REBUILDING THE AUSTRALIAN DREAM

PRACTICAL AND PHILOSOPHICAL STRATEGIES FOR HOUSING AFFORDABILITY AND FINANCIAL STABILITY

Introduction: The Australian Housing Crisis in Context

Australia’s housing crisis is not just a headline—it is a lived reality for millions. The ‘Australian Dream’ of home ownership, once a cornerstone of the nation’s identity,

is now slipping out of reach for an increasing number of citizens. Soaring property prices, rising rents, and a growing cohort of Australians experiencing housing stress or home- lessness are just the visible symptoms of a much deeper problem. This crisis is not simply a matter of supply and demand; it is a complex interplay of demographic shifts, policy decisions, and philosophical questions about the kind of society Australia aspires to be.

Recent years have seen unprecedented population growth, largely driven by immigration. As international borders reopened after the pandemic, the influx of new residents was not matched by a corresponding increase in housing supply. According to the Australian Bureau of Statistics (ABS), Australia’s population grew by over 600,000 people in the year to September 2023—the highest annual increase on record (ABS, 2023). This rapid growth has placed immense pressure on housing markets, especially in major cities like Sydney and Melbourne, where demand far outstrips available homes.

The consequences of this mismatch are profound.

Housing stress is now a daily reality for many families, with a growing number of Australians spending more than 30% of their income on housing costs. Homelessness is also on the rise, with vulnerable groups—including young people, single-parent families, and older women—particularly affect- ed. The crisis is not just about bricks and mortar; it is about social cohesion, economic stability, and the very fabric of Australian society.

The philosophical dimension of the crisis is equally important. Is housing a basic right, or is it simply a commodity to be bought and sold? The Sustainable Population Australia briefing note captures this tension: “Australia is facing a crisis in the affordability and quality of housing which is leading to increased inequality and homelessness, threatening to shatter the social contract.” This statement underscores the gravity of the situation and the urgent need for action. The Firstlinks article, “Can’t Separate Housing Policy from Migration Policy,” reinforces this point: “With the reopening of the international borders we have not been building anywhere near enough new homes.” This simple observation highlights the core of the problem—demand is outstripping supply, and the consequences are being felt across the country.

To truly address the crisis, it is essential to understand its root causes, its economic and social consequences, and the practical solutions that can help rebuild the Australian Dream.

Root Causes: Population Growth, Migration, and Policy Failures

To understand the housing crisis, it is necessary to delve into its root causes. At the heart of the issue is rapid population growth, driven primarily by high levels of immigration. While immigration has long been a corner-

stone of Australia’s economic and social policy, its impact on housing demand has often been underestimated or ignored in political discourse.

The Sustainable Population Australia briefing note is unequivocal: “The connection between population growth – driven by high immigration – and high housing inflation is often ignored or denied in political circles but is accepted as an undeniable fact by almost everyone knowledgeable

about the property industry.” This reflects a growing consensus among experts that migration is a significant driver of housing price increases.

However, migration is not the only factor. Supply-side constraints—such as slow planning approvals, restrictive zoning laws, and high construction costs—have also played a critical role. The Firstlinks article, “Key Factors Behind the Housing Supply Crisis,” explains: “Housing supply is inelastic, meaning that significant changes in the rate of population growth such as those seen over recent years don’t necessarily result in a supply response.” In other words, even if demand increases rapidly, the supply of new homes cannot keep up due to structural and regulatory barriers.

Policy failures have compounded the problem. Tax incentives like negative gearing and capital gains tax discounts have encouraged speculative investment in property, driving up prices and making it harder for first-home buyers to enter the market. These policies have created a situation where property is seen as a vehicle for wealth accumulation rather than a basic need. At the same time, planning and coordination between federal and state governments have often been inadequate, leading to fragmented and ineffective responses to the crisis.

The Grattan Institute has highlighted the need for planning and zoning reforms to unlock more housing supply (Grattan Institute, 2023). Their research shows that restrictive zoning laws in major cities have prevented the construction of higher-density housing, exacerbating the shortage. For example, in Sydney, only a small fraction of land is zoned for medium- or high-density housing, despite the city’s chronic housing shortage.

Another layer of complexity is added by the role of foreign investment. While foreign buyers are often blamed for driving up prices, the evidence suggests that their impact is relatively small compared to domestic factors. Nevertheless, the perception of foreign investment as a problem has shaped public debate and policy responses.

The cumulative effect of these factors is a housing market that is increasingly unaffordable for average Australians.

As the Firstlinks article, “Key Factors Behind the Housing Supply Crisis,” notes: “The mismatch between supply and demand is most acute in high-growth areas.” This mismatch is not just a matter of economics; it is a reflection of deeper policy and planning failures that need to be addressed.

Economic and Social Consequences: Inequality, Wealth, and Resilience

The housing crisis is not just an economic issue—it is also a social one. The rising cost of housing has led to increased inequality, with wealthier Australians benefiting from rising property values while others are left behind. This dynamic is particularly evident in the growing gap between generations, with younger Australians finding it increasingly difficult to afford their own homes.

The Sustainable Population Australia briefing note makes a powerful observation: “Wealth inequality has increased much more than income inequality, and land inflation is the main cause. It is recreating a Dickensian dystopia, locking in intergenerational classes of advantage and disadvantage.” This statement underscores the profound social implications of the housing crisis, with the potential to entrench inequal- ity for decades to come.

The impact on wealth management and financial resilience is also significant. For many Australians, property is their largest asset and a key component of their retirement planning. However, the current market dynamics mean that those who do not own property are at a significant disadvantage. The Firstlinks article, “9 Ways to Fix Australia’s Housing Crisis,” notes: “The average investor/SMSF trustee needs all the help they can get.” This reflects the challenges faced by individuals and families trying to navigate an increasingly complex and volatile housing market.

The Productivity Commission has highlighted the growing intergenerational divide, with younger Australians facing lower rates of home ownership and higher levels of housing stress than previous generations (Productivity Commission, 2023). This trend has implications not just for individuals, but for the broader economy and society. When young people are locked out of the housing market, they are less likely to start families, invest in their communities, or contribute to long-term economic growth.

The social consequences of the housing crisis are also evident in the rise of homelessness and housing insecurity. According to the Australian Institute of Health and Welfare (AIHW), the number of people experiencing homelessness has increased in recent years, with women over 55 and Indigenous Australians particularly affected (AIHW, 2023). This is not just a personal tragedy; it is a failure of the social contract and a threat to the cohesion of Australian society.

The crisis also has implications for mental health and wellbeing. The stress of housing insecurity, the fear of evic- tion, and the struggle to make ends meet can take a heavy toll on individuals and families. Research from the Australian Housing and Urban Research Institute (AHURI) shows that housing stress is linked to poorer mental health outcomes, especially for children and young people (AHURI, 2023).

In summary, the housing crisis is not just about economics—it is about fairness, opportunity, and the kind of society Australia wants to be. Addressing the crisis requires not only practical policy solutions but also a renewed commitment to social justice and equality.

Practical Solutions: Policy, Planning, and Investment

Addressing the housing crisis requires a multi-faceted approach that tackles both demand and supply-side factors. The Sustainable Population Australia briefing note is clear: “The solution to the housing crisis is multi-faceted. It must include a combination of tax reform, regulation, investment in public housing and a sustainable population policy that will contribute to demand management.” This comprehensive approach is essential to ensure that all Australians have access to affordable and secure housing.

Tax Reform

Tax reform is a critical component of any solution.

Reforming negative gearing and capital gains tax concessions could help to reduce speculative investment and make housing more affordable for first-home buyers. These policies have been criticised for distorting the market and encouraging investors to bid up prices, making it harder

for ordinary Australians to enter the market. The Grattan Institute has called for the removal of negative gearing and a reduction in capital gains tax discounts, arguing that these reforms would level the playing field for first-home buyers and reduce housing price inflation (Grattan Institute, 2023).

Planning and Zoning Reforms

Planning and zoning reforms are also needed to unlock more housing supply. The Grattan Institute has highlighted the need for greater flexibility in zoning laws to allow for higher-density development in well-located areas (Grattan Institute, 2023). This would help to address the mismatch between where people want to live and where housing is available. For example, allowing more medium-density housing in inner-city suburbs could make better use of existing infrastructure and reduce urban sprawl.

Investment in Public and Social Housing

Increasing investment in public and social housing is essential to provide options for those who are priced out of the private market. The Australian Housing and Urban Research Institute (AHURI) has called for a significant increase in funding for social housing, arguing that this is a key part of the solution to the crisis (AHURI, 2023). Social housing not only provides affordable homes for those in need but also helps to stabilise the broader housing market by reducing demand pressure on the private rental sector.

Sustainable Population Policy

A sustainable population policy is another key element.

The Firstlinks article, “9 Ways to Fix Australia’s Housing Crisis,” argues: “A comprehensive population plan is needed to link migration with housing, infrastructure, and employment opportunities.” This means ensuring that population growth is managed in a way that is consistent with the capacity of the housing market and the broader economy.

Slowing the rate of population growth, at least in the short term, could help to ease pressure on the housing market and give supply a chance to catch up with demand.

Bipartisan Cooperation and Long-Term Planning

Bipartisan cooperation and long-term planning are also essential. The housing crisis is a complex and long-term challenge that requires sustained commitment from all levels of government. The Firstlinks article, “9 Ways to Fix Australia’s Housing Crisis,” notes: “A bipartisan national housing policy is needed to address both supply and demand, including immigration policy.” This kind of cooperation is rare in Australian politics, but it is essential if we are to make real progress.

Practical Strategies for Advisers and Homeowners

For advisers and homeowners, there are practical strategies to consider. Diversifying investments, exploring alternative housing models (such as co-housing or build-to- rent), and staying informed about policy changes can help individuals to navigate the current market and protect their financial interests. Advisers can play a key role in helping clients understand the risks and opportunities in the housing market and in developing strategies to build resilience in the face of uncertainty.

Case Study: The Build-to-Rent Sector

One promising development is the growth of the build- to-rent sector. This model, which is well-established in countries like the United States and the United Kingdom, involves institutional investors building and managing rental properties for long-term tenants. In Australia, the build-to-rent sector is still in its infancy, but it has the potential to provide more stable and affordable rental options for Australians. The federal government has introduced tax incentives to encourage investment in this sector, and sever- al major projects are now underway in Sydney, Melbourne, and Brisbane (AHURI, 2023).

Case Study: Community Housing Providers

Community housing providers are another important part of the solution. These organisations provide affordable rental housing to low- and moderate-income households, often with support services to help tenants maintain their tenancies. The sector has grown in recent years, but more investment is needed to meet the growing demand (AHURI, 2023).

Conclusion: Toward a More Resilient and Equitable Future

The Australian housing crisis is a complex and multifaceted challenge, but it is not insurmountable. Addressing it will require coordinated action from governments, policymakers, industry, and the community. The Firstlinks article, “Can’t Separate Housing Policy from Migration Policy,” offers a clear direction: “We need to ask better questions and form a population plan linked to housing, infrastructure and employment opportunities.” This holistic approach is essential to ensure that population growth is managed in a way that supports, rather than undermines, housing affordability.

The journey toward a more resilient and equitable housing market will not be easy. As the Firstlinks article, “9 Ways to Fix Australia’s Housing Crisis,” notes: “It will be a long slow road back toward the Australian Dream. That journey cannot begin until population growth is greatly reduced.” This statement reflects the scale of the challenge, but also the importance of persistence and collaboration.

Looking to international examples can provide inspiration. Singapore’s public housing model, for instance, has been highly successful in providing affordable and secure housing for the majority of its population (HDB, 2023). While Australia’s context is different, there are valuable lessons to be learned from such approaches.

Ultimately, rebuilding the Australian Dream will require a renewed commitment to fairness, sustainability, and resilience. By addressing the root causes of the housing crisis, implementing practical solutions, and fostering a shared vision for the future, Australia can create a housing system that works for everyone.

References

1. Sustainable Population Australia. (2023). Housing Crisis and Population Briefing Note. Retrieved from https://population.org. au/wp-content/uploads/2023/04/housing-crisis-and-population-  briefing-note-final1.pdf
2. Firstlinks. (2023). Can’t Separate Housing Policy from Migration Policy. Retrieved from https://www.firstlinks.com.au/cant-separate- housing-policy-from-migration-policy
3. Firstlinks. (2023). 9 Ways to Fix Australia’s Housing Crisis. Retrieved from https://www.firstlinks.com.au/9-ways-to-fix-australia-s-housing- crisis
4. Firstlinks. (2023). Key Factors Behind the Housing Supply Crisis. Retrieved from https://www.firstlinks.com.au/key-factors-behind-the- housing-supply-crisis
5. Australian Bureau of Statistics (ABS). (2023). National, state and territory population. Retrieved from https://www.abs.gov.au/

statistics/people/population/national-state-and-territory-population/  latest-release

• Grattan Institute. (2023). Housing Affordability: Reimagining the Australian Dream. Retrieved from https://grattan.edu.au/report/ housing-affordability-reimagining-the-australian-dream/
• Productivity Commission. (2023). Advancing Prosperity: Productivity Commission Inquiry Report. Retrieved from https://www. pc.gov.au/inquiries/completed/productivity/report
• Australian Housing and Urban Research Institute (AHURI). (2023). Housing Policy in Australia. Retrieved from https://www.ahuri. edu.au/research/final-reports/housing-policy-in-australia
• Housing & Development Board (HDB), Singapore. (2023). Public Housing: A Key Social Pillar. Retrieved from https://www.hdb.gov.sg/ residential/living-in-an-hdb-flat/overview

Australian Institute of Health and Welfare (AIHW). (2023). Homelessness and Homelessness Services. Retrieved from https:// www.aihw.gov.au/reports/housing-assistance/homelessness-services