Budget slammed for not addressing the housing crisis

The federal Treasurer Jim Chalmers delivered his second budget on Tuesday (9 May), acknowledging “affordable housing has been out of reach for too many Australians”, given growing house prices and stagnant wage growth. 

“We want more Australians to know the security of a roof over their head — which is why we’re also working with the states and territories to improve planning, build more houses and deliver a better deal for renters,” Mr Chalmers said.

Among the measures announced, the government’s $14 billion cost-of-living package, paid for in part by savings of $17.8 billion, is expected to create more affordable housing, a boost to wages and lower power bills.

Mr Chalmers announced “$3 billion in direct energy bill relief for eligible households and small businesses, co‑funded with the states”.

“A big part of making sure that energy bills are more affordable into the future is improving the energy efficiency of Australian homes — and not just new builds,” Mr Chalmers said.

As such, the government is investing $1 billion to help provide low‑cost loans for double glazing, solar panels, and other improvements that will make homes easier — and cheaper — to keep cool in summer and warm in winter.

Property Council’s chief executive Mike Zorbas welcomed the boost to home energy efficiency but warned: “The issue of housing lingers”.

The budget highlighted the strength of net overseas migration over the next five years, amounting to almost 1.5 million people and has allocated around 70 per cent of places in the 2023–24 permanent Migration Program to skilled migrants.

However, at the same time as population growth has been faster than expected, with the return of international students and working holiday-makers, supply constraints are forecast to worsen over the next five years.

“The population growth outlined in this budget highlights the need for faster and better housing delivery and planning across our cities,” he said.

While the government has made changes to international student visa settings and employment rules and has boosted migration, “we need to explore new measures to help grow the supply of purpose-built student accommodation to relieve pressure on the private rental market”, Mr Zorbas said.

Supply constraints to continue

Master Builders Australia CEO Denita Wawn said the country needs “around half a million new building and construction workers” by the end of 2026, to meet the shortfall in housing demand and “to attract, train and retain workers in the industry”.

“At present, builders are facing a shortage of key tradespeople while substantial industry transformation is underway for a net-zero economy,” Ms Wawn said.

She said the association will work closely with the government on the implementation of the new Australian Skills Guarantee, apprenticeships support, and National Skills Agreement but fears the “housing crisis continues”.

“We have not seen enough to start increasing housing supply,” Ms Wawn said.

“The pain of higher interest rates and high inflation is real and if we do not get it under control we could be in for a lengthy period of pain and depressed construction activity.”

The government’s National Housing Accord to build 1 million new homes, announced in its previous budget, is heavily weighed on the feasibility of the $10 billion Housing Australia Future Fund that will build 30,000 new social and affordable homes.

Mr Chalmers reiterated during his budget speech the implementation of the housing fund was “critical” — to build more of the social and affordable houses that our people need, as parliamentary support on the bill hangs in the balance.

Rental relief

As previously promised, the government has lifted the National Housing Finance and Investment Corporation’s (NHFIC) liability cap from $5.5 billion to $7.5 billion from 1 July 2023, to support more social and affordable rental homes.

“We want more Australians to know the security of a roof over their head — which is why we’re also working with the states and territories to improve planning, build more houses and deliver a better deal for renters,” Mr Chalmers said.

Indeed, the rental squeeze has hit Australians hard, with property and insights network PEXA arguing the rental market is “broken” and that delivering long-term solutions for the 2.9 million households that rent and the nation’s 2.2 million property investors relies on addressing the incompatibility between renters’ need for security and landlords’ need for flexibility.

PEXA’s recent white paper on the rental crisis showed more than 26 per cent of households in Australia rent in the private rental system, a proportion that continues to grow.

In addition, people are also renting for longer with nearly 43 per cent of all renters in Australia renting for 10 years or more and two-thirds of low-income households allocate more than 30 per cent of their disposable income towards rent payments.

Thus, addressing the rental crisis formed a key part of this year’s budget, with the Treasurer announcing a lifting of the maximum rates of rent assistance by 15 per cent, providing up to $31 extra a fortnight and “new tax breaks for investment in build-to-rent [housing]” to tackle low vacancy rates and high rents by increasing supply.

Under the changes, the depreciation rate will increase from 2.5 per cent to 4 per cent per year for eligible new build-to-rent projects where construction commences after 9 May 2023 and the government will reduce the withholding tax rate for eligible fund payments.

PEXA’s chief economist Julie Toth said: “These two tax changes are estimated to be worth a total of $30 million, suggesting the government is not expecting a large take-up given the relatively low implementation cost.”

She added that while the rent assistance was significant “it will not cover advertised rent increases that have averaged 13 per cent nationally for capital city houses and 22 per cent for capital city units over the year to March 2023”.

Home Guarantees expansion falls short

In addition, the government’s announcement to expand its Home Guarantee criteria to include more people including permanent residents, cohabiting friends, and previous home owners will broaden the diversity of participants.

Ms Toth said: “While this possibly improves the uptake rate, which has been relatively low in previous years. This program provides a guarantee rather than a grant.”

As such, it will assist low-deposit buyers by avoiding the additional cost of mortgage insurance, but it does not reduce their total loan liability or their total home purchase price, she said.

Furthermore, the Housing Industry Association’s (HIA) Jocelyn Martin said the government’s move to invest in improving the supply of social and affordable housing “will do little to put downward pressure on rental costs and housing affordability in the wider market”.

“Housing affordability challenges facing Australian households can only be addressed if the supply of housing can align with demand,” Ms Martin said.

“HIA estimates that Australia needs 1.66 million additional houses by 2030, just to keep up with the demand from population growth.

“Tackling housing affordability starts with making the supply of housing a national priority.”

[Related: Budget 2023-24 released: What you need to know]

Kate Aubrey is the senior content producer of Momentum Media's mortgages titles: The Adviser and Mortgage Business.

Prior to joining Momentum Media, Kate covered regional and breaking news for ABC Radio for more than three years.

She has a Master of Arts in Journalism from the University of Melbourne and a Bachelor of International Business and Business Management from Griffith University.

Email Kate at: This email address is being protected from spambots. You need JavaScript enabled to view it.