Guilty parties escaping blame in the great housing debate

Like a conversation about real estate at a Sydney dinner party, the debate over Australia’s housing crisis contains considerable headshaking and professions of concern, while self-interest floats just beneath the surface, apparent to all.

Labor wants the political advantage of being seen to do something about housing without really doing very much beyond the budgeting trick of establishing a $10 billion “fund” to provide a stream of annual grants to state and territory governments. The Greens — like most of us, actually — want a lot more housing, but just not anywhere near their affluent inner-city electorates, thanks very much. The Coalition thinks we just need to let the market rip and remove planning regulations that restrict high-density developers.

In the mainstream media, YIMBYism is coming into fashion, even at outlets like The Sydney Morning Herald, where NIMBYism has been a staple of coverage for years. We’re told to pity poor developers, hampered by planning bureaucracy (even after planning powers have been taken from local government and handed to expert panels), who would love nothing more than to build all the housing that we need.

As Australia’s best property economist Cameron Murray — one of the few coming to the debate in good faith — has often pointed out, developers have no interest in increasing the supply of housing to the point where it becomes cheaper. Instead, they’ll sit on residential land until the market maximises their returns. Murray has also discredited the oft-touted claim that Auckland’s removal of planning restrictions led to a big rise in residential construction.

The Albanese government is discovering that taking on housing is not merely hard policy — after all, it’s the intersection of several different major policy areas such as migration, the labour force, infrastructure, government services and finance — but is making a rod for its own back that previous federal governments have avoided. The Housing Australia Future Fund (HAFF) is effectively a guaranteed supply of public housing grants to the states and territories (and others who might get lucky along the way) dressed up as a $10 billion fund to sound impressive (and waste a few million a year in fund management fees). This at least avoids relying on flawed private sector supply-side solutions.

But it’s the state and territory governments who are the villains of the piece. They have primary responsibility for housing, not the Commonwealth, through planning, land supply and their traditional role as providers of social housing. But consider how the states responded to the Rudd government’s GFC social housing stimulus package. According to Bureau of Statistics dwelling approvals data, in NSW public housing approvals soared to over 800 a month in 2010 — compared to an average of 70 a month in 2008. But in 2011 they fell to just 46 a month; in 2012, just 24 a month.

Similarly, in Victoria, where before the GFC there had been a small rise in public housing dwelling approvals, the Rudd peak of over 200 a month was followed by a large fall in approvals, with monthly approvals sometimes not even reaching double figures. In Queensland, approvals went from over 400 a month to monthly numbers in the 20s in the years after the stimulus program.

That is, the states simply cost-shifted their public housing spending to the Commonwealth, and then resumed the long-term decline in public housing dwelling approvals that had been going on since the 1990s.

And remember, this is just for public housing approvals — it doesn’t factor in demolitions or sales that remove public housing from availability. In terms of net public housing stock, numbers in NSW have barely shifted over the last decade.

To their credit, both the Victorian and Queensland governments have recently begun significantly increasing funding for social housing. In Victoria, this has led to a sharp rise in public housing approvals, well above the levels of the Rudd stimulus, although this has been accompanied by large-scale demolition, meaning the net increase in social housing stock has been small.

A more recent stimulus package announced in Queensland has yet to filter through to approvals, but a 2021 UNSW report showed the expected impact of over 4000 dwellings in that state, and over 8000 in Victoria. Tasmania also ramped up its social housing spending and is looking at an additional 1000+ dwellings in coming years.

The story in NSW, however, remains bleak: there’ll just be an extra 400 dwellings in net terms in that state in coming years.

The Albanese government is thus trying in one electoral cycle to make up for the failures of states over more than a decade — failures that are only now, slowly, being remedied, and not in our biggest state.

To the extent that the HAFF increases the capacity of the states to better play their traditional role of providing social housing, it’s a good thing — provided the states don’t do what history shows they’ve been eager to do in the past, and use it as an excuse to curb spending again.