Australia's initiative to improve housing affordability is facing challenges as it enters its third year. Recent data shows that the national median house price rose by 0.8% in September, marking the largest monthly increase this year. Since the National Housing Accord was signed in October 2022 by all levels of government, nine superannuation funds, and housing industry bodies, the median house price has surged by $127,117, averaging an increase of $42,000 annually. This growth reflects a compound annual growth rate of 5.5%, continuing a trend that has contributed to the current housing crisis.

The Accord aims to construct 1.2 million homes over five years, translating to 240,000 homes annually. However, only 170,000 homes have been built in the first year, necessitating an increased target of nearly 260,000 homes per year for the remaining four years. Additionally, housing approvals have declined, dropping 6% in August. The rising house prices are largely attributed to increased demand, fueled by the Reserve Bank's decision to cut interest rates three times.

The government's expanded first home buyers' scheme was intended to help buyers secure homes more quickly. However, industry experts warn that this has led to heightened competition among buyers, which may not significantly impact overall demand but does raise prices. Despite the cash rate being 1% higher than it was in October 2022, the 5% deposit scheme is expected to further increase demand by allowing more individuals to qualify for mortgages.

Since the Accord's inception, Australia has seen a net influx of 1.4 million migrants, contributing to a total population increase of 1.7 million. In contrast, only 512,000 homes have been constructed during this period, resulting in a shortfall of approximately 200,000 homes based on the average household size of 2.4 people. The Accord primarily focuses on increasing housing supply rather than addressing demand, as political constraints prevent changes to negative gearing and capital gains tax discounts.

The states are responsible for town planning, and while some, like Victoria and New South Wales, are actively pursuing housing development, others are less engaged. The Reserve Bank governor has acknowledged that chronic housing undersupply is likely to persist for at least the next two years. In urban areas like Sydney and Melbourne, efforts are underway to increase density around existing infrastructure, particularly near train stations.

New South Wales Minister for Planning and Public Spaces Paul Scully has proposed a plan to guarantee 50% of pre-sold apartments under $2 million to assist developers in securing financing. If the guarantee is invoked, the government will purchase the apartments at a discounted rate for use as social and affordable housing. This initiative has garnered interest from other states, although none have yet implemented similar measures.

Despite these efforts, a report from BuildSkills Australia indicates a significant shortage of construction workers, estimating a shortfall of 116,700 workers, or 23.8% of the workforce needed to meet the Accord's housing target. The report highlights that natural attrition will require an additional 139,300 workers in residential construction. Furthermore, productivity in the construction sector has declined by about 20% over the past decade, returning to levels seen nearly 30 years ago when the population was significantly smaller.

In summary, the issue of housing affordability in Australia is complex and requires sustained attention beyond typical election cycles. The effectiveness of the current strategy, which focuses solely on increasing supply, will be evaluated in 2029 when the outcomes of the Accord are assessed. The challenge remains whether simply boosting supply will suffice or if demand also needs to be addressed.