Australian housing affordability is driven by many factors, with two of them relating directly to mismatch of density and underutilised dwellings in the best locations.
Zoning rules provide huge advantages to existing owners in well-located areas at the expense of new buyers, thus pushing up prices and rents. This outcome was recently outlined in a report from the Grattan Institute.
Combined with under-utilised property in prime locations, housing affordability and the requirement to build at a higher density in sub prime locations away from existing infrastructure is also creating sub optimal housing outcomes.
Empty-nesters often remain living in large family homes on large blocks in prime locations, thus having quality housing under-utilised while the young families best suited to these homes are forced to outer ring locations and then on their way to work each day drive past these empty homes inhabited by retirees!
In some extreme cases, often these multi-million dollar homes are inhabited by pensioners who are unable to maintain the dwelling, but continue to live in prime real-estate as the primary residence is not part of any means testing of pensioners.
To tackle the problem, Australia builds just 535 dwellings per 1000 adults – less than Canada, Germany, Japan, the US, UK, Netherlands, NZ and Sweden – while having the second-most expensive housing costs of any OECD country. The next federal government will need to change tax rules and encourage reforms to state planning laws, the think tank says.
"You could make housing a lot cheaper if we allowed more of it to be built where people actually want to live," said Grattan fellow Brendan Coates.
The growing imbalance, which means lower-income Australians pay even more of their income in housing costs, means home ownership rates are already falling and has already put this country in 29th place out of the 37 OECD countries for home ownership, Grattan's Commonwealth Orange Book 2019 says.
The country needs to build an extra 50,000 homes a year for a decade to bring down housing prices and rents and to do this, the Commonwealth government should encourage states to release more land, focus City Deals programs on housing affordability as well as infrastructure and economic development, establish an independent coordinating body to collect data on housing supply and demand, and measure state and local government land-use planning systems, infrastructure charges, and migration, the think tank said.
"The intractable problem is that planning rules in a neighbourhood are set by the local council and the local council reflects the ideas of those that already live in the area," Mr Coates said.
"Those that would move in if more housing was built don’t get a vote. It’s led to very little increase in density outside the CBD areas of Sydney and Melbourne and that’s led to less housing and high rents."
Limiting housing in inner-ring suburbs that benefited from close access to a wide range of publicly funded services, as well as close access to employment was inefficient for the wider economy and increased social inequality, he said.
Sources: AFR & Grattan Institute