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{{propApi.successMessage}} {{region}} Change locationAustralia's Housing Shortage To Worsen As Home Building Falls Behind Population Growth
Australia's Housing Shortage To Worsen As Home Building Falls Behind Population Growth
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“HIA estimates that Australia needed to build more than 250,000 homes last year just to keep pace with demand growth and begin reducing the housing shortage. Instead, we commenced construction of just 196,000 homes. That gap is why housing affordability continues to deteriorate," stated Tim Reardon, HIA's Chief Economist.
Wednesday, 17th June 2026
Ahead of tomorrow's release of population statistics by the Australian Bureau of Statistics, the Housing Industry Association (HIA) is warning against simplistic interpretations of population growth data that continue to underestimate Australia's housing shortage and future demand for housing.
“Tomorrow, the ABS is expected to report that Australia's population increased by approximately 420,000 people during 2025, including net overseas migration of around 300,000 people,” added Mr Reardon.
"Every time population data is released, commentators misrepresent the scale of the housing problem.
“They simply divide population growth by average household size of 2.5 and conclude Australia only needs to build 170,000 homes per year. This obtuse approach grossly underestimates the demand for homes and perpetuates a misunderstanding of the nature and depth of Australia's housing shortage.
“Alongside the persistent myth that Australia has one million vacant homes, the claim that we are building enough housing continues to be repeated despite clear evidence to the contrary.
“Dispelling these myths are important as the consequence of perpetuating misinformation is poorly targeted policy responses that fail to address the underlying shortage.
The National Housing Supply and Affordability Council (NHSAC) forecasts that Australia will continue to under-supply housing through to at least 2030.
“HIA's modelling indicates that Australia's housing shortage is likely to worsen more rapidly than NHSAC forecasts as population growth is likely to remain elevated, occupancy rates are likely to continue declining over time and unemployment is expected to remain low.
“Demand for housing rises with a strong economy, not just population growth.
“Australia is essentially trying to fit 11 million households into 10 million homes. At the same time, demand for homes is exceeding supply each year, and this is likely to continue each year till at least 2030.”
HIA's new report, Beyond Population ÷ 2.5: Understanding Housing Demand in Australia, explains why simplistic population-based calculations consistently underestimate housing demand and contribute to poor housing policy outcomes.
"Australia would need to build more than 100,000 homes each year even if population growth fell to zero. Economic growth, ageing, household formation, relationship breakdowns, changes in the location of employment and replacement demand continue to create demand for housing regardless of migration.
“New migrants and occupants of higher-density housing typically live in smaller households than the national average. This means population growth cannot be accurately translated into housing demand using a ratio of 2.5 people per dwelling.
“Add to this, the number of homes required to accommodate population growth is not the same as the number of homes that need to be built. Australia enters this period with a significant housing deficit that must also be addressed.
"Migration contributes to housing demand, but so do population ageing, household formation, relationship breakdowns, changing housing preferences and replacement demand.
“The Parkinson Review recognised that migration is essential to Australia's long-term economic growth and that migration, infrastructure and housing policy must operate as an integrated system.
"The solution is not to deny that migration creates demand for housing. The solution is to ensure housing supply can respond to that demand."
The risk now is that Australia starts to plan migration around housing shortages rather than planning housing around migration.
“Stable and reliable migration supports labour force growth, economic growth and government revenue.
“Stronger economic growth also creates demand for more housing.
“But if demand and supply of homes remain out of balance and affordability continues to worsen there is an increasing risk of poorly targeted policy responses. The industry has always sought stable and reliable migration to support ongoing economic growth.
“Even if migration is set to zero, Australia will continue to build homes at the current rate for three years. That demonstrates the scale of Australia's existing housing shortage.
“Successive governments, across all three tiers, have underestimated the volume of housing required and failed to deliver sufficient infrastructure for that growth.
“The $2 billion in investment in housing infrastructure, announced in the Budget is a significant step in the right direction to lowering the cost of new housing supply, and the right mechanism to target.
“To make homes more affordable, governments need to lower the cost of delivering new homes to market. It is difficult for governments to lower the price of labour or building materials. Land prices however have increased two to three times faster than the cost of labour or materials.
“The price of land has increased as governments have increasingly shifted the tax and regulatory burden onto the cost of new home building over recent decades.
"The evidence is clear. Rents are rising, prices are rising and vacancy rates remain critically low. Australia is not building enough homes to meet last year’s demand growth, let alone reduce the housing shortage that already exists.
"Achieving the Housing Accord target of 1.2 million homes is therefore not optional. It is the minimum required if Australia is to restore affordability and give more Australians access to secure housing."
A copy of HIA's report, Beyond Population ÷ 2.5: Understanding Housing Demand in Australia
“Tomorrow, the ABS is expected to report that Australia's population increased by approximately 420,000 people during 2025, including net overseas migration of around 300,000 people,” added Mr Reardon.
"Every time population data is released, commentators misrepresent the scale of the housing problem.
“They simply divide population growth by average household size of 2.5 and conclude Australia only needs to build 170,000 homes per year. This obtuse approach grossly underestimates the demand for homes and perpetuates a misunderstanding of the nature and depth of Australia's housing shortage.
“Alongside the persistent myth that Australia has one million vacant homes, the claim that we are building enough housing continues to be repeated despite clear evidence to the contrary.
“Dispelling these myths are important as the consequence of perpetuating misinformation is poorly targeted policy responses that fail to address the underlying shortage.
The National Housing Supply and Affordability Council (NHSAC) forecasts that Australia will continue to under-supply housing through to at least 2030.
“HIA's modelling indicates that Australia's housing shortage is likely to worsen more rapidly than NHSAC forecasts as population growth is likely to remain elevated, occupancy rates are likely to continue declining over time and unemployment is expected to remain low.
“Demand for housing rises with a strong economy, not just population growth.
“Australia is essentially trying to fit 11 million households into 10 million homes. At the same time, demand for homes is exceeding supply each year, and this is likely to continue each year till at least 2030.”
HIA's new report, Beyond Population ÷ 2.5: Understanding Housing Demand in Australia, explains why simplistic population-based calculations consistently underestimate housing demand and contribute to poor housing policy outcomes.
"Australia would need to build more than 100,000 homes each year even if population growth fell to zero. Economic growth, ageing, household formation, relationship breakdowns, changes in the location of employment and replacement demand continue to create demand for housing regardless of migration.
“New migrants and occupants of higher-density housing typically live in smaller households than the national average. This means population growth cannot be accurately translated into housing demand using a ratio of 2.5 people per dwelling.
“Add to this, the number of homes required to accommodate population growth is not the same as the number of homes that need to be built. Australia enters this period with a significant housing deficit that must also be addressed.
"Migration contributes to housing demand, but so do population ageing, household formation, relationship breakdowns, changing housing preferences and replacement demand.
“The Parkinson Review recognised that migration is essential to Australia's long-term economic growth and that migration, infrastructure and housing policy must operate as an integrated system.
"The solution is not to deny that migration creates demand for housing. The solution is to ensure housing supply can respond to that demand."
The risk now is that Australia starts to plan migration around housing shortages rather than planning housing around migration.
“Stable and reliable migration supports labour force growth, economic growth and government revenue.
“Stronger economic growth also creates demand for more housing.
“But if demand and supply of homes remain out of balance and affordability continues to worsen there is an increasing risk of poorly targeted policy responses. The industry has always sought stable and reliable migration to support ongoing economic growth.
“Even if migration is set to zero, Australia will continue to build homes at the current rate for three years. That demonstrates the scale of Australia's existing housing shortage.
“Successive governments, across all three tiers, have underestimated the volume of housing required and failed to deliver sufficient infrastructure for that growth.
“The $2 billion in investment in housing infrastructure, announced in the Budget is a significant step in the right direction to lowering the cost of new housing supply, and the right mechanism to target.
“To make homes more affordable, governments need to lower the cost of delivering new homes to market. It is difficult for governments to lower the price of labour or building materials. Land prices however have increased two to three times faster than the cost of labour or materials.
“The price of land has increased as governments have increasingly shifted the tax and regulatory burden onto the cost of new home building over recent decades.
"The evidence is clear. Rents are rising, prices are rising and vacancy rates remain critically low. Australia is not building enough homes to meet last year’s demand growth, let alone reduce the housing shortage that already exists.
"Achieving the Housing Accord target of 1.2 million homes is therefore not optional. It is the minimum required if Australia is to restore affordability and give more Australians access to secure housing."
A copy of HIA's report, Beyond Population ÷ 2.5: Understanding Housing Demand in Australia
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