The collapse of small to medium building companies is making it much harder to solve Sydney’s housing crisis.
Sydney’s wretched housing crisis is one of the most difficult challenges facing NSW, but a major component in solving the problem – small to medium building companies – has been hampered by its own crisis.
While plenty is being attempted to improve matters – the Minns government has promised a $5.1 billion housing package, moved to reduce impediments including slow-moving development applications, amended planning to permit medium rise near 30 train stations and warned reform opponents that NIMBYism was no longer tenable – failing building companies are now emerging as an unacknowledged threat to relieving the crisis.over the past three years.
The construction industry is Sydney’s third-largest employer, with some 275,000 workers, and although big developers attract the publicity and seem better insulated against the vicissitudes of the sector, the reality is that construction relies heavily on small businesses, especially for residential growth. “We often think of it as an industry dominated by large players, but in fact the sector is dominated by small businesses and subcontractors,” demographer Mark McCrindle says.
But a post-COVID spike in building costs and the spate of interest rate increases between May 2022 and November 2023 have caused havoc among smaller firms. They have also been hit by a shortage of skilled builders who have left residential work for infrastructure and non-residential construction, as employment in big infrastructure projects grew far more quickly in Sydney between 2016 and 2021 than in residential construction.New home completions in Sydney peaked in 2018-19 at just over 56,000.
Despite continuing political debate about housing, the seemingly endless run of headlines about building companies going broke not only provides one clue as to why the supply of new dwellings is lagging, but suggests the crisis cannot be cured by reforming planning policies alone. The spate of insolvencies in the sector cannot be ignored – Sydney needs a thriving residential construction industry to deal with the housing supply crisis.
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