Media Release

NATIONAL HOUSING SUPPLY COUNCIL LAUNCHES STATE OF SUPPLY REPORT 2011

The National Housing Supply Council today presented its State of Supply Report 2011 to the newly appointed Minister for Housing and Homelessness, Hon Robert McClelland MP. The report updates the Council's estimates of the underlying demand for housing and the supply of dwellings to June 2010, and presents projections of underlying demand and supply over the 20 years to 2030. It also examines housing affordability trends, and considers the factors contributing to Australia's housing shortage.

"I am pleased the Council is able to release this update. It will assist in ensuring that government, industry and other interested parties have a strong evidence base for decision making," the National Housing Supply Council Chair, Dr Owen Donald said.

Key findings of the report include:

• The production of additional housing stock failed to match increased underlying demand in 2009-10 and 2010-11.
• The extent of the deficit in the construction of dwellings was moderated by the production of additional social housing funded as part of the economic stimulus package that responded to the Global Financial Crisis.
• But there was still a shortfall of the order of 28,000 dwellings in 2009-10, producing an estimated cumulative shortage of nearly 187,000 dwellings since June 2001.
• The shortfall is projected to have extended to around 215,000 in 2010-11.
• The largest gaps between underlying demand and supply are in NSW and Queensland.
• The housing 'sub-markets' with the greatest shortages are affordable purchase and rental for households on low to moderate income, and subsidised rental housing for low income people.

"The Council believes that actions that impact directly on the supply side of the market are needed to improve housing supply and affordability," Dr Donald said.

"The scope of such action could usefully include government financing of additional housing for lower income people (such as through the National Affordable Housing Agreement or the National Rental Affordability Scheme), support for financing instruments to increase the supply of such housing, changes to planning and development approval arrangements, and changes to infrastructure provision, coordination and financing. Existing demand-side measures like the First Home Owners Grant and Commonwealth Rental Assistance could also be re-examined with a view to having a more substantial impact on housing supply and affordability.

"There are signs that some development and construction firms are responding to the need for more lower cost housing by developing smaller dwellings on smaller allotments and by working with housing associations to increase the supply of subsidised rental housing.

"There has also been some movement on land release arrangements and infrastructure coordination in several states. But much more of this is needed and infrastructure financing and scheduling are still major issues. So too are planning and development approval arrangements for infill housing in most jurisdictions, with delays, uncertainty and adverse community reaction being major obstacles to increasing supply within existing urban areas.

"The Henry Review and Tax Summit have also drawn attention to aspects of the tax-transfer system at national and state levels that contribute to poor affordability and favour individual investors over institutions like superannuation funds.

"The Council is very pleased about the creation of a Cabinet-level ministerial position with responsibility for all Commonwealth's housing-focussed activities," Dr Donald said. "This should provide a sound platform for an integrated approach to housing policy with a strong focus on supply and affordability and their links to a productive, equitable and sustainable society."

The report explains that the presence of a gap between underlying demand and supply is not inconsistent with the softer market conditions experienced since the Global Financial Crisis. Underlying demand is driven predominantly by demographic factors. Its conversion into actual demand (order and sales) is moderated by a wide variety of market considerations, including the state of the economy, business and consumer confidence, housing prices in various areas, and housing affordability relative to the incomes of prospective buyers and investors.

The Council has also observed that there are parts of Australia where the housing market is still running hot, notably in areas where employment has been boosted by increasing demand and prices for natural resources.

The Council has also projected underlying demand and supply through to 2030. The medium growth scenario (extending existing trends) suggests a shortfall of over 600,000 dwellings by that time. An emerging housing shortfall of such magnitude would likely lead to changes in demand (lower population growth, and fewer but larger households than indicated by the projections), housing production (higher than projected volume with new products emerging to address the areas of shortage) and government policy on housing assistance, urban development and infrastructure provision. The effect of lower than projected underlying demand and of increased housing prices arising from severe shortages could have negative repercussions for economic growth and living standards.

The National Housing Supply Council was established by the Government in 2008 to provide forecasts, analysis and advice on the adequacy of land supply and construction activity to meet housing demand and improve affordability. The State of Supply Report provides independent and consistent data on the balance between underlying demand and supply and on housing affordability for owners and renters.

"On behalf of the Council, I would like to thank the our previous Minister, Hon Tony Burke MP, Minister for Sustainability, Environment, Water, Population and Communities, for his support and encouragement of the work of the Council. We look forward to working with Mr McClelland and making further progress in the coming year," Dr Donald said.

The report is available at www.nhsc.org.au.