The Australian dream of owning a home isn’t what it used to be – for many, it’s now simply impossible. Bold reforms are the only solution.
By Ehsan Noroozinejad, Western Sydney University and Greg Morrison, Western Sydney University
December 23, 2024
Housing affordability in Australia has become a national emergency. For many Australians, the dream of homeownership is slipping out of reach, and soaring rents leave low-income families in unstable and unviable living situations.
It’s a crisis stoked by wealth inequality, and it has serious impacts on mental health and the social fabric that holds communities together. Creating real solutions means tackling the structural drivers of inequality and supporting those most affected by housing stress — not just looking for quick-fix policies.
Recent data shows that a typical median-income household, earning approximately AU$112,000 annually, can afford only 14 percent of homes sold nationwide — a dramatic decline from 43 percent just three years ago. In New South Wales, the situation is even more severe: only 10 percent of homes fall within reach for median-income earners.
For renters,things are no better. National vacancy rates are at historic lows, and rents have surged by over 30 percent since 2019 . In NSW, nearly 80 percent of renters are spending more than 30 percent of household income on rent — the definition of rental stress.
In New South Wales alone, achieving the government’s targets will require 75,000 new dwellings annually, with 82 percent of them located in infill areas. However, current completion rates are expected to fall drastically short, with only 10,350 apartments forecasted each year over the next three years. This stark mismatch highlights the urgency for structural reforms and innovative housing approaches.
Wealth inequality and housing
The housing crisis is a significant driver of wealth inequality in Australia. Recent researchfrom the Australian Council of Social Service and UNSW highlights that the wealthiest 20 percent of households own 82 percent of all investment properties, while the bottom 20 percent hold negligible housing assets. The wealthiest 20 percent of households own 82 percent of investment properties, while the bottom 20 percent are left with little to no housing assets.
Rising property values disproportionately benefit existing homeowners, creating a generational divide. In 1984, the average Australian was looking at a market in which the average house was valued at three times their yearly salary. Today the average house price has risen to 10 times what the typical individual makes annually in 2023.
This gap has turned housing into a speculative investment vehicle rather than a basic necessity.
Tax policies have further exacerbated the issue by incentivising property investment over housing accessibility, through schemes such as negative gearing and capital gains tax discounts. These mechanisms reward high-income earners, widening the gap between the rich and the poor and perpetuating cycles of inequality.
Social impacts
The housing crisis is not just an economic problem; it has substantial social consequences. Housing insecurity is closely linked to mental health problems, with renters particularly vulnerable.
Studies have shown that the combination of unaffordable rents and insecure leases significantly increases the risk of anxiety and depression. For example, research by Melbourne University social epidemiologist Rebecca Bentley has highlighted the severe mental health impacts of “double precarity”, where insecure housing and employment exacerbate anxiety, depression and overall well-being challenges.
Repeated knockbacks from landlords and real estate agents can lead to a state of learned helplessness, in which people feel powerless to change their circumstances. This erosion of agency not only damages mental health but also disrupts long-term life planning, such as starting families or building careers.
Beyond its effect on people’s mental health, the crisis undermines community cohesion. Relocations frequently force individuals to leave their neighbourhoods, severing ties with local networks and increasing social isolation. Marginalised communities, including migrants, face additional barriers due to systemic discrimination in the rental market, compounding their housing stress and social exclusion.
Structural drivers
The roots of Australia’s housing crisis lie in decades of policy decisions that prioritise profit over people. Tax policies favouring property investors, combined with insufficient investment in social and affordable housing, have skewed the market.
The supply of social housing has not kept pace with population growth, leaving low-income Australians to compete in the private rental market.
At the same time, zoning restrictions and bureaucratic planning systems have hindered new housing developments, especially in high-demand urban areas.
This mismatch between housing supply and demand drives up prices and rents, pushing more Australians into financial stress. Meanwhile, speculative investments continue to inflate property values, locking out first-time buyers and perpetuating a cycle of inequality.
Learning from global success stories
Australia can look to other countries for inspiration. For example, Finland’s robust investment in social housing and innovative “housing first” approach has significantly reduced homelessness.
Other European countries’ emphasis on affordable public housing ensures a steady supply of well-located, high-quality homes for low- and middle-income residents. While these models cannot be translated wholesale to the Australian context, they offer valuable lessons in balancing housing supply, affordability and equity. For instance, during the mid-20th century, Sweden’s investment in prefabricated housing transformed its housing standardsfrom among the lowest in Europe to among the highest.
Ways forward
Addressing Australia’s housing crisis requires bold, systemic reforms. There are some potential solutions.
Tax reform would be a big step towards improving housing affordability. Reducing capital gains tax discounts and phasing out negative gearing would discourage speculative property investment. Implementing a broad-based land tax could capture unearned value from rising land prices and fund affordable housing initiatives.
Social housing can be scaled up by increasing federal and state investments in social and affordable housing projects. This would help address the estimated deficit of over 1 million social and affordable homes by 2036, with Sydney alone requiring an additional 217,000 units. Partnering with private sector developers through “built to rent” schemes could help alleviate this shortfall.
Enhancing tenants’ rights with stronger regulations would help prevent no-cause evictions and cap rent increases. The Commonwealth Rent Assistance program could also be expanded to better target those under housing stress.
Adopting innovative building practices, such as 3D printing and prefabricated modular homes could reduce construction costs and timelines. Fast-to-market cross-laminated timber solutions and advanced modular techniques offer scalable options that address both the housing and climate crises. Encouraging community-led housing initiatives, such as cooperative housing and land trusts, can empower residents and promote social cohesion.
Planning and zoning reform could streamline approval processes to accelerate housing developments in high-demand areas, and also incentivise medium-density developments to increase housing diversity and accessibility.
Australia’s housing crisis demands urgent and comprehensive action. By prioritising equity, sustainability and innovation, Australia can rebuild its housing system to serve all its citizens, ensuring that housing is not just an asset, but a fundamental human right.
Dr Ehsan Noroozinejad is a Senior Researcher at Western Sydney University’s Urban Transformations Research Centre and an internationally recognised expert in Smart and Resilient Construction, specialising in innovative solutions to tackle the housing crisis. Dr Farsangi has received funding from the Institute for Culture and Society (ICS) at Western Sydney University and the James Martin Institute for Public Policy to support his research on innovative housing solutions and community resilience.
Professor Greg Morrison, Lang Walker Endowed Chair in Urban Transformation, is a renowned leader with significant contributions to Circular Economy, Net Zero initiatives, Living Labs and climate adaptation and innovation. He serves as Co-Director of the Urban Transformations Research Centre at Western Sydney University.
Barrie Harrop is an Australian placemaker and entrepreneur with over 40 years of experience in large-scale premium housing and building developments nationwide. He serves as the Executive Chairman of Thrive Construct, a company dedicated to innovative, sustainable, and affordable housing solutions.
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Originally published under Creative Commons by 360info™.