Signature Labor housing policy at risk of falling thousands of homes short of target

There is a substantial risk the government will fail to meet its target of 40,000 affordable and social homes despite spending more than $770,000 on each new house over the next 25 years, an audit of the $10 billion Housing Australia Future Fund has found.

Compiled by the independent auditor-general, the report into the fund – a centrepiece of the government’s housing agenda since it came to office – found the Treasury department had failed to take full responsibility for the scheme, which will cost future taxpayers billions of dollars in extra payments through the late 2030s.

Anthony Albanese went to the 2022 election promising the creation of the housing fund, with interest on the $10 billion funnelled into social and affordable housing, which over the past two decades has failed to keep up with population growth.

After initial delays caused by demands from the Greens and opposition from the Coalition, the fund was finally approved in November 2023. Applications for the first round of funding, which went to 177 projects, closed in March the following year.

According to the auditor-general, as of April this year, the fund had delivered 1432 homes, of which 762 were newly built by specific providers, while 670 were new builds from the private sector that were then bought. Social housing is provided for very low-income earners and those on welfare, while affordable housing is that provided at below-market rates.

It is forecast that by mid-2028, half of the 40,000 target will be built, with the rest to be completed in the following 12 months.

The auditor-general found there was “considerable uncertainty about this forecast”, especially as the third and final round of projects is being vetted and approved.

Of the homes approved, 2590 are expected to be finished this financial year, with another 7238 in 2027-28 and 6994 in 2028-29. The remaining 20,000 homes that have yet-to-be-approved funding need to be constructed on top of those already greenlit for construction.

The scheme provides concessional loans, upfront capital grants and ongoing availability payments to suppliers of social and affordable housing.

Treasury estimates that for the first two rounds of the program, the average level of government support per home will be $770,387 over the next 25 years. Once inflation is taken into account, it equates to $392,518 per home.

Social homes are more expensive at $825,225 per property, while affordable homes are $715,124.

The cost is largely due to ongoing “availability payments”, which are made to the providers of the various homes.

The audit found that the Treasury had been “largely effective” in designing the scheme, which is aimed at meeting the chronic undersupply of social housing across the country. In the decade to mid-2024, the number of households waiting for social housing increased from 155,000 to 169,000.

But the audit also found that by late 2024, there were warning signs about the entire program, including long-term cost risks and the failure to meet the 40,000 target.

“Treasury documented its approach to risk management more than a year after the program was established,” it found. “It has not regularly reviewed and updated its program risks and has not assessed the effectiveness of controls for each of the risks in a structured manner.

“A key risk related to the delivery target of the 40,000 homes has been rated ‘high’ for most of the delivery period. There is a shared risk register with documented controls, but Treasury has not been proactive in seeking assurance from delivery partners in managing shared risks.

“Treasury’s ongoing monitoring of risk for the program is not sufficient and lacks monitoring of long-term risks to program outcomes.”

A funding boost in last year’s midyear budget update resulted in the risk of the government failing to hit its 2029 target being reduced from high to medium.

The “availability payments” are made to encourage the construction of homes that ordinarily would not be built due to their low profit margins.

The audit estimates that between 2024-25 and 2039-40 the availability payments will cost the government $12.2 billion. Of that, $8.9 billion will come from the interest earned on the future fund.

But an extra $3.2 billion will have to come from taxpayers.

Housing Minister Clare O’Neil said the audit showed that Treasury’s design of the fund was largely effective, with the department improving the program over time.

“This program is being delivered in one of the toughest construction markets in decades,” she said.

“As building and financing costs increased, Treasury identified those pressures early and the government acted to protect our commitment to deliver more social and affordable homes.”

Opposition housing spokesman Andrew Bragg said the report made clear that additional legislation to make the fund more transparent was needed, and that he would seek to introduce a bill when parliament returned in August.

“This is all proof that Labor’s housing scheme is a nightmare that has squandered scarce taxpayer money and failed to build the houses desperately needed by Australians,” he said.

The 40,000 social and affordable homes form part of the government’s overall 1.2 million home target by 2029. It is an estimated 80,000 to 90,000 properties behind schedule.

Cut through the noise of federal politics with news, views and expert analysis. Subscribers can sign up to our weekly Inside Politics newsletter.