Why Australia's $33 Billion Housing Fix Might Not Be Enough
The Federal Government announced a significant $33 billion housing package in the 2025-26 Budget—the biggest effort ever by an Australian government to fix Australia’s housing shortage.
But despite this big spending, several ongoing problems suggest our housing troubles may continue—and possibly get worse—in the years ahead.
What's in the $33 Billion Plan?
The main goal is ambitious: to build 1.2 million new homes over five years (2024-2029) through the National Housing Accord.
Here's what the plan includes:
Help for Buyers and Renters
The budget provides support for Australians to buy and rent a home:
- For buyers, the expanded Help to Buy program will contribute up to 40% of the purchase price for eligible home-buyers
- For renters, the maximum rate for Commonwealth Rent Assistance increased by 45%, helping around one million rental households
Foreign Buyer Ban
Starting 1 April 2025, there's a two-year ban on foreign buyers purchasing existing homes:
- $5.7 million for the ATO to enforce it
- Extra $8.9 million to stop land banking by foreign buyers
New Ways to Build
The Government is backing modern building techniques to change how we build homes:
- $120 million to cut red tape around modular and prefabricated construction
- $50 million to boost Australia's modern building capabilities
Construction Workforce Boost
The Government has introduced financial incentives to tackle worker shortages in construction:
- Up to $10,000 for eligible apprentices over their apprenticeship period
- Up to $5,000 for employers of apprentices as a Priority Hiring Incentive
Why It Might Not Work
Housing markets, like most free markets, are driven by supply and demand – when demand exceeds supply, prices increase.
Only 45,000 homes were finished in the first quarter of the National Housing Accord. This is short of the 60,000 needed per quarter to meet the 1.2 million housing target, showing a big gap between what's planned and what's actually happening.
While $33 billion sounds impressive with its initiatives on workforce development and modern building techniques, the plan falls short on addressing the deeper structural issues holding back supply.
The Building Industry Is Struggling
This shortfall makes more sense when you look at what's happening in construction. According to Master Builders, the building industry needs to grow to about 1.5 million workers by 2029 to meet Australia's construction needs.
Currently, the industry has about 1.37 million workers, meaning we need 130,000 more people – a 10% increase – over the next five years. But here's the real challenge: more than 100,000 workers leave the industry each year through retirement and job changes.
That's over 500,000 people to replace over five years, plus the additional 130,000 new workers needed. The apprenticeship incentives are a step in the right direction, but they're up against a massive workforce challenge.
The Real Problems Aren't Being Fixed
The budget largely ignores some major barriers to housing supply:
- Zoning issues: Most of the residential land is still locked up by restrictive zoning regulations, seriously limiting how many homes we can build and where
- Council approval delays: Federal Treasury's analysis shows housing approval waiting times have blown out to four months in Victoria and New South Wales. These delays not only add costs but discourage builders from taking on projects in the first place. The latest Australian Bureau of Statistics (ABS) figures show annual housing approvals are 16% fewer than the 10-year average and 29% below the government's target. This means the building indusYttry will struggle to meet the 1.2 million housing goal.
What This Means for Property Investors
These ongoing supply constraints suggest house prices will continue to rise:
- Limited supply: The mix of zoning rules, building industry labour shortages, and approval delays means we won’t build enough homes
- Strong demand: Immigration and population growth will continue driving housing demand
- Basic economics: The gap between supply and demand is set to continue, which drives increases in house prices and rents
Bottom Line
This budget is the biggest Government push to solve Australia's housing undersupply in years. While the $33 billion package offers some hope, the reality is that multiple practical barriers will likely prevent this investment from fully fixing the supply shortage. For investors, this suggests the market fundamentals remain strong, with ongoing supply constraints and strong demand likely to support property values for some time to come.
Key Takeaways:
- The Federal Government has committed $33 billion to address the housing crisis, but they're already falling behind on targets - only 45,000 homes built instead of the needed 60,000 in the first quarter.
- Labour shortages in the building sector are a major constraint to adding more supply.
- The budget doesn't address the fundamental problems - restrictive zoning limiting available land and council approvals delays.
- With these ongoing challenges, housing supply will remain tight while demand stays strong - meaning property values will likely stay high.
