Presented to the Australasian Housing Researchers Conference, Thursday 7 June
The conventional wisdom among many affordable-housing advocates is that boosting the supply of market-rent housing won’t help low-income earners. They argue that most new housing built in Australia is too expensive for low- and middle-income earners. They believe that building more homes won’t lower the rents paid by the poorest Australians unless the new homes are explicitly built to house them.
This conventional wisdom is wrong. Recent Australian research claiming that most new housing built in Australia is targeted at the top end of the market is flawed because it groups price deciles by the number of Local Government Areas (LGAs), rather than by the number of dwellings. Half of all Australians live in the 10 per cent of LGAs with the largest populations — all of which are in or close to our major cities. Just 5 per cent of Australians live in the smallest half of all LGAs. Failing to account for the different size of LGAs skews the researchers’ findings.
Grattan Institute’s new analysis, which accounts for the different sizes of LGAs, shows that most new houses are being built in cheaper-than-average suburbs on the fringes on our major cities. Two-thirds of all new houses built in 2016-17 were in areas with cheaper house prices than average, and 16 per cent of new houses were built in the cheapest 20 per cent of LGAs. Meanwhile most new apartments and townhouses are being built in the inner and middle-ring suburbs of Sydney, Melbourne and Brisbane, close to jobs and transport.
Our findings add to the growing evidence that new housing supply will improve housing affordability, including for low-income earners.