A Rate and Rank Council Strategy for Housing Affordability

Wednesday, November 5th, 2014
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Twenty-one years after the landmark Hilmer Report unleashed a national competition policy in the Australian economy, the positive effects are still felt today.

The Competition Policy Review Panel, chaired by professor Ian Harper, also has a once-in-a-generation opportunity to set the nation on a path to much needed microeconomic reform.

The panel must fundamentally shift the competition policy framework and rigorously make the case for competition enhancing policies that will result in the increased productivity, economic growth and employment necessary for Australians to enjoy a better standard of living.

There is no single solution, but there are policy directions that will significantly benefit consumers and the economy.

One such option would be reforms to unlock growth in the housing sector to aid the government and economic regulators as they set about re-balancing the economy to cope with the receding investment face of the resources boom. That would deliver significant benefits.

Master Builders has called on the Harper Review to seriously look at reforms that would simultaneously improve housing affordability and target local government red and green tape that prevents or delays the release of land for residential development and the granting of building approvals.

Housing affordability is of great concern to the community and largely requires a structural solution. In taking up this reform opportunity, Harper and his team would be ensuring that home ownership remains a realistic aspiration in the future.

Streamlining processes and cutting red and green tape will boost building activity and the construction of new housing that will result not only in increased jobs and growth but also play a key role in exerting downward pressure on house prices.

A relatively simple and effective pathway to this outcome would be to rate the efficiency of the nation’s 560 local councils and appropriately reward improved performance by replicating the national competition payments the Keating Government introduced as incentives for state governments to abolish anti-competitive laws and regulations and inefficient practices.

To get to this point, the Productivity Commission would need to benchmark how efficiently local governments deliver key services that are a major factor in the time taken to obtain development approval to build a new dwelling.

The PC has been performance benchmarking state governments across a range of metrics since 1995, so this template could be readily rolled out across the local tier of government.

Through a reinvigorated COAG, the federal government could then work with state and local jurisdictions to establish the key performance indicators making better performing councils eligible for national competition payments. If the example of the Hilmer reforms in the 1990s is any guide, local governments will be fierce competitors for financial reform incentives.

The community benefit of this competition policy would supplement the substantial productivity dividend that would result. By tackling the undersupply of housing, it will help ensure that home ownership does not become an unaffordable dream.

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