Much press has been dedicated lately to the issue of housing affordability as nearly every available measure shows that we are nearing a crisis point in Australia. Australian families are now on average devoting more than 30% of their household income to housing costs, well beyond the point of what has traditionally been regarded affordable.
The property industry is responding at the delivery end with an increase in the range of finance and equity packages to assist particularly first home buyers. But this is not enough. The approach to address lack of affordability should be integrated across Government, the property industry and the community. The issue of affordability is multi facetted and there is no silver bullet solution. Despite the doom and gloom, the Property Council of Australia is advocating a raft of simple remedies to help repair the situation some of which follow.
Firstly, fix the development assessment system. The current system in NSW is not outcome focused. The process is increasingly complicated, time consuming and expensive. It harbors risk and uncertainty, discouraging property, business and economic investment and development. State and Local Government appear to recognize the shortcomings but action to address it is lagging.
Secondly, Government related taxes, fees, charges and compliance costs are adding enormously to the cost of new housing. Based on contemporary research commissioned by the Residential Development Council, these costs have increased by typically between $50,000 and $100,000 in the last five years. The costs represent up to 33% of the cost of a new house and land package. The Property Council believes the drift towards “user pays” tax and regulatory models on new housing is not sustainable and raises serious questions about generational equity. Moves towards broadly based public debt to provide for urban public infrastructure should be accelerated.
Thirdly, limited land supply, induced by restrictive land release policies of state and local governments, is a significant driver of rising housing costs. Despite the recent easing of demand in NSW, the cost of land has been accelerating well ahead of the increase in cost of construction. If current land release policies do not change, Australia faces a serious shortfall of land supply relative to demand beyond 2010 and worsening rapidly into the future. Areas like the Hunter which boast a relatively healthy land stock risk suffering also as demand shifts to comparatively abundant areas quickly soaking up available supply.
The challenge for us all is not to ignore the indicators of decreasing affordability. By doing nothing, we will consign future generations of Australians to an uncertain future whereby home ownership is well beyond the reach of the greater proportion of the population.