Housing Affordability

I’m not an economist, so I don’t know which position is correct…

Today Urban Taskforce released a report called Going Nowhere, which was picked up by the Daily Telegraph and the Australian. They argue that:

– The NSW goverment’s planning policy has led to huge housing shortages in Sydney
– Most of these housing shortages are in “affordable” areas
– Housing shortages are driving up house prices
– High housing prices and housing shortages are lowering the rate of home ownership
– High house prices are dampening population growth and driving migrants away to other capital cities in Australia.
– Therefore the NSW government needs to reform its planning policy to encourage rapid development and housing contruction, particularly in “affordable” (read: greenfield) sites around Sydney.

Another article went out today in New Matilda. Taking a national rather than local perspective, Ben Eltham argues that:

– There isn’t a housing shortage. In the 2006 census, the ABS estimated that there were 10 million dwellings in Australia, yet only 8.3 million dwellings were recorded as occupied.
– Australia has a housing affordability problem, not a housing shortage problem
– Houses have become inaffordable for many low and middle income Australian families because the market is poorly regulated. Housing taxes favour those who purchase houses for investment purposes:

“Most houses are therefore being bought by investors. As the RBA’s figures demonstrate, around a fifth of Australian houses are bought “without a mortgage” — in other words, by cashed-up investors who simply pay with a cheque. (…) Australia has one of the most skewed property taxation regimes in the industrialised world, rewarding investors and owner-occupiers at the expense of renters and those looking to buy a house. The Capital Gains Tax exemption for the family home costs taxpayers $30 billion a year, disproportionately advantaging those of us who own multi-million dollar homes.”

This is a very bizarre situation, to have two reports released on the same day saying completely different things. It’s like a high brow version of what happened in the newsagency a couple of years ago when I was putting out the women’s tabloids on a Monday morning. I opened one bundle of magazines to see photos of Kelly Osbourne looking morbidly obese – “Kelly’s obesity crisis!”. And the next bundle’s front page had a big photo of Kelly Osborne as thin as a rake – “Anorexic Kelly!”.

Like Kelly Osbourne all those years ago, both of these stories can’t be true. Or can they? Is there some kind of middle ground that explains housing affordablity in Australia? If you are interested in this kind of thing, please let me know what you think about these two reports, because I am very confused.

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5 thoughts on “Housing Affordability

  1. darvids0n

    For some reason, LiveJournal is the only website where I have to click on each link about 8 times for it to even start loading the next page.

    On a less unrelated note, I agree more with Ben Eltham on that one. Since all of my home-buying experience (read: renting cheap housing) has been based in Sydney, particularly in the inner suburbs, I can see the ridiculous prices for rentals, and the loads of money one can make from investment properties in this area.

    I plan to buy an investment property in this area as a response to that.

    Reply
  2. dumsum

    Here’s my take on the issue. I’ll take it as given that we only have an 83% occupancy rate (8.3m out of 10m), so we really don’t have a shortage of houses. Moreover, go to regional areas (and yes I include outer Sydney as regional) and most people would accept that housing prices are quite reasonable.

    So what’s causing affordability problems in the inner suburbs? Sprawl! Australia has some of the least dense cities in the world. You only have to travel a matter of a few hundred metres out of a CBD to find houses! People for whatever reason insist on owning a house close to the city, but there’s the problem: you can only fit so many in. Low supply + high demand = (very) high price. Regulation isn’t the issue, people’s insistence on living in a house is.

    What we need is more dense housing (think Q1), close to the city. It’s the only way to meet the demand in these areas, which not only lowers inner suburb prices, but eases the affordability problem for the majority of the population (because that’s where most of us want to live anyway).

    It also has the added benefit of easing the burden on our shitty infrastructure, which can only be a good thing.

    Reply
    1. Alison Post author

      I totally agree with you on the sprawl front. Urban sprawl is one of the lamest thing in the universe. It was one of the problems I have with the first article. They seem to be suggesting that the best response to the problem is for the government to speed up its land relases around the fringes of Sydney to provide more “affordable” housing. Two issues here… How is that housing going to actually people who need affordable housing? They will be so far away from public transport and services that they will be just as disadvantaged and financially strained. Secondly, if we keep building on farmland, it will drastically increase the price of food and the city’s econological footprint.

      The problem is that these are social and environmental arguments, and therefore they are disregarded by economists 😛

      P.S. “It also has the added benefit of easing the burden on our shitty infrastructure, which can only be a good thing.”
      Be careful about using this argument, because I’ve heard it very convincingly dismantled before! Denser housing in the inner suburbs only puts more strain on the roads, drains, trains etc in those areas. But I hear you anyway!!

      Reply

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