Don't disagree with the premise that we need a massive, sustained investment in public housing (every suburb should have at least 5% housing stock). But the pessimist in me wonders where all this money (let alone all the other bits and bobs) will come from. Governments worldwide suffer from a lack of revenue and I see no appetite for tax reform that can turn this around. On the other hand the world seems to be awash with private equity capital and they certainty won't be interested in public housing, unless there is some sweet deal attached.
One way I could see it happening if the Federal and State Governments get together in a version of Mission Economy (https://marianamazzucato.com/books/mission-economy/) that is locked into a future Commonwealth-State Housing Agreement. In particular it can seek to focus on three main outcomes:
1. Improve the share of good quality and appropriate public housing stock (well, dah!).
2. Use this project as a means to focus on getting people out of hazardous areas (e.g. flood and fire prone area). While not all these people will be candidates for PH, some will be (renters living in the lower cost housing); and others can take up opportunities afforded by new development. I have been a fan of Transferable Development Rights (TDR) as the means to facilitate moving dwellings out of hazardous areas and rebuilding at greater density in more appropriate and nearby locations, whilst not requiring expensive buy backs (obviously some money has to trade hands).
3. Modular homes should be compulsory in any TDR deal. This is where the private sector can be involved and R&D tax write off should be maximised to encourage firms to go all in on developing and fine turning this form of dwelling construction, especially at density. I believe high rise timber construction is now possible and is well advanced in European countries. Ideally the terms of the agreement should be favoured towards Australian companies where the profits and IP can be retained within the country.
With these 3 things there becomes a much stronger and compelling case for Joint Government intervention to increase the share of PH, which could be expanded upon over time to include more affordable private housing (owner occupied and rentals).
And finally, in (Dr) Geoff I trust. An analytical mind.
Great thoughts as always Neil. I agree re: modular homes. A big issue with getting that industry started seems to be the large initial capital investment, which is screaming out for public sector involvement to help spin it up.
As for the money? One word: Submarines. What is it... $350bn for 7 of them? Cancel three of them and spend the money on actually useful stuff we actually need.
Typical East Coast chauvinist: gives us stats on the only area of the country that really matters to him, to hell with WA and SA and the NT and Tassie.
In NSW there were a number of spectacular construction failures, some beyond remedy and all placing considerable burden on the purchaser. This has eroded public confidence and lenders in residential construction, particularly in apartment buildings. The implementation of the Design and Building Practitioners Act has sent a rocket up builders with defects liability being enforced with more vigour. This compliance has seen a number of builders walking away from class 2 construction.
With the introduction of 10 year latent defect insurance and associated QA pre, during and post construction its hoped that the industry can recover from its own defects.
Wow that sounds bleak. This validates my theory that we're going to see sweet F.A. new apartments until the financials start to make sense again - when it's this tight nobody wins.
Yes, commencements are the best indicator for concrete progress, but aren’t abs’s building approvals (not planning approvals) pretty good if you want to guess commencements a year or 2 in the future?
ABS publishes abandonment rates (dwellings approved and never built or abandoned after commencement) in the June release of the building activity dataset each year. It differs by state, but Vic usually has
~1% abandonment rate which I interpret as an all clear to use building approvals as a guide for future commencements (in that state at least).
Yes agree that building approvals can give you a good sense if you can make some informed assumptions about the abandonment rate. I'm actually surprised to learn that the abandonment rate is so low - so thanks for the link! I wonder why its so much higher in other states?
Not sure why the variance between states honestly, but I imagine if you give an incentive for getting a building approval you’d see an increase in the abandonment rate if people with no intention to actually build get an approval just to get the incentive (I’d expect a bit of that happening with homebuilder grants)
Thanks for the rework of the paper and the acknowledgement. There is certainly a lot to be said for increasing social housing. In my mind the real post-Covid housing crisis was the lack of availability of private rentals, driven initially by declining household sizes during Covid and then by the resurgent immigration post-Covid. Greater social housing would reduce the housing stress of a significant proportion who struggle to find decent housing in the private sector at the best of times, exacerbated by the sudden demographic shifts of a shock to the system like Covid.
Totally agree Geoff re: the resizing of household sizes during COVID - I reckon this is a massive part of the story that doesn't get told. But yes, thanks for correcting the data - appreciate your work!
Don't disagree with the premise that we need a massive, sustained investment in public housing (every suburb should have at least 5% housing stock). But the pessimist in me wonders where all this money (let alone all the other bits and bobs) will come from. Governments worldwide suffer from a lack of revenue and I see no appetite for tax reform that can turn this around. On the other hand the world seems to be awash with private equity capital and they certainty won't be interested in public housing, unless there is some sweet deal attached.
One way I could see it happening if the Federal and State Governments get together in a version of Mission Economy (https://marianamazzucato.com/books/mission-economy/) that is locked into a future Commonwealth-State Housing Agreement. In particular it can seek to focus on three main outcomes:
1. Improve the share of good quality and appropriate public housing stock (well, dah!).
2. Use this project as a means to focus on getting people out of hazardous areas (e.g. flood and fire prone area). While not all these people will be candidates for PH, some will be (renters living in the lower cost housing); and others can take up opportunities afforded by new development. I have been a fan of Transferable Development Rights (TDR) as the means to facilitate moving dwellings out of hazardous areas and rebuilding at greater density in more appropriate and nearby locations, whilst not requiring expensive buy backs (obviously some money has to trade hands).
3. Modular homes should be compulsory in any TDR deal. This is where the private sector can be involved and R&D tax write off should be maximised to encourage firms to go all in on developing and fine turning this form of dwelling construction, especially at density. I believe high rise timber construction is now possible and is well advanced in European countries. Ideally the terms of the agreement should be favoured towards Australian companies where the profits and IP can be retained within the country.
With these 3 things there becomes a much stronger and compelling case for Joint Government intervention to increase the share of PH, which could be expanded upon over time to include more affordable private housing (owner occupied and rentals).
And finally, in (Dr) Geoff I trust. An analytical mind.
Great thoughts as always Neil. I agree re: modular homes. A big issue with getting that industry started seems to be the large initial capital investment, which is screaming out for public sector involvement to help spin it up.
As for the money? One word: Submarines. What is it... $350bn for 7 of them? Cancel three of them and spend the money on actually useful stuff we actually need.
Typical East Coast chauvinist: gives us stats on the only area of the country that really matters to him, to hell with WA and SA and the NT and Tassie.
When they start mattering I’ll let you know
In NSW there were a number of spectacular construction failures, some beyond remedy and all placing considerable burden on the purchaser. This has eroded public confidence and lenders in residential construction, particularly in apartment buildings. The implementation of the Design and Building Practitioners Act has sent a rocket up builders with defects liability being enforced with more vigour. This compliance has seen a number of builders walking away from class 2 construction.
With the introduction of 10 year latent defect insurance and associated QA pre, during and post construction its hoped that the industry can recover from its own defects.
Wow that sounds bleak. This validates my theory that we're going to see sweet F.A. new apartments until the financials start to make sense again - when it's this tight nobody wins.
Yes, commencements are the best indicator for concrete progress, but aren’t abs’s building approvals (not planning approvals) pretty good if you want to guess commencements a year or 2 in the future?
ABS publishes abandonment rates (dwellings approved and never built or abandoned after commencement) in the June release of the building activity dataset each year. It differs by state, but Vic usually has
~1% abandonment rate which I interpret as an all clear to use building approvals as a guide for future commencements (in that state at least).
Source is file #8 in the June release: https://www.abs.gov.au/statistics/industry/building-and-construction/building-activity-australia/jun-2023
(Edit: #8 under ‘data cubes’…)
Yes agree that building approvals can give you a good sense if you can make some informed assumptions about the abandonment rate. I'm actually surprised to learn that the abandonment rate is so low - so thanks for the link! I wonder why its so much higher in other states?
Not sure why the variance between states honestly, but I imagine if you give an incentive for getting a building approval you’d see an increase in the abandonment rate if people with no intention to actually build get an approval just to get the incentive (I’d expect a bit of that happening with homebuilder grants)
Thanks for the rework of the paper and the acknowledgement. There is certainly a lot to be said for increasing social housing. In my mind the real post-Covid housing crisis was the lack of availability of private rentals, driven initially by declining household sizes during Covid and then by the resurgent immigration post-Covid. Greater social housing would reduce the housing stress of a significant proportion who struggle to find decent housing in the private sector at the best of times, exacerbated by the sudden demographic shifts of a shock to the system like Covid.
Totally agree Geoff re: the resizing of household sizes during COVID - I reckon this is a massive part of the story that doesn't get told. But yes, thanks for correcting the data - appreciate your work!
Why doesn’t building a lot of public housing reduce the value of existing homes?