2. General overview of housing affordability

‘Housing affordability’ is a broad term that is used regularly in public discourse. It continues to be identified as a matter of public concern1, which contributed to the establishment of this inquiry. The phrase ‘housing affordability’ can mean different things in different contexts.
This chapter discusses housing affordability and supply from multiple angles, and thus sets the scene for the remainder of this report.
This chapter contains:
a high-level overview of what housing affordability is and how it can be measured
a summary of key housing affordability issues in Australia, including recent changes during the COVID19 pandemic and long-term trends
global context for housing affordability; and
detail on the implications of housing affordability issues.

What is housing affordability?

Definitions of housing affordability

At a high level, housing affordability can be considered in relation to the private market for purchasing or renting property and/or housing that is subsidised by the government to some degree (referred to respectively hereafter as ‘market housing’ and ‘non-market housing’). Non-market housing is often referred to as social and affordable housing. Much of the evidence to this inquiry explicitly or implicitly focused on both or one of these forms of housing.
Within market housing, housing affordability relates to multiple groups of people including those who already own a home (with or without a mortgage), those renting in the private market and intending to purchase a home, and those renting in the private market and not intending to purchase a home.
There are also individuals and families who are unable to fully afford market prices and consequently require access to non-market housing. As identified in Chapter 1, this report focuses primarily on market housing, apart from select issues relating broadly to non-market housing that are of interest to the Committee, which are covered in Chapter 4.
To avoid confusion, it is useful to distinguish housing affordability, which will be discussed further below, from affordable housing. Affordable housing is defined by the Constellation Project as ‘all housing that is affordable for low income earners.’2 Thus, housing affordability is a broad concept, whereas affordable housing falls within non-market housing.
The Australian Housing and Urban Research Institute (AHURI) defined housing affordability as ‘a measure of the degree to which a household finds it easy to afford their housing’, and noted that housing affordability can also denote individuals’ capacity to purchase a first home, and/or the ability of either renters or home owners to afford current housing costs.3
Like AHURI, the Grattan Institute also discussed housing affordability in terms of both renting and purchasing a property. On the former, the Grattan Institute stated that rental prices reflect ‘the actual cost of consuming housing services in the housing market’, and that rents vary based on ‘shifts in the balance of demand and supply of the housing stock.’4 The Grattan Institute further stated that house prices ‘are the costs of acquiring a house, and reflect the discounted net present value of future rental income… plus any expected capital gains in future.’
The Reserve Bank of Australia (RBA) told the Committee that housing affordability commonly refers to ‘the relationship between household income and household expenditure on housing’, be that expenditure in terms of house prices, mortgage repayments or rent.5 The RBA and CoreLogic distinguished between housing affordability and housing accessibility, the latter of which they broadly defined as the ability of households to purchase their first home (that is, obtain a mortgage and a housing deposit) or pay a rental bond for rental housing.6

Measuring housing affordability

Throughout the inquiry the Committee encountered many different metrics for measuring housing affordability. Some of the common metrics that were referenced included: housing purchase prices, cost and time required to save a housing deposit, mortgage payments, and rental housing prices. These metrics were often considered either in absolute terms or relative to other factors such as household income.
While less commonly referenced during the inquiry, other metrics that were identified as relevant to housing affordability included: additional costs associated with owning or renting a home such as repairs, maintenance, council rates and insurance; transaction costs buyers must pay at the time a property is purchased; the costs of any alterations or additions to a home that may be required by the personal circumstances of its occupants, such as due to mobility or disability factors; and total living costs (for example, including transport costs to get to work).7
One key question became apparent during the inquiry: housing affordability for whom? This is relevant because housing affordability varies between households and over time. As Master Builders Australia (MBA) described:
‘…a household’s affordability situation can improve or deteriorate over time as a result of mortgage interest rate variations, job loss, illness, taxation changes and many other factors.’8
While remaining cognisant of the unique circumstances facing individual households, for the purpose of this report statistics - often focusing on household cohorts - are essential to assessing housing affordability. The section below outlines some of the statistics used by submitters and witnesses to measure different aspects of housing affordability and identifies how these often focus on certain cohorts.

Home ownership and rental affordability metrics

As identified earlier in this chapter, multiple witnesses and submitters considered a household’s ability to purchase a first home as one aspect of housing affordability. The Grattan Institute outlined three factors that must be met to purchase a home: mortgage serviceability, savings for the housing deposit, and the level of risk that home buyers are willing to take on.9 Of these factors, only the level of risk that home buyers are willing to assume is flexible. Thus, many of the statistics for assessing the affordability of entering home ownership relate to either mortgage serviceability, a housing deposit, or both.
When assessing first home buyers’ capacity to enter the housing market, the focus throughout the inquiry was often on average income earners. For example, Mr Jonathan Rochford, Managing Director of Narrow Road Capital, proposed one focus within housing affordability could be ‘ensuring that the average income earner can afford to purchase an average property.’10
Submitters outlined to the Committee several common metrics to assess the ability of first home buyers to purchase a property. One was mortgage serviceability, which the RBA defined as ‘the cost of servicing mortgage debt’11; in other words, the ability to afford ongoing mortgage payments. The RBA explained that mortgage serviceability depends on mortgage interest rates, house prices, and income.
The Grattan Institute noted that ‘the share of household income required to pay the typical mortgage’ (referred to as the mortgage burden) is sometimes referenced as another measure of housing affordability and observed that this ‘more closely reflects the cash-flow costs of housing.’12
An additional affordability metric put forward by the RBA is the ratio between house prices and household incomes.13 Holding all other factors equal, if dwelling prices are growing faster than household incomes, the affordability of purchasing a home is decreasing. The RBA submitted that while this comparison can offer insight, it is important to note two factors: ‘first-home buyers typically do not purchase the average or median-priced home, but rather one that is substantially cheaper’ and first home buyers generally have a higher income than the median household; thus there are some limitations to this metric.
Other metrics referenced by the RBA are the estimated average housing deposit first home buyers require to enter the housing market, and the average time it takes to save this amount.14 AHURI noted that alongside the housing deposit, first home buyers’ ability to get mortgage approval and cover relevant transaction costs are also relevant.15
The RBA also referenced sales outcomes (more specifically, loan commitments by borrower type) as another metric to assess housing affordability for first home buyers.16 Noting that most property purchasers borrow funds, the proportion of new housing loan commitments attributed to first home buyers can also indicate the extent to which first home buyers have been able to enter the housing market.
For assessing rental housing affordability, the RBA identified that a key metric is simply the cost of renting, including moving more frequently than home owners, and noted that a common approach is to compare household incomes to rental payments.17
Whereas the focus was often on average income earners when discussing affordability in terms of home ownership, many submitters and witnesses focused on low-income earners when discussing rental affordability.18 The Grattan Institute stated that:
Rental stress for low-income households is defined as the bottom 40 per cent of households with respect to equivalised disposable household income (excluding Commonwealth Rent Assistance19), spending more than 30 per cent of gross income on rent.20
A range of other metrics for assessing rental housing affordability are available on the Australian Institute of Health and Welfare’s website.21

Housing affordability issues in Australia

As previously noted, housing affordability varies for different cohorts within Australia and depending upon the metrics used. Since multiple demand and supply factors affect housing affordability, it also fluctuates over time with changes in these variables. The section below summarises many of the housing affordability issues that were raised during the inquiry and considers both recent data as well as long-term trends.

Housing affordability during the COVID-19 pandemic

Many submitters and witnesses described to the Committee how housing affordability has changed during the COVID-19 pandemic. Given the national focus of this inquiry, the Committee focused on overall trends, while acknowledging there are many exceptions.
The Committee heard from multiple sources that house prices have increased substantially in many parts of Australia since the onset of COVID19.22 The Planning Institute of Australia (PIA) noted this is despite ‘zero net overseas migration since early 2020.’23
Data provided by Domain demonstrated this growth, with median house prices both nationally and for each capital city increasing year on year (from 2020 to 2021).24 Ms Eliza Owen, Head of Research at CoreLogic, agreed and informed the Committee that:
…in the 12 months to the end of October [2021] national dwelling values have increased 21.6 per cent, which is the highest annual growth rate since June 1989…25
While drawing attention to the fact that average first home deposits and the time taken to save a deposit have increased, in terms of actual purchases by first home buyers the RBA advised that ‘there has been a large rise in the share of new housing loan commitments from first-home buyers over recent years… suggesting that housing accessibility has improved.’26
Ms Owen from CoreLogic referenced a more recent short-term period and noted that, according to lending data from the Australian Bureau of Statistics (ABS), the mortgages secured by first home buyers dropped 13 per cent in the quarter from July to September 2021, while investor purchases grew.27
The RBA noted that due to declining interest rates, mortgage serviceability has improved over recent years.28 However, mortgage serviceability is only one aspect of entering the housing market and low interest rates can also enhance other barriers to home ownership. The RBA explained:
…lower interest rates increase capacity to borrow and pay for housing for both current owners and potential first-time buyers. Housing prices therefore tend to be bid up, which increases the size of the deposit first-time buyers must accumulate and/or reduces the size/quality of the property they can purchase.29
Domain noted that younger Australians and low-income earners have borne the brunt of negative financial impacts from the pandemic, and that ‘COVID19 will put homeownership further out of reach...’.30
Domain also highlighted how challenging it is to save a housing deposit and submitted that in 2021 it took first home buyers in most capital cities on average between two to nine months longer to save a housing deposit, than it took in 2020.31 According to Domain, in Sydney it now takes a couple, with both partners working full-time, seven years and one month to save an entry-priced housing deposit.
COVID-19 has had disparate impacts on rental affordability in different parts of Australia. The Committee heard that rents have increased in many regional and coastal areas due to an influx of people away from urban centres.32 Dr Kim Houghton, Chief Economist of the Regional Australia Institute, told the Committee that the problem is two-fold:
…it’s not just people leaving the cities that’s driving this regional population growth; it’s actually more people staying in regions. So fewer people are leaving regions to go back to the cities – that normal cycle. That means they’re not vacating their properties for housing or rent, so that’s really adding to this particular pinch point.33
The Shop, Distributive and Allied Employees’ Association (SDA) submitted that rental prices are increasing in many regional areas and noted that ‘lower income families [are] particularly vulnerable to increased rental prices.’34
The Queensland Department of Communities, Housing and Digital Economy (DCHDE) told the Committee that ‘demand for housing in Queensland has been impacted by population growth’, with ABS data showing a population increase of 0.9 per cent from March 2020 to March 2021.35 For this period this represents ‘the largest population growth in real and proportionate terms in any state and territory.’
At the same time, rents fell in many capital cities as people moved to regional areas, international migration paused, and many foreigners who were temporarily in Australia returned home.36 Ms Owen from CoreLogic illustrated this, stating:
Between March 2020 and October 2021 the City of Melbourne has seen rents in the LGA [Local Government Area] decline by 17 per cent, while rents were up 18 per cent across the Mornington Peninsula.37
In addition to assessing advertised rents, some submitters focused on tenants’ ability to meet their rental payments. Domain outlined that younger renters have been disproportionately impacted by loss or reduced income due to the COVID19 pandemic ‘with more than 30 per cent of 18 to 29-year-old and 30 to 49-year-old renters having lost some or all of their income during the recession.’38
Domain’s comments align with survey findings from the Australian National University’s National Centre for Social Research and Methods, which indicated that the proportion of Australians unable to make rental or mortgage payments on time approximately doubled from April 2020 to May 2020, with renters particularly impacted.39

Long-term housing affordability trends

While shifts in consumer preferences have occurred during the COVID-19 pandemic, it is yet to become clear whether these will be temporary or enduring and consequently, the RBA noted that ‘there may be greater than usual uncertainty in evaluating any prospective policy changes.’40
In addition to analysing recent changes, long-term trends are a key source of information regarding housing affordability in Australia. Thus, as the SDA stated, ‘COVID trends should be read in conjunction with longer-run trends in home ownership and affordability’.41
There was generally strong agreement among witnesses and submitters that the overall long-term picture for housing affordability in Australia is not positive. Mr Saul Eslake, economist and the Principal of Corinna Economic Advisory, expressed to the Committee:
Although most Australians are… physically well housed, it can no longer be said that we are, in general, affordably housed; nor can it be said that the ‘housing system’ is meeting the needs and aspirations of as large a proportion of Australians as it did a quarter of a century ago.42
In relation to first home buyers, there was broad consensus among submitters that housing affordability has deteriorated over recent decades, as evidenced by decreases in home ownership rates.43
Independent researcher Dr Cameron Murray remarked that ‘Australia was not always a nation of homeowners’ and outlined to the Committee:
We had a period after the Second World War of very heavy-handed government intervention in housing to get us up from that 42 per cent to 72 per cent homeownership over two decades…. That [heavy-handed public intervention] included rent controls on landlords to make it expensive to be a landlord so they would sell to first home buyers… We had huge government land grants and new build finance programs, and a massive amount of public housing. Fifteen per cent of new dwellings for a decade were public construction of new housing. A lot of that got sold off to tenants and privatised to boost homeownership rates.44
However, Australia’s Survey of Income and Housing shows that over the past 20 years home ownership has fallen from approximately 70 per cent to 66 per cent.45 This decline has particularly impacted low to middle-income earners and individuals between the ages of 25 to 44.46 Ms Owen from CoreLogic agreed and reiterated that: ‘There is, long term, a decline in rates of homeownership… most exacerbated in low-income cohorts…’47
Mr Eslake told the Committee that:
The decline in home ownership rates among younger age groups is almost certainly due in part to changing preferences (including partnering and having children at older ages, and greater importance attached to proximity to employment or entertainment venues): but it also undoubtedly owes more to declining affordability.48
The Committee heard that home ownership has also fallen among people approaching retirement, with the SDA noting that for those aged between 50 and 54, home ownership rates have declined 6.6 per cent from 1996 to 2016.49 Furthermore, home ownership without a mortgage is declining, dropping from 32.1 per cent in 2011 to 31 per cent in 2016.50
The Committee heard some evidence suggesting that this long-term trend of declining home ownership is likely to broadly continue. The SDA cited analytics by Trading Economics which predict that Australia’s home ownership rate will decrease to approximately 64 per cent in 2022.51 Meanwhile, longer-term modelling by the Grattan Institute predicts that just over half (57 per cent) of people over the age of 65 will own their own home by 2056.52
The Grattan Institute noted that ‘Australian dwelling prices have grown much faster than incomes, particularly since the mid-1990s’53, and explained that median property prices were approximately four times median incomes in the 1980s and early 1990s and have increased to now be approximately more than eight times median incomes (and even higher in Sydney).54 The SDA echoed this view, citing statistics which show that ‘real home prices across Australia have climbed 150% since 2000, while real wages have climbed by less than a third.’55 The RBA commented that the housing pricetoincome ratio has increased over recent decades for all states and territories.56
The RBA elaborated that ‘relatively low income growth over the past decade has also made it harder to accumulate the [housing] deposit’ and noted that over this period both the average deposit first home buyers need to enter the market and the average time it takes to save this deposit have increased.57
In terms of the rental market, the RBA noted that a greater number of Australians are now renting: approximately one third of households rented in 2018, compared to around one quarter in the late 1990s.58
Over the past decade rents have experienced slower growth than house prices.59 Nonetheless, rents have increased as a share of household income, particularly for low-income households.60 The Grattan Institute told the Committee:
More than half of low-income Australians in the private rental market suffer rental stress, especially those in capital cities. One in five working-aged households who rent are in financial stress, defined as skipping a meal, accessing charity, pawning something or not heating the home. 61

Global context

Although it is beyond the scope of this inquiry to explore housing affordability in other countries or directly compare other countries with Australia, multiple submitters and witnesses told the Committee that Australia is not unique in experiencing housing affordability challenges, and that most developed countries are experiencing a housing price boom.62
Alongside low interest rates in many parts of the globe, the RBA identified that: ‘Strong housing price increases have been seen in most advanced economies in recent decades in both nominal and real terms.’63 Mr Eslake agreed, stating:
It’s happening almost everywhere around the world [a housing boom in the aftermath of COVID-19] – including in countries which hadn’t seen rapid growth in property prices over the previous two decades, such as Germany.64
In addition to escalating house prices, Dr Murray commented on home ownership rates globally, telling the Committee that:
…declining homeownership rates in the last three decades is a common feature of most developed nation property markets. This is not a unique Australian thing. If we’re saying it’s a structural issue with Australia, we’ve got to look a bit more broadly and say maybe it’s something bigger than that.65
The Centre for Independent Studies (CIS) highlighted that by some metrics, Australia’s housing is particularly expensive compared to other countries, illustrating that according to one study, ‘Sydney and Melbourne are the third and sixth least affordable housing markets of the 92 international cities surveyed…’.66
However, Dr Luci Ellis, Assistant Governor, Economic at the RBA, cautioned against cross-country comparisons, stating:
It’s not clear to me that Australia is an outlier in terms of those metrics [comparing the affordability of cities] on prices. I recognise that you can cherry-pick those depending on which source of data you use.67
Dr Murray echoed this view and said:
You can pick and choose time periods that show you anything. If you pick the most recent 10 years, or the most recent seven years, you’ll find that, for example, Houston, Texas, increased more in price than Sydney; and you’ll find that a lot of cities in Germany also did… The fact that property cycles aren’t in sync allows a lot of picking and choosing in this.68

Implications of housing affordability issues

Why does housing affordability matter? While an answer may seem self-evident, throughout the inquiry the Committee heard a wide range of current consequences that stem from Australia’s housing affordability issues, as well as anticipated future implications should the current situation continue or worsen. This section summarises these points.
First and foremost, housing affordability issues tangibly and in some cases perpetually negatively impact the welfare of many people. Mr David Reiling, a private member of the public, called for the individuals experiencing these negative repercussions to be kept at the forefront of the inquiry, and emphasised that: ‘behind every chart showing a declining rate of home ownership are people who cannot afford homes.’69
At its most basic level, housing fulfils our human need for shelter.70 As Mr Eslake outlined:
[h]ousing…meets a variety of deeply personal needs, including those for shelter and (ideally) security. It provides a sense of attachment… and, for many people, contributes to their sense of identity.71
Throughout the inquiry the Committee heard personal stories describing how a lack of adequate affordable housing has impacted and continues to impact individuals from all walks of life. These impacts include people being ‘pushed into poverty – possibly even made homeless – by an excessive rent burden.’72 The Grattan Institute stated that ‘higher rents increase the risk of homelessness for those who are already vulnerable.’73
Ms Sarah Nelson, a housing and homelessness advocate, described to the Committee how a lack of secure housing impacted her ability to be a fully functioning member of society, stating:
The issues of housing affordability and supply have impacted on every facet of my life due to housing stress and homelessness. When you're in housing stress or you're homeless, you are in 'fight or flight' mode. You simply cannot be productive or participate in society to your full capacity. Every ounce of your energy is spent just trying to get through the day. I lived this way for decades.74
Evidence provided to the inquiry indicated that housing stress, whether that is difficulty meeting mortgage or rental payments, can harm our physical and/or mental health.75 Additionally, the Committee heard that unaffordable housing and subsequent housing stress face may contribute to domestic violence76, with Professor Andrew Beer and colleagues outlining that:
Current research draws a direct link between unaffordable housing and the incidence and impact of domestic violence against women, to which one death per week on average can be attributed.77
The National Aboriginal Community Controlled Health Organisation (NACCHO) highlighted that some Aboriginal and Torres Strait Islander people in rural and remote communities live in overcrowded housing, which increases the risk of various health problems including infection, disease, and mental health issues.78 NACCHO elaborated that: ‘a lack of quality, affordable housing contributes to the structural inequities facing Aboriginal and Torres Strait Islander people.’ Relevantly, the National Agreement on Closing the Gap 2020 includes as one outcome area that ‘Aboriginal and Torres Strait Islander people secure appropriate, affordable housing that is aligned with their priorities and needs.’79
In addition to these health implications, the Committee heard stories of the toll housing affordability issues take on young people, such as Mr David Reiling who recounted how he and his partner are weighing a difficult choice between buying their first home and starting a family; and Mr Harrison Jones who expressed frustration, stating:
I'm extraordinarily angry looking at a housing market that seems entirely stacked in favour of people who treat housing as an investment tool or a safe place to park money rather than the human right that it is.80
In terms of employment, Dr Nick Dyrenfurth, Executive Director of the John Curtin Research Centre informed the Committee that:
A lack of affordable housing, whether people are looking to buy their own home or rent, impacts on people’s ability to find jobs which are located in proximity to their community.81
The Committee further heard that many people cannot afford to live near their workplace due to unaffordable housing causing long commutes. Mr Scott Weber, Chief Executive Officer of the Police Federation of Australia, said:
We all know there are police officers around the country that commute large distances just to get to work. This can be a critical issue when there’s a disaster or a counterterrorism issue or if we need a surging of police.82
Domain noted that ‘long commute times are impacting the quality of work-life and work productivity’ and also impact individuals’ work-life balance.83 Domain explained that this not only impacts the affected individuals, but also employers because ‘when businesses have a range of employees available to them they are more likely to choose the best skill-fit for the job, improving labour market productivity.’ One study cited by Domain found that people who commute two or more hours per day have lower levels of overall job satisfaction and are more likely than those with shorter commutes to quit or lose their jobs within the next year.84
The Committee also heard about broader financial and economic implications of housing affordability issues, which explains why, as Ms Sarah Nelson recorded, housing policy ‘…sits at the intersection between economic and social policy.’85
In regional and remote areas of Australia a lack of affordable housing can make it challenging for businesses to recruit appropriately qualified employees. Mrs Caitlin Breheny, the Director of Connect Paediatric Therapy Services based in Karratha in Western Australia, detailed to the Committee:
…the lack of housing affordability up here directly relates to our difficulty in recruiting appropriate professionals to work for us. For instance, we’ve been advertising for some positions for over two years…
As a health professional business we pay our staff based on the awards, and, because of the cost of living and the cost of housing up here, we look at trying to pay everyone 30 per cent above the award. But even that is insufficient in terms of what it costs to live up here and to rent a house, so we’re losing staff.86
In addition to impacting individual businesses, the Committee was told that limited affordable housing can constrain entire towns and regions, serving as a major barrier to attracting prospective residents and essential workers such as teachers. For example, the Western Queensland Alliance of Councils highlighted that ‘the availability and diversity of quality housing stock is a key barrier to growing the economic and social potential of Western Queensland.’87
Professor Andrew Beer and colleagues explained that ‘[h]ouseholds with access to suitably located affordable housing are more likely to fully engage with the labour market, contributing to the productive capacity of the economy…’88 Thus, Professor Beer and others outlined, efficient housing systems enable improved workforce mobility, which leads to greater economic productivity.89
MBA agreed, submitting that:
A better housing affordability situation would also allow the labour market to achieve improved outcomes. This is because the process of moving from one geographic market to another would involve lower costs when it comes to deposits for rental or home purchase in addition to ongoing housing costs in the destination market. This would provide individual workers with greater mobility and allow better matching between job vacancies and the workers filling them.90
Beyond this, MBA proposed that greater housing affordability would ‘soothe wage demands and, over time, offer the opportunity for Australia’s economic competitiveness to improve relative to other countries.’91
The City Futures Research Centre in the University of New South Wales (UNSW) identified other implications of unaffordable housing, including that economic productivity may suffer due to ‘excessive housing costs borne by households crowding out consumer spending’, and ‘housing debt displacing investment in more economically productive activities’.92 Furthermore, the City Futures Research Centre stated that unaffordable housing can impact our national financial stability (see Chapter 7 for further discussion on housing and macroprudential regulation), with:
…internationally high rates of mortgage-inflated household debt compounding financial system vulnerability…93
Multiple submitters informed the inquiry that the long-term decline in home ownership, including among low income earners and Australians over the age of 50, carries significant future implications for the welfare system and subsequently for taxpayers who fund it.94 The SDA proposed that declining outright home ownership will ‘lead to poorer, more insecure retirements and a higher base living costs [sic].’95 In relation to the increasing number of Australians who will retire with a mortgage and will need to draw on their superannuation or other savings to pay it, the SDA submitted that:
…this will have a significant impact on cost of living in retirement and will grow with each successive generation. This will also place added burden on community and public housing, as well as expanding the numbers eligible for Commonwealth Rent Assistance, placing additional strain on the [C]ommonwealth budget.96
Ms Sarah Nelson echoed this view, commenting:
What will happen in 20 or 30 years time? What will happen to the taxation system? What will happen with a whole lot of people who don't own homes who don't have that fallback position? If we're talking about 40 to 60 per cent of a generation that doesn't own a home, the money they have is going to go into a dead space instead of going into an asset base. So they're insecure. What does that mean for our economy and even our welfare and health systems at a later date?97
Multiple submitters argued that housing affordability issues contribute to or are a main driver for growing wealth inequality in Australia.98 Mr Eslake of Corinna Economic Advisory acknowledged that for many Australians housing ‘…is an important means of building wealth…’.99 Thus, another consequence of worsening housing affordability, and subsequent declining home ownership, is that this limits many individuals’ ability to accumulate wealth. Mr Eslake described that:
…the inability of a growing proportion of Australians to attain home ownership is contributing to a widening in the inequality in the distribution of wealth between those who own property and those who don’t.100
Ms Owen from CoreLogic agreed, commenting that
…the long-term decline in rates of home ownership have been most exacerbated in low-income cohorts, so that would suggest that you have widening wealth inequality perpetuated through Australia’s housing system.101
On the topic of whether low interest rates are contributing to wealth inequality (via the housing market), Dr Ellis from the RBA commented:
The way I would characterise it is that it’s an intergenerational issue, that people whose parents already have homes… can end up relatively easily becoming homeowners. People whose parents rented are going to be in a much more difficult situation to actually get into housing themselves.102
The SDA elaborated on how renting as opposed to home ownership can compound inequality, stating:
Income inequality, and as a result, wealth inequality in Australia becomes even greater when we compare household incomes after accounting for housing costs such as paying rent. This is because housing costs as a proportion of income for richer households have been relatively stable (due to low interest rates) while housing costs as a proportion of income for low-income households have risen sharply (because rents have climbed faster than wages and social security benefits.103

Committee comment

The Committee acknowledges the fundamental importance of adequate housing for Australians to live happy, healthy, and productive lives. Equally, the Committee recognises the human, industry, community, and societal impacts caused by Australia’s housing affordability challenges.
Despite housing affordability being a broad concept, the Committee accepts there is a long-term trend in Australia of housing becoming more and more unaffordable for many Australians, particularly younger people.
The main measures of housing affordability – mortgage servicing costs as a proportion of average household disposable income, rents as a return on equity and as a proportion of average incomes, the value of an average deposit as expressed in terms of the time it would take to accumulate and the necessary savings and stamp duty costs, have increased dramatically in Australia over recent decades.
This has led to a reduction in the home ownership rate amongst Australians compared to historic trends, and a significant increase in the proportion of individuals and households’ budgets spent on the cost of housing over time.
The Committee also accepts that the effect of the long-term increase in the cost of housing in Australia is social division, dislocation and reduced quality of life with many people being forced to live further away from their place of employment with increasing commute times and reduced time with family and social networks.
While housing affordability is a shared issue across the globe, the severe implications of this issue for Australia enforces the need for action.

  • 1
    See for example: S Long, ‘Going, Going, Gone: What’s driving Australia’s Property Frenzy?’, ABC Four Corners, 1 November 2021, broadcast transcript, www.abc.net.au/4corners/four-corners--what’s-driving-australia’s-real-estate-frenzy/13612062, viewed 17 January 2022.
  • 2
    Constellation Project, Submission 86, p. [2].
  • 3
    Australian Housing and Urban Research Institute (AHURI), Submission 79, p. 1.
  • 4
    Grattan Institute, Submission 94, p. 3.
  • 5
    Reserve Bank of Australia (RBA), Submission 52, p. 2.
  • 6
    RBA, Submission 52, p. 2; Ms Eliza Owen, Head of Research, CoreLogic, Committee Hansard, Canberra, 17 November 2021, p. 2.
  • 7
    Master Builders Australia (MBA), Submission 125, p. 4; MGS Architects and Andy Fergus Design Strategy, Submission 77, p. 5.
  • 8
    MBA, Submission 125, p. 3.
  • 9
    Grattan Institute, Submission 94, p.5.
  • 10
    Committee Hansard, Canberra, 3 November 2021, p. 43.
  • 11
    RBA, Submission 52, p. 5.
  • 12
    Grattan Institute, Submission 94, p. 3.
  • 13
    RBA, Submission 52, p. 5.
  • 14
    RBA, Submission 52, p. 7.
  • 15
    AHURI, Submission 79, p. 1.
  • 16
    RBA, Submission 52, pages 7-8.
  • 17
    RBA, Submission 52, pages 10-12.
  • 18
    See for example: Mr Rochford, Narrow Road Capital, Committee Hansard, Canberra, 3 November 2021, p. 43; Community Housing Industry Association (CHIA), Submission 90, p. 12.
  • 19
    Commonwealth Rent Assistance is not considered as part of this report. See House of Representatives Standing Committee on Social Policy and Legal Affairs, Final report – Inquiry into homelessness, July 2021, Canberra, pages 72-75, 87.
  • 20
    Grattan Institute, Submission 94, p. 4.
  • 21
    Australian Institute of Health and Welfare, Housing affordability, 30 June 2021, www.aihw.gov.au/reports/australias-welfare/housing-affordability, viewed 13 January 2022.
  • 22
    Planning Institute of Australia (PIA), Submission 29, p. 4; Dr Nick Dyrenfurth, Executive Director, John Curtin Research Centre, Committee Hansard, Canberra, 10 November 2021, p. 50; RBA, Submission 52, p. 14.
  • 23
    PIA, Submission 29, p. 4.
  • 24
    Domain, Submission 89, p. [6].
  • 25
    Committee Hansard, Canberra, 17 November 2021, p. 1.
  • 26
    RBA, Submission 52, p. 7.
  • 27
    Committee Hansard, Canberra, 17 November 2021, pages 6-7.
  • 28
    RBA, Submission 42, p. 5.
  • 29
    RBA, Submission 42, p. 6.
  • 30
    Domain, Submission 89, p. [3].
  • 31
    Domain, Submission 89, p. [12].
  • 32
    Mr Rochford, Narrow Road Capital, Committee Hansard, Canberra, 3 November 2021, p. 43; Professor Nicole Gurran and Emeritus Professor Peter Phibbs, Submission 51, p. 3.
  • 33
    Dr Kim Houghton, Chief Economist, Regional Australia Institute, Committee Hansard, Canberra, 8 November 2021, p. 13.
  • 34
    Shop, Distributive and Allied Employees’ Association (SDA), Submission 88, p. [11].
  • 35
    Queensland Department of Communities, Housing and Digital Economy (DCHDE), Submission 149, Attachment 1, p. 1.
  • 36
    Professor Gurran and Emeritus Professor Phibbs, Submission 51, p. 3; Mr Rochford, Narrow Road Capital, Committee Hansard, 3 November 2021, p. 43.
  • 37
    Committee Hansard, Canberra, 17 November 2021, p. 1.
  • 38
    Domain, Submission 89, p. [3].
  • 39
    N Biddle et al, ‘COVID-19 and mortgage and rental payments: May 2020’, Centre for Social Research and Methods, The Australian National University, June 2020, openresearch-repository.anu.edu.au/bitstream/1885/213190/1/COVID19_and_housing_
    FINAL.pdf, viewed 17 January 2022; cited in S Whyte, ‘Almost half of young people in housing stress; 15 per cent of Australians struggling to pay rent or mortgage’, The Canberra Times, 30 June 2020, p. 16; cited in SDA, Submission 88, p. [10].
  • 40
    RBA, Submission 52, p. 2.
  • 41
    SDA, Submission 88, p. [22].
  • 42
    Mr Saul Eslake, Submission 3, Attachment 2, p. [7].
  • 43
    RBA, Submission 52, pages 3-4; Mr Eslake, Submission 3, Attachment 2, p. [7].
  • 44
    Committee Hansard, Canberra, 17 November 2021, p. 21.
  • 45
    Mr David Zago, Program Manager Household Surveys Branch, Australian Bureau of Statistics (ABS), Committee Hansard, Canberra, 15 November 2021, p. 10.
  • 46
    From 1995-96 to 2017-18 home ownership rates for the second and third income quintiles dropped from 68 per cent to 61 per cent, and 73 per cent to 65 per cent respectively. Over the same period home ownership rates for those aged 25 to 34 and 35 to 44 dropped from 52 per cent to 37 per cent, and 73 to 61 per cent respectively; ABS, Exhibit 2, PowerPoint slides 2 and 3, ‘Home ownership, by income quintile’ and ‘Home ownership, by age of household reference person’.
  • 47
    Committee Hansard, Canberra, 17 November 2021, p. 6.
  • 48
    Mr Eslake, Submission 3, Attachment 2, p. [6].
  • 49
    Australian Institute of Health and Welfare, Home ownership and housing tenure, 30 June 2021, www.aihw.gov.au/reports/australias-welfare/home-ownership-and-housing-tenure, viewed 19 January 2022; cited in SDA, Submission 88, p. [6].
  • 50
    W Stone et al, ‘Home ownership remains strong in Australia but it masks other problems: Census data’, The Conversation, 27 June 2017, theconversation.com/home-ownership-remains-strong-in-australia-but-it-masks-other-problems-census-data-80068, viewed 7 February 2022; cited in SDA, Submission 88, p. [6].
  • 51
    Trading Economics, Australia Home Ownership Rate, undated, tradingeconomics.com/australia/
    home-ownership-rate, viewed 17 January 2022; cited in SDA, Submission 88, p. [4].
  • 52
    B Coates and T Chen, ‘Retiree home ownership is about to plummet. Soon little more than half will own where they live’, The Conversation, 12 April 2019; cited in SDA, Submission 88, p. [6].
  • 53
    Grattan Institute, Submission 94, p. 3.
  • 54
    J Daley and B Coates, ‘Housing affordability: re-imagining the Australian dream’, Grattan Institute, 4 March 2018, grattan.edu.au/wp-content/uploads/2018/02/901-Housing-affordability.pdf, viewed 18 January 2022, p. 16; cited in Grattan Institute, Submission 94, p. 3.
  • 55
    C Murray and J Ryan-Collins, ‘When houses earn more than jobs: how we lost control of Australian house prices and how to get it back’, The Conversation, 18 August 2020, theconversation.com/when-houses-earn-more-than-jobs-how-we-lost-control-of-australian-house-prices-and-how-to-get-it-back-144076, viewed 18 January 2022; cited in SDA, Submission 88, p. [7].
  • 56
    RBA, Submission 52, p. 5.
  • 57
    RBA, Submission 52, pages 6-7.
  • 58
    RBA, Submission 52, p. 3.
  • 59
    Grattan Institute, Submission 94, p. 4.
  • 60
    RBA, Submission 52, p. 11; Grattan Institute, Submission 94, p. 3.
  • 61
    Grattan Institute, Submission 94, p. 4.
  • 62
    Mr Louis Christopher, Managing Director, SQM Research, Committee Hansard, Canberra, 17 November 2021, p. 5; Ms Owen, CoreLogic, Committee Hansard, Canberra, 17 November 2021, p. 5.
  • 63
    RBA, Submission 52, p. 25.
  • 64
    Mr Eslake, Submission 3, p. [8].
  • 65
    Dr Murray, Committee Hansard, Canberra, 17 November 2021, p. 21.
  • 66
    Urban Reform Institute and Frontier Centre for Public Policy, Demographia International Housing Affordability: 2021 Edition, February 2021, www.demographia.com/dhi.pdf, viewed 17 January 2021; cited in Centre for Independent Studies (CIS), Submission 24, p. 5.
  • 67
    Committee Hansard, Canberra, 14 September 2021, p. 17.
  • 68
    Committee Hansard, Canberra, 17 November 2021, pages 20-21.
  • 69
    Mr David Reiling, Submission 23, p. [1].
  • 70
    RBA, Submission 52, p. 1; MBA, Submission 125, p. 6; PIA, Submission 29, p.2.
  • 71
    Mr Eslake, Submission 3, Attachment 2, p. [1].
  • 72
    City Futures Research Centre of the University of New South Wales (UNSW), Submission 42, p. 7.
  • 73
    G Johnson et al, ‘How do housing and labour markets affect individual homelessness?’, Housing Studies, 7 November 2018, DOI: 10.1080/02673037.2018.1520819, viewed 18 January 2022; cited in Grattan Institute, Submission 94, p. 6.
  • 74
    Committee Hansard, Canberra, 3 November 2021, p. 2.
  • 75
    Dr Dyrenfurth, John Curtin Research Centre, Committee Hansard, Canberra, 10 November 2021, p. 51; Professor Andrew Beer et al, Submission 54, p. 2; Mr Toby O’Connor, Chief Executive Officer, St Vincent de Paul Society National Council of Australia, Committee Hansard, Canberra, 10 November 2021, p. 48.
  • 76
    Mr O’Connor, St Vincent de Paul Society National Council of Australia, Committee Hansard, Canberra, 10 November 2021, p. 48.
  • 77
    Professor Beer et al, Submission 54, p. 2.
  • 78
    National Aboriginal Community Controlled Health Organisation (NACCHO), Submission 122, pages 3-4.
  • 79
    Australian Government, National Agreement on Closing the Gap, July 2020, www.closingthegap.gov.au/national-agreement, viewed 2 February 2022.
  • 80
    Mr Reiling and Mr Harrison Jones, Committee Hansard, Canberra, 3 November 2021, pages 3-4.
  • 81
    Committee Hansard, Canberra, 10 November 2021, p. 51.
  • 82
    Committee Hansard, Canberra, 10 November 2021, p. 51.
  • 83
    Domain, Submission 89, p. [16].
  • 84
    R Wilkins et al, ‘The Household, Income and Labour Dynamics in Australia Survey: Selected Findings from Waves 1 to 17’, Melbourne Institute: Applied Economics and Social Research, 2019, melbourneinstitute.unimelb.edu.au/_data/assets/pdf_file/0010/3398464/HILDA-Statistical-Report2019.pdf, viewed 18 January 2022, pages 84-85; cited in Domain, Submission 89, p. [16].
  • 85
    Committee Hansard, Canberra, 3 November 2021, p. 2.
  • 86
    Committee Hansard, Canberra, 3 November 2021, pages 29-30.
  • 87
    Western Queensland Alliance of Councils, Submission 140, p. 1.
  • 88
    Professor Beer et al, Submission 54, p. [3].
  • 89
    D MacLennan et al, ‘Making better economic cases for housing policies’, UNSW City Futures Research Centre, undated, cityfutures.ada.unsw.edu.au/research/projects/delivering-affordable-housing-improving-economic-arguments-housing-interventions/, viewed 18 January 2022; cited in Professor Beer et al, Submission 54, p. [3].
  • 90
    MBA, Submission 125, p. 5.
  • 91
    MBA, Submission 125, p. 5.
  • 92
    D Maclennan et al, ‘Housing: Taming the elephant in the economy’, UNSW City Futures Research Centre, University of Glasgow and University of South Australia, June 2021, cityfutures.ada.unsw.edu.au//research/projects/housing-and-economy-scenarios-australia-2025-and-2045/; cited in City Futures Research Centre UNSW, Submission 42, p. 7.
  • 93
    M Bullock and D Orsmond, ‘Housing prices and financial stability: An Australian perspective’, Hot Property, 2019, pages 195-205; cited in City Futures Research Centre UNSW, Submission 42, p. 7.
  • 94
    See for example Mr Eslake, Submission 3, Attachment 1, p. [4].
  • 95
    SDA, Submission 88, p. [6].
  • 96
    SDA, Submission 88, p. [9].
  • 97
    Committee Hansard, Canberra, 3 November 2021, p. 4.
  • 98
    Grattan Institute, Submission 94, p. 6; Mr Eslake, Submission 3, Attachment 1, p. [4]; SDA, Submission 88, p. [8].
  • 99
    Mr Eslake, Submission 3, Attachment 2, p. [1].
  • 100
    Mr Eslake, Submission 3, Attachment 1, p. [4].
  • 101
    Committee Hansard, Canberra, 17 November 2021, p. 6.
  • 102
    Committee Hansard, Canberra, 15 November 2021, p. 26.
  • 103
    SDA, Submission 88, p. [8].

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