We are not building enough apartments and we are building them in the wrong place. These two problems can be rectified by setting and enforcing housing targets for local councils. These targets specify how much extra housing we need and broadly where it should be built.

As a case study, this paper discusses the Sydney housing market, the location of much of Australia’s most expensive housing. It argues that appropriately designed housing targets would involve a large increase in apartment construction in the affluent inner and eastern suburbs, where the housing shortage is most severe.

New South Wales’ Greater Cities Commission already sets housing targets for local councils in the Sydney metropolitan area. These targets are too low, they lack a clear rationale or evidentiary basis, and they lack a clear enforcement mechanism. This paper presents targets that partially rectify these problems.

Uncontroversially, targets should house a growing population. More importantly, targets should also aim to bring the price of housing down to the cost of supply.