The cost of buying or renting a house is putting an intolerable strain on many Australians. Credit:Glenn Hunt It found an increasing proportion of young Australians still living with their parents into their mid-20s. The report shows the great Australian dream becoming an unattainable fantasy for more people. Australian homes are the third-least affordable of OECD countries with only New Zealand and Canada having a higher price-to-income ratio. There has also been a big jump in the number of people either living in social housing, or on a waiting list for a place. The number of homeless Australians has jumped, with a quarter of a million Australians accessing specialist homelessness services in 2014, the report said –a 4 per cent rise in a single year.

Australia's housing market is becoming increasingly unaffordable, according to Kate Shaw, an urban geographer at Melbourne University and a planning and housing expert. "This is not a natural consequence of the increase in living and health standards documented in the report," Dr Shaw said. "The severe unaffordability of housing in Australia is due to poor policy decisions and could have been avoided. This is not part and parcel of being a wealthy country." In the year to July, Melbourne house prices climbed 10.2 per cent, Sydney 16.2 per cent, and national capital average prices by 9.8 per cent. Asked which other wealthy countries around the world had avoided such dramatic house price rises in recent years, Dr Shaw said: "All of them, except perhaps Canada, which suffers from the same problems."

She said both Canberra and state governments should be acting to change policies that were exacerbating housing stress. This included the states increasing protection for renters, who now make up a third of all households, and the federal government must remove tax concessions and incentives for investors. "Specifically negative gearing and the 50 per cent discount on capital gains tax," she said. "If these were phased out we would have billions of dollars every year to invest in affordable social, community and public housing, and other forms of affordable housing too." There was, Dr Shaw said, "a whole layer of low to medium-income housing arrangements provided in Canada and Germany and so many other places in the world that we have just completely ignored – they don't exist in Australia. And because we don't have them, it is increasing the pressure on the private rental market."

There was, Dr Shaw said, "a whole layer of low to medium income housing arrangements provided in Canada and Germany and so many other places in the world that we have just completely ignored - they don't exist in Australia. And because we don't have them, it's increasing the pressure on the private rental market." She said the International Monetary Fund, in a significant shift from its thinking from decades past, in June advocated that policymakers in advanced economies "focus on the poor and the middle class" if they wanted to boost economic growth, and reduce inequality between the haves and have-nots. Dr Shaw said if IMF economists were calling for the removal of middle-class welfare such as low taxation of capital gains on property, it was time Canberra paid attention. Negative gearing, and allowing reduced tax to be paid on profits from property, was "providing a substantial amount of middle class welfare to investors". "What sort of situation do we have where we're most encouraged to invest in areas that are a source of significant problems in Australia, and actively discouraged from investing in renewables and various other kinds of research and development enterprises that could actually benefit Australia?"

The report found that the proportion of people in rental stress, in which households pay more than one-third of their income on accommodation, rose from 35 per cent in 2007-08 to 41 per cent in 2011-12. And it did not get much easier for mortgage payers, the report found. "Households with low to moderate incomes who manage to acquire their own homes sometimes cut back on necessities in order to meet mortgage repayments, especially in the early years," it found. "As a result, they ultimately may be forced to choose between owning a home and going without other consumables." A majority of Australians aged over-65s own a home outright but the proportion has fallen from 78 per cent in 2002 to 71 per cent in 2011. Higher living costs are associated with an increase in the rise in the rate of people working past retirement age.

The proportion of Australians aged 55-64 who have retired fell from 49 per cent to 26 per cent between 1997 and 2012–13 and from 93 per cent to 77 per cent for those aged 65 and over. Kerry Flanagan, acting director of the AIHW, said Australians were living longer and were healthier in senior years. "Adult participation in the labour force is higher than 20 years ago, and while some people are staying at work longer after retirement, the majority of older Australians are not using aged-care services," she said. Ms Flanagan said other issues flagged in the report included increases in children receiving child protection services, youth unemployment and the proportion of young people who are not in employment, education or training.