Recent internal documents from the Victorian government, disclosed to the ABC, have brought to light significant budgetary challenges facing the Big Housing Build initiative. Initially announced with a budget of $5.3 billion, projections indicate that costs could escalate to $6.2 billion by early 2023, prompting discussions on various cost-saving measures.
Despite the alarming figures, the government maintains that there will be no alterations to the overall budget or the ambitious goal of constructing over 12,000 homes under this prominent program.
Launched as a pioneering social housing initiative, the Big Housing Build is now contending with a budget shortfall exceeding $1 billion, just over two years since its inception. In response to rising expenses, bureaucrats explored options such as outsourcing to large builders, seeking federal co-funding for specific projects, and potentially reducing the total number of planned homes.
The documents reveal the impact of increased construction costs, attributed largely to COVID-19-related inflation, which have surged since the program was first announced. After a prolonged battle over transparency, these documents were released following a decision by the Office of the Victorian Information Commissioner (OVIC) that overturned the government’s claims of cabinet secrecy.
The Big Housing Build, touted as the largest state government investment in social housing in Australia, was announced in November 2020 with plans for approximately 10,000 new social homes, alongside 2,400 affordable and 500 private residences. However, the anticipated costs have risen, with analysts noting that prices for essential materials, such as structural timber and reinforcing steel, increased by up to 60% during the pandemic, affecting both affordability for buyers and the viability of construction projects.
According to the FOI documents, overall cost increases, which include $848 million in sector-wide escalations and $144 million in non-housing related expenses, have placed considerable financial pressure on the initiative. The documentation suggests that if the original $5 billion proposal were submitted today, it would require $6.261 billion to be considered viable.
By early 2023, the government had reportedly identified around $330 million in savings, primarily through the sale of private homes and interest income from the Social Housing Growth Fund (SHGF). Nevertheless, an additional shortfall of over $800 million remained, leading to the consideration of further savings options, totaling an estimated $498 million. These included:
- Engaging volume builders to cut costs for low-rise developments (potential savings of $26 million)
- Requesting federal co-funding for select projects ($200 million)
- Investing further in the SHGF to support community housing providers ($207 million)
- Reallocating funds from projects on state-owned land to alternative delivery methods ($65 million)
Among the more drastic proposals was the potential reduction of approximately 1,110 homes from the program, which could impact ongoing projects at sites like Bell Bardia in Heidelberg West and Banksia Gardens in Broadmeadows. Such cuts would threaten regional investment goals and reduce the number of homes managed by community housing organizations, possibly affecting vulnerable groups, including Aboriginal Victorians and individuals with mental health challenges.
In response to the release of these documents, Homes Victoria indicated that they reflect early deliberations amidst a complex operational environment. The agency acknowledged the significant construction cost pressures encountered since the program’s launch in 2020 but asserted that these challenges are being managed without compromising the overall budget or the target for new social and affordable housing units.
The Victorian Auditor-General’s Office (VAGO) previously highlighted budgetary issues within the Big Housing Build and outlined strategies for resolution. Their upcoming audit, scheduled for June 2024, will provide further insights, particularly regarding Homes Victoria’s decision to adjust the delivery model by constructing fewer homes on government land while increasing reliance on community housing organizations.
In light of the FOI revelations, opposition housing representatives have criticized the government’s handling of the situation, alleging a lack of transparency in addressing the budgetary concerns affecting the Big Housing Build.
