How To Improve Housing Affordability

How to Improve Housing Affordability



General Manager

Share this post

Housing affordability is a major issue in Australia. There are solutions that will fix the problem. Learn more about the key steps required to make housing more affordable.

Affordable housing is critically important for a healthy and happy society. Australia has a massive housing affordability problem and it’s getting worse. Rents have increased dramatically across much of the country and house prices have sky-rocketed in the past 12 months. Recently, there has been increased focus on the key issue ‘How to improve housing affordability?’.

The last 20 years have demonstrated that government at all levels in Australia have not genuinely cared about affordable housing. Government controls many levers that directly affect housing affordability. In actual fact, government have a vested interest in house prices going up.

The simple facts are:

The impact of these government charges is that for every new home built in Australia, the government often generates in excess of $100,000. Government charges are sometimes 15% – 20% of the cost of a new home. This is an unsustainable model for delivering affordable housing.

Keys to Delivering Affordable Housing

The team at Affinity Property have been involved with various affordable housing projects over the past 20 years.

We’ve learned the keys to deliver more affordable housing for buyers and tenants are:

The critical question that needs to be answered by government, banks and the housing construction industry is:

How do you deliver quality housing at lower cost with an attractive investment return?” 

Banking & Finance System Does Not Support Affordable Housing

The banking and finance system is broken with respect to affordable housing. Banks sell debt. They simply want to sell more of it. That is their basic business model. The banks loved the Australian property boom. Why would they want more affordable housing? Australia needs to rethink how it wants to finance affordable housing. Institutional investors, including the National Housing & Finance Investment Corporation and Australian Superannuation Funds, need to be brought to the table, to fund the increased supply of affordable housing.

Core Logic reported in February 2022 the national median house value had increased to $718,146 – an increase of 22.4% in just 12 months.

$ 0
Median House Price

Guess what? Canstar reported in February 2022 that the average new home loan in Australia for people buying an existing property was $635,609 – an increase of 17.1% on January 2021.

$ 0
Average New Home Loan

So house prices have gone up by $131,236. At the same time the debt to purchase these homes has increased by a similar amount. The only winner in this equation is the banks.

Development Approval System Does Not Support Affordable Housing

The nation’s development approval system is broken with respect to affordable housing. The national Community Housing Industry Association (CHIA) has reported numerous times on the increasing crisis with lack of affordable housing. Poor planning and inadequate policy have contributed significantly to this crisis. There is no unifying thought or gold standard system between Federal/State/Local government. We just hear the same old rhetoric every election cycle and government at all levels engage in the ongoing blame game. It is a truly pathetic cycle.

Housing affordability in Australia is among the worst in the world. The 2022 Demographia International Housing Affordability report has Sydney ranked number 2 for least affordable housing markets internationally – only behind Hong Kong.

In Sydney, the median house price is 15 times more than the average household income. Australia has the dubious honour of having five of the top 20 least affordable cities to live anywhere in the world – Sydney, Melbourne, Adelaide, Brisbane & Perth.

Mortgagee Sale
Australias world class housing unaffordability

Actionable Steps To Improve Housing Affordability

Australia builds approximately 180,000 – 200,000 new dwellings every year (houses, units & townhouses). ABS data shows that approximately 35% (63,000 – 70,000) of these properties will become rental housing.

Problems with Home Buyer Grants

Many so-called “affordable housing” government initiatives simply drive up the cost of housing. 

Grants such as Homebuilder and other stimulus measures represent short-term political band-aids for much larger problems. Not only that, but some affordable housing programs have resulted in home buyers losing tens of thousands of dollars due to builders going bust.

Problems with Affordable Rental Schemes

Investors in some affordable rental housing programs have also been ripped off with excessive fees, damaged properties and housing companies breaching Australian Consumer Law. The Commonwealth National Rental Affordability Scheme (NRAS) experienced numerous problems throughout the scheme, with poor governance from the National Regulator. Also, with some housing programs like NRAS, tenants can become severely disadvantaged or potentially homeless at the end of the scheme.

Clealrly, Australia needs a cohesive long-term plan to address housing affordability for home buyers and tenants.

Intelligent debate and decisive action involving thought leaders in the affordable housing space is required now. Immediate actions that can be considered include:


Changes in urban planning

State and Territory governments control the urban planning system. The planning system’s primary objective is to ensure sustainable development. 

This deceptively simple goal requires planners to balance competing interests. Much urban infill is limited by planning restrictions. Greenfield development at the urban fringe is often limited by slow release of land, planning approval delays,
and uneconomic developer charges.

Minimum quotas for new housing estates

Legislating minimum affordable housing requirements in all new housing estates – for example, minimum quota requirements across the country for every new subdivision and unit development.

Innovation in planning schemes & introduction of national affordable housing planning code

Innovation could include increased use of layered community title schemes, with different ownership structures and tenures. Schemes might have low cost homes that are located on rented land. Once the home loan is paid off, the land can then be purchased at pre-agreed fixed price with a separate loan.


Introduce new funding model

The introduction of new funding models that are well designed and properly regulated will attract finance if affordable housing investment returns are stable and secure. A mix of funding models and different types of investors will create a more robust and sustainable affordable housing market. The Australian Government should also introduce changes to the tax system to stimulate and reward investment in affordable housing.

Government funding tied to delivery of desired housing

Federal and state funding tied to delivery of minimum affordable housing quotas and minimum design standards that support low-cost sustainable living. (i.e. solar orientation, universal housing design, flood proofing, energy efficient design, etc.). 

Introduce national schemes with long-term funding models

Increase rent to buy schemes that are properly regulated and that don’t allow skimming by scheme operators – possibly regulated through a national body such as the National Housing Finance and Investment Corporation (NHFIC).


Modernise commonwealth state housing agreement & regulate long-term land supply in each state and territory

Both Commonwealth and State governments will need to play a critical role in implementing a better national framework for delivering affordable housing. It is possible to achieve lasting, meaningful change. Improved land supply arrangements with guaranteed quotas delivered each year is viable. 

Improve Commonwealth-State Housing Agreement

Introduce a national shared equity scheme as recommended by the Grattan Institute. This could be part of a complete reshaping of the Commonwealth-State Housing Agreement (CSHA)

Nationally regulated long-term land supply commitments

Ensure the supply of ample and affordable development sites for delivery of affordable housing, as recommended by the Urban Development Institute of Australia (UDIA) to the Australian Government.


Increase supply of affordable rental properties

The NRAS program delivered an average of less than 5,000 new affordable rental properties each year between 2008 and 2016. The total number of properties delivered under NRAS was 38,000 homes over 8 years. For every NRAS rental property leased, approximately 70 – 80 people applied for the rental property. Clearly, there was a massive shortfall of affordable rental properties under NRAS.

There is compelling evidence to quadruple the supply of affordable rental properties to 20,000-plus new dwellings per annum. There is also a strong argument to modify the Commonwealth Rent Assistance (CRA) program to include more existing homes and units. An improved CRA with tax incentives would encourage existing landlords to discount their rent and offer their homes as affordable rental properties in areas of high rental stress.

Legislate national affordable rental housing strategy

Introduce a national shared equity scheme as recommended by the Grattan Institute. This could be part of a complete reshaping of the Commonwealth-State Housing Agreement (CSHA)

Tax reform to incentivise more affordable rental housing

Tax reform to provide incentives for institutions and mum and dad investors to invest in affordable rental properties.

Modify Commonwealth Rent Assistance (CRA) program to include more existing homes and units. Provide tax incentives to encourage existing landlords to discount their rent and offer their homes as affordable rental properties in areas of high rental stress.

There are hundreds of very smart people across Australia who have contributed great ideas over many years to improving housing affordability. If Commonwealth & State Governments are truly committed to improving housing affordability and reducing rental stress, Australia can have a legislated solution within 6 months.
The Australian public deserves it.
Call us now