Housing Affordability in Australia: An Intractable Problem?
A White Paper by Geoff Nunn
Page Under Development
Disclaimer: the comments and opinions expressed on this page are the personal views of the author and do not represent professional advice.
Housing Affordability in Australia: An Overview
We’ve heard a lot about the housing crisis in Australia over the last few years. It seems incredible that a nation with our wealth and advanced technological capability should be unable to provide appropriate housing for a significant percentage of the population. The problem can be summarized in five basic and interrelated categories:
The Federal Government’s National Housing Accord target of 1.2 million new dwellings by 2029 is commendable, but may be unachievable. According to the Housing Industry Association there is a likely to be a shortfall of approximately 200,000 houses required to meet demand in the Australian housing market over the next five years. A significant number of people will continue to experience housing stress for the foreseeable future without significant policy changes.
The high cost of residential housing is a barrier to entry into the market for many people. As of September 2025, the national median house price in Australia was $920,000. $1,056,444 in capital cities and $709,000 in regional areas. Even those who successfully find suitable housing may be required to spend up to 50% or more of their disposable income on mortgage repayments.
The high cost of residential housing forces up rental payments for those in the rental market. The number of people experiencing rental stress continues to grow and is related to deteriorating mental health for many.
There is a wait list of approximately 170,000 for social housing. This is a significant shortfall and highlights the fact that social housing across Australia has not kept pace with need.
It is estimated that 135,000 people in Australia are experiencing homelessness in 2025, up from 122,000 at the 2021 census. Homelessness is a multi factored issue with many varied causes. Crisis services are often stretched beyond breaking point to offer support. The high cost of residential housing and rental accommodation are just two factors contribution to homelessness.
The Federal Government continues to support a supply side solution to the housing crisis. This has its advantages from a political point of view. It avoids the need to tackle the hard issues, such as the tax treatment of investment properties, for which solutions are likely to be electorally unpopular. Various stakeholders are likely to oppose any measure which brings about a correction in our over-heated residential housing market. This is a valid concern with $11.7 trillion of our collective wealth tied up in residential housing. Any strategy that results in borrowers holding negative equity is to be avoided. Rather we need to slow growth in the market pricing for residential housing to around the CPI and make it a less attractive investment option. The scaling back of the number of speculative investors in the residential property market has the potential to re-balance the economy toward greater investment in infrastructure and other value adding industries. We have the structural, regulatory and market levers to affect this shift. However, it takes considerable political will to pull those levers to the extent required.
To summarise potential solutions to the Housing Crisis I have prepared a White Paper which has been forwarded to key decision makers. You can view the paper here (click below to download the Paper as a PDF):
The Housing Crisis in Australia: An Intractable Problem? White Paper October 2025
The Treasurer, Dr Jim Chalmers and Minister for Housing, Claire O’Neil have primary ministerial accountability to address this issue. It’s a tough call.
Secure Housing as a Basic Human Right
Secure housing needs to be regarded as a basic human right in Australia. Turning housing into an attractive investment option denies many this basic right. The Federal Government has a mandate to address housing affordability and homelessness. Some countries do it better than we do, such as Finland. See Finland’s approach to tackling homelessness: https://housingfirsteurope.eu/country/finland/
Rising house prices mean rising rents. This contributes to homelessness, and it’s not just impacting on people reliant on a government pension. A 2022 report by Council to Homeless Persons Victoria found that only 1% of housing in Victoria was affordable for people on the minimum wage ($948 per week). We are now seeing a broader demographic falling through the housing affordability cracks with more people in the low middle income bracket experiencing housing stress.
Safe, affordable and secure housing is recognised as a human right by international treaties, the Australian Human Rights Commission and Amnesty International Australia. Although, sadly, with the National Housing and Homelessness Plan Bill (2024) failed to pass the Senate late last year. This Bill would have formalised Australia’s recognition of housing as a human rights issue and required the development of a national housing and homelessness plan. https://www.amnesty.org.au/senate-committees-failure-to-support-the-right-to-housing-affirms-urgent-need-for-a-federal-human-rights-act/
The Housing Crisis: Some Underlying Issues and Considerations
The Dream of Home Ownership has been alive and well in Australia since the end of the first world war. Despite ups and downs and shifting preferences, Australians have sought to own their own homes and have worked diligently to achieve this goal. Many have borrowed heavily to achieve a secure dwelling in which to raise a family and live in a relatively peaceful environment. Some Australians took the dream further and realised the aspirational goal of a holiday house at the beach or in the country.
Housing as Retirement Savings: for some, owning a residential property is a way of saving for retirement. Some older Australians may look to sell the family home to partly fund their retirement. Particularly if they have favoured paying down their mortgage ahead of superannuation savings.
Housing as an Investment Vehicle: according to the latest figures from the ATO approximately 2.25 million Australian taxpayers have an investment property. To quote Steve Gruber from Morningstar we have become “A Nation of Landlords and Fund Managers”.[2]
Residential Property and National Wealth: a recent estimate put the combined value of residential housing in Australia at $11.7 trillion, compared to $4.3 trillion in superannuation and annual GDP of $2.6 trillion. Any move to re-align this wealth distribution will have consequences. “If house prices were to grow by less than wages, it would mean that housing would shrink in importance versus the economy. It would mean less investment going into housing and more into other areas of the economy - potentially more innovative sectors. That could spur better productivity and growth.” Source: https://www.firstlinks.com.au/nation-of-landlords-and-fund-managers
Investment in Residential Property Boosts Rental Availability: Of those 2.25 million Australians with investment properties, many place these properties into the long-term rental market. The relatively high price of entry to this market ensures that rent remains high. Most yield around 4.0% to 6.0% of capital cost per annum (higher with the impact of negative gearing and CGT concessions).
A Rise in the Number of Short Stay Rentals Has Impacted Long Term Rental Availability: the advent of various platforms for short term rental market has seen a dramatic increase in the availability of such properties. Some are former long tern rental properties, others traditional holiday houses, and yet others specifically purchased or built for that purpose. This impacts on the availability of long-term rental accommodation in many areas. Some businesses struggle to attract staff in locations where long-term rentals are unavailable.
Residential Property Lending Drives Bank Profitability: according to an Australia Institute report of October 2024 (Profit in Home Lending) the Big 4 derived around 40% of their profit from owner occupied home lending.[3] Adding investment property lending to this figure boosts the proportion of profit derived from residential lending to around 60%. A significant proportion of the Big 4’s total lending is directed toward residential housing. It affords a strong income stream in a rising market. Positive returns to shareholders follow and many superannuation funds hold significant interest in the major banks, which contributes to positive fund returns to members.
Social Housing Has Not Kept Pace with Need: as a June 2024 there were approximately 452,000 social housing dwellings in Australia. Public housing stock has declined somewhat while the gradual increase has been supplied by private providers. The wait list for social housing numbers approximately 170,000. This is a significant shortfall and no doubt contributes to homelessness. There is scope for state and territory governments to ramp-up the construction of public housing. Private providers have a role to play. But the bulk of social housing stock needs to be government funded and managed.
Rethinking the Housing Market in Australia: The Case for Structural Reform
Clearly there are a number of initiatives that could make residential housing more affordable in Australia and take the heat out of the market. Most of those listed below have been proposed elsewhere. What we need is high level strategy co-ordination across all levels of government and involving all stakeholders. Housing Australia, with an expanded mandate, is well placed to take up this role. The strategy time horizon is 10-20 years.
In making policy decisions the Federal Government needs to be conscious of not eroding the investment and savings that many Australians have in the housing market, particularly owner occupiers. Let’s have a look at what some of the policy initiatives might be (overview only). For more detail view the White Paper here:
The Housing Crisis in Australia: An Intractable Problem? White Paper October 2025
