The current headline that our construction industry is delivering half the homes per labour hour than 30 years ago certainly speaks to the fear in the community. (Government-funded research paper here). Housing construction productivity is not the simplistic media headline.
Why do we want a fear headline?
The age-old strategy of divide and conquer. If everyone is in fear, we are easily controlled and distracted away from the main massive issues.
The core issue is not supply!
Nope, absolutely, not a supply issue.
- We have 1 million vacant homes today and somewhere between 120000 and 450000 people who are homeless.
- Of the remaining 10 million homes in Australia, each one has at least one spare bedroom. Our homes are vast, the largest homes in the world, with few people per home. You don’t have to house a stranger, how about your grandparents, aunts or uncles, or the new teacher required at your children’s school.
When the Productivity Commission reviews the construction sector’s “productivity” performance over the past 30 years, some home truths add to the output per hour calculations. (Read the current reporting here)
Reducing Housing Productivity
1. We all want more
Forever, parents have aspired to leave better conditions for their future generations. We all want our offspring to have better conditions as they fly the coup. This might be visible in more modern cars, higher education, more entertainment, and better employment outcomes with commensurate longer hours and higher pay.
2. These houses are now obese
In the past three decades, we have continued to build larger homes and now provide the largest houses in the world—not higher-performance houses, just large in every sense. On average, our houses are significantly larger than those of Americans.
3. These houses are enormously profitable (taxable) by the inherent system
Industry analysis by the Centre for International Economics (2011 but still verified as current in 2024) says that the three levels of government collect 40% of the final cost across the housing supply process. (read more here)
The housing sector is one of the most heavily taxed sectors of the Australian
economy, both in absolute and relative terms. The housing sector contributes
between $36 billion and $40 billion in taxation revenue each year to federal, state and local governments in Australia. This equates to 11 to 12 per cent of the total revenue collected by all tiers of government. Only one sector, wholesale and retail trade, contributes more and its contribution is only marginally larger.1
4. Increasing Regulation
With our evolving community, we can all agree that our more inclusive and diverse outlook is progressing. Still, there are costs to accommodating star ratings, liveable housing design guidelines and less wasteful practices. These are not operational delivery costs but more the academic thinking and development costs of innovation, which are never funded in our current system.
5. Small Construction businesses
Small construction enterprises (typically construction businesses have two employees) cannot take the time to innovate and learn while still putting food on the table and keeping a roof over their own heads.
Housing Construction Productivity: Answers?
So perhaps we could look beyond the simplistic issues of our tradie villains! Some will like to push their simplistic agenda that it is overcharging plumbers, EBA entitlements or union input on specific construction sites. There are many issues in our current housing market, but selecting the next villain is not helping much to progress our discussion.
To me, it is no wonder that we are not delivering the same number of houses per hour as in decades past. The issue is more complex and nuanced than this sort of argument, which does neither favour nor progress a sensible discussion seeking an actual solution. As always, there are some great businesses and wonderful master trades out there building great homes. At the same time, laggard businesses and backward-looking government departments are dragging the industry back.
Perhaps a grand vision of Australian housing for all of our citizens is worthwhile. An Australia where we all get a fair go, land is abundant, we have plenty of resources, and we all believe in supporting each other.
This idea of a fair go and supporting our mates:
We see time and time again.
We see this in its most vivid form during natural disasters. Yet, quickly after the initial rush of the mud army or wildlife rescue, we slip back into our status quo.
Head back to Renovation Insider Home
- Taxation of the Housing
Sector . www.TheCIE.com.au ↩︎
