Action on Australia’s housing crisis is well overdue

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By any measure, Australia’s housing market is in dire straits. Despite a recent easing of prices, would-be home buyers continue to struggle with affordability. Renters are enduring record-low vacancy rates and soaring rents. Those with mortgages have seen sharp increases in repayments. And demand for homes will only increase as migration resumes and international students continue to return.

Depressingly, a survey compiled last month for the Australian Housing Monitor showed that while 85 per cent of non-home owners hoped to one day buy their own property, less than a quarter thought they would ever have the financial resources to actually do so.

House prices appear to have bottomed and may well, if history is any guide, shortly renew their climb.Credit: Joe Armao

As Shane Wright and Rachel Clun report, in 1994 it took about six years to save a 20 per cent deposit for a median-priced home on the nation’s east coast. Despite wage rises and an increase in the number of double-income households it now takes about 14 years to save a deposit for a median-priced property.

Rental vacancies, meanwhile, have hit an all-time low, fuelling double-digit rent increases year-on-year across our capital cities. Demand is so high in some suburbs of Sydney and Melbourne that long queues are now common at inspections and some applicants are offering over the asking price in an attempt to beat the competition, sure signs of a market in extreme stress.

This situation is not going to get better any time soon.

House prices appear to have bottomed and may well, if history is any guide, shortly renew their climb skywards. The return of international students, working travellers and skilled migrants will only increase the pressure on rents.

The Grattan Institute’s Brendan Coates says that in the future unless a person has wealthy parents their chances of buying into the Great Australian Dream will be close to zero. Those young Australians in a position to draw on generational wealth – the “bank of Mum and Dad” – effectively help to concentrate property ownership in the hands of fewer and fewer families and shut out an ever-growing cohort of have-nots.

Home owners with mortgages, meanwhile, are carrying a record burden of debt, which is becoming increasingly difficult to service as fixed rate loans roll over onto much higher standard rates, putting yet more pressure on living standards.

This week, The Age began a series investigating the housing crisis, starting with a simple question: has Australians’ love affair with housing so distorted the economy that it is at the heart of the problems plaguing our cities, our governments and our way of life?

The federal government is planning to finance the construction of 30,000 social and affordable homes over five years, and wants to bring together states, local government, the investment community and the construction sector to build 1 million “well-located homes” between 2024 and 2029. It is a start: we must begin to remedy the dozens of ways in which housing growth is constrained in this country.

We need to embrace higher density, and tweak zoning laws to encourage it. That must be done carefully and strategically, in a way that ensures an increase in high-quality homes in good locations.

Australia is ready for a mature discussion about some hitherto untouchable property policies: capital gains tax exemption on the family home, negative gearing on investment properties and first home buyer stimulus.

We need less NIMBYism (Not in My Back Yard) stubbornly holding up in-fill development in established suburbs and more YIMBYs (Yes in My Back Yard-ers) who embrace the benefits that higher density living brings to once-moribund neighbourhoods.

The key is to start looking at solutions now, before things get any worse. We must undo decades of policy and inaction that has allowed housing to overwhelmingly become a generator and storer of wealth. It should, primarily, be a basic human right, the bedrock of an equitable society and a safety net for our old age.

Patrick Elligett sends an exclusive newsletter to subscribers each week. Sign up to receive his Note from the Editor.

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