Attempts to tackle the nation’s housing crisis are being undermined by the failure to complete dwellings over the past five years. In Sydney, it is being exacerbated further by the failure of developers to even start work on projects that have been granted building approvals.
In a curious juxtaposition, construction of thousands of new Sydney homes has stalled despite the city’s deepening rental crisis as soaring building costs, supply problems, tradesmen shortages and interest rates put residential projects on hold.
The Herald’s Matt Wade reports that more than 11,000 homes around Sydney were approved but not yet commenced in December, which was 8 per cent higher than the five-year December average. About 80 per cent of the total were townhouses and apartments, prime rental market properties. According to a new report by KPMG, the number of new dwellings approved across NSW but not commenced jumped from 13,765 in the March quarter of 2023 to 15,593 by the December quarter.
Despite population increase fuelling the demands by both buyers and renters, dwelling construction has been hit by a perfect storm of constraints on activity. In the early days of the COVID-19 pandemic, supply chain disruptions significantly limited the sector’s ability to respond to increasing demand, which was partly linked to the HomeBuilder program for first home buyers and eligible owner-occupiers. Materials, fixtures and fittings, and skilled labour, especially in finishing trades, were in short supply and shipping delays significantly extended build timelines. Pandemic-related supply chain disruptions and competition for resources from other types of construction have pushed up prices significantly, by nearly 40 per cent since late 2019.
Reserve Bank of Australia assistant governor Sarah Hunter, addressing a conference in Hobart earlier this month on housing market cycles in the building sector, said that the building industry had navigated the temporary disruption created by the pandemic but was now facing weaker demand and dwelling approvals were the lowest in decades.
In Sydney, the rise in the number of projects approved but still on hold leads to the conclusion that some developers have delayed projects because of the relatively high cost of building when compared with the project’s returns.
What’s to be done to liberate these lifelines to the housing crisis? Since coming to power, the Minns government has attempted to address the housing crisis by “rebalancing housing growth” across NSW with a focus on well-located homes close to transport, jobs and existing infrastructure. Eight Sydney transport hubs have been selected for accelerated rezoning aimed at delivering 47,800 new high and mid-rise homes and rezoned locations across NSW, allowing for 138,000 new homes to be created within 400 metres of metro or suburban rail stations and town centres. Minns has also pledged to change the rules to allow flat-building in all residential zonings. While welcome, most of these proposals could take up to 15 years to bear fruit.
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That is a long way off but the 11,000 plus homes put on hold by developers are a low-hanging and quick fix. Initiatives that streamline approvals and build processes will reduce costs and ultimately lift supply and the Minns government should consider what sort of leverage it can exert on recalcitrant developers to start work on the properties that have received building approvals.
A suggestion from the mayor of North Sydney, Zoe Baker, that the Minns government could offer residential builders a financial guarantee to ensure approved projects are completed quickly is worthy of consideration. Such a proposal raises the possibility that developers could be persuaded to build additional social housing as part of the deal and has the advantage of incentive rather than big stick.
Source Agencies
