Could a public developer solve our housing shortage?
When a $3.4 billion developer collapse leaves 14,000 homes unbuilt, 'let the government do it' sounds like common sense. History says something different.
The collapse of Bathla Group, one of Australia's larger affordable housing developers, has left around 3,000 creditors owed $3.4 billion, 14,000 homes in various states of not-quite-existing, and thousands of buyers wondering whether their deposits are gone for good. It is a genuine disaster for the people caught in it. And the Greens have used it to argue something that sounds reasonable in the moment: if private developers keep failing, why not have the government build homes directly? The logic has a kind of emotional clarity. It also has a long and fairly instructive history.
The post-war precedent proves less than the Greens claim
The case Senator Pocock makes rests on two pillars: first, that private developers are failing, and second, that the post-war government proved public construction can work at scale. The first point is true in the narrow sense that individual developers do fail. The second is true but incomplete in ways that matter considerably.
After World War Two, Australia faced a genuine housing emergency: population growth, returning servicemen, and a construction sector that had been largely idle for years. The government stepped in, built at scale, and for a period accounted for a significant share of new dwellings. What the argument tends to skip over is what happened next. As the emergency passed, public housing authorities became progressively less responsive to demand, more expensive per unit to build, and increasingly concentrated on the most disadvantaged renters, which made them politically easier to underfund. By the 1980s and 1990s, state housing commissions were not supplementing private supply — they were managing a diminishing and ageing stock while private construction did most of the work. The emergency model, repurposed as a permanent institution, ran out of energy.
A public developer doesn't compete with the market — it displaces it
There is a reason government-run enterprises systematically cost more and deliver less than their private equivalents, and it is not that public servants are incompetent. It is structural: without profit pressure, tender competition, or the threat of the kind of failure that just befell Bathla, there is no mechanism to discipline spending, force innovation, or punish delay. We have covered this dynamic before at The Bearing — it applies with particular force to construction, where margins are already thin and cost overruns in government projects are closer to a rule than an exception.
But the deeper problem is what a public developer does to the market around it. A government builder that does not need to turn a profit, does not carry the same financing costs, and can access cheaper capital backed by the Commonwealth is not competing on level terms with private developers. It is undercutting them.
That sounds appealing until you follow the logic through: private developers exit or shrink, because they cannot win work against an entity that does not face the same constraints. Total building capacity contracts. The public developer, now carrying more of the load, faces the full weight of a structural undersupply problem with a workforce and supply chain that has been further hollowed out. This is not a hypothetical pattern. It is essentially what happened to the Victorian prison labour road proposal: a price-controlled workforce inserted into a functioning market tends to displace it rather than supplement it.
The government is already part of the problem
Housing in Australia is badly undersupplied, and the combination of planning restrictions, slow approvals, infrastructure levies, and demand-side subsidies that inflate prices rather than build homes has made things considerably worse. The government has not been a neutral bystander to this — it has been an active participant, funding schemes that, as we have reported, tend to enrich developers rather than house people.
The question is whether the right response to a badly functioning private market is a public one, or whether it is fixing the conditions that make the private market function badly. Zoning reform, faster approvals, genuine competition in the construction sector, and deposit protection schemes for buyers caught by collapses like Bathla's: these are all things that could help without inserting a government entity into a market it is likely to distort.
The Bathla collapse is real and the people harmed by it deserve protection. But a genuine crisis makes for a bad moment to reach for a structural remedy, because the urgency compresses the analysis. The post-war housing push worked because it was a temporary intervention into an extraordinary situation, not because government construction is inherently superior to private. Treating an emergency model as a permanent solution is how you get the next emergency.
Sources
Australian Greens — Bathla collapse: the case for a public developer
The Bearing — Why government-run enterprises cost more and deliver less
The Bearing — Victoria's road gangs: Good for roads, bad for business
The Bearing — How subsidies meant to fix housing affordability are enriching developers instead
Frequently Asked Questions
What happened to Bathla Group and the people who bought homes from them?
Bathla Group collapsed leaving around 3,000 creditors owed $3.4 billion and 14,000 homes unbuilt or incomplete. Thousands of buyers are now uncertain whether their deposits will be recovered.
Why did post-war public housing work but later government housing programs fail?
The post-war program was a temporary intervention into an extraordinary supply emergency — mass population growth meeting a construction sector idle for years. When that emergency passed, public housing authorities became entrenched institutions without market discipline, and by the 1980s were managing a shrinking, ageing stock rather than building at scale.
Would a government housing developer actually build more homes?
Probably not. A public developer with cheaper capital and no profit requirement undercuts private builders, causing them to exit or shrink — contracting total building capacity rather than expanding it. The public developer then inherits a larger problem with a hollowed-out workforce and supply chain.
What is causing Australia's housing shortage if not developer failures?
Planning restrictions, slow approvals, infrastructure levies, and demand-side subsidies that push up prices rather than increase supply are the structural causes. Government has been an active contributor to these conditions, not a neutral bystander.
What policy alternatives exist to a public housing developer?
Zoning reform, faster planning approvals, greater competition in the construction sector, and deposit protection schemes for buyers harmed by developer collapses are all targeted responses to specific parts of the problem. These address the conditions making the private market function badly, rather than replacing it with an entity likely to distort it further.