Housing shortfall blows out Call for tax reform to lift investment

Despite the slowdown in building demand and house prices, the 2011 State of Supply report from the National Housing Supply Council found that the gap between housing supply and population demand increased by 28,000 over the past financial year.

At current population growth, Australia's housing shortfall is expected to blow out by more than 640,000 over the next two decades.

The council's formula for calculating the shortfall incorporates building trends such as affordability, demolitions and approvals, and population trends such as migrant intake, homelessness and household transitions.

The ambitious land release programs on Melbourne's urban fringe in the past year have ensured that Victoria's housing shortfall (17,600) is significantly smaller than either NSW (73,700) or Queensland (61,900). About 14,000 lots were released in greenfield sites in Victoria this year, with a further 37,000 to be made available early next year.

However, greenfield development will not supply the 630,000 to 930,000 extra homes the state will need in the next 20 years, warns the council's chairman, Dr Owen Donald.

"The cost of infrastructure is already high we can't go on simply adding extra land and get away with it," Dr Donald said.

The greatest shortages remain in low-cost and subsidised rentals, despite the federal government's National Rental Affordability Scheme, which has underwritten 4603 subsidised rentals out of a 2016 target of 50,000.

"A much smaller proportion of the housing market is owner occupancy," said Dr Donald, "and that market is shrinking."

To supply the levels of rental housing required in the next two decades, negative gearing and progressive land taxes need to be wound back, Dr Donald said, to encourage institutions and superannuation funds to invest in large tracts of rental properties.

Commonwealth rent assistance could also be boosted, he said, to help those on low-incomes into private rental. His proposals were backed by the Housing Industry Association and Master Builders Australia.

The report is "depressing reading", said Eleri Morgan-Thomas, head of social policy at Mission Australia, which has invested heavily in community housing.

"Despite the billions spent on social housing by governments in the wake of the global financial crisis addressing a shortage that had grown worse over decades it hasn't been enough to meet demand."

New Housing Minister Robert McClelland accepted the report's findings, saying: "We need to make sure housing supply matches the needs of our changing populations."