Calls for more social housing as construction activity hits record low

Construction activity has hit a record low in one index.

Construction activity has hit a record low in one index. Photo: TND

Industry groups are calling for greater investment in social housing, fast-tracked infrastructure and incentives for home building after construction activity hit a new record low in April.

New orders, employment and average wages all plunged to record lows in the closely followed Australian Performance of Construction Index, contributing to the fastest one-month decline since records began in 2005.

Builders also reported supply chain delays, cost increases, and raw material shortages – with all industry sub-sectors suffering accelerated rates of contraction.

Apartment building is shrinking the fastest, followed by commercial and engineering construction.

And although house building is holding up slightly better, in April, it recorded the sharpest monthly rate of contraction, on the back of lower enquiries, home sales and cancelled contracts.

The Australian Industry Group and Housing Industry Association, which conduct the construction survey, said the impacts of COVID-19 on the construction industry were only just beginning.

“Construction-related investment and spending decisions will be affected for some time to come,” they said.

“For construction, it is possible that worse declines in activity and demand are yet to be felt.”

That spells bad news for the broader economy, as the construction industry employs almost 10 per cent of the workforce and has a large economic multiplier effect. (People moving into new homes spend money on furniture and appliances, and boost demand for professions such as real estate agents and surveyors.)

Housing Industry Association chief economist Tim Reardon said the immediate challenge for the construction industry was the big hit to consumer confidence and demand caused by the coronavirus.

This will only improve once governments start to lift restrictions, he said, while investment in long-term infrastructure assets, incentives for home building, and more infrastructure maintenance at the local council level will support employment over the coming months and years ahead.

Mr Reardon told The New Daily it was also a good time to invest in social housing, as there’s little risk of government crowding out private-sector investment during such a weak economic period.

“When we see a down cycle in the housing market, which it appears we have before us, then governments are likely to get a far better return on their investment by investing in public housing infrastructure,” Mr Reardon said.

His comments come after housing groups on Tuesday urged government to invest $7.7 billion into building 30,000 social and affordable homes and renovating existing stock.

‘Social housing-led recovery’

Community Housing Industry Association CEO Wendy Hayhurst said a “social housing-led recovery” would create thousands of jobs as the construction industry is such a major employer.

“At the same time it will start to make inroads into our huge national shortfall in rental housing affordable to ordinary people,” Ms Hayhurst said.

“Immediate renovation work on existing social housing properties will improve their energy efficiency, and bring down bills for tenants.

“It will improve the standards so that everyone can stay safe and healthy inside their own homes.”

Meanwhile, lobby group Master Builders Australia has called on the government to expand the First Home Loan Deposit Scheme and fast-track infrastructure, after builders reported a 40 per cent fall in forward work on their books.

The Rudd government included social housing in its economic stimulus package after the global financial crisis – building 19,500 units and refurbishing a further 80,000 over two years, at a cost of $5.2 billion.

The Grattan Institute think tank wrote in September that the Social Housing Initiative was well targeted and provided an immediate boost to the economy.

Grattan’s report came after University of New South Wales research found Australia needs to build more than one million social and affordable houses over the next 20 years to meet unmet demand.

Stay informed, daily
A FREE subscription to The New Daily arrives every morning and evening.
The New Daily is a trusted source of national news and information and is provided free for all Australians. Read our editorial charter.
Copyright © 2024 The New Daily.
All rights reserved.