'Build more houses' sure sounds great as a solution to the housing crisis, but a few key factors scream 'buyer beware'

According to Abraham Maslow's famed "Hierarchy of Needs", human beings will act with urgency to address basic physiological requirements for survival (food, air, shelter, water and so on) before worrying about more existentially trifling issues, like whether they are actually happy or what they think of the Marvel franchise. 

In Maslow's theory, you only worry about the next level — they range up through safety, then belonging and love, then esteem, then cognitive well-being and so on — once you've satisfied the one before. 

The final level, the pointy bit of the pyramid with which Maslow's model is regularly depicted, is "Transcendence", which until recently in Australia involved buying a $15,000 light machine off Pete Evans.

The theory finds broad support in the current Australian political environment, where basic needs are absolutely front of mind: food, warmth, housing. 

These basic needs are all expensive, and getting more so, and the number of households finding themselves obliged to "pick any two" is on the way up.

But what is it about this last-mentioned need — housing — which lends itself historically to quite such crazed policy-making at the federal level?

Australia is in the grips of a legitimate housing crisis and yet the temptation for our leaders to deny the bleeding obvious, or make promises that are patently undeliverable, continues to prove too much for them.

This week marked the beginning of the five-year period over which the Albanese government has claimed its Housing Accord will deliver "1.2 million new, well-located homes". To achieve this target, we will need to build 240,000 new homes each year — or 20,000 a month.

This seems as good a time as any to evaluate the reliability of what politicians tell us about housing, and how they're going to make things better.

Let's break down the problem

The first thing to remember is that there are two very distinct groups of Australians with a keen interest in housing affordability: people who own homes already and people who don't but want to.

People who already own homes — especially those who bought them recently, and thus wake every day to the nauseous certainty that today is the day the property bubble will burst — want prices to keep growing.

People who want to buy a house, however, want prices to crash. Ideally precipitously, and for long enough for the interested party to relieve some distressed seller of a well-positioned three-bedder close to all facilities, before booming again. This is the Australian dream.

No politician can make both groups happy at once. So who wins? Let's look at the numbers.

In the 2021 Census, the Australian Bureau of Statistics reported that 67 per cent of Australian households were owner-occupied. So in the war of "do we want house prices to boom or bust", it's easy to see why no political leader who wants to survive is ever selling a "bust" model.

It's why, at state and federal levels, governments will periodically pretend that the best way to address the raging bin-fire of real property prices is to give first-home buyers money to spend. Arm them with their own personal can of accelerant, in other words.

Between 2012 and 2021, according to the Australian Housing and Urban Research Institute, Australian governments spent $20 billion on assistance to first-home buyers.

Over that time, according to CoreLogic, house prices in Sydney doubled.

These types of measures are by no means out of favour, despite their hilariously predictable effects on the market. The Queensland Labor government doubled its first home buyer grant to $30,000 last September, and Opposition Leader Peter Dutton recently restated his policy of allowing first home buyers to use their super to buy a house.

The opposition's other "demand side" solutions to the housing crisis include banning foreigners from buying established houses at auction and cutting immigration numbers so there'll be less competition for the limited number of houses on offer.

The Albanese government, so far, has shown itself to be more interested in "supply side" solutions. Street name: "Build More Houses".

And it sounds great because it makes sense and you can and absolutely should wear high-vis and a hard hat while announcing such initiatives. Building more houses means people get jobs AND houses. And that's a win-win. Building 1.2 million new "well-located" houses in five years? C'mon Aussie! Let's go! 

But the strong denial-of-the-bleeding-obvious tradition around housing policy in this country does not stop at political leaders squirting accelerant onto the bonfire of house prices and acting all surprised when it works.

And there are several bleedingly obvious factors that mean, even with the best will in the world, it is highly unlikely that in five years' time, Australians will be carrying each other over the thresholds of 1.2 million new, well-located homes.

Why 1.2 million homes are unlikely to happen

The last time Australia got even close to building 240,000 new homes in a single year was 2017, when we built 223,563.

As property analyst Cameron Kusher noted this week, that was back when interest rates were still sitting pleasantly at 1.5 per cent. Today, interest rates are at 4.5 per cent and there is a watching brief on Reserve Bank governor Michele Bullock's eyebrows, lest even their merest twitch betray an intention to raise them further.

Meanwhile, construction companies — especially the mid-tier types that build medium-density apartment buildings — are dropping like flies.

By March, according to ASIC, 1,913 construction companies had so far gone bust this financial year. Three times as many as at the comparable point in 2021/22.

Why? Because banks aren't financing these companies the way they used to. Because a bunch of them got caught up in fixed-price projects during COVID, and now can't afford to carry them out.

Also, because building materials are about a third more expensive than they were before the pandemic.

Also, because there is an acute labour shortage of tradies, owing in part to the decline in apprenticeships. There were 376,800 in 2012, and only 134,800 by 2020. Australia's tradie workforce is aging and overworked.

What's the solution?

Well. We could import more skilled labour from overseas. But Dutton doesn't want to do that because they'd be competition at house auctions, and the Albanese government last year expressly excluded tradies from its new super-expedited visa scheme.

Unions don't love importing labour, and the Albanese government doesn't love offending unions.

And one last conundrum

One of the other strands to this infuriating knot is the whole idea of "well-located" homes.

Gone are the halcyon days of the 1970s, when vast tracts of developable land were to be had within an easy commute of city centres.

These days, well-located, medium-density housing usually entails careful planning. And guess what Australia also lacks? Yep, town planners.

Matt Collins, the Planning Institute of Australia's chief executive, recently warned that there are now 232 local government areas in Australia where no planners are working at all. "This is 43 per cent of all local government areas," he said, in an update posted to LinkedIn.

Bond University has recently announced the closure of its planning school; James Cook University is set to follow suit.

There's no doubt that the Albanese government is pouring energy and attention into addressing the issue central to this housing crisis. And "Build more houses!" is an eminently saleable proposition.

But a detailed title search on this attractive electoral property leaves many questions unanswered.