What housing crisis? For most, there isn’t one – but look how the other third live

2 months ago 4

Opinion

December 31, 2025 — 1.30pm

This may come as a surprise given the media narrative, but Australia is not in a generalised housing crisis. Two-thirds of the nation’s householders own or are buying their homes – they are by definition not in housing crisis. The 20 per cent who own investment properties are doing just fine.

House prices in the past two decades have at least doubled and, depending on location, have increased up to tenfold. Rents are high even with market fluctuations. Australia’s home owners not only have a secure roof over their heads but are accumulating wealth in the process.

Housing is a genuine crisis for the have-nots, but not so much for the other 67 per cent.

Housing was only deemed in “crisis” when the offspring of these property owners found themselves locked out of the market. Unexpectedly, they joined the minority of people in this country for whom precarious housing has been the way since settler-occupation. Suddenly, the ranks of those unable to afford where they would like to live swelled dramatically. It is the rapid expansion of this minority that finally brought media and public attention to what has long been a crisis in low-cost housing.

Recognition of the problem is good. But effective redress requires addressing the behaviour that created the problem in the first place – that is, treating land and housing as investment vehicles, and extracting as much financial return from them as possible in rent or at sale.

Unfortunately, the policy approach favoured by federal and state governments to increase the supply of market housing is just creating more opportunities for the same behaviour. It still offers tax incentives to investors. It still encourages buying and selling churn. It is not bringing prices down.

Here’s the thing: no amount of increase in density or market-rate housing supply will reduce prices. Nor do governments and most Australians want it to. The market will continue to produce housing that generates profit for its developers and owners, and prices will continue to rise. So let’s do away with the conceit that an increase in supply will increase affordability. It will not. Studies in Vancouver and Toronto, which experienced large increases in housing supply in the 2000s and 2010s, show that far from slowing down, price growth rose more rapidly.

There are various reasons for this but key is that local and global investors see safe investment opportunities in Canada, as they do in the UK and Australia. The lock-up and leave apartment is a purpose-built investment product.

Prosper Australia’s recent speculative vacancies report, which shows an increase in empty dwellings in Melbourne, supports this analysis. Recent vacancy data from the ABS corroborates Prosper’s findings and shows that, nationwide, 9.7 per cent of dwellings are not used as a primary residence (accounting for holiday houses and such) and 1.3 per cent are long-term vacant.

It is clear to those who observe the high-rise new builds springing up all over our major cities that many apartments are empty. Some are owned by the developers and are not selling because those trying to buy a home cannot afford them. Others have been bought by investors who leave them vacant rather than reduce the rent, which would deflate the value of the asset that they might borrow against or sell when they are ready.

The point is, market prices are simply beyond the reach of a growing number of people whose incomes are not keeping pace. The filtering theory so beloved of classical economists – where a supply of new apartments incentivises people to upgrade and vacate their older apartments, which then become available to lower-income households – is a fantasy in markets like these.

So what is to be done, given the dominance of people invested in property investment and maintenance of high prices? There is only one option: Australia needs more non-market low-cost housing, which can only be produced at scale by governments. Of course, many governments worldwide did just this for the best part of the past century.

Government-built public housing once constituted almost 7 per cent of Australia’s housing. It now sits at about 4 per cent in Sydney and 3 per cent in Melbourne – a result of the global shift towards small government and privatisation in the 1980s and failure to keep pace with population growth.

This combines with the financialised private housing market to exacerbate inequality. We are not in a generalised housing crisis that can be alleviated by across-the-board housing provision. We are in a very serious low to moderate-income housing crisis, which will only be solved by providing more low to moderate-income housing.

Australia needs a lot more public housing. This would enable a reversal of the filtering model, as lower-income households moving out of the private rental market and into public housing would free up lower-end rentals for people on moderate incomes.

The Victorian and NSW governments, however, are doing the opposite. The Victorian government intends to demolish Melbourne’s 44 public housing towers and push their 10,000 residents onto the list that already has more than 66,000 people waiting for a home they can afford. After the demolitions, the government says, new housing on those estates will triple the number of dwellings.

The devil is in the detail. The demolished public dwellings will be replaced by community housing units (run by non-profits but financed by corporate investors who seek returns on those investments). Their number will increase by just 10 per cent. No new public housing will be built (beyond one federal-funded replacement scheme in Carlton). The remaining two-thirds of the new dwellings will comprise a small component of “affordable housing” (renting at 90 per cent of market rate) and a much larger component of private market housing.

The first stage of Sydney’s Waterloo renewal project will soon demolish the housing of well over 1000 residents, nearly a quarter of whom have lived there for more than 20 years, and 22 per cent of whom are Indigenous. Again, these will be replaced by community and “affordable” housing and double that number in market-rate housing. On completion, the project will have destroyed 2000 public dwellings.

Will any of these actions redress the nation’s low-cost housing crisis? You be the judge.

Dr Kate Shaw is an urban geographer at the University of Melbourne.

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