Fixing Australia’s housing affordability crisis: Vacancy taxes could be the start

The solutions to housing problems are never easy, but they can be found if governments start to look in all the right places.

The issue of housing continues to be in the spotlight, driven by persistent concerns over affordability and access. Recently, two main factors have captured attention in Australia: the substantial portion of unoccupied housing stock and the contentious idea of using superannuation funds to purchase homes.

At any given time, approximately 10 per cent of all housing stock in Australia remains unoccupied, a figure that includes both temporarily vacant properties, such as those undergoing renovations or in the process of changing ownership, and those deliberately left empty, and about half of these vacant properties are not available for use due to reasons such as being land-banked, reserved as holiday homes, or kept vacant for speculative purposes such as Airbnb rentals. This strategic withholding of property not only skews market dynamics but exacerbates the housing shortage, impacting affordability and accessibility for many Australians.

In response to this, there has been a growing call for the implementation of a vacancy tax, aimed at providing incentives for property owners to release these homes into the market. Such a tax would ideally decrease the number of persistently vacant homes, increasing supply and help to stabilise or reduce housing prices. This approach is being seriously considered by state governments in New South Wales and South Australia and given the pressing nature of the housing crisis, these proposals merit not just consideration but swift enactment.

Critics of Airbnb and similar platforms argue that they have transformed from a means for homeowners to earn extra income by renting out spare rooms into a commercial enterprise that reduces the housing stock available for long-term residents. This shift has had a pronounced effect in areas such as the Gold Coast, where the scarcity of affordable housing close to employment hubs is impacting local economies, as potential employees cannot afford to live within a reasonable distance of their workplaces.

The tax incentives currently favouring property investors are also another area of concern. These benefits contribute to market distortions by encouraging investment in real estate primarily for speculative gains rather than for providing housing. This issue is deeply entrenched, with significant resistance to change likely due to the personal financial interests and ownership of investment properties by many members in Parliament.

As Australia attempts to deal with these challenges, the focus must also shift to alternative solutions that can provide immediate relief to those most affected. Subsidised rents or temporary housing solutions could serve as interim measures to assist those in dire need, such as individuals currently living in cars or temporary accommodations.

Addressing Australia’s housing crisis requires a multifaceted approach that not only increases the supply of available homes but also ensures sustainable and equitable access to housing for all Australians. Whether through taxation reform, regulatory changes, or new and experimental financial mechanisms, the path forward must be guided by both immediate and long-term strategies to resolve this pervasive issue.

Urban planning and government intervention: The complex terrain of Australia’s housing market

The roles and interactions between government intervention and urban planning continues to significantly influence the Australian housing market. Historical initiatives such as the first homeowner grants, intended to assist Australians in purchasing their initial homes, have paradoxically contributed to inflating housing prices. While these grants were aimed at making homeownership more accessible, they inadvertently increased demand without a corresponding increase in supply, thus driving up prices and negating the grants’ intended affordability benefits.

In addition, local council zoning laws across Australia have often been critiqued for being overly restrictive, particularly in how they delineate residential, commercial, and industrial spaces. Such restrictions have constrained the development of new housing, limiting supply in areas with high demand and exacerbating the housing shortage. This shortage has not only escalated prices but also limited living options, impacting the overall quality of urban life and sustainability of cities.

In response to these challenges, the New South Wales government has initiated the Transport Oriented Development program, an innovative approach which aims to increase the density of housing near public transport hubs—specifically, within a 400-metre radius of 31 train stations across the Sydney region. By rezoning these areas to allow for the construction of up to six-story apartment buildings, the plan seeks to capitalise on existing infrastructure while promoting a more sustainable urban lifestyle, reducing reliance on private vehicles and enhancing accessibility to jobs and services.

This strategy represents an extension of the urban consolidation efforts previously seen in New South Wales and reflects a broader shift towards denser, more efficient urban living arrangements. However, these changes have not been universally welcomed—local resistance and political contention are common, as debates over urban development often stir concerns about increased congestion, the strain on local services, and the preservation of community character.

Addressing these concerns, NSW Minister for Planning, Paul Scully, emphasised the government’s commitment to tackling inherited housing challenges by delivering “well-located, well-designed, and well-built homes” that integrate seamlessly with the urban fabric. On the other side of politics, NSW Opposition Leader Mark Speakman highlighted the importance of engaging with local communities to tailor developments that meet their specific needs and infrastructure requirements, suggesting a more bottom-up approach to planning.

The tension between ‘not in my backyard’ and ‘yes in my back yard’ attitudes and the need for more inclusive, accessible housing solutions underscores a broader societal debate. This conflict often pits longer-term residents against newer, younger populations who may have different visions for their communities. Such dynamics necessitate difficult decisions from governments, which must balance immediate local concerns with the long-term strategic needs of urban areas across Australia.

The evolving nature of work, particularly the rise of remote work, also offers potential solutions for decongesting major cities like Sydney and Melbourne. Promoting remote work could alleviate the pressure on urban housing markets, encouraging population dispersal and making it feasible for more people to live in less densely populated areas. This shift could also help preserve historically significant architecture within cities by reducing the need for high-density developments in culturally sensitive areas.

It is imperative to consider sustainable living solutions that don’t only respond to current demands but anticipate future needs. The goals must remain clear: to provide affordable, accessible, and suitable housing for all Australians, fostering communities that thrive both socially and economically.

Superannuation for home buying: A controversial fix that won’t work

The ongoing debate over housing also includes the controversial proposal of allowing Australians to use their superannuation funds to purchase homes, and this approach is seen by some as a potential remedy to enable first-time home buyers to enter the market. However, detractors argue that this could lead to further inflation of housing prices by increasing demand without corresponding increases in supply and such a policy could also undermine the primary purpose of superannuation, which is to secure financial stability in retirement.

Recent polls, however, such as the most recent Essential Report, indicate a significant public backing, with 57 per cent of respondents supporting the idea of accessing superannuation for buying a first home. Despite its popularity, the policy has faced substantial criticism from economists and policymakers who caution that such measures would likely escalate property prices even further. This inflation is expected because withdrawing significant amounts of superannuation would increase demand without a corresponding increase in housing supply, thereby soaking up the available superannuation funds and potentially reducing individuals’ financial security upon retirement.

This debate underscores a broader problem with short-term, politically driven decisions that have characterised Australian housing policy over the past 30 years. Such policies are often popular for their immediate benefits but have had detrimental long-term effects on the economic landscape and the housing market. For instance, similar interventions in the past—such as the first home buyers grant—have resulted in unintended but predictable consequences such as dramatic increases in home prices, which outstripped the initial financial support provided.

This pattern of policy-making highlights the need for a more educated and economically aware approach among Australia’s political leaders. The current political environment, influenced by short electoral cycles and the selection of candidates more focused on personal or party gain rather than public service, exacerbates the issue. There is a call for substantial reform in political party dynamics and candidate selection, promoting leaders who prioritise long-term national interests over immediate electoral gains. While this is inherently a separate issue to housing, these factors are interlinked.

Any measure adding to demand—without increasing supply—will inevitably lead to higher prices and this is a fundamental concept that seems to be repeatedly overlooked in government interventions across various sectors, including housing. As observed with the first home buyers grant, initial assumptions about moderate price increases were vastly underestimated, demonstrating a profound misunderstanding of market dynamics.

Addressing these challenges requires a shift towards more sustainable economic policies that consider both immediate impacts and long-term outcomes. The suggestion that superannuation should be preserved exclusively for retirement is based on the principle of ensuring long-term financial security rather than being seen as an immediate solution to current problems like housing affordability. This approach calls for a broader vision and more profound economic strategies that look beyond the next electoral cycle, focusing instead on creating robust systems that can support the country’s economic health over decades.

Australia’s housing crisis demands a multifaceted approach that includes reforming political processes, enhancing economic understanding among leaders, and implementing policies that genuinely address the root causes of the crisis. Only then can the nation hope to achieve a stable, affordable housing market that serves the needs of all Australians, ensuring that the dream of homeownership does not compromise the financial stability of future generations.