Melbourne provides an interesting case study as to what happens when you raise the supply of new homes, particularly apartments, in the marketplace. 

The city’s median home value has fallen by 1% over the past year, and CoreLogic researchers say this is mostly due to Victoria building more homes than any other state or territory over the past 10 years. Plus a lot of those new homes were apartments, which skewed the city’s median value lower. 

This is the sort of impact the Federal Government is hoping to achieve with its National Housing Accord. The aim is to raise housing supply across Australia’s chronically undersupplied market, and while no politician wants to see home values fall, they’re hoping to slow down the rate of growth.

The official goal is to build 1.2 million homes over the next five years, including 20,000 affordable homes for essential workers and 20,000 social homes funded by returns from the $10 billion Housing Australia Future Fund investment strategy. 

The Accord officially began on July 1 and the first round of funding for social and affordable homes was opened to applications. Last week, Housing Australia announced it had selected 185 projects for this first round of funding, which will involve a total of 13,700 new social and affordable homes. 

This sounds great – if various challenges including a labour shortage can be overcome to get these developments off the ground. But at least we are finally seeing some action to try and address the housing undersupply after years of warnings from the property industry and other experts. 

Governments of all stripes have failed to build enough social housing to meet community needs, which has led to extra demand seeping into the private rental market. This extra demand, along with other drivers like more people preferring to live alone post-COVID, has driven weekly rents up. 

As every tenant in Australia knows, rents have grown rapidly in recent years. Growth is slowing now amid immigration returning to normal levels and more renters forming share houses. But we need to ensure an adequate future supply given many more Australians will be renting for the long term.

Meantime, state governments are making their own changes to facilitate new supply under the Accord. NSW, for example, is rolling out the Transport Oriented Development plan, which allows for new apartment developments within 400 metres of train and Metro stations in 37 suburbs. 

Separate reforms also allow for duplexes and semis to be built on more single blocks to diversify housing options. Once again, all of this sounds great, but we are yet to see if local councils are willing to stand up to Not-In-My-Backyard (NIMBY) objections and hand out more DAs, where appropriate. 

I’ve long advocated for a swifter approvals process and a sensible review of rezoning opportunities in areas that would cope with higher density living. 

But we also need to see a reduction in statutory costs for developers and the release of more state-owned land for development to make a meaningful difference to housing supply. 

Meantime, the Australian Housing and Urban Research Institute has released a report documenting the progress of rental reforms agreed to by the National Cabinet a year ago. The idea was to harmonise the rules to provide greater protection and peace of mind for tenants. 

Reforms included a ban on rental bidding (adopted everywhere), limiting rental increases to once per year (adopted everywhere except the Northern Territory) and removing no grounds evictions (adopted everywhere except the Northern Territory and Western Australia). 

There is more work to be done with rental reforms but a sensible balance is required. Australia relies on ordinary mum-and-dad investors who typically own just one investment property to supply the bulk of our rental housing stock. So, we need to keep investment costs manageable for them while also ensuring fairness for tenants, particularly in terms of minimum standards of condition. 

By John McGrath, Chief Executive Officer of McGrath Estate Agents. 

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