Strategic response to Australia’s housing problems long overdue

Apr 3, 2024
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In just four years since the advent of COVID-19, Australia’s house prices have climbed by a dizzying 50%. Defying orthodox expectations that property inflation would be quelled by rising interest rates, that upward trend has continued even since the RBA’s monetary tightening phase began in mid-2022, with prices up by 12% in that period alone.

And, with advertised rents also climbing by an extraordinary 50%, nationally, since March 2020 -vastly exceeding contemporary wage growth – it has become harder to contest the widespread claims that Australia is experiencing ‘housing crisis’.

But while dramatic in themselves, these are only the latest symptoms of a chronically under-performing housing system that increasingly weighs on Australia’s economic as well as social well-being. Young adult home ownership has been trending down for decades, while homelessness and rental stress have surged since the millennium.

In part, these developments reflect a deeply-embedded tradition of official complacency and neglect, as well as mistaken political choices. But, as we argue in a newly-published article, they also attest to a failure of policymaking due to a long-term degeneration in housing system governance and policymaking, bedevilled by the Commonwealth-state divide.

Clearly apparent since the late 1990s, this trajectory has seen a weakening sense of national direction on housing, increasing fragmentation of responsibilities and declining bureaucratic capacity. Over a longer timescale, the post-war era has seen Canberra’s explicit attention to housing being, at best, episodic. At worst, the direction of travel has represented a ‘long term abrogation of responsibility and narrowing of the [housing] policy agenda’.

Refuting the familiar excuses for Commonwealth inaction, especially a lack of constitutional license, we contend that national strategic leadership is essential to the fundamental policy re-set required.

Housing-related powers in the Australian Constitution

Despite the importance of the issue and its rising popular and electoral salience, a meaningful national housing policy or plan has been absent in Australia since the post-war reconstruction schemes of the Curtin Government in the 1940s. A central factor here is the status and positioning of housing within the governance and institutions of the Australian Federation.

True, Australia’s Constitution (Section 51) designates no powers to legislate on housing or urban issues, as such. Rather, the nation’s founding charter is conventionally understood as delegating housing and urban-related decision making to state governments. Nevertheless, the Commonwealth has regularly legislated on housing using the Constitution’s external affairs power or by agreement with the states and territories.

Moreover, there is in fact a range of constitutionally-prescribed Commonwealth policy responsibilities that hugely affect the housing system. Most importantly these include banking (e.g. housing finance regulation), taxation (including property-associated income tax settings), social security (e.g. housing-related transfer payments) and immigration (a crucial component of housing demand).

In other words, under a holistic conception of ‘housing policy’, many of the key levers are held at the national level, and not by the states.

And, as increasingly recognised, housing system outcomes can have damaging implications for the economy as well as for population well-being and social cohesion – all important objectives for Australia as a nation. Such concerns can hardly be dismissed as irrelevant to federal administrative obligations.

Even from a narrow ‘cost to government’ perspective, the Commonwealth cannot afford to disown an interest in the functioning of the housing system as seen under the Coalition governments of the 2010s. On the current trajectory of falling home ownership, for example, future budgetary challenges will arise in relation to outlays for rent assistance and for age pension expenditure, as Australia’s comparatively low age pension payment rate becomes hard to sustain in the face of more pensioners exposed to rising rents in retirement.

Therefore, on several levels, the Commonwealth’s Constitutional responsibilities and self-interest create rational imperatives for a proactive national government interest in housing.

The case for a national strategic approach in housing

Importantly, housing functions as a complex, inter-connected system in which multiple factors affect both demand and supply. Housing policy therefore extends well beyond those government departments with ‘housing’ in their name.

Without treating housing as a system, policy interventions are unlikely to be effective. Micro-measures targeted on select aspects of that system are liable to have minimal or even counter-productive impacts. Therefore, we argue that housing logically demands a strategic (rather than an incremental, reactive or piecemeal) policymaking approach.

Most state and territory governments have, over recent years, issued documents with ‘housing strategy’ in their title or strapline. Unfortunately, though, these often fail to fulfil basic criteria for strategic utility which, we would argue, must include (a) analysis of problems to be tackled, (b) clear and measurable goals, (c) identified actions to achieve goals, and (d) a costed and resourced action plan.

Further, with key housing policy levers held by the Commonwealth, state-level ‘housing strategies’ are inherently highly constrained in their potency. This only goes to emphasise the rational case for a meaningful national housing strategy, not least as an overarching framework for state-specific plans.

A key role for such a document could be to specify national housing policy objectives that – it would be hoped – command wide support and build consensus. We suggest aiming to facilitate a system in which:

1. The market functions more smoothly; housing stock is used more efficiently

2. The energy and environmental performance of the housing stock is enhanced

3. Housing tax settings are transitioned towards tenure-neutrality

4. A more diverse range of housing forms enhances consumer choice

5. Historically rising levels of housing affordability stress and homelessness are reversed.

Prospects under the Albanese Government

In its first two years of existence, the Albanese Government has rolled out a wide-ranging array of housing initiatives. Rebuking her Coalition predecessors, Housing Minister Julie Collins has explicitly owned the role of national policy leadership. Potentially the most significant aspect of this could be the national housing and homelessness plan pledged as part of the ALP’s 2022 election platform.

On the up-side, this is envisaged by the Minister as setting out ‘a 10-year national vision [that] will consider the full spectrum of housing and homelessness challenges, from homelessness to home ownership’.

On the down-side, though, the Plan’s sluggish and low-profile development so far highlights its modest standing among official priorities. Beyond this, the mistaken delegation of Plan development to the Department of Social Services instead of Housing Australia has become glaringly evident in the platitudinous ‘issues paper’ published in 2023 as the declared foundation for the project, and in the similarly anodyne summary of consultation responses issued earlier this year.

It is expected that the Plan will be published shortly. It may be that the best that can be hoped for is that the document can be treated as a provisional output; a stepping-stone to a more substantive and ambitious effort to be produced in the next term of government.

Albeit with some discontinuities, the past 75 years have seen the opposite of a trajectory towards a national housing policy. That must be reversed. While recent decades have seen immense economic, social and demographic changes, the vast bulk of Australia’s key housing system settings (e.g. on tax and social security) have remained essentially frozen since the last century, and devolution of housing policymaking to the states and territories has failed. A fundamental overhaul is well overdue.

The case that a national housing policy is ruled out by the Australian Constitution is overstated. In delivering some of its key constitutionally-assigned responsibilities, the Commonwealth is heavily invested in the effective operation of the housing system over which it – and not the states – in fact wields greatest influence.

Only through a nationally-co-ordinated approach can Australia begin to redress the damaging social and economic impacts of housing stress and inequality that are continuing to grow.


‘Towards a national housing policy for the 2020s’ by Hal Pawson and Vivienne Milligan is a published as a (free to download) chapter in the newly-released book ‘Australian Urban Policy: Prospects and Pathways’, edited by Rob Freestone, Bill Randolph and Wendy Steele (ANU Press)

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