Bold claim: even 1.2 million new homes over five years won’t meaningfully fix Australia’s housing affordability, and here’s why.
Is simply building more homes the cure for Australia’s housing crisis? Not by a long shot. In fact, delivering an unrealistically large overbuild in the next two decades would barely budge affordability, according to Christian Nygaard, a housing-economics professor at UNSW’s City Futures Research Centre.
The Albanese government aims to reach 1.2 million homes by mid-2029 as part of a housing accord. Yet, after policymakers at federal and state levels try, almost no one believes that target will be met.
The National Housing Supply and Affordability Council recently estimated about 938,000 new homes could be built in the latter half of the 2020s—roughly 262,000 fewer than the government’s goal.
Even if we somehow hit that target, and repeat the same feat for the following 15 years, would affordability improve enough to satisfy widespread demand—especially among younger Australians?
Nygaard’s model suggests this massive construction push might only trim the national house-price-to-income ratio from about 8.0 to 6.7. In Sydney, where the ratio is closer to 12, the improvement might be to around 10.
Why is the payoff so modest?
- Economics shows that increasing supply by 1% faster than population growth can reduce prices by roughly 2–3% over several years.
- But housing affordability isn’t governed by supply alone. We are getting richer over time, which pushes demand upward. Tax policies also make buying homes more attractive. And over the past two decades, shifting borrowing costs have amplified these effects.
When you add these three factors together, the overall impact of producing more housing on affordability ends up smaller than the 2–3% figure suggested by supply-only models.
Nygaard does not oppose boosting supply. He argues for a balanced view: we need more housing given rising incomes, growing populations, and shifting demographics, but simply counting house numbers misses the bigger picture.
Two major concerns emerge from his analysis. First, there’s a lack of clarity about how adding more homes translates into real affordability gains. Nygaard emphasizes that focusing only on construction totals won’t automatically resolve affordability as a political issue, a societal challenge, or a wellbeing outcome. To address these broader objectives, policy must scrutinize how the produced housing is distributed, not just how many are built.
Second, overemphasizing supply can let politicians dodge tougher conversations about tax settings that make investment in housing so lucrative, or about how economic and urban policies shape where people want to live.
Nygaard suggests even small changes to capital gains tax for investors could have a symbolic and practical impact, but a radical rethink may be necessary. He notes that the vast majority of capital gains accumulate in the owner-occupied sector, and politically touching that is extremely challenging. If policymakers declare, “it’s too difficult to reform owner-occupied capital gains,” and shift focus elsewhere, they risk prescribing the wrong cure: more building rather than addressing the real drivers of affordability.
Bottom line: building more homes helps a bit, but it doesn’t automatically fix affordability as a political, social, or wellbeing goal. A more nuanced approach—focusing on who gets the new homes, how they’re financed, and where people want to live—is essential.
What do you think: should policy priorities shift away from sheer housing numbers toward reforms in taxation, finance, and urban planning? Is there a balance point where supply gains and policy levers work together to deliver real affordability, or is the problem too tangled to fix with construction alone? Share your views in the comments.
