Australia has a housing problem and it could decide country’s next PM in May 3 election

With the federal election coming up on May 3, Australia is facing a major problem that influence the outcome of the vote. As living costs rise, inequality grows and cities struggle to keep up with demand, housing has become one of the biggest issues in the national conversation. Whether people are trying to buy or rent, finding an affordable home has become harder than ever. This housing crisis could end up deciding who becomes the next prime minister. For many voters, the big question isn’t just who should lead the country — it’s who can actually make sure they have a place to live.

A homegrown crisis: 39 per cent price hike and soaring rents

The cost of buying a home in Australia has skyrocketed by 39 per cent over the past five years, according to CoreLogic data cited in the BBC. In Sydney, now the second least affordable city globally, the average home commands a price of nearly A$1.2 million. Nationally, prices hover around A$900,000 in capital cities, far outpacing wage growth and deepening the divide between those who can afford a home and those left behind.

Renters are also feeling the squeeze. The BBC noted that rental prices have increased by 36.1 per cent since the pandemic began, equivalent to an additional A$171 per week. Sydney’s median weekly rent stands at A$773, followed closely by Perth and Canberra. Vacancy rates have plummeted and housing demand has far outstripped supply, especially in metropolitan centres.

The 10-year deposit

Owning a home in Australia used to be a birthright, an emblem of the so-called “Australian dream.” Today, it’s a fading mirage. According to a 2024 State of the Housing System report, it now takes an average of 10 years to save for a 20 per cent deposit on a median-priced home—twice as long as it did in the 1990s.

The Conversation’s Tracy Walsh reported that for young Australians aged 25–29, home ownership has plummeted from 43 per cent in 2001 to just 36 per cent today, marking a stark generational divide.

This delay in home ownership translates into long-term financial insecurity. The wealth gap between homeowners and renters is growing rapidly, exacerbated by stagnant wages. Over the past two decades, housing prices have risen far faster than income leading to the lowest levels of housing affordability seen in modern Australian history.

Wages stagnant as the population booms

While housing costs have ballooned, wages have failed to keep pace. This imbalance has created a perfect storm where Australians are spending more of their income on housing, leaving less for essential needs and long-term savings. The lowest-income households have seen real income growth of just 12 per cent after housing costs, compared to 43 per cent for the top fifth, according to The Conversation.

Compounding the issue is rapid population growth. Australia’s population has surged over the past two decades outpacing most developed nations. While high levels of migration have often been scapegoated for housing shortages, the BBC said that foreign property purchases represent less than 1 per cent of all home sales.

Experts like Brendan Coates from the Grattan Institute and Michael Fotheringham from the Australian Housing and Urban Research Institute argue that the real problem is not immigration, but the failure to build enough homes.

Not enough homes, not enough social housing

The root of Australia’s housing crisis is, fundamentally, a lack of supply. The Urban Development Institute of Australia warns that the government will fall short of its 1.2 million new homes target by nearly 400,000. This shortfall isn’t just about private housing. Social housing, which once formed a safety net for vulnerable Australians, now accounts for just 4 per cent of the housing stock—far below the level needed to meet current demand.

According to the BBC, waitlists for public housing are ballooning forcing many Australians into homelessness or substandard living conditions. Yet, both state and federal governments have consistently underinvested in this sector for decades. Without robust social housing programmes, low-income Australians are left to compete in an overheated rental market with little hope of respite.

Planning laws: A structural bottleneck

Australia’s planning regulations are another choke point in the housing pipeline. New planning laws in Sydney and Melbourne have made it more difficult to build homes in areas where people want to live. The BBC reported that red tape and low urban density are partly responsible for the chronic shortage in metropolitan housing.

Australia has some of the most restrictive land-use planning laws among OECD countries. The Conversation highlights that Australia is one of only four OECD nations where the number of homes per capita has actually declined over the past two decades. These restrictions make it harder to increase housing stock where demand is highest—near jobs, schools and transport.

Recent efforts in New South Wales and Victoria to reform zoning laws represent a step forward, but significant community pushback—so-called NIMBYism—threatens to stall or reverse these reforms. The upcoming election will test whether political leaders can hold the line and push through reforms in the face of public resistance.

Election promises: Who’s building what?

Housing policy has become a central pillar of both major parties’ platforms ahead of the May 3 election. The ruling Labour Party has promised to build 1.2 million new homes by 2029, including 100,000 reserved exclusively for first-time homebuyers. Labour’s initiatives also include expanding a shared-equity scheme, building more social housing and introducing subsidies for low- to moderate-income earners.

The opposition Liberal-National Coalition, meanwhile, has pledged to unlock 500,000 new homes and introduced bold measures such as allowing first-time buyers to tap up to $50,000 from their superannuation to fund a home purchase. They have also promised tax-free mortgage payments for up to five years on newly built homes and a A$5 billion investment in development-supporting infrastructure.

However, the Coalition’s strategy comes with a more controversial edge: a promise to slash migration, cap international students and ban foreign investment in existing properties for two years. While politically popular in some quarters, experts like Coates warn this approach could backfire economically. A reduction in skilled migrants would diminish economic productivity and tax revenues ultimately leaving Australians worse off.

While both parties have offered ambitious housing platforms, analysts agree that the proposed measures are unlikely to solve the housing crisis alone. The failure to commit to large-scale zoning reform and adequately fund social housing risks undermining any new home construction promises.

Grants and subsidies for first-time buyers, long a political favourite, may also worsen affordability by inflating prices further. Meanwhile, without action to ease planning restrictions and invest in high-density urban housing even a well-funded construction boom could fall short of meeting demand.

Australia’s housing challenge echoes Europe’s struggle

Australia isn’t the only country dealing with a housing crisis — and planning reforms or building more homes might not be enough to fix it. As Eri Sugiura reports in the Financial Times, European cities are facing similar pressures — but with an added twist: the explosive growth of short-term rental platforms like Airbnb. Across cities such as Lisbon, Venice and Barcelona, campaigners say these platforms have distorted local housing markets, pushing out residents and driving up rents.

In Lisbon, protester Antonio Gori says even the middle class is being priced out, despite restrictions on tourist rentals. In Venice, nearly one in three homes in some districts are offered as holiday lets, while the city’s population continues to decline. And in Barcelona, authorities are taking the most aggressive stance of all — banning all short-term tourist rentals by 2028.

The challenges in Europe mirror Australia’s struggle to balance housing supply with affordability, especially in urban centres affected by tourism and investment pressures. While Australia has not experienced the same scale of short-term letting saturation, cities like Sydney and Melbourne are watching closely as global trends evolve — particularly as platforms expand and travel demand rebounds.

Sugiura noted that some policymakers see short-term lets as a scapegoat for deeper structural failures including restrictive planning laws and underinvestment in public housing — issues Australia also faces. Meanwhile, critics of outright bans argue that poorly designed restrictions can backfire, as seen in New York, where hotel prices spiked after tough Airbnb laws came into effect.

A political tipping point

Australia’s housing crisis is not just a policy failure—it is an economic and social emergency with far-reaching implications. It is eroding the middle class, widening the gap between generations and reshaping what it means to be Australian. As voters head to the polls on May 3, housing may prove to be the single most consequential issue.