The New South Wales government has unveiled a $1 billion plan aimed at accelerating apartment construction to help address the ongoing housing crisis. This program seeks to facilitate the pre-sale of up to 5,000 off-the-plan units. In so doing, it allows those developers to achieve quicker finance approval for up to 15,000 homes. Despite this, government officials, including state Premier Chris Minns, have continued to praise the policy as “world-leading.” Experts are concerned about its real potential to increase housing production.
Martin Loosemore, a distinguished professor of construction management at the University of Technology Sydney, has asked the right questions. Yet he worries about the long-term effect of this new initiative. As I wrote last week, he stressed that the proposal addresses “just a tiny piece of the problem.” He says it won’t dramatically reshape the housing status quo.
Concerns About Effectiveness
Loosemore pointed out that homes are currently being built at 50% of the pace they were 30 years ago. “Whether it will lead to an increase in the number of dwellings being constructed is obviously open to question,” he stated. The professor pointed out that technology and building materials have come a long way since then. When it comes to building homes, that hasn’t changed much from how it was done 50 years ago.
He further elaborated on the complexity of modern dwellings, noting that “dwellings have obviously got more complex over that period.” This complexity, Loosemore says, makes it even more important for any new policies to focus directly on improving the efficiency of construction itself. He remarked, “It will just ease the supply blockages potentially,” but cautioned that this measure is merely “a drop in the ocean” compared to the broader housing accord targets.
Government’s Assurance and Challenges
Paul Scully, New South Wales Minister for Planning and Public Spaces, defended the policy by stating that it is “not open slather to anyone who wants to get involved.” He expressed that developers need to be focused on obtaining planning permission, show clear pre-sales, and need to be ready to start building within 6 months. The reasoning behind this requirement is to avoid having unserious or unqualified developers apply to the RFI process.
Nicole Gurran, an academic specializing in urban planning, told Loosemore that she shared his worries over financing challenges. She noted that “Australia is fairly unique in… developers needing to demonstrate a high level of sales before they’re able to get finance for projects.” This requirement is a major barrier to the creation of large-scale developments and tightens supply constraints.
A Broader Context
This initiative comes against the backdrop of a game changing report released recently by the Australian Productivity Commission. The report underscored a major decline in homebuilding costs across the last three decades. Gurran said that she was hopeful this first phase would lead to increased supply of housing. If successful, it would be a model for such schemes to be implemented elsewhere.
The policy is modeled after successful programs in Finland. Together, these programs advance some of the most successful strategies for addressing their respective housing challenges. Experts aren’t sold on the idea that this local adaptation will lead to actual outcomes.
