OPINION: Australia's housing problem may have dramatic consequences

"We need to build a home-owning nation if we are to preserve our traditions of sturdy independence", Sir Robert Menzies declared in 1958. This is every bit as true today as it was then. The decline of homeownership in Australia is something that should concern us all.

Here in Tasmania, Premier Gutwein is on the right track with initiatives for young Tasmanians to buy their own home, including the $20,000 First Homeowners Grant that was extended until 2022 and an extension of the stamp duty concession for first-home buyers of established homes.

Yet as we face challenges in Tasmania, there is also a severe problem with housing affordability across Australia in 2020. This has wide social consequences that need to be fully appreciated.

If the issue does not improve soon, the consequences may be dramatic.

For too many people the Australian dream of homeownership has either slipped away or, with continued price increases, soon will.

Since 1970, the national dwelling price to income ratio has doubled, with nearly all of that increase occurring in the last 20 years.

Fed by low-interest rates, foreign investment, and rapid population growth driven by historically unprecedented numbers of migrants and temporary residents (including students), housing prices have skyrocketed in recent years.

In the 20 years to 2016, the proportion of outright owner-occupiers in Australia dropped steeply, from 41.8 per cent to 30.4 per cent. Those with a mortgage have grown from 29.6 per cent to 37.1 per cent. Compared to 25 years ago, there are fewer homeowners overall.

Homeowners are more likely to be paying off a mortgage, and the average size of that mortgage is larger. Supply has simply not kept up with demand.

The problem on the supply side is largely exacerbated by the stifling hand of local government in slowing land releases for housing, height limits, and other red tape restricting supply. The problem is stark when compared to other nations in the OECD and European Union.

Within this group, Australia ranks in the lowest quarter for aggregate homeownership, yet in the top third for the proportion of homeowners with a mortgage.

The rising cost of housing is the principal contributor to Australia's level of household debt, second only to Switzerland and sitting at 120 per cent of GDP.

Since the first Household Income and Labour Dynamics in Australia survey in 2001, housing debt has more than doubled in real terms.

Think of all the money which could be otherwise invested that is currently going towards housing, which although an essential asset is not a productive one.

This money could be invested in starting new businesses or productivity-enhancing technology.

It is also proving to be a drag on consumption, especially in recent years.

Money that people might otherwise spend on a new car, a holiday, or other goods is servicing mortgages instead. An increasing number of Australians are approaching retirement with high mortgage debts.

Between 1990 and 2015, the proportion of homeowners between 55 and 64 years of age with mortgage debts exploded from 14 per cent to 47 per cent.

The same cohort has also seen a near doubling in their average mortgage debt-to-income ratio, from 72 per cent to 132 per cent. However, it is Australians under 45 who are disproportionately affected by the high cost of housing and squeezed out of the market. ABS data reveals that in the 20 years from 1995, homeownership among 25-34-year-olds fell dramatically from 52.2 per cent to 38.6 per cent.

This is Australia's future middle class, rapidly losing its grip on one of the rightful bedrock middle class expectations: owning one's own home.

Most of those who own property have been happy to accrue the benefits of rising prices for the assets they own.

However, these are benefits that are coming at the expense of Australia's social fabric and way of life. Housing is much more than an economic matter. It goes to the very heart of our type of society.

Nothing can give stronger impetus to the development of the type of strong local attachments celebrated by renowned philosopher Edmund Burke than owning one's own home.

It gives people a genuine stake in their communities.

The decline of Australian home ownership, driven by declining affordability, is a major issue we need to address from both the demand and supply sides.