Housing is less affordable now. Lets get a committee together!
Australia's housing affordability inquiry is on its seventh hearing — while the construction pipeline is going backwards. When does analysis become organised delay?
The Senate Select Committee on Intergenerational Housing Inequity held its seventh public hearing this week, this time in Perth. Seven hearings. A committee formed specifically to examine the gap between what older Australians paid for housing and what younger Australians face today. The gap, for what it is worth, is enormous, well-documented, and has been growing for the better part of three decades.
Australia has been inquiring into housing affordability for so long that the inquiry itself has become a genre
There is nothing wrong with parliamentary inquiries as a mechanism. They can surface evidence, give affected communities a voice, and occasionally embarrass governments into action. The problem is not the tool, it is the frequency with which the tool gets used in place of doing anything. Australia has been inquiring into housing affordability for so long that the inquiry itself has become a genre.
The basic structural problem is not a mystery. Supply has not kept pace with demand, particularly in the major cities. Planning systems restrict density in the places where people most want to live. Negative gearing and the capital gains tax discount create a tax environment that rewards holding property as an investment asset, which pushes prices higher and reduces the proportion of stock available to owner-occupiers. The 50 per cent capital gains tax discount, a Senate inquiry has already found, functions broadly as designed — it is just that what it is designed to do has distributional consequences that favour asset holders over everyone else.
The construction pipeline, meanwhile, is going backwards. New dwelling approvals fell 1.1 per cent in May, with the multi-unit segment, the category that typically delivers the most affordable urban housing, dropping more than 10 per cent. You cannot hold seven hearings about intergenerational housing inequity while the number of homes being approved to build is declining, and treat these as unrelated facts.
A committee is cheaper than a tax reform. A hearing in Perth generates less hostile mail than a change to negative gearing.
Demand-side concessions are well-tested and demonstrably counterproductive
What does a committee recommend? Usually a mix of demand-side concessions and calls for further work on supply. The demand-side concessions are, at this point, well-tested and demonstrably counterproductive. As we have covered before, first home buyer grants have repeatedly failed to improve affordability — when supply is constrained, handing buyers more money does not lower prices, it just allows sellers to charge more of it. The money moves from the public purse into existing owners' equity, and the underlying problem stays exactly where it was.
The supply-side recommendations tend to be more substantive. Planning reform, density targets, build-to-rent incentives, changes to the tax treatment of investment property. These are the levers that would actually shift the structural picture. They are also the levers that attract the most political resistance, because the people who benefit from the current settings are not shy about saying so, and they vote in higher numbers than the people locked out of the market.
The political system has a revealed preference for being seen to act over actually acting
This is the dynamic that makes committee work feel, after a while, like organised delay. Not because the participants are acting in bad faith — many of the witnesses at these hearings are researchers and advocates who have spent careers working on exactly these problems — but because the political system has a revealed preference for being seen to act over actually acting. A committee is cheaper than a tax reform. A hearing in Perth generates less hostile mail than a change to negative gearing.
There is a version of this committee's work that is genuinely useful: if the final report makes specific, costed, politically uncomfortable recommendations, and if the government is pressured into responding to them on the record. That would be worth seven hearings. The less useful version is a report that catalogues suffering with precision and then recommends further review.
The intergenerational housing gap is real and it is large. The people who will give evidence in Perth this week will describe it accurately. The committee members will nod, and take notes, and ask follow-up questions, and eventually produce a document that will add to the already considerable pile of documents explaining the same thing. The question Australia has been avoiding is not diagnostic. It is political: who bears the cost of fixing this, and whether the government is willing to make that case to the people who would pay it.
Seven hearings in, that question remains conspicuously unanswered.
Sources
Australian Greens — ALERT: Perth Hearing - Senate Inquiry into Intergenerational Housing
The Bearing — Why first home buyer grants make housing less affordable
The Bearing — Housing approvals slide as construction pipeline weakens
Frequently Asked Questions
Why has Australia had so many housing affordability inquiries without fixing the problem?
Parliamentary committees are politically cheaper than the reforms that would actually move prices — changing negative gearing or capital gains tax discounts generates intense opposition from property owners who vote in high numbers. Inquiries allow governments to be seen acting without bearing the cost of acting.
Do first home buyer grants actually help people get into the housing market?
No — when housing supply is constrained, grants give buyers more money to bid with but do not increase the number of homes available. Prices rise to absorb the grant, transferring money from the public purse into existing owners' equity without improving underlying affordability.
What is the capital gains tax discount and how does it affect housing prices?
The 50 per cent capital gains tax discount reduces the tax paid when an investment property is sold, making property a more attractive asset to hold relative to other investments. A Senate inquiry has found it functions as designed — but what it is designed to do favours existing asset holders over people trying to enter the market.
What housing policy changes would actually improve affordability in Australia?
Supply-side reforms have the strongest evidence behind them: planning changes that allow higher density in major cities, reform of negative gearing and the capital gains tax discount, and build-to-rent incentives. These levers face the most political resistance because they directly affect the returns of existing property investors.
What is the Senate Select Committee on Intergenerational Housing Inequity examining?
The committee is investigating the gap between what older Australians paid for housing and what younger Australians face today — a gap that has been growing for nearly three decades. It has now held seven public hearings, including one in Perth, and is expected to produce a final report with recommendations.