NSW could unleash more than $17 billion in economic gains through providing more affordable housing closer to the city, a new report has found.

In its latest report, the University of New South Wales analysed the economic impact of moving low to moderate income households from areas on the fringe of Sydney to better locations with affordable housing which were closer to jobs and services.

It also factored the cost to government of investing in 125,000 new affordable rented homes over 10 years in well-located neighbourhoods.

It found that individual households who had access to affordable housing and government grants to bring down the cost of housing ($8,500 per year over ten years) would be able to save $2,500 per year each and every year on travel costs and also save on travel times.

More significantly, however, greater access to employment would cause their incomes to grow by as much as $12,000 per year in the case of unskilled workers and p to $41,000 per year in the case of skilled workers.

Overall, it found that moving workers closer to better jobs could deliver economic gains to New South Wales to the tune of $17.57 billion over forty years.

Duncan Maclennan, lead researcher in the study and Visiting Professor at the UNSW City Futures Research Centre (CFRC), said the study shows that housing has a substantial impact on the economy.

“The conventional view in Australia is that housing expenditure is primarily a social role of government,” Maclennan said.

“But our work shows that by building affordable housing at reasonable distances from where people work and in sufficient volume, there is a significant reduction in travel times that reduces costs to households, which also releases time for work and increases labour supply.”

The study was jointly commissioned by a consortium of not-for-profits, government and private sector organisations, including the Community Housing Industry Association of NSW (CHIA).

It found that living closer to job markets also means increased job mobility and higher incomes over time.

Accordingly, Maclennan said there are productivity gains associated with housing which is closer to cities.

Housing policy, therefore, was not simply about redistribution but also about economic productivity and growth.

Maclennan has called on governments to think of housing more like roads, public transport and other economic infrastructure when assessing public policy and investment.

He says the affordability problem primarily impacts younger people, but also effects those up to 40 years of age in disproportionate amounts.