Home for good: housing affordability in Melbourne

RoyalAuto magazine

From rent-before-you-buy to pre-fab housing, new ways to buy, build, invest and rent might help ease Melbourne’s housing affordability crisis. 

Story: Larissa Dubecki
August 2018.

The anecdotes are endless. A 50-strong queue of hopeful renters outside a tumble-down house. The rising number of people sleeping rough on Melbourne streets. Adults in their 30s moving in with their parents in their quest to save a house deposit. And who can forget Millennials being scolded for giving up on the Great Australian Dream and spending their money on smashed avocado instead?  

Economics can generate some polarising debates, but for once the experts agree: a crisis of housing affordability has engulfed Melbourne and other capital cities, while leaving regional areas relatively immune. 

According to the Grattan Institute, a “perfect storm” of rising incomes and falling interest rates, migration, tax and welfare settings that feed demand, and planning rules restricting supply has seen house prices rise 50 per cent in Melbourne since 2012. Housing affordability stress is estimated to affect one in nine households. Home ownership rates are dropping as prices soar. Fewer Australians of all ages own their home outright than they did in the past. 

‘We call it the culture of living closer together.’

Sure, those without a lucky toehold on the city market have just experienced a once-in-a-lifetime gain. But for the rest of us the challenge of getting into the housing market, or even finding an affordable rental, has resulted in a range of innovative housing solutions that don’t involve relocating to remote or regional Australia (as suggested by Barnaby Joyce when he was deputy prime minister). 

For some, the silver lining in the affordability crisis cloud is the new emphasis on sustainability and community. Assemble Communities was born out of the frustration of three Melbourne building industry creatives seeking a quality apartment with a sense of community. “We call it the culture of living closer together,” says Abbie Freestone, Assemble’s head of community.  

Launched in June, the Assemble model provides a new pathway to home ownership. Its first 73-apartment project in Kensington, due to start construction at the end of the year, sees buyers rent their apartment for five years. They start saving (with the help of Assemble’s financial coaches) while building up equity as well as experiencing the home before committing to buy. It comes with an escape clause: if a buyer comes to the end of the lease and the market has dropped or personal circumstances have changed, there’s no obligation to go through with the sale.  

“The return is not as high as it would normally be… but the bigger picture is we still make enough to continue with more projects,” says Abbie. “We have to practise what we preach.” 

‘The market is really starting to understand the benefits of prefabrication.’

The affordability crisis has sparked a wide-scale re-evaluation of the way we want to live. Apartment living, previously anathema to backyard-loving Australians, is becoming more commonplace. When it comes to houses, people are downsizing their expectations to embrace the small-scale over the four-bedroom faux mansion with media room. Studios, lofts, shacks and one-bedroom apartments are experiencing a resurgence in popularity. The renovation market is running hot as people upcycle their homes rather than moving. 

Abbie Freestone,
Assemble Communities

And as technology and design smarts increase, cost-effective approaches such as prefabrication are becoming popular. Design and construction practice ARKit is showing the way to make low-impact, eco-friendly extensions and even entire homes at less cost than turning up to an architect with a blank sheet of paper.  

‘It really encourages a model of density that’s sensitive to evolving family structures.’

“The market is really starting to understand the benefits of prefabrication,” says ARKit director and architect Craig Chatman. “The benefits are quality control and assurance. There are efficiencies, such as our clients not having to move out of their homes for a lengthy period of time. And there is far more certainty around what the project will cost.”  

A clever repurposing of an inner-suburban backyard granny flat into a multi-purpose music studio, storage area, workshop, laundry, kids’ play room and self-contained guest room won Matt Rawlins of Figureground the 2016 award for small project architecture at the Victorian Architecture Awards.  

The project was emblematic, he says, “of [the way] our endlessly expanding urban growth continues to place more value on inner-suburban sites and increases our desire to realise the full potential of our block”. 

Craig Chatman,

It also speaks implicitly of the return to multiple-generation living, whether by necessity or desire. “It really encourages a model of density that’s sensitive to evolving family structures.” 

‘There are a few ways landlords can work with us.’

At the crisis end of the affordability spectrum, not-for-profit real estate agency HomeGround Real Estate harnesses the private rental market to help tackle homelessness.  

Currently managing around 400 properties, from single-bedroom units to family homes, the division of Launch Housing aims to increase the supply of affordable rental accommodation.

 “There are a few ways landlords can work with us,” says Heather Holst, Launch Housing acting CEO. “Some of our landlords require a full-market return on their rental, and the property management fee they pay goes back into our mission. We also work with many socially conscious landlords who have agreed to offer a discount on the market rent to low-income households.” 

Significantly, the Australian Tax Office has made a class action in relation to HomeGround Real Estate that allows Launch Housing to issue donation receipts for discounted rentals – meaning landlords charging less than the market can claim the gap as a tax deduction. 

Matt Rawlins,

 “What’s great about that is not only do they help directly increase the volume of affordable housing options available in Melbourne, but they can deduct it against their own taxable income,” says Heather. 

RACV home advocacy and advice manager Nathan Taylor also has his eye on the tax system. It’s the key, he says, to unlocking housing for those who are less well-to-do. 

It would, however, involve a radical reappraisal of classic Australian ways of living – including abandoning the shibboleth that home ownership is worth pursuing at any cost. 

“The tax system currently incentivises you to borrow a large amount of money to buy an asset you’ll live in for 30 to 40 years. If you do that, and manage to eventually pay it back, you’re set up very well. But for those who miss out it’s a very different story,” says Nathan. “A regulatory environment that allows you as a tenant to actually feel like you own a home makes sense.” 

He recommends we take our cues from countries such as Germany, where most people are life-long renters but have a sense of ownership due to lengthy leases. 

Heather Holst,
Launch Housing

“The Great Australian Dream has been encouraged by successive governments. But it effectively penalises renters. What if we were to say, here’s another clever way of approaching how we look at home ownership and the way we live?” 


Discover the benefits of RACV solar in your home today

Tracking RACV’s Tiny Home  

The RACV Tiny Home offers great ideas for housing that is affordable to run. Visit the RACV Tiny Home at the Royal Melbourne Show. To see where it’s heading next visit racv.com.au/visittinyhome


  • 27.5% of private dwellings in Victoria are rented, up 3.6% from 2006. 
  • There has been a 20% decrease in home ownership for 25 to 34-year-olds between 1982 and 2013. 
  • Only 14.7% of mortgage applications were from first home buyers in 2016-2017. 
  • $113,200 is the average amount needed for a 20 per cent deposit on a median-priced dwelling in Melbourne. It’s $60,000 for regional Victoria.