As the election campaign rolls on, housing has been, unsurprisingly, a major campaign focus. We’ve seen a series of housing policy announcements^[1] from across the political spectrum, including duelling announcements from the major parties in recent days.

Labor will expand access to their Help to Buy^[2] and Home Gurantee^[3] schemes by either raising or removing income limits and price caps.

The Liberals will allow first homebuyers to access their super for housing^[4] and deduct mortgage repayments from their income tax^[5], while lowering the mortgage serviceability buffer^[6].

While the politicians make big promises, it’s worth thinking about what evidence shows would actually make a meaningful difference. We have five ideas.

But first, the extent of the problem

It’s old news that we have a significant housing affordability problem in Australia.

Between 2004 and 2024, the national dwelling price to income ratio climbed rapidly from five to eight, hitting ten in Sydney^[7].

Advertised rents have climbed by more than 20%^[8] since the start of COVID.

The public housing waitlist is around 170,000 households^[9], and the number of homeless persons rose from 95,000 to 122,000^[10] in the two decades to 2021.

Policies of the past decade have not worked, and in some cases they’ve made it worse^[11]. So what would help?

Read more: Labor and Coalition support for new home buyers welcome but other Australians also struggling with housing affordability^[12]

1. It’s a cluster problem that needs a cluster solution

When we talk of the affordability crisis, what we’re really talking about is a complicated cluster of interrelated problems that make housing unaffordable to buy, build and rent.

Unaffordable housing comes from the interaction between the global economy, interest rates, inefficiencies in our construction and planning systems, as well as the outcomes of poor government policies. We should be wary of hitching our wagon to any of these alone.

Reform of the planning system, for example, is held up by some as the simple solution. While the planning system needs to be improved, it does not make up the entirety of the housing production pipeline^[13] – and it’s definitely not a magical solution.

Equal attention needs to be given to workforce shortages, productivity concerns in the construction industry, development financial risk and developer behaviour. These are all arguably as important as planning in delivering new supply.

2. It’s not about supply versus demand. It’s both

Many major housing policy announcements are either supply-focused or demand-focused^[14]. What Australia needs are coherent and integrated policy packages addressing both sides of the problem at the same time.

During this election campaign, both major parties have made a series of demand-boosting policy announcements^[15] in rapid succession, designed to put more cash into the hands of first homebuyers.

All these measures will further fuel increases in house prices at a pace that income growth cannot match.

It is true both parties have proposed supply measures, such as Labor’s plan to build 100,000 new homes exclusively for first homebuyers^[16].

However, supply lags mean these houses will not be delivered in time to offset any rise in demand (and price) from the expansion of the demand-boosting schemes.

3. Think beyond new supply

The shortfall of dwellings in Australia is certainly a problem, but even an ambitious construction target is likely to add only about 2% to our existing stock each year^[18].

We need to look to the homes already built and how they can better meet demand. This might include measures^[19] to promote granny flats, or enable additional subdivision.

4. Aim before shooting

Too many housing programs are poorly targeted. We need to zero in on those in housing need. We shouldn’t be providing assistance to those who don’t need it^[20].

Policymakers need to confront the targeting errors that afflict their proposed plans.

Currently, 11% of aspiring first homebuyers^[21] are able to meet deposit and repayment requirements to purchase a home.

Labor’s plan to lift the income limits and caps on available places^[22] will open up the scheme to many homebuyers who don’t need government-funded assistance for a home purchase.

The Liberals’ super for housing plan will also benefit higher-income^[23] and older groups.

5. Design policies through an intergenerational lens

As we live longer, policymakers must embrace the challenge of meeting the housing needs of multiple generations. This co-existence in society is the new normal.

For instance, economists have consistently called for^[24] the abolition of stamp duties in home purchases, favouring instead a broad-based land tax. This removes a major upfront sum that would otherwise be paid by both young people looking to buy their first home and older “empty nesters” looking to downsize.

Read more: 25 years into a new century and housing is less affordable than ever^[25]

Stamp duty is a major revenue source for state and territory governments. This reform needs Australian government financial support as we move to a more affordable future. Australia’s reliance on stamp duty is second only to South Korea^[26] among OECD countries.

But even if stamp duties are not abolished, we could better use this revenue to meet housing needs, including building additional social housing, bolstering homelessness services and constructing new housing infrastructure.

The elephant in the housing policy room

At the end of the day, it’s worth remembering that housing isn’t all about supply, buildings, investment and construction. Our housing is also where we live, sleep and grow old.

Our population aren’t just passive players in the housing system, they actively shape it, in their choices to buy housing, to rent, seek out major cities and renovate.

By demonstrating, de-risking, and promoting a broader range of housing options (such as making rental an attractive lifetime tenure, expanding shared equity options, or championing advances in modular and prefabricated construction), governments can shape demand towards more affordable homes.

References

1. ^{^} housing policy announcements (stories.theconversation.com)
2. ^{^} Help to Buy (www.abc.net.au)
3. ^{^} Home Gurantee (www.abc.net.au)
4. ^{^} super for housing (www.liberal.org.au)
5. ^{^} deduct mortgage repayments from their income tax (www.abc.net.au)
6. ^{^} lowering the mortgage serviceability buffer (www.liberal.org.au)
7. ^{^} five to eight, hitting ten in Sydney (www.anz.com.au)
8. ^{^} more than 20% (www.rba.gov.au)
9. ^{^} around 170,000 households (www.aihw.gov.au)
10. ^{^} 95,000 to 122,000 (www.aihw.gov.au)
11. ^{^} made it worse (www.abc.net.au)
12. ^{^} Labor and Coalition support for new home buyers welcome but other Australians also struggling with housing affordability (theconversation.com)
13. ^{^} housing production pipeline (www.parliament.nsw.gov.au)
14. ^{^} either supply-focused or demand-focused (www.abc.net.au)
15. ^{^} demand-boosting policy announcements (www.abc.net.au)
16. ^{^} 100,000 new homes exclusively for first homebuyers (www.abc.net.au)
17. ^{^} Dan Himbrechts/AAP (photos.aap.com.au)
18. ^{^} 2% to our existing stock each year (www.abs.gov.au)
19. ^{^} measures (www.ceda.com.au)
20. ^{^} who don’t need it (www.ahuri.edu.au)
21. ^{^} 11% of aspiring first homebuyers (www.ahuri.edu.au)
22. ^{^} lift the income limits and caps on available places (www.abc.net.au)
23. ^{^} benefit higher-income (theconversation.com)
24. ^{^} called for (www.ceda.com.au)
25. ^{^} 25 years into a new century and housing is less affordable than ever (theconversation.com)
26. ^{^} second only to South Korea (www.realestate.com.au)