Federal, State governments urged to address housing supply and affordability

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The Federal government could increase housing supply and ease affordability issues by providing states with financial incentives to overhaul their planning laws.

According to a report authored by Deloitte Access Economics and commissioned by the Property Council of Australia, incentivising the reform of planning controls would go a long way to addressing current supply issues.

“This is about moving away from ‘dinky’ initiatives that give the illusion of dealing with housing affordability, but that do not deal with the substance,” PCA chief executive Ken Morrison said.

“The critical ingredient to addressing housing affordability is freeing up planning systems to help close housing supply gap, which currently sits at more than 200,000 homes,” Morrison said.

The proposal put forward by Deloitte and the PCA would see state governments be provided with upfront payments for planning reform as well as ongoing payments for continued strong performance.

That would include setting housing targets agreed upon by both levels of government as well and ensuring data is being measured and collected against those outcomes.

States would also be required to provide extensive modelling of their plans and the benefits they bring, while local governments would also be rewarded for planning overhaul.

Morrison said state governments could be assessed and rewarded based on metrics such as number of dwellings under construction, the cost of the average housing unit, or the number of dwellings under construction deemed affordable, as well as stricter and shorter timeframes for development applications.

“Some have argued that the Commonwealth shouldn’t be rewarding States and Territories for good behaviour. Our view is that housing affordability is an issue owned by all governments, and we should provide the necessary incentives, given the Commonwealth gets a productivity dividend through better cities,” he said.

“The approach outlined pays on performance by setting clear targets, tracking action and outcomes and linking them clearly with rewards.

“Across our major cities, we regularly witness delays in the planning system that adds months – even years – to new projects, which slows supply and adds costs.”

Morrison said there is evidence that similar incentive projects have worked in the past and believes all levels of government would benefit.

“This is an exciting model that is based on the highly successful ‘national competition policy’ that was delivered by the Commonwealth and the States from 1995 – 2005.

“Providing incentives for reform could unleash $3 billion in uplift a year and create 3,000 full time jobs. State and Federal governments will also reap benefits with more housing delivering stamp duty, land tax and GST from construction; and local government will also benefit through rates.”

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