Housing supply and affordability are likely to remain material public policy issues for many years. Both issues have been examined by parliamentary enquiries over recent years, including enquiries by the Senate Economic References Committee and the NSW Legislative Council.128
Although the decades-long decline in average household sizes has turned around slightly since 2001,129 there is continuing concern that the supply of housing has not been growing in line with demand.130
These pressures are likely to continue for some time. As noted elsewhere in this report, Australia's population, especially in its larger cities, is expected to grow appreciably over the next several decades. This will drive demand for housing.
Recent work undertaken for the Australian Treasury suggests that, depending on the population projection, somewhere between 4.4 and 5.9 million additional dwellings will be required nationally between 2011 and 2041.131 On the medium population projections used in the analysis for Treasury (which are close to the projections subsequently issued by the ABS and being used in this Audit), Australia will require approximately 5.4 million additional dwellings to 2041.
Most of these new dwellings will be required in the cities. The current plans of the state and territory governments focus on meeting much of this dwelling demand through infill development in the established parts of their cities.
Urban consolidation can offer lower costs and lower environmental impacts than urban fringe development. A 2010 study by the Centre for International Economics132 found that the resource costs of providing infrastructure associated with urban infill development are seven to 12 per cent lower than on the urban fringes.
Subsequent work has found that different patterns of infill development in Sydney (focusing on centres versus dispersed infill development) could yield different economic costs and benefits. Concentrating development around key centres was found to offer higher net benefits than other patterns of infill development.133
Infrastructure will play a crucial role in meeting the demand for affordable and denser development. A study of transport and housing issues in Sydney and Melbourne commissioned by the former National Housing Supply Council found that:
■ investment in transport infrastructure can galvanise apartment activity in a location, but the infrastructure in question needs to be of sufficient scale and scope to substantially boost an area's linkages to major employment nodes. More minor transport upgrades which improve localised circulation are less likely to substantially lift apartment activity;
■ correctly targeted 'city shaping' transport infrastructure can effectively boost the supply of housing land within existing urban footprints, by raising the intensity of its use. Such expansion in effective land supply for housing can place downward pressure on housing prices; and
■ optimising the housing benefits from major transport investments requires a suite of supportive policies including development assessment reforms, active involvement of public sector development corporations, various forms of land value capture and mechanisms to ensure that areas undergoing intensification maintain a reasonable supply of affordable housing.134
Ongoing opposition to redevelopment around key nodes in urban areas is likely to continue to constrain housing supply in areas close to jobs and public transport. The reasons for local opposition are likely to be varied and cover a range of issues, including concerns about perceived amenity impacts, concerns about the adequacy of local infrastructure to cope with additional demand, and broader social issues.
Governments will need to work with local communities and the development sector to address these issues. Without focused attention, there are likely to be:
■ significant implications for housing supply and affordability; and
■ risks that the economic and social returns from investment in new projects will be undermined, e.g. if the housing projections on which the business case for a project is based are not realised.
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128. For details see Senate Economics Reference Committee (2015) and NSW Legislative Council (2014).
129. National Housing Supply Council (2014). Although published on the Australian Treasury website, Treasury has pointed out that the report reflects the views of the National Housing Supply Council only.
130. Australian Associated Press (2014)
131. McDonald, P. and Temple, J. (2013)
132. Centre for International Economics (2010)
133. Centre for International Economics (2012)
134. SGS Economics and Planning (2013)