Policy report

Unlocking supply: consideration of measures aimed at improving housing supply (Vol.2)

14 Sep 2017
Description

We know that a shortage of shovel ready land and embedded charges and planning costs can add 30% to the cost of a new home. These costs are attributed to inadequate land supply, embedded land costs, rising developer and infrastructure charges and poor planning and zoning.

These costs have contributed to land prices growing at consistently four times faster than construction costs.

The 2017 Federal Budget included an unprecedented commitment by the Commonwealth Government to housing affordability and infrastructure investment.

Previous work by Cadence Economics, commissioned by Master Builders Australia (Master Builders), showed that this extra funding into housing and transport related infrastructure could support the construction of up to an extra 100,000 new homes by 2021 boosting supply by 41% and closing the gap on the 100,000 shortfall estimated by the government.

However, to take advantage of this opportunity and make the most of this commitment by the Commonwealth Government, regulatory barriers at state and local government levels to the construction of new homes must be removed.

Therefore a coordinated and cooperative approach across all levels of government is required.

Subsequent modelling in this report, undertaken by Cadence Economics, and commissioned by Master Builders, presents a set of scenarios of the most critical areas for reform to boost the supply of housing. In doing so, it sets the platform for policy measures to be developed to ensure funding announced as part of the 2017 Federal Budget is best targeted.

Implementing the full suite of reforms could reduce house price growth by as much as 15%.

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