The recent report by the Grattan Institute - Housing Affordability - Re-imagining the Australian dream - makes a plea for more medium density housing in inner and middle-ring suburbs of Australian cities.
The report’s argument is that the new age creative and IT jobs are clustering in the CBDs of Australian cities and that the knowledge workers or creatives like to live close to these hubs. This has led to a boom in apartments and townhouses in the close in suburbs of Sydney, Melbourne and Brisbane.
But there is a problem, because the existing residents do not want the housing market to be flooded with cheaper homes as this will devalue their property.
“Existing residents usually prefer their suburb to stay the same. Restricting development effectively increases the scarcity value of their property. And they worry that increased population will reduce the value to each of them of the current publicly provided infrastructure,” the report reads.
“Meanwhile, prospective residents who don’t already live in middle-ring suburbs can’t vote in council elections, and their interests are largely unrepresented.”
So the most ideal places for the key people who will drive our economy are being strongly protected from future growth by NIMBY activists who are probably being driven by their own interest in keeping the values of their homes as high as possible. The people who will drive Australia’s creative and technology related jobs are being shut out of their most desirable places to live is really what the Grattan Institute report is saying.
They go on to say the planning system needs to be stronger to ensure the economic strength of cities like Sydney is maintained and grows. The report calls for “code-assessed” planning processes or for “as of right” development to be legislated by state governments rather than allowing local councils that are NIMBY influenced to determine new development.
Another recent report on housing affordability issued by the Reserve Bank of Australia, The effect of Zoning on Housing Prices, found that restrictive zoning that prevented new development in urban areas was adding significant costs to housing in Australian cities. The RBA report found that in Sydney, restrictive zoning added $489,000 to the price of an average house and $399,000 to the price of an average apartment. These are massive amounts.
Clearly, a big contributor to Sydney’s housing affordability crisis is the tension between existing residents who do not want change and future residents who find that home prices are unaffordable. And this is most focussed in the inner and middle-ring suburbs that are locations most desirable for the growing number of workers wanting the growing number of quality jobs in city centres.
But governments at state and local level are increasingly focussing on existing residents and the nearer the timing is to an election the less adventurous the government gets.
A good example is the NSW government, who are clearly becoming less adventurous in driving urban densities. The focus on growth in “Priority Precincts” has given way to a focus on neighbourhood character, the greening of suburbs and a change of name to “Planned Precincts.” It looks like we will need to wait until after the March 2019 NSW election before the Grattan Institute’s more proactive approach can become reality.
The Grattan report made a number of other significant recommendations, including the need to to improve transport networks to increase the supply of well-located housing. Clearly, this is a priority as urban roads become more congested and a switch to public transport, particularly for commuting to work and back, becomes the preferred transport mode. The report calls for independent assessment of expensive transport projects by Infrastructure Australia or similar state based bodies.
Another recommendation was to release more greenfield land particularly in Sydney, but the report raised concerns about the added costs of infrastructure levies. The Grattan Institute Report into housing affordability is a welcome input into the housing debate in Australian cities as is the Reserve Bank discussion paper on restrictive zoning. What both of these reports demonstrate is that housing is part of a complex economic system and that solutions to housing affordability must understand this rather than simple take a populist position of blaming the developer.