Real estate and housing experts across the country have weighed in on Tuesday’s Federal Budget, simultaneously giving the thumbs up to the cash splash while lamenting it didn’t go far enough.
The consensus is the Federal Government’s 11.3 billion Homes for Australia plan focused on drastically needed housing supply but much more is needed, especially when the backlog of council approval processes and trade and material supply shortages are considered.
Many applauded the 10 per cent rise in Commonwealth Rent Assistance, but some stressed that it, even combined with the 15 per cent increase from late last year, would only provide minimal relief to our most cash strapped residents.
We’ve rounded up the thoughts of our panel of experts below.
Nicola Powell – Domain
Domain Chief of Research and Economics, Dr Nicola Powell, said the 2024-2025 Budget was a step in the right direction, but questioned if it would be enough to solve the nation’s housing crisis.
“It’s great that we are focused on supply and it really does showcase that the government is actually backing themselves around getting these 1.2 million homes, or as many of them as we can, built by putting the right funding in place to help that target,” she said.
“I question whether it’s enough.
“I think that we’ve had such an undersupply of housing for a very long time, and that to fix it is going to take a long time.
“That’s where governments really need to be visionary in their approach and actually have that long-term view and not plan for the election cycle.
“I think that supply is an issue now, but it’s something we need to address now and ongoing into the future.”
Dr Powell also welcomed the increase in Commonwealth Rent Assistance, but again said it didn’t fully meet demand.
“When you look at rents, rents have gone up across our combined capitals 43 per cent over the past four years for houses, 38 per cent for units,” she said.
“I think the increase in rent assistance was very much needed.
“I think it’s interesting that they’ve done it off the back of the rent assistance increase that we saw late last year.
“I think when you look at the figures of a 40 per cent increase in asking rent, it really showcases the need for rent assistance because it’s such a struggling sector.”
Dr Powell also welcomed changes to foreign investment, which will allow foreign investors to purchase established Build-to-Rent developments with a lower foreign investment fee, conditional on the property continuing to be operated as a Build-to-Rent development.
“I am supportive of initiatives like this because, ultimately, we need these developments off the ground,” she said.
“We need to make these projects feasible and we need that investment to be able to get them built.”
Dr Powell said while Build-to-Rent was often seen as a higher end of the market solution, she pointed out that renters in the middle income bands could trade up to Build-to-Rent properties, freeing up their band for others.
She also weighed in on Treasurer Jim Chalmers’ comment that inflation could return to the RBA’s target two to three per cent range this year.
“It’s concerning when you’ve got governments relying on rate cuts coming,” Dr Powell said.
“Overall it’s a really complex environment that we’re in economically and it’s really actually hard to pick where things are going to go.”
Dr Powell said rents formed a large part of the CPI basket and the RBA had revised its outlook on when the first interest rate cut may be.
“I think that rate cuts aren’t going to come until next year,” she said.
“I think most people are aligned on that now, but I think what he’s probably trying to be is positive, isn’t he?”
Eliza Owen – Core Logic
CoreLogic Head of Australian Research, Eliza Owen, said the Federal Budget, despite placing a strong emphasis on housing, had fallen short in several critical areas.
“The Federal Budget has allocated funding to where it is urgently needed: crisis accommodation, social and affordable housing funding, and a boost to rental assistance for renters receiving other social assistance payments,” Ms Owen said.
“Like many before it, this Budget misses an opportunity to make meaningful changes that could make a fairer and more efficient housing system in the long term.”
Ms Owen said while Commonwealth Rent Assistance was increased, it needed to be better targeted.
“The budget missed an opportunity to optimise CRA payments by ensuring they are well targeted,” she said.
“The productivity commission noted that in 2019-20 (albeit before rent values boomed) that 28 per cent of CRA recipients would still have avoided housing stress without the payment, and 27 per cent of recipients were in the top 60 per cent of household incomes.
“CRA payments vary depending on circumstance, but the maximum rate of around $125 per week means the biggest increase under the budget will be $12.50 per week.
“As noted in our budget analysis last year, CRA increases offered by the government are very modest in dollar terms compared to actual rent increases in the private rental market.
“A broad-based boost to CRA for those already receiving it is a pretty efficient way to ensure those in more vulnerable positions in the private rental sector can remain a little more competitive in the private rental market.
“But optimising the payment means more funding could be allocated to those who really need it.”
Ms Owen said the Budget also missed a chance to provide a bigger boost to construction capacity.
She said the sector struggled with high costs and project delays, which hampered housing supply, and while the $19 million for training will be helpful, it will take years to manifest in a larger workforce.
“A quicker way to boost productive capacity could be to focus more on already qualified migrant labour,” Ms Owen said.
“Reduced levies for businesses to take on overseas migrant workers, and streamlining skills recognition are important structural reforms that need to be made across a range of sectors, but especially construction at the moment.
“Increasing female participation in construction is a focus of this budget (noting the announcement of the Building Women’s Careers program), where women currently make up an alarmingly low 14% of total construction employment in Australia.”
Ms Owen said the Budget also missed a chance to shape housing demand.
“Bold tax reform on housing has the potential to increase government revenue, and shape housing demand so that our existing housing stock is used more fairly and efficiently, at a time when new supply is challenging to deliver,” she said.
“Working with state and territory governments to introduce land tax as a replacement for stamp duty, or factoring in the family home as an asset in the aged pension test, are examples of policies that can shape the amount of housing demanded.
Nerida Conisbee – Ray White Group
Ray White Group Chief Economist Nerida Conisbee said an “immediate positive” in the Budget was the 10 per cent increase in rent assistance.
“While this won’t immediately help with housing supply, it will likely reduce rental increases which feed into inflation,” she said.
“Given that rents have been such a major component of high inflation, it may even result in interest rates being cut a little sooner than currently forecast.”
She also welcomed the government’s plan to assist student housing, but said it wouldn’t do enough to combat the biggest challenge, which is housing supply and building 1.2 million homes over the next five years.
“There are a number of challenges in achieving the goal of 1.2 million houses,” Ms Conisbee said.
“The first is ensuring planning systems make it possible, the second is to find the money to build them and the third is to ensure the construction industry is available to build.
“The first is being addressed already by the government, the third has been addressed in the Budget.
“The challenge now is the second – the money for new housing has to come from somewhere.”
Ms Conisbee said the government had record debt levels and there were limits to how much money could be provided for homes.
She said debt repayments alone were the government’s fastest growing expense, increasing 11.7 per cent per annum over the next decade.
“There are also inefficiencies with government supplied housing,” she said.
“We have most recently seen this in New Zealand where a program to build 100,000 affordable homes was launched in 2018 with the eventual aim of recreating a new social housing department.
“The program created barely any new homes with the New Zealand Government coming up against the same challenges that private sector developers face – rising construction costs, difficulty in finding sites, staffing problems and push back from local residents.”
Ms Conisbee said Build-to-Rent provided some opportunity, but would remain a tiny proportion of total rental stock for a long time.
She said foreign investors also provided an opportunity to increase housing supply and the government needed to find ways to encourage this investment.
“At a minimum, many of the additional taxes and fees that were implemented last decade should be reviewed,” she said.
“Regardless, it is unlikely that we will see this form of capital flood back in in the same way as when it funded the highest level of development we ever saw in the five years to 2018.”
Melinda Jennison – Real Estate Buyers Agents Association of Australia (REBAA)
REBAA President Melinda Jennison the Budget promised plenty but failed to recognise one of the most simple ways to remedy the rental crisis.
She said the Federal Government had again refused to incentivise investors into the market.
“Again, we have been presented with a variety of measures to supposedly boost housing supply at a time when building approvals and completions are at decadelows,” Ms Jennison said.
“For decades, property investors shouldered the burden of providing rental supply for successive governments. However, it’s evident that this is no longer the situation.
“The rental crisis is the end result of this changing dynamic.
“The volume of investors currently active in the market is well below where it needs to be to significantly improve rental supply, but the Federal Government still won’t do anything to encourage more investors into the market.”
Ms Jennison said it was surprising the Budget had incentivised foreign investors to buy established Build-to-Rent developments but did not do the same for resident investors who provide homes for millions of renters throughout our country.
She said while the announcement of the $9.3 billion National Housing and Homelessness Agreement (NHHA) appeared to be a new initiative – the agreement had been in place since July 2018 and was established by the former Coalition Government.
“It is disappointing that the Albanese Government appears to be grandstanding on a policy that had already been in place for more than five years and provided $1.6 billion each year to states and territories to improve Australians’ access to secure and affordable housing across the housing spectrum,” Ms Jennison said.
“It also appears that total funding to support state affordable housing services is set to fall from $2.6 billion in the 2024/2025 financial year to $2 billion in 2027/2028.
“However, doubling homelessness funding to $400 million every year, matched in total by states and territories, and $1 billion for the National Housing Infrastructure Facility for crisis and transitional accommodation are both welcome initiatives as is the additional help for low income renters.”
Maiy Azize – Everybody’s Home
Everybody’s Home Spokeswoman Maiy Azize said the Federal Government had provided a “business as usual spend” that would not shift the dial on the housing crisis.
“The government’s ‘new’ funding for social housing is a repackaging of existing initiatives, offering loans instead of providing real funding, and the continuation of a funding agreement with the states and territories – something the Commonwealth routinely renews for other essential services like education and health,” she said.
“An increase to Commonwealth Rent Assistance will provide some short-term relief, but it’s not a lasting fix.
“It isn’t enough to keep up with rising rents, and it doesn’t go to all of the people who need it.
“If the government was serious about tackling this crisis, it would build more social housing to end the massive shortfall.
“These are the rentals people can actually afford.
“A target for the private sector will only deliver more of the same – homes that are way too expensive for average people.”
Daniel Gannon – Retirement Living Council
Retirement Living Council Executive Director Daniel Gannon said the Budget focussed on the needs of some Australians, but forgot about the older generation and the challenges associated with age-friendly accommodation and care.
“The number of people aged over 75 around the country will increase by 70 per cent by 2040, which should lead to governments prioritising what is required to house this ‘silver tsunami’,” he said.
“Instead, it’s radio silence on why purpose-built seniors’ housing still hasn’t been included in the Prime Minister’s 1.2 million new homes target and what the government’s response is to the Aged Care Taskforce recommendations.
“Given the government is the judge, jury and executioner of this Taskforce and having already had five months to consider their own findings, noncommunication signals one of two things: it’s either bad news for consumers or it’s bad news for operators.
“But until we hear from the government, both parties remain in the dark.”
Mr Gannon said the government should include units in retirement communities as a key delivery component of the Housing Accord target to build 1.2 million new homes nationwide by 2029.
“Increasing the number of retirement communities across the country is a no-brainer for the government, as the benefits to the housing market are two-fold: retirement communities provide age-friendly and care-focused accommodation for older Australians while also injecting existing homes back into the market for younger buyers and growing families,” he said.
“With the government’s own National Housing Supply and Affordability Council forecasting a 300,000-home shortfall against its target, the 67,000 retirement dwellings required to maintain existing market demand would close that gap by 22 per cent.
“The ongoing exclusion of units in retirement communities from the Accord target is worrisome but can be rectified at any time.
“It is in fact a very simple fix that can be addressed with a laptop and a bullet point.”
