The Grattan Institute's latest report highlights a pressing issue in Australia's housing market: the need for more affordable housing. The report suggests a bold solution: constructing townhouses to lower rents and house prices. By allowing three-storey unit blocks across Australian cities and streamlining building approvals, renters could save $1,800 annually, and the median home price could drop by $100,000. This proposal addresses a critical housing shortage in desirable areas, pushing young people out of middle suburbs. The report blames an overly restrictive planning system, which defaults to saying 'no' to new housing, for this problem. To tackle this, the think tank recommends rezoning all residential land in capital cities to accommodate up to three-storey dwellings, with six-storey buildings near transport hubs and city centres. The federal government could incentivize state and territory governments to adopt these planning changes, ensuring a more efficient and cost-effective approach to housing development. However, the report also acknowledges the efforts of some state governments to boost building rates, but notes that these initiatives fall short of the national target of 1.2 million new homes over five years. The federal government's subsidies have faced criticism for exacerbating the demand issue. House prices surged in the first month of the expanded home guarantee scheme, which provides 5% deposit support for first homebuyers. Despite this, the scheme's impact is most noticeable at the lower end of the market, where it is most prevalent. Grattan Institute, an independent economic research organization, advocates for increased supply as the solution to the housing crisis. The report calls for a review of heritage protections and enforceable housing targets for councils, emphasizing the need for a housing policy revolution. Lead author Brendan Coates states, 'Australia needs a housing policy revolution. The equation is simple: more homes in desirable areas mean lower housing costs and more vibrant, healthier cities.' The analysis highlights a 'missing middle' in Australian cities, with a lack of construction between 5 and 20 kilometers from city centres. This has resulted in low density in major cities like Sydney, Melbourne, Brisbane, Perth, and Adelaide, particularly affecting young people. Only 20% of residential land in these cities is zoned for buildings over three stories, with even less in some areas. Restrictions on floor space and other planning requirements make multi-storey buildings unviable in many cases. Councils can add requirements that make high-density development impossible, such as dictating maximum heights, limiting floor space, and imposing 'setbacks' that leave large portions of land unused. Only a third of Sydney councils allow flats on land zoned for three storeys. The application process for new projects is costly, time-consuming, and often takes a year or more to receive a response, especially for complexes with 20 or more dwellings. While the Victorian and NSW governments have recently relaxed planning restrictions, zoning over two million extra homes, the report estimates that only a third of these homes are commercially feasible without simplifying the application process and reducing the complexity of regulations. The report's housing market model predicts that the proposed reforms would result in an additional 67,000 homes annually over the next decade, with house prices and rents 12% lower than they would otherwise be.
