The accelerating decline in home ownership among young people shows the great Australian dream of owning a home is becoming a nightmare, one of the nation’s leading economists has warned.
Brendan Coates, the economic policy program director at the Grattan Institute, said in order to address the housing crisis, high-density housing should be encouraged in cities, negative gearing should be abolished and the capital gains tax discount reduced.
In a wide-ranging speech on Wednesday night, Coates also called for renting to be made more attractive, including by increasing commonwealth rent assistance by 40%, and he demanded greater investment in social housing.
“Many states and local governments restrict medium- and high-density developments to appease local residents concerned about road congestion, parking problems and damage to neighbourhood character,” Coates said when delivering the Henry George commemorative lecture in Melbourne.
“Australian capital cities are more sparsely populated than cities of similar size in other developed economies [but] this is not what most Australians want.
“It is a myth that all new first-homebuyers want a quarter-acre block. Many would prefer a townhouse, semi-detached dwelling or apartment in an inner or middle suburb rather than a house on the city fringe.”
A person’s future wealth in Australia was increasingly likely to be driven by “who their parents were rather than their own talent”, Coates said.
The economist said there had been accelerated declines in home ownership rates in the past two decades.
While home ownership rates peaked at more than 71% in 1966, between 1981 and 2021, home ownership rates among 25-34 year-olds fell from more than 60% to 40%.
He said that among the poorest 40% of that age group it has more than halved, from 57% to 28%.
“Within living memory, Australia was a place where housing costs were manageable, and people of all ages and incomes had a reasonable chance to own a home with good access to jobs,” Coates said.
“But the great Australian dream of home ownership is rapidly turning into a nightmare for many young Australians.
“Since the last census, we’ve started to see accelerating declines among middle-income households too, with noticeable falls in home ownership at all age levels, and including older, middle-income households.”
Home prices are falling at their sharpest rate since the 1980s, CoreLogic data shows, after an enormous leap of 24% last year.
Coates said that despite “much recent public commentary”, income inequality was not particularly high in Australia, and nor was it getting much worse.
But when considering incomes after accounting for housing costs, inequality was growing, and the poor were being hurt the most, he said.
Wealth inequality in Australia, while still below the OECD average, has been growing over the past two decades and inheritances were only widening the gap.
“Big inheritances boost the jackpot from the birth lottery. Richer parents tend to have richer children,” Coates said.
“Among those who received an inheritance over the past decade, the wealthiest 20% received on average three times as much as the poorest 20%. Large intergenerational wealth transfers can change the shape of society. They mean that a person’s economic position can relate more to who their parents are than their own talent or hard work.”
Coates said his suggestions for addressing the problem should be considered by the federal government which has promised a national housing and homelessness plan.
He wants the commonwealth to provide incentives for states and territories to increase housing supply. He called for the building code to be strengthened and for developers to return a greater proportion of the windfalls gained by land rezoning to the community.
Julie Collins, the federal minister for housing and homelessness, said in a statement last month: “Our plan will address the complex challenges facing our housing system – from homelessness to increasing supply of social and affordable housing.”
