Why are young people struggling to enter the housing market? How can we solve this problem?
The housing market has a unique place inside Australian culture. While the ever-increasing cost of housing is hardly an issue limited to Australia, it seems to disproportionately occupy the thoughts of Australians.
Even as we suffer one of the worst societal and economic crises in our 120-year history, there is one pervasive question at the tip of many people's tongues:
"How does this affect the housing market?"
Of course, there is a rational reason for our increasing concern about the cost of housing.
Housing is increasingly out of reach for much of the younger population. For many people growing up today, the dream of owning your own home is well and truly in tatters. But why is this the case? And how can we solve the problem?
According to the NSW Productivity Commission's 2021 White Paper report, we just aren't building enough housing. Greater Sydney has almost consistently missed housing targets for the past 15 years, resulting in an ever-growing shortage of housing.
While this shortage has shrunk ever since we closed our borders due to the pandemic, current projections pin it as a persistent problem well into the future.
However, we also need to consider that the location of housing is just as important as the supply. Building new houses in areas people are not interested in living does not serve the needs of the ever-growing NSW population.
And yet, the construction of new housing in the outer rings of Sydney has consistently outstripped the inner circle of the city. When compared to the other great cities of the world, the suburbs of inner Sydney have a shockingly low population density.
This is far from a sustainable model of housing - if we're going to make a serious attempt at rectifying these issues, we need to make changes to the underlying framework behind housing.
Among the NSW Productivity Commission report are 7 recommendations that will help NSW and Sydney better plan for the future needs of housing. Key parts of the roadmap include:
Establishing a system of incentives to encourage local governments to deliver on housing targets
Identifying where housing regulation is justified and ensuring it applies proportionate responses
Implementing measures to address the drivers of delay and uncertainty in the NSW planning system
When you combine the total impact of these recommendations, the economic benefits of building more housing are overwhelming. Should these reforms be successfully implemented, the report estimates that the resulting boost would lift the state economy by $3 billion by 2029 and $5 billion by 2041.
Of course, the typical response to any of these recommendations is that planning restrictions help preserve neighbourhood character. Locals often feel aggrieved when they perceive that too much construction is happening in their proximity. In fact, NSW Planning Minister Rob Stokes has often criticised economists who advocate for increased housing supply even though economists across the world have come to this consensus.
But our current course is not feasible in the long term. What we have been doing up until now is just not working.
We can solve the housing crisis. However, it is going to require decisive action by our state government. And maybe one day, the dream of house ownership won't be so out of reach anymore.
By Omead Musa - Bachelor of Commerce & Bachelor of Advanced Studies (Finance & Economics)