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ABSTRACT At policy level, the remedy for the housing affordability trend and crisis experienced in Australia and internationally is increasingly focusing on raising supply above historic levels of output. This Policy Analysis evaluates how effective increased housing supply is and can be in tackling house price affordability trends. A long‐run model of house prices and housing affordability is estimated (1974–2023) to identify the required levels of dwelling output to stabilise and improve the house price to income ratio. Achieving Australian aspirational supply targets would only marginally improve the price–income ratio, and only after 20 years of above average supply. One reason for this is the income elasticity of demand relative to the price elasticity of demand. The results show that unrealistic levels of dwelling output is required to materially affect house price affordability and discusses industry‐originating barriers, the income elasticity of prices and distribution of new supply to complement current planning and deregulation debates.
Christian Nygaard (Mon,) studied this question.