Australia's Housing Market Rebuts Supply Side Housing Policies

Australia's housing market has built steadily at market rates but housing affordability has remained steady. What if building waves of new supply isn't enough to improve affordable housing options for those in need?

March 16, 2018, 9:00 AM PDT

By James Brasuell @CasualBrasuell

Australia Hotel

lkpro / Shutterstock

An article with a small committee of writers, and published by The Conversation, aims to debunk policy clichés "that keep reemerging" in the face of Australia's affordable housing shortage.

To put it simply, this article is taking aim at supply side approaches to housing policy—i.e., loosening zoning to allow for more building. In Australia, according to this article, supply is booming, but that hasn't helped lower housing costs.

Australia’s new housing supply per capita is actually very strong by international standards. Over the past decade, supply of new units and apartments has been flowing in job-rich metropolitan areas with dense populations, which are also higher-value locations.

According to the cliché, this supply response should have cooled prices. Yet dwelling price inflation has surged even in metropolitan areas where new housing supply has exceeded population growth.

The article also takes aim at the notion of filtering, "whereby older housing moves down to the affordable end of the market over time." The authors claim that the evidence for filtering is thin in the United States. As for in Australia: "in Australia there’s still no evidence to suggest new housing supply has filtered across the housing stock to expand affordable housing opportunities for low-income Australians, or that it will do so any time soon."

The authors also argue that builders would stop building as soon as prices did cool, so "high levels of supply output are rarely sustained." All of these arguments lead to the conclusion that planning reform is inadequate as affordable housing strategy. The only solution, according to the article, is a larger affordable housing sector.

Wednesday, March 14, 2018 in The Conversation


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