Overcome NIMBYs and build where people want to live: The tough, but necessary housing solutions

Is our love affair with housing responsible for the problems plaguing our cities, governments and way of life?See all 7 stories.

The agenda to fix the nation’s housing crisis reads like a long political suicide note.

Tax changes hitting millions of people. Taking power away from local councils to prevent development. Greater housing density. More loans by banks to “risky” business propositions.

The solutions to making housing more affordable, and reducing the distortion to the economy caused by the property sector, are largely agreed upon. But also agreed upon is the near impossibility of winning broad political support for any substantial change.

Australian National University demographer Liz Allen says without change, the situation will only become worse. But the politics of change are almost too much for any party.

“We need reform but it may be too unpalatable for the Australian electorate,” she says.

“If you care about the future of Australia, you need to care about housing. The present system is not delivering the secure housing that we need. We have a pretty sad fate ahead of us without change.”

The solutions boil down to two key areas: supply and demand.

Build more homes

The key solution, says former Reserve Bank economist Peter Tulip, is to lift the supply of housing where people want to live.

He says expensive housing not only causes social inequities but reduces the quality of life for everyone – from the person stuck in traffic on their daily commute to the increase in homelessness in our richest cities.

“The solution is we need to put more money into housing, we need the construction sector to be a larger part of the economy. We need more housing, and here in Sydney we need more in the inner suburbs and in the eastern suburbs,” he says.

Make sure that includes more public housing, too

The federal government is trying to create a $10 billion Housing Affordability Future Fund, the earnings of which would finance the construction of 30,000 social and affordable homes over five years.

It is also hoping to strike what it calls a Housing Accord with the states, local governments, investment community and the construction sector to build one million “well-located homes” between 2024 and 2029.

Negotiations over the accord are ongoing while the government faces opposition to the housing future fund from the Coalition (which does not support the future fund) and the Greens (which argue the fund needs to be super-sized).

Housing Minister Julie Collins says the government’s policy agenda recognises that the current situation cannot continue.

“We need to get some really large-scale investments in that affordable rental space to really make a difference so that people can have secure tenure longer leases, and that it also then provides a secure return for investors,” she says.

“One tier of government can’t solve this alone, and governments need to be working with the construction sector, with builders, with industry, with institutional investors and with community housing providers. If we’re going to turn this around, we all need to be working and heading in the same direction.”

Public housing in the mid-1960s accounted for about 9 per cent of all housing. It’s now less than 4 per cent and the waitlist continues to grow.

Chris Martin, a senior research fellow with the UNSW’s City Futures Research Centre, says that after World War Two, governments sank huge amounts of money into cheap public housing, with up to 60 per cent of Australians getting a start this way.

Building societies were subsidised to lend money to prospective homeowners. Regulations covering landlords were introduced, making it much tougher for them to lift rents while requiring them to lift the quality of their offerings.

Build housing closer together, near schools, work and transport

Former prime minister and public transport aficionado Malcolm Turnbull says he can see the problems – and potential solutions – every time he rides Sydney’s railway network.

He says across much of Sydney, single-block homes run alongside rail lines and up to stations.

Former prime minister Malcolm Turnbull says housing densities around train lines need to be increased.Credit: Nick Moir

He says with the sheer amount of money spent by governments on infrastructure to service far-flung communities, there needs to be a major step-up in density levels.

“What you need is densification. One of the problems is that there needs to be more density of housing around railway stations,” he says.

“It’s no use continuing to push people further and further out west, when often people don’t want to live there, and they have to travel further to get to work and governments have to provide more and more services.”

Change planning rule to overcome NIMBYs

Tulip, now chief economist with the right-leaning Centre for Independent Studies, has one of the most aggressive ideas to deal with the nation’s housing problems.

He wants a huge overhaul of local council and state government rules that effectively prevent more housing in highly sought-after areas.

Southbank in Melbourne has one of the highest densities of any urban part of Australia. But more density is needed.Credit: Justin McManus

The right to block developments needs to be removed from councils’ hands and the NIMBY (not in my backyard) ratepayers who pressure them, he says. He also wants approval or construction targets set for each council to add to supply.

“The decisions need to be taken out of the hands of local voters. They represent those who are there, but there is no representation for the thousands of people who would be the beneficiaries of more housing,” he says.

“Local councils can have control over the type of housing and the location, but the local council needs to be told the quantity of housing.”

Housing Industry Association chief economist Tim Reardon agrees, and says local councils have no interest in future residents.

Housing Industry Association principal economist Tim Reardon says taxes on housing need to be reduced.

“They aren’t seeking to increase the supply of housing to meet residential demand. They’re seeking to protect the interests of existing ratepayers, and that’s where we strike a particularly unique market failure,” he says.

Independent economist Nicki Hutley says the problem must be dealt with as soon as possible and believes policy changes have to be directed at NIMBY communities.

“The longer we leave this problem, the greater the role for government will be, because the gap will just get wider and wider,” she says.

“We need to overcome the damn NIMBY movement.”

Make those changes through financial incentives

The last federal inquiry into the housing sector was headed by then Liberal MP Jason Falinski.

One of his recommendations, which economists and experts believe has merit, was to encourage higher urban density by offering states or local councils direct payments.

Similar to the national competition payments used by the Keating and Howard governments to get states to increase competition, these would be offered to those jurisdictions prepared to lift the density levels of their communities.

Brendan Coates, from the independent think tank The Grattan Institute, backs the idea of federal incentives payable to local councils or states to change their planning rules to get more housing constructed.

Other countries are implementing this concept. This month, the Biden administration pledged $US98 million to communities that reduced barriers to affordable housing.

Coates says payments to the states would give them a financial incentive to lift their game.

“The single largest issue is that we haven’t built enough housing, and we’ve done that for decades. The states will take their own approaches to boosting supply, but there needs to be an incentive for them to get more supply,” he says.

Reardon says local council and state government taxes have disincentivised investors, and lifted the cost of new housing. Those high charges combined with local council opposition to new homes simply mean less supply.

Per Capita CEO Emma Dawson says unaffordable housing is hurting younger generations.Credit: Luis Ascui

“You cannot make housing cheaper by taxing it more. That’s simply moronic. If you put a tax on housing, you will get less housing,” he says.

Reardon says governments should find ways to attract larger investors, such as super funds, into the private rental market, and provide incentives for foreign investors to come back into the market.

“It’s evident that there is a problem there that we’re not attracting enough investment into building residential homes,” he says.

Take a look at taxes

Executive director of progressive think tank Per Capita Emma Dawson says, apart from a huge increase in social housing, there needs to be a change to the tax system and the capital gains treatment of property.

“We’ve ended up with a situation where young families can’t afford to put a roof over their heads, older people can’t afford to downsize into their community, and we’ve got a banking system overly dependent on mortgages,” she says.

“It’s bad for the broader economy, and we’re creating this division between generations while increasing inequity.”

One part of the tax system often cited as needing reform is negative gearing, which is the ability of landlords to write-off losses on their property against all their income.

Labor under Bill Shorten took proposals to sharply reduce negative gearing to the 2016 and 2019 elections. Malcolm Turnbull’s government considered changes, including a limit on the number of properties someone could negatively gear, but abandoned the idea in 2017.

One of the reasons cited by Turnbull in his autobiography was a conversation with Reserve Bank governor Philip Lowe who expressed concern it would have a negative impact on house prices.

Supporters of negative gearing maintain that without the measure, landlords would effectively go on strike.

But critics say that despite negative gearing, the nation’s rental market remains extraordinarily tight. Another problem is an army of landlords, many only holding one or two properties, who have little experience in dealing with tenants and their issues.

Stop throwing money at the (demand) problem

Independent economist Saul Eslake says that while supply is a major issue, policies aimed at demand are just as bad.

“All the policies to give people more money to enter the property market have just made the situation worse. They have not worked. They’ve just helped make housing more expensive,” he says.

Independent economist Saul Eslake says governments keep coming up with policies that simply increase the cost of housing.Credit: Louise Kennerley

During the pandemic, as the Reserve Bank slashed official interest rates to an all-time low of 0.1 per cent, governments threw incredible amounts of money at potential home buyers.

A buyer in the Northern Territory, through various state and federal programs, could access up to $88,000 worth of assistance. In Victoria and NSW, people received about $85,000.

In its recent report into Melbourne’s housing troubles, Infrastructure Victoria found that while programs, such first home buyer grants, outwardly sound good, they failed to achieve their stated outcomes.

It said these grants drive up prices where first time buyers seek to live, deliver a windfall to sellers and put property further out of reach for those who don’t qualify for a handout.

Eslake says all policies that add to prices – such as stamp duty exemptions or discounts for first time buyers – should be axed. The money saved from ending these programs should then be spent on boosting supply.

Stamp duty should be ditched in favour of land taxes, infrastructure spending should be increased to help make it easier for people to live in more densely populated areas, developer fees on greenfield projects should be reduced while planning rules around brownfield projects should be overhauled.

“We’ve lived through a period of unforeseeably low interest rates which remarkably has done nothing for housing affordability. Affordability has got worse,” he says.

Scott Morrison went to the 2021 election with a plan to enable people early access to their superannuation, so they could secure a deposit to get into the housing market.

The Coalition’s housing spokesman, and former housing minister, Michael Sukkar still backs that policy, but says more is needed on the supply side, including incentives for states and councils to boost the nation’s housing stock.

“It’s going to have to be matched by an equally aggressive supply-side response. Counterintuitively, that’s going to require greater federal government intervention,” he says.

Cut through the noise of federal politics with news, views and expert analysis from Jacqueline Maley. Subscribers can sign up to our weekly Inside Politics newsletter here.