How to tackle Australia’s housing challenge - Grattan Institute

Australia’s housing crisis has been building for a long time. Too many Australians remain homeless. Many more struggle to afford to keep a roof over their head and still pay the bills. Others can’t find a home close to where they want to live and work, or a home to call their own.

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But the pandemic has made it worse. Rental vacancy rates are at record lows, and asking rents have risen rapidly, while house prices are once again on the rise. The pandemic and the ensuing

work-from-home revolution have spurred a ‘race for space’. And now migrants are returning in record numbers as Australia’s borders have reopened after the pandemic. Low-income renters are suffering the most, finding it harder to secure stable tenure and make ends meet.

Historically, we have not built enough housing to meet the needs of Australia’s growing population. Land-use planning rules that constrain development have led to less medium- and high-density

housing than Australians actually want, while increasing the costs of providing infrastructure for governments. This is primarily a problem for state governments: they set the overall framework for land and housing supply and they govern the local councils that assess most development applications.

National Cabinet’s recent decision acknowledged this and was a major step forward. The National Planning Reform Blueprint adds 200,000 homes to the previous target of 1 million extra homes over five years, and, critically, incentivises the states to build them. Building these extra 200,000 homes over the next five years should result in rents being 4 per cent lower than otherwise, saving renters over $8 billion in total.

This benefits all renters, including low-income ones. Irrespective of its cost, each additional dwelling adds to total supply, which ultimately improves affordability for everyone. The onus is now on the states and territories to undertake the steps – especially reforms to land use planning rules – to turn the plan into reality.

Building more housing benefits everyone, but there is also an urgent need for more government support to help house vulnerable Australians and reduce homelessness. Australia’s social housing stock has stagnated in recent decades. The National Housing and Homelessness Plan should give priority to constructing new social

housing for people at serious risk of homelessness. But boosting social housing is expensive: it should be reserved for people most in need, and at significant risk of becoming homeless for the long term.

Rent Assistance remains the most effective way to support most low-income earners with their housing costs. But the maximum rate of Commonwealth Rent Assistance is inadequate. The recent 15 per cent raise should be turned into at least a 40 per cent lift from the previous level. And other income support payments – especially JobSeeker – should be raised further.

Federal and state governments should steer clear of proposals to strictly cap or freeze rents, which risk doing more harm than good. There is a case for states to require landlords to justify particularly large rent increases, as already occurs in the ACT, but only once better benchmarks for regional rents are available.

Housing all Australians poses substantial policy challenges. Past governments have refused to face up to the size of the problem.

But momentum for change is building and the challenge is not insurmountable. Policy can make a difference, but only if we make the right choices.

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Joey Moloney

Economic Policy Deputy Program Director
Joey Moloney the Deputy Program Director of Grattan Institute’s Economic Policy program. He has worked at the Productivity Commission and the Commonwealth Treasury, with a focus on the superannuation system and retirement income policy.

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