The policy director at the Centre for Future Work and Guardian columnist Greg Jericho writes (I June 2023) about solutions to Australia’s housing crisis. His professionally researched analysis bares out a long-term trend away from the suburban block to higher density living in townhouses and apartments. Rising interest rates are driving away home buyers. This masks the surge in multistorey residential projects. There is still not enough housing to meet the needs of a growing population. A surge in public and social housing would be a way to fix this. Greg Jericho’s contribution to the debate is timely contribution to the debate, especially when silly blame home seeker calls for people to tighten the belt stop being fussy are on the rise. These are not the only relevant factors behind the housing crisis, but they are an important part of it.
Every now and then, policy is not as hard as you might think. Climate change? Reduce emissions, don’t approve new mines to be offset with dodgy carbon credits. Poverty? Give poor people more money rather than regurgitate the line that the best form of welfare is a job. And when it comes to housing … gee, I don’t know, how about … build more housing?
Tuesday’s building approval numbers showed there has been a large drop in new residential buildings being approved for construction – houses down 18% and other residential down 38 percent:
This is certainly due to the massive increase in interest rates over the past year, and it does suggest a very strong slowing of residential building at a time the population will increase 2 percent.
But the growth numbers are a bit misleading, because they are compared with April a year ago when the cash rate was still 0.1 percent.
If we look at total approvals, the amount in April was down, but not massively below the long-term median.
In fact, it is a weird thing about housing – no matter how far you go back there is usually the same number of houses being approved for construction each month.
The ABS provides raw data going back to 1956. If we use a six-month average to take out some of the noise, since around the late 1960s you could predict about 9,000 new houses would be approved in any month and you would not be far wrong.
The big change has been the number of non-housing residences:
It is clear from the breakdown of approval numbers that back in the 1960s and 1970s when people were building a home, they were building a house; now it is more likely that a townhouse or block of apartments is being built:
The ABS only has data on the type of “other residential” going back to 1991, but here again we can see the changes.
The share of townhouse and terrace housing remains steady, but there has been a big shift towards apartments with more than four storeys and away from the more traditional Australian one or two-storey “flats”:
But the thing about the steady number of houses and residences being approved is that of course population is not steady.
This month in raw terms there were 6,757 houses approved for construction – just three more than were approved in April 1958. The only difference is that we currently have a tick more than 26.5 million people living in Australia whereas back then there was just a touch under 10 million.
Building approval relative to population shows this decline in the new supply of housing coming into the market.
In the 1960s there were about 60 new houses approved each month for building per 100,000 Australians. Now it is about 40.
And while in the past decade there was a surge in the number of apartments and “other residential” construction, it was really only on a par with the same surge we saw in the late 1960s and early 1970s when baby boomers were moving out of home and starting families:
Clearly supply needs to be increased.
The NSW productivity commission just released a report that kind of gave away the whole thing with its title: “Building more homes where people want to live.”
Seems kind of obvious.
The report noted that NSW builds fewer homes than Victoria and Queensland, a claim definitely borne out by the building approval numbers:
Its three main recommendations are to raise average apartment heights in suburbs close to the CBD, allow more development near transport hubs, and encourage townhouses and other medium-density development.
Unfortunately, the report does not mention public housing at all and social housing only twice – to point out that “New South Wales experienced a 45% surge in priority applicant households on the social housing register, with 6,519 priority social housing applicants waiting for assistance as at 30 June 2022”.
Call me crazy but a surge in demand for social housing might also require a surge in the supply of social housing?
On this score we might for example hope the ALP would bring in its policy of providing support for investors to build 250,000 new units and houses over the next decade.
Oh wait. Sorry, that was the policy for the 2019 election. The current housing policy of its Housing Fund is targeting 30,000 new homes over the next five years.
Needless to say, 30,000 over five years is not going to make much of a dent.
And the data shows just how neglected public-sector housing has become.
In 1983, 14 public-sector residential buildings were approved for every 100 private-sector ones. Now it is 1.7 per 100.
So yes, build more homes, and allow increased housing density closer to the CBD and public transport hubs. But also build more public housing.
When the solution is obvious, do it.