Development deadlock deepening the housing crisis

[Pelican Press 0]

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Development deadlock deepening the housing crisis

More than 10,000 approved apartments sit idle across Perth – not because of planning issues or lack of demand but due to stark economic realities.

The Property Council of Australia’s recent Sky High: What’s really driving high costs and declining infill development report crystallised what many in the industry have long recognised: as one of the world’s lowest-density cities – with just 1.1 per cent of homes being apartments, compared to Sydney’s six per cent – Perth’s housing diversity gap continues to widen.

Despite having a widely recognised housing affordability crisis and thousands of development approvals in place to address it, these much-needed homes remain unbuilt.

To meet our housing targets, Perth needs to deliver about 11,000 apartments annually – more than five times our current rate.

Since COVID-19, construction costs have risen by at least 30 per cent nationally, with Western Australia experiencing even steeper increases. Some developers are reporting construction estimates nearly double those of similar projects just five years ago.

This cost escalation has meant the development community need to think, build, fund and procure differently if they hope to meet the divide between development costs and achievable sales prices for all but the most premium projects.

The root cause? A perfect storm of factors. Infrastructure spending in WA has more than doubled in five years, with large public works projects creating unprecedented competition for materials and skilled labour, while at the same time, border restrictions during the pandemic limited access to both.

Multi-residential developments are also more complex to build, with a diverse buyer pool, individualised fit-outs and varied floor plans, pushing builders towards simpler, more profitable infrastructure projects.

As property prices climb, government revenue from property-related taxes have nearly doubled from $2.6 billion in 2018-19 to $4.5 billion in 2023-24. However, this windfall is largely funding more infrastructure projects, further straining construction resources and perpetuating the cycle.

Breaking this cycle requires targeted intervention, and the State Government’s Infrastructure Development Fund is a step in the right direction, especially if it can be expanded to allow developments to utilise the full approved amount.

It is also positive to hear Minister for Planning John Carey’s pledge to have the State Government intervene and deliver houses in categories where market ******** is preventing private sector delivery, specifically in the social and affordable categories.

While the private sector will, and should, remain the principal provider of housing, the economics in the current environment mean the market alone cannot solve this crisis. Without intervention, supply of moderate to sub-premium housing will continue to fall, putting upward pressure on prices and driving more households into housing stress.

The 10,000 approved but unbuilt apartments represent an immediate opportunity to address our housing shortage. With the right economic settings, we could see significant progress towards meeting our housing targets between 2026 and 2029.

Or we can simply continue on our current path and watch the housing crisis deepen.

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