A report into the housing crisis in Sydney and Melbourne finds flawed evidence has driven a policy response that will do little to address the root problems.
As is well known, the shortage of affordable separate housing in Sydney and Melbourne means that most first home buyers and renters cannot currently find housing suited to their needs in locations of their choice.
The dominant response from the housing industry and commentators is that governments must unlock the potential for more intensive development of the existing suburbs. From this standpoint, the recent surge in high-rise apartment construction in Sydney and Melbourne is part of the solution.
For those looking at the issue from a financial perspective, escalating housing prices is seen as a reflection of low interest rates, as well as incentives for investors to take advantage of negative gearing and capital gains tax concessions. For the Australian Prudential Regulation Authority, this means the answer is to restrict access to borrowing.
While these factors are important in contributing to the affordability crisis in housing, the issue has deeper roots that lie in the changing demographic make-up of Sydney and Melbourne’s populations. […]