The conventional wisdom among many affordable housing advocates is that boosting the supply of market-rent housing won’t help low-income earners. They argue that most new housing built in Australia is too expensive for low- and middle-income earners. They believe that building more homes won’t lower the rents paid by the poorest Australians unless they’re explicitly built to house them.
This conventional wisdom is wrong. Recent Australian research claiming that most new housing built in Australia is targeted at the top end of the market is flawed because it groups price deciles by the number of Local Government Areas, rather than by the number of dwellings. And claims that more housing doesn’t help low-income earners are at odds with international literature showing that market-rent housing remains the largest source of affordable housing for low-income earners.
This matters, because many people are using the recent research to argue that governments should focus on increasing the subsidies for affordable housing rather than tackling politically difficult planning reforms. This would be misguided policy, based on misguided analysis.