Infrastructure Charges, Slow Approvals Hamper New Home Builds

A report from the Property Council of Australia and global real estate firm Savills forecasts 133,000 new homes will be delivered under business-as-usual during the five-year 2024-29 Housing Accord period, based on 2023 completion rates – just 41 per cent of Greater Sydney’s overall target.

Property Council NSW Executive Director Katie Stevenson said another 107,400 homes across Sydney, the Hunter, Central Coast and Illawarra-Shoalhaven could be delivered with Government support for targeted, time-limited measures to get the housing pipeline moving.

“The NSW Government can’t control all the costs preventing housing delivery, but one lever they can pull right now is to limit the impact of property taxes and charges stifling development.

“Savills’ modelling shows that temporarily suspending new infrastructure charges and faster planning approvals could support the delivery of more than 100,000 additional homes by 2029.

“This research clearly demonstrates Government taxes and charges are in some areas adding up to 40% to the cost of construction of new homes.”

Ms Stevenson said property taxes and charges were becoming an increasing focus for other State and Territory Governments aiming to meet housing delivery targets.

“The NSW Government should follow the lead of the Queensland and ACT Governments and commit to reviewing the impact of state taxes and charges that are negatively impacting housing supply.

“The NSW property industry contributes more than any other sector to tax revenue, providing almost half of the NSW Government’s $43.2 billion tax and royalty revenue in 2021-22.

“We’re calling for a suspension of new infrastructure taxes and charges during the Housing Accord period, and for Government to invest upfront in the infrastructure needed to support new homes.”

Ms Stevenson said it was critical to deliver more housing without delay, and that completed projects will allow the Government to recoup its investment in the long term.

“Housing projects that get built generate stamp duty, land tax and payroll tax. Housing projects that remain on a spreadsheet don’t generate any value at all,” Ms Stevenson said.

“It’s already a tough environment for construction – new taxes and charges make it even more difficult for companies to secure financing to get vital housing projects moving,” she said.

The report shows that suspending two charges that came into effect in the last 12 months – Water Development Servicing Plans (DSPs) and the Housing and Productivity Contribution (HPC) – and accelerating approval processes, could help NSW get closer to its 2029 Housing Accord target.

“Suspending these charges just for the next five years could means the difference between more than 100,000 new homes getting built – or not,” Ms Stevenson said.

The final report in the Property Council/Savills series details barriers to feasibility across Greater Sydney with a particular focus on the Lower Hunter, Greater Newcastle and Central Coast regions.

Savills National Director Property Consultancy, Stephanie Ballango said the research cast doubt on the NSW Government’s current focus on new apartment development in existing neighbourhoods.

“Our analysis shows that even with the suspension of the DSP and HPC taxes, infill apartment development remains financially unviable under current conditions and into the immediate future.

“This issue is particularly acute for smaller operators who dominate the infill development space, and a major concern given Government’s focus on ‘building up, not out’,” Ms Ballango said.

Ms Stevenson called for urgent action to remove the financial barriers choking housing delivery.

“We need to think beyond business-as-usual and use consolidated funding to deliver new sewers, roads, parks and other infrastructure during the period of the Housing Accord. This would make housing delivery more viable by removing these taxes from project costs.

“Suspending taxes during the Housing Accord period and putting more urgency behind speeding up planning approvals will give us a fighting chance to meet our housing goals,” she said.

The research shows that, over the Housing Accord period, no increases in taxes and charges, reductions in key state taxes and faster approvals could help deliver an additional:

  • 34,000 homes in the Eastern Harbour City
  • 33,500 homes in the Central River City
  • 22,000 homes in the Western Parkland City
  • 10,250 homes in Illawarra-Shoalhaven City
  • 3,150 homes in the Central Coast City
  • 4,500 homes in the Lower Hunter and Greater Newcastle City

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