Sydney’s housing crisis is causing significant economic losses, amounting to over $10 billion a year or 2 percent of the city’s annual GDP, according to newly published research by the urban policy think tank Committee for Sydney. The report, titled “Chronically Unaffordable Housing,” highlights that the housing crisis in Sydney is a chronic problem rather than a short-term issue. The CEO of the Committee for Sydney, Eamon Waterford, emphasized that young professionals in Sydney are especially impacted by the high housing costs, limiting their opportunities for career development.
The research also reveals that Sydney’s median property price is more than 13.3 times the five-year median household income, exceeding the international benchmark of eight times the median income. Sydney is ranked as the sixth most unaffordable city globally, surpassing cities like New York, London, and Paris. The report warns that the situation may worsen in the future, as Sydney’s housing supply falls short compared to highly unaffordable cities such as Vancouver.
The loss of talent is a significant contributor to the $10 billion economic loss, accounting for $1.5 billion annually. The report notes the decline in Sydney’s attractiveness for talent over the past seven years, based on surveys ranking the top cities for footloose digital talent. Furthermore, reduced innovation and research and development (R&D) are estimated to cost $2.9 billion due to the high costs of talent and land in unaffordable cities like Sydney, which often leads to fewer start-ups and decreased R&D investment.
The largest portion of the economic loss, approximately $6.8 billion annually, is attributed to decreased productivity. Inefficient commutes alone can cost Sydney over $1.1 billion per year, with the city having a high average commute distance and time. Additionally, the housing shortage in Sydney forces families to relocate, resulting in increased turnover and hiring costs for businesses.
To address the housing crisis, the report proposes three recommendations: the implementation of an inclusionary zoning target to ensure affordable housing in residential developments, increased investment in social and affordable housing, and a significant increase in overall housing supply with good access to public amenities.
The New South Wales government has already introduced planning reforms, including incentives for developers to include at least 15 percent affordable housing. Outgoing Reserve Bank of Australia Governor Philip Lowe also emphasized that the high housing costs in Australia are not solely caused by interest rates but rather the result of societal choices regarding city design, zoning, transportation, and land and housing investment. He believes that tackling these issues is crucial in addressing the housing affordability problem and its economic and social consequences.