Making housing affordable for younger Australians will require lower land prices and a major increase in housing supply. But the rush to build risks sacrificing planning standards, urban amenity and sustainability, while the labour shortage makes immigration an unavoidable part of the equation.

It seems to be dawning on some voters and political players that if housing is to be made affordable for young Australians, the price of land must fall. A large constituency of older voters see their house as their major asset and do not want this. Many are worried about whether younger generations can aspire to own houses. That’s in principle, of course, as is the wish that economic conditions change so younger Australians can get a foothold in the market.

Excuse thus some moments of panic as house prices slow, steady and begin to fall. It’s already happening in the major markets, and some predict falls of up to 10 per cent from recent peaks. That is still well more than price inflation over recent decades. But though wealthier Australians have been quite resistant to being taxed on capital gains until they are realised, they have counted on appreciation, in many cases of more than $1 million, and, as a primary dwelling, free from capital gains tax. They have decided, moreover, that they want to die with that house value and their superannuation largely intact rather than exhausted, so that they can pass it on to their descendants.

They may have helped subsidise their children’s access to the housing market but will not be happy if they come to see a loss of, say $100,000 in land value as a disinterested contribution to younger Australians in general.

Older Australians will be encouraged by some politicians to see falling prices as a wider grab for their income and assets. Such campaigns will encourage them to see political parties purporting to speak for younger Australians as the enemy. Wealth in Australia is overwhelmingly concentrated among the old, and not only because of housing assets.

Right now, falls or signs of a steadying market are not the result of new power among younger investors. They reflect uncertainty and a lack of confidence. Signs that the market was past its peak have encouraged many who were thinking of selling to cash out now, even as others have been reluctant to enter the market until they see what is happening. The biggest problem remains that industry is not turning out enough dwellings to satisfy demand.

Capturing the existing housing stock is not the main problem. It’s getting the builders to build new houses.

That’s first a problem of labour supply, but also, some insist, a problem of bureaucracy, delay and planning rules. Treating the consequences of years of inaction as a crisis has armed........

© Pearls and Irritations