Thank you for the opportunity to talk with you today.

I want to focus today’s talk to you around three themes:  the underlying demographic challenges facing the housing sector- into which you play- the challenge of sustainability in the construction industry and finally, the innovation opportunities that potentially lie ahead.

I speak to you from the perspective of three recent roles I have held: I was a member of the COAG expert panel on Cities and we looked closely at the changing nature of the housing sector and the sustainability of cities; secondly, I have been privileged to sit on the NHSC for several years now, and The NHSC looks at the supply and demand for housing across Australia and reports annually.  Our 2013 report got tied up in the government transition so has not been release yet.  I will therefore talk only generally about the direction of our thinking. Finally, I also chaired the Built Environment Industry innovation council.  This council finished its assigned timeline at the end of last year.  Members are continuing to pursue a built environment precinct in the future depending on the new government’s policies.  One of the achievements of the council was the successful bid for a built environment CRC- the Low Carbon Living CRC- on which I was an interim director.

I’m going to speak to you with the knowledge that has come from that recent work.

Demographics and Change

First of all I want to talk about the changing nature of our society and the demography that’s driving that. This information comes from the Major Cities Unit ’s recent report on the State of Our Cities 2013.

Australia has one of the highest population growth rates in the OECD. Around half this comes from net overseas migration. Since the average growth of our major cities is slightly above the national rate, this indicates many Australian cities have some of the highest growth rates in the developed world.

 In the 2011–12 year, the larger capitals grew almost 50 per cent faster than the rest of the country. Over the last five years, the previously high population growth rates in regional Queensland’s major cities have moderated. Growth rates in Darwin and Perth have remained particularly strong.

There are large differences in the age and gender of those moving to and from individual capital cities. Canberra, Darwin, Perth and to a lesser extent Brisbane are attracting high numbers of mainly male 15–24 year olds. Sydney is losing significant numbers of residents across all age groups but overseas migrants are taking their place at a rate that keeps Sydney growing, albeit below the national average.

Sydney’s population grew by 7.6% between 2006 and 2011, to 4,605,992. The historic patterns of Sydney’s growth are projected to continue into the future. By 2016, the population may have increased by half a million people, reaching 5 million by 2021. This means a city of 5.6 million by 2031.

In 2010‒11, over 20k more people left Sydney for other parts of Australia than moved to Sydney from other parts of Australia. Sydney had the largest domestic outward migration of all the major cities of 86k between 2006-2011

The biggest demographic challenge is our aging population. In 2008, the proportion of Sydney’s population aged 65 and over was 12%, below the national average of 13.3% but, in line with national trends it is projected to nearly double by 2056 (to 20.5%—22.6%). That means that there will be an increase of people aged 65 and over from 500000 to almost a million by 2031.That’s the same number as the number of under 15year olds!  And almost 30% of them are one person households, and well over 50% are in 2 person households.

So that’s the raw data.  But what does it mean for the housing industry.  From 2006-2011, only 3600 new dwellings were constructed in the western region of Sydney, and our housing stock across the city grew by only 5%- well below the population growth.   This continues the all time low production over the last 10 years.  The latest Metropolitan Plan for Sydney sets a an ambitious target of at least 545,000  new houses across Sydney by 2031- one new dwelling for every two people. 

However, because household formation is higher than in the past, if people continue to live in households in the same way they do now,  650k dwellings would be required.  This will leave a shortage of housing.

This is where the NHSC comes in.

One of the things that the Council does is to estimate and project underlying (or ‘latent’) demand primarily in order to assess whether the rate of housing production has been, is, or will be sufficient to meet the housing needs of this growing and changing population. Like the major cities unit, we use the 2011 census, together with other information to make an estimate of how far housing production is falling behind demand.

As outlined for Sydney, results from the 2011 Census showed the population of Australia was not quite as large as previously estimated, particularly in the 15‑19 and 20‑24 year age groups. Ageing of the population is very evident, with proportionately fewer households in the younger age groups and, conversely, proportionately more in the older age groups.

After adjusting for changing demographics the NHSC then estimate the number of additional households that would normally look for housing in each age group if Australians in 2011 lived the same way as they did in 2001.  Not surprisingly, there is a gap between the ‘demand’ and the supply, which we call the underlying demand. 

But somehow those households, (and the actual number varies depending on the base year) have found somewhere else to live-  they’re not on the street, so they probably stay at home with their parents longer, or they share with other couples or singles.  What is does say, however, is that our housing stock is falling behind the creation of households, and quite apart from the fact that it would be good for the construction industry for the housing sector to pick up, it would also be good for household affordability for more dwellings to be constructed.

So all the drivers point to a need for more housing.   But our cities cannot sprawl ever outwards.  So  the highest proportion of dwellings being built, and indeed needed, are smaller  dwellings for smaller households in locations accessible to public transport and other facilities. The Australian dream may still be to own your own house, but now its location that’s driving the dream not the brand new little house in the outer suburb.

The sustainability and liveability of our cities are taking on a new importance. 

It has taken a long time, but most families now recognize that affordability means more than the cost of the actual house.  It means how much you pay to get to work, how much your water and electricity bills are, how LONG it takes to drive the kids to school. And gradually, the location of your home, and the sustainability of the dwelling itself is taking a much higher priority in peoples minds.

And this is one of the focus of the CRC for Low Carbon Living. 

We know that most of the potential low cost greenhouse gas emissions (carbon) saving opportunities are known to be in the built environment. However, past experience suggests that market failure/ barriers will prevent uptake of these opportunities (even with a price on carbon).

The aim of the CRC is to provide government and industry with social, technological and policy tools to overcome identified market barriers preventing adoption of cost effective low carbon products and services, while maintaining industry competitiveness and improving quality of life.

They are looking at 3 key issues: buildings and materials in integrated building systems, precincts, and communities and people in the shift towards low carbon living.