the development of new materials, finishes and fittings. Sure, we’ve played with design and aesthetics, but the basic principles of laying out a slab, building a frame and sheeting the structure have remained fairly constant.

Widespread adoption of different construction methods must be part of the solution.

For example, home prefabrication could be a saviour. Constructed off-site and in weather-protected facilities, it is possible to create all the components of a home away from where it will eventually be situated. You can even pre-install services and outlets. The result is that the modules are transported to a site, placed and affixed with a turnaround time counted in days, not weeks or months.

Finance

The way construction loans are structured isn’t conducive to stimulating supply.

Banks only fund what’s fixed in place on a build. They exclude materials that have been supplied and purchased but are being stored, waiting for the project timeline to reach their installation point. The expense of holding those materials between delivery and installation is being borne by the builder and/or client.

At a time when more housing supply is needed, adopting more flexible terms on new construction loans would help in the delivery of homes. This might be through APRA directives or even pressure from a political level. Perhaps a solution is to issue a guarantee or lien over the materials to the bank so the funds can be accessed immediately by the builder.

Town planning

Complying with town planning requirements is a huge cause of frustration and delay in the building sector. Gaining approvals for a build of any sort is expensive and takes inordinate amounts of time.

There is no doubt we need politicians across many levels to step up here if we want to see more housing.

Adequately resourcing council planning departments, or outsourcing the work to more efficient private certifiers, would be a start.

There also needs to be an overhaul of most town plans with a focus on removing impediments to development. While safety should remain a priority, reducing limitations around higher-density construction in inner-urban areas must be considered. Also, the ability to produce smaller lot sizes in less dense suburbs would be a huge benefit.

And then there are government fees and levies which can add up to 20 per cent to the cost of producing each allotment. Reduced headworks and other charges would be welcomed widely by the industry. This would help make the numbers stack up for affordable housing.

Another note on this – the era of the NIMBY must end. “Not in my back yard” has no place in the current crisis. Stopping development for the sake of appeasing established residents (i.e. restricting housing supply for the many to satisfy the few) makes no sense.

Labour

One of the primary reasons Australia is in this current position is that the cost of labour has risen dramatically. The two primary sources of labour are domestic and imported (i.e. immigration).

Incentivising school leavers to take up a career in the trades is a good start. Subsiding education and employers to make this happen is part of the solution. So are comprehensive information campaigns about how lucrative and enduring a job in the sector can be.

With immigration, there must be a focus on attracting skilled immigrant in the construction sector. These are the workers we need most right now to help us create more housing.

Insurance

The cost of insurance is an enormous financial impediment on individuals and companies throughout the nation. Site/building insurance is a huge component in the construction contract, but so is business insurance and public liability cover.

This is one of the elements I deal with constantly in my specialist role. I’ve seen some outrageous things happing in recent years where the cost/benefit of insurance renders it almost pointless. In some cases, entities can’t even get someone to insure their properties.

Again, I think this is a matter which needs to be addressed at a political level.

The fact is we simply need to find ways to create more housing throughout our nation if we want to deliver affordable, decent-quality shelter to our citizens. Unfortunately, without a combined effort by our nation’s leaders and those throughout the industry, I fear we may be in for much more pain in the years to come.

Marty Sadlier, director, MCG Quantity Surveyors