How the Datacentre Boom Threatens Australia Housing Supply

Australia is experiencing a significant surge in residential housing construction, with overall building volume rising 8.7% in the year to June, marking the strongest rate recorded since 2016.

Residential Building Surge Faces Industrial Competition

Data released by the Australian Bureau of Statistics shows that total building activity jumped 10% over the year to June, reaching levels not seen since the global financial crisis stimulus years. New private sector house commencements rose 11.6% to 31,707 dwellings, the highest figure recorded since 1994 when excluding abnormal pre-GST spikes and the pandemic-era homebuilder grants.

While the government points to these numbers as evidence that investors are shifting toward new housing construction to retain the 50% capital gains tax discount, public sector housing continues to lag. Public and social housing accounted for just 2.3% of residential buildings in the year to June, well below the 13% average recorded between 1955 and 1985.

Senate Committee Highlights Continuing Housing Shortage

The persistent shortage of affordable housing was a central finding in a report titled Locked Out: The Growing Generational Housing Divide, released by the Senate select committee on intergenerational housing inequality. Chaired by Greens Senator Barbara Pocock, the multiparty committee unanimously agreed that Australia is facing an entrenched housing crisis.

The report emphasized that despite adjustments to capital gains tax discounts and negative gearing, significant gaps remain in public and community housing supply. Senator Pocock proposed that the federal government commit to a national target increasing public and community housing to at least 10% of Australia’s total housing stock over the next decade.

Datacentre Boom Diverts Skilled Labor and Capital

A major bottleneck for all new housing construction is the availability of skilled builders, a resource increasingly absorbed by a massive boom in datacentre construction. Datacentres fall under the Australian Bureau of Statistics commercial building category, which typically accounts for roughly 1% of the value of non-residential building commencements.

In the year to June, that category surged to account for 20% of non-residential commencements, driving nearly three-quarters of the total increase in non-residential building values. More than 17 times the amount of money was spent building datacentres over the past year compared with factory construction, marking a stark shift in commercial investment toward facilities that employ few people after completion.