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Why does this matter? Because housing policy doesn’t just determine affordability - it determines who bears the cost of it. Victoria has shown that building more homes can materially improve affordability by keeping both price and rental growth more contained than elsewhere. But policy settings that discourage investors don’t remove housing pressure - they shift it. In this case, the benefits of stronger supply have flowed more to home buyers, while renters have faced tighter conditions and higher rents.
And renters don’t simply disappear. They are typically younger, lower-income, and more exposed to rising costs. The consequences are long-term. Those who reach retirement while still renting are far more likely to experience financial stress and poverty, and higher rents only make that outcome worse. Shifting affordability from prices to rents doesn’t solve the problem - it moves it onto those least able to absorb it.
The broader implication is clear. If similar policy settings were applied at scale in areas with strong population growth such as Queensland, Western Australia and South Australia, the outcome would likely be very different to Victoria. These states have experienced much stronger price growth precisely because supply has been more constrained. Reducing investor participation in these markets would not solve affordability - it would tighten rental supply further and place even more pressure on rents. In fast-growing markets, where population growth is strong and supply is already struggling to keep up, discouraging investors risks amplifying the rental crisis rather than easing it. The pressure doesn’t disappear - it intensifies where supply is weakest.
Despite being more affordable than many other parts of the country, Victoria’s broader economic position is more challenging - and this is also weighing on house price growth. Business confidence is the lowest in the country, while government debt continues to rise, increasing pressure on state finances. Population growth remains strong, but is now almost entirely driven by overseas migration, with more than 80,000 residents lost to other states over the past five years, many to stronger markets such as Brisbane and Perth.
For residents, houses may be cheaper but conditions are tougher. Unemployment is now the highest in the country and one in seven young people are now unemployed. Not surprisingly, this is flowing through to consumer stress which is also amongst the highest in the country. The economy is becoming increasingly uneven, with a growing divide between those supported by public sector employment and those exposed to weaker private sector conditions.
There is also a risk to this model that has maintained affordability. A strong development pipeline depends on a confident and profitable private sector. With business confidence low, costs rising and taxes increasing, the economics of building are becoming more challenging. Policies that discourage investors also affect the feasibility of new projects, particularly in higher-density development. Over time, this risks slowing the pace of construction. If supply begins to weaken, the affordability gains Victoria has achieved will become harder to sustain.
There is, however, a clear positive in Victoria’s experience. It shows that housing affordability is not out of reach - but it also makes clear where it comes from. It isn’t the result of higher taxes or discouraging investors. It is the result of building more homes, consistently and at scale, over a long period of time. That supply has made a real difference, keeping both price and rental growth more contained than elsewhere. In a country defined by housing shortages, that is a meaningful achievement. The lesson is simple: if you want better housing outcomes, you have to build.
