Women's budget statement

The deregulatory journey

Inflation must be beaten

More super-centenarians

Snapshot of citizenship

Lest We Forget

Shared priorities at 2020

A service centre for kids

...more

If today's big problem is housing affordability, the big solution is to increase housing supply. It is often said that it is impossible to get economists to agree on anything. Well right now, it seems that's not quite the case. Housing economists agree that Australia simply doesn't have enough homes. They can't, of course, agree on exactly how many more we need.

Household formation outstripped housing supply around 2004. The gap has continued to grow since that time. Conservative estimates suggest that Australia is now 30,000 homes short with some estimates being considerably higher.

The truth is that no-one has been asking the question of how many houses we need, of what kind, and in which locations, for over a decade. The assumption that the market would - in the long run - right itself has meant that Government policy didn't try and encourage better balance between supply and demand. In fact, policies like the superannuation tax changes seem to have exacerbated the problem. Certainly the relaxed attitude of the previous Government to serious skills shortages in the building industry didn't help.

The Government has already announced its intention to establish a National Housing Supply Council. The National Housing Supply Council will provide forecasting and analysis of Australian housing need, because we never want to be in the sort of mess we're in now, again. The Council will be an expert body, providing advice and forecasts to government on housing supply. This Council will publish an annual State of Supply report to analyse the adequacy of construction and land supply for the next 20 years.

Housing Affordability Fund
The Government will invest $500 million in a Housing Affordability Fund, firmly focused on helping developers and local government to unblock the supply of housing and pass the savings on to new home buyers. This commitment is targeted at supply side barriers that hold up new construction, inflating holding costs that are passed on to purchasers.

The Government intends to provide funds for projects that reform the handling of development applications and defray the costs of local infrastructure currently funded through charges and levies.

I am confident that there are real gains to be made by fast tracking planning reforms. I met recently some people from local government who informed an investment of $4 million dollars to their state would produce $140 million in benefit - simply from rolling out the electronic Development Application standard. We want fund practical projects that produce real measurable gains in the form of more houses, more quickly.

National Rental Affordability Scheme
The National Rental Affordability Scheme is perhaps the most ambitious of the Government's new housing policy commitments. This Scheme aims to create a new asset class for institutional investors in affordable residential housing. The Scheme will provide an annual incentive to institutional investors to build new homes and rent them to low and moderate income earners at 20 per cent below market rates.

The Australian Government will provide institutional investors with an annual $6,000 refundable tax credit for new buildings - with capacity to provide the credit as a grant instead for non-taxable entities such as community housing agencies. State and Territory Governments have agreed to contribute at least $2,000 per annum in cash or in kind for each home. Each property will attract this subsidy for 10 years, at which time the property may be rented at market rates or sold.

In the first five years the Government aims to bring 50,000 properties on line. If there continues to be demand, the Government will expand the Scheme to 100,000 properties over the following five years - a major new investment in Australia's affordable housing stock. Tenants will be subject to a clear income test that will target low and moderate income earners.

First Home Saver Accounts
One of the biggest barriers to becoming a first home owner is saving a decent deposit. First home buyers now account for 18 per cent - or barely one in six - of all home purchasers - compared to 22 per cent in June 1996. The proportion of 18-34 year olds buying their first home fell from 48 per cent to 44 per cent between 1994 and 2004.

To begin to reverse these trends, the Government is providing for the introduction of First Home Saver Accounts. The Accounts will provide a simple, tax effective way for Australians to save a meaningful deposit for the purchase of their first home. Since the announcement of these new Accounts, the Government has increased the benefits to low income earners through the provision of a minimum 15 per cent Government contribution on after tax contributions of up to $5,000 each year.

A couple earning average incomes and putting aside 10 per cent of their incomes for their first home, could be able to save a deposit of up to $80,000, depending on returns. This is considerably more than if they held the money in a normal bank account. The Accounts also support national savings. We estimate that the Accounts will contribute around $4 billion to national savings within four years.

Conclusion
Our future housing priorities must include tackling homelessness, the need for greater environmental sustainability in our housing and of course the important work that is being led by my colleague Jenny Macklin to address the appalling state of housing in many remote Indigenous communities.

Ten years of cuts to public housing, and consequent tighter targeting, has led to dysfunctional systems that may take many years to fix. But there are no silver bullets - no overnight solutions when it comes to housing affordability. Any policy changes we make today will take years to have a substantial effect on the widespread availability and affordability of housing.

But with national leadership, cooperation with the States, local government and industry, and the right housing policies, we can make a difference in the medium to long term. We can breathe life back into the great Australian dream.

NOTE: This is an edited excerpt of a recent speech, whcih can be read in full on the minister's website here: http://www.fahcsia.gov.au/internet/tanyaplibersek.nsf/content/housing_23apr08.htm