Why is it so hard for everyone to have a house in Australia?

Home ownership in Australia was once regarded as proof of success in life. However, it remains elusive for many people today.

Prices have soared beyond wage growth, rents keep rising, and even some well-intentioned government initiatives, including those announced by Labor and the Coalition at their election campaign launches on the weekend, risk driving up demand.

What’s gone wrong?

The Grattan Institute says increasing housing supply is essential to maintain price stability over time, but notes we are not making enough progress.

Australia will miss its goal to build 1.2 million new homes within five years if we stick to the current housing policies and construction practices.

Why it’s not working

There is a wide range of reasons why Australia is failing to provide enough housing:

Fragmented policy approach: A national approach involving all levels of government aligning their policies, rules and regulations is needed.

Planning bottlenecks: Some projects face years of delay due to local council regulations and zoning requirements. The Productivity Commission has reported Australia’s planning system has excessive barriers to new projects, including medium-density developments.

Land release delays: State governments are slow to release new land for housing. This is often because of community opposition, political considerations and market dynamics. This results in limited availability, which leads to higher costs for land that can be developed.

Skills shortages: Recent immigration restrictions have worsened the shortage of skilled tradespeople in the residential construction sector.

Demand-side subsidies: Government programs, such as first home buyer grants, help some people buy homes. However, they also make housing less affordable because they can result in increased prices.

What could work without raising prices

There are various changes that could be made without necessarily raising prices.

Duplication and logjams could be removed if a national housing strategy was introduced. This should integrate policies and regulations across federal, state and local jurisdictions.

Federal grants and incentives should be tied to states meeting targets for land release, re-zoning permits and streamlined approvals.

Using innovative construction technologies can cut construction time by as much as 50%. These include prefabricated and modular building parts, which are made in factories and later assembled at the construction site.

A government update of land use and zoning permits would make it easier and faster to build medium-density housing near transport and job hubs. This is a quick way to add dwellings without sprawl.

Governments could also offer tax or planning concessions for developments that lock in affordable rents. This would help create stable, long-term rental options.

Learning from other countries

Australia can get ideas for increasing housing supply without raising prices from the experience of other countries.

Through substantial investments in social housing, Finland has significantly reduced homelessness and created stable housing options for families with limited income.

Large-scale prefab public housing originated in Singapore decades ago as a method to accelerate construction timelines and reduce expenses. Prefabrication is only used in 8% of projects in Australia at the moment.