Thinking outside the box: 5 alternative solutions to Australia’s housing woes

“We know the root of our housing crisis is an undersupply”, Dr Mardiasmo said.

She cited the latest data from the Australian Bureau of Statistics (ABS), which showed dwelling approvals have declined by 21.8 per cent since 2021.

“This was mainly due to the end of HomeBuilder, exacerbated by rate hikes throughout 2022 and the current shortage of construction materials and labour,” Dr Mardiasmo explained. 

With data from the Housing Industry Association (HIA) showing that one out of every five home-building contracts is being cancelled each month, the expert predicted ongoing impacts on the housing supply pipeline.

Adding to the housing market’s woes is the issue of declining affordability, which was exacerbated in the wake of the pandemic due to property prices rising to “historical highs”. 

Given all these compounding factors, Dr Diaswati believes “now is the time to discuss real, practical solutions to addressing the housing undersupply.”

“With inflation having increased by 7.8 per cent in the 12 months to December 2022, continued interest rate hikes, and international migration returning, there is an increasing need to focus on future-proofing the Australian real estate market,” she stated.

On the upside, the expert pointed out that Australia is not alone in its struggle for affordable housing. 

“The good news is we are not alone in this issue; there are many other countries who have or are currently experiencing this.” 

PRD’s latest report, Alternative Solutions: Solving the Housing Supply Issue, analyses five housing models from overseas markets that are either non-existent or in their nascent stages in Australia and assesses whether they may be a suitable solution for solving local housing affordability issues.

PRD managing director Todd Hadley said the firm wanted the paper to act as a “conversation starter”.

“The Housing Supply Solution report provides a wide variety of options, all of which have been evaluated against a set of criteria,” Mr Hadley said.

“This gives a richer landscape for different governments across Australia to select and adopt a solution that suits their area best,” he added. 

Below are the five alternative housing solutions outlined by the report:  

1. Public Private Partnerships 

Public-private partnerships could involve the government providing land for a private partner to develop, with the aim of providing affordable housing, according to Dr Diaswati. 

In her report, she cited Ireland’s Social Housing Bundles project as an example of the model being successfully used to provide low-income housing. 

However, it highlighted that a successful PPP will require the “careful selection of key players” to ensure mutual benefit and the smooth development and operation of any resultant developments.

“This solution has the potential to ease the housing stress, but it will require active participation by the government from all levels — federal, state, and council — to identify suitable sites in urban areas,” Dr Diaswati wrote. 

In addition to intergovernmental collaboration, Dr Diaswati emphasised that the solution requires an innovative approach to ensure that red tape is minimised, delivery timelines are shortened, and the highest impact for the community is achieved”.

2. Modular Homes 

While modular homes, which are transportable accommodations that can be built offsite have been utilised as an alternativeto traditional home building for some time across the world, Dr Diaswati noted its potential as an alternative housing solution is currently not being implemented at its “highest and best use” in Australia.

“For this to occur, joint ventures between multiple governments, manufacturers, contractors, and community housing organisations (potentially as a PPP) is needed,” Dr Diaswati recommended. 

She also highlighted the potential to use modular housing in conjunction with the 2032 Brisbane Olympics to provide accommodation to athletes which can then be repurposed following the conclusion of the event.

3. Build-to-Rent 

Another solution Dr Diaswati put a spotlight on is build-to-rent (BTR) projects. 

BTR projects, in which a single entity or company (usually by an institutional investor) retains ownership of an entire building with the purpose of providing rental accommodation, could help ease Australia’s rental crisis, the report found.

Aside from offering long-term viability for both the owner and occupants, due to their unique ownership structure, the expert highlighted that the model provided stability compared to traditional rental property, in which the renter’s security is dependent on a private landlord.

“BTRs enable flexibility for the market they serve by offering housing at rental market value and/or subsidised rates, thus allowing for multiple tenure types. More often than not, BTRs incorporate in-house amenities, thus becoming a ‘one-stop shop’ for their residents,” she added. 

But Dr Diaswati pointed out the tendency among current build-to-rent projects to gravitate towards providing market-rate rental accommodation as a potential weakness of the solution model. 

“BTRs in Australia must have a portion accessible to lower-income households as per localised data and not just a set percentage below its market offering,” she stated in the report. 

“This will maximise its impact on reducing the affordable housing shortage.”

The report noted that it was also vital that build-to-rent projects provide a variety of floor plans so that buildings remain an accessible option for families.

4. Asset repurposing 

With the pandemic paving the way for more flexible working set-ups and driving e-commerce growth, and rendering many traditional office and retail buildings vacant, the report argued that repurposing assets could be a viable solution to the housing crisis.

“Asset repurposing would see these vacant buildings being re-modelled or reconfigured into another asset class such as infrastructure (for example, a school or hospital) or into a type of accommodation (whether student accommodation, commercial hotels or motels, or units for the rental market),” Dr Diaswati stated.

The expert cited other countries where asset repurposing projects were turned into affordable housing options, including the Quayside Village in Canada, Savonnerie Heymans Public Housing in Brussels, Quinta Monroy Housing in Chile24, and the Elderberry Walk estate in the UK25.

“These projects are aimed at providing affordable housing to the most disadvantaged in an effort to ease the housing stress.”

5. Community-based land initiatives

Community-based land initiatives can provide affordable housing through the consolidated land assets owned by the government and managed professionally for the betterment of the community, according to the report. 

The report cited similar initiatives with the same goals, such as urban wealth funds (UWF), land rent schemes (LRS), and community land trusts (CLT). 

Due to the structure of community-based land initiatives, Dr Diaswati explained that the model’s suitability as an alternative housing supply solution depends on the participation of the government at all levels. 

“There are already some initiatives in place relating to auditing available land, which is advantageous. The key is to unlock land, but in close consultation with targeted stakeholders. Each community-based land initiative example offers a distinct opportunity and more analysis is needed to determine the most suitable option for different local communities,” she explained.