Five measures experts say will help fix the housing affordability crisis

As Australia’s housing crisis deepens, experts are calling for long term strategies that will help resolve the housing crisis.

Scrapping negative gearing and giving a discount on capital gains tax are regularly mooted as options, while a report by The People’s Commission into Australia’s Housing Crisis suggests the development of social housing as the solution.

Given the private market has failed to provide affordable housing it says the government should create 750,000 social homes over the next two decades.

Others are pinning their hopes on the Help to Buy scheme to help about 40,000 homebuyers into the market. The shared equity scheme enables the government to give an equity contribution worth up to 40% of the property to homebuyers, which the value of the equity stake has to be paid back when they sell their home.

There are other fixes being suggested, too, including:

1. Slash taxes to reduce housing costs

The high cost of building new homes is a major barrier to increasing housing supply.

Analysis by real estate analyst Terry Ryder says the average cost of building a new house in Australia is now $537,000, and the median lot price in capital cities is $408,000.

Hotspotting director Terry Ryder warns Australia is experiencing its greatest ever housing crisis. Picture: supplied

Ryder wants to see all three levels of government slash taxes, fees and charges, which make up almost 50% of the cost of a house and land package in Sydney. In Brisbane and Melbourne, it’s between 40% and 45%.

Ryder, who is the director of Hotspotting analysed data from the Australian Bureau of Statistics and the Housing Industry Association, which reveals that the median price for a residential home site in a capital city is over $400,000, but more than $700,000 in Sydney.

“At a time when Australia is experiencing its greatest ever housing crisis – marked by shortages of homes, poor affordability, escalating rents and increasingly high construction costs – it’s outrageous that anyone building a new house on a small block will be paying a huge percentage of the cost to government," he says.

2. Incentivising property investors

Diverse economic and market conditions are having little impact on the housing undersupply, says Real Estate Institute of Victoria chief executive (CEO) Kelly Ryan.

“We’re seeing incredible capital growth in Queensland, pricing people out, while Victoria faces decline and stagnation,” she says.

Government incentives to maintain supply and support for private investors who provide essential rental properties were vitally important, she says.

“We need to bring some incentives into the market, especially at a time where it is incredible critical to maintain supply."

The challenges faced by renters and property providers were growing given the increase in regulation in the sector. “

We have more regulation than ever before in the state of Victoria, adding costs to people holding investment properties, which will drive an increase in rental prices and force people to make lifestyle compromises,” Ms Ryan adds.

“We’re also seeing more people living in groups than ever before to combat the cost of renting. It’s going to be a lifestyle shift for this country going forward."

'Is your city leading Australia's home price growth?' youtube.com/mortgagechoice

3. Recalibrating migration programs

Strong migration over the past two decades has seen Australia’s population rise much faster than most other wealthy countries, but new home build rates just haven’t kept up.

The mismatch between housing supply and demand has been exacerbated by immigration policies and regulatory constraints, shadow federal housing minister Michael Sukkar says.

He says that the nation’s capacity to build homes cannot meet the demand: “Huge constraints from state and local governments on new housing projects and the time it takes to make them happen are significant barriers".

"Additionally, the immigration program has not been calibrated with our capacity to build new homes,” Mr Sukkar says.

'What the budget means for the property market': youtube.com/mortgagechoice

He’s calling for an adjustment in immigration programs and significant reforms in planning and zoning to address the accumulated housing deficit.

“Population growth driven primarily by immigration needs to be calibrated to the capacity to build new homes.

“Australia needs to build more homes than we need for at least a 10 to 15-year period just to catch up with the accumulated deficit we’ve got.”

4. Freezing changes to the National Construction Code

The technical standards for building design and construction are updated every three years to ensure that buildings meet evolving expectations and safety measures.

Known as the National Construction Code, these regular updates are published, and the industry is expected to adapt in accordance with any changes.

The Australian government set a lofty target for new home building in Australia that is proving difficult to keep up with. Picture: Getty

But last month, the Australian Building Codes Board released a short statement saying it would not follow that pattern in 2025. 

The timing is interesting given that Opposition leader Peter Dutton has committed to freeze changes to the NCC for 10 years in a bid to boost housing supply.

The Coalition says the move would reduce costs by halting further requirements for energy efficiency, safety and amenity in new houses. The move would enable builders to get on with the job of building homes, it has said.

5. Boosting the number of prefabricated and modular homes

There’s no quick fix to the talent shortage in the construction sector, but advancing prefabricated and modular homes will go some way toward alleviating the housing crisis by speeding up build times.

That’s according to Property Council chief executive Mike Zorbas, who says modular and prefabricated housing can play a role in creating more affordable housing supply.

“Alongside planning reform and more skilled workers, boosting prefabricated and modular home construction hits the innovation sweet spot,” Mr Zorbas says.

Built to consistently high standards, faster and with strong sustainability and safety credentials, the $49.3 million announced in the federal budget for advancing this sector of the housing market couldn’t come soon enough, he says.

Mr Zorbas concludes: “This funding will lift the sustainable pipeline of work, giving innovative public and private investors further confidence to expand production."