How bad is Sydney’s housing crisis? It’s an early sign of economic decline

The housing affordability issue isn’t just about intergenerational inequity: it is a warning sign of a brewing economic and social catastrophe. If we don’t fix the current crisis, it will affect us all.

Research by University of Washington associate professor Gregg Colburn has demonstrated that housing market conditions – not individual circumstances, drug use, or mental illness – are the primary drivers of homelessness rates.

Young people are leaving Sydney at an alarming rate, as the community grapples with unaffordable housing costs.Credit: Monique Westermann

Colburn, the author of Homelessness is a Housing Problem, has shown that the very conditions that plague Sydney – expensive housing markets and low vacancy rates – are the predictors of future homelessness crises. During a recent tour of the Australian eastern states sponsored by housing group Housing All Australians, his warning to more than 900 Australian business leaders was unequivocal: we have just 20 to 25 years to avoid America’s catastrophic path. Australia’s increase in homelessness is a direct result of our extraordinary house prices.

NSW Productivity Commissioner Peter Achterstraat says Sydney could become a “city with no grandchildren.” He’s right, but it’s worse than that. The Herald’s Saving Sydney series featured many young people adversely affected by the housing issue. When north shore uni student Jordan Whalland said she didn’t know anyone who’d moved out without parental support and graduate Genevieve Heggarty described Sydney as merely a “stopgap destination” for young professionals, they’re describing the early stages of economic decline.

The numbers are stark. The Leptos Review in 2021 for the federal government identified the need for 891,000 additional dwellings over 20 years – specifically 614,000 social and 276,000 affordable homes, requiring an investment of $290 billion. Housing All Australians’ economic modelling shows this crisis will cost taxpayers an additional $25 billion annually by 2032 (and growing) if left unchecked.

Look at San Francisco, where a housing crisis has led to $1.1 billion in annual homelessness services costs while its business district crumbles. Colburn’s research proves this isn’t inevitable: it’s the predictable result of not addressing housing market failure. When 31-year-old professionals like Jackie Olling can secure a 50 per cent pay rise by moving to London, we’re not just losing talent, we’re losing our economic future.

One participant’s observation that young people face two choices – “accept defeat and spend money on enjoying life or leave” – is playing out in real time. We’re witnessing a brain drain that will cripple our economic future. These aren’t just young people seeking adventure; they’re skilled professionals who see no viable future here.

When post-World War II Australia faced a housing crisis, we mobilised unprecedented resources to increase housing stock by 50 per cent between 1947 and 1961. We need similar ambition today. This isn’t about politics or social policy, it’s about our long-term economic survival.

The solution requires co-ordination between government, business and institutional investors. With just 7 per cent of Australia’s $4.1 trillion superannuation industry invested in property, we have enormous untapped potential for market-based solutions. We need innovative financing mechanisms, planning reforms and a 30-year housing strategy with bipartisan support. This is our collective problem as a society and that includes business. We must put politics aside in the national interest.

NSW Housing Minister Rose Jackson acknowledges that making Sydney a place where young people want to stay can’t be solved overnight. But we don’t have the luxury of time. Every month we delay, more talent leaves. As Krish Raja told the Herald, even established professionals in their late 30s are concluding that buying a home in Sydney is “untenable”.

This isn’t about smashed avocado or spending habits. When skilled professionals can earn more and pay less for housing in global cities like New York and London, we have a fundamental market failure. The problem isn’t young people’s choices; it’s our collective failure to address a systemic economic threat.

We don’t need more studies or blame games. We need action on a scale not seen since the 1950s. The future of our economy – and whether we’ll have a next generation to inherit it – hangs in the balance.

Robert Pradolin is the executive director of Housing All Australians.

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