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Here is why the federal government has increased its housing construction target…

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The federal government has increased its housing construction target, in a bid to increase supply and improve affordability.

Prime Minister Anthony Albanese, after meeting with the National Cabinet recently, announced a new national target to build 1.2 million well‑located new homes over five years, from 1 July 2024. That replaces the original target of 1 million homes, which was announced last year.

Only 10,000 of those homes will be built by the federal government. The vast majority will be built by the private sector. Some will be built by the states and territories. As a result, the government also announced $3 billion of performance‑based funding for states and territories that achieve more than their targets and conduct reforms to boost housing supply.

The government also announced an additional $500 million competitive funding program for local and state governments to kickstart housing supply.

An increase in the housing supply should lead to a decrease in demand, which should put downward pressure on property prices and make housing more affordable.