The Times Australia
Business and Money
The Times Real Estate

.

How housing made rich Australians 50% richer, leaving renters and the young behind – and how to fix it

  • Written by Brendan Coates, Program Director, Economic Policy, Grattan Institute
How housing made rich Australians 50% richer, leaving renters and the young behind – and how to fix it

Compared to the rest of the world, income inequality is not particularly high[1] in Australia, nor is it getting much worse – until you include housing.

Rising housing costs have dramatically widened the gap between what Australians on high and low incomes can afford. Rising home prices paired with plummeting rates of homeownership are driving up wealth inequalities.

If we want to address inequality, we will have to fix housing.

Housing is draining the incomes of the poor

People on low incomes, who are increasingly renters, are spending more of their incomes on housing.

The inflation-adjusted incomes for the lowest fifth of households increased by about 26% between 2003-04 and 2019-20. But more than half of this was chewed up by skyrocketing housing costs, with post-housing incomes climbing only 12%.

In contrast, the real incomes for the highest fifth of households increased by 47%, and their after-housing incomes by almost as much: 43%.

Note: Growth in income including housing costs is calculated by subtracting growth in housing costs from growth in disposable income. Source: ABS Survey of Income and Housing microdata[2]

Housing is driving wealth inequality

Wealth inequality in Australia is still below the OECD average but has been climbing for two decades.

While average full-time earnings have doubled over the past half-century, home prices have quadrupled.

It’s made more and more Australians millionaires. In 2019-20, fully one-quarter of homeowning households reported net wealth exceeding A$1 million[3].

Read more: Renters spend 10 times as much on housing as petrol. Where's their relief?[4]

Rising asset prices over the following two years, albeit now starting to reverse, mean this figure is almost certainly higher now.

Median net wealth for non-homeowning households is a lowly $60,000.

Since 2003-04, the wealth of high-income households has grown by more than 50%, much of that due to increasing property values. By contrast, the wealth of low-income households – mostly non-homeowners – has grown by less than 10%.

Housing is driving up capital income

Rents used to make up just 2% of national income in Australia. Now they’re almost 10%. This explains more than a quarter of the rise in the capital share of income in Australia since 1960.

As housing has become more expensive, it’s the wealthier Australians who own more housing who have benefited the most.

Economists Josh Ryan-Collins and Cameron Murray estimate[5] that up until June 2019, in more than half of the previous 30 quarters the median Sydney home earnt more than the median full-time worker.

In other words, a relatively low-risk, low-effort investment provided greater returns than a year of hard work.

Housing is creating a Jane Austen world

The growing divide between the housing “haves” and “have nots” is being entrenched as wealth is passed onto the next generation.

And the swelling of national household wealth to a total of $14.9 trillion – increasingly in the hands of the baby boomers and older generations – means there is an awfully big pot of wealth to be passed on.

Source: ABS Survey of Income and Housing microdata Big inheritances boost the jackpot from the birth lottery, the jackpot that underlies the Jane Austen novels set in the early 19th century. It was a world in which none of the rich got rich by working[6]. Among the Australians who received an inheritance over the past decade, the wealthiest fifth received on average three times as much as the poorest fifth. Notes: Data on inheritances by wealth of recipient is not available from the probate records, so we use data from HILDA on self-reported inheritances. Wealth captured only in 2002, 2006, 2010, and 2014 surveys. Wealth quintile based on most recently-captured wealth information for an individual. Source: HILDA Survey, 2002 to 2017 And inheritances are increasingly coming later in life. As the miracles of modern medicine have extended life expectancy, the most common age in which to receive an inheritance has been late fifties or early sixties – much later than when the money is needed to ease the mid-life squeeze of housing and children. Large intergenerational wealth transfers can change the shape of society. They mean that a person’s economic position relates more to who their parents are than to their own talent or hard work. To unwind inequality, we need to make housing less expensive. Fix tax, but build more houses The federal government should start by reducing the capital gains tax discount and abolishing negative gearing. The effect on property prices would be modest – roughly 2% lower than otherwise[7] – but the impact on home ownership would be a lot larger over time, as first home buyers begin to outbid investors at auctions. However, housing inequality won’t really fall until more housing is built. Australia hasn’t built enough housing for its growing population, because the construction of new homes has been all too often constrained by planning rules[8]. Read more: A brief history of the mortgage, from its roots in ancient Rome to the English 'dead pledge' and its rebirth in America[9] Planning is a state responsibility, and easing planning restrictions is hard for state governments because many residents don’t want more homes near theirs. That’s why the federal government should make it worth the states’ while via the new Housing Accord that sets targets for new construction and pays the states for each home built above a baseline. Grattan Institute calculations suggest that if an extra 50,000 homes were built each year for the next ten years, national home prices and rents would be 10-20%[10] lower than otherwise. Auckland’s[11] large-scale re-zoning in 2016 saw an extra 5% of the housing stock built in five years. We could do something like it here. Correction: an earlier version of this piece put the value of national household wealth at $14.9 billion. The value is $14.9 trillion. References^ not particularly high (www.pc.gov.au)^ Source: ABS Survey of Income and Housing microdata (www.abs.gov.au)^ exceeding A$1 million (grattan.edu.au)^ Renters spend 10 times as much on housing as petrol. Where's their relief? (theconversation.com)^ estimate (www.tandfonline.com)^ got rich by working (inequality.org)^ roughly 2% lower than otherwise (grattan.edu.au)^ planning rules (grattan.edu.au)^ A brief history of the mortgage, from its roots in ancient Rome to the English 'dead pledge' and its rebirth in America (theconversation.com)^ 10-20% (grattan.edu.au)^ Auckland’s (cdn.auckland.ac.nz)Authors: Brendan Coates, Program Director, Economic Policy, Grattan Institute

Read more https://theconversation.com/how-housing-made-rich-australians-50-richer-leaving-renters-and-the-young-behind-and-how-to-fix-it-195189

SME Business News

Why Your Dental Business Needs Professional Digital Marketing Services

Running a successful dental practice today requires more than just great patient care. In a digital-first world, your online presence plays a huge role in how potential patients discover, choos...

Brand Storytelling: How Video Marketing Can Enhance Your Brand Identity

In the competitive landscape of 2025, building a strong and recognisable brand identity is crucial for standing out in the marketplace. One of the most effective ways to shape and communicate y...

Future-Proofing Your Business with Strategic Defence Insight

In an era marked by rapid technological change, global uncertainty, and evolving security risks, the need for long-term resilience in business has never been greater. Organisations across indu...

Maximise Your Amazon Profits with These 5 Simple Seller Strategies

Selling on Amazon offers countless opportunities for individuals and businesses to grow their income. But with so many sellers joining the platform every day, it’s not enough to just list your ...

The Times Features

The Best Adjustable Bed and Mattress Packages for Comfort

The appropriate bed and mattress are essential for establishing the perfect sleep environment. If you seek a way to upgrade your sleep experience, adjustable bed and mattress pac...

Designing a Modern Home: Features That Will Make Your Dream House Stand Out

Designing your dream home is an exciting journey, and for many, it’s an opportunity to create a space that reflects their personal style, functionality needs, and modern trends. ...

Client Dinners Done Right: Tips for Meaningful Engagement

Client dinners offer more than just a meal—they’re an opportunity to build lasting business relationships in a more personal and relaxed setting. Done well, these dinners can str...

From Classic to Contemporary: 5 Timeless Costumes for Any Party

When it comes to dressing up for a costume party, you want to choose something that is not only fun but also memorable. Whether you're attending a Halloween event, a themed gathe...

Action Figures as Art: The Growing Trend of Custom Figures and Modding

Action figures have long been regarded as collectible items, valued by enthusiasts and fans for their connection to popular culture. However, in recent years, a growing trend has...

The Ultimate Guide to Securing Grants for Your Small Business in Australia

Running a small business in Australia comes with both opportunities and challenges. While it can be rewarding, funding your business through the early stages or periods of growth...

Business Times

Why Your Dental Business Needs Professional Digital Marketing Ser…

Running a successful dental practice today requires more than just great patient care. In a digital-first world, your onlin...

Brand Storytelling: How Video Marketing Can Enhance Your Brand Id…

In the competitive landscape of 2025, building a strong and recognisable brand identity is crucial for standing out in the ...

Future-Proofing Your Business with Strategic Defence Insight

In an era marked by rapid technological change, global uncertainty, and evolving security risks, the need for long-term res...

LayBy Shopping