Eight Housing Affordability Myths

Australians are conflicted in their attitude to this long-run change in real house prices because they are both investors in housing as an asset class and consumers of housing services. This conflicted attitude on the part of the public is reflected in confused public policies followed by Australian governments. Unfortunately, many of the policies pursued by Australian governments in the name of housing affordability, such as first home buyer grants and concessions, increase demand for housing, while failing to tackle regulatory and cost barriers to housing supply. Some policy proposals for improving housing affordability focus on demand suppression and diversion rather than augmenting housing supply. This reflects a failure to understand the relationship of these policies to the overall supply and demand for housing. However, it also reflects a number of highly persistent myths about the nature of housing markets, the dynamics of house prices, and the drivers of housing affordability that in turn condition public policy. This report seeks to tackle these myths in an effort to improve the quality of public debate about housing affordability.