Trends show that home ownership is unlikely to increase in the future

Despite the challenges of Australia’s changed institutional environment since the late 1970s, overall home ownership has held up well. In 2016 the homeownership rate was 67% - only marginally less than 68% in 1976; however, there appears little chance of Australia sustaining home ownership at current levels with the home ownership rate projected to decline to around 63% by 2040.

‘A housing system in which one half—predominantly older homeowners—acquires wealth and the other half—generally younger renters—doesn’t, is a recipe for long-term social problems’ says lead researcher Professor Terry Burke of the Swinburne University of Technology.

The latest Australian research, Australian home ownership: past reflections, future directions, explores this trend both internationally and domestically. The research suggests that while no single policy failure, single political decision or single market or state failure has eroded the ability to achieve the ownership dream, the change has come from complex shifts throughout the entire institutional environment.

‘A housing system in which one half—predominantly older homeowners—acquires wealth and the other half—generally younger renters—doesn’t, is a recipe for long-term social problems’ says lead researcher Professor Terry Burke of the Swinburne University of Technology.

While weakening affordability has been an important factor in this erosion, other factors should not be neglected including an increase in casual employment, a financial and tax environment favouring rental investors, the emergence of new housing products largely designed for rental living, the inability of housing supply to match population and household growth, and the financialisaton of housing.

‘Broadly, Australia now has an institutional environment which no longer supports ownership as it did in the past,’ says Professor Burke. ‘This means the housing system will become more inequitable irrespective of what incremental housing policy reforms are made.'

‘The financialisaton of housing is an international factor and is best understood as the process where housing is treated as a commodity to be invested in rather than a home, meaning more and more money flows into housing but without any necessary improvement in housing supply or quality,’ says Professor Burke.

An important finding in the present Covid-19 context is that crises such as the Global Financial Crisis (GFC) which produced major falls in dwelling prices in many countries (less so Australia) did not create a return to ownership. Fiscal austerity, lack of finance, weakened household income, purchasers being outbid by investors for available finance meant ownership in most Western countries fell sharply after the GFC rather than increased.

‘Broadly, Australia now has an institutional environment which no longer supports ownership as it did in the past,’ says Professor Burke. ‘This means the housing system will become more inequitable irrespective of what incremental housing policy reforms are made. Given this, we have to rethink what sort of housing system is appropriate for Australia’s future.’

‘Either we embrace fundamental and broad-based reforms to rebuild ownership or we accept a retreat from its historical dominance, moving to a system which has more balance between rental and ownership—what we can call a dual tenure system.’

For governments, new policy instruments would be needed to give renters the opportunity achieve greater security, affordability and liveability in private rental, while also rebuilding social housing. But policies beyond housing are also important including enabling renters to create wealth and/or processes to redistribute some of the asset-generated wealth of owners. In addition, governments will need to supply greater income support for households in older age, as older renters on the age pension struggle with unaffordable rents. And none of these will be achieved unless Australia has a National Housing and Urban strategy to facilitate a policy conversation around our housing future.