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In the past, housing policy-makers have argued that housing is a social, rather than an economic, investment. However, problems with the housing market may be constraining national growth and imposing costs on the public purse (e.g. homelessness impacts on health budgets).

Published research suggests a range of potential links between housing and economic growth. For example:

  • High house prices might distort the economy toward construction investment and away from more productive industries in tradeable products or services.
  • Housing tenures like home ownership might reduce workers’ willingness to move to jobs.
  • Housing density might promote agglomeration economies and thus labour productivity.
  • Housing close to jobs might reduce time in commuting and increase time for work.
  • Housing market processes can segregate lower income people into certain areas reinforcing areas of low productivity.
  • Low residential construction productivity might curtail overall productivity.
  • Housing might affect health and childrens’ learning which influence human capital formation and long run productivity.

However, there is a lack of systematic empirical evidence in Australia testing these relationships. Where research on productivity has been done, housing variables have often not been included. The study identified a range of databases and statistical techniques that could be used to explore this area further, and also argued for greater focus on studies at the local and metropolitan levels.

Practitioners at a local level in Victoria and Western Australia were found to be only weakly connecting housing and economic development. Housing affordability, rising land values and house prices displacing economic activity were often cited as issues. Some policy-makers have responded by using housing and planning levers to promote growth, such as through mixed land use activity centres or programs encouraging home-based economic activities. Even so, many economic development practitioners see housing outside their portfolio, and many strategies are unclear on the broader spatial and economic consequences of housing decisions.

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