Inquiry into housing policies, labour force participation and economic growth

This Inquiry, funded by the Australian Housing and Urban Research Institute (AHURI), presents evidence on how housing policies might promote labour force participation and economic growth through four channels—housing supply responsiveness, labour mobility, employment decisions and consumption.

Despite strong evidence of housing’s large presence in the economy, it is often viewed as an adjunct of social policy with few economic consequences. The Inquiry findings highlight a critical need to reposition housing from the periphery to a more central place within economic policy debates.

Key findings:

• In terms of housing supply responsiveness, structural impediments may be weakening the trickle down of new housing supply to lower income groups, with potentially adverse implications for their ability to secure housing closer to where jobs are located. Hence, targeted government intervention might be needed to ensure adequate supply of affordable housing to vulnerable groups at the lower end of the market.
• Private renters exhibit higher residential mobility rates than those in other tenures. Because Commonwealth Rent Assistance is transferable, it provides opportunities for individuals to move to regions with better economic prospects.
• There is a case for implementing reforms to alleviate the adverse impacts of home ownership related tax concessions on labour mobility. However, there is a trade-off here because there is some evidence of home ownership’s positive impacts on workforce engagement, and as a financial source of parental support for education and business start-ups.
• Reforms that strengthen public housing tenants’ incentives to work will have only small positive effects on employment rates. An integrated approach that addresses multiple barriers to employment (e.g. drug and alcohol abuse programs, mental health skills and so on) is likely to be a more effective approach.
• A strong link exists between house price changes and consumption for middle aged and older households. The take-up of further debt among highly leveraged households exposes them (and the macroeconomy) to significant risk if house prices fall, or if interest rates rise. Hence, monetary policy levers, while not directly housing related, have important influences on housing wealth related consumption effects.
• There is little systematic integration of housing policy interventions at various government and spatial levels, nor is there an overarching agency that articulates how these interventions impact on economic outcomes nationally. A more considered and coordinated policy treatment of housing as an economic asset that has implications for nation-wide economic growth is clearly overdue.