The pressing issue of housing supply shortages in New South Wales was the focal point of the recent HIA Feasibility Forum, where industry leaders and policymakers gathered to discuss the significant barriers hindering new housing developments. The forum underscored the urgent need for substantial changes to make new housing projects viable amidst rising costs and regulatory hurdles.

“Today’s HIA Feasibility Forum highlighted that significant changes are needed to make new housing projects stack up,” stated Brad Armitage, HIA Executive Director NSW. His comments set the tone for the forum, which revealed alarming statistics about the current state of land development and housing feasibility in the region.

HIA members disclosed a startling revelation that less than 2% of potential land development sites are currently feasible. This bleak scenario extends to the multi-unit sector, where development costs frequently surpass the market price of apartments. The forum heard that approximately 75% of approved apartment projects never materialise. This situation underscores the dire need for a strategic overhaul to address the feasibility of housing projects.

In his address, the NSW Shadow Treasurer, the Hon Scott Farlow MLC, acknowledged the challenges faced in critical areas where housing demand is high. “In the areas where housing is needed most, it is just not feasible to build,” he stated, highlighting the disconnect between housing needs and the current economic and regulatory environment.

HIA Senior Economist Maurice Tapang provided further insights, noting that while housing starts in NSW are experiencing a marginal increase, the supply remains significantly below the levels required to meet burgeoning demand. This shortfall exacerbates the housing crisis, putting additional pressure on the market and driving prices higher.

A major contributing factor to the feasibility challenges is the array of taxes, fees, and charges imposed on new housing developments. “Taxes, fees and charges continue to be a major barrier to new housing,” Mr Armitage explained. He elaborated that in Western Sydney, local council infrastructure contributions, Sydney Water development servicing charges, and the Housing and Productivity Contribution collectively add over $120,000 to the cost of building a new home. Such financial burdens make it increasingly difficult for developers to bring new projects to fruition.

The limited availability of land further compounds the issue, with land costs rising at a pace six times faster than construction costs. This trend was highlighted as a significant obstacle, reminiscent of challenges faced in previous decades. “In the 1970s, Gough Whitlam talked about land supply being a major barrier to new housing. Here we are more than 50 years later still facing the same issues,” Mr Armitage remarked, drawing a parallel to historical challenges that continue to persist.

While planning reforms have been introduced as a preliminary measure to address these issues, Mr Armitage emphasised the need for a more focused approach. “If we are going to truly combat housing supply shortages, then the focus must now turn to tackling the feasibility challenges,” he concluded. This call to action underscores the necessity for a concerted effort to address the multifaceted barriers impeding housing development.

The discussions at the HIA Feasibility Forum highlight the critical need for policymakers, industry leaders, and stakeholders to collaborate on developing innovative solutions. Addressing the feasibility challenges will be essential to ensuring that new housing projects can proceed, ultimately alleviating the supply shortages that have plagued the region for decades. As NSW grapples with these complex issues, the insights and recommendations from the forum provide a roadmap for future action in the quest to make housing more accessible and affordable.