Governments rely on the industry and evidence to inform their analysis and individual decisions. However, in the case of housing, has all the reporting and standards put in place resulted in access to housing becoming too much of a challenge for many Australians?

For some time, HIA has been voicing its concerns about housing affordability, which has often fallen on deaf ears. Recent changes to national standard-setting bodies obligations mean they no longer need to engage Office of Impact Analysis (an independent assessor) as a mandatory obligation.

At the same time, additional cost pressures, such as land costs and interest rates, have placed this topic even more directly in the spotlight. The result is an increasing demand to focus on it as an explicit objective and ensure the proportionality of standards.

Value of impact assessment

Increasingly, our buildings are being asked to address technical, health and social issues. The result requires more regulatory changes and an increase in the number and extent of building policy proposals.

Something HIA has fought long and hard for many decades is to demand government bodies conduct comprehensive regulatory impact assessments (cost/benefit assessments) as part of any consideration of any building code, workplace health and safety or Australian Standards, and IR laws changes.

A deciding factor for new regulation is what benefits outweigh the costs and whether other options, including non-regulatory measures, are more effective. This principle has effectively guided the ‘objectives’ of building codes and standards. This requires a rigorously tested rationale that is effective and proportional to the issues being addressed, the competitive effects be considered, and the code be no more restrictive than necessary in the public interest.

Other individual changes at all levels of government are often seen as having a lower impact relative to other fluctuations (land costs and interest rate changes). However, taking these changes together can be significant. At a time when Australia faces housing supply and affordability at its lowest-ever levels, these key principles have never been more important.

So where has it all gone wrong, and what can be done?

Proportional regulation

Proportional standards mean that regulation does not go further than necessary to address an issue, and government intervention to address an issue is a last resort where non-regulatory measures haven’t been sufficient.

Nationally, the Office of Impact Assessment requires standard-setting bodies to consult and inform their proposals using regulation impact analysis where appropriate. This oversight is meant to ensure the industry is given adequate opportunity to engage before the decision on new national proposals, so requirements don’t actively work against each other, and they have sufficient explanation and clear objectives.

Recent changes to how the government is required to prepare analysis, along with an increase in the rate of reforms from all agencies interested in housing, mean that even those who meet best practice ideals can still overlook their part in the bigger picture of supply and affordability.

A fit, proper process?

Where intervention is justified, impacts are often accompanied by formal consultation and economic analysis. For others, the argument is that an economic assessment can’t assess the full range of implications, particularly social considerations. After all, analysis is one input into the process; its outcomes don’t constrain decision-makers, and the issues they consider need not be solely economic.

However, best practice principles serve more than an economic purpose. They require evidence, objectives, alternatives and unintended consequences to be assessed, and importantly, that consultation provides transparency and new information to be considered and responded to. It therefore plays an important role in forcing governments to confront different assumptions and views which, for proposals with merit, they have little to fear.

Consequences of no assessment

For major proposals where there’s no accompanying analysis, this undermines what the industry fought hard to achieve in the name of accountability and transparency. It rewards decisions that avoid scrutiny and moves the burden of proof on those affected – when it should be the agencies and proponents designing, consulting and disclosing the evidence for reasonable changes.

Reversing the burden of proof

The alternative is to hear about the regulation after it's been agreed upon. This deprives those affected of the opportunity to demonstrate why a change should not occur. It also deprives decision-makers of the benefit of other perspectives and the scrutiny of the industry who are closer to the details and coalface of changes. Adequate time ensures those busy with the business of building aren’t overwhelmed by devoting the time required to highlight its consequences.

Transparency and understanding

The disclosure also forces governments, through the rigour of critical thinking and analysis, to declare their intent on change. Without a clear statement of its aims, any of the positive or negative effects of regulation, overreach or unintended consequences would not be given clear thought.

Following best practice principles places the burden where it belongs, at the feet of those proposing change – who would otherwise be unhindered by the inconvenience of economics, industry views on impacts or other trade-offs like affordability.

The best practice assessment process manages both the evidence for change and a ‘net benefit’ test, which shows that after costs, individuals and society as a whole benefit.

Low level of affordability

The residential building industry continues to be one of the most heavily regulated sectors in the economy. While other objectives are being pursued, affordability recently hit its lowest level in decades. 

It has suffered at the hands of many forces. One is undoubtedly an accumulation of marginal changes which, regardless of how well-intentioned they were and even if properly assessed, accumulate to discourage new home buying. This commits many to older, less efficient and less resilient homes.

The analysis process is insufficient in measuring affordability impacts, but it provides a framework for it to be disclosed and discussed.

What changes should be made?

The current decision-making process does not require affordability impacts to be directly considered, nor that it not be reduced or improved. If it did, it would not be necessary to argue about specific methods or contributors.

Australian housing is high performing by most measures. Further enhancing the rigour applied to the assessment of new obligations, whether technical standards or administrative processes, has profound benefits if it leads to the supply of more high-performing housing around the country.

The obligation of any government to consult and disclose the impacts is a key step to testing alternative approaches and is central to evidence-based decision-making, transparency and efficiency. Decision-makers should request affordability as an explicit and overarching objective at the forefront of policy decisions. It would provide a useful enhancement potential to improve the lives of home buyers and the industry through more supply and affordability of new housing.

First published 28 November 2024