Should Government Intervene in Housing Crisis

Last years interest rate increases are keeping Australia's housing market in a down slide. While it is a dream of many Australian's to enter the housing market and to become home owners, the reality is that it is just not affordable at this time for many people. Australian first time home buyers taking home loans in February was the lowest since June of 2004. The number of mortgages granted in February was the lowest in ten years. This shows, not only are applications for home loans down, but those that are being approved are even lower. On that same note, the number of home building permits approved in the past year is down 22 per cent over previous years. This means not only are fewer people applying for home loans, but there are just fewer new homes in general, both contributing to the housing slump.

House Rents
The decline in the housing market is making Australians reconsider home ownership as a viable investment. They are seeking to invest their money elsewhere, as well as consider rental as a more suitable option for living. Housing rentals in the capital cities of Australia have seen huge increases so far this year. However, with the increase in people entering the rental sector, demand is driving up rental prices. In Sydney, 40 per cent of renters are paying more than $400 per week for home rents. In the more isolated Pilbara rents as high as $1650 per week can be seen. With these rental prices skyrocketing, it is making renting in the city impossible for low-income families. It is also taking much longer for people to find suitable housing and therefore those in a time crunch are settling for homes that are less desirable or out of their price range.

Government Involvement Thus Far
The housing crisis, including decrease in home ownership and increase in home rents, is prompting some people to think that the government should get involved and consider initiatives to ensure good quality house rentals and affordable housing. The International Monetary Fund has suggested that state and federal government's intercede to help increase interest in the failing housing market.

There has been an overwhelming focus from the government on home ownership. Grants are available for first time home buyers as a way to encourage people to enter the housing market. However, the IMF has suggested that it might be better to put more focus on affordable housing, especially for low-income individuals and families. The focus by the government on home ownership rather than quality rentals, may be contributing to housing price swings. They suggest that a more level tax across owner- occupied and rental housing could help decrease the focus on home ownership alone.

Future Involvement
Some people think that the government is already too involved in the housing market and should stay out of it. Either way, there needs to be more options available to low-income families for affordable, quality home rents. For those with low-income and less access to transportation, living in the cities near work places, stores, and public transportation makes the most sense. However, these are the areas that have the highest house rents. Government intervention and tax incentives might be the way to go to ensure affordable living options for this population.

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