Australia is well-placed for a breakthrough year in the housing crisis next year after heightened activity in the second half of 2024, according to a senior NAB banker.

The announcement of funding for the first round of applications to the Federal Government’s Housing Australia Future Fund (HAFF) and the National Housing Accord Facility (NHAF) was scheduled for last July.

However, the process was delayed until mid-September, when the agency selected an initial pipeline of 185 projects with $9.2bn of investment and more than 13,700 social and affordable homes.

This led to Housing Australia’s announcement on Monday of a fast-tracked round two of applications to HAFF to deliver up to 5,000 new social homes in partnership with states and territories.

The call for applications will close at the end of January next year.

NAB is one of the most active participants in the affordable housing market and the biggest player in the scalable build-to-rent (BTR) segment.

Chief executive Andrew Irvine said earlier this month there was a huge demand and supply imbalance in the market, which was not delivering the kind of society to which this country aspired.

“I’m proud of NAB’s role working with businesses like Local in helping to finance the construction of homes so more Australians can afford to rent or buy with greater stability,” Mr Irvine said at the opening of Local’s BTR project in Kensington, Melbourne.

“Through this work we’re on track to deliver $6bn to support access to more affordable housing by 2029 and we are the largest financier of scalable BTR projects.”

NAB Executive Business Metro and Specialised, and Chair of NAB’s Affordable Housing Council, Julie Rynski said the extension of the timeline of HAFF funding announcements into the second half of calendar 2024 had delayed the commencement of projects.

“We expect this will change in 2025 as the first round of HAFF funding is now available and we are seeing more activity from clients looking to progress their development projects,” Ms Rynski said.

The first round of funding is expected to deliver 4200 social and 9500 affordable homes – more than one-third of the program’s five-year target of 40,000 dwellings.

About 700 of the homes are due for completion by June this financial year.

The five-year HAFF program to build 40,000 new homes is a fraction of the Federal Government’s plan to build 1.2 million homes over the same period, or, indeed, the 100,000 first home buyers coming into the market each year.

Other measures designed to alleviate the problem – also administered by Housing Australia – include the First Home Guarantee Scheme, which enables first home buyers to buy a dwelling with a deposit as low as five per cent of the purchase price without the need for lenders mortgage insurance.

In the 2024 financial year, the scheme supported one in three first home buyers, up significantly from one-tenth in its first year of operation in 2020.

Of the 50,000 places for eligible home buyers, 43,800 were taken up – a 34 per cent increase on 32,600 in 2023, amid a series of 13 interest-rate hikes since May 2022.

A further measure, the Help to Buy scheme which enables participants to co-purchase a home with the Federal Government, passed into law last November.

The government can contribute an equity stake under the program of up to 40 per cent of the cost of a new home, or 30 per cent of an existing dwelling.

Also in November, a BTR tax reform bill was passed to lift investment in apartment blocks designed and constructed for rental occupancy, where the developer retains ownership of the building and the units are rented to tenants.

Rents can be set at market rates or, in the case of affordable housing, discounted, often with an appropriate level of government support.

While the professional services firm EY estimated BTR was worth $16.87bn at February 2023 – equal to 0.2% of the residential housing sector – a different consultancy valued the pipeline last January at $39bn.

Housing Minister Clare O’Neil said last October that the housing crisis was not a recent phenomenon; it was an issue which had been “cooking for an entire generation”.

“I think it’s clear, though, that we are going to have to do more to work with the sector to improve construction capacity,” Ms O’Neil said.

“And the government is working with states to try to do some big things to shift that.

“But it’s tough. It is tough. If this was an easy problem to solve, a government would have sorted it out a long time ago.”

Like many experts, Ms Rynski said the five-year, 1.2 million homes target was “aspirational”.

However, the key point was any measure that “promotes, motivates or encourages more housing is a good thing”.

That said, there were policies which could facilitate construction activity and help to ease the crisis.

“One of the main issues we see with our clients is planning – it takes a long time, sometimes years, to get projects through planning, so any streamlining would help,” NAB Head of Real Estate Bill Halmarick said.

One of the reasons frequently cited for the sub-scale size of affordable housing in Australia is its lack of access to private capital and reliance on government funding.

The advent of the HAFF and its first funding round was seen as part of building the necessary financial infrastructure to support the creation of a new asset class.

“There are a number of different capital sources required to build and own this type of housing,” Mr Halmarick said.

“One area NAB is in active discussions with its clients is to provide construction funding.

“There is significant interest from private capital but it still requires an economic return and there are many different approaches being explored to achieve this.

“So conceptually there is a lot of investment appetite, but the path to new housing at institutional scale delivering required market returns for capital, is a work in progress.”