Why Simply Building More Homes Will Not Solve Sydney's Housing Crisis
In recent years, the YIMBY (Yes In My Backyard) movement has gained traction as a seemingly straightforward solution to Sydney's worsening housing crisis. At its core, YIMBY ideology promotes two main principles: build more homes everywhere to alleviate the housing shortage and override local community objections to fast-track development. While these ideas may sound appealing, they fail to address the systemic inefficiencies and inequities at the heart of Sydney’s housing system. Without tackling these deeper issues, an uncritical embrace of YIMBY ideology risks exacerbating the very crisis it aims to solve.
The Fallacy of “More Homes Equals Affordable Housing”
The assumption that increasing housing supply will automatically lead to affordability ignores the realities of how Sydney’s housing market operates. Developers are not incentivised to build for affordability; they prioritise high-margin luxury housing in areas where profits are maximised. As a result, simply adding more homes without targeted reforms will likely lead to an increase in premium apartments and houses—not the affordable housing needed by Sydney’s struggling renters and first-time buyers.
Moreover, other systemic and market issues undermine the “more homes” approach including (but not limited to) the following.
Land Banking
Developers and investors often sit on undeveloped or partially developed land, waiting for prices to rise. According to the NSW Parliament’s economics of housing supply report, this speculative practice significantly constrains housing availability and inflates land prices (NSW Parliamentary Research Services 2024). The practice of land banking reduces the availability of land for housing, driving up costs and further delaying affordability benefits.
Underutilised Housing Stock
Thousands of homes in inner urban areas like Millers Point remain empty, with one in three homes reported vacant in some Sydney suburbs (Sydney Morning Herald, 2022). Additionally, many suburban homes are significantly under-occupied, exacerbating the inefficiency of housing stock usage. Tackling this inefficiency—through taxes on empty homes or underutilised bedrooms—would make better use of existing housing stock and ease pressure on supply.
Cost of Building Materials
The rising cost of construction materials is a significant barrier to affordable housing in Sydney and across Australia. According to Altus Group, the price of key materials such as steel and concrete has increased by over 30% since 2020. In NSW, timber prices have surged by 25% due to supply chain disruptions and increased demand. Nationally, the cost of construction labour has also risen, adding further pressure on developers to prioritise high-margin luxury projects over affordable housing. Without measures to stabilise material costs or incentivise affordable developments, the affordability crisis will persist, regardless of how many homes are built.
In addition, inflated building material prices will further push developers to target new housing projects that maximise returns, resulting in more luxury, unaffordable homes in select areas across Sydney.
Money Laundering in Real Estate
Sydney’s property market has become a magnet for illicit funds, inflating prices and distorting demand. AUSTRAC’s 2019 brief revealed that real estate transactions are frequently used for money laundering, with billions of dollars in illicit funds flowing through the sector annually, inflating prices and leaving more homes empty (AUSTRAC 2019). Until stricter regulations, such as a beneficial owners registry, are introduced, new housing will continue to serve as a vehicle for money laundering rather than a solution to housing needs.
The Myth of “Obstructionist Communities”
YIMBY advocates often paint local communities and councils as obstacles to progress, framing their concerns as selfish or irrelevant. This rhetoric ignores the legitimate grievances many residents have about unsustainable development. Communities are not opposed to housing per se; they object to developments that fail to address infrastructure, environmental impacts, and quality-of-life concerns. According to a review by UNSW, community objections often focus on inequities created by poorly planned developments that disproportionately benefit developers while burdening residents with inadequate infrastructure (UNSW Business School).
Overriding local voices risks creating developments that exacerbate existing inequalities. For example, without community input, new housing might lack access to public transport, schools, and green spaces—factors essential for liveable, equitable urban growth.
Systemic Reforms: The Missing Piece
If Sydney is serious about addressing its housing crisis, it must go beyond the simplistic YIMBY mantra of “build more homes” and implement comprehensive reforms that target the root causes of housing inequity. These include:
Land Tax: Transitioning from stamp duty to a broad-based land tax would discourage land banking and ensure that land is used more efficiently.
Empty Homes and Bedrooms Tax: Penalising property owners who leave homes empty or underutilised could incentivise better use of existing housing stock. An empty homes tax/levy, such as the one proposed by the Mayor of Randwick (ABC News 2024d) would bring vacant properties in key inner urban areas back into circulation.
Reform Negative Gearing: Data shows that one million Australians are negatively gearing properties, which drives up competition and prices, particularly in urban areas (ABC News, 2024a). Shifting tax incentives away from speculative property investment would reduce competition for housing and help stabilise prices.
Immigration Reform: Aligning immigration levels with infrastructure and housing capacity would help mitigate demand shocks in the housing market.
Boost Domestic Construction Capacity: Investing in local production of building materials and modular homes would reduce construction costs and accelerate housing delivery.
Prohibit Land Banking: Introducing stricter regulations to prevent speculative land hoarding would increase the availability of land for development.
Beneficial Owners Registry: A publicly accessible registry would prevent property from being used as a vehicle for money laundering, ensuring that new housing serves genuine demand.
A Smarter, Fairer Approach
Sydney’s housing crisis cannot be solved with a one-size-fits-all approach. While increasing housing supply is undoubtedly part of the solution, it must be accompanied by robust policies to address speculation, inefficiency, and inequality in the housing system. Simply building more homes without tackling these underlying issues will only perpetuate a cycle of unaffordability and exclusion—leaving Sydney’s most vulnerable residents further behind.
To create a city where everyone has access to safe, affordable housing, we need a nuanced, equitable strategy that prioritises systemic reform over simplistic slogans. It’s time to focus on solutions that truly address the roots of Sydney’s housing crisis.
Bibliography
ABC News. (2024a, December 17). One million Australians are negatively gearing. Retrieved from https://www.abc.net.au/news/2024-12-17/one-million-australians-are-negatively-gearing/104737164
ABC News. (2024b, July 22). Sydney ghost homes: Thousands of vacant houses remain in inner suburbs. Retrieved from https://www.abc.net.au/news/2024-07-22/sydney-ghost-homes-vacant-houses/104076682
ABC News. (2024c, July 28). NSW ghost apartment towers: The growing trend of vacant homes. Retrieved from https://www.abc.net.au/news/2024-07-28/nsw-sydney-ghost-apartment-blocks-towers-vacant-homes/104132070
ABC News. (2024d, September 16). Randwick mayor proposes empty home levy to tackle housing shortage. Retrieved from https://www.abc.net.au/news/2024-09-16/randwick-mayor-want-to-introduce-empty-home-levy-nsw/104328054
Altus Group. (2024). Australian construction material price outlook. Retrieved from https://www.altusgroup.com/insights/australian-construction-material-price-outlook
AUSTRAC. (2019, July). Real estate money laundering in Australia. Retrieved from https://www.austrac.gov.au/sites/default/files/2019-07/sa-brief-real-estate_0.pdf
NSW Parliamentary Research Service. (August 2024) The economics of housing supply. Retrieved from https://www.parliament.nsw.gov.au/researchpapers/Documents/The-economics-of-housing-supply.pdf
Sydney Morning Herald. (2022, September 23). In this Sydney suburb, one in three homes is empty. Retrieved from https://www.smh.com.au/national/nsw/in-this-sydney-suburb-one-in-three-homes-is-empty-it-s-not-just-a-data-error-20220923-p5bkfh.html
UNSW Business School. A review of objections to residential land values. Retrieved from https://www.unsw.edu.au/business/sites/default/files/documents/121-A-review-of-objections-to-residential-land-values.pdf
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