IGR 2015 and Development Policy Settings

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Monday, March 16th, 2015
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The 2015 Intergenerational Report (IGR 2015) projects the need to build another 9 million homes over the next 40 years, working on a population projection base of 1.3 per cent annual growth leading to a population requiring housing (in all its forms) to support 30.7 million by 2055.

The Housing Industry Association notes that the federal government must focus on investment in economic and social infrastructure increase the supply of residential land and remove impediments in the planning system.

The Master Builders Association suggests that incentivising local councils to release more greenfield land for residential development and using brownfield areas for housing.

UDIA national president Cameron Shephard is reported as saying that state and federal government must work together to deliver infrastructure and cut red tape, and inefficient taxes to encourage new building.

Greater investment in all forms of infrastructure and taxation reform is required to provide for more housing and development opportunities.

The calls for investment in infrastructure, greenfield land release, brownfield developments and taxation reform are valid conversations to be had at all levels of society and business. Consideration of blanket changes at the national or even the state level to redress these perceived (or real) shortcomings in land release, taxation and infrastructure (in responses to the IGR), cannot reflect the very real differences in growth rates in population between and within cities, urban and suburban areas across the country. What may be perceived to be an effective policy setting at the national level will invariably have a negative impact on some, or many, communities at the local level.

Differences in infrastructure in, within and between cities, urban and suburban areas can be profound. The adage of which comes first – infrastructure or community – can be very real issue in some localities.

For example, promoting major road infrastructure at the federal level may have the adverse affect of increased public infrastructure spending in major cities and regions (with possibly a marginal social benefit) at the expense of much needed road infrastructure or the extension of an existing rail line in other centres (with possibly a much larger social benefit).

A policy setting that favours an economic return on investment over a social return on investment will almost always see major centres advantaged over smaller regional centres. Unit costs in major centres will inevitably be lower than regional centres due to resident and visitor population volume.

Creating policy settings at the national and state levels that create proportionally equal weighting between economic, social and environmental is a necessity to help make more objective decisions on where to spend the limited infrastructure budget.

Knowing where population growth is taking place is essential for projecting demand for infrastructure and public services. It can also be a window into what kinds of communities people prefer to occupy.

The IGR 2015 has limited value (in this respect) to help determine in what form any the proposed policy settings should take for land development, infrastructure development and government/ non-government service delivery as the Australian population grows and diversifies in its composition.

Similarly, for major infrastructure policy and expenditure, housing supply and energy pricing policy, tax policy, and other factors all affect the availability and cost of housing and, as a result, where people end up living.

Housing “bubbles” are occurring in different cities and communities. The rate of growth varies considerable between these centres. The place in the cycle at which different communities find themselves mean that policy positions and their potential affect need to be considered within the capacities of objective assessment criteria and a lack of real-time data.

Individual Australian capital cities are regularly among the least affordable cities in the world. The recent decision by the Australian Government to reduce the level of support to housing focused support agencies, and the community/political response to the decision, highlights the level of sensitivity the issue engenders in the community and the need to consider housing and infrastructure needs for our growing and diversifying population on a much longer term basis than recent national policy decisions address.

Denser, more walkable, neighbourhoods and satellite communities outside big-city boundaries may be better served by transit services (or broadband internet services) than some neighbourhoods located within city boundaries. Population and diversity growth may outpace capacity to deliver services. Densification may be encouraged through location specific land use planning practice at the expense of other areas within the city. Incentivising at the local government or state government level can also cause distortions in the market.

Analyses based on city or statistic area levels can’t always tell national and state government decision-makers whether more growth is occurring in neighbourhoods that are urban or suburban in nature. Using population growth and density as a measure growth (positive or negative rates) is a measure of limited utility at the national level for urban planning and development. A community’s share of detached single-family homes; household density; income diversity; racial and ethnic diversity; prevalence of commuting by transit, walking, or biking; and restaurant density are additional measures.

The size and diversity of the economic activity of a suburban, urban, city geographic space must be considered longitudinally and with consideration of policy positions of government over that time span to understand appropriate policy settings at the national level.

Providing access to the IGR 2015 Treasury supplementary reports will help decision makers and the health, education, development, infrastructure and finance sectors (amongst others) have the capacity to more fully understand where the opportunity costs and benefits to the nation really lie. This will help give the lower levels of government and industry the capacity to develop location specific policy settings that meet the needs of both the nation and the community at large.

The IGR 2015 and the diversity of responses across the multitude of issues raised with the report clearly show that that there is no single or simple answer to how to manage growth, and that addressing both the demand and supply sides of the economy is required.

National, state and local governments have a clear role to play in pursuing the necessary structural reforms, exercising fiscal responsibility and providing regulatory certainty to boost investment in support of jobs and growth, though not at the expense of environmental and social obligations.

Bi-partisan affordable housing policy and programs must be part of the national debate in responding to the matters raised in the IGR 2015. A national infrastructure white paper should also be completed concurrently to the taxation reform white paper. Policy reform in isolation to other major domestic and international issues is not in the best interest of the nation.

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