Here’s a shocking truth: Australia’s ambitious plan to build 1.2 million homes by 2029 might barely scratch the surface of its housing affordability crisis. But here’s where it gets controversial—experts argue that even doubling down on this effort for decades won’t deliver the seismic shift in affordability that Australians, especially the younger generation, desperately need. So, is building more homes really the solution? Not exactly, and here’s why.
Christian Nygaard, a professor of housing economics at UNSW’s City Futures Research Centre, paints a sobering picture. According to his model, even an unprecedented construction boom over the next two decades would only modestly reduce the national house-price-to-income ratio—from 8.0 to 6.7. In Sydney, where the ratio hovers around 12, it might drop to 10. And this is the part most people miss—while increasing supply can lower prices slightly, other factors like rising incomes, tax incentives for homeowners, and fluctuating borrowing costs complicate the equation.
Economists agree that boosting supply 1% faster than household growth can reduce house prices by 2-3% over time. However, Nygaard warns that focusing solely on construction numbers oversimplifies the issue. Here’s the kicker: without addressing who buys these homes and why, we risk missing the bigger picture. The current debate sidesteps tougher conversations about tax policies that make housing investment so lucrative and urban planning that shapes where people want to live.
Nygaard isn’t against building more homes—far from it. He acknowledges the need for housing to keep up with growing populations and incomes. But he argues that policymakers must shift their focus from sheer numbers to the distribution of housing. Who benefits from these new homes? Are they affordable for those who need them most? Without answering these questions, we’re treating symptoms, not the root cause.
Now, let’s stir the pot: What if the real solution lies in rethinking tax breaks for investors or even tackling the politically untouchable capital gains tax on owner-occupied homes? Nygaard suggests that avoiding these difficult discussions could lead us to prescribe the wrong policy solutions. Building more homes is part of the answer, but it’s not the whole story.
So, what do you think? Is Australia’s housing crisis a matter of supply, or do we need to dig deeper into tax policies and urban planning? Let’s debate—the comments are open!
