The quarter century record on housing affordability, affordability drivers, and government policy responses in Australia

Abstract

Purpose - The purpose of this paper is to analyse the record on housing affordability in Australia over the period 1985 to 2010, conceptually link this with the purported demand and supply drivers given in the literature, and comment on government policy responses. The paper also provides a suggested framework for future research on housing affordability. Design/methodology/approach - The paper employs descriptive analysis of measures of affordability using commercial and other information. In addition, the paper undertakes analysis of the affordability drivers and government responses using recent governmental inquiries and other research into housing affordability. Findings - Housing affordability in Australia has worsened significantly in the past quarter century, including in both urban and regional areas, and is now among the world's most unaffordable. The main contributor at the national level has been the escalation of housing prices because of continuing strong demand arising from strong economic and population growth, the availability of cheaper and more accessible finance, and tax and other incentives for home and investor housing ownership. An additional contributor is unresponsive housing supply resulting from an extensive governmental role in land release and zoning, infrastructure charges, and building and environmental regulation. Research limitations/implications - As an analytical paper, the central aim is to summarise the findings and conclusions of other work and provide a suggested framework for future research. Accordingly, no attempt made to model directly the relationship between housing affordability, its demand and supply drivers and government policy responses. Practical implications - There is a need to reassess government policy at all levels as it relates to population, economic, urban, and environmental planning and government regulation and taxation and housing affordability. Need for future empirical work to quantify the causes and consequences of housing affordability. Originality/value - This study provides a complete account of housing affordability and policy and the literature on housing affordability in Australia over the past 25 years.