Analysts claim Labor’s ambitious plan to construct one million new homes within five years may fall short due to challenges in the housing industry. 

The Housing Industry Association (HIA) has cautioned that high interest rates and escalating costs are stifling the pipeline for new homes. The HIA’s submission to Treasury's employment white paper, set to be released later this year, predicts that only 185,000 new homes would be constructed in 2024 and 2025, falling short of the required annual target of 200,000. 

The HIA attributed this to the long-lasting effect of changes in the cash rate on the wider economy.

While the Labor government's commitment to building one million new homes is a significant step towards boosting housing supply, the HIA suggested that it might not be enough to address the underlying shortage of homes.

“One million homes started within five years will be sufficient to ensure that the acute shortage of housing supply does not deteriorate further, but it will not be sufficient to address the long-term undersupply,” the HIA stated.

Moreover, the Australian housing market is facing a rental crisis due to a shortage of available properties. Experts warn that tenants are experiencing surging rents, with historically low levels of supply. 

The Real Estate Institute of Australia has revealed that existing housing commitments are far below what is required, with vacancy rates falling below 1 per cent in some cities.

Other challenges facing the construction industry include the vulnerability of the supply chain to disruptions due to the Labor government's industrial relations reforms, which introduced multi-employer bargaining. 

The Committee for the Economic Development of Australia (CEDA) also warned of poor planning practices that restrict medium-density housing, exacerbating the supply crisis.

While the Labor government's commitment to building one million new homes is an ambitious target, it may not be sufficient to address the chronic shortage of housing supply. 

As such, experts are calling for a more comprehensive strategy to boost housing supply, including addressing the underlying issues that restrict supply and lead to escalating costs.