Vitruvian Solutions

Is housing affordability a symptom of deeper economic and urban planning challenges, or is it the root cause of the issues plaguing many of our cities today? This debate is central to understanding one of the most pressing urban concerns of our time. Globally, housing affordability has been a growing problem, affecting not just the lives of individuals and families but also economies, businesses, and the future of sustainable urban development. In Australia, the stakes are high, with a projected cost of $25 billion annually to taxpayers by 2051 if the crisis remains unresolved.

The housing affordability issue is more than just a matter of high rents or expensive property prices—it touches on urban planning, supply and demand dynamics, financialisation of the housing market, and regulation, just to mention a few. As cities continue to grow, and the demand for housing increases, it’s essential to take a holistic look at the problem. By asking whether housing affordability is the root cause or a symptom of broader societal and economic trends, we can explore potential solutions that are both practical and forward-looking.

(Personal note: I am very blessed with great circumstances on the financial front but I am not willing to pay the current market price for a house to own it. Partly because I am conscious of my finances – some would say stingy – but partly because as an architect I know that the prices do not reflect the value for me.)

The global context of housing affordability

Housing affordability has become a global concern, driven by a combination of factors such as rising property prices, stagnant wages, and rapid urbanisation. Over the last decade, house prices in cities like London, New York, Hong Kong, and Sydney have surged, often far outpacing wage growth. This has made homeownership increasingly unattainable for many, particularly in major urban centres.

More than 55% of the world’s population now lives in cities, a number expected to grow to 68% by 2050. This shift towards urban living has placed immense pressure on housing demand, particularly in already densely populated areas. However, the housing supply has failed to keep up with this rising demand. Slow construction rates, land scarcity, and regulatory hurdles have all contributed to a supply-demand imbalance, pushing prices up even further.

At the same time, wages have not kept pace with rising housing costs, creating an affordability gap. In many developed economies, this gap is particularly pronounced. The World Bank considers housing unaffordable when more than 30% of household income is spent on housing costs. Yet, in cities across the globe, a significant proportion of households exceed this threshold, particularly among lower-income populations.

The Australian Housing Crisis

Australia exemplifies the global housing affordability crisis, especially in cities like Sydney and Melbourne, where house prices have soared. Between 2010 and 2020, house prices in Sydney rose by nearly 80%, while wage growth remained much lower. The result? Homeownership is out of reach for many Australians, and rental affordability has become a significant concern. According to a 2023 report by Anglicare Australia, less than 1% of rental properties in Australia are affordable for a person earning the minimum wage or receiving social welfare.

This affordability crisis has wide-ranging consequences. High housing costs force people to move further away from city centres, leading to longer commutes, environmental strain, and social disconnection. Moreover, the mismatch between wages and housing costs has made it difficult for businesses to attract and retain workers, especially those who cannot afford to live near their jobs. Some companies have even started offering affordable accommodation as part of their employee retention strategies.

Housing affordability as a root cause?

Unaffordable housing can be seen as the root cause of several social, environmental, and economic issues in modern cities. One major consequence is the growing fragility of urban environments, as high housing costs often lead to the creation of homogenous, single-class neighbourhoods. Homogeneity is fragile because it lacks the resilience that comes from diversity—diverse communities offer a variety of perspectives, solutions, and approaches that can better withstand economic and social shocks.

Unaffordable housing also contributes to urban sprawl, as those priced out of cities move to more affordable suburbs – where prices for housing might be more affordable, but the living is not due to the distances from economic (work), physical (utilities) and social (education, social services, shopping, etc) infrastructure. This sprawl increases reliance on cars, leading to longer commutes, higher carbon emissions, and greater pressure on infrastructure. Cities then face the challenge of expanding services like transport, utilities, and healthcare to more distant areas, which can be costly and inefficient.

Additionally, unaffordable housing accelerates gentrification. As wealthier individuals move into lower-income neighbourhoods, long-time residents are displaced, breaking up communities and pushing vulnerable populations further out to the urban fringes. These residents, in turn, face reduced access to job opportunities, education, and healthcare, further exacerbating inequality.

The long-term societal costs of unaffordable housing are significant. Homelessness rates rise, particularly among vulnerable groups such as children and the elderly. According to a report commissioned by Housing All Australians, over 76,000 children under 18 sought assistance from homelessness services in 2022–23. The trauma associated with childhood homelessness—frequent moves, instability, and stress—can have lasting effects on development and well-being, leading to future welfare costs and social issues.

The Barefoot Investor, Scott Pape, highlighted this problem thusly in his latest newsletter:

“Specifically, more than 76,000 Aussie children under the age of 18 who sought help from homelessness services in 2022–23. Almost 16,000 of these kids were alone – unaccompanied by a parent or caregiver. The other 60,000 kids sought help with their family, according to Homelessness Australia. Know this: the long-term trauma of a childhood spent without a stable roof over your head, of constantly moving schools, and absorbing the impact of Mum or Dad being constantly stressed about where they will live, is real and it’s long lasting.”

Unaffordable housing as a symptom?

While unaffordable housing creates many problems, it can also be seen as a symptom of broader economic, policy, and social challenges. One key factor is the imbalance between housing supply and demand. In many cities, land availability is limited, and the construction industry is slowed by high costs and regulatory obstacles. Australia’s construction industry, for example, is one of the most expensive in the world, yet this costliness does not necessarily result in higher-quality housing, as Ted Baillieu, former Premier of Victoria, highlighted in episode 182 on the What is The Future for Cities? Podcast.

Another contributing factor is the financialisation of housing. In cities like Sydney, housing is often treated as a financial asset rather than a place to live, attracting investors—both domestic and foreign—who buy properties with the goal of capital appreciation. This drives up property values and prices locals out of the market. Additionally, stagnant wage growth in many developed economies means that even as housing prices increase, household incomes remain relatively flat, further worsening affordability.

Government policies also play a role. In Australia, schemes like the First Home Buyer Scheme have had limited success in addressing the core issue of affordability. Moreover, insufficient investment in public housing and limited rent controls have allowed the crisis to persist. In many cases, policies designed to stimulate the housing market have inadvertently inflated prices by increasing demand without sufficiently addressing supply issues.

Balanced approach: Solutions to affordable housing

Addressing housing affordability requires both immediate and long-term solutions, balancing social, economic, and environmental concerns. Increasing urban density through well-planned development can help alleviate housing shortages without contributing to urban sprawl. Sustainable densification efforts, such as building higher-density housing closer to city centres while incorporating green spaces and public transport, can offer a balanced solution that improves both livability and sustainability.

Revitalising underutilised spaces is another approach. Converting vacant commercial or industrial spaces into residential units can not only provide more housing but also rejuvenate neglected areas. This strategy reduces the strain on city infrastructure by making use of existing resources. Robert Pradolin, the founder of Housing All Australians, especially highlights the “sweating the existing infrastructure” approach in episode 264 of the What is The Future for Cities? Podcast. He advocates for regulation change, for example, where the boomer generation is allowed to rent their properties without financial penalty on their retirement funds.

Innovative building techniques, such as prefabrication and modular construction (like Boxabl), could also help reduce housing costs by lowering material waste and labour requirements. Autonomous building techniques, including the use of robotics and 3D printing (which does not seem so far fetched after the We Robot Tesla day), are starting to gain traction as a way to streamline the construction process, making it faster and more cost-effective.

At a policy level, governments need to consider how to better manage land use, zoning regulations, and incentives for affordable housing developments. Encouraging mixed-use developments that combine residential, commercial, and recreational spaces can reduce the reliance on car travel and foster more vibrant, inclusive communities. Additionally, community land trusts and housing cooperatives can offer innovative ways to keep housing affordable by protecting land from speculation and allowing residents to have a stake in their housing. Trialing new collaborations can also improve the housing affordability situation, efforts like the Nightingale Housing (discussed in episode 18 on the What is The Future for Cities? podcast).

What If we had affordable housing?

Imagine a world where housing was truly affordable. Families would no longer have to spend the bulk of their income on rent or mortgages, allowing them to save, invest, and improve their quality of life. Homelessness could significantly decrease, while businesses would benefit from a more stable workforce that could afford to live near their jobs. Social diversity in cities would be preserved, leading to more vibrant and resilient communities.

Affordable housing would also lead to environmental benefits. With fewer people pushed to the suburbs, urban sprawl would slow, reducing car dependency and the associated emissions. Urban areas would become more sustainable, with shorter commutes, more walkable neighbourhoods, and increased use of public transport. Moreover, affordable housing developments could serve as a testing ground for new, sustainable building techniques, benefiting both people and the planet.

How can we move forward to affordable housing?

The question of whether housing affordability is a root cause or a symptom is complex, but the need for action is clear. Cities cannot afford to let this issue fester any longer. Governments, businesses, and communities must come together to implement bold, forward-thinking solutions. How can we increase housing density without sacrificing livability? What role should the private sector play in providing affordable housing? And how can we ensure that affordable housing is both sustainable and inclusive?

It’s time to rethink how we build, plan, and live in our cities—so let’s start the conversation. What are your thoughts? Could a more balanced approach to urban development and housing affordability solve this crisis? How can we ensure that future generations can afford to live in the cities they call home?