Beyond Welfare: The Case for Subsidised Housing

Welcome to Part 5 of the #AtlasHousingDownload – our six-part series exploring Australia’s housing market.‌ In Part 4, we explored how Australia’s rental market has become increasingly constrained. Rental supply has become more volatile, affordability has declined and more households are competing for a shrinking pool of affordable rental homes.

That raises the next question: What happens when households can no longer access suitable housing through the private market?

Housing is a fundamental need. Yet in Australia, we primarily rely on the private market to provide it. For most households, that works. But markets alone cannot meet everyone’s needs.‌

This is where Australia’s subsidised housing system comes in. It provides‌ a safety net for households unable to access suitable housing through‌ home ownership or the private rental market.‌ Like healthcare, education and transport, it recognises that some‌ essential services cannot be left entirely to the market.‌ As Australia’s housing market has become unaffordable, the importance‌ of this safety net has grown. Yet it has not kept pace with demand.

In Part 5, we examine how Australia’s subsidised housing system has changed over time. Why demand continues to outpace supply and why evidence suggests subsidised housing should be viewed not simply as welfare, but as essential economic infrastructure.‌

The shrinking safety net

Subsidised housing¹ provides a safety net for households unable to secure suitable housing through home ownership or the private rental market. The role it plays today reflects a fundamental shift in Australia’s housing system, from one in which governments directly expanded housing supply to one that relies primarily on the private market.

• Governments once played a major role in housing delivery: During much of the post-World War II period, governments directly supported the expansion of housing supply. Between the mid-1950s and mid-1970s, around 15,500 subsidised homes were approved each year.ⁱ

• Government-supported supply began to decline: From the early 1990s, annual approvals fell below 6,000 homes. Over the past decade, they have averaged only around 3,100 homes a year. ⁱ

• The private market gradually became the main source of new housing: As governments stepped back from direct delivery, subsidised housing was left to perform a narrower role, supporting households unable to access suitable housing through the private market. This is outlined in Figure 1.ⁱ ‍

• ‍The safety net has not kept pace with Australia’s growth: Subsidised housing declined from 6% of Australia’s housing stock in 1996 to 3.9% in 2025, while the population grew by 25%.ⁱⁱ

• As a result, the safety net is becoming progressively smaller: Decades of underinvestment have reduced the availability of subsidised housing at a time when the need for it remains substantial.
  

Figure 1: Subsidised Housing Building Approvals (1947-2022)

Source: Shelter NSW (2026)

‍

Demand continues to outpace supply

A shrinking subsidised housing system would be less concerning if few Australians relied on it. However, the need for subsidised housing remains substantial, while new supply continues to fall well short of what is required.

• Demand is substantial: In 2023, around 640,000 Australian households were estimated to require subsidised housing, including almost 145,000 households in Sydney, and ~109,800 in Melbourne.ⁱⁱⁱ This reflects the growing number of households unable to secure suitable housing through home ownership or the private rental market.

• Waiting lists continue to grow: In 2026, more than 200,000 households were waiting for subsidised housing, with some facing waiting periods of more than 10 years.^iv

• Delivery is falling well behind the national target: The Australian Government established the $10 billion Housing Australia Future Fund (HAFF) in 2023, initially targeting 30,000 new subsidised homes over five years before increasing the target to 40,000. However, only 1,432 homes (or 3.6%) had reportedly been delivered by April 2026. The figure below compares actual delivery against the target up to end of 2026.

• ‍The shortfall is expected to persist: Based on the delivery rate to April 2026, around 1,856 subsidised dwellings are expected to be completed by the end of 2026, increasing to approximately 3,580 by 2028. At this rate, even the original five-year target of 30,000 is unlikely to be achieved.^v

The challenge, therefore, is not simply to fund more subsidised housing. It is to deliver homes quickly enough to stop the gap between supply and need from widening.

Figure 2: HAFF Target v Achieved Dwellings (2023-2026)

Source: Housing Australia (2026)

Subsidised Housing is an Investment, Not a Cost

Subsidised housing is often viewed as a welfare expense. However, it is much more than that. Access to secure and affordable housing supports better health, education and employment outcomes, creating stronger communities and a more productive economy. Together, these benefits make a compelling economic case for subsidised housing.

• Australian research found that every $1 invested in subsidised housing generates around $2 in economic and social benefits, placing it alongside major infrastructure investments.ⁱⁱ

• Doing nothing is equally costly. It estimates that unmet housing need could cost Australia an additional $25 billion annually by 2052 through higher health, education, justice and productivity costs. These are the costs of not providing stable housing.ⁱⁱ

• International evidence tells the same story. A major Canadian study found that $1 investment in subsidised housing generated around $2.8 returns in economic and social benefits, boosted GDP, supported more than 350,000 job years and reduced pressure on hospitals, homelessness services and the justice system.^vi

The conclusion is straightforward. Subsidised housing should not be viewed simply as welfare. It is essential economic infrastructure that reduces future government costs while strengthening the nation’s economy.

The Challenge Ahead

The HAFF acknowledges that increasing private housing supply alone is unlikely to meet the needs of all Australians. Targeted investment in subsidised housing remains important for households locked out of the private market.

While this is an important step, recent reviews suggest reversing decades of underinvestment will require sustained commitment. The challenge is not simply to deliver more homes, but to ensure Australia’s housing safety net grows alongside the communities it supports.

Across the first five parts of the #AtlasHousingDownload, a consistent theme has emerged: Australia’s housing challenges are interconnected. Construction productivity, planning regulation, rental affordability and subsidised housing all influence the broader housing market.

The final article, Part 6, asks the most important question: What do we do? It explores the reforms needed to improve housing supply and affordability, expand subsidised housing and create a more responsive housing system.

References

1.‌ Includes Affordable Housing, Public Housing, Community Housing, Indigenous Community Housing and

State-owned and managed Indigenous Housing.

i. Shelter NSW (2026). Getting our facts and housing history in order

ii. SGS Economics and Planning (2024). ‌ Leave No Young Australian Behind The long-term costs of youth‌

homelessness to Australia - Cost-benefit analysis report

iii. UNSW City Futures Research Centre (2023). Unmet Housing Need

iv. AHURI (2026). Households and Waitlists

v. Financial Review (2026). Labor’s $10b housing fund has completed just 1432 homes

vi. GTHA (2026). The Public Housing Dividend: Social and Economic Impacts of Public Housing in the GTHA‌