Making connections: housing, productivity and economic development

This is a scoping study funded by the Australian Housing and Urban Research Institute (AHURI) with the immediate aim of reviewing links between housing and productivity. It uses scans of existing literature, assessments of local strategies for planning, and interviews with key practitioners involved in metropolitan and local economic development strategies. Published research and practitioners’ experiences are used to suggest new ways in which to construct an understanding of how housing might impact productivity and future economic growth. The longer, broader aim of the report is to encourage housing sector advocates, practitioners and policy-makers to become better equipped to argue economic cases for housing and for equivalent groups dealing with economic policy and local economic development strategies to be more aware of the economic consequences of housing outcomes.

There is a long understood and well-measured impact of housing investment on national income and employment in the short-term (multiplier effects), and a growing recognition of the potential of housing markets to reinforce cyclical instabilities. However, there are few well researched arguments on how housing impacts long-term growth and productivity. Growth cases for housing are rarely made in the policy context and this is in marked contrast to arguments frequently made in support of other forms of infrastructure investment.

This omission is surprising as housing constitutes such a large share of consumption, investment and employment in national and local economies. A range of housing processes, including construction and design, have a potential to impact national productivity and, importantly, the housing prices, rents and characteristics that prevail in an economy have a significant potential to impact growth.