The housing affordability emergency

Ask a 32-year-old renter in outer Melbourne how the maths on a first home actually works, and they will not reach for a spreadsheet — they will reach for their payslip. A 20 per cent deposit on a median-priced home now costs more than most full-time workers earn in a year, on top of the rent they are already paying while they try to save it. Their parents bought a first home in their mid-twenties on something close to a single income; this renter is doing the same sum in their early thirties, often with two incomes, and still coming up short.

That is not a complaint about one unlucky renter in one expensive suburb. It is the arithmetic behind one of the starkest generational shifts in modern Australian economic life: the relationship between what a home costs and what a worker earns has moved further out of reach than at almost any point in the post-war record, and federal housing policy since 2022, for all its new funds and legislated targets, has not yet bent that line back down.

What the government did

The government's housing program began, in part, before its own term did in name: the Housing Accord was first floated in the October 2022 Budget as an agreement between the Commonwealth and superannuation and institutional investors to co-invest in affordable housing. National Cabinet folded that idea into a much larger, formal target the following year — on 16 August 2023, the Commonwealth, every state and territory, and local government signed the National Housing Accord communiqué, committing to 1.2 million new, well-located homes over five years from 1 July 2024, an implied national run-rate of roughly 240,000 completions a year (National Cabinet, National Housing Accord communiqué, Aug-2023). To support that target, the government created a $3 billion New Home Bonus to reward states and territories that build beyond their share, and expanded the National Housing Infrastructure Facility — concessional financing for the water, power and road connections a new estate needs before a single home can be built (Treasury; National Housing Infrastructure Facility, approx.).

The centrepiece financing vehicle is the Housing Australia Future Fund, or HAFF, legislated in September 2023 after nearly a year of negotiation, including a stand-off with the Greens in the Senate that delayed the bill twice before a deal was struck. The HAFF is a $10 billion off-budget investment fund: the government borrows the capital and invests it, spending only the investment returns — not the underlying $10 billion — on social and affordable housing, with a legislated minimum of $500 million a year guaranteed regardless of how the fund's investments perform in any given year (Housing Australia Future Fund Act 2023; Treasury, approx.). Housing Australia's own target for the fund is around 30,000 social and affordable homes delivered over its first five years, including homes for women and children escaping domestic violence and older women at risk of homelessness (Housing Australia; National Housing Accord, approx.).

Help to Buy, legislated in 2024 after further Senate negotiation, is the government's shared-equity scheme: eligible buyers on modest incomes can purchase a home with the Commonwealth co-owning up to 40 per cent of a new build or 30 per cent of an existing home, reducing both the deposit and the mortgage the buyer needs to service (Help to Buy Act 2024, approx.). The scheme is capped at 10,000 places a year nationally (Housing Australia, approx.). The existing Home Guarantee Scheme — the First Home Guarantee, Regional First Home Buyer Guarantee and Family Home Guarantee, which let eligible buyers purchase with a deposit as low as 5 per cent (2 per cent for single parents) without paying lenders' mortgage insurance — was widened in stages: eligibility was loosened in 2023 to admit joint applicants, friends and siblings buying together, not just couples, and the regional guarantee was made an ongoing program rather than a capped pilot (Housing Australia, approx.). The government has since flagged removing income and price caps from the First Home Guarantee altogether so that any first-home buyer can use it, a change signalled to take effect from 2026 (Government housing announcements, approx.).

On the supply side, the government legislated tax changes in 2024 to encourage institutional investment in build-to-rent housing — cutting the withholding tax rate on managed investment trust distributions from build-to-rent projects and increasing the depreciation rate available to developers — aimed at unlocking large-scale, purpose-built rental developments that had previously struggled to compete with owner-occupier housing for capital (Treasury; Build-to-Rent tax legislation, 2024, approx.). National Cabinet also agreed a Planning Reform Blueprint in 2023, committing states to speed up planning and zoning approvals, though implementation of planning reform remains chiefly a state and local responsibility outside the Commonwealth's direct control (National Cabinet, 2023, approx.).

The evidence

The core measure behind this topic's opening vignette is the dwelling price-to-income ratio: the median dwelling price divided by median household income. By the most widely used Australian series, published regularly by ANZ and CoreLogic, that ratio reached roughly eight times median household income nationally in 2023-24 (approx.) — the highest recorded in the series' history, and roughly double the ratio of the early 1990s, when it sat closer to three-and-a-half to four times income (ANZ CoreLogic Housing Affordability Report, 2023-24, approx.). Sydney, Australia's most expensive market, has for several years running been ranked among the two or three least affordable major housing markets in the world by the Demographia International Housing Affordability Survey, with a median multiple — a related but stricter house-price-only measure — above thirteen times median household income in recent editions (Demographia International Housing Affordability Survey, approx.), a level the survey's own methodology classifies as "severely unaffordable" at anything above roughly five times income.

Translate that ratio into the years a renter actually has to live through, and the same report estimates it now takes a median-income household roughly a decade of saving (approx.) to accumulate a 20 per cent deposit on a median-priced home, assuming a representative fixed share of income banked every year (ANZ CoreLogic Housing Affordability Report, approx.). A decade ago the same calculation ran to six or seven years (approx.); two generations ago, closer to three or four. Every year that figure lengthens, it competes directly with the years a household would otherwise spend paying down a mortgage instead of paying rent — meaning the deposit-saving phase is eating further into working life at exactly the point renters most need that time to build superannuation and other savings for retirement.

Put that decade in weekly terms and the scale of the task is clearer still. A median-income household saving conscientiously for ten straight years needs to set aside on the order of $300 to $400 a week, every week, without interruption, to reach a 20 per cent deposit on a median-priced home (approx., derived from the ANZ CoreLogic deposit-hurdle estimate) — a sum that leaves little room for a bad year, a job loss or an unexpected bill without pushing the target further out. Mortgage-serviceability measures published alongside the same report show the task does not end at settlement: a household taking out a new, average-sized loan today devotes roughly half of median household income to loan repayments in the years soon after buying (approx.), nearly double the share of around 30 per cent that lenders have traditionally treated as a comfortable ceiling.

A deposit that once took three or four years to save now takes closer to a decade — and every year added to that wait is a year not spent paying down a mortgage instead of paying rent.

Over the same period, the ABS Wage Price Index rose only modestly in nominal terms and even more modestly once adjusted for inflation (ABS Wage Price Index, approx.) — meaning most of the widening in the price-to-income ratio traces to prices rising faster than incomes, not incomes falling in absolute terms. Home prices did not need to keep climbing for the ratio to hit a record; wages simply needed to keep failing to keep pace, and on the available data, that is exactly what happened. This article's chart could equally be read as a wage line falling further behind a price line each year, rather than a price line climbing on its own.

The national ratio also hides real dispersion. Perth and Adelaide, historically among the country's more affordable capital cities, recorded some of the fastest rates of price growth of any capital in 2023 and 2024, as interstate buyers priced out of Sydney and Melbourne moved their budgets west and south (CoreLogic Home Value Index, approx.), while regional centres within commuting distance of the largest cities saw a similar pandemic-era repricing that has only partly unwound. The record national ratio in this article's chart is not simply a Sydney story; it describes a housing market where the affordability problem has spread to cities that used to be the safety valve for buyers priced out elsewhere.

Housing supply is the denominator in every one of these ratios, and it has not kept pace. ABS Building Activity data shows annual dwelling completions running at roughly 175,000 a year through the early-to-mid 2020s (approx.) — well short of the 240,000-a-year run-rate implied by the National Housing Accord's 1.2 million target over five years from July 2024 (ABS Building Activity; National Housing Accord communiqué, Aug-2023). In the Accord's own first full year of operation, completions tracked below that run-rate, meaning the shortfall the target was designed to close has, on the evidence available so far, continued to widen rather than narrow (ABS Building Activity, approx.). The migration surge examined elsewhere on this site added to that arithmetic: net overseas migration above 500,000 in a single year implies underlying demand for on the order of 200,000 additional dwellings from that intake alone, a figure not far short of a full year's national completions by itself (ABS Overseas Migration; ABS Census 2021, approx.).

The renter's task is harder still because the two halves of the affordability problem compound each other. This site's coverage of rental stress documents advertised rents rising sharply across the same period that price-to-income ratios climbed to a record; a renter trying to save the deposit this article's chart implies is doing so while paying a rent that has itself been rising faster than wages, leaving less of each pay cheque available to save in the first place (see the rents and mortgage-stress topic on this site, approx.). The deposit hurdle and the rental-stress problem are not two separate crises arriving at the same time by coincidence — they are the same underlying shortage of housing supply, expressed through two different price mechanisms.

The buyer-side data tells a related but distinct story. ABS Lending Indicators show first-home buyers accounting for roughly one-quarter to three-in-ten of new owner-occupier home loan commitments in recent years (approx.) — a share that has been propped up, not driven down, by the Commonwealth's expanded loan-guarantee schemes, which let eligible buyers enter with a smaller deposit. That headline share therefore understates how much harder entry has become: it counts only the first-home buyers who did get a loan, not the much larger pool of would-be buyers who gave up, delayed, or leaned on family help to get there. The buyer who does clear the hurdle is also, on average, older than in the past: Housing Australia and industry lending data put the typical first-home buyer in their early-to-mid thirties in recent years, up from the late twenties in earlier decades (approx., Housing Affordability Report; Housing Australia data) — consistent with a deposit-saving task that now takes roughly twice as long as it once did.

The clearer generational signal sits in home-ownership rates by age. Analysis of ABS Census data by researchers including the Australian Institute of Health and Welfare and the Grattan Institute shows home ownership among 25-to-34-year-olds fell from roughly six in ten in the early 1970s to well under half by the 2021 Census (approx., AIHW/ABS Census analysis) — a decline that had been under way for decades before this government took office, but one the price-to-income and deposit-hurdle data above shows has not been arrested, and on the most recent figures has continued to widen. Housing Australia's own reporting on the HAFF's first funding rounds shows a committed pipeline running into the tens of thousands of dwellings against a total need the Accord itself has pegged at 1.2 million (Housing Australia, approx.) — a comparison the critique below returns to directly.

The critique

Australia's price-to-income ratio is not unique in the developed world — Canada, New Zealand and the United Kingdom have faced comparable affordability crises over the same period, each with its own housing-supply institutions to blame (OECD housing data; approx., international comparison). What distinguishes Australia is that this government explicitly set itself a numeric target and stood up new machinery to hit it, which raises the bar for judging the result: a government that measures itself is fairly measured against what it promised, not merely against how other countries with no equivalent target have fared.

Separate what this government caused from what it inherited, and the honest answer sits mostly in the second category, with one important exception. The price-to-income ratio had already climbed for three decades under governments of both major parties before 2022, driven by planning constraints, population growth and a tax system that has long favoured property investment — this government did not create that trend, and no single term of any government could plausibly reverse three decades of compounding scarcity in two or three years. The exception is pace and timing: the migration settings examined elsewhere on this site added population, by policy choice, faster than at almost any point in the historical record, at the same moment housing completions were flat — a decision this government made, not one it inherited, and one that pushed directly on the same price-to-income ratio the Accord was simultaneously trying to bring down.

Weigh the scale of the government's new financing vehicles against the scale of the problem they are meant to solve, and the mismatch is the next thing that stands out. Housing Australia's own target for the HAFF is around 30,000 social and affordable homes over five years — an average of roughly 6,000 dwellings a year (approx., Housing Australia) — against a national Accord target of 1.2 million homes overall. Even taken at face value, the HAFF's contribution amounts to something on the order of two to three per cent of the total homes the government itself says the country needs, and that contribution depends on investment returns from a $10 billion portfolio that are not guaranteed to hold steady if markets turn, which is precisely why the Act had to legislate a $500 million-a-year funding floor as a backstop in the first place (Housing Australia Future Fund Act 2023, approx.). A fund built to be immune from annual budget politics is a genuine design strength; a fund whose annual output is a small fraction of the target it sits inside is a genuine scale problem, and both things are true at once.

A fund built to survive the next budget cycle is a genuine design strength. A fund whose yearly output is a rounding error against the target it sits inside is a genuine scale problem — and both are true of the HAFF at once.

The government's demand-side measures carry a different risk. Help to Buy and the expanded Home Guarantee Scheme both work by letting an eligible buyer borrow, or effectively borrow, more purchasing power than their own deposit alone would allow, at the same modest end of the market where first-home buyers already compete hardest for a limited supply of entry-level homes. Basic housing economics, examined in more depth in this site's coverage of the Greens' housing proposals, holds that adding purchasing power to a market where the number of homes for sale is fixed or slow to grow tends to show up, at least in part, as higher prices rather than higher access — the extra buying power gets bid into the price rather than converted into an extra home (Productivity Commission and Grattan Institute housing-supply research, cited as secondary analysis, approx.). None of the government's shared-equity or guarantee schemes are large enough on their own — 10,000 Help to Buy places a year against several hundred thousand annual home sales nationally (approx., Housing Australia; ABS) — to move the national price level by themselves, but they illustrate a pattern common across the whole housing program: the loudest, most visible measures help buyers clear the deposit hurdle, while the quieter, harder task of adding enough homes to bring the hurdle down for everyone has moved more slowly.

The National Housing Accord's central limitation is structural rather than a failure of intent: it is a National Cabinet communiqué, not a piece of Commonwealth legislation binding on the states. The levers that most directly determine how fast new homes get built — zoning rules, planning-approval timeframes, land release and local council decisions — sit constitutionally with state and, in turn, local governments, not with Canberra. The Commonwealth can fund incentives such as the New Home Bonus and the National Housing Infrastructure Facility, and it can convene National Cabinet to seek agreement on a Planning Reform Blueprint, but it cannot itself approve a single development application. That division of power is a genuine constraint on what any federal government can deliver alone, and it means judging the Accord purely by the national completions total risks holding Canberra responsible for decisions made in town halls it does not control.

Supply is also constrained by a construction sector that has spent much of this period losing capacity rather than gaining it. Residential builder insolvencies rose sharply through 2022-23 as fixed-price contracts signed before rapid materials and labour cost inflation turned loss-making, and the trades most needed to lift completions — carpenters, bricklayers, electricians and plumbers — remained on Jobs and Skills Australia's national skills shortage list throughout the Accord's opening years (ASIC insolvency statistics; Jobs and Skills Australia, Skills Priority List, approx.). A funding target and a planning-reform agreement can shorten the distance between an approved development and a start date, but neither directly creates the construction workers needed to turn approvals into finished homes at the pace the Accord's run-rate requires — a capacity constraint that sits alongside, and partly explains, the gap between the target line and the actual line in this article's chart.

It is also, on the timeline available so far, too early to declare the Accord's supply-side settings an outright failure. Housing construction runs on a multi-year cycle from rezoning to planning approval to a completed dwelling, and the Accord's five-year target window only began in July 2024. What can be judged this early are the leading indicators — building approvals and dwellings already under construction — and those, on the ABS data available through the Accord's opening period, have not shown the step-change in pace the 240,000-a-year run-rate requires (ABS Building Activity, approx.). A target can be sound in design and still be missed if the underlying capacity to build was never large enough to hit it in the time available.

The states carrying the heaviest share of recent population growth are, in several cases, the same states this site's coverage of state finances shows are carrying the heaviest net debt loads — a coincidence that limits how much additional infrastructure and planning capacity those states can fund to support faster building, without either raising state taxes or adding to debt already flagged by credit-rating agencies (state Budget papers, approx.). A federal target that depends on state execution is only as strong as the weakest state's balance sheet.

One policy choice sits outside the housing program itself but shapes the same price-to-income ratio directly: negative gearing and the capital gains tax discount, which let property investors offset investment-property losses against other income and pay tax on only half of any capital gain, remain unchanged under this government. Investors compete with first-home buyers for the same entry-level stock the government's own shared-equity schemes are aimed at; leaving the tax settings that favour investor purchases untouched, while building new guarantee schemes to help first-home buyers compete against those same investors, is a coherent political choice — the government took reform of negative gearing to elections previously and concluded the political cost outweighed the benefit — but it is also a choice that leaves one of the demand-side forces pushing up the price-to-income ratio in this article's chart working in the opposite direction to the supply-side program the government did build.

What they got right — and the honest caveats

Credit is due on several fronts. No previous federal government had set an explicit, numerical, national housing-supply target and agreed, through National Cabinet, to be measured against it in public. Getting every state and territory to sign on to a shared build target, in a federation where housing supply is chiefly their responsibility, was a genuine coordination achievement, not a formality. The HAFF, whatever its scale against the total target, is the largest dedicated perpetual funding vehicle for social and affordable housing in the country's history, and the guaranteed $500 million-a-year floor negotiated into the legislation — secured in part through Greens amendments during the bill's passage — means social-housing funding no longer has to be re-won from scratch in a budget contest against health, defence and aged care every single year.

It is also worth noting the government has, at least in this instance, applied its own stated logic consistently. It resisted the opposition's proposal to let first-home buyers withdraw superannuation for a deposit, arguing publicly that doing so would add demand-side purchasing power into a supply-constrained market and risk pushing prices higher rather than improving access — the same demand-supply logic this article's critique applies to some of the government's own smaller-scale guarantee schemes. Applying a consistent economic argument even when it counts against a politically popular alternative is worth crediting, even if the government's own demand-side measures are not entirely immune from the same critique at a smaller scale.

The government also increased funding to the National Housing and Homelessness Agreement, the long-standing federal-state agreement that funds homelessness services and crisis accommodation, adding several hundred million dollars in additional funding across recent budgets on top of the HAFF (Budget Paper No. 1, various years, approx.) — a lower-profile commitment than the Accord's headline target, but one that matters most to the households closest to losing housing altogether rather than those saving for a first deposit.

The build-to-rent tax changes target a real gap in the market: purpose-built rental housing at scale has been common in the United States, the United Kingdom and parts of Europe for decades, and Australia's tax settings had made it comparatively unattractive to institutional capital before 2024. If the sector grows as intended, it adds a form of supply — professionally managed, longer-lease rental stock — that neither owner-occupier construction nor the existing, mostly individual-landlord rental market has provided at scale. It is also fair to note that home-ownership rates among younger Australians were falling for decades before this government took office, driven by planning constraints, construction costs and tax settings that long predate 2022; the price-to-income ratio in this article's chart was already climbing under governments of both major parties well before the current one, and no single term of government, of either colour, created a problem three decades in the making.

The honest caveat that cuts hardest against the government is time, not intent. Judged purely on the completions and approvals data available so far, the gap between the Accord's implied run-rate and actual delivery has not closed; whether the planning reforms, the New Home Bonus and an eventual construction-sector recovery will close it before the Accord's five-year window ends in 2029 is, as at the date of writing, genuinely unresolved rather than settled in either direction.