Lots of thought provoking stuff in this article.

I must admit I never really thought much about the supply side of housing affordability before. The idea, promoted by various politicians, that taxes were to blame for lack of affordability always seemed a bit dodgy. Most buyers would have taken taxes into account when working out what they could afford to pay - if the taxes were removed, they'd probably just say "great, now I can afford to spend a bit more!"; hardly a recipe for lower prices.

And of course, lowering prices is the only way to improve affordability. Lowering interest rates just made debt more affordable, not the actual property, and was possibly even counter-productive. But how many homeowners and investors, who paid top dollar for their houses, would welcome strategies like releasing more land, that might lower the value of their prized possessions?

Caught between opposing interests, I suspect the politicians wil do what they do best - talk a lot and do nothing.

Dead right talk is cheap but that is what the people what not solutions, so the people will keep being obedient to their masters and nothing will change.

www.tapp.org.au

Interesting issue.

Sydney has long since achieved the size (about 1 million) that is critical to producing its own economic momentum independent of the economy of the rest of the state. And now it continues to concentrate wealth from the rest of the state even when the result of that concentration results in serious diseconomies of scale.

We must recognise that State governance is a key driver of wealth concentration and break up these unitary state models that have completely outlived their use by date. Two or more regional states will create head office type jobs in new capitals and take some of the unsustainable heat out of Sydney, Melbourne, Brisbane and Perth's growth.

What every major city in Australia needs most is more time to deal with their compounding problems and devolution is the best way to deliver that additional time and space.

And once each metropolitan and regional economy has it's own state government we can begin to implement an interest rate policy that is state specific. At the moment, whenever the Sydney real estate market overheats we get high interest rates in Broome, Albany, Cooktown and Tamworth where the least of their problems is an overheating realestate market, but it too will be choked off anyway.

In fact, this consideration of the wider consequences of interest rates generally means that the Sydney and Melbourne markets are allowed to go too far before applying the breaks while the regions get the brakes too soon.

This is a very blunt instrument that could be made far more precise with structural political reform and state based interest rates. Nothing will take the heat out of metropolitan housing markets like an interest rate differential. Nothing will decentralise population faster than an interest rate differential.

It is about time some of you growth crazy economists took some notice of Hamilton and realised that the world has only finite resources and that some day in the not too distant future, things will grind to a halt.

The land, like many other things, contains a finite amount of nutrients and, in spite of modern technology, will ultimately run out of its ability to produce food to the ever burgeoning population. We need food on the table, we cannot subsist on software or clever machines, or even lawnmower clippings.

To mis-paraphrase some of the text "According to received wisdom, enquiry into this complex field suggests our cities will slide into a phase of slow decline. In the wake of drought, the Stern Review and now the IPPC fourth assessment report, climate change will sweeps all before it."

Now, lets discuss the problem of house affordabilty. I wonder has someone had a look at the size of today’s houses compared to times past. Back in the fifties, before the authors were cognisant, a young couple on one wage, contemplating matrimony, was satisfied with a twelve square house in which to raise thee children. Today, they want a twenty five square house with all the trimmings. It is no wonder house have become affordable, people just want too much. It has got nothing to do with interest rates, monetary policy, taxes, levies etc.

To be continued.

Land prices are probably having too great an effect as well, but putting a brake on the size of the population would have large effect on demand, therefore lowering prices. Releasing more land, is not going to be the panacea that some would have us believe. We are going to run out of that too, at the present rate of population growth, and in addition, the supply of additonal infrastructure will increase in cost at a geometric rate.

Now is the time to start taking concrete steps to stabilise and ultimately reduce the population before our civilisation diappears as others have done before us, some perhaps for similar reasons, including failure of the food supply and major droughts.

The shortage of affordable housing is caused in part by private investors avoiding supplying low income housing. If it costs $120,000 to build a modest house on your block of land and $135,000 to build a McMansion why would you build a modest house where your rental return will be capped by the earning capacity of the tenants, when for a little bit more money you can charge more rent and be more confident the tenants will not default on paying rent.

Perhaps we also need to review current domestic housing building practices which seem to be less efficient than techniques used in modern high rise construction.

Can't see the virtue in subdividing market gardens located close to population centres for yet more suburban housing.

Its time to grit our teeth and house more people in high density housing. Why was the block in Redfern such a disaster and the expensive high density housing on Sydney's waterfront seems to work?

Some areas are being strangled by the inability of low income workers to live in the areas in which they work. For example Manly has about 2000 rental flats. Manly Council runs a commuter bus from the central coast for their workers. Its difficult to get shop assistants, nurses, teachers to work in Manly because they have to travel in for work.

There is discussion of investors through their superannuation funds building low income housing.