Australia’s Housing Crisis: When the Numbers Stop Adding Up

Conor's Corner

"As someone who leans toward classic Keynesian economics, I see this as a straightforward case of supply and demand. With housing supply clearly constrained on multiple levels—labour shortages, construction costs, infrastructure delays—it’s time we also have an honest, balanced conversation about demand. Population growth, largely driven by high levels of immigration, is outpacing our capacity to build. If we’re serious about fixing housing affordability, we can’t ignore the role of immigration policy in the broader equation. The current trajectory is putting immense pressure on everyday Australians, with skyrocketing rents and home prices eroding quality of life."

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​Australia is currently facing a significant housing shortfall, with construction approvals lagging behind governmental targets. The federal government's housing accord, initiated on July 1, 2024, aims to build 1.2 million dwellings over five years, necessitating 20,000 approvals monthly. However, recent data from the Australian Bureau of Statistics (ABS) reveals that only 15,400 homes were approved in February 2025, falling 23% short of this goal. 

Over the first eight months of the accord, a total of 123,800 dwellings received approval, which is 36,200 fewer than the targeted 160,000. Furthermore, in the year leading up to February 2025, only 178,600 homes were approved, significantly below the annual requirement of 240,000 to meet the accord's objectives. ​

Compounding the issue, approvals do not always translate to completed constructions. Historically, 6% more dwellings have been approved than completed, suggesting that actual construction rates may be even further behind targets.

The Urban Development Institute of Australia (UDIA) forecasts a shortfall of 393,000 housing completions in major capital cities by 2029, attributing this to escalating construction costs and persistent labor shortages. Brickworks CEO Mark Ellenor has also expressed skepticism about meeting governmental targets, citing infrastructural backlogs in essential services like water and sewerage connections. ​

Several factors contribute to the constrained housing supply:

1. Higher Interest Rates: Elevated rates increase borrowing costs, discouraging new developments.​

2. Rising Building Costs: Inflation in material prices makes construction less economically viable.​

3. Labor Shortages: A dwindling skilled workforce hampers construction progress.​

4. Builder Insolvencies: Financial instability among construction firms leads to project delays or cancellations.​

   
   
   
   

Simultaneously, Australia's population is projected to grow by 1.8 million over the next five years, with significant increases in Victoria (544,000), New South Wales (486,000), and Queensland (412,000). This surge in demand, coupled with limited housing supply, exacerbates affordability issues. 

Addressing this crisis requires aligning housing demand with supply capabilities. Policymakers face the challenge of balancing population growth with sustainable housing development to ensure affordability and accessibility for all Australians.