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Marist College Canberra News

Cracking the Housing Affordability Code


Louis Jang

property. However, this criticism can be


W eve been looking at getting into the
debunked by both statistics and qualitative
market for a few years now, Tegan Gatherer research on the finances of young people,
explains on the ABC 7.30 report. I watch, which point to the fact that for many young
intrigued; buying a home is not too far in the Australians, purchasing a home in the
distant future, and making sensible financial foreseeable future is simply not a reality. In a
choices early are vital for home ownership. recent TED talk, economist Eliza Owen
However, the story gradually becomes estimates that if you have a job that pays $20
somewhat disconcerting, with a voice over per hour, you would have to work over 47, 000
playing, Tegan may never get to buy a home hours to buy a house at a median price. As
in the city that she grew up in. As I continue many young people study full or part time and
to watch, I become increasingly unsettled as are reliant on casual or part time work, or are
she explains buying a home is simply not an in low-paying entry level jobs or internships,
option for her, her dreams shattered as she this cost is far out of reach. The Perceptions of
has been informed she will need a $100, 000 Housing Affordability report by property data
deposit. I had previously seen media articles analysts Core Logic, found that 62% of
talking about decreasing housing affordability, respondents who were living at home only did
but I never expressed much interest, thinking so because they could not afford to buy
it was a minor issue that would not affect me, property.
and as long as I saved, I would be fine. I was
now not so sure, and eager to see whether
So why is this crisis so little understood by
Tegans experiences reflected the broader
older generations? The reality is, as John
demographic of young people, I decided to
Daley describes, younger households,
investigate further.
particularly those on lower incomes, used to
be able to buy houses in Australia and now
What I found was that young people are they cant. What many older generations fail
constantly being told that we cannot afford to understand is that housing prices have risen
houses simply as a result of our inability to by over 250% since the mid 1990s and the
save and excessive consumption habits of median house in Sydney is now above $1
dining out and overseas travel. However, these million. Home ownership is at its lowest point
arguments reveal how little many Australians since the aftermath of World War Two.
understand the current housing crisis. This So what if anything needs to be done to rectify
article strives to debunk some common the situation? Well, what is clear, is that action
misconceptions amongst the public and needs to be implemented soon, or many
propose options for much-needed reform. leading economists estimate that the
A common criticism that commentators often consequences may exceed that of the Global
claim is that young people simply to prefer to Financial crisis. Aside from the economic
live at home and/or are just too lazy to buy
consequences, Ross Gittins point out apartments where there is demand. I believe
homeownership is a basic Australian right. this is the most important measure that needs
Indeed, young people deserve the security and to be implemented, however, as economist
stability of home ownership that older Chris Richardson points out, other reform too
Australian citizens were granted. The situation needs to be implemented and the government
is so severe that some commentators such as alone cannot curb sky-high house prices in
Liberal MP John Alexander have claimed that Australias cities.
their only advice to young Australians is to It is often suggested that young people who
buy a lottery ticket. cannot afford homes in the capital cities
Nevertheless, the situation is not completely should move to rural areas or other, less
dire and solutions are available, however expensive cities. Whilst this may be a viable
complex they may be. There are many option for some, depending on an individuals
different opinions on potential solutions, career, it is often not feasible. Moving to a
however what is clear is that not one solution rural town has been emphasised by Deputy
can be adopted to solve the crisis. Instead, a Prime Minister Barnaby Joyce. However, this
multi-faceted approach is necessary. suggestion has been rightfully criticised as
Firstly, government reform is necessary. out of touch. Rural towns have significantly
Increasing the supply of homes is a commonly less jobs available, particularly in white collar
suggested reform measure that the government industries. Furthermore, despite pricing being
could implement. This could include creating evidently cheaper in pricing, particularly
new suburbs or government housing, available compared to major cities such as Sydney or
for purchase or lower-cost rentals that would Melbourne, they lack the convenience and
be relatively affordable. There is also the diversity that larger cities offer.
viable possibility of allowing developers to
induce a bigger footprint, in return for An interesting solution that has been proposed
providing more affordable housing. However, is that of house-sharing between younger and
this is not a solution. As chief executive of the older generations. This solution is largely
Committee for Sydney, Tim Williams, says, based off the statistic that over 500, 000 homes
every year, we build in any city in the world in NSW occupied by residents over 50 had at
about 2 percent more housing. Guess what? least two empty bedrooms. To combat
That is not enough to affect the house prices, concerns about undesirable housemates, it is
which are determined by the 97 per cent. suggested that the future program includes
criteria to match the applicant's. Another
On the other hand, apartments are essential to similar and effective option for reform is to
this solution, outlined by Nerida Conisbee, encourage homeowners to rent out spare
Our future cities need apartments in the right rooms or granny flats to younger individuals.
areas, not housing in the wrong ones, This is a win-win situation, as the homeowner
pointing to statistics that show high levels of gets extra rent and the renter is granted more
apartment development moderating price affordable rent whilst they save for a home.
growth. Conisbee shuts down solutions that
suggest building housing on the fringes of Stamp duty is also a commonly referred to
cities, which is expensive and often leads to solution. Stamp duty is a frictional tax with
undesirable social outcomes. He also doesnt creates disincentives for moving homes. Many
suggest that large apartments should be argue that introducing a high stamp duty
developed in suburbs, which creates more would prevent negative gearing, and from
traffic and car parking requirements, but homeowners seeking to excessively profit off
argues that we should introduce dense their homes. However, this duty may account

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for older individuals living in family homes Finally, a less drastic, but effective measure
with empty rooms as opposed to downsizing. that can be adopted by young people is to read
Furthermore, higher stamp duty was up and study economics. As advised by
introduced in the previous financial year and it economist Eliza Owens, this could be studying
made no major differences to the crisis. economics at school or university or
Between January and March, there was a $315 something as simple as reading economic
million increase on the first quarter of the last journals regularly. This would help young
financial year, and this made little difference people understand the market and can make
to affordable crisis. appropriate financial decisions. Hopefully, in
the short-term, this would result in less people
experiencing disappointment as Tegan did.

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