Cities are known to be the economic engine rooms for many countries, including Australia. And talent is often seen as a City’s greatest asset. But to attract and retain that talent requires a mix of conditions that are necessary to ensure the quality of life for people is high, and that access to opportunity is abundant.
Along with availability of jobs, city branding, innovation clusters and the like, housing affordability remains one of the least spoken about conditions in this important dialogue. And while cities are acutely aware of the challenges with bringing affordable housing to the market, there is a more complex set of underlying issues.
While younger knowledge economy workers are often happy to share rental properties in convenient locations, lifestyles and other priorities change as they age. The younger workers may prioritise a vibrant night life, where older couples and families may prioritise access to parks and schools.
It’s a complex set of issues that cannot be solved simply by bringing more affordable product into the market, but rather having a more diverse strategy for creating diverse places for people to live, work and play. — Adam Beck
A young couple has decided to leave Sydney just a few years after getting their college degrees. On one hand, it doesn’t sound like much of a story in a city that’s expected to swell to double its size in just a few decades.
But on the other, affordable housing is one of the key factors that makes a city liveable. And a lack of affordable housing could impair your ability to attract the workforce your employers need.
Not willing to make a huge sacrifice
Back to the couple we mentioned earlier. The Sydney Morning Herald profiled Meg and Tim McCloud and found they exhibit a lot of the traits of today’s young professionals and the constraints of the housing market.
It finds less than half of people between the ages of 25 and 34 own a house. That’s down from over 60% three decades ago. (Home ownership rates are dropping in all age categories, but not by anything resembling that decline.)
Here’s the problem. First, saving for the deposit requires an increasingly painful sacrifice — one fewer young people are willing to make. The typical deposit now requires all of one’s disposable income. Just 15 years ago, it required about two-thirds. In the case of the McClouds, they say that when they have free time, they want to spend it traveling or with friends, and they’re not willing to give up all of their fun for a house.
And there’s no question it’s a bigger sacrifice than it’s ever been. In today’s dollars, while food and clothing costs are half what they were a few generations ago, the percentage of household income that needs to be spent for housing has nearly tripled.
It’s not just about building more homes
Across Australia, more than 140,000 homes were built last year. That’s almost the same number of homes that were constructed in the United Kingdom, even though it has two-and-a-half times as many residents.
In Sydney, in particular, home construction has doubled since 2011, but home prices have leapt 40%.
One of the issues is that investors are outnumbering first-time home buyers. Tougher lending restrictions aimed at curbing that haven’t worked. And the market analysis shows that while the red-hot housing market will have to slow someday, it will cool off — not crash.
So what can cities like Sydney do? While issues like the investment boom are beyond the control of cities, cities can and should be smart about how they plan for future growth. The types of construction you allow for and encourage today can play a role in your level of affordable housing down the line.
And the experts also suggest that owning a home isn’t a goal for everyone. Tastes have changed. For many young professionals, the ability to live close to where they work is what’s critically important. And they want that even if they have to rent.