Underlying housing deficit causing snowball crisis effect

Photo: Greater Sydney Commission
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SYDNEY’S major districts will struggle to deliver on their 2026 targets of housing additions, analysis shows, which is likely to exacerbate Australia’s housing affordability crisis.

Analysis from the Property Council of Australia and Gyde Consulting shows only the central district will come anywhere close to meeting the target of 112,000 dwellings set by the Greater Sydney Commission (GSC) for the 10-year period from 2016 to 2026.

This is despite Greater Sydney achieving its housing targets in the 2017-18 and 2018-19 financial years, which delivered just over 42,000 dwellings each, above the target of 36,250 dwellings per year.

The targets do not incorporate the deficit into dwelling demand, meaning there is an underlying deficit that can persist, even when dwelling targets are achieved.

Property Council’s NSW executive director, Luke Achterstraat said the results showed there was an underlying deficit of housing supply in Greater Sydney.

“Each year the dwelling targets are not met exacerbates this deficit and worsens the affordability crisis. Crucially, the current targets do not incorporate the deficit into dwelling demand, meaning that there is an underlying deficit that can persist, even when dwelling targets are achieved.

“Ongoing delivery of housing above the identified target demand is required to manage this deficit and ensure sufficient housing supply for Greater Sydney’s population.”

There is slightly more positive news surrounding Western Sydney, where Blacktown, The Hills, Penrith, Liverpool and Wollondilly are delivering beyond the GSC’s five-year targets.

Achterstraat said it is important to note that these areas have a higher proportion of greenfield development than other parts of Sydney, and that while future projections may seem positive, the review of flood zoning and serviceability of new sites could lead to a curtailing of development in these communities.

The Property Council supported the government’s expansion of the Accelerated Infrastructure Fund to unlock more housing growth in the area, while the coming flood review will “make it all the more critical that government review the urban/rural boundary of Sydney in search of opportunities to build suitable sites”.

“It was promising to see a strong housing supply focus in this year’s NSW Budget which included $500m in supply initiatives such as faster approvals, expert assessments and the rezoning of land for housing precincts,” Achterstraat said.

However, in order to keep pace with future demand, Western Sydney requires the delivery of 25,530 dwellings per year, and the region is currently 6,000 homes short of this number. This is despite the region exceeding the zero to five-year period target to 2021 by 600 dwellings.

“As greenfield housing opportunities decline, we will need stronger partnerships between state and local government to promote the careful planning and renewal of the region’s town centres.

The eastern district, which includes the Sydney, Randwick, the Inner West and Woollahra LGAs, is expected to fall short of the 10-year target by about 20,000 dwellings. The likelihood of the LGA meeting the GSC housing target for the six to 10-year period – from 2022 to 2026 – is very low in all of them, except for Woollahra where it is high.

The central district exceeded the GSC’s 2021 target by 1,500 but is still expected to fall short of the 112,000 total target due to the very low likelihood Cumberland and Parramatta will meet their targets.

The south district is tipped to fall 5,000 short of its 41,000 target, while every LGA in the north district has a very low likelihood of reaching their individual targets, making for a near-10,000 home shortfall on the district’s target of 52,650 dwellings.

“In recent years, there has been an increasing proportion of greenfield land in completions, which indicates a reliance on Western Sydney to deliver sufficient housing, as this is where the two, identified greenfield growth areas are located. It is clear that, in order to meet future targets, dwellings must be provided across the whole of Greater Sydney, rather than concentrated in one or two districts,” the analysis said.

According to the Property Council and Gyde Consulting, the pandemic showed while demand is influenced by levels of immigration, it is not the sole driver. Latent demand for housing amongst the domestic population and more savings fuelled high housing prices and increased demand for housing.

Infill housing was the dominant housing type delivered in the peak housing years of 2017-18 and 2018-19.

“It is critical to maintain the historical proportional split between the two housing types, as infill housing typically provides a greater number of dwellings, with better access to existing infrastructure, services and transport options,” the analysis said.

In 2017-18 dwelling completions delivered 30,510 multi-unit dwellings and 11,670 detached houses. In 2018-19, 29,815 multi-unit dwellings and 12,600 detached houses were delivered.

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