Was Australia’s Unaffordable Housing Crisis Avoidable? 11

Friday, June 17th, 2016
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Over recent decades, the price of Australia’s housing stock has continued to soar. Now in 2016, we have reached a crisis point where, for so many Australian families, the dream of owning their own home is no longer achievable.

However, Australia’s ‘unaffordable housing syndrome’ did not happen inadvertently or unexpectedly. Rather, successive governments’ long-term pertinacious policy is the cause of today’s disparity of opportunity. Worst of all, the inequitable outcomes were anticipated and absolutely avoidable.

Australians’ dreams disappear

With each passing year, we watch the dreams of more Australian families disappear as evermore of them face the realization that they are locked out of buying a home. Whilst this subject is of paramount importance, it has only gained traction with the media in recent times. However, this issue is by no means a recent phenomenon – it was just expertly concealed and for decades kept under the radar.

As the issue of rising house prices has reached the public, the genie is out of the bottle – and the details decry any past delusion. A recent 4 Corners program called ‘Home Truths’ provided the cold, hard facts. A few decades ago,  the price of a house was three or four times the family’s gross annual income. Now it is 10, 20 or even 30 times annual income.

New Zealand researcher Hugh Pavletich states if housing is to be accessible and affordable, housing costs should not exceed three times a household’s income. But as we know, this ‘affordable’ formula was now surpassed, and with it many Australians’ dreams of home ownership have fallen by the wayside.

The Australian Bureau of Statistics (ABS) figures shine a light on the  pattern over time. In 1982, an ABS survey found that 10 per cent of home buyers spent more than 30 per cent of their gross income on housing. By 2011, It was 21 per cent of home buyers, with the increase in housing costs reflecting the increase in housing prices. The ‘now reality’ revealed is that this trend is on target to worsen and the gap between rich and poor is likely to grow ever wider.

Sydney and Melbourne are now two of the most expensive cities in the world in which to buy housing. In Sydney, houses are well beyond the reach of families, even with two combined incomes of $180,000 per year. Today, the median house price in Sydney is more than $1 million (and Melbourne is not far behind). And the huge debt incurred requires an average payment of $50,000 a year just to service the loan, despite historically low interest rates. For many of our young people, no matter how hard they might work and save, repayment of debt is unreasonable and owning a home unaffordable.

In recent years, we have had a boom in apartment buildings, especially in Sydney and Melbourne. This has served the needs of Australian and overseas investors, but as Governments well knew, this was not the right kind of housing for low and middle income families. As Dr Kate Shaw from the University of Melbourne noted, we have had a pattern of “buying, selling, demolishing, rebuilding (very badly), buying more,” and so on. This pattern effectively pushed up sale prices and rental costs, which provided good news for the winners, those already in the market. But this was at very great cost to those young Australians seeking to enter the housing market, and as their dreams disappear, they are the unmistakable losers.

House prices a prickly issue

For the major parties, the trend of ever-increasing house prices has been a prickly issue, in particular the consequences for low and middle income families. Thus, this was determined a most unpalatable subject and relegated to the fringe as if the shattered aspirations of Australians were of negligible significance. The pollies’ expectation was that if the subject was out of sight, it could effectively be out of mind – and all at fault could escape any public scrutiny and accountability. And it has worked a treat!

So what’s the strategy?

  • Bad Government policy, predicated on pandering to the interests of business was at the core of planning policy. Planning, not building, was the number one priority, and there has been no official housing policy.
  • There has been no supply side problem, just the wrong mix of housing. This has suited developers, building interests and, incidentally, investors.
  • The corollary is that our young low and middle income families’ interests were totally ignored. As consumers with no voice on any government board or committee, their views were easily discounted – and unsurprisingly they became the disadvantaged.
  • The cost of land, together with the need for developers and their buddies to snatch a bigger piece of the pie, forced land and house prices to continue to rise
  • Disincentives for many older Australians to downsize or sell their investment properties – think stamp duty and capital gains tax – contributed to the spiral of increasing house prices.
  • Focus on the economy, with all considerations rationalized in economic terms, has underpinned all policy ‘strategies’ – an enormous mistake, with the ramifications for people totally inconsequential.
  • Those most impacted have had no access to pollies, no forum for consultation and no part in any decision making – as all consumers, their voices have been effectively non-existent.


For this election, the focus is again on the economy, Mr ‘Jobson Growth’ the sloganistic prime mover of the Liberal platform. The Libs’ housing policy is to retain the status quo, with Malcolm Turnbull’s referring to the idea of limiting negative gearing and decreasing capital gains tax as “an assault on economic freedom.” He obviously means an assault on those who profit from directing policy.

The Labor Party’s position is no different; ‘Budget Repair that’s Fair’ – the focus on ‘budget’ as for the Libs, combined with Labor’s ‘fair’ slogan as a fallacious con. Then we have both parties in sync on ‘consumer policy,’ which incidentally sits under Treasury and Finance. Yes, as befits ‘consumer matters’ which we now know do not concern consumers, all consumer matters are simply of economic and business significance. The only ‘consumer’ issue is “how can consumers be used to boost business, sales and increase profits?”

In this campaign, there is nothing anywhere about new polices on housing or building, despite shelter being our most basic need. There’s nothing about the increasing the disparity of wealth among Australians and nothing about people – full stop.

For many low and middle income Australians, owning a home for their family is now out of reach. In the ‘lucky country’ we know that attaining this milestone of unaffordable housing was not inevitable. It was not the result of a weak economy, nor too few resources, nor for that matter a lack of planning. Rather it was predictable, the natural outcome of bad policy, one predicated on pandering to the interests of business and ignoring the incremental detriment to consumers.

Unquestionably, the policy makers were cognizant of the inequity and injustice, and yet as per business and bureaucratic demands, they shamelessly committed to policy which they knew would make unaffordable housing for ordinary Australians utterly unavoidable.

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  1. Barry B

    An excellent and timely article Anne, as well as one which highlights the gross failure of both major parties to cater to the needs of ordinary Australians.

  2. Les Williams

    Another great article. Its simplistic but Australia has been sold down the river. We have a government refusing to give states and territories funding if they don't enter into asset sales — asset sales to their mates who have politically donated. In QLD before the last state election we had our worst Premier in the states history running around QLD threatening electorates they would not get improvements if they didn't vote for his party. Generally they didnt How have we managed to allow some companies such huge market share? Market share that is detrimental to consumers and small business in Australia. The spectre of political donation threatens our democracy. It is nothing but corruption.

  3. Andrew

    Once again Anne has it the nail on the head. The housing crisis has been worsening over time and all governments have sat back and allowed all the interest groups, i.e. developers, building industry associations, insurance companies and the other groups who benefit to control public policy. This is beyond scandalous. It is ordinary Australians who vote in governments and the two party system (both in agreement on this issue) has made it impossible for them to have any voice – they cannot be heard over those who make the big donations. And the money which arrives as donations originates from ripping off ordinary Australians. How disgraceful!

  4. Charles Litho

    When you could sit on my aunties front Porch & watch cows grazing, 6 kilometres out from the Melbourne CBD, my mother made a comment "why can’t we cross the river and build ourselves a two room house" on all that vacant land.
    My father made my mother aware all land in Australia is owned by somebody, and, no one will even give away 50 metres to anyone that has a need to live somewhere. Finding a place to rent was impossible, let alone buy anything. Some people lived in slums that were below third world conditions.
    A person I know told me his uncle used to shoot Aboriginal, women and children if they camped by any Creek and burn their bodies, when the men were away, on his land a few hours outside Melbourne, in my lifetime.
    The philosophical restrictions about land ownership and the political stupidity about keeping people poor and controllable worked against everyone. The silly old world thinking about controlling everything the ordinary people do is still with us.
    As a country we are as rich and democratic as the bravery we allow ourselves, to trust each other.
    In a wide street in Melbourne’s Toorak I watched three storey town houses being constructed while in a working class suburb with the same zoning, the same land size in a wide busy street close to all services I have to justify why I wanted to build two stories and with less site cover, and, being refused a permit.
    I used to be a member of a couple of industry bodies who had members who thought the main aim has to be about restricting competition and who can work in the industry. They make some bad Unions look like extreme liberals.
    Economic freedom and deregulation has to be our only aim. Deregulation and increase in living standards go together.

  5. Tim Pine

    Down here in Melbourne, an average priced house some of the lowest price suburbs like Melton South will set you back around $250k. For a houseshold on, say, $60k per annuum, that's more than four times their income before tax. In the eastern suburbs, even average priced homes would set the family on a modest income back more than ten times their average income before tax. From what I understand, in Sydney, it is even worse. If nothing is done, we will have a generation locked out of home ownership. Given all of the social issues associated with families being locked out of the most secure forms of housing, this is a major, major problem.

  6. Mark Whitby

    A problem well stated once again Anne.

    Unfortunately, economics revolves around supply and demand… and the demand is being driven up rapidly by immigration of enormous proportions to 'help our GDP'. The incentives to investors hasn't helped either… and so we have first home buyer grants … all of this pushing up the demand further and further. And so the prices go through the roof, with less building companies to compete with each other and very few builders building 'speccies' any longer… all this lowering supply. Make it easier for the small builder to compete perhaps?

    Also, new houses are on average twice the size of those in the 1980's when 125 square metres was the go. This greed based in easier loan arrangements with both partners working also doubled the demand.

    In turn these demands on materials, labour and land have only served to drive up existing property prices and increase congestion. We need to work on the supply factors more and demand factors less.

  7. Mike M

    At last – an article which clearly articulates the inadequacies of a system which privatises everything and anything and panders to the wealthy. Unaffordable ousing is just another means of keeping control of wealth in the hands of the rich. Only the rich can own property so they can "loan" it to the poor at exorbitant rates. The cost of housing in Sydney is at least double what it should be. End negative gearing, have governments take over the cost of developing the roads and services needed for new housing developments and cap the value of land by taxing large developments and developers a meaningful amount. Further, we must stop overseas investors from owning property in the domestic (housing) sector – period. If overseas investors want to put money into Australia, make them put it into commercial building projects or meaningful infrastructure projects.

  8. Diarmuid Hannigan

    Australia desperately needs productive industries not speculative ones that support a parasitic banking sector. The house prices in Australia are being inflated by a large number of overseas buyers. Approximately 15% of house buyers do not live in Australia. The three basic requirements that a human needs for survival are food, shelter and safety from predators. In today`s Australia more and more families are being denied this basic human right. Our two major political parties do not have any policies that will address these pressing issues as they have both swallowed the economic rationalist pill of free trade. Our food is imported the money and the buyers that are inflating our house prices are imported and the process is supported by three tiers of incompetent government that is facilitated by a corrupt financial and legal sector. In many instances our food is not fit to eat as it is imported by the duopoly from god knows where, we cannot afford to either rent or buy a shelter and if we can it could be made from substandard imported materials.

  9. Irvine

    Thank you Anne for this article and also to Sourceable for publishing it. It is so refreshing to read something real, especially in the midst of 8 weeks of spin from the politicians. This resonates strongly with me because I have grandchildren who are locked out of the housing market and many of my friends share my fears for the future of their grandchildren. We now have no faith in either of the major parties. They refuse to govern in the interest of all Australians, and ignore we ordinary Australians who get them into power and pay their salaries and exceptional superannuation benefits. As you correctly point out, the housing industry has rewarded big business just as the building industry has rewarded the vested interests and caused such harm to so many Australian families. We are angry and we are certainly not alone. We need some new independents to take this issue on board, to clean up the broken system and to put people ahead of company profits.

  10. R. Jones.

    The old saying. The Good Old Days when Aust. was Australia, now its not Australia. I have been told to come to GB. We need more people like Anne Paten to take up with the govt the problems they are having to get them standing up for Australia. 0

  11. Shaun

    Well I feel screwed over. My combined income with my wife totals under $170k.
    It's 10k under what you wrote. And being the frugal type, 10k is a LOT of money to us. It's practically double our household spending on food (we don't go out to eat. It's hard enough trying to save).
    With a good portion of our money going to tax, and with an even better portion going to the landlord, whatever scrap there is left to pay the bills will see me saving up a decent sized deposit after a fair few years.

    Upon which, my life wouldn't improve, because instead of paying rent, that same money will go to a bank, where I have locked the next 30 years of my life paying that same amount to service my home loan. God forbid that I knock my wife up, cuz then I'll be doubly screwed having to feed an extra mouth and sending them off school. Hell, just with this income and the two of us, life is already hard enough.

    Fast forward 30 odd years from now, I'll be 65. Hopefully with no kids. I finally own my dog box that I've spent so many years paying off. I'll be old and frail and will likely have no choice but to work another 5 years to earn a retirement. Does this sound like quality life to anyone???

    Honestly, the thought has come across as to whether I should drop my health insurance. Doing so will relieve me of $80/month. Some breathing room for instant cash, in exchange for saving a few 10s percent of that amount in tax that I'll only see at the end of the financial year.

    In all honesty, having said all that, the thought of ending my life is becoming more and more feasible everyday.