One way to ease the housing crisis: go public
Idea
I have just returned from four weeks in Türkiye with colleagues from the International Urban Research and Action Network. Annual INURA meetings are hosted by member cities; here local researchers and activists show visiting delegates an underbelly rarely seen by tourists. Still, the dark side of Istanbul is unlikely to be overlooked; Urban development in the east and west is progressing very rapidly.
Residential towers rising up to 40 stories are stretching as far as the eye can see, consuming arable land, pushing the limits of basic infrastructure, and uniting previously separate towns into one massive settlement.
The fascinating part of this huge increase in housing supply is that sales prices and rents are not falling. From where? It’s complicated, but that’s partly because the new builds are firmly above market, partly because of collusion, and partly because many are financed by the elites of war-torn countries who have no intention of releasing their parked assets yet.
Vacancy rates around the world are difficult to measure, and governments that boldly try to tax vacant housing (which Türkiye does not) have to rely on voluntary disclosures, so official figures always conflict with local estimates. The Turkish government does not collect such data, but a local estimate in 2023 put Istanbul’s vacancy rate at around 100,000. 11.5 percent. Researchers from Istanbul University now unofficially put this rate closer to 30 percent.
Türkiye is an extreme example and its problems are very serious, but the dynamics of building high-end properties to achieve higher returns, fixing prices and perpetuating housing shortages are universal.
Spectacular tower demolitions in China in recent years have been attributed to poor and/or illegal construction and geographical incompatibilities; apartments are too expensive for the local market or are being built in areas where demand is low. However, the underlying reason for these very costly explosions is to keep housing prices high.
While mass vacancies and demolitions are the more radical of possible responses to housing oversupply, smaller cities are engaging with the same problems in smaller ways.
The apartment boom in Vancouver and Toronto has added thousands of apartments to those cities over the past 20 years, and both still rank among the cheapest cities in the world. But prices began to stabilize two years ago when dramatic cuts to immigration were made along with interest rate increases and stricter mortgage tests to cool the market by reducing demand.
In June of this year, in the face of a looming housing glut, the Canadian federal government announced a program to buy up unsold condos in exchange for “affordable” housing. Prime Minister Mark Carney confirmed this would save developers from making changes. They reduce sales prices.
One thing is clear everywhere: Real estate investors and developers do not do what they do to lower prices. If they are honest, governments won’t want them to do this either. The prosperity of many countries is so dependent on urbanization and cranes on the horizon (cheap signals of economic growth) that the unequal distribution of income becomes secondary.
In Australia, property and infrastructure development and the financialisation of housing are among the best our state and federal governments can offer our cities. To reconcile this with the resulting glaring social injustices, they cling to the illusion that the market will create surplus until prices drop, eliminating housing insecurity and homelessness, and saving us from the affordable housing crisis, hallelujah.
Developers are more realistic. Construction booms in Melbourne and Sydney slowed two years ago as profit margins were threatened by rising construction costs. This imprint reported in October 2024 that real estate experts warned that the government’s plans to ramp up new high-rise towers would not be feasible without a significant increase in apartment prices. Industry analysts Charter Keck Cramer said that figure needed to rise by at least 15 percent to encourage developers to build new high-density homes.
Developers in Australia act more rationally than their international counterparts when faced with the prospect of falling prices. While they too tend to leave buildings vacant, or their investor buyers do, they don’t do it en masse, blow up buildings, or beg (too much) for government bailouts. On the contrary, they stop building.
This is our governments’ nightmare, but if they look beyond free market ideology they will see salvation. Even industry personnel Susan Lloyd-HurwitzThe former Mirvac CEO, who is now chairman of the National Housing Supply and Affordability Council, says governments should play a role in housebuilding “like we used to”.
The evidence is international and domestic. Private markets will resist any attempt to reduce prices. They will never be able to build affordable housing. They will produce high-end products that provide the highest returns. Governments are in a unique position to have the resources and capacity to build what and when the market cannot or will not do. Yes, there are budget limitations, but Australia is a rich country. I can think of a spare $368 billion that would help.
Our cities are still mostly beautiful. We still have arable land. We have a good and constantly improving infrastructure. But it is fragile. Our politicians and policymakers need to see more of the dark realities of the world beyond propaganda-filled state visits. Or maybe listen better to those who can listen.
Dr Kate Shaw is an urban geographer at the University of Melbourne.
Dr Kate Shaw is an urban geographer at the University of Melbourne.
