Reviving the Great Australian Dream

In the minds of Australians, the term “Australian dream” is even more firmly associated with homeownership than the term “American dream” is in the minds of Americans. For more than a century, Australia has enjoyed higher homeownership rates than the United States.

Yet now the Australian dream is nearly dead thanks to state land-use restrictions that have made Australian housing some of the most expensive in the world. According to Wendell Cox’s housing survey of English-speaking countries, Sydney, Australia is the second-least affordable urban area, with only Hong Kong being less affordable. Hong Kong at least has an excuse of somewhat limited land area.

Some blame the housing crisis on the “concentration of wealth,” when in fact the opposite is true: by making housing expensive, the government has concentrated wealth in the hands of existing homeowners at the expense of renters and recent and aspiring homeowners. Others suggest that Australians should dream about something else, as if there is little anyone can do to ever make housing affordable again.

In fact, it is somewhat ridiculous that urban planners have been given the power to make housing unaffordable in one of the lowest-density countries in the world. Australia has about 90 percent of the land area of the contiguous 48 states but less than 8 percent of the population. More than 89 percent of Australians live in the quarter of a percent of land that is considered urban. Despite Australia’s reputation as a big desert, more than half the country is considered suitable for agriculture, yet less than 6 percent of that agricultural land (around 3.8 percent of the nation as a whole) is needed for growing crops. Urbanization is clearly no threat to farm production.

One person who understands the housing crisis is Senator Bob Day. As former president of the Housing Industry Association, Day understands that the costs of sprawl are often imaginary while the costs of controlling sprawl are huge.

Sadly, Day’s party (Family First) has just one seat out of 76 in the Senate. But perhaps Day can use public agitation about the nation’s housing crisis to persuade parliament to pass national legislation overruling the state land-use laws that have destroyed the Australian dream.

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5 thoughts on “Reviving the Great Australian Dream

  1. FrancisKing

    It’s not just land zoning. According to the first link above:

    “Negative gearing – which allows investors to claim losses on a property, including interest or maintenance costs, against their taxable income – is one villain. Another is a capital-gains tax exemption for investors selling property. Both encourage buyers to stick their capital in a second or third home, pitting them at auctions against first-time buyers.”

  2. MJ

    “Negative gearing – which allows investors to claim losses on a property, including interest or maintenance costs, against their taxable income – is one villain. Another is a capital-gains tax exemption for investors selling property. Both encourage buyers to stick their capital in a second or third home, pitting them at auctions against first-time buyers.”

    There is nothing particularly wrong with the first of those two practices. If a homeowner is using their house as a rental property then interest and maintenance expenses are legitimate business expenses and should be deductible from taxable income. Excluding capital gains taxes from investment properties, however, is indefensible on economic grounds. We did so here in the US back in the 1990s and the results in terms artificially inflating home prices have been predictable.

  3. Scott

    msettty: There was no previous mention of banksters. Property investors were mentioned by FrancisKing. You do know the difference, right? Although, he did not provide any figures on their supposed contribution to increased housing prices (aka bubble), reduced housing supply & such.

    Home flipping can increase demand, thus prices, but that occurs in an already tightened housing market. In other words, prices are already rising, which is created mostly from reduced supply through excess zoning & other restrictions. Zoning & such also incurs various add-on costs, depending upon what each locality charges.

    Why do so many people not understand supply & demand? When there is less of a good (ie land), the price is bid up, especially on a needed good, rather than a wanted good. Looking further at vacancy rates for a housing market (urban area) can help one see how limited the housing supply supply.

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