Housing undersupply continues: State of Supply 2011

THE National Housing Supply Council last week released its 3rd State of Supply Report, finding that there was a shortfall of 28,000 dwellings in 2009-10, producing an estimated cumulative shortage of nearly 187,000 dwellings since June 2001.

State of Supply 2011 updates the Council's estimates of the underlying demand for housing and the supply of dwellings to June 2010 and presents projections of underlying demand and supply over the 20 years to 2030. The report also examines housing affordability trends and considers the factors contributing to Australia's housing shortage.

The new Minister for Housing and Homelessness, Robert McClelland MP, welcomed the release of the report, saying it provides a valuable contribution to the government's policy development in the area of housing supply and affordability.

"The Labor Government has done a lot to increase the available housing stock, both public and private. However, as this report highlights, there is still a lot to be done to address the inescapable fact that growth in underlying demand for housing is outstripping supply," Mr McClelland said.

The report notes that the wider housing market has changed significantly since the 2010 report was published, with the market having slowed since the middle of 2010 and transaction levels and prices declining variably in most parts of the country.

According to the report, these changes to the housing market have coincided with "a widening gap between supply and underlying demand, and evidence that the rental market has tightened further."

The Council estimates that as of June 2010, there were just over 8.7 million households in Australia. The number of households is projected to be 12 million by 2030 (medium underlying demand projection), representing a net increase of nearly 3.3 million households between 2010 and 2030.

Over the next 20 years, households of lone persons and of couples without children are projected to grow proportionally much more rapidly than those of families with children, in all regions.

It is also expected that most regions will see a greater relative increase in demand for flats, apartments and townhouses than for detached houses, while demand for public housing and affordable private rental accommodation is also likely to increase as the population ages.

The stock of private dwellings in Australia was estimated to comprise 9,148,300 dwellings at June 2010 and based on the medium-trend projection for housing supply, it is estimated there will be an additional 2,986,700 dwellings during the period 2010 to 2030.

According to the report, the gap between total underlying demand and total supply is estimated to have increased by approximately 28,200 dwellings in the year to June 2010, to a cumulative shortfall of 186,800 dwellings since 2001.

The shortfall is projected to have extended to around 215,000 in 2010-11 with the largest gaps between underlying demand and supply in NSW and Queensland. By 2030, the same projection assumptions produce a cumulative gap of 640,200 dwellings.

The Council concludes that "despite the apparent easing of demand and price pressures in the market, demographic trends and current and historic rates of house building point to a widening of the 'housing shortfall'."

The Council calls for a greater focus on increasing supply rather than on subsidising demand in order to tackle affordability pressures and the housing shortage more effectively.

National Housing Supply Council Chair, Owen Donald, said measures could include government financing of additional housing for lower income people (such as through the National Affordable Housing Agreement or the National Rental Affordability Scheme) and support for financing instruments to increase the supply of such housing.

Dr Donald also said supply could be increased through changes to planning and development approval arrangements and to infrastructure provision, coordination and financing.

The Urban Development Institute of Australia (UDIA) said the report "paints an alarming picture" of the housing supply situation in Australia.

"This is a new report delivered by a newly appointed Council, but unfortunately the same concerning conclusions have been reached", said UDIA National President Julie Katz.

"We are simply not producing enough dwellings for the current and projected future number of households in Australia. It is crucial that governments address the barriers to supply, such as the excessive taxation on the industry and the unresponsive planning system" said Ms Katz.

Master Builders Australia welcomed the release of the report and said it highlights the growing problem of undersupply of housing and the urgent need for all governments to address the problem through a coordinated policy response.

"Reducing developer charges and taxes such as stamp duties, speeding up development applications and increasing land supply are the key measures that would make a significant difference in solving both the housing undersupply and affordability problems," said CEO of Master Builders, Wilhelm Harnisch.

The Residential Development Council (RDC) said the report confirms what the industry has long known – that there is an ever-widening gap between the demand for homes and the number of being delivered.

"The report identifies major gaps between the demand for homes and the available supply with the disparity being particularly pronounced in NSW and Queensland," said Caryn Kakas, Executive Director, Residential Development Council.

"This is the result of a significant number of barriers impeding the housing market. These include record levels of development taxes and charges, inefficient planning systems and the failure of governments to deliver linking hard and soft infrastructure to new communities," she said.

Ms Kakas said solutions include investing more funds into successful programs, such as NRAS, that specifically target the supply of homes to low and moderate income earners as well as "radical reform of the planning system to give the industry and the broader community greater certainty."

"Crucial to successfully tackling Australia's housing supply problems is a holistic, integrated approach from all levels of Government to support the delivery of new homes. The Federal Government's involvement must be matched by leadership from the States and Territories to support a more affordable future," Ms Kakas said.

Following the release of the report, Australians for Affordable Housing (AAH) called on the Australian Government and the new Housing Minister to make creating more affordable housing a major priority for 2012.

AAH Campaign Manager, Sarah Toohey, said the report shows an unacceptable shortfall in the supply of housing in Australia.

"Australia has a structural problem in the housing market and only a comprehensive plan that includes extra affordable housing supply, taxation reform, increases to and reform of Commonwealth Rent Assistance and better and more targeted support to first home buyers will deliver the affordable housing solutions that low and middle income Australians need," Ms Toohey said.

The National Housing Supply Council's 3rd State of Supply Report is available from the National Housing Supply Council's website at <> or directly from this link (PDF: 5.94 MB).

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