‘Exhausted’: housing supply hit as affordability dips
The government’s independent housing adviser has warned that the Iran war could lead to 33,000 fewer homes being built in Australia than planned.
Australia was making progress on its housing supply targets before the outbreak of conflict in the Middle East in late February, the National Housing Supply and Affordability Council found in its annual state of the housing system report released on Thursday.
However, the virtual closure of the Strait of Hormuz, which caused fuel prices to skyrocket and supply chains for construction materials such as PVC pipes to disrupt, had a serious impact on the housing sector.
“There is huge pressure on costs, particularly for smaller firms,” council chief executive Susan Lloyd-Hurwitz told AAP.
Before the clash, the council estimated Australia would build 980,000 new homes over the National Housing Agreement period, which ends in June 2029.
The deal set an “ambitious” target of 1.2 million new homes over the sector’s five years, but recent building approvals and construction start data showed progress was being made.
But the council expects 33,000 fewer homes than previously anticipated to be built over the agreement period if the crisis continues and the rise in construction costs reaches 10 per cent.
Ms Lloyd-Hurwitz warned the impact could be even worse because the council’s modeling failed to take into account consumer sentiment, reluctance to borrow and wider economic conditions.
The report found that although the supply outlook looked brighter before the war, affordability continued to deteriorate.
The share of the average household’s income required for rent rose to a record high of 33.1 percent in 2025.
The number of years required to save for a 20 percent deposit increased to 11.2 years.
The inability to afford rents stems from a chronic shortage in supply, pushing vacancy rates well below long-term averages.
Only two per cent of rental stock was available nationally in 2025, according to the Real Estate Institute of Australia.
Single mother Rachael Jackson has felt first-hand how affordable the private rental market is.
She and her three children have been in and out of homelessness after escaping domestic violence.
Ms Jackson was struggling to find a place to rent on Sydney’s Northern Beaches because none of the social housing options available to her were suitable for her family.
“We are tired, we just want stable accommodation,” he said.
“The structure of the system is that if you go out and get a job or get a raise, you lose your subsidy, so you’re still homeless.
“So this was not done to help poor people escape poverty, but to trap you.”
Community service group Anglicare Australia found that just one in 48,776 rental listings across the country on the weekend of March 14-15 were affordable on JobSeeker and suitable for a single person.
A rental property is considered affordable if it does not exceed 30 percent of a household’s budget.
Executive director Kasy Chambers said Anglicare’s rent affordability snapshot showed there were no options for low-income Australians in the private rental market built to benefit investors.
Prime Minister Anthony Albanese, who called on the government to rein in tax breaks for property investors and use the money to build more social housing, agreed that a change to negative gearing and capital gains relief was needed to address anger over intergenerational injustice.
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