An election is coming. But no one is promising things that will make housing cheaper or more available.

Australia can’t afford to make policy based on a lazy understanding of housing markets. This election we need prospective governments to acknowledge the limits of the private housing market, control superheated demand and ensure affordable housing is available. It is not only about shelter – it’s about putting the nation’s wealth to work smarter.

It has only taken a generation for home ownership to slip out of reach for many Australians. With the value of housing growing much faster that incomes, home ownership is attainable to only 45 percent of young households, compared to 60 percent in the 1980’s. More middle-income earners will be in the rental market for their whole lives and lower-income earners have the fewest housing choices and live furthest away from jobs. Our housing markets are creating a spiral of inequality and making our nation less productive.

Untangling how housing markets operate is fiendishly difficult. Even the Reserve Bank are tying themselves in knots. But we cannot abandon the topic just because it is hard.

Economists and planners agree that a home serves two functions – it’s somewhere to live as well as an investment asset – sometimes both at the same time. The value of these two things respond differently to demand and supply – and get in each other’s way in setting house prices. The growing dominance of a homes’ asset value is part of the ‘hyper-commodification of housing’.

Interest rates are at historic lows and there are serious tax advantages for home ownership. This has superheated demand for housing as an investment generating most of the recent house prices surges. It means that it takes over 10 years to save a deposit on an average income, twice what it took a generation ago. And government first home buyer programs, intended to help young people jump the deposit hurdle, have actually made housing more expensive overall.

On top of this, our regional rental markets are getting more expensive, fueled by more middle-income renters and work-from-homers. This is pricing out lower-income earners in these places, forcing them away from community and job connections. Responses to COVID and the rise of short-term letting have sped this up. Resulting homelessness and rental stress means greater pressure falls on social and community housing, without adequate investment from governments in new stock.

It’s become common to hear commentators suggest our planning systems are a barrier to housing supply. But before Covid hit, Sydney and Melbourne had strong apartment supply and new suburban development was growing across our capitals. Our planning approval systems ramp up and respond to house price surges and channel growth into places that have infrastructure and services planned to absorb growth. Zoning is not a ‘barrier’ rather a ‘lane marker’ towards where more housing makes sense.

But just because a house is approved, doesn’t mean it is built and sold quickly. Developers make commercial decisions on the rate they supply the market to maximise sale price – while labour and construction material availability are also factors. There is growing evidence that it isn’t planning that is setting the speed limit for new housing production.

We also need to ask, what is the impact of new supply on house prices? Most units and houses built are sold at prices only moderate and higher income earners can afford. We have heard the RBA Assistant Governor acknowledge that you can’t build your way out of high house prices. And recent modelling shows that we can’t realistically supply new houses at a rate that would overcome the strong price effect of low interest rates.

Despite growing evidence to the contrary, commentators and some Federal Parliamentarians continue to peddle the ‘supply myth’ and point the finger at planning. It deflects attention from the ways the government could rein in demand and make a real difference on house prices.

But let’s imagine that strategic planning was pushed aside, what then? We would give up an orderly sequence of housing development to meet population growth. We would lose money on investment in infrastructure. Our cities and towns would be more expensive to live in because homes were further from jobs and services. We would use land wastefully and encroach deeper into natural habitats. We would lose the ability to design suburbs, make our streets safer and homes more comfortable in a changing climate.

For example, the savings in the cost of living, avoided environmental harm and improved return on investment were estimated at over $25 billion over the life of the Melbourne Plan. Planning shapes our cities and towns in ways that makes them safe, resilient and nice places to live.

Planning can’t change tax settings or interest rates – but planners can make social and affordable housing easier to deliver, improve design for a changing climate, regulate short term rentals, mandate affordable housing in new development – and clear the way for alternative ownership and rental models.

Worsening rental stress and homelessness demands attention beyond planning. The Federal Government should support the states to improve the capacity of the community housing sector to produce social and affordable housing at a scale not seen since post war years.

An incoming Government can’t hide behind a lazy understanding of housing markets. A next generation housing policy needs to hose down superheated demand, make affordable housing available where it is needed, and offer choices for Australians to put their wealth to work productively.

John Brockhoff, Planning Institute of Australia (PIA), National Policy Director