This author is a well-known advocate of urban sprawl, and his bias shows in the article.

Clearly, the supply of new housing is limited just as much by government policies preventing denser development of existing suburbs as it is by government policies preventing building on the already far-flung urban fringes. Yet this author concentrates only on the former.

Wendell's underlying point is correct, of course. When demand exceeds supply, prices go up. When governments ration supply, as they are currently doing for all sorts of specious reasons, they are directly, though not entirely culpable, for the reduction in housing affordability.

Increasing the first home buyers grant, simply adds to demand, which was the Rudd government's intention. The collapse in house prices in the US, UK and much of Western Europe will lead to recession. The government hopes that putting a floor under Australian house prices might help to stave off a recession. They will probably be technically right but it will still feel like a recession to most of us. The problem will arise later when the next housing bubble starts from a higher price base. The collapse at that time will be bigger and more painful.

It is unremarkable that government policy/politics shapes the supply of residential building land. Land use is very properly a matter for community involvement and decision.

It is also misleading to suggest that current high house prices are solely attributable to policy involvement in the release of new residential development land. In most cities, there is adequate land available, but in aggregate developers restrict the rate of release to maintain their land prices. Price maximisation is a normal part of commercial operations.

What is more interesting is to see how the growth of personal debt has mirrored the growth of residential prices across Australia as a whole. The two have gone up virtually in lock-step. Most people need to borrow to buy their homes, and as people are able to borrow more, they bid up residential prices.

In the long run, unnecessarily high borrowing to support unnecessarily high house prices is bad economic and public policy. It is a bubble that needs bursting, and the sooner it is burst the softer the impact will be.

It is not likely to influence the present situation but my involvement in the Real Estate Industry goes back a long way.I was a young salesman who remembers having a block to sell in Broadbeach on the GOLD COAST on a site where the BROADBEACH hotel now stands for 250 pounds Australian,and I COULDN'T FIND A BUYER! as a Buyer for a Land Sales company I bought 5 acre blocks for 400 pounds and the Company sold them for 1400 pounds on terms.Developers back then bought Racehorses, a sure way to spend some of your fortune. I had spent a year in Germany in 1961 and never met anyone with a house.They all rented apartments in High Rise Buildings.Some had plots on the Danube where they grew their own vegetables. We in Australia always want a "home among the gumtrees" but the world is changing, our expectations might have to be lowered.I have paid off my 30 year mortgage recently but I AM 75!

There are many facets to this problem from well meaning environmentalists who think we will be more sustainable if we all live closer together to governments who see land as a "painless" way to raise revenue.

A "solution" to the problem is to make sure that the money obtained for land is spent on the people who live in the neighbourhood. The value of a piece of land is determined by who lives near by. Thus if I spend a lot of money on a piece of land then the money I give should be spent on amenities near my piece of land.

This simple fact has been ignored by governments who use the so called egalatarian idea of putting land sales money into consolidated revenue to the disadvantage of the disadvantaged. If all the money collected from land sales in our urban areas was spent on infrastructure near where the land was purchased then most of our housing affordability problems would go away because what happens now is that money for land in outlying areas goes to subsidise the rest of the community and NOT the other way around.