INDUSTRY INSIGHT: A Unified Effort to Solve the Housing Crisis: Opportunity Awaits
Housing is far more than bricks and mortar; it’s the foundation of our well-being, a cornerstone of happiness, and an essential component of thriving communities.
The ongoing housing shortage, both in Australia and globally, underscores the urgent need for a collective effort to deliver innovative solutions that cater to diverse needs. As industry leaders, policymakers, and communities, we must tackle this issue head-on with pragmatism, creativity, and collaboration.
The housing sector faces a range of challenges—regulatory restrictions, rising costs, and capital constraints, to name a few. Yet, within these challenges lie opportunities to redefine how we deliver homes, build communities, and support the people who need them most.
Late last year, Prime Edition’s Senior Development Manager, Daniel Lao attended the 2024 FuturePlace Living Sectors Summit, an event aimed at bringing together developers, investors, financiers, government, urban planners and the AEC sector to discuss all the major issues and to unlock access to affordable, sustainable and resilient living solutions through innovation and partnerships.
Breaking Down the Barriers
The barriers to housing development are multifaceted:
1 . Regulatory Challenges: Specific end-user groups, onerous design requirements, and slow town planning processes all contribute to delays and inefficiencies. Reforming these systems is not just necessary—it’s urgent. We’ve seen promising steps suggested solutions to address these systemic issues, such as the use of AI in planning schemes, but the pace must quicken to match the scale of demand.
2 . Financial Hurdles: Feasibility remains a stumbling block. High build costs, linked to labour shortages and material supply issues, make it increasingly difficult to achieve the financial returns (often IRR) required to ensure that feasibility improves allowing developers speed to proceed. Government incentives, such as GST relief and targeted funding, can help bridge the gap, but private capital will also play a critical role.
3 . Evolving Demand: Housing needs have evolved. Today’s solutions must cater to generational and lifestyle shifts, from students seeking flexible accommodations to older Australians needing homes that support aging in place. The traditional one-size-fits-all approach no longer applies.
4 . Risk Allocation: There is constant pressure towards builders in reducing the construction cost. Although there certainly has been significant challenges in this space, the industry needs to engage holistically, whether it is through alleviating the planning controls, funding mandates or government incentives in order for the industry to achieve the goal of restoring supply.
A Diverse Housing Mix is the Answer
Solving the housing crisis demands innovation and a commitment to a diverse range of housing models. Each has its place in addressing specific needs:
- Social and Affordable Housing: Essential for those in critical need, requiring strong partnerships between governments, developers, and other providers such as Community Housing Providers (CHPs)
- Build to Rent (BTR) and Land Lease Models: Long-term rental solutions with stable yields, appealing to institutional investors while offering flexibility to tenants/end users.
- Co-Living: A dynamic model optimized for urban areas with high turnover and communal amenities, catering to younger demographics and small households.
- Purpose-Built Student Accommodation (PBSA): Efficient, high-density housing designed for students, delivering rapid returns and reducing pressure on broader housing markets.
- Retirement Living: Independent Living Units (ILUs): Tailored for older Australians, enabling them to age in place in comfortably communities while reducing pressure on the healthcare system.
Unlocking the Opportunity
While challenges exist, there is immense opportunity to foster growth and innovation. The Australian government’s ambitious target of 40,000 homes over the next five years, supported by $7-10 billion in funding, offers a starting point. But we must think bigger and act faster.
To achieve this, collaboration is key. Partnerships between Government CHPs, private capital, and developers are already proving successful in unlocking supply. The UK’s example of large-scale private CHP involvement shows how it’s possible to deliver high-quality, community-focused housing while ensuring financial stability.
Consistent population growth within Australia has driven strong sentiment from foreign institutional capital. The past few years have shown a balanced shift towards interest in Australia’s living sector. The risk profile is key to obtaining the capital required for each project, and working collaboratively within the industry will build confidence it takes to expediate the required supply in the sector.
The role of ESG (Environmental, Social, and Governance) initiatives is also critical. Housing projects that prioritize sustainability, inclusivity, and community engagement are not just socially responsible—they’re increasingly attractive to investors looking for stable, long-term returns.
A Call to Action
The housing crisis is a shared challenge, and addressing it requires us to step beyond traditional boundaries. As an industry, we must celebrate the progress being made while advocating for solutions that work financially, socially, and environmentally.
