Great, finally some funding for housing, but…

Updated 13 May 2024

Dr. Stephen Glackin

Senior Research Fellow, Centre for Urban Transitions, Swinburne University of Technology

Email: sglackin@swin.edu.au

Both Federal and Victorian budgets have put aside large sums of investment for new housing. This is great and something that we’ve been advocating for some time. However, there are a number of serious issues that need attention before we assume that the funding will be as effective as we first imagine.

The first concerns planning. Changes to planning regimes takes time, often years, and can be the difference between being able to capitalise on a resource and not. Often holdups in large scale planning that meant to encourage higher density and development mean that landowners and developers simply redevelop to the currently allowable heights, taking that land off the redevelopment table for the next 40+ years. And as we know many councils resist change. So, what needs to happen is for state planners to work with councils to streamline new planning arrangements at a city-wide scale. Here care has to be taken not to simply override municipal strategies, which may have been running for years and overriding them may see less homes being built, as councils need to start from scratch. Alternatively, less proscribed land use zoning may be required, where built form, use and outcomes can change with the surround context (Read the full article here).

The second is land availability. For big developments you need big land parcels and there are simply not enough large parcels of land in the existing urban footprint of the capital cities to build as many dwellings as are required. Site assembly across multiple lots has been on the agenda of most state planning authorities for some time but has failed to eventuate for a range of reasons. For site assembly to become a reality, state planning authorities need to create mechanisms that promote this. As without it we will continuing to redevelop 1 standalone house into 2 or potentially 3 townhouses, the effort spent on which will not achieve the volume build that we need. The work on urban greyfields offers solutions to this issue.

Third is the state of the workforce. There are simply not enough builders to get this work done. Large projects are not the mainstay of the building industry, and even if we were to have a doubling of the building workforce able to work at the prosed scale of development, this would pull builders away from sites to focus on training, and, on graining the trade, there would not be enough experienced managers to supervise them – particularly in building environment where complexity is ever increasing. This is not to say that investment in education and training is not needed, but it’s going to be a long time until the workforce gets to the volume required for the task and to a point where the current premium on trades due to undersupply can be managed.

The final aspect speaks to developer business models. Developers walk the tightrope of liquidity. They need enough ready funds to get loans and can only build as much as they can get the loan for. They also need insurance to get these loans so can therefore only work within the financial envelope allowing to them by both insurance and capital. All the while also acquiring land for future development projects to ensure a pipeline of work to retain staff. Having more cash for building in the economy is therefore largely irrelevant to most of the development sector, as, without direct capital investment in the building firm, not necessarily in the housing project, the developer will not be able to significantly increase the volume of  a build. What is needed here is therefore some sectoral reform, across lending and insurance, that promotes higher yield developments while maintaining the security of all parties involved.

All of these factors are why we are currently at a historically low point in planning approvals and without focusing on the sector as a whole, much of the proposed budget for housing may amount to little more than business as usual.