Raising construction costs in housing crisis is madness

Since the election, Labor has been presenting itself as a deregulation crusader.

On the ABC’s 7:30, Treasurer Jim Chalmers said: “We’re strengthening and streamlining regulation... We genuinely have an open mind to making our economy more efficient, more competitive, more productive, more dynamic. Competition policy and deregulation is an important part of that.”

Housing Minister Clare O’Neil got in on the act as well, telling reporters: “The Commonwealth, state and territory and local government have been putting in place rules and regulations that are slowing us down and holding us back from building the housing we need.”

According to O’Neil, she’ll be leading the Housing and Business Ministers Councils to identify and remove regulations that are holding back housing supply.

On the surface, this sounds great. As the party of smaller government, we would welcome genuine steps to strip back regulations that are holding back housing supply.

But there are three reasons why Labor’s ‘deregulation agenda’ is not genuine.

Firstly, the regulatory burden of building new homes has increased during Labor’s last term.

Under Labor’s watch, more than 1,500 new regulations were implemented across the Infrastructure and Treasury portfolios.

These regulations—including changes to the National Construction Code—have made it harder and more expensive to build new homes in Australia.

When making these changes to the NCC, it’s clear O’Neil and Labor failed to consider the impact on housing supply.

It’s surely no coincidence that when the Coalition was last in Government, Australia was building just shy of 190,000 homes a year. Under Labor, this has crashed to barely 170,000. They need to hit 250,000 annually to meet their National Housing Accord.

Let’s call a spade a spade: The Prime Minister’s promise to build 1.2 million new homes by 2030 is a dead duck.

During the last Senate Estimates, just three months ago, I asked the Infrastructure Department whether Minister O’Neil had sought ideas on cutting housing red tape. The response was a flat “no.”

The Infrastructure bureaucrats were defensive of the changes, while also conceding that amending the NCC would increase construction costs.

Increasing construction costs during a housing crisis is madness. With the construction industry consistently leading the nation in insolvencies, Labor’s regulations are further strangling the sector—making new housing development untenable in Australia.

Secondly, Labor’s housing agenda this term is a thicket of big state intervention.

During the election, Labor promised to become both the nation's largest mortgage insurer and a property developer.

When announcing the expansion of the Home Guarantee Scheme, Prime Minister Anthony Albanese and O’Neil said: “The Albanese Government will guarantee a portion of a first home buyer’s home loan, so they can buy a home with a 5 per cent deposit and not pay Lenders Mortgage Insurance.”

Labor is now moving to guarantee loans for an unlimited number of first home buyers. The fact it’s not means tested, means even Clive Palmer’s children could access the scheme to buy their first home.

By encroaching into a function currently served by the private market—Lenders Mortgage Insurance—Labor will create a significant contingent liability for the Commonwealth.

As the Insurance Council of Australia put it: “Effective nationalisation of the LMI market for first home buyers as proposed will have the effect of reducing the pool of LMI customers so significantly that the market may become unviable...”

In other words, the state crowds out the private sector with more regulation and more Canberra bureaucracy. 

And think about how much Anthony Albanese forking out 15% of your first home deposit might cost if people’s repayments turn south? Anyone who’s ever had to balance a budget knows: government guarantees may present as harmless, but they eventually lead to major losses for the taxpayer.

But Labor doesn’t stop there. They also want to become a property developer, with a plan to build 100,000 homes exclusively for first home buyers.

According to Mr Albanese: “The Albanese Government will also invest $10 billion to partner with state developers and industry to build up to 100,000 homes.”

Instead of supporting the struggling construction sector and smaller developers, Labor wants the Commonwealth to become a major property developer itself.

It’s clear that Labor is abandoning builders and private developers—and trying to usurp them.

Thirdly, Labor’s existing regulations have already cost Australians an eyewatering sum.

The cost of new 5,000 regulations implemented by the Albanese Government up to this point will cost the economy billions in compliance expenses. 

This is money that should be put towards stimulating growth. Instead, it’s being tied up adhering to Labor’s new rules.

Labor cannot blame any former government for these increased economic pressures. They are the direct result of decisions made by this Government.

It’s insulting for Labor to claim it is cutting red tape when the cost of its regulations to date has been astronomical.

The idea that Labor now wants to slash regulations is completely at odds with its record last term and the promises it made heading into this one.

If Labor is serious about cutting red tape, it needs a complete course correction.

In housing, that means confronting how its own decisions have pushed up the cost of construction and compliance.