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Housing crises or housing choices

Housing crises or housing choices?

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Labelling our current housing situation as a “housing crises” implies it is a short-term deadlock or impasse. It makes us think of the housing shortage like a situation that just needs diplomatic agreement between various parties such as government and industry to resolve.

If only it was that simple… While there are many issues at play it boils down to us not having enough homes. To make matters worse, there is very little new construction on the horizon. We know demand is out stripping supply but are there other ways to think about this?

History is peppered with housing supply shortages. The early 1950s, mid 70’s, and early 80’s all saw housing shortages in varying degrees around the country. In each case it took many years to unblock the supply pipeline that created the shortfall in the first place.

In each of those previous cycles the new housing supply came predominantly via suburban houses with relatively little apartment or townhouse developments. Today however we can build apartment communities with many hundred new homes relatively quickly. Unfortunately, the financial metrics for these projects are marginal or not feasible at the moment.

Understanding the extent of the shortage is also important to ensure the response is measured and doesn’t over correct.

In a recent Financial Review article, Michael Bleby – Deputy Property Editor said it best when he wrote a story saying Housing not so “impossibly unaffordable” after all. His story highlighted a recent study by US based research company Demographia, showing Sydney and Melbourne housing affordability was the second and seventh worst (most unaffordable) in the world respectively. It shows the housing price to income ratio for Sydney and Melbourne as 13.8 and 9.8 times respectively.

Michael’s story went on to cite a further study by Sydney based financier FrontYa which added apartments into the equation. By doing this, the price to income ratio fell to 9.1 and 7.6 for the two capitals respectively. Sydney dropped to 10th and Melbourne to 14th most unaffordable.

On Demogaphia’s numbers all of Australia’s 5 mainland state capitals were in the top 20 most unaffordable cities in the world. That is pretty telling in itself. It speaks to Australia’s prosperity and high standards of living which is perhaps the cross that we bear. Or is it part of our obsession with housing.

Maybe the current housing issue is not just about supply. Maybe it is also grounded by our living choices. What the FrontYa study shows is that if we embraced apartment living as a normal long term housing solution the affordability and supply of what we consider as a suitable home would be addressed more quickly.

Markets have a knack of rebalancing themselves. Part of solution may involve a shift in living norms and housing choices rather than just building more houses in more suburbs. Apartment living has been identified by governments and industry as a big piece in the puzzle to address housing at every level of affordability. It makes use of existing infrastructure and minimises the environmental impact on currently undeveloped greenfield land.

It’s worth thinking about what we can do to make apartment living a comparable alternative to stand along houses in our living choices.

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