APN Research Brief: Australia's True Housing Shortfall is 1.9 Million Homes, Rendering Federal Accord Obsolete: HIA Report

The 1.9 Million Shortfall: Deconstructing Australia’s Obsolete Housing Accord

Executive Summary

The Australian housing market has effectively decoupled from the strategic framework established by the National Housing Accord, rendering the federal government’s target of 1.2 million new homes by 2029 not merely ambitious but statistically and economically obsolete. This report validates the primary intelligence released by the Housing Industry Association (HIA) on November 19, 2025, which fundamentally recalibrates the scale of the national housing deficit. The core finding of this research task is that the “true” gap, defined by the inventory required to restore housing affordability to historical norms for the average single-wage earner, is 1.9 million dwellings, a figure nearly double the existing political target.¹

Current analysis indicates a structural divergence between the Accord’s static supply goals and the dynamic reality of Net Overseas Migration (NOM). While the Accord targeted a supply increase based on outdated population forecasts, the actual intake has surged, creating a scenario where even the successful delivery of 1.2 million homes would result in a net deterioration of affordability and social cohesion. The HIA’s Chief Economist, Tim Reardon, and Senior Economist, Tom Devitt, have provided data confirming that the construction sector is on a trajectory to miss the 2029 deadline by approximately six years, locking in a decade of “wealth funnelling” where asset inflation acts as a regressive tax on the productive economy.¹

This report provides an exhaustive deconstruction of the “1.9 Million Shortfall,” analyses the demographic and industrial vectors driving the Accord’s obsolescence, and maps the resultant socio-economic impacts, including the erosion of social cohesion and the entrenchment of intergenerational inequality.

1. The “Obsolete” Accord: Strategic Failure of the 1.2 Million Target

The declaration by the Housing Industry Association (HIA) on November 19, 2025, that the “1.2 million homes target is obsolete” represents a pivotal shift in the national discourse. It moves the debate from a logistical conversation about construction pacing to a structural critique of the policy’s foundational assumptions. The “obsolescence” is not a function of time, but of ratio; the denominator (population demand) has expanded so rapidly that the numerator (housing supply target) no longer yields a result that resembles affordability.

1.1 The “Missed by Six Years” Trajectory

The critique levelled by HIA Chief Economist Tim Reardon is rooted in the velocity of current construction relative to the accelerating rate of household formation. The HIA’s projections, released in their November 2025 National Outlook, indicate that the nation is likely to build only slightly more than 1 million homes by the 2029 deadline, falling short of the political target by approximately 200,000 dwellings.¹ However, the critical insight is that hitting the target is no longer the metric of success.

The analysis suggests that the timeline for achieving the affordability outcomes originally promised by the Accord has been pushed out significantly. Due to the compounded effects of labour shortages, high interest rates (referenced at 6.13% for home loans), and soaring material costs, the “affordability parity” point, where supply essentially catches up to demand, is projected to be missed by six years.¹ This effectively pushes any genuine relief for buyers into the early 2030s, turning the five-year Accord into a decade-long crisis management exercise.

The “obsolescence” claim is further substantiated by the realisation that the 1.2 million figure was a static political target set in 2023, based on Treasury forecasts that assumed a rapid normalisation of migration patterns post-COVID. These assumptions have been falsified by subsequent data. As noted by HIA Senior Economist Tom Devitt, the target was established when population growth was expected to stabilise, but “population growth really surprised everyone over the past few years, and it’s remained more elevated than what anyone, including government, thought”.¹ Consequently, the target of 240,000 homes per year is now viewed by industry bodies not as a solution, but as a managed decline in living standards.

1.2 The Divergence of Political Targets vs. Economic Reality

A forensic examination of the data reveals a decoupling between government policy targets and on-the-ground economic reality. The political narrative remains fixated on the “1.2 million” number as a symbol of ambition, while the economic reality dictates a need for a “supply shock” of vastly greater magnitude.

The table above illustrates the “True Gap.” The government’s target was designed to accommodate a population growth trajectory that no longer exists. With Net Overseas Migration (NOM) consistently tracking above 400,000 per year through 2024 and 2025, the demand side of the equation has expanded by approximately 60% more than the Accord anticipated.¹ This renders the 1.2 million target mathematically insufficient to prevent the housing crisis from worsening, let alone resolving it.

2. The “True” Gap: Forensic Validation of the 1.9 Million Metric

The most significant analytical vector in the HIA’s November 2025 release is the introduction of the “1.9 million shortfall” metric. It is crucial to understand that this figure does not represent the number of homeless individuals or a simple deficit of roofs over heads. Instead, it quantifies the Affordability Gap, the volume of additional supply required to crash the asset price to a level affordable for the average worker.

2.1 Defining the Metric: The “Average Single-Wage Earner”

The HIA’s calculation is predicated on a specific sociological benchmark: restoring the Australian housing market to a state where an “average single-wage earner” can service a mortgage on a median-priced home without experiencing housing stress. This benchmark was the historical norm in Australia prior to the rapid asset inflation of the 21st century.

Current market conditions (Nov 2025) present a stark contrast to this ideal:

• Median House Price: Approximately $773,803.¹
• Average Wage: Approximately $2,032 per week.¹
• Mortgage Rate: Standard variable rates are cited at 6.13%.¹
• Serviceability Ratio: It currently requires 1.7 times the average single wage to service a mortgage on a median home.¹

To return to a scenario where a single average earner can afford the median home (a ratio of 1.0 or lower), housing prices would need to contract by approximately 40%.¹ The 1.9 million figure is the supply-side lever required to force this price contraction.

2.2 The Econometric Methodology: The “Peter Tulip” Elasticity Model

The HIA’s 1.9 million figure is not arbitrary; it is derived from econometric research conducted by Dr Peter Tulip, Chief Economist at the Centre for Independent Studies (CIS). The methodology relies on the concept of the price elasticity of supply, which measures how much housing costs respond to changes in the housing stock.

Dr Tulip’s research posits a specific elasticity coefficient: a 1% increase in the housing stock results in a 2.5% reduction in housing costs.¹

• The Calculation: To achieve the necessary 40% reduction in home prices to restore single-income affordability, the market requires a supply shock equivalent to a 16% increase in the total dwelling stock.
• The Result: When applied to Australia’s existing housing stock (approximately 11 million dwellings), a 16% increase equates to an immediate need for 1.9 million additional homes.¹

This methodology shifts the definition of “shortfall” from a demographic headcount (homes needed for new people) to an economic price-setter (homes needed to crush asset price inflation). It reveals that the Accord’s target is merely a “treading water” metric, whereas the 1.9 million figure is the “correction” metric.

2.3 Regional Distribution of the Shortfall

The HIA report further breaks down this 1.9 million aggregate figure into regional requirements, highlighting that the crisis is not uniform but is concentrated in the major economic hubs where productivity is highest. To normalise prices today, the following instant additions to stock would be required:

These figures represent the “True Gap.” The Accord’s target of 1.2 million homes over five years addresses future population growth but does almost nothing to address this structural deficit. By failing to target the 1.9 million figure, the current policy framework effectively accepts the permanent pricing out of the single-wage earner from the property market in Australia’s major cities.

3. Project Carrying Capacity: The Population & Migration Vector

The obsolescence of the Accord is primarily driven by a sustained deviation in population metrics. The HIA’s analysis, supported by Australian Bureau of Statistics (ABS) data, indicates that the “Project Carrying Capacity”, the nation’s ability to build infrastructure relative to population intake, has been breached.

3.1 The NOM Disconnect: Forecast vs. Reality

The National Housing Accord was constructed on Treasury forecasts that assumed Net Overseas Migration (NOM) would revert to a long-term mean of roughly 235,000–260,000 per annum following the post-COVID surge.² This assumption was critical; if migration returned to these levels, the 1.2 million target would have allowed supply to exceed demand, slowly improving affordability marginally.

However, HIA Chief Economist Tim Reardon cites ABS data showing a structural shift in migration volume that has invalidated these assumptions. The actual data reveals a persistent surge:

• 2022-23 NOM: 535,520.²
• 2023-24 NOM: 445,640.²
• 2024-25 Forecast vs. Actual: The government originally forecast NOM would fall to 260,000. The mid-year budget update revised this to 340,000. Yet, ABS data for the year ending March 2025 showed population growth of 423,000.¹
• Monthly Tracking: In August 2025 alone, net permanent and long-term arrivals totalled 31,450, trending 32% higher than the revised forecasts.²

This discrepancy means that, for every home the government planned to build, demand has increased by roughly 1.6. The “carrying capacity” of the housing market, its ability to absorb new entrants without price inflation, has been overwhelmed.

3.2 The “Boom/Bust” Capacity Constraint

Tim Reardon argues that the volatility of NOM, specifically the “boom/bust cycles”, destabilises the construction industry’s capacity planning.³ The industry cannot simply turn on a tap to meet a sudden surge of 500,000 migrants. It requires long lead times for land release, capital investment, and workforce training.

• Workforce Attrition: Master Builders Australia (MBA) data indicates an industry natural attrition rate of 8% (approx. 110,000 workers/year).⁴ The industry is losing experienced tradespeople faster than it can train apprentices, a problem exacerbated by the competing demands of large-scale infrastructure projects.
• Capacity Limit: The HIA suggests that, given current labour and material constraints, the maximum sustainable output is approximately 240,000 homes per year, precisely the Accord’s target.¹ However, because population growth is exceeding forecasts, 240,000 is no longer a “catch-up” pace; it is barely a “stand-still” pace.
• The Reardon Thesis: “Population growth has pushed Australia past the point of 240,000 new homes a year being enough even to stop housing affordability getting worse”.¹

This confirms the “Obsolescence” vector: the target designed to solve the problem is now mathematically insufficient to prevent it from worsening. The system is operating at maximum theoretical capacity, yet failing to meet the minimum required demand.

4. The Wealth Funnel & Social Impact Vectors

The HIA’s confirmation of the 1.9 million shortfall and the failure of the Accord has triggered significant analysis regarding the “Wealth Funnel”, the mechanism by which housing scarcity transfers capital from wage-earners to asset-holders. This phenomenon is not an accidental side effect but a direct structural consequence of the supply-demand imbalance.

4.1 The “Wealth Funnel” Mechanism

Market analysis indicates that the housing shortfall acts as a vacuum, siphoning disposable income from the “average single-wage earner” and depositing it into the equity of existing property owners and the banking sector.

• Asset Inflation: With demand (NOM + natural increase) structurally exceeding supply (Accord failure), prices remain elevated. This protects the $6.2 trillion to $10 trillion residential asset class primarily held by Baby Boomers and older Gen X cohorts.⁵
• Intergenerational Transfer: The failure to build the 1.9 million homes required for affordability is forcing a reliance on the “Bank of Mum and Dad.” This creates a hereditary wealth class system in which home ownership is determined by lineage rather than labour.⁵ The HIA notes that investors (often older Australians) are responsible for 43% of new homes in some quarters, further concentrating ownership.⁸
• Financial Repression: The high cost of housing (requiring 1.7x average wage) is described in broader economic commentary as a form of “financial repression” or a “soft-stealing” of wealth from the productive younger workforce.⁹ Wages that should be going into business creation, innovation, or consumption are instead funnelled into servicing large mortgages or paying high rents.

4.2 Social Cohesion and Political Risk

Reaction to the HIA’s November 2025 report highlights severe risks to social stability. The inability of the “average Aussie wage earner” to access the housing market is not just an economic issue but a threat to the social contract.

• “Gaping Wound”: The housing crisis is described in parliamentary discourse as a “gaping wound for Australia,” threatening the social contract and creating deep divisions between the landed and the landless.¹⁰
• Erosion of Cohesion: The Scanlon Foundation’s 2025 Mapping Social Cohesion report explicitly links financial hardship and housing stress to a decline in social trust and cohesion.¹¹ The report notes that financial hardship is a “weight on our social cohesion,” particularly for younger generations who feel locked out of the Australian dream.
• Innovation Stifled: Beyond social unrest, there is a profound economic cost. The HIA and peripheral economic bodies note that the housing shortage stifles innovation. As noted in commentary surrounding the crisis, “innovation relies on risk, but the ability to take risks without losing one’s house is far too great”.¹² A generation burdened by excessive housing costs becomes risk-averse, staying in safe jobs rather than starting new enterprises.

4.3 Industry & Political Reaction (Nov 2025)

The release of the HIA report has galvanised reactions across the political and industrial spectrum.

• Master Builders Australia (MBA): Aligns closely with the HIA, forecasting a miss of 167,000 homes by 2029. They emphasise that “using the wrong data” (referring to outdated climate and population models) leaves the industry exposed and unable to plan effectively.¹³
• Opposition (Liberal Party): The Shadow Housing Minister and Opposition Leader have seized on the HIA report to claim the government’s plan has been “blown out of the water,” citing a potential shortfall of up to 400,000 against the target and accusing the government of making the crisis worse through mismanagement of the migration programme.^{1, 15}
• The Greens: Characterise the target as “obsolete” and indicative of a system that requires radical intervention beyond market mechanisms. They argue that the failure to meet even these modest targets proves that reliance on private developers is a failed strategy.¹⁶

5. Industrial Capacity: The Supply Chain & Workforce Bottleneck

While the “1.9 million” figure defines the demand-side requirement, the supply side is constrained by severe physical limitations. The HIA and MBA analysis highlights that the construction sector is effectively red-lining, unable to expand capacity to meet the Accord’s theoretical targets, let alone the “True Gap.”

5.1 Workforce Attrition and Shortages

The most critical bottleneck is human capital. The construction workforce is aging and shrinking, even as the volume of work required is increasing.

• Natural Attrition: The Master Builders Australia (MBA) reports a natural attrition rate of 8% per annum, resulting in approximately 110,000 workers leaving the industry each year due to retirement or career changes.⁴
• Recruitment Deficit: While the sector needs to recruit significantly to expand capacity, it is barely treading water. The HIA Trades Availability Index indicates a persistent shortage of skilled trades, from bricklayers to electricians.⁴
• Competition for Labour: The residential sector is in direct competition with the civil infrastructure sector (roads, rail, energy), which often pays higher wages and offers more stable employment conditions. This “cannibalisation” of the workforce makes it difficult for residential builders to scale up production to meet the 240,000/year target.¹⁷

5.2 The “Shovel-Ready” Land Myth

Another major constraint identified by the HIA is the lack of “shovel-ready” land. The report notes that while land may be zoned for housing, the lag time for infrastructure connections (water, sewage, power) and regulatory approvals means that land is often not available for construction when needed.

• Land Banking vs. Regulation: While some political rhetoric focuses on “land banking” by developers, the HIA and Peter Tulip argue that the primary constraint is planning regulations that prevent density in desirable areas.¹⁸ The HIA’s “National Outlook” identifies the high price of land as a significant barrier, driving households to renovate rather than build new, further skewing the market away from new supply.⁸
• Regulatory Costs: The accumulation of regulatory burdens, from energy efficiency standards to local council fees, adds significant cost and time to every project. The HIA argues that these costs render many projects unfeasible, especially at the affordable end of the market.²⁰

5.3 Material Costs and Supply Chain Volatility

The post-pandemic inflation in material costs continues to plague the sector. While the rate of increase has slowed, the base cost of construction remains elevated (approx. 30-40% higher than pre-pandemic levels). This creates a “viability gap” in which the cost to build exceeds the finished product’s market value in some areas, leading to project cancellations and developer insolvencies.

6. Regional Analysis: State-by-State Performance

The HIA’s November 2025 report provides a granular look at how different states are performing against their Housing Accord targets. The crisis is not uniform; it is a patchwork of failure and localised success.

6.1 Western Australia: The Outlier

The HIA identifies Western Australia as the “current front runner” in meeting housing construction goals.¹

• Performance: WA has maintained a higher construction velocity relative to population growth than the eastern states.
• Drivers: A more flexible planning system and a strong economy driven by the resources sector have supported this performance. However, even WA is not immune to the labour shortages plaguing the national industry.

6.2 The Eastern Seaboard: The Epicentre of the Crisis

The situation in New South Wales, Victoria, and Queensland is significantly more dire. These states bear the brunt of the overseas migration intake and face the most severe capacity constraints.

• New South Wales (Sydney): Requires an immediate injection of 440,000 homes to restore affordability.¹ The state is struggling with severe land constraints (hemmed in by mountains and ocean) and a highly restrictive planning environment.
• Victoria (Melbourne): Requires 289,000 homes.¹ While Melbourne has historically been better at supplying greenfield land, the cost of infrastructure provision is becoming prohibitive, and the state government’s tax changes have dampened investor activity.
• Queensland (Brisbane): Requires 204,000 homes.¹ Brisbane has seen a massive influx of internal migration (from southern states) in addition to overseas migration, overwhelming its housing stock and driving up prices at the fastest rate in the country.

6.3 The Policy Disconnect

The HIA report ranks the states based on their progress, noting that while some are making efforts to streamline planning (e.g., NSW’s Transport Oriented Development programme), the scale of these interventions is insufficient to meet the Accord targets, let alone the “True Gap”.⁴ The divergence between state-level planning targets and the federal immigration intake remains a critical point of failure in the national housing strategy.

7. Strategic Conclusion

The HIA’s November 2025 analysis serves as a terminal indictment of the National Housing Accord’s current parameters. The research confirms that the “1.2 million homes” target is an artifact of outdated demographic assumptions and is no longer a viable roadmap for resolving Australia’s housing crisis.

7.1 Validation of the Shortfall

The “1.9 million shortfall” is not a hyperbolic figure; it is a valid economic metric derived from rigorous elasticity modelling. It represents the supply shock required to reverse asset price inflation and restore affordability for the average worker. By failing to target this figure, policymakers are implicitly accepting a permanent reduction in the standard of living for non-asset owners.

7.2 Obsolescence of the Accord

The National Housing Accord is obsolete because its foundational variable, Net Overseas Migration (NOM), has structurally shifted. A build target of 240,000 homes per year is insufficient for a migration intake of ~400,000 per year. The Accord is currently functioning as a mechanism to manage the rate of decline, rather than to reverse it.

7.3 The “Wealth Funnel” Consequence

The persistence of this gap guarantees the continuation of the “Wealth Funnel.” Housing will continue to act as a mechanism for upward wealth transfer, cementing a landed gentry class and eroding the socio-economic mobility of the electorate. The “Bank of Mum and Dad” will become the primary determinant of home ownership, fundamentally altering the Australian social contract.

7.4 Final Assessment

The HIA report confirms the target will be missed by a significant margin (six figures), but, more importantly, it reveals that the target itself was insufficient by nearly 60% relative to the economic reality of 2025. The crisis is no longer a temporary imbalance; it is a structural feature of the Australian economy, driven by a mismatch between population policy and industrial capacity.

Works Cited

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• 2. “Terrible outcome” – Huge shortfall in first year of Housing Accord, accessed on November 19, 2025.
• 3. Ambitious housing target hits regulatory roadblocks – Surf Coast Times, accessed on November 19, 2025.
• 4. State of the Housing System 2025, accessed on November 19, 2025.
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• 6. Baby Boomers Hold 60% of Australia’s Housing Wealth – Inspired Money, accessed on November 19, 2025.
• 7. Australia’s $3.5T Wealth Transfer Crisis: Why Estate Planning Fails – Legasy, accessed on November 19, 2025.
• 8. Renovators and investors boost home building activity – HIA, accessed on November 19, 2025.
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• 10. Hansard – House of Representatives 1/09/2025 Parliament of Australia, accessed on November 19, 2025.
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• 12. Housing in ‘Impossibly Unaffordable’ Australia – The Diplomat, accessed on November 19, 2025.
• 13. ‘Using the wrong data’: Major problem with the 1.2m new homes – Domain, accessed on November 19, 2025.
• 14. Are ‘innovative’ prefab homes the answer to the housing crisis? | Money magazine, accessed on November 19, 2025.
• 15. Leader of the Opposition’s Budget Address in Reply – Liberal Party of Australia, accessed on November 19, 2025.
• 16. Adam Bandt on why the Greens are playing hardball on housing : r/australia – Reddit, accessed on November 19, 2025.
• 17. Hansard – House of Representatives 19/11/2024 Parliament of Australia, accessed on November 19, 2025.
• 18. Land Banking: red tape and a dearth of housing supply are a myth – Michael West Media, accessed on November 19, 2025.
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• 20. AUSTRALIAN GOVERNMENT GUIDE TO REGULATORY IMPACT ANALYSIS, accessed on November 19, 2025.