Supply targets alone won’t solve the problem – we need redistribution and tax reform

Prosper Australia today condemned the punitive approach taken by the Allan government to address housing supply, calling the strategy a complete miss of the mark.

“Our research shows that Melbourne does not have a supply issue, rather an issue with distribution as seen in the tens of thousands of empty homes still lying empty across existing Melbourne suburbs and the development-ready land being withheld for speculative gain,” said spokesperson Rayna Fahey.

“During the Covid-19 lockdowns, we saw a radical reversal in migration but no change in construction, which generated an excess supply of dwellings of 5.1-6.7% of the housing stock. Yet the effects were short-lived with rents returning to pre-covid levels by mid-2022.” 

“One contributing factor was the 35,000 homes more than usual that sat vacant over the entirety of 2021 and 2022. Renters couldn’t afford to outbid the value of speculative withholding of supply.”

“We have an over-dependence on the market to deliver new housing. This means supply is profit-driven not need-driven, and when it’s more profitable to sit on undeveloped land and housing than to put it into use, that’s what the market does. Punishing councils for the actions of the private sector makes no sense.“

“The Housing Statement aim of 80,000 new homes per year was never a realistic goal. Instead of owning a mistake, we are seeing this government double down and seek to shift the blame onto councils – who can only approve a planning application once it’s made by a private developer.”

“The government has the most appropriate levers to pull to stop rewarding speculation and start rewarding development – the tax levers – and only the government can provide the social housing necessary to adequately house those people the market won’t look after.”

Key figures: 

• An estimated 5.1% to 6.7% of dwelling growth over population growth over the two years to mid-2021 – equivalent to a supply boost of 100,000 to 130,000 dwellings – led to 35,000 more dwellings being held vacant (a 50% increase) and a only a moderate, temporary fall in rents. (source)
• To maximise profitability developers employ a staged release or ‘drip feeding’ model of housing supply, which means there’s no guarantee of zoning change increasing construction. Over 110,000 approved greenfields sites analysed by Prosper, only 26,000 sites, or less than a quarter, had been sold over the past decade, with landbanking developers taking an average 40 years to sell their subdivisions. (source)
• Our latest Speculative Vacancies figures (next report release due this year) based on water meter data uncovered over 100,000 empty or under-used homes across Melbourne. (source)

Photo by Damien Tait on Unsplash