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Australia's Housing Crisis: Key Factors



Australia is currently experiencing a housing crisis, with a growing number of people struggling to find affordable and appropriate housing. This issue not only has a significant impact on individuals but also on the overall Australian economy.

In this blog post, we will explore the top factors contributing to Australia's housing crisis, including supply and demand issues, urbanization, wage growth, poor zoning regulations, population growth, and rising construction costs.

The Housing Crisis Defined#

A housing crisis is a situation where the demand for affordable and appropriate housing significantly exceeds the available supply, leading to negative consequences for both individuals and the economy. It manifests in various ways, such as rising rental and purchase prices, increased homelessness, overcrowded households, and longer waiting lists for public housing. Furthermore, a housing crisis can exacerbate social inequalities, impede economic growth, and undermine overall living standards.

The term "Housing Crisis" is often used in conjunction with related terms like "Rental Crisis" and "Cost of Living Crisis," as these issues are interconnected and often stem from similar underlying factors.

To understand the extent of a housing crisis, it is essential to examine factors such as affordability, availability, and quality of housing.

  • Affordability: Refers to the ability of households to meet their housing-related financial obligations without experiencing undue hardship.
  • Availability: is mainly concerned with the degree to which suitable housing options exist for households with varying needs and preferences.
  • Quality of housing: entails the physical state of properties, as well as their suitability to meet the occupants' needs in terms of size, location, and accessibility.

Top 6 Factors Contributing to Australia's Housing Crisis#

1. Lack of public housing#

One key factor contributing to the housing crisis is the lack of public housing supply. The stock of social housing in Australia has barely grown in 20 years, despite a 33% increase in the country's population 1. In 1991, social housing equated to about 6% of Australian housing; now, it has dropped to less than 4% 1.

This issue is particularly evident in states like New South Wales, where the government has sold off AUD 3 billion worth of social housing, while simultaneously failing to meet their own targets for new properties 2.

2. Urbanization#

Urbanization plays a significant role in the housing crisis due to the concentration of economic activity in urban areas. In Australia, 80% of the country's goods and services are produced on only 0.2% of the land 3. This increased demand for housing in major cities puts immense pressure on housing supply, driving up prices and exacerbating the affordability issue.

3. Stagflation and Wage Growth#

Stagflation is a term used to describe an economic situation where economic growth is low, but inflation is high. The current economic climate features stagflation. It has a high inflation rate of 7.0% 4, and the wage growth rate in Q1 2023 was only 0.8% for the quarter and 3.7% for the year 5. With the GDP growth rate forecasted to slow to 1.5% in 2023 6, and wage growth remaining relatively sticky 7, it's becoming harder for Australians to keep up with rising housing costs.

4. Poor Zoning Regulations#

Poor zoning regulations are another factor limiting the supply of housing. Detached house prices in Sydney have been raised by 73%, due to zoning regulations 8. By creating density limits and restrictions on land use, zoning policies limit the availability of land for housing developments, ultimately increasing property prices.

5. Population Growth#

Population growth is a critical factor driving housing demand in Australia. As of September 2022, Australia's estimated resident population was over 26 million, with an annual growth rate of 1.6% 9. During the 2021-22 financial year, capital cities experienced a combined growth of 205,400 people 10. This increased demand for housing, coupled with limited supply, contributes to the housing crisis.

6. Rising Construction Costs#

The cost of constructing new homes is also on the rise, with CoreLogic's Cordell Construction Cost Index (CCCI) reporting an annual growth rate of 10.2% in the 12 months to March 2023 11. This increase is driven by factors such as volatile timber prices, rising metal product prices, and unstable concrete values 11. These higher construction costs ultimately translate to increased housing prices, worsening the affordability crisis.

How has the Housing Crisis evolved?#

In Australia, the housing crisis is a pressing issue that has been growing steadily over recent years. According to the Australian Bureau of Statistics, house prices have skyrocketed by 23.7% in the past year 12, and rental prices have also experienced significant increases in major cities. As a result, the proportion of households experiencing housing stress – defined as spending more than 30% of their income on housing costs – has risen, with low- and middle-income earners being disproportionately affected.

Moreover, the waiting lists for public housing have grown increasingly longer, leaving many vulnerable individuals and families without access to affordable and secure accommodation. According to the Australian Institute of Health and Welfare, over 150,000 applicants were on waiting lists for social housing as of June 202113. Additionally, homelessness continues to rise, with around 116,000 Australians experiencing homelessness on any given night14.

Current State of the Housing Crisis in Australia#

The current state of the housing crisis in Australia is characterized by an insufficient supply of affordable housing options, which predominantly affects low-income households and vulnerable populations. Housing affordability has become a widespread issue, with many Australians priced out of homeownership and renters facing steep increases in their housing costs. Consequently, the crisis has prompted widespread public concern and debate, with calls for government intervention and policy reform to address the underlying factors contributing to the problem and mitigate its detrimental effects on Australian society.

Phillip Lowe's Response#

On June 31, 2023 Reserve Bank governor Philip Lowe suggested that Australian's should find flatmates or stay with their parents to help with the housing crisis.

This response fails to address systemic underlying issues of the housing crisis, and instead shifts the burden onto the Australian people.

Final Thoughts#

In conclusion, Australia's housing crisis is a multifaceted issue driven by a range of factors, including insufficient public housing supply, urbanization, stagnant wage growth, poor zoning regulations, population growth, and rising construction costs. Tackling this crisis requires a comprehensive and well-coordinated response from both the government and the private sector. Addressing these challenges can help improve housing affordability and quality for all Australians, fostering greater social and economic wellbeing across the nation.


  1. Grattan: A place to call home: it's time for a social housing future fund 2

  2. More than $3bn of social housing sold by NSW government since Coalition took power

  3. 83 years of Australian land-use planning

  4. ABS: Consumer Price Index, Australia

  5. ABS: Wage Price Index, Australia

  6. RBA Statement on Monetary Policy – February 2023

  7. High Inflation to Stick Around, Warn Investment Heavyweights

  8. The spatial distribution of economic value added for Australia

  9. Australian Demographic Statistics

  10. Australian Bureau of Statistics

  11. Corelogic: Australian construction costs hit new high, but signs of easing emerge 2

  12. Residential Property Prices Indexes: Eight Capital Cities

  13. Social housing waiting lists have grown, but new allocations are falling

  14. AIHW: People experiencing homelessness

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