NSW Productivity Commissioner Peter Achterstraat has perfectly captured the real cost of Sydney’s housing crisis: “If we keep playing musical chairs with too few homes, it is the youngest and lowest-income people among us who will lose.”

His words are in the forward of a new commission report What we gain by building more homes in the right places. And Achterstraat names those places closer to Sydney’s CBD where the biggest gains would flow to low-and-middle income earners. The report argues we can make Sydney better as it gets denser.

The commission’s latest report on how to make housing more affordable and make the best use of Sydney’s infrastructure unveils how unequally the housing crisis has fallen on the young. City rental prices have led to a mass exodus of people aged 30 to 40. The report finds renters would have been saved $1800 a year if the average apartment development built between 2017 and 2022 was just three storeys taller, while prices could fall by up to 40 per cent if enough stock were on the market.

In a nutshell, the report says improving housing affordability lifts living standards, enabling NSW residents to spend on things other than housing. This is especially important for younger households and other lower-income households that spend large shares of income on housing.

The report’s key findings come as a fillip to the Minns government’s policy initiative to tackle the state’s housing supply crisis by building up instead of out. It found policymakers could unlock more homes in high-demand locations by recognising the benefits, not just the costs, of allowing more people to live in existing areas. It also advocated focusing on providing access to high-quality open space, which may mean adapting existing open space to suit a community’s changing needs, and suggested taking a more strategic and balanced approach to heritage protection – preserving Sydney’s identity while allowing more homes in inner areas, enhancing the value of heritage by letting more people live near and enjoy it.

The report said there was no doubting that Sydney’s anaemic rate of home building in the early 2000s plunged to levels lower than during the Great Depression and World War II.

The shift to higher-density living in much of Sydney over the past few decades has transformed the city’s skyline. But we’re still playing catch-up on housing supply – especially in well-located suburbs where demand is strongest.

The government’s plan to tackle the soaring cost of home ownership in Sydney involves widespread high-rise rezoning, which will allow six-storey blocks within 400 metres of more than 30 of the city’s train stations from April. The report backs in housing reforms outlined by Premier Chris Minns as he faced concerted pushback from some Sydney mayors over density plans, with one absurdly claiming that turning dual occupancy on properties would turn “western Sydney into Kolkata” and end backyard cricket.