I was in Sydney recently, and within less than an hour of my arrival of the airport, I was thrust into a conversation about how completely unaffordable the city was becoming. 'Bonkers' was the general consensus. But how did it get this bad and what can be done to repair the current state of affairs?
Part of the issue with home ownership is that it serves two purposes? — ?as an asset (or more appropriately, a vehicle for middle class wealth accumulation) and a home. Any government wishing to make housing affordable has to contend with homeowners who don't want to see the value of their asset drop, while simultaneously placating new entrants to the market who want to see housing become more affordable and within their reach.
Research by Rachel Ong for CEDA shows that fewer young people in 2013 (25 percentage points) own their own home compared to ownership rates for the same cohort from 1982. The home ownership rates of older cohorts has remained roughly the same. However there has been a slight increase in the proportion of home-owner investors across all age groups.
Many a commentator has pinned the housing affordability issue on young people for not being frugal. But there are a few things that are different now to generations past.
An increasing number of young people are taking on higher education debt. It is a good thing that we've been able to extend the opportunity of many more young Australians to access higher education. However, this is quite a different scenario to the one faced by Gen Xers for whom education was free (or much less than the CSP rates that undergraduate domestic students face now) and therefore had less debt to pay down.
And while there are certainly benefits to having a compulsory lifetime savings scheme in superannuation, it locks up a lot of capital and potential assets that young people could have put towards securing a deposit on a home.
These present significant constraints and imposts on the ability of young people to independently finance their own home. However in spite of all these constraints, the demand for housing has not wavered. Young Australians (and new entrants to the market) want the opportunity to call a piece of land their own, not unlike their parents and grandparents before them.
"Our focus has been so excessively drawn towards opposition to new development, that we've lost sight of the harm that