Home ownership in Australia has been on a steady decline since the 2000s. This statistic is a surprising reality considering the current demand for home ownership. So, what’s causing this significant housing challenge?
In simple terms, the price of housing has risen faster than the average household income, with higher purchase prices impacting the cost of rent too. Yet, a simplistic approach falls short of capturing the extent of the current housing crisis – and what approaches are needed to tackle it.
Fundamentally, fixing the housing crisis means building more homes (where people want to live). Yet, obstacles in the form of household debt, rising living costs, planning laws and financial regulation remain challenges to be addressed and overcome.
Although there has been considerable discussion about the state of housing in Australia, the best long-term solution remains an ongoing discussion. In this article, we’ll cover the major contributors to the housing affordability crisis across a cross-section of supply and demand.
What is the current state of Australia’s housing crisis?
Secure housing is central to a functioning community. Without access to safe and affordable housing, we cannot actively participate in employment, education or local communities.
Yet, the challenges facing millions of Australians have elevated these challenges from an individual problem to a housing problem.
The road here has been one of two paths. Firstly, a lack of proactivity in building affordable public housing. Secondly, lack of change at a policy level has meant housing has become a vehicle for wealth-building as much as it has the means to live.
The intersection of these long-term challenges has led to a situation where many low and middle-income earners are struggling to find suitable and affordable housing.
Chances are you already know that Australia’s property market is considered to be one of the most expensive in the world (you may be experiencing this first-hand). Adding further pressure, Australia’s housing sector experiences some of the highest debt levels in the world.
With a household-to-debt (the ratio of debt payments to income) ratio of 211%, this more than DOUBLES the United States (101%) and the United Kingdom (148%).
Below, we delve deeper into housing shortage reasons and solutions. Through a breakdown of primary causes, we can begin to explain the current structural problems of the housing crisis as well as outline possible avenues for long-term solutions.
What factors contribute to a lack of affordable housing?
#1 – Lack of new construction: There has been a shortage of new housing construction, particularly in major cities, for a number of years. In Queensland, this clashes with an ageing population. With a drop in dwelling approvals (-6% over the year) this results in a growing shortfall of housing.
#2 – High demand for housing: Population growth and immigration have led to increased demand for housing in Australia, particularly in major cities where most of the population growth is occurring.
#3 – Low wage growth: Despite Australia’s strong economic performance in recent years, wage growth has been relatively low, particularly for low and middle-income earners. This has made it difficult for many people to afford housing, particularly in areas with high property prices.
#4 – Economic instability: The COVID-19 pandemic has had a significant impact on the economy and has led to increased unemployment and reduced incomes for many Australians. This has made it even more difficult for people to afford housing, particularly in areas with high living costs.
What is the government doing about housing affordability in Australia?
The Queensland government’s (only) actioned response so far, is to change the way existing housing stock might be able to be used. In particular to allow renting so-called “Granny flats”.
The use of land for more than one house/dwelling is very confusing as there are a number of types and definitions both in the Planning Act and then local planning schemes may further change this again. Currently, the legal definitions are a “secondary dwelling” or a “dual occupancy”. In Logan, they also have an “auxiliary dwelling”, which is a little bit of both.
Secondary dwellings are intended to be smaller than the main dwelling and cannot be separately titled and sold. They were also supposed to only be occupied by the same “household” as the main dwelling so could not be rented out. The State Planning Minister made changes to the definition of what is a “household” so that they could legitimately be rented out.
However, the local planning schemes are not always that easily overridden and thus the intent may not actually be realised so easily, although we note changes are progressively being made. There are also building certification issues to consider which include things like fire safety. Failing to have all of the required approvals could result in insurance not being honoured should the worst happen.
In addition, the change is only for 3 years. We do not know what will happen at the end of that period, however, it is possible that at the end of 3 years the situation reverts back to what it was previously and any rented units will have to be vacated.
So far local councils are “cashing in” on the changes by increasing rates and “infrastructure” charges.
This leaves landowners in a bind – if they have to pay substantial charges in the 10’s of thousands, and make alterations to the building, will they be able to recoup that money in 3 years? If so, what kind of rent would they need to charge to recover it? It’s quite likely that the net result is no actual gain for the landowner.
| bplanned & surveyed Recommendation: Before launching into a building project to create a secondary dwelling to rent out, or if you already have one, it’s best to check with us that a planning approval is still required and also check with a building certifier or builder if any additional building approvals are required. Also, check with the Council what the new rates and infrastructure charges will be. |
The Final Word: Possible solutions to the housing crisis
Innovative affordable housing solutions will require a comprehensive approach that includes a range of solutions. Some potential solutions to alleviate the housing crisis:
Increasing the supply of affordable housing: Such as government-funded social housing programs – making up less than 4% of the entire housing market in Queensland – incentives for developers to build more affordable homes, and reforms to planning regulations to encourage the construction of more housing.
Increasing land availability: Options include releasing more government-owned land for development, reducing restrictions on land use and zoning regulations, and promoting the development of underutilised land.
Addressing speculation and investment: This can be achieved through the implementation of policies that discourage speculative investment in the property market, such as taxation on vacant properties or increasing taxes on investment properties.
Supporting first-home buyers: Support may be provided through the provision of financial assistance, such as grants or subsidies, to help first-home buyers enter the property market.
Overall, addressing the housing crisis in Australia will require a coordinated and sustained effort from government, industry, and the community, and a range of innovative solutions that take into account the specific challenges facing different parts of the country.
Work with Brisbane’s best surveyors and town planners at bplanned and surveyed
If you want to hire expert town planning services, plan sealing services, or need a boundary surveyor or Form 12 certification assistance for your next development project, call bplanned & surveyed today.
Reach us at 1300 275 266 or contact us online to learn more about town planning costs or to start a conversation about your upcoming or current project.
