Australia's Housing Divide - Why Structural Imbalances Outweigh Supply Shortages

The deeper structural challenge

Older Australians are living longer, wealthier and in larger homes than ever before — a positive social outcome, but one with significant housing consequences. At the same time, younger Australians are facing record barriers to entry: high deposits, limited stock, and rising inequality in access to home ownership.

As Leslie notes, 85% of households aged over 55 have two or more spare bedrooms, while Australia ranks among the top five OECD nations for rooms per person. That’s not a shortage of houses — it’s a misallocation of them. Policies that have favoured and protected wealth held in property for decades — from stamp duty exemptions and superannuation tax breaks, to the exclusion of the family home from the pension assets test — have compounded the gap.

Re-zoning and density aren't enough

The instinctive policy response has been to build faster, build taller, and build denser. But if that’s all we do, we risk solving the wrong problem.

Simply adding supply in the form of high-density apartments — particularly in markets where demand is shaped by affordability, not volume — doesn’t guarantee improved access or affordability. It may, in fact, distort demographic needs, funnelling young Australians into smaller, more expensive apartments that do little to support family formation or long-term financial stability.

As the AFR piece highlights, this approach risks becoming a short-term patch for a long-term structural imbalance — one that ultimately benefits incumbent landowners, not future generations. Some argue the solution is simply to build more homes. But if that’s the only lever we pull, it risks being both wasteful and short-sighted.

As Leslie highlights:

“Collectively, policy settings tilt the scales of wealth accumulation against younger cohorts. The Treasury’s retirement income report revealed that retirees typically maintain or even grow their wealth during their retirement, meaning housing stock recycles through inheritance rather than retirement draw-downs.”

With fertility now almost 30 per cent below replacement, absent migration, each generation will be markedly smaller than the last. Yet we keep funnelling young Australians into expensive apartments that do little to support family formation — compounding the very demographic decline that will shape our future housing market.

Policy incentives

If policymakers want to create meaningful change, the conversation needs to extend beyond planning reform to the incentive systems that keep housing locked up.

That means:
• Encouraging turnover by reforming stamp duty and moving toward fairer, annual land-based taxes.
• Reviewing superannuation and pension settings that reward holding excess housing wealth.
• Supporting genuine downsizing pathways — not through token incentives, but through practical housing and infrastructure solutions that make moving feasible and appealing.

Without this, policy will continue to reinforce the status quo — where the benefits of past property booms and tax concessions remain concentrated among those least affected by the current crisis.

Intergenerational equity

One of AFR article’s most compelling points is that Australia’s housing system isn’t just an economic issue; it’s an intergenerational one. Younger Australians are not just competing for homes — they’re contending with decades of policy design that entrenched advantage for earlier generations.

Reforming planning systems is important, but reforming distribution, taxation, and access is essential. If not, we risk perpetuating the same imbalance — a market that builds more, costs more, and still leaves younger families further behind.

Conclusion

Planning reform is a critical lever, but it’s not a solution on its own. As Leslie and the AFR rightly highlight, Australia’s housing crisis is not about how much we build, but how intelligently we use and share what we already have.

For younger generations, genuine reform means confronting structural inequities — not just tinkering with zoning maps. And for policymakers, it means recognising that long-term stability won’t come from more construction alone, but from a fairer, more efficient housing system that serves all Australians, not just those who got in first.

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