Housing can be good for productivity. Here are 5 ways we can build it better

Most Australians invest much of their income into housing, making employment, education and retirement decisions^[1] based on the location, timing and strength of their housing investment.

Across the nation, the housing choices of the last four generations have shaped our cities’ economic success and productivity. Stable housing enabled development, and affordable housing provided a stable workforce fuelling this progress.

Yet, in recent decades, policymakers have largely lost sight of how important housing is for productivity. It’s pleasing to see it’s a focus of discussions at the government’s economic roundtable^[2].

Australia’s housing affordability crisis is undermining the economies of our cities^[3], which have become too expensive^[4] for many to live in, work, start businesses or pursue education. Growing numbers of Australians are forced to move to the urban fringes and endure long commutes to work^[5].

Many in job-dense areas live in poor-quality dwellings^[6], which they cannot afford to repair. Poor-quality housing worsens health^[7], which is a drag on productivity^[8].

So how can we harness housing to drive up productivity? Here are five ways.

1. Build houses more efficiently

The way we build Australian homes is wildly inefficient^[9].

A key reason is that subcontracting has fragmented^[10] the construction industry. A head contractor signs on dozens of subcontractors. Then, costs grow due to days with no-one on site, or with delays due to a specific subcontractor being unavailable.

Modern methods of construction^[11] can speed up the construction workflow and revolutionise the way we deliver housing.

This will require rapid testing and scaling up a range of innovative technologies such as prefabrication, alternative materials (such as recycled steel), 3D printing and robotics to deliver housing more quickly, and standardisation to deliver more efficiently.

2. Use our housing stock more productively

As the population ages and household composition changes, we need to move beyond the myth of the quarter-acre block, Hills Hoist and Victa mower.

Our current average household size of 2.5 people is around half the household size 100 years ago^[12]. Yet Australian homes are now, on average, the largest on Earth^[13] and double the size of housing in most European and Asian nations^[14].

Greater stock diversity through townhouses, apartments and other higher density forms will narrow the mismatch between the housing stock and population needs.

Almost all of tomorrow’s housing supply already exists today^[15]. So there is much to gain^[16] from re-purposing ageing stock and increasing its use, and even adapting former office accommodation^[17].

Abolishing stamp duties on home purchases and replacing them with a broad-based land tax^[18] will also promote labour mobility and downsizing.

3. Streamline government responsibility for housing

If we want to increase housing supply and improve productivity, we need to consider integrated policy.

Federal and state governments need to think about impact: aligning the housing and cities portfolios under one minister, with a mandate to deliver housing first and foremost. We need to get away from multiple ministers and departments tripping over each other.

We’ve seen successful streamlining already in some states. In South Australia, ministers have combined housing and planning responsibility as the head of a housing “super department”^[19].

4. Tap into economic potential beyond cities

Our national target of 1.2 million well-located homes^[20] should not be misunderstood as 1.2 million inner-city homes. New builds don’t have to be in the biggest cities.

Our regions have boomed in recent years and could grow further^[21] if governments gave priority to planning their future and delivering infrastructure, unlocking tens of thousands of new homes.

Pressure would come off big city housing markets, while more regional housing would provide the workforce needed to deliver national ambitions around a better connected electricity grid and strong regions.