The Australian home of dream ownership is becoming a nightmare for some people.

Home ownership rates are descending. Between 1981 and 2016, the share of 25 to 34 year-olds who owned their own residence descended from more than 60 per cent to 45 per cent. Half of the most poverty stricken 40 per cent of Australians aged 25-34 owned their houses in 1981. Now it’s 30 per cent. Younger Australians’ best opportunity of owning a house is to inherit it from parents.

The widening divide between the residential haves and have-nots is a reason that wealth inequality is on the rise. The typical house in Victoria garnered its owner $140,000 per year, more than twice what the average Australian worker earns each year – and the typical house in NSW generated for its owners more than $200,000.

What should the federal government do to fix this situation? In New Zealand, a bipartisan bill just passed Parliament that will render it easier to construct more homes in the nation’s largest cities.

The new legislation pressures local councils of major communities like Auckland, Wellington, and Christchurch to permit townhouses up to three storeys tall “as of right” in metropolitan suburbs, without needing approval from the local council.

Builders still must adhere to basic regulations. They must adhere to minimum green space requirements and obstacles.

Councils can alter these requirements to render them more permissive (like permitting higher buildings), but they are not permitted to render them less permissive.

The most recent changes coincide with an earlier move to permit six-storey developments “as of right” within walking distance of city centres and primary transport networks.

The federal government should encourage the states to reform land-use planning laws in ways that will boost housing supply.

These reforms attack one of the key impediments to greater density – the structure of government – that lead to too few homes being built.

In New Zealand, as in Australia, the benefits of population growth align with society as a whole, while decisions regarding development approvals rest with local councils.

Standing residents want their suburb to remain the same and are concerned that more development will mean more traffic congestion, more crowding on public transportation, more sound traffic, and less “street appeal”.

In the meantime, folks who would like to reside in the region can’t vote in the local council elections, and they remain unrepresented. Fewer houses are constructed than what’s required.

Modelling by consulting firm PwC says the new rules in NZ could result in 48,000 to 105,000 new houses being constructed in the next five to eight years. Permitting more dense housing will reduce carbon emissions and empower improved transport links.

Like New Zealand, Australian cities are not delivering denser forms of housing – townhouses and apartments – in the quantities that Australians say they would prefer.

Here in the states, as opposed to the national government, that hold constitutional responsibility for land-use planning, the states establish the planning framework, and they govern local councils that review most development applications.

As opposed to assuming direct control over planning decisions, as in New Zealand, the federal government should encourage the states to reform land-use planning laws in a manner that will enhance housing supply.

A certain precedent exists. Under the national competition policy, the federal government paid the states nearly $6 billion over a decade in exchange for required regulatory and competition reform. The Productivity Commission concluded that the advantages of the policy massively were more than the costs.

Increasing housing supply will enhance affordability slowly, as it requires time to construct more homes.

On the other hand, cutting back tax and welfare settings that increase demand for housing would have another vital effect.



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