Fixing Australia’s housing predicament

If there is one thing that’s clear from the humiliating defeat in Aston, it’s that the Liberal party has been too preoccupied with fighting over fringe social issues when we should be focused on offering genuine solutions to the biggest issue facing Australians today: a cost-of-living crisis caused by a double whammy of sharply rising inflation and even faster growing rents.

Given the Labor government’s current focus on providing expensive social housing, this article will focus housing, where their mismanagement has been egregious.

The numbers tell the story:

Vacancy rates have plummeted: from 3.4% in 2019 to 1.4% currently.

Construction of new dwellings has plummeted: commencements down 22% in the last year.

Capital city rents have skyrocketed: up 17.6% for units and 14.6% for houses in 2022.

In spite of this trend, the Labor government is pouring fuel on the fire by jacking up immigration to unprecedented levels, well beyond our capacity to build new houses.

Net migration is expected to exceed 25,000 people per month this year, most of those being students who live in single person dwellings.

Compare this with new dwelling commencements: 14,000 per month and trending downwards.

The equation is simple: we are simply letting in people faster than we can build houses for them, and as supply falls relative to demand, prices skyrocket.

Of course, immigration is a crucial source of skilled labour and necessary to addressing the acute labour shortage our nation is currently facing.

But consider this: the labour shortage may well be the product of an overheated economy, which the RBA is fighting desperately to cool. When the inevitable rise in unemployment arrives, our massive migration intake will look a whole lot less prudent, especially to those who find themselves out of work.

Instead of using immigration as a silver bullet for addressing the labour shortage, the government should be reigning in its spending, especially on construction projects which are driving up the cost of materials and labour and exacerbating the housing affordability crisis.

The mismatch between immigration and housing construction is down to a fundamental flaw in our system of government: the federal government controls migration while the state governments (and by devolution local councils) control the supply of housing.

Addressing the many inefficiencies and shortcomings of our federal system is an area of genuine opportunity for meaningful reform, and a chance for the Liberal party to put forward a positive agenda instead of the negative, ‘no’ agenda that gave us Aston.

There are many such federation reforms that could be targeted, from stopping the wasteful duplication of public service effort and resources, to GST reform and removal of inefficient state taxes such as stamp duty.

In the case of housing, stronger incentives are required to ensure state governments provide a greater supply of housing, or control should be taken out of their hands altogether. Just as it was utterly catastrophic for state governments to have power over lockdowns during COVID with the federal government footing the bill, it just as dangerous to have state governments throttling the supply of housing while the federal government supercharges the demand.

Another major opportunity for boosting housing supply is a concerted national effort to promote development of regional towns and cities and ease the burden on capital cities. In the modern era of remote work, there are two key ingredients to making regional towns attractive places to live and work: fast internet and a fast train. If we can make these two things our focus, we open up huge tracts of cheap, greenfield land that can be quickly developed to meet out housing needs.

John Howard said that he thinks we lost the last election because we didn’t have a plan for the future. It’s time we made one, and housing reform is a timely place to start.