The social and economic impact of the housing affordability crisis

Font size :

While Australia’s housing affordability crisis has many dimensions, including economic repercussions, one aspect that is frequently overlooked is its negative social impact, according to Glen Anderson, a lecturer in law at the University of Newcastle.

In a recent opinion piece that was published in New Matilda, Anderson highlighted the socially corrosive nature of the housing affordability crisis. First, with median house prices surging ahead of wage growth, particularly in the eastern capitals, many young families trying to save for a mortgage deposit are forced to live for many years with parents and in-laws. This forces Aussies to squeeze into smaller living spaces and reduces material living standards across all generations.

Anderson believes this phenomenon may be contributing to Australia’s declining fertility rates. According to 2012 data from the Australian Bureau of Statistics, women on average had 1.93 children. This figure is projected to drop to a worrying 1.8 by 2026, which is well below the required 2.1 children per woman needed to sustain the country’s population.

Further complicating this situation is the reality that mothers and fathers are postponing having children until later in life. This increases the risks of medical complications (such as autism in children), and also means grandchildren are less likely to know their grandparents. 

Meanwhile, young Australian families that are forced to rent are basically painting themselves into a corner, said Anderson. With rents increasing to cover investor-landlord borrowings, young families have to increasingly resort to weekend work or relocate to alternative postcodes, dislocating children from schools and social groups. 

The picture is no less rosy in the realm of economics. “At its most basic level, the growing gap between median wages and house prices is ensuring that an ever-greater quantum of income is devoted to mortgage repayments. Household debt as a percentage of household disposable income is now at record highs,” Anderson said.

This makes the average Australian family more financially vulnerable to future interest-rate hikes. While the RBA’s official interest rates are at record lows, they will inevitably rise, wreaking havoc in the process.

Moreover, with household debt levels now in the trillions of dollars, there is less income per household available for discretionary spending. “This reduces aggregate demand for goods and services supplied by small and medium businesses, which in turn leads to stagnating wages, underemployment, casualisation and anaemic investment,” Anderson said.

“If these are not good enough reasons to act now on housing affordability, then here is the bad news: failure to act will only make the problem much worse, and result in an even larger housing bubble, that will make an even bigger economic mess when it inevitably bursts,” he said.

He went on to offer several concrete solutions to the housing affordability crisis, including reforms to negative gearing, reforms to tax concessions for capital gains, and more stringent property taxes for foreign buyers. 

“Inflationary house prices are impacting upon all generations socially and economically. It’s in everyone’s interest to tackle Australia’s housing affordability crisis,” Anderson said. 

With interest rates at their lowest for more than 50 years, there are some great rates available. The best thing to do is to compare rates from all the lenders. Let us help take the leg work out of doing this - Compare Home Loans now

Mortgage News and Articles

How to tell when a housing market is cooling How to tell when a housing market is cooling

You need to check clearance rates, listings, and the price gap, among other factors Read more

Growing demand for green apartments in Sydney Growing demand for green apartments in Sydney Both owner-occupiers and investors favour eco-friendly buildings for their energy-saving features and reduced environmental footprint ... Read more

Are property investors as rich as they appear? Are property investors as rich as they appear? A multi-property portfolio doesn’t guarantee easy millions ... Read more

Be proactive about getting a better mortgage deal Be proactive about getting a better mortgage deal Apathy could be costing you a considerable amount of money over the lifespan of your loan ... Read more

More mortgage news and articles

Sponsored Links

Saturday, Sep 23, 2017
Top Featured Rates
Top Bank Rates

Get help choosing the right home loan

Let us help you find the right home loan for your needs.

Tell us a bit about your circumstances:
  • Purpose of mortgage
  • Household Income
  • How much do you want to borrow?
  • How much deposit do you have?
  • How much is your house worth?
  • How much do you still owe on your mortgage?
  • What type of mortgage do you have?

  • How much is your new home?
  • How much do you want to borrow?
  • How soon do you want a mortgage?
  • First name
  • Last name
  • Where do you live?
  • Phone number

Special Offers

Related Keywords