The Australian government wants to create affordable housing. An admirable goal, although the means leave a lot to be desired:

“The $10 billion Housing Australia Future Fund will provide ongoing investment returns to deliver new social and affordable homes as well as investments to address acute housing needs. Returns from the fund will deliver the Government’s commitment of 30,000 new social and affordable homes in the fund’s first five years, including 4,000 homes for women and children impacted by family and domestic violence or older women at risk of homelessness.”

So the fund plans to build 30,000 new homes over five years, rent them out, then reinvest any profits in new housing – in other words, it’s a government run build-to-rent property developer targeting the bottom end of the market. If it sounds familiar, it should: a similar plan was rolled out by New Zealand’s Jacinda Ardern when her Labour government was elected back in 2017, with the lofty goal of building 16,000 new homes in their first term. Six years later, just 1,380 houses have been built with a further 1,223 under construction.

Now the Kiwis were building to sell, not rent, but the Australian government will likely encounter similar difficulties in terms of delivering the builds. That’s because the government has to compete for scarce development resources: it doesn’t have its own crew of architects, builders and construction workers; it has to bid for them on the market. A recent Productivity Commission report on housing concluded that the “evidence suggests that subsidised affordable housing crowds out market-rate construction”, and that a better way to improve housing affordability is through movement chains:

“Movement chains is the concept that, as new residents move into newly constructed units, they vacate their old units, and the vacant units are then occupied by new residents whose old units become vacant, and so on. Through this process, new market-rate housing can have moderating price effects in the city’s lower-income neighbourhoods, not just its immediate neighbourhood… Taking a midpoint estimate of the effects of movement chains (from the studies above) to those in the bottom quintile, if governments eased zoning restrictions in a middle-ring suburb in a major city, such that 100 new market rate dwellings could be built, 25 new dwellings would become vacant in bottom quintile suburbs.”

The Housing Australia Future Fund is currently being blocked in Parliament. Not because it’s an expensive, sub-optimal solution to the housing crisis that will reduce the incentive for developers to build market-rate housing (amongst other problems, such as where homes are constructed and how rentals are allocated). No, it’s being held up because the Greens, Jacqui Lambie and David Pocock want higher social housing targets and billions extra for government-led affordable housing projects.

So that’s where we’re at: with elected officials like these, the housing market will not improve because none of the actual causes of expensive housing have been addressed. Instead of pushing for the government to remove barriers to new housing, such as the zoning and planning regulations that drive up costs and restrict supply, these Senators want the government to become even more involved in housing.