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Increasing The Supply Of Cost Effective Housing Products

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1.0 The Australian Chamber of Commerce and Industry in Brief 3

2.0 The Housing Affordability Crisis 3

3.0 Scope of the Issue 3

4.0 Economic Context and Background 4

5.0 Key Factors 5

5.1 Property Taxation 5

5.2 Land Supply 5

5.3 Development Application 6

6.0 Summation 6

7.0 References 7


The Australian Chamber of Commerce and Industry is Australia’s largest and most enduring business association which has represented the interests of business for over 100 years. Currently the ACCI has over 350 000 member businesses including small, medium and large enterprise across all industry sectors that employ over 4 million people. This membership includes many organisations from the building and construction industry and some of Australia’s largest and most recognisable building associations, such as; the Master Builder’s Association of Australia and the Housing Industry Association of Australia. The main role of the ACCI is to identify the concerns of the business community and take a lead role in developing policy and strategy for change. The ACCI makes submissions on this basis to Federal Government in order to bring about legislative change that will improve the regulatory framework within which business operates, leading to a healthier business environment and consequently a stronger economy (ACCI 2007)


This submission has been prepared in response to the Federal Government inquiry into the housing affordability crisis in Australia. The inquiry is welcomed by the ACCI as this issue requires urgent attention form the Federal Government along with a focused policy agenda to combat the issue. If the Federal Government is serious about reliving the pressure of housing affordability on Australian families, drastic action is required to increase the supply of affordable housing by bringing State and Territory Governments into line on excessive taxes and charges, restrictive land supply policies and excessive delays in the development approval process. By removing these obstacles the Federal Government can allow private enterprise to significantly reduce the cost of delivering new housing product to the market and increase the quantities in which it does so.


The two most well recognised measures of housing affordability are the median multiple and the 40/30 Rule. In Australia, the median multiple has generally been around 4, meaning that the cost of a median priced home was 4 times the median household income. Currently, the median multiple is an absurd 7, or even 8 times the median income in some areas (The Residential Development Council 2007). To put the issue in perspective, the 3rd Annual Demographia International Affordability Survey: 2007 which uses the median multiple to compare housing affordability internationally, places many Australian cities in the top 27 most unaffordable in the world with Sydney coming in at number 7. Another common measure of affordability is the 40/30 rule where if the bottom 40% of a nation’s income earners spend more than 30% of their income on housing, they are considered to be in a situation known as Housing Stress (Australian Housing and Urban Research Institute 2006). An extensive research paper commissioned by the Australian Housing and Urban research institute, Housing Affordability in Australia, shows that 862 000 Australians are living under housing stress. Closer inspection of the data reveals that housing stress is not limited to those pursuing the Australian dream of home ownership, in fact, half of the 862 000 who are currently experiencing housing stress occupy rental accommodation (Burke 2007). The cost of housing is also a massive problem for those who are looking to purchase their first home. At current levels, housing affordability is so bad that according to a survey by Mortgage Choice; 28% of Australians will be 41 or older before they purchase their first home (Business Review Weekly 2007). All of the statistics point to a crisis in housing affordability and a prevalent social and economic situation for the nation. Not only is the concept of home ownership in ground in the Australian psyche, the family home is the largest asset many people have and is the principal mechanism for creating house hold wealth and savings. (Residential Developer 2007:21).


For the past 11 years The Federal Government has worked hard on macro economic policy to provide an environment where interest rates and unemployment have been at historically low levels and the nation’s population has grown steadily. These conditions have contributed to a steady increase in demand for housing. Over the last 5 years however, State and Territory Governments have put a stranglehold on housing supply by rapidly increasing taxes and charges and introducing policies to limit urban growth (Real Estate Institute of Australia 2007). Due to these policies, which drive the basic cost of construction on new housing upwards, statistics are now showing a reduction in building approvals in a period where need for new housing is high. Recent figures released by the Australian Bureau of Statistics show that housing starts dropped 3.4% over the year to June. Craig James, Chief economist with ComSec says that “A lack of construction will only serve to further tighten the property market and the outlook remains dim” (Business Review Weekly 2007). In the greater macroeconomic context, the housing industry is of vital importance in providing jobs and contributing to the economic growth of the nation as it contributes 3.6% of Australian GDP (Housing Industry Association 2003). If housing starts continue to decline, there is no doubt that the pressure will spill over to a point where it will affect employment levels and economic growth. As builders are being forced



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