2023 Federal Budget – An opportunity missed and a problem created.

From my reading of the Federal Budget from earlier this week, I’m a bit disappointed; the can of the housing crisis has – yet again – been kicked down the road.

While the increases in rent assistance for low income earners and Centrelink recipients is welcome, as are the other measures to try to ease the cost of living pressure, there is nothing that I can see which addresses the immediate issue of the crisis in housing – no financial assistance to renters, no plan for an increase in supply or how we’re going to house an additional 1.5 million immigrants due in the next 5 years.

Yes, you read that right – the budget forecast is for a net migration into Australia of 400,000 in this financial year; 315,000 in the next, then another 250,000 – 260,000 per year for each of the 3 financial years afterward – with no plan on how or where they’re going to be housed, in the middle of a housing supply and rental price crisis. 

And yes, a proportion of this number will be international students but it still leaves us in a perilous situation where competition for the available housing stock is already very tight and this will only apply a significant amount of pressure to that supply, creating further shortages and the resultant increases in rental prices.

Immigration is vital to us as a society, it brings many benefits from an economic and social perspective to us all, but bringing more bodies into a country whose housing system is already under immense strain is incredibly shortsighted. There’s already a growing number of our own countrymen and women who are struggling to find somewhere to live, so where is the government proposing that this influx of people live when they get here?

Simply put, we need to address supply, and where we don’t do that, we only band-aid the problem.

The announcements made so far include a tax break for build-to-rent projects (tick but this won’t help with new supply inside of the next 3 years at least) and making extra funding available for the National Housing and Finance Investment Corporation (NHFIC) – they’re supposed to build at least 1200 houses in each state over five years. Or more correctly, the budget says it will “require NHFIC to take reasonable steps to allocate a minimum of 1200 homes to be delivered in each state and territory” – that’s still less than 10,000 new builds when we’re going to need at least 50 times that number to meet the projected demand and balance out the housing market, yet the budget forecast is that new dwelling starts will Decrease rather than increase.

To say that a “rent freeze” (which has been lobbied for by some of the fringe parties) isn’t a consideration is helpful as this would have led to an even greater number of landlords leaving the permanent rental market, but they could have helped ease some of the strain and costs involved in renting by possibly including a system of grants to support renters who are struggling to afford increasing prices; perhaps something along the lines of a one-off payment direct to the various state bond authorities to support the bond, or a grant paid direct to the agent or landlord of a percentage of the rent, a system of vouchers or tax or other credits to be distributed to those whose rents exceed a specific percentage of their income, all of which would be means tested, or possibly assisting to free up some of the red tape at a state level.

While some of this might add a temporary jump in rental prices and an impost on the budget to the extent that the surplus would be decreased, it would be offset in the medium term by greater affordability for renters in the first instance and increases in the taxation inflows in the second.

It’ll be interesting to see what the individual states do, but I’m not hopeful they’ve got any answers either.

Economics 101 tells us what happens when supply and demand are out of balance.