Let's face it: the Australian housing sector is a mess, with no easy solutions. The affordability crisis is entirely of our own making, but fixing it will require much more than the policies currently on offer from both state and federal governments — more land releases and subsidisation of infrastructure provision.
The problem is that real estate in all its aspects — from speculative construction of new houses to negative gearing, from renovations to the national sport of sitting back and watching the house go up in value by 10 per cent a year — implicates such a large proportion of the population that few governments have the courage to do anything that will either cool off, let alone reduce, house price inflation or call into question the national obsession with houses and what to put in them.
The fundamental issue is that real estate development, both commercial and residential, is now one of the driving forces of the Australian economy.
To a certain extent this has always been the case. But in the past — with the possible exception of the 1870s and 1880s in Melbourne, which ended in 1890s depression — the construction of houses, shops, offices and factories was one element of relatively balanced economic development, with the parallel growth of the agricultural and industrial sectors. Large scale private and public investment went primarily into the development of the country's productive capacity, while real estate represented a secondary circuit of capital, dominated, especially in residential construction, by small scale investment by owners or small builders.
Since the onset of global economic restructuring in the 1970s, Australia has witnessed a pattern of declining industrialisation, with occasional but short-lived revivals. In order to fend off economic decline prompted by changes in the global system of industrial production, which have affected Australia's old industrial cities in particular — chiefly Melbourne, Adelaide and, to a lesser extent, Sydney — state governments have encouraged the growth of the real estate sector as a means of economic development in its own right.
Hence state governments have liberalised planning laws, abolished the old planning agencies like the Melbourne and Metropolitan Board of Works, sold land on the cheap, facilitated big, controversial developments and so on.
Australians have been encouraged by Federal Government policy to borrow more and more to finance ever greater investment in housing. This has, in turn, stimulated the further disproportionate growth of the