Fixing Australia’s Housing Crisis: The Real Answer Is More Homes, Not More Handouts

Australia’s Housing Crisis Isn’t About Buyers – It’s About a Broken Supply System

The housing affordability crisis gripping Australia isn’t just a matter of who can or can’t buy a home – it’s a result of decades-long supply issues. Yet recent policy announcements from both sides of politics continue to focus on short-term demand-side fixes, offering temporary relief while avoiding the harder structural reforms that would deliver long-term results.

Both Labor and the Coalition have launched proposals aimed at helping first-home buyers – Labor’s subsidy for 5% deposits and the Coalition’s interest tax deductions on new builds – yet neither addresses the root cause: not enough homes are being built, fast enough or affordably enough, to meet our growing population.

Demand-side measures tend to boost prices rather than reduce them, as subsidies and incentives enter the market well before any new housing does. The result? Rising property prices, inflated household debt, and younger Australians further locked out of home ownership.

What’s Going Wrong with Housing Supply in Australia?

Australia needs bolder, supply-focused reforms to fix the underlying imbalance. Let’s examine the key issues and what needs to change:

1. Planning Approvals Are Choking Development

The biggest bottleneck in delivering new homes isn’t construction – it’s the approvals process. Developers across the country are entangled in outdated planning codes, excessive red tape, and inconsistent local council policies. These delays not only slow down new builds but also increase costs passed on to buyers.

Streamlining and digitising the planning process could unlock faster development, especially in high-demand urban areas where land is already serviced with infrastructure.

2. Fixing the ‘Missing Middle’ in Housing Density

Australia’s cities, particularly Sydney and Melbourne, lack sufficient medium-density housing – the “missing middle” between detached homes and high-rise apartments. Local councils, often pressured by NIMBYism (Not In My Back Yard), are reluctant to upzone, limiting the supply of townhouses, duplexes, and low-rise apartments.

The Business Council of Australia has called for widespread rezoning to address this. Auckland’s success with loosening zoning restrictions and promoting medium-density development provides a compelling model Australia should consider emulating.

3. Replace Stamp Duty with a Broad-Based Land Tax

Stamp duty is one of the most inefficient taxes in Australia. In cities like Sydney, it can account for over 30% of the cost of a new apartment. This tax discourages mobility, disincentivises downsizing, and entrenches inefficiencies in the housing market.

Replacing stamp duty with an annual land tax would lower the upfront cost of moving or buying a home, encourage better use of existing housing stock, and ultimately help free up more homes for growing families.

4. Boosting Productivity in the Construction Sector

Australia’s housing construction sector has seen productivity fall by more than 50% since the mid-1990s. Labour shortages, competing public infrastructure projects, and high material costs have all contributed to the downturn in housing completions.

The solution lies in a coordinated strategy to increase skilled migration, streamline training pathways for tradies, and prioritise residential construction over government megaprojects. Former RBA Governor Philip Lowe has warned that Australia hasn’t created the right climate to encourage private sector investment in housing – something policymakers must now urgently address.

Conclusion: It’s Time for Courageous Reform

Without serious supply-side reform, Australia risks creating a permanent underclass of renters and saddling future generations with unsustainable debt. The housing crisis is not about a lack of willing buyers – it’s about an entrenched failure to deliver enough homes where they’re needed most.

Encouraging meaningful planning reform, rezoning our urban centres for medium-density housing, overhauling inefficient taxes like stamp duty, and revitalising our construction sector are all crucial to restoring housing affordability.

Let’s stop applying band-aids to a broken system. If we truly want to fix Australia’s housing crisis, we need to start by building more homes – and fast.