The focus of this report (and its companion) is on the key economic effects of problems associated with housing affordability. The basic aim is to provide a broader than normal rationale for, and a basis on which to develop, policies designed to improve affordability outcomes. Housing affordability is here considered in relation to the operation of the national and regional economies and not merely as a question of social policy.
The traditional theory of public finance identifies three fields or ‘branches’ of economic intervention by the state allocation, distribution and stabilisation (Musgrave, 1959). In the first place governments may intervene to of fset or correct market imperfections and failures. Secondly, governments act to change the market determined distribution of income and wealth. Finally, since the mid twentieth centuries, governments and key agencies like central banks, have taken on the responsibility of steering the whole economy to achieve some combination of price stability, adequate aggregate employment and external economic balance.