Tackling a Wicked Problem – Australia’s Housing Crisis. By Emma Dawson,

By EMMA DAWSON

Owning one’s own home has long been understood as the Great Australian Dream.

From the early days of the federation, working and middle-class Australians were far more likely to own the home in which they lived than were their counterparts in Britain or the USA. In the years after World War II, home ownership began to be regarded as a key measure of security and success for ordinary Australians, as policy makers made housing security and affordability a core element of the post-war reconstruction.

To this day, an assumption of home ownership among the majority of Australian families underpins the Australian social contract: wages, social security payments and the retirement income system all rely, to a greater or lesser extent, on widespread home ownership.

Yet, in 2022, secure housing in Australia is increasingly out of reach for a growing proportion of the population — arguably more so than in any comparable country. In fact, Australia is now behind the United Kingdom when it comes to outright home-ownership, and has fallen behind the US for owner-occupied mortgaged households. The proportion of households living in a home they own outright or with a mortgage in Australia is a full 13% below the OECD average, and falling.

The difficulty of accessing the Australian housing market today is the subject of much political and public discussion. Yet the national debate about declining affordability for first home buyers too often obscures the larger issue of a lack of housing security throughout all segments of the Australian populace: for example, it is not widely understood that, on average across the life course, renters spend a larger proportion of their income on housing than do homeowners.

Similarly, recent public debate that positions home ownership primarily as a generational divide ignores the significant disparities in wealth and housing security within generations. That is, while the popular narrative holds that ‘baby boomers’ are cashed-up home owners with multiple investment properties, and are locking younger generations out of home-ownership, the evidence shows that one in four older Australians lives in permanent income poverty, and that this is primarily due to the fact that they do not own their
own home and must pay private rental costs.

What is true, and should be of utmost concern to policy makers, is that the proportion of Australians who will never own a home is increasing, with dire consequences for Australia’s future prosperity and social cohesion. Younger generations are entering the home-ownership market later than ever, if at all. The long-term impact of this trend is already apparent: the proportion of homeowners aged 55–64 years still owing money on mortgages has tripled from 14% to 47% in the last 25 years.

In a poll conducted in mid-2021, two-thirds of Australians responded that they thought home ownership was now out of reach for young people. At the same time, many economists were arguing that mortgage affordability was better than ever before and that first-time buyers just needed to grasp the opportunity of low-interest rates to get on to the property gravy train.

With interest rates now on a steep incline, this blithe advice looks even more callous, but even when money was virtually free to borrow, such an analysis failed to recognize both the lifetime cost of servicing a mortgage as a proportion of income and the increasing prohibitive price of entering the market with a secure deposit of 20 percent of the purchase price. When the increases in housing costs are outstripping people’s ability to save by several thousand dollars each month, it is becoming impossible for young intergenerational inequality and social mobility