Australia's housing crisis is intensifying, with affordability concerns at an all-time high.
The government has set an ambitious target to build 1.2 million homes over the next five years.
However, without addressing fundamental input factors that impact costs, affordability is likely to remain out of reach, according to Brent Thomas, Colliers Engineering and Design Managing Director.
“For the first time in decades, there is genuine alignment and political will to tackle housing affordability as best we can,” Mr Thomas said.
The solution isn’t about choosing between infill or greenfield development; both are essential parts of the equation.
“Each development type has a role to play to help solve the housing crisis,” he said.
“But we do need a mix of products that meets the financial and social needs of a range of buyers – and we need to be able to deliver housing solutions with the ability to scale up or down quickly based on market demands.”
Urban Growth Boundaries: A Major Constraint
One of the biggest hurdles to housing affordability is the artificial constraint created by urban growth boundaries (UGBs) and urban footprints.
“We work at the coalface every day helping developers build communities, and those developers tell us their biggest barrier is finding appropriately zoned land for development – their pipelines are waning rapidly,” Mr Thomas said.
The artificial constraints imposed by UGBs drive up land costs, with price differentials of nearly tenfold observed between land inside and outside these boundaries.
“Inside the boundary, developers might pay $100,000 to $150,000 per lot for the raw land, but just outside, where it’s still zoned rural, it could be as low as $15,000 - $20,000 per lot,” he said.
“With that price differential, there is more money available for investment in infrastructure, community facilities and increased amenities within greenfield communities.”
Mr Thomas advocates for a merit-based land assessment system to replace rigid UGBs.
“While urban growth boundaries should serve a useful function from an infrastructure and planning perspective, a more flexible system that allows suitable land to be included via logical inclusions process would enable more efficient land supply and faster housing delivery,” he said.
Lengthy Approval Processes Driving Up Costs
Extended approval timelines are significantly escalating development costs, directly impacting housing affordability.
Delays in rezoning, infrastructure planning and funding, and approvals are placing substantial financial burdens on developers, ultimately impacting buyers.
“A brand-new master-planned community can take 10-15 years from idea or concept to the first lot hitting the market,” Mr Thomas said.
“That is just way too slow. During that time, developers are paying land taxes, rates, and holding costs, all of which get passed on to home buyers.”
This protracted process results in substantial holding costs being passed on to buyers.
“In one recent case, a developer was paying $2.5 million per month in interest while awaiting approval over a relatively minor detail—the width of bicycle storage in the basement. That’s a cost that will likely make its way into the final sale price,” he said.
“It is important to get the details correct but we need a faster way to resolve sticking points on applications so that delays and holding costs are minimised and projects are brought to market faster.”
The Impact of Planning Inconsistencies
Inconsistencies in local planning regulations create significant cost discrepancies for developers.
“Some councils require eight-metre-wide local roads, others six-metre-wide roads; some mandate two-metre footpaths on both sides, while others require only 1.5 metres on one side,” Mr Thomas said.
“Councils in a similar geographical area have different standards for drainage design – some allowing smaller pipes and others needing larger pipes for minor storm events.”
These variations result in substantial price differences.
“There is a lot contributing to why the development costs vary from site to site but something as simple as differing standards means developers might pay $150,000 per lot in one council area but only $120,000 in another,” he said.
Aligning these standards to be fit-for-purpose could reduce construction costs and, in turn, lower the final sale price of land.
A Call for Better Coordination
Achieving Australia’s target of 240,000 new dwellings annually will require enhanced coordination between government and developers.
“In our experience, infrastructure planning and land release are often out of sync, leaving developers to fill the gaps and work it out as they go. This often causes negative sentiment around greenfield development from the community,” he said.
Increased government investment in select infrastructure projects is crucial to unlock development potential, he said.
“Funding for critical infrastructure such as a major sewerage pipe, water reservoir or road to support a major growth front will help ensure that new housing supply reaches the market more efficiently and at a lower cost.”
