Given our current crop of politicians have yet to demonstrate their capacity for hard reform, and scored a notable Fail on emissions trading, how will they perform addressing the looming economic issue of the next five years, and perhaps longer, our housing supply shortage?

Bear in mind this has been long and widely acknowledged to be a major policy challenge. An unusual grouping of welfare organisations, the Housing Industry Association and the ACTU was holding summits on housing as far back as 2004. The current government can get some small credit too — in opposition, Labor seized on housing affordability as one of its key areas of difference with the Howard government. Its proposed policy remedies, including first home saver accounts and tax changes, didn’t amount to much, although it did commit to reversing the long-term decline in federal government funding for social housing, which would bear greater fruit in the second stimulus package last year.

The Reserve Bank has also warned — repeatedly, and with increasing frequency, that a failure to address housing supply might in the future lead to a property bubble.

There are some obvious parallels and differences between housing and climate change as reform issues. Clearly fixing our housing problems is within our control. It has only a limited international context — although efforts to blame the problem on Chinese investors is reminiscent of, and makes about as much sense as, the view that we should not take action on climate change until the Chinese do.

But there are housing denialists, who’ll tell you the problem doesn’t exist, that it’s been confected by vested interests who’ll profit from attempts to “solve” it.  There’s a strong issue of inter-generational equity involved, since it is young people, as well as lower-income earners, who are disadvantaged by poor housing affordability, and older people who benefit — although Essential Research polling this week seems to suggest older voters are conflicted over house prices, possibly because they often have adult children looking to get into the housing market.

However, housing is a tougher issue. Climate change is a matter manifestly in the bailiwick of a national government. But the federal government has constitutional and traditional impediments to taking control of housing — and it doesn’t control that much land anyway. It must work through the states and local government, which is exactly the process that is under way currently, through the infrastructure planning and co-ordination stream within COAG, and the Swan-led Treasurers’ group on housing supply.

And there are more vested interests than in climate change. Home ownership and property values exercise an almost hypnotic fascination for Australians. Householders might casually indicate a willingness to pay more for their power if it means greater renewable energy, but rare is the community that will ever support medium — or high — density housing, or the provision of social housing nearby.

(As an aside, it’s also amusingly typical of the conservative media that it has now switched from attacking the slow pace of rollout of the government’s stimulus package social housing initiatives last November to airing NIMBY complaints about the placement of social housing in communities.  Presumably they should all be built very quickly out in the middle of nowhere where no one will have to see the poor people.)

By the time you add in the complicating factor of the role of our financial sector — itself a significant economic reform issue in its own right, as the six economists pointed out last year — and related issues such as an ageing workforce, the task of improving housing and infrastructure supply, removing regulatory and financial barriers to investment and doing so in a way that complements a tax reform agenda of greater efficiency and effectiveness, starts to make an ETS look pretty straightforward.

An ETS was about introducing a market mechanism to address a hitherto-ignored distortion. Housing is about removing layer upon layer of impediments to a market mechanism working effectively — a much harder task, because each of those impediments has powerful proponents or community support.

The danger is that, as we’ve seen with climate change, politicians will cave in to the temptation to throw money at the problem in the hope that will stave off calls for action until after the next election. This will be exacerbated by the reliance on COAG, which rarely achieves anything without the Commonwealth bribing the states to support reform. Throwing money at the problem, as we’ve seen with the first home owners’ grant/boost, provides at best only a short-term fix or actually exacerbate things, while the long-term problems around co-ordinating infrastructure planning with housing supply, removing regulatory and financial burdens on developers and improving access to finance for property development remain unaddressed.

On the evidence so far, we can’t have much confidence our politicians will be up to fixing what is emerging as another diabolical policy problem.