00:00The story of the housing affordability crisis is repeated across the country and also inside
00:07families. Let's compare two parents buying a house back in 2001 with their son and his partner trying
00:14to buy today. Each pair have typical jobs and earn typical incomes for their era. Each pair
00:20has been saving steadily for six years and in today's dollars the kids are way ahead and yet
00:26the parents have enough to get a typical three-bedroom home in the suburbs but their kids are still four
00:32years away from getting there. The social contract where a middle-class job yields a middle-class home
00:38has been left at the bottom of a house price mountain. Back in 2001 the average house price
00:44was four times the yearly income for an average household. Let's call that the bottom of the
00:50mountain. In the years since incomes have doubled but house prices have quintupled.
00:58View it this way and it's little wonder that housing has become the dominant economic anxiety
01:03for a generation that is now hungry for a solution. But what does a solution actually look like?
01:09Well suppose that we wanted to return things to the way they were. Pretty clearly you can't bring
01:15the house price mountain back down to the wages hill without taking the housing market off a cliff.
01:21And that would unleash chaos even if it were possible which let's be very clear it is not.
01:26Even these tiny blips that you see in the past were painful for many people who already had homes
01:31with a broader chilling effect on the economy. There's a reason why housing crashes are often
01:36associated with recessions. Maybe instead we could imagine more of a steady decline. Even so it would
01:44still take more than a decade to get back to the old level and property values would be falling that
01:49whole time. Something politicians are keen to avoid. Imagine instead that we could just keep house prices
01:56constant. It would take even longer to catch up all the way out to 2048. Or if we let house prices keep
02:04growing, say at the rate of inflation, there would be very little catching up at all for the foreseeable future.
02:10Of course targeting house prices is not something governments try to do or even could do. In reality they are
02:16shaped by interest rates, by migration and by all sorts of things that we can't foresee. So what's the point
02:22of all these lines? Well hopefully not to make us feel too helpless but as a reminder that all of our policy
02:28debates about housing today are only likely to change the housing story over the long term.
02:34A housing problem that took a generation to create could take a generation or more to fix. Unless our
02:40housing market makes a painfully sharp adjustment.
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