11 April 2023

The housing crisis is a population growth crisis

This briefing note (PDF) reviews the causes of Australia’s housing crisis and finds that it cannot be solved without a major slowing of population growth.

Summary of key points

  • Australia is facing a crisis in the affordability and quality of housing which is leading to increased inequality and homelessness, threatening to shatter the social contract.
  • It is demand growth rather than supply constraints that has pushed up housing prices.
  • The connection between population growth – driven by high immigration – and high housing inflation is often ignored or denied in political circles but is accepted as an undeniable fact by almost everyone knowledgeable about the property industry.
  • Following the lull during the pandemic, the Albanese government has slammed its foot on the immigration accelerator, leading to record population growth and consequent housing stress.
  • An accumulation of ill-advised policy measures (e.g., negative gearing, reduction in capital gains tax, and first home buyer grants) have combined with accelerated population growth to create a perfect housing storm.
  • Increasing urban sprawl and densification due to population growth are causing negative environmental impacts such as habitat and biodiversity loss, urban heat island effect and increased greenhouse gas emissions from construction.
  • The solution to the housing crisis is multi-faceted. It must include a combination of tax reform, regulation, investment in public housing and a sustainable population policy that will contribute to demand management.
  • A lower net migration level is needed to slow growth and stabilise population size. Even an optimally regulated market will not prevent housing inflation in the face of endless population growth.
  • Lower, well-targeted immigration will not cause intractable skills shortages or unmanageable population ageing, but will reduce housing stress and inequality, and improve environmental amenity.

Read the housing crisis briefing note in full here. (PDF)

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