The Global Housing Crisis, By Paul Walker
Alan Kohler, writing in the Leftist Guardian.com, puts the case that the housing/accommodation crisis which is destroying so many Australians of a lower socio-economic status, leading to street sleeping and tent cities, is seen across the world. He shows with case studies that there are just not enough affordable houses being built. Kohler supports his claim with an examination of the housing situation in New Zealand, Japan, Austria, the Netherlands and Colorado US. These carefully selected examples do support his thesis of the problem of meeting housing demand by the builders.
However, be that as it may, Kohler said at the beginning of his discussion that he will leave aside "the migration and refugee flows that are causing extreme housing shortages in some countries." That, however, is the relevant question for Australia, even though there are still the same problems of inefficiency with the building industry here as seen in Kohler's other case studies. Mass immigration makes every problem worse.
"Although Australians are naturally focused on their own housing misery, the truth is that the crisis is global. Much of the developed world has a dire housing shortage and prices are rapidly becoming unaffordable everywhere, or already are. Leo Tolstoy's maxim "Happy families are all alike; each unhappy family is unhappy in its own way" applies to each country's problems with housing.
Leaving aside the migration and refugee flows that are causing extreme housing shortages in some countries, the number of houses being built in the world is simply falling short of population growth, even though that growth is declining. UN-Habitat says the world needs to build 96,000 affordable homes every day to house the 3 billion people who will need adequate housing by 2030.
And just as each unhappy family is unhappy in its own way, each country is dealing with housing in its own way – some are doing it well, some not so well. Here are a few of them.
New Zealand
New Zealand's house prices started rising rapidly around 1980 and have since gone from twice average incomes to nine times – a bigger increase than in Australia, but over a longer period. In the past 25 years, Kiwi house prices have even outpaced Australia's.
Now the government has introduced funding schemes totalling NZ$3.8bn to unlock more land for housing development by supporting infrastructure, and has enacted the Infrastructure Funding and Financing Act 2020 to help developers raise long-term financing for infrastructure to support new housing.
To try to dampen demand, the government has also tightened loan-to-value ratio restrictions on the banks, and the NZ Reserve Bank has raised the official cash rate to bring inflation down, but also to curb highly leveraged borrowing. Furthermore, some new interest deductibility rules have been introduced to discourage property investment, and overseas investment legislation was reviewed in 2018 to restrict foreign buyers of residential land, except for citizens and residents of Australia and Singapore (Peter Dutton would approve).
Queenstown in New Zealand's South Island has a lack of available housing and surging rents. Photograph: James Allan/The Guardian
But the most interesting thing going on in New Zealand was a zoning experiment in Auckland in 2016, in which the council removed restrictions in some areas, opening up suburban blocks to higher-density housing. It was a huge success, at least in terms of housing supply in those areas (although they found out later what the local residents thought – there was, of course, a backlash).
It was so successful that the Labour government decided to bring it in for the whole country, but then it lost the 2023 election and the incoming National government, which had earlier supported the legislation, reversed its stance during the campaign and then duly repealed most of it. The Nationals justified the reversal by claiming they "got it wrong" on the medium density residential standards and were responding to concerns from suburban residents opposed to densification in their neighbourhoods. Yes, Nimbyism at work – one of the most powerful forces in the world pushing up house prices.
Japan
Japan has seen remarkable success in supplying affordable housing – even in the major cities. Thirty years ago, property in Tokyo was the most expensive in the world. Then there was a devastating crash which is still reverberating today, but other countries have caught up and gone past, so Japanese housing is relatively affordable. While average rents in Sydney are more than A$3,000 per month, in Tokyo they're about $2,500. The median dwelling price in Sydney is $1.156m; in Tokyo it's 70m yen, or $680,000.
This isn't the result of government-built social housing, or danchi as it's called – less than 5%of homes across Japan are socially rented. It's simply because they build a lot more houses. The houses are much smaller, of course – 94.85 sq metres on average versus 252 sq metres in Australia – but that's partly because they're building a lot more one-bedroom flats for singles and young couples, who more often live alone rather than sharing.
The planning system behind this is simple zoning that promotes across-the-board development rather than granting planning permission for each individual site. There are 12 zones, each defined by the nuisance level they allow, ranging from residential to industrial. It means pretty much anything can be built, provided it does not exceed that zone's nuisance level. So supply can respond quickly as demand changes and ensures development and density is driven by land values. If the demand increases, old houses can easily be knocked down to increase density.
Another factor promoting the building of new homes is tax: the valuation of land and buildings for property taxes, or rates, paid to local councils declines over time, which increases the incentive for the councils to approve new houses to get their rates back up.
Austria
Austrians pay a housing tax of about 1% of income and employers contribute as well. The money from the tax is then distributed among the nine Austrian provinces.
There are various kinds of housing that are either fully owned by the City of Vienna, which are called Gemeindebauten or "communal buildings", or where the city government provides funding to not-for-profit developers to build rent-controlled flats. Both are available to people below a certain income level; the Gemeindebauten apartments don't require a deposit, while the rent-controlled flats sometimes do require deposits of between €10,000 and €20,000, which are returned when the tenant moves out.
The Vienna skyline. Gemeindebauten and rent-controlled flats can include playgrounds, community rooms and community gardening. Photograph: Michael Brooks/Alamy
At the moment, Gemeindebauten and rent-controlled flats are available for people with an annual net income of less than €79,490 in a two-person household, which is almost €30,000 more than Austria's average income. There's no shame in renting these places – even people on fairly decent incomes regard it as a chance to live well at an affordable rent. Apparently Gemeindebauten and rent-controlled flats are even better than private housing in some respects, including playgrounds, community rooms and community gardening.
The Netherlands
The Netherlands, in particular Amsterdam, has an absolutely dire housing crisis, with the median price now more than 10 times income. By the end of 2023 the average Dutch house cost €452,000, versus the average salary of €44,000. House prices have more than doubled in the past decade and in some areas have risen 130%. Rents are €1,500 to €3,000 a month – almost as much as in Sydney!
The reason the Netherlands is in such a pickle is something Australians well understand: the government has been stimulating demand while not doing anything about supply.
Academic Gregory Fuller of Groningen University said recently: "The key features of the housing crisis – rising prices, increasing inequality, shortages of affordable homes and foreign investors infiltrating the market – are the result of decades of dubious housing policies."
A pro-market Dutch government in effect abolished the housing and planning ministry in the early 2010s and freed up sales of housing corporation stock. Partly as a result, about 25% of homes in the country's four big cities are owned by investors. Further driving up prices are measures such as mortgage tax relief for buyers, and others – meant to aid young buyers – that have instead ended up helping existing owners invest in more property. At the same time, subsidies for house building all but dried up.
After far-right politicians such as Geert Wilders blamed migrants and asylum seekers for the crisis, a special rapporteur for the United Nations, Balakrishnan Rajagopal, visited the Netherlands and said Dutch government policy choices were to blame for the country's housing crisis, not asylum seekers or migrant workers. "An alternative narrative has emerged in the Netherlands that an 'influx of foreigners' is responsible," Rajagopal said. The crisis – of both affordability and availability – had, he added, been "two or more decades" in the making. Among other factors, he blamed a lack of regulation of social housing providers, an absence of rent caps in the private sector and "insufficient attention to the role of speculation and large investors in the real estate market".
Sound familiar? Well, the proposed solutions will sound familiar as well. The government aims to build 900,000 new homes by 2030, but construction is behind schedule. They've also brought in regulations to make renting more secure for tenants and are looking into rent control options.
The house building incentive scheme provided €1bn in grants to municipalities to get them to build more houses; however, a report by the Netherlands court of audit cast some doubt on whether this would lead to more housing being built quickly enough. Nevertheless, the new government plans to press on and allocate another €1bn to the scheme.
In 2022, a law was passed banning buyers of homes below a certain value from renting them out, aimed at increasing housing supply for owner-occupiers. But this reduced the number of rental properties and pushed up rents.
Overall, it's probably fair to say the Dutch are at their wits' end, a bit like Australians.
Colorado, US
Home prices in Colorado increased sixfold in 30 years, outstripping both Florida and California, for the usual reason: demand was greater than supply. Seniors were staying in their houses longer, investors were buying second homes and short-term rentals, and millennials were trying to break into the housing market in increasing numbers.
Then, on 13 May 2024, Colorado governor Jared Polis signed a bill requiring local governments to plan and zone for more apartments and condominiums near transit stations. On the same day, he signed another law allowing accessory dwelling units – small apartments located on the same lot as a single-family house – to be constructed in large cities and towns. These bills followed others that eliminated minimum vehicle parking requirements for apartments and preempted local rules prohibiting people from living with roommates. These changes will make housing more affordable by allowing developers to build more – and more diverse – housing at a lower cost."
Add to this housing problem, for Australia is "the longest per capita recession on record following six consecutive quarterly declines and seven declines over the past eight quarters":
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