Who Is Going to Fund Australia’s Next Million Homes?

Housing does not just need to be approved. It needs to be financed, built and held.

I had an interesting meeting in Sydney this week with a senior executive from one of Australia’s major non-bank lenders.

We were talking about the property market, development finance and where things may be heading.

One point stood out.

In his view, there is no shortage of developers wanting to borrow money to build. The constraint is the amount of credit available to fund projects on terms that still allow them to proceed.

That distinction matters.

An Approval Does Not Build a Home

Australia’s National Housing Accord has an aspirational target of 1.2 million new, well-located homes over the five years to June 2029.

That target has focused attention on approvals, land supply, planning systems and the construction workforce. All of those things matter.

But an approval does not build a house.

Capital does.

A developer can own the land, secure planning approval, appoint a builder and know there is demand for the finished product.

If finance is not available on terms that make the project viable, the project may never get out of the ground.

This is one of the parts of the housing discussion we are not talking about enough.

Housing Has a Capital Chain

Housing supply is often discussed as if approval is the finish line. It is really only one link in a much longer chain.

Break one link and the homes may never be delivered or retained.

Lenders Are Pricing the Whole Journey

Development carries significant risk, and the last few years have shown how quickly a project’s financial position can change.

One Gold Coast development Koste knows well through our tax depreciation work is Chevron One. We prepared around 60 depreciation schedules within the 41-level, 229-apartment development.

I was not involved as the project quantity surveyor, so I do not pretend to know every detail of its feasibility or delivery.

But large, multi-year projects demonstrate why a lender cannot look only at whether the numbers work on day one.

A lender also has to consider what happens if:

• construction costs increase
• the builder fails or performance deteriorates
• completion is delayed
• valuations fall before settlement
• purchasers fail to settle
• the project requires another year of interest and additional capital

Those risks affect how much a lender is prepared to advance, how much equity it requires, what presales it expects and the price it charges for the debt.

Non-bank lenders are an established part of this system. The Reserve Bank has noted that non-banks often serve borrowers and market segments underserved by banks, including commercial property development.

The Housing Shortage We Do Not See

A simple example makes the constraint easier to understand.

Imagine a developer wants to deliver 100 apartments through a $60 million project. The developer has $15 million of equity and expects to borrow the remaining $45 million.

This is a simplified illustration, not a description of a specific project or current lending terms.

Nothing has changed about the need for those 100 apartments.

The developer may still want to build them. Buyers or renters may still need them.

But unless the developer can find another $10 million, reduce the cost or restructure the project, it no longer works.

Those 100 homes disappear from future supply before construction starts.

That is the housing shortage we do not see.

Australia Has Capital, but Capital Has Choices

Australia has very large pools of capital.

There is money in superannuation, banks, private credit, institutions, family offices and offshore investment funds.

But capital and development credit are not the same thing.

Capital can move into government bonds, listed shares, infrastructure, private debt, commercial property, overseas assets or cash.

It only becomes housing finance when someone decides the expected return justifies the risk.

If investors can earn an attractive return elsewhere with less risk, they will require a higher return before committing capital to property development.

That increases the developer’s funding cost. At some point, the numbers stop working.

So when we hear there is “not enough credit”, it does not necessarily mean there is no money in the system.

It can mean there is not enough capital willing to accept development risk at a price that allows the project to proceed.

That is a very different problem.

Who Funds Housing Can Shape Who Owns It

Institutional capital is taking a larger role in housing.

That money can come from superannuation funds, global pension funds, insurers, sovereign funds, private equity and large asset managers. These groups can fund or own hundreds of apartments in a development and retain them for many years.

That can form part of the solution to Australia’s housing shortage.

But I do not believe institutional investment should become the only solution.

Australia needs institutional capital. It also needs private developers, individual investors, owner-occupiers, community housing and public and affordable housing.

There is too much housing required to rely on one source of capital or one ownership model.

There is also a broader question worth asking.

If smaller developers and individual investors find finance progressively harder to obtain, while institutional capital becomes more important, are we gradually changing who owns Australian housing?

In some cases, an individual who finds it harder to borrow to own investment property directly may have superannuation invested indirectly in residential property owned by a large institution.

There is nothing inherently wrong with that.

But it is a very different model of ownership.

Constrained Supply Does Not Make Holding Easy

For existing property owners, a project that fails to secure finance today may have been due to deliver homes in two or three years.

If enough projects fail to get funded, future supply falls.

That can eventually place more pressure on rents, vacancy rates and the existing housing stock.

But investors should not confuse constrained future supply with an easy investment environment today.

The opposite may be true.

Interest, insurance, maintenance and tax costs can rise. Refinancing can become harder. Household cash flow can become increasingly stretched.

That is why I keep coming back to the importance of being able to hold.

A property may ultimately benefit from constrained supply over the long term. That means very little if the owner is forced to sell before those benefits arrive.

The Entire Chain Has to Work

The National Housing Supply and Affordability Council reported in August 2026 that quarterly approvals and commencements had increased compared with the quarter before the Accord period.

That is progress.

But Australia still has to turn those approvals and commencements into completed, financed and sustainably owned homes.

If Australia is serious about increasing housing supply, we need an environment where more projects can survive the whole journey.

That means understanding construction risk, maintaining viable development finance, keeping capable smaller developers in the market and attracting institutional capital where it makes sense.

We spend a lot of time asking how many homes Australia needs.

Perhaps we should spend more time asking who will finance them, who will build them and who will own them when they are finished.

Because housing does not just need to be approved.

It needs to be financed, built and held.