Alan Kohler: Australians can’t afford homes – something politicians can’t risk fixing

In my Quarterly Essay to be published next week (The Great Divide: Australia’s housing mess and how to fix it), I point out that the cost of housing, the most basic necessity of life, has doubled as a multiple of income in the past 23 years – from three-to-four times to seven-to-eight. This has changed everything about the economy and the way Australian society works.

Can’t turn back the clock

The only housing policy that would effectively deal with that would explicitly aim to reduce that ratio to what it had been for most of the nation’s history.

And since drastically reducing house prices would be both impossible and disastrous, the only viable way to achieve that reduction in the house price-to-income ratio is to ensure house prices don’t rise for 18 years, through reduced demand (removing tax incentives) and increased supply (fast trains to open up a lot more land further from the cities).

That’s how long it would take for incomes rising at 4 per cent per year to catch up and bring the house price-to-income ratio back to three to four times.

But would any political party that actually promised to try to keep house prices unchanged for 18 years ever win an election? Definitely not.

Most people own a house, often more than one, and expect it to increase in value – many need it to, especially young families, so they can build some equity. Super is too long distance, for retirement only, and, anyway, anything can happen to the sharemarket. Housing is the way Australians know how to safely build wealth.

So here’s the excruciating paradox: Everyone agrees that housing affordability is one of Australia’s biggest economic problems, if not the biggest, exacerbating inequality and causing deep resentment among voters, but promising to fix it will ensure that you don’t get elected.