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The AHURI has assessed the relationship between affordability and productivity. Image – Canva.
  • Productivity of large cities at risk from unaffordable housing and congestion
  • Households might not be able to move into some areas to earn higher wages
  • Businesses are struggling to get skilled staff at affordable wages and be competitive

The answer to whether unaffordable housing hurts productivity can be found in the Australian Housing and Urban Research Institute’s (AHURI) latest research: ‘Relationships between metropolitan, satellite and regional city size, spatial context and economic productivity’.

What’s happening?

AHURI found that economic growth and productivity in Australia’s largest capital cities “appear to be slowing”.

“There is growing statistical evidence that rising ‘quit rates’ due to unaffordable housing and long commute times are already affecting cities such as Sydney, London, Toronto and Los Angeles,”

Professor Chris Leishman, University of South Australia

In late May this year, The Property Tribune reported on essential workers being priced out of the main capital cities.

Only two LGAs in Sydney were affordable to key workers on moderate incomes, and they were 150 kms from Sydney’s CBD.

A similar problem could be found in Melbourne, where the only affordable local government area is Golden Plains which is over 80 kms from the CBD.

The report

Researchers from the University of Adelaide, Curtin University and the University of Glasgow (UK) came together to produce the report that found a complicated relationship between housing affordability and wages.

“… as workers face rising housing costs due to metropolitan growth, households may not be able to move into areas that offer them the potential to earn a higher wage.

“At the same time, some businesses are struggling to get the skilled (and semi-skilled) staff they need at the wages they can afford to pay and still be competitive in a global market.”

AHURI

One of the key findings was: “Larger cities that had led national productivity growth are now reverting to average national performance. For instance, there have been claims in Sydney and Melbourne that creative cultural clusters and other skilled households and firms are being diverted by high costs and congestion in major metropolitan cores to smaller, lower-cost locations.”

“Regardless of the scale—or the causes—it is clear that housing outcomes are reducing productivity.”

AHURI

It is not an issue isolated to Australia, with other large and advanced nations including the United States of America, Britain, and other European nations also experiencing reduced growth rates in metropolises compared to national growth rates.

The AHURI research also found that “… the positive relationship between population and income is conditional on city population levels, suggesting that having greater levels of population increases wage rates for smaller cities rather than for much larger cities.”

“To make large cities ‘work’ it will be essential to reconceive housing policies as being, in part, concerned with real economic infrastructure to facilitate economic development,”

Professor Chris Leishman, University of South Australia

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