Housing Affordability - the Conundrum
It's commonly said that there's currently a housing affordability crisis in Australia. The real problem, though is land affordability; this is the largest contributing factor to housing affordability in Australia. You can read about this in The Housing Affordability Problem
To increase land affordability, incomes need to be brought closer to entry-level land prices. This does not necessarily mean that existing land prices go down; if the land supplyLand supply
Land supply is a term that indicates how many blocks of land are available. Allowing subdivision (such as by rezoning from rural to residential) increases the land supply, as does limiting the amount of land that someone can buy. You can read more about it in Land Supply and Demand. is increased, the new supply at the urban fringes will sell cheaply, but the land in the suburbs will retain its high value.
Why are Land Prices high? To quote Alan Moran (Institute for Public Affairs):
Australia has such comparatively unaffordable metropolitan housing because it chooses to do so. Australia has the lowest land-to-population ratio in the developed world and probably the most efficient house-building industry in the developed world. That its metropolitan housing is so expensive (whether renting or buying), that the dream of owning one's own house requires such financial efforts, are major public policy outcomes. These outcomes are the regrettable testimony to the efforts of public policy entrepreneurs.
If (as Moran says in his final sentence), public policy is to blame, then public (or government) policy is what requires adjustment. The first question that then needs to be asked is "What government policies do or could affect housing prices, and how should they be adjusted to increase housing affordability?" I think the three main areas are:
Each of these above areas is important enough that I have dedicated an entire article to it. However, once these government policies are adjusted appropriately, the housing affordability problem should be self-solving. The question, of course, is how to get the government to adjust its policies. To read more about how to do this, see Who can do What?