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Australia’s ongoing (some would say interminable) debate about housing affordability was given fresh impetus last month when Federal Treasurer Scott Morrison weighed in with calls for liberated land supply and planning reform by state and local authorities.

Morrison’s call closely followed a less edifying observation by demographer Bernard Salt that young people simply needed to change their breakfast preferences to afford a house.

Predictably, discussion swirled around the excessive cost of housing in the inner city markets of Sydney, Melbourne and Brisbane, the declining rate of first home buyers entering the market, the rise of a renting class and the push for higher density apartments of limited size as a means of gaining a foothold in the market. It’s a familiar conversation and one that’s been repeated for a long time now.

The same arguments were being thrashed around in the lead up to the 2007 Federal Election: release more land, reduce up front development levies, and free up a notoriously dysfunctional planning system. At the time, the Residential Development Council  famously sent every Member of Parliament a rubber banana, likening housing to the price of bananas (which when in short supply, rise in price).  The debate got a lot of traction and both Prime Minister John Howard and Opposition Leader Kevin Rudd made a number of statements on the issue.

Fast forward 10 years and nothing much has happened on the policy front, while the problem has grown. What’s worse, the level of analysis in the debate hasn’t improved. One of the realities which ought to get serious attention is that Australia has plenty of affordable housing. It’s just not where the jobs are.

That might sound simplistic, but if we continue to push for greater concentrations of employment in the inner city areas of Sydney, Melbourne and Brisbane, we will only make the affordability problem worse. And this is what we are doing. Prime Minister Malcolm Turnbull’s ‘Smart Cities’ plan has been much celebrated by the inner urban cognoscenti, but in reality it is mainly an inner cities plan. Infrastructure priorities by state and local governments continue to lavish inner city regions with transport and social infrastructure in a vain attempt to keep up with the pressures of centralisation.

More economic centralisation is the last thing we need. It will create an infrastructure challenge we simply cannot afford and will never win. It will add to competitive pressure for housing near city centres and lead to social and economic inequity as wealth splits into the sort of ‘haves and have nots’ more typically associated with the British aristocracy in the 19th Century.

Yet in all the debate about housing affordability and urban planning, there is a consistent implication that centralisation is the objective. To create more housing near centralised employment markets, we encourage very high density apartments and whinge about the cost of housing. Governments at all levels (with the partial exception of NSW’s Bruce Baird) have centralised their considerable departmental operations in central city locations. Business is encouraged to do the same – via a planning regime which promotes centralisation and costly transport networks which service it.

Where in all this is the realization that the affordability problem is confined mainly to the inner and middle ring areas of mainly three cities?

Perth is sorting itself out via the deflation of its housing market bubble, as is Darwin. Adelaide first needs an economy before worrying about affordability, and the same largely goes for Hobart. There are dozens of larger regional towns and cities where affordability is not a problem. Jobs are.

In an era where digital technology has all but obliterated the tyranny of distance, why continue to live with this tyranny? Why don’t we have a genuine strategy to encourage employment growth and opportunities in regional cities and towns? In the US, this has been happening for years. It’s not the megacities like New York or San Francisco but the middle cities like Austin (Texas), Salt Lake City (Utah) or Denver (Colorado) that are the fastest growing economies.

Here in Australia, however, we seem hell-bent on ever greater populations and densities in a small handful of cities while we allow regional centres – many with more than adequate infrastructure, good climates, and plentiful and affordable land for housing – to languish.

Australia does have a housing affordability problem, but that problem is largely confined to three or maybe four cities, and then mainly to the inner and middle areas of those cities, because that’s where we insist on putting the jobs. Rather than fretting over this dimension of the problem, perhaps instead our debate could turn to expanding and distributing the economic and employment footprint into outer urban and regional centres, where housing is affordable and land plentiful.

What’s needed is a slightly larger share of the economic pie. Not only would this alleviate the affordability problem, but it would reduce the impossible infrastructure burden associated with even greater concentration of economic activity in a select handful of inner urban areas.

 
  • If only it were that easy. If only it were that simple.

    The concentration of economic activity in cities is not an optional strategy, its a global trend. In some places, like China, it's a tsunami. Currently, around 50% of the world's population lives in cities (vs 89% in Australia) and 80% of the world's GDP is generated by cities (versus 80% in Australia). This will change rapidly over the coming decades as cities in developing countries grow, putting Australia at a disadvantage unless in can improve its productivity.

    There are a number of reasons for the inevitable concentration of population in cities but the most important from Australia's standpoint is that larger cities generate a higher proportion of GDP and more productive than smaller cities, all else being equal. Because of our smaller population size, slower rate of growth, declining productivity and shift to a more service-based economy, Australia has no choice but to support the growth of its major cities. To do otherwise would be to erode our ability to compete in the global economy.

    Australia's cities and regions need modern, faster and better connected transport networks that enable population growth to be better distributed while also allowing jobs and specialised services to be concentrated in urban centres. This requires a serious and sustained commitment by government to reform the ways we plan, fund and deliver major transport project. We don't need less economic concentration in our cities, we need to build better cities.

  • While all that is going on it is very possible for many Government and private organisations to decentralise a significant number of employees and alleviate the problem. Use the convenience of digital traffic to offset congestion while allowing a broader spread of housing. A portion of staff in the CBD, other groups in a few outer suburban hubs and the flexibility to properly manage some working from home. Getting together when required. Workspace costs would also reduce, it just takes some progressive thinking to start the trend.

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