New report finds competition payments could unlock new housing supply

A new report has found that providing Federal incentive payments to the States to fix their planning systems could unlock $3 billion in economic benefits and ease the pressure on housing prices.

The report by Deloitte Access Economics “A Federal Incentives Model for Housing Supply” was commissioned by the Property Council and details how the Commonwealth and the States and Territories can work together to increase supply and ease housing stress.

“This is an exciting model that is based on the highly successful ‘national competition policy’ that was delivered by the Commonwealth and the States from 1995 – 2005”, said Ken Morrison, Chief Executive of the Property Council of Australia.

“We need to incentivise the States and Territories to reform their planning systems so that we can ‘turbocharge’ supply and deliver practical solutions to the issue of housing affordability.

“This is about moving away from ‘dinky’ initiatives that give the illusion of dealing with housing affordability, but that do not deal with the substance.

“The critical ingredient to addressing housing affordability is freeing up planning systems to help close housing supply gap, which currently sits at more than 200,000 homes.

“There are long-term economic and social benefits from fixing clunky planning systems that strangle projects in excessive red tape and delays”

The Deloitte Access Economics Paper details how Federal incentives could drive planning reform:

  • Set targets – States and the Commonwealth agree on metrics and outcome, with flexibility in the arrangements to accommodate jurisdictional differences.                   
  • Make someone responsible – there needs to be an entity that collects data and measures performance against targets and outcomes.                                                      
  • Model the benefits – modelling needs to be thorough to better understand the size of the revenue or economic gains.
  • Link Payments to Action – both for up-front reforms, and on an ongoing basis.
  • States to lead but involve local government – States have a responsibility to set direction, but local government should be rewarded for delivering at the granular level.

“Some have argued that the Commonwealth shouldn’t be rewarding States and Territories for good behaviour. Our view is that housing affordability is an issue owned by all governments, and we should provide the necessary incentives, given the Commonwealth gets a productivity dividend through better cities.

“The approach outlined pays on performance by setting clear targets, tracking action and outcomes and linking them clearly with rewards.

“Across our major cities, we regularly witness delays in the planning system that adds months – even years – to new projects, which slows supply and adds costs.

“The Commonwealth has used ‘competition payments’ to great effect in the past, and it can do so again to deliver increased housing supply.

“The metrics could include the number of dwellings under construction, the cost of the average housing unit, or the number of dwellings under construction deemed ‘affordable’, as well as stricter and shorter timeframes for development applications.

“Providing incentives for reform could unleash $3 billion in uplift a year and create 3,000 full time jobs. State and Federal governments will also reap benefits with more housing delivering stamp duty, land tax and GST from construction; and local government will also benefit through rates.”