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Introductory Remarks to Parliamentary Inquiry hearing: Housing affordability and Supply in Australia, 17 November 2021

Posted by on November 17th, 2021 · Affordability, Government, Housing, Housing supply

By Prof Bill Randolph and Prof Hal Pawson.

We’d like to thank the Committee for inviting us to address you this morning. The issue of housing supply and its relationship to housing affordability is central to the pursuit of essential reforms to national housing policy.

The City Futures Research Centre is one of the leading University research teams focusing on urban issues in Australia. Research on land use planning, housing markets and housing policy are among our key concerns, together with gathering data on the housing system. Much of our work is funded by the Australian Research Council and AHURI.  More recently, we are working with NHFIC, the AIHW, the ABS and others on developing the Australian Housing Data Analytics Platform, funded by our partners and the Federal government. 

As we argued in our submission, adequate housing supply is a key component of a healthy housing market. But we would argue that the causes of housing unaffordability are complex and call for consideration of both housing supply and housing demand and the underlying drivers on both sides of the market.

Boosting home ownership is a key objective that we fully support. But, as argued in our recent report, ‘Housing – Taming the Elephant in the Economy’, Australia’s home ownership system has transformed from its historic function of spreading wealth into a modern day system that concentrates wealth and drives growing inequality. Over-preferencing existing home owners and investors has increasingly excluded young adults from access. 

Housing supply is important for housing affordability. But it’s not simply a matter of growing the total stock of housing. We need to encourage the right kind of supply in the right places. Australia needs a more diverse housing market that provides more consumer choice, is more inclusive, less volatile and more resilient to economic shocks. That means promoting a wider range of housing to fill the missing middle – not just high-rise apartments for investors in town centres and project homes on the fringe. For example, we need well located medium density homes and build-to-rent housing at both market and affordable prices.

The Australian Government could play an important role in supporting such diversity. Not only by reforming key tax settings, but also through influencing urban development. Although it can’t do that directly, there is plenty of scope to do so indirectly. With the National Housing and Homelessness Agreement between the Commonwealth and States up for re-setting next year, it could use the terms of that Agreement for that purpose.

Beyond that, the Turnbull Government’s City Deals policy could be revived and ramped-up as a vehicle for joint working with key local governments to promote affordable and market housing supply. The Australian Government could look to the example of the Canadian Liberal Party which has just pledged a $4 billion fund to reward local governments that streamline  and expand housing development.

But although maximising housing supply is important, it does not follow that you can simply build your way out of housing unaffordability, any more than you can build your way out of urban congestion. As our submission concluded, and as correctly stated by Luci Ellis in an earlier session, there is little international evidence of significantly reduced house prices resulting from expanded supply, rather than from a severe economic shocks.

As we have seen recently in some of our inner-city apartment markets, if supply does exceed demand, prices plateau or begin to fall, and the development industry responds in a perfectly rational way by rationing output. Development approvals for apartments fell away in 2019 and 2020, not because the planning system refused them, but because developers were not submitting applications when faced with declining investor demand.

Local resistance to housing development can be an important constraint, especially where medium or higher density is proposed. The only constructive way to address this issue is by ensuring that there is sufficient local infrastructure investment to support the greater local population. That comes back to the issue of development contributions – it will be possible to reduce reliance on these only if urban financing is reformed so that infrastructure costs are borne by the whole community over time, as they used to be.  Again, the Australian Government could play a key role in supporting this.

We presented a range of new data in our submission with a view to providing some additional information on the outcomes of the development process of relevance to the Inquiry’s objectives.  We would be happy to take questions on these data and any other related matters. 

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