A persistent and intensifying housing crisis Australia faces sees property values climbing at an unsustainable rate, leaving wage and income growth lagging significantly behind. While homeownership was once considered an achievable goal for the average Australian, it has now become a distant dream for many, creating a widening economic divide. Without bold and decisive policy action, the country risks fostering a permanent underclass of renters locked out of property ownership.
This issue stems from decades of policy shortcomings and a financial system that prioritizes escalating property values over genuine affordability. Governments, Treasury, and the Reserve Bank have historically measured economic success by rising house prices rather than ensuring stable and accessible housing for all Australians. Now, as home prices continue to climb and debt burdens increase, a fundamental shift in strategy is needed.
Housing Crisis Australia: Why Prices Keep Climbing
The steady increase in Australian property prices, particularly when compared to wage growth, paints a stark picture of the affordability crisis.
- Over the last 27 years, wages have risen by 127.5%, while housing prices have surged by 483% (Source: ABS Wage Price Index, Dallas Fed International Housing Price Report).
- Australia now has the highest household debt-to-income ratio among comparable economies, a direct result of property price inflation (Source: CBA, Bloomberg, RBA, Stats NZ, Macrobond).
This disconnect between incomes and housing costs has led to a significant affordability gap, pushing many Australians into long-term rental situations and limiting social mobility. Young families, in particular, are delaying key life decisions, such as having children, due to housing insecurity. Meanwhile, government policies—such as ongoing high immigration levels—have sustained demand, exacerbating the crisis.
Without urgent intervention, homeownership will become even more unattainable, and rental markets will continue to suffer from excessive demand, driving rents even higher.
9 Key Reforms to Restore Affordability
To address these growing challenges, Australia needs a national bipartisan housing policy aimed at stabilizing and rebalancing the market. Here are nine actionable steps that could make a real difference:
Banks currently use LMI to increase loan-to-value ratios (LVRs), protecting themselves rather than borrowers. Removing LMI or reforming its structure would limit excessive leverage and cool speculative investment in housing.
While the government has recently introduced new restrictions on foreign buyers, additional measures could be implemented to ensure property investment serves the needs of Australian residents first.
Slowing immigration until housing supply catches up could help stabilize demand and ease pressure on the market. Skilled migration policies should also prioritize workers in the construction industry to accelerate housing development.
A national housing policy should establish clear targets for each state, with penalties for underperformance (such as reduced GST revenue). This would ensure that infrastructure and planning laws facilitate, rather than hinder, much-needed housing development and aid in the current housing crisis Australia.
Public-private partnerships could be used to create long-term rental housing through government-backed infrastructure bonds. This would encourage institutional investment in affordable rental supply.
Superannuation funds and private investors should be incentivized to provide funding for mid-tier housing developments, ensuring that a steady supply of affordable homes reaches the market.
Potential tax reforms could include making rent payments tax-deductible for low-income earners or restricting negative gearing to income generated by the property itself. Government-backed infrastructure bonds could also be introduced to direct investment toward affordable housing projects.
Rather than allowing the market to crash unpredictably, the government could intervene to facilitate a gradual adjustment in property prices. This could include measures such as acquiring and restructuring unsustainable mortgages to prevent financial instability while improving affordability.
Many planning laws restrict the ability to share or co-live in existing homes, exacerbating supply issues. Reforming these laws could allow better use of existing housing stock, particularly in areas where demand is highest.
A Call for Bold Action
Fixing the housing crisis Australia will require difficult and sometimes unpopular decisions. Many of the policies that have driven home prices higher were politically convenient, favoring existing homeowners and investors at the expense of affordability. However, if Australia is to maintain its high standard of living and prevent the formation of a permanent housing underclass, decisive action is needed now.
By implementing bold reforms—ranging from taxation changes to supply-side policies—the country can ensure that future generations have access to stable, affordable housing. The alternative is a worsening crisis where homeownership becomes a privilege for the few, rather than an achievable goal for all.
Now is the time for policymakers to prioritize long-term housing stability over short-term market gains. Only by addressing the root causes of the housing crisis Australia can the nation secure a fair and prosperous future for all its citizens.
Gil Elliott is the Managing Director and Founder of Positive Income Properties. Gil has a rich background in business consulting and property investment. All of these he gained in his nearly four decades of experience in the real estate and marketing industries.
