Housing Affordability Crisis in Australia: Causes, Impacts, and Alternative Solutions

This report discusses the housing affordability crisis in Australia, its causes, impacts on stakeholders, and alternative solutions. It also explains economic concepts such as scarcity, market structure, and government interventions. The report recommends implementing new tax rules and reducing subsidies on owner-occupied housing to reduce the crisis.

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Running head: HOUSING AFFORDIBILITY CRISIS IN AUSTRALIA
Housing affordability crisis in Australia
Name of the student
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HOUSING AFFORDIBILITY CRISIS IN AUSTRALIA
Table of contents
Executive summary....................................................................................................................2
Introduction................................................................................................................................3
Main issues.................................................................................................................................3
Key stakeholder impacts............................................................................................................4
Consumers..............................................................................................................................5
Investors.................................................................................................................................5
Renters....................................................................................................................................5
Economic concepts.....................................................................................................................5
Scarcity...................................................................................................................................6
Market structure.....................................................................................................................6
Government interventions......................................................................................................6
Alternative solution....................................................................................................................7
Conclusion..................................................................................................................................7
Reference list..............................................................................................................................8

HOUSING AFFORDIBILITY CRISIS IN AUSTRALIA
Executive summary
The following report aims to focus on the housing affordability crisis present in Australia.
The thesis statement in the following report is as follows- Australia is facing a severe
housing affordability crisis in the recent decade where people are unable to afford
houses and the foreign investors and the baby boomers are the major reason behind it.
The first part of the report focuses on the crisis which has been caused due to the housing
affordability in Australia. It has been found out that due to the high cost of land, it has
become write impossible for the Australians to find an affordable house. The problem is that
popular cities like Sydney and Melbourne have been termed as the least affordable places for
dwelling in Australia. The major stakeholders who are affected in the crisis are mainly the
consumers and the renters. The report further shows how the consumers, renters and the
investors who are the part of the stakeholders gets affected by the housing affordability crisis
in Australia. the following part of the paper states the reasons behind the crisis which took
place in Australia. next comes the economic concepts through which the problem can be
related. The method of research which is used in the study is secondary. The economic
concepts shows how scarcity of land can lead to the rise in market price and how government
intervention is required when there is a presence of market failure. From the report it can be
found out that when government intervenes in the market, the housing affordability crisis can
be brought down. Scarping of the stamp duty and applying new tax rules for buying new
houses is highly recommended.

HOUSING AFFORDIBILITY CRISIS IN AUSTRALIA
Introduction
Housing responsibility refers to the term which is used to describe the relationship
that is present between the incomes of the household and the expenditures on housing.
Housing affordability in Australia has become one of the focus point for the urban planners in
the current years. Sydney has been ranked as one of the least affordable housing market (The
Conversation. 2018). Rising property prices is one of the reason for the affordability crisis in
Australia. Sydney and Melbourne are the worst affected places.
Problems:
The shortage of any kind of affordable housing in both Sydney and Melbourne means
the huge rise in price of the land. In large number of small towns in Australia it has become
nearly impossible in Australia to build homes. Also, in some parts of Australia people are
been forced to move out of the city where they have been raised to less attractive places
where they can afford to stay.
Thesis
Australia is facing a severe housing affordability crisis in the recent decade where
people are unable to afford houses and the foreign investors and the baby boomers are
the major reason behind it.
Main issues
The key issue describes in the case study refers to the housing affordability crisis
present in Australia. The housing affordability crisis present in places such as Wingecarribee
shows the way Australians live. The housing affordability crisis also making the people much
poorer. One of the major reason behind the housing affordability crisis is due to the
availability of cheap and easy credit provided by the Australians banks. Another reason

HOUSING AFFORDIBILITY CRISIS IN AUSTRALIA
behind the housing affordability crisis is also largely because of the baby boomers (Austin,
Gurran and Whitehead 2014). The wealthy people buy the property in Australia and spends
only few weeks in a year which however, impacts the housing market. A huge level of
interest in investing the real estate market of Australia had been an important contributing
factor for the affordability crisis. The investors had also made up huge money from the
properties in Sydney. Migration is also one of the significant factor behind the housing
affordability crisis. The huge surge in the purchase of the dwellings also leads to the crisis.
The surge in the currant population of Sydney also one of the reason. The huge cost of the
dwelling in Australia had been in the currant policy debates which concerns the taxation
arrangements of Australia. The affordability of housing in Australia has already went down
since the early 1980s. There had been a huge growth in the price of the house between the
year 2009-2010. According to the Australian Bureau of Statistics it has been found out that
the expenditure of the household on the currant housing have risen to 18% (McGreevy 2018).
Another reason of the crisis is the huge cost of the land which results in the high cost of the
housing construction.
Key stakeholder impacts
Stakeholders are referred to that party that has interests in any organization which can
be affected by the business. The primary stakeholders in a business consists of investors,
employees, suppliers and customers. Stakeholders can be of two types on in external
stakeholders and internal stakeholders. Internal stakeholders are those stakeholders whose
interest in any organization usually comes through a direct relationship like investment or
employment. A person or group of people who usually owns a share of business is termed as
stakeholders (The Conversation. 2018). Lastly, as the average incomes are lower in the
country towns, households need to spend a high percentage o their earning on their rents.

HOUSING AFFORDIBILITY CRISIS IN AUSTRALIA
Consumers
Consumers are the biggest suffers in the housing affordability crisis which took place
in Australia. The consumers have been fruitlessly searching for the affordable homes where
the prices of houses and rents are increasing at a huge rate. People have to pay so much for
the houses that they are into financial hardships. The housing prices in Australia have
increased at the rate of 140% (Minnery 2017). Although the wages have stagnated, the rents
in the city have increased twice the rate on inflation when compared to the last five years.
Investors
A high level of interest in investing in the real estate of Australian market had been an
important contributor present in the current affordability crisis. Investors are those people
who commits to invest at that time in the market which will help them to grow wealth in the
long time (McGreevy 2018). Although in the present situation the investors have shown little
interest in the housing due to the presence of risk and low returns of the affordable housings.
Investors usually invests when they expect a high rate of return.
Renters
According to the housing affordability and cost publications the proportion of renters
have increased to 31%. Along with that the proportion of households who are renting from
the private landlords have risen to 26% in the same period (Jacobs 2017). The cost of renting
privately has also increased at a huge rate. There also have been increase in the competition
among the renters making the household to either rent down or append more that they can
afford on rent.

Availability of land
Availability of house
HOUSING AFFORDIBILITY CRISIS IN AUSTRALIA
Economic concepts
Economics have impact on every moment of the life. Some of the basic economic
concepts which relates to the case study are one of the is the scarcity. Another one can be the
supply and demand. The third economic concept which can be applied in the case study is
that market failure, might need government intervention.
Scarcity
Theory- It is known that economic growth reduces scarcity. Scarcity also means that
everything is limited. Scarcity is the fundamental economic problem which is faced by all
societies. Unlimited wants with only limited resources are the main cause of scarcity.
In the following report it can be seen that there has been a scarcity of affordable place
for housing in Australia. Places like Melbourne and Sydney have been regarded as the least
affordable places in the world due to the housing affordability crisis. It has been found out in
the Demographia report that Australia has some of the least affordable housing markets in the
world (Demographia.com. 2018).
Fig1: scarcity of resources

S
D1
D
HOUSING AFFORDIBILITY CRISIS IN AUSTRALIA
Market structure
Theory: It is known that when the demand of a good rises more compared to the supply, then
price of the good will also rise. According to the law of demand, price of a good increases
when demand rises.
The property market of Australia comprises of the trade of land along with the
permanent fixtures which is located within Australia. The property price of Australia had also
grown after inflation. However, the property prices grew at a much faster rate between the
years 1990 to 2017 due to the contraction of the economic bubble (Austin, Gurran and
Whitehead 2014). It had also been found out that during the late 200s, the pricing of houses
in Australia which is relative to the average income were among the highest in the world.
Then prices of the housing were more than six times high than the average rate.
Fig2: supply and demand of houses.

S+TAX
S
HOUSING AFFORDIBILITY CRISIS IN AUSTRALIA
Government interventions
Theory: government intervention is a regulatory action taken by the government in the
presence of market failure. Taxes on the negative externality make the consumers pay the
social cost of the good which in turn will reduce consumption.
It is known that government interventions are required when there is a presence of
market failure. The government tries to combat the inequalities in the market through
taxation, regulation or by providing subsidies (Birrell and McCloskey 2016). He also
intervenes the market in order to promote general economic fairness. Therefore, in this case it
was announced by the Australian government that the COAG Council would be forming an
Affordable Housing working group. The government had also promised to fix the housing
affordability crisis in Australia. However, the housing affordability did not receive much
attention before.
Fig 3: government implementing tax

HOUSING AFFORDIBILITY CRISIS IN AUSTRALIA
Alternative solution
It has been stated in the case study of the housing affordability pricing in Australia
that it is quite difficult to solve the problem of the crisis since the affordability of housing is
quite difficult in the regional centres as due to their geographical spread and of differing
circumstances. In some communities planning restrictions have been meant in order to
protect the land that is used for the purpose of agriculture. Buffers have been placed around
water courses for protecting the natural vegetation. The sale of housing by public government
had also been termed as a solution.
However, other alternative solutions include removal of stamp duty. As stamp duty is
collected on the value of the property and with the strong growth in the price of the housing
means it will have a huge impact on the budget of the property buyers. Therefore, by scraping
the stamp duty it will be easier for people to afford houses. Another solution is tat new tax
rules around housing can help the Australians to afford more houses (Minnery 2017).
however, decentralising government business and services can be another method of solving
the problem of housing affordability crisis. As most of the Australian population resides in
the capital cities, therefore it is needed to incentivise businesses or start ups in the small
regional centres. The third alternative solution can be reducing subsidies for owner occupied
houses. When home owning subsidies will be reduced, owning a home will become less
affordable.
The best solution to reduce the housing affordability crisis in Australia is either by
implanting a new tax rules or by reducing subsidies on owner-occupied housing as it will
make place for the government to build more public housing for a large number of people.

HOUSING AFFORDIBILITY CRISIS IN AUSTRALIA
Conclusion
It can be concluded from the report that the Australians face housing affordability
crisis in the recent decade. The major reason behind the housing affordability crisis is mainly
due to the baby boomers and the foreign investors. The article also states that most of the
famous cities in Australia have been ranked as the least affordable housing market. The
reason behind is that due to the rise in land prices. The above report states the reasons behind
the housing affordability crises faced by the Australians. Therefore some of the
recommendations are that government should increase public housing, promote efficient
housing land supply and funding programs should also be started.It also shows how the crisis
has impacted the major stakeholders in Australia. lastly, the report also showed certain
alternative solution in order to deal with the housing affordability crisis in Australia.

HOUSING AFFORDIBILITY CRISIS IN AUSTRALIA
Reference list
Austin, P.M., Gurran, N. and Whitehead, C.M., 2014. Planning and affordable housing in
Australia, New Zealand and England: common culture; different mechanisms. Journal of
Housing and the Built Environment, 29(3), pp.455-472.
Bentley, R.J., Pevalin, D., Baker, E., Mason, K., Reeves, A. and Beer, A., 2016. Housing
affordability, tenure and mental health in Australia and the United Kingdom: a comparative
panel analysis. Housing studies, 31(2), pp.208-222.
Birrell, B. and McCloskey, D., 2015. The housing affordability crisis in Sydney and
Melbourne Report One: The demographic foundations. The Australian Population Research
Institute.
Birrell, B. and McCloskey, D., 2016. Sydney and Melbourne’s housing affordability crisis
report two: No end in sight. Canberra: The Australian Population Research Institute.
Chappell, J. and Campbell, N., 2018. The Housing Gap—Sydney, Australia. In Sustainable
Development Research in the Asia-Pacific Region (pp. 293-304). Springer, Cham.
Demographia.com. (2018). [online] Available at: http://demographia.com/dhi.pdf [Accessed
23 Sep. 2018].
Jacobs, K., 2017. Neoliberalism and the Housing Affordability Crisis.
Jacobs, K.A., 2016. Australia’s housing affordability crisis.
Li, J., 2015. Recent trends on housing affordability research: where are we up to?.
McGreevy, M.P., 2018. Housing Diversity and Affordability: The Effects of 35 Years of
Exclusionary Land Use Regulations on Housing Affordability in Adelaide, South Australia.
Urban Policy and Research, pp.1-18.

HOUSING AFFORDIBILITY CRISIS IN AUSTRALIA
McLaren, J., Yeo, A. and Sweet, M., 2016. Australia is facing a housing affordability crisis:
Is the solution to this problem the Singapore model of housing?. Australasian Accounting,
Business and Finance Journal, 10(4), pp.38-57.
Minnery, J., 2017. Politics, Planning and Housing Supply in Australia, England and Hong
Kong.
Power, E., Mee, K. and Horrocks, J., 2018. Housing: An infrastructure of care for older
Australians. Parity, 31(4), p.16.
The Conversation. (2018). A housing affordability crisis in regional Australia? Yes, and
here's why. [online] Available at: https://theconversation.com/a-housing-affordability-crisis-
in-regional-australia-yes-and-heres-why-71808 [Accessed 23 Sep. 2018].