Basically, if we limit lending based on income multiples, it will reduce people’s ability to participate in a crazy housing market that defies fundamentals. Emphasis added:

Our society needs to make a choice. We must either embrace homes as sacred places where ordinary people can afford a stake in this country, or continue to regard homes as speculative investments for those able to play the market. We cannot have it both ways.

If home ownership is deemed a sacred social good, we must go back to the future and directly support owner occupants, not just first-home buyers, through subsidised government loans floated at, or near, the Official Cash Rate. Loans should be affordably pegged to borrower income, to a maximum of three times the income. Ideally, that same income multiplier would serve as a threshold for lender recourse in case of default and would apply to all mortgages. Banks may bleat, but society would heal.

The idea of income or median multiples defining affordable housing is widely accepted by economists.