Addressing the housing crisis for vibrant cities

The housing crisis in Australia was a key theme in the 2025 federal election, however our housing system has been under stress for decades.

According to the KPMG residential property market outlook for January 2025, national house prices have increased by 5.1 per cent, rent inflation sits at 6.7 per cent and it takes roughly 50 per cent longer to build a house than it did four years ago.  

Price increases in major cities have outpaced wage growth for decades, putting significant pressure on low- and middle-income earners.

The absence of significant social housing investment over the past 30 years has also exposed lower-income households to an increasingly unaffordable private housing sector. This structural undersupply was exacerbated by the COVID-19 pandemic, which led to steep increases in construction costs and rendered large swathes of Australia commercially unfeasible for development despite strong demand. 

This is prime fuel for deepening wealth, health and geographical inequality, declining productivity, increasing homelessness and generational disadvantage, and cannot be fixed with just one solution. For decades, housing has been considered an investment commodity, a wealth creation tool, rather than a human right that is key to building a fair and thriving society.

Why is diverse housing so important for vibrant cities? 

There’s not a city council in Australia that doesn’t want their region to be fair, thriving and vibrant. Vibrant cities are essential for economic growth, cultural exchange, high quality of life and social interaction – they attract businesses, talent and diverse populations, while providing rich experiences and amenities.  

Diversity of housing, tenure, typology, amenity, accessibility and affordability helps create thriving urban environments by ensuring inclusivity and sustainability, which in turn fosters stable communities, reduces inequalities and supports local economies by keeping essential workers close to their jobs. 

In KPMG’s ‘Keeping us up at Night 2025’ report on social issues concerning business leaders, housing availability and affordability has risen to the top, up from fifth a year ago. The lack of meaningful progress on housing affordability was seen as the number one issue, not only for the immediate outlook but, given the runway required to achieve improvements in supply, also for the medium-term outlook. 

The human reality 

The housing crisis is affecting some groups more adversely than others.  

Essential workers like first responders, teachers, hospitality staff and cultural contributors are the lifeblood of most cities. As these jobs tend to come with lower pay, irregular shifts or fluctuating income, many are unable to afford to live near where they work. In fact, an Anglicare 2024 rental affordability report showed that workers on a full-time minimum wage, could afford less than 1 per cent of all rental properties. 

Another group disproportionately affected by the housing crisis in Australia is women. Between 2011 and 2021, the number of women aged 55 and over experiencing homelessness increased by 40 per cent. More caring responsibilities fall on women, and women are the least protected in terms of their savings, asset accumulation and superannuation balances. As such, affordable, flexible, safe and secure housing options close to workplaces are essential for women, and central to combating gender inequality.

What are the solutions? 

KPMG’s Shaping Cities of Value report explains that inclusive housing and polycentric cities can enhance community engagement and economic activity. Diverse models of housing can mitigate economic and social disparities, while innovative construction methods and inclusive planning can accelerate the creation of dynamic and sustainable urban landscapes. 

We need solutions that are: 

• Focused on increasing social and affordable housing: Australia will need over 1.1 million social dwellings by 2037 according to AHURI research. To address this, ideally one in every 10 homes should be social or affordable housing (currently sitting at under one in four).
• Approved by all sides of politics: a bipartisan Commonwealth housing strategy that treats social and affordable housing as essential infrastructure, with cooperation from state and local governments, is crucial for creating effective partnerships across the housing eco-system. 
• Replicable, scalable and certain: national housing targets, backed by a pipeline of land release and government investment, providing certainty and reducing sovereign risk. 
• Invested in accelerating production and capabilities: our skills shortage challenges require focus on construction worker training and the time to construct requires advancing technologies for sustainable, efficient and faster production of homes. 
• Mastering density planning: developments that integrate mixed-use spaces, efficient designs, vertical buildings and an inclusive approach for optimal land use and quality of life. 
• Including diverse typology options: vibrant cities must meet the physical housing needs of their citizens, e.g. culturally appropriate housing, large and small generational living options, ageing in place, and solutions for differing mental and physical needs. 
• Promoting mixed tenure: citizens need access to home ownership options, secure affordable and private rental properties, student specific housing, youth foyer models, co-living options, shared home ownership, aged care homes, specialist disability accommodation and social housing in perpetuity. 
• Developed in partnership with community housing providers (CHPs): CHPs understand local needs, deliver tailored services, and collaborate with government and private sectors to tackle housing challenges. Policy certainty enables CHPs to invest in skills, resources and growth with confidence, attract investment and deliver quality housing for communities in need.

Significant systemic reform, government support and industry innovation are needed to improve housing supply and affordability. A consistent and collaborative effort across the housing ecosystem is required. By adopting these approaches and being innovative, we can tackle economic disparities, support communities and watch our cities thrive.