Challenge to supply affordable regional housing needs strategic focus

Government action may be necessary to unlock affordable housing supply in rural and regional housing markets, which face some different challenges - including some more adverse - than those faced by metropolitan areas, according to new AHURI research.

The research, ‘Disruption in regional housing: Policy responses for more resilient markets’, undertaken for AHURI by researchers from University of South Australia, University of Adelaide and Royal Melbourne Institute of Technology, examines housing trends and the processes of delivering housing supply in rural and regional Australia. The research addresses the challenge of providing housing at an affordable price in non-metropolitan Australia, and takes into account the turmoil and change driven by the COVID-19 pandemic and its after-effects.

The research found that rural and regional housing markets face some more adverse conditions than those in the metropolitan areas because of their smaller scale, their difficulties in sourcing a local labour force, the limited number of builders and the additional costs associated with being further away from suppliers. However, other factors often considered to be a barrier to new housing supply – such as planning permission – were not considered significant impediments in most regional housing markets.

With the greatest challenge to building new housing in regional Australia being the shortage of a skilled workforce, the research suggests a guaranteed program of ongoing work and new-builds, possibly funded through the Commonwealth Government’s Housing Affordability Future Fund, may be needed to attract and retain labour in the housing sector.

Research survey finds resource limitations biggest barriers to new housing supply

‘Our research surveyed regional and rural local governments and not-for-profit housing providers to understand the trends impacting regional development. Sixty per cent of respondents identified resource impediments, such as workforce shortages and shortages of land for development, as the top barrier to delivering affordable housing supply in their areas,’ says research author, Professor Andrew Beer from the University of South Australia.

‘Limited support from state and federal governments was also considered a major barrier by a similar number of respondents (57% state governments, 49% federal).’

‘Survey participants widely acknowledged the absence of new investment in social housing provision was impacting growth of the overall housing stock across regional Australia.’

‘Interestingly, factors often considered to be a barrier to new housing supply – such as planning permission – were not considered significant impediments in most regional housing markets.’

‘One size fits all’ solutions won’t work for regional housing markets that are quite different from each other

The research found that the housing markets in different types of regions (such as those classified as stalled, volatile, stable, coastal, expensive or growing) were becoming more different over time. Housing solutions that might work well in one area might be inappropriate or lead to increased housing costs in another market.

Expert panel indicates Government may need to play a key role in unlocking supply

The investigative panel meetings with experts from industry, government and the community acknowledged the important role governments, including regional governments, may need to play in developing stronger supply chains for rural and regional housing. The panel members articulated the need for developing a national urban and regional strategy, which could provide certainty for private investment, while also unlocking potential State and Australian government support.

If regional housing providers could access the Housing Affordability Future Fund to build additional dwellings, these could be added to existing demand to create a more secure pipeline of work for builders and their workforce. This would need to be a long-term strategy, otherwise short-term action may exacerbate existing challenges such as shortages of building materials, placing additional price pressure into the market.

‘Overall, we found that relatively small public sector interventions are likely to deliver substantial benefits to future generations of regional and rural residents,’ says Professor Beer. ‘In many ways, the most pressing need is for the creation of an institutional architecture that would include local housing providers, construction-related training providers and enhanced supply chains so as to support the growth of both market and non-market housing. There is also a role for direct government investment in these housing markets, particularly for social housing.’