Boomers & Millennials: young and poor miss out on Australian dream of owning a home

by | May 12, 2020 | Boomers & Millennials

Like many of the entries in this series, housing inequality in Australia is both an intergenerational as well as an inter-class issue. Those priced out of the housing market, predominantly the young and poor, have missed a once in a lifetime wealth boom and are now forced into either long-term rentership or the buying on the outskirts of cities as Callum Foote reports.

Housing inequality: intergenerational

Owning a house remains a core aspiration for the majority of Australians, yet it is widely recognised that a significant portion of the Australian population have been priced out of a home.

House prices have more than doubled in the past 20 years with Sydney and Melbourne being most acutely affected. This never to be repeated housing boom has contributed to the broadening wealth gap between older and younger generations as boomers have seen the value of their assets skyrocket under them.

The unfortunate underside to this boom is that there is now a generational underclass in the housing market. A poll conducted by ANU revealed 87% of Australians believe that future generations will not be able to afford to buy a home. With 68% house-less, younger Australians are worrying they’ll never be able to afford a home if present conditions persist.

The disparity between who owns a home and who doesn’t, is marked by a widely acknowledged generational fault line. According to the ABS, fewer than half of 25-34-year olds own a home today. If present conditions persist, almost half of retirees will remain renters in 40 years’ time.

However, like all socio-economic issues, it is the poor who have borne the brunt of housing inequality. The generational differences for those in the lowest wealth quintile is growing, with only 20% aged between 25 and 34 owning their own home today compared to 60% in 1981.

The gaps within generations are growing alongside the gaps between them. Twenty years ago, home ownership rates were relatively consistent across the socio-economic board. However, as poorer potential home buyers are forced into competition with medium- and high-income households, in a market which is deficient by approximately 228,000 homes according to the RBA, they have been priced out.

Those who do not have access to parental support or the means to compete in the urban housing market have been forced to move into suburbs further away from jobs and family or into long-term rentership.

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Renting affordability

Again, as is the case with home buyers, low-to-medium-income earners are obliged to compete with higher-income earners for a limited number of affordable rental properties in areas where they have a higher chance of landing a job.

The proportion of Australian households renting has increased over the past few decades from 27% in 1997-98 to 32% in 2017-18. A lack of public housing has also pushed many into the private rental market with the proportion of public housing tenants decreasing from 6% to 3% over the same period.

As you might suspect, long term rentership is a vicious cycle blocking many low-to-medium income earners from home ownership. Despite those with mortgages paying more on average per month, renters are forced to pay a higher portion of their income to the landlord. On average, 20% of income is spent by renters on housing, compared to 16% for those with mortgages and just 3% for those that own their home outright. When considering just low-income earners, these number jump to 32% and 29% for renters and mortgagers respectively.

Housing costs, nation-wide, have increased between 40 and 50% over the last 20 years adding extra stress on those on low and medium incomes compared to bigger earners.

Why are prices going up?

So, clearly there is a problem with Australia’s housing market with the young and the poor, particularly the poor-young, bearing the brunt of overpriced homes and long-term rentership. But why have these trends persisted and what is their driving force? The simple answer is demand for affordable housing has outgrown supply by a long way, and there are two factors driving this demand.

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The first are housing investors. In 2017-18 one in five Australian households owned one or more properties other than their usual home including holiday homes and investment properties. Of these, 71% owned only a single other property, whilst the top five per cent owned four or more. These rates have been increasing over the past few decades and reflect government policy designed to encourage such investment. Primarily, it has been government re-structuring of the tax system, changes to the capital gains tax and the ease of negatively-gearing properties which have increased the profitability of property investment. The interaction of negative gearing and capital gains tax concessions contribute to lowering housing affordability.

Negative gearing is the ability to write off losses made from an income-generating asset against your total income and has been in place in its current form since 1986. Capital gains are profits made from selling an asset at a higher price than you bought it for. In 1999, Howard introduced a concession whereby 50% of all capital gains made from selling property were tax except. With the capital gains concession in place, negative gearing became all the more appealing to property market speculators.

The argument behind sustaining these two tax structures is that they act as incentives for property investment, which increases the supply of rental, and eventual ownership of properties on the market. However, the RBA found that the arrangement predominantly helped high income families, with more than half of the benefit going to the top 20% of earners. The ease of negative gearing investment properties as well as the capital gains concession has led to raised house prices as high-income investors compete with each other, and outcompete lower-income households, for the limited number of properties.


The second factor which has increased demand has been the growth in migration since the mid-2000s. Australia’s population grew by 3.8 million between 2006 and 2016, with the majority of this growth occurring in capital cities. Since 2005, migration has been the major factor contributing to population growth as opposed to natural population growth. This increase in the demand for property around job centres in capital cities has not been met with an increase in supply. As a result, since 2012 house prices have risen 50% in Melbourne and 70% in Sydney.

What to do?

It has taken two decades of ineffective policy decisions to get us into our current housing mess. However, assuming that home ownership remains an important goal for Australians, there are two simple policy objectives to pursue.

The first involves cleaning up the tax incentives which artificially inflate demand. This means reducing or axing negative gearing and capital gains concessions for property investors. This has been backed by RBA Governor Phillip Lowe in 2017, and more recently by The Grattan Institute in 2018.

However, to do so is politically challenging for the Coalition as it would mean back tracking on 21 years of claims stating that such measures are a vital cornerstone of every-day Australian property owners. Labor came into the last election looking to prune back the Capital Gains concession to 25% and wind back negative gearing to just income on investments.

The second is to significantly increase the supply of affordable housing in areas with easy access to transport and jobs. This again, poses its own challenges as home owners in prime suburbs oppose developments.


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Callum Foote is a journalist and Revolving Doors editor for Michael West Media. He has studied the impact of undue corporate influence over Australian policy decisions and the impact this has on popular interests.

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