Home ownership has become increasingly unaffordable because land prices have increased so much under population pressure. The only way to restore affordable housing is to increase urban density.

The cost of housing is by far the main source of cost-of-living pressure, at least for the two-thirds of households who have a mortgage or who rent.

Median house prices have risen from about four times median incomes at the beginning of this century to around 8.5 times today, and around 10 times in Sydney. Although house prices have recently started to fall in Sydney and Melbourne, nationally house prices are up by around 55 per cent since 2020.

Mortgages are therefore now much bigger, and interest rates on home loans have also doubled compared to the first two decades of this century. As a result, around half of all mortgage holders are now spending more than 30 per cent of their disposable income to cover their housing costs – a sure sign of housing stress.

Home ownership rates have therefore fallen among all ages, but especially among young people, with the latest available census data showing that the home ownership rate for 25–34-year-olds fell from more than 62 per cent in 1981 to 44 per cent in 2021 and is almost certainly even lower today.

How best to reduce housing costs

Obviously we need to bring down the cost of housing to make it more affordable. How best to do that, however, depends upon an analysis of why the cost of housing has risen so much relative to incomes.

As can be seen from the table below, median dwelling prices increased much faster than construction costs,........

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