Persistent undersupply has placed upward pressure on house prices over recent years, contributing to a significant deterioration in housing affordability for many Australians.
One of the key constraints contributing to housing undersupply has become the persistent shortage of skilled trade workers across the construction sector.
To address the housing crisis, governments need to consider the importance of workforce capacity alongside planning and infrastructure and other reforms.
The National Housing Accord is an important first step toward addressing undersupply and improving affordability. However, achieving its ambitious targets will require much more than just setting goals.
In the Bankwest Curtin Economics Centre’s recent Every Person Counts: Planning for Western Australia’s Future Population report, released earlier this year, the research projected that WA’s population will grow by around 500,000 over the next seven years.
In context, that’s an increase of roughly 16 per cent by 2033, or an extra 71,000 people per year who will need somewhere to live.
And with many supply-side factors holding back construction, accommodating this growth is likely to be very challenging.
One of the most pressing constraints is the shortage of skilled workers in the construction industry.
Builders must compete with other industries, such as mining, energy and defence, for workers with similar skills, making it increasingly difficult to expand the workforce needed to deliver new homes.
When comparing the number of open positions advertised online to the number of filled positions, technicians and trades workers are among the most in-demand occupations, with 20 advertised positions per 1,000 workers.
Compare this with professionals who, despite making up around 26 per cent of the state’s workforce, recorded just more than 16 advertised positions per 1,000 workers.
In other words, vacancy intensity for technicians and trades workers is around 25 per cent higher than for professionals.
And this isn’t just a post-pandemic phenomenon. Vacancy rates for trades workers remain around twice their pre-Covid level, even as hiring pressures have eased across much of the economy.
Demand for trade workers began accelerating around 2017, rising to levels near those of professional occupations. This acceleration coincided with a range of factors, including a historically low-interest rate environment and an increase in the First Home Owner Grant from $10,000 to $15,000 at the start of that year.
This demand accelerated following the post-Covid lockdown economic recovery, supported in part by significant housing stimulus measures introduced by state and federal governments to sustain economic activity.
More recently, government incentives aimed at boosting housing construction have added to already strong demand for machinery operators and drivers, and labourers.
Of course, undersupply cannot be attributed solely to labour shortages.
Planning regulations, infrastructure constraints and delays in bringing land to market all limit the pace of new housing supply.
But the reality is that homes cannot be built without workers.
Construction firms can attempt to attract workers by offering higher wages, but this is likely to lead to higher labour costs, higher house prices and additional inflationary pressures.
This is why expanding the supply of construction workers should be a central part of housing policy.
This could include increasing targeted skilled migration, expanding trade apprenticeships and supporting higher completion rates.
The WA government’s recent $216 million investment in fee-free TAFE places for trades, together with the federal government’s commitment to faster recognition of overseas-qualified tradespeople, are important steps in addressing construction workforce shortages.
More will be needed to meet Australia’s long-term housing ambitions, however.
Without ongoing investment in the construction workforce, Australia will struggle to deliver its target of 1.2 million new homes by June 2029.
And if that target is not met, housing shortages will persist, placing continued upward pressure on house prices and pushing home ownership further out of reach for many Australians.
• Alex Buckland is a research assistant with the Bankwest Curtin Economics Centre
