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A potpourri of all things eccentric, salty and sour is a perfect description of the current situation of the Australian housing market. Anyone who cares to analyse it will leave with an augmented sense of mixed feelings than they had when they entered the market. It is undecided, ambivalent and wobbly, but it is also undoubtedly in a crisis. A prolonged one.
The severity of the housing crisis is such that it is foretold that by 2027 there will be a deficit of 1 million homes. This shortage has led to a significant decrease in rental affordability, with just 6% of rental properties considered within financial reach for households in the lowest 20% income bracket, according to the 2021 Rental Affordability Index.
The country’s housing affordability woes were underscored by the 2021 Demographia International Housing Affordability Survey, ranking it as the third least affordable nation worldwide. In this context, cities like Sydney and Melbourne are among the most unaffordable urban centres on a global scale. This housing affordability issue is a major driver of poverty in Australia, affecting over 3 million citizens who find themselves living below the poverty line.
Prefabricated homes a.k.a modular housing
A solution that was suggested as one that is feasible and promising is prefabricated homes or prefab homes. Prefabricated houses, once associated with the post-World War II era in Britain, are making a resurgence, albeit with a new name; modular homes.
According to The Guardian, the New South Wales government has allocated $10 million in its state budget to experiment with modular housing as a means of providing rapid, high-quality social housing. This funding will be used to explore planning strategies, establish guidelines for building to top-notch standards, and evaluate prospective suppliers and locations. Modular housing can be delivered in diverse shapes and sizes where it could either be ‘as a box’ in completed form, as a flat pack- split up parts such as wall frames and floor panels- or as a kit of tinier components.
These homes are gaining momentum because traditional construction methods struggle to fall in line with the rising demand for houses. It has become more of a ‘been there, done that’ situation where it is proven that building traditional housing does not happen swiftly or on command, leading to a scarcity of houses. Prefab homes encompass the production of construction components within a controlled factory setting, followed by their on-site assembly during the construction process.
The reasons why this could be a preferable and favoured response to address the housing crisis is because it is an instant fix that will help tackle the supply shortage, the high-quality of the end product as opposed to the stigma around them that has labelled them as cheap, cost-effectiveness and sustainability. However, although prefab houses have a fair amount of benefits, one of the biggest pitfalls of it is the difficulty in implementing it on a bigger scale in Australia. This is mainly because Australia has a relatively petite prefab industry that is yet to include a developed infrastructure and supply chains.
A few success stories that are a testament to the efficiency of prefab/modular homes are that of ‘The Rise’; a multi-story apartment building that is situated in Adelaide, South Australia, ‘The Evoke Living Homes’ in Sydney, New South Wales and ‘The Swanston Square’; a significant Melbourne development which used modular construction as their framework.
As a result of the widespread reach of modular homes, the Queensland government has taken the initiative to establish modular houses as a long-term solution, as opposed to a makeshift one, and more than 100 homes are expected to be erected at the end of this year.
Super funds to construct ‘rent-to-buy’ high-rise buildings
The conference rolled out more than one solution so that the entire nation would not lean on just one. A solution that shared the spotlight along with prefab homes is obtaining super funds to build ‘rent-to-buy’ high-rise buildings.
This method permits the tenants to purchase property that they have been renting at a predetermined price after a lease period. However, concerns were flagged about this approach. Some were of the opinion that the main risk that it carries is the property price being fixed, irrespective of the volatility and fluctuations in the market. While it has its risk factors, build-to-rent models offer the possibility of minimising the need to sell multiple units to individual buyers. In the UK, where the build-to-rent industry is more established, specialised property developers construct apartment buildings targeting build-to-rent operators.
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