Great Australian Plight Part One: Untangling the ‘spaghetti web’ strangling Australia’s housing system

A “spaghetti web” of different levels of government that has hamstrung Australia’s housing system for decades has now left the nation facing one of the lowest levels of housing stock in the developed world.

National Housing Supply and Affordability Council chair Susan Lloyd-Hurwitz said there was no “silver bullet or quick fix” to address a crisis created by successive governments failing to address an increasing shortage of supply amid growing demand.

Ms Lloyd-Hurwitz said fixing Australia’s housing crisis would likely take decades and that the job required the collective action of governments, communities and the private and non-profit sectors.

“There’s no one department or one minister that has carriage of thinking about how we prioritise housing,” she said.

“It is a spaghetti web, if you like, of people in the ecosystem. And we’ve been having the same discussion for years and years and years.”

Ms Lloyd Hurwitz said she was deeply concerned that deepening demographic and geographic inequality was being built into the housing system.

“It is pretty clear that Australia is being divided into those who can afford to buy a house and those who can’t,” she said.

“That is a fundamental problem in our society, which is deepening. It’s not just a question of providing shelter to people - it’s a question of making sure we don’t create this generational inequity.”

You have 500 councils around Australia that have planning consent authority. It’s a complicated long system that needs to be navigated.

The price of a freestanding house in Australia increased by 10.5 per cent between January 2023 and March 2024, according to research by McCrindle, while the price of units jumped 7.8 over the same period.

The increases are largely due to insufficient supply and elevated demand increasing the pressure on housing stock and driving prices higher.

The NHSAC has previously forecast the Albanese Government’s target to build 1.2 million houses by 2029 will fall short by nearly 300,000 dwellings, although it is understood there are no plans as of yet to revise the policy goal.

Ms Lloyd-Hurwitz said solving Australia’s housing crisis would likely take decades and said the country needed to focus on removing impediments to supply, with complex planning systems an impediment to increasing housing stock.

“There are multiple government agencies and departments that get involved in bringing supply to market, it is a very slow and cumbersome process,” she said.

“You have 500 councils around Australia that have planning consent authority. It’s a complicated long system that needs to be navigated.”

A single full-time worker earning the median weekly salary of $1500 cannot afford to buy a free-standing house anywhere in the greater Sydney region, according to research jointly conducted by the University of Sydney and the University of Technology Sydney.

CoreLogic head of research Eliza Owen said declining rates of home ownership in Australia reflected a structural issue in the housing market.

“I don’t think it’s too late but it’s a big boat to turn around,” she said.

“Part of the tension that’s involved in our housing market is we’re balancing access to housing with financial stability.

“Because as Australians have accessed the housing market through greater levels of debt, we have incredibly high debt-to-income ratios and that means the value of property at least needs to remain stable to ensure we don’t destabilise the mortgage market.

“Or you need to have a very strong economy to support serviceability of mortgages even if the value of housing does decline. That’s part of the issue that’s emerged from previous housing booms.”

Other challenges to increasing housing supply in Australia include the rising cost of construction, which has increased by 40 per cent since 2020, and a shortage of construction workers.

Only about 50 per cent of building and construction apprentices complete their training program, according to MasterBuilders Australia, and about 25 per cent of the industry’s workers are migrants.

Another issue is competing jobs in the mining sector and infrastructure big builds happening in NSW and Victoria that offer high wages but require fewer skills than construction.

Treasurer Jim Chalmers on Wednesday conceded there were skill shortages in the construction and infrastructure sectors but said the Albanese Government was investing tens of billions of dollars to address the shortfall.

“We are always looking at the infrastructure pipeline to make sure that we can build what we’re committed to,” he told the ABC.

“From budget to budget, often you’ll find that there are tweaks made to the infrastructure pipeline. We’ve done that before. Every government does that.

“But our major focus here is on building the infrastructure and the housing, not the infrastructure or the housing. And what we need to do there is to keep investing in skills, because that’s the biggest part of this challenge.”

The price of purchasing a new dwelling increased 3.8 per cent over the past 12-months, according to the Australian Bureau of Statistics Consumer Price Index.

The most dramatic increase was in Perth, where prices jumped 18.1 per cent, and Adelaide, 7.4 per cent.