The Australian housing supply myth

Cameron Murray ()

No r925z, OSF Preprints from Center for Open Science

Abstract: Australia’s expensive housing market is claimed to be primarily the result of a shortage of supply due to town planning constraints, leading to political pressure on councils and state governments to remove planning regulations, regardless of their planning merit. We argue that this supply story is a myth and provide evidence against three key elements of the myth. First, there has been a surplus of dwellings constructed compared to population demand, rather than a shortage. Second, planning approvals typically far exceed dwelling construction, implying that more approvals or changes to planning controls on the density and location of development cannot accelerate the rate of new housing supply. Third, large increases in the rate of housing supply would have small price effects relative to other factors, like interest rates, and come with the opportunity cost of forgone alternative economic activities. Indeed, if the story were true, then property developers would be foolishly lobbying for policy changes that reduce the price of their product and the value of the balance sheets, which mostly comprise undeveloped land.

Date: 2019-11-25
New Economics Papers: this item is included in nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:osf:osfxxx:r925z

DOI: 10.31219/osf.io/r925z

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