Sharply rising interest rates and the rapid surge in population growth post-pandemic is magnifying Australia's housing shortage and affordability woes.
Community opposition to new development, the lack of suitable land for projects, long lead times and sky-high construction costs are also holding up new housing projects and contributing to a projected shortage of 106,000 dwellings by 2027.
The modelling by the National Housing Finance and Investment Corporation in the State of the Nation housing report points to a growing housing supply and affordability problem unless action is taken.
Prime Minister Anthony Albanese said the annual health check of the nation's housing stock painted a troubling picture and supported the case for passing his government's housing future fund.
The government has been locked in negotiations with crossbenchers needed to pass the multi-billion dollar housing fund through parliament
"We know this is a big problem, but we have a comprehensive plan," the prime minister told 96FM radio.
The $10 billion fund would finance the construction of 30,000 social and affordable rental homes over five years and is only one part of the government's response to the housing crisis.
Independent ACT senator David Pocock, one of the crossbencher votes the government is vying for, said the report underscored the need for a bigger commitment than outlined in Labor's housing fund bill.
"The government has been given the gift of a Senate looking to make positive change for our communities," Senator Pocock said.
"We've worked our way through to agreements on everything from climate to industrial relations - I really want to see us do the same on housing."
The report predicts more than 1.8 million new households are expected to form across Australia in the next decade, taking total households to 12.6 million.
The sharp increase in interest rates much earlier than the Reserve Bank indicated during the pandemic is also driving up borrowing costs and making it difficult for new projects to get off the ground.
New construction is expected to sink to 127,500 in 2024-25 from 148,500 in 2022-23, before interest rate cuts likely drive a recovery in supply in 2025-26.
Housing Industry Association chief economist Tim Reardon said the government was on track to fall well short of its goal of building one million homes over five years.
He said the report highlighted the need to boost the construction of new apartments.
"Commencements of apartments last year were 40 per cent lower than at their peak in 2016," he said.
