There has been only a slow increase in population in Australia over the past few decades, but housing is now becoming unaffordable.

I doubt if releasing land is going to do much, but there is a noticeable trend in demographics. I cannot find the data now but I remember reading that about 60% of Brisbane households will be single person households in a few decades. With so many individuals living in their own unit, it will certainly increase demand, which will then push up house prices further or keep prices just as high.

As well, single person households are probably the most impoverished, particularly if that person is on a pension.

“Almost half of households (in receipt of social security payments) pay between 30 per cent and 50 per cent of their income on rent. In terms of how different household types fare in this analysis, single person households have the highest rate of affordability problems; couples with children have the lowest.”

http://www.build.qld.gov.au/smart_housing/news/updates/2005/nov/page13.asp

But as well as adding to the housing demand, single person households consume the most water.

“The research conducted by the WSAA found that in Melbourne, a single person consumed an average 220 litres daily indoors, a second person in the same household used 176 litres, and a third and subsequent householders use 110 litres.”

So, to solve a number of crisis concerning housing and also water, maybe the government should introduce a policy of “Get married - Stay married”

Many factors have contributed to the housing affordability crisis but here are a few of the principal ones.
Firstly, there is the value placed on land when it becomes available for housing development. This valuation seems to have no relationship to the value of the land for any agricultural purpose. Speculation in vacant land is a case of the older generations taking unfair advantage of the young. The young were not about when a particular piece of land was available cheaper than it is now. I am not sure what should be done about this but a redistributive tax on capital profits on land speculation should be part of the solution.
A second major factor is the rate of increase in the loans or assets books of financial institutions. Allowing financial institutions to determine the rate at which they can create loans by letting them set the rate at which they can expand their capital adequacy, has led them to seek extraordinarily high profits from excessive charges. Those profits over and above that necessary for a reasonable dividend can be added to their capital base. A multiplier is at work and for each loan category this multiplier is the inverse of the capital adequacy ratio for that category.
For the last eight years at least the banks have increased their loans by 12–15% per annum compound. Is it any wonder that money has lost purchasing power in the housing asset market? This particular problem has been caused only by Commonwealth Government policy. It was John Howard who commissioned the Campbell Report into the deregulation of the financial industry although the Hawke Government put the Campbell recommendations into effect. I assume that the Fraser Ministry had more sense. -More

Continuing-
The fundamental argument is that money is not something that is produced in a manner similar to guns and butter, or subject to the economic choices that the production of real goods entail. Creation of money is subject only to prudential considerations and as such should be the subject to sufficient regulation to ensure that money's value is maintained reasonably steady. We need to move away from a self-regulation system based on capital adequacy ratios to something similar to the old statutory ratios system which allowed the government, or the Reserve Bank, adequate controls over the actual money supply as long as it applied to all takers of monetary deposits. The Campbell report advocated dumping the statutory reserves system and adopting a system that could only have been invented by bankers, hardly economists interested in the welfare of the hoi polloi.
Another significant cause is failure to effectively apply tax law to negative gearing. The Tax Commissioner has some power to ensure that interest charges are allowed as a tax deduction only if there is the prospect of the activity being profitable in a reasonable time frame. Allowing those on high income to compete for properties, while their interest bill is tax deductible, against home-seekers for whom the interest bill is a non-deductible burden is inequitable.

Two things are behind this.

1) Easy credit.
2) People buying more than they can afford.

The 'great Australian dream' of owning a home, is, unfortunately, always going to be beyond the reach of some - this is why it is 'the dream.'

Unfortunately, almost anyone can get a loan these days. The sad fact is, this isn't how it should be. The simple mathematics of supply and demand mean that if lots of people are buying houses, the price is going to go up.

If credit institutions were more stringent on who they lend money to then this wouldn't be nearly as much of a problem as it is now.

Sometimes, you just have to say no.

"Speculation in vacant land is a case of the older generations taking unfair advantage of the young." No, its just a case of the early bird gets the worm. You dont think this generation of young people will do exactly the same when they are older?? There is a tax on capital profits, for any asset purchase post Sept 1985 - called capital gains tax. Those that have made big profits, get slugged by this, at their marginal tax rates, so the wealthy pay a higher rate than those poor that might simply have been lucky with a good purchase years ago. Its reasonably fair.

In relation to negative gearing, it is not just the wealthy that use this. In fact from what I have seen, the wealthy are more likely to invest in holiday homes (for rental income) rather than ordinary housing and in the share market. It is often fairly low income-earners that branch out into the rental market. Eg a council worker I know owns his own home, plus 5 rentals. He makes around $45,000 a year from his job. Not rich by any stretch of the imagination. To remove negative gearing from the rental market will ensure that many investors would need to further raise rents, only tightening the rental squeeze

Most of the solutions proposed by this article are likely to be costly and ineffectual.

Prices are rising because demand growth is faster than supply growth, with the bulk of evidence pointing to supply constraints as a key cause of recent price spikes. In this environment, tax breaks and subsidies that boost purchasers’ buying power will add to demand and simply disappear in even higher prices, leaving the prospective purchaser no better off. More grants and subsidies are not the solution.

Likewise, more public housing may help to alleviate the problem for a small number of stressed households, but governments don’t have the resources or capacity to expand to meet current demand. Anyway, the housing industry can’t meet current demand, and governments face the same capacity blockages as the private sector.

Governments are encouraging infill development, but it has clearly not been effective in meeting all of the growth in demand.

And ideological hostility to “urban sprawl” has prompted government to choke off traditional sources of low-cost new housing on the urban fringes, which some analysts say is the largest single reason for the decline in affordability in the first place. (see for example http://www.onlineopinion.com.au/view.asp?article=4811)