"NSW currently has a crisis in housing supply and affordability, according to Urban Taskforce CEO Tom Forrest. In this article, Forrest describes the consequences of the housing supply crisis for real people and explores the attitudinal barriers and practical options for how the crisis can be addressed.

Consequences

The consequences of the housing supply crisis are published in media releases, newspaper and electronic media articles and news broadcasts every single day.

Barely a day passes without a fresh set of data highlighting a new (or repeated) aspect of the crisis. ABS data on housing approvals or housing completions. Core-Logic analysis of construction expenditure and rising costs. Domain Quarterly rent reports showing crisis levels of rental vacancies and spiralling rental prices.

There are multiple economic factors at play. Supply is less than demand, forcing prices up. The war in Ukraine has had a direct impact on the cost of construction. Labour shortages prevail (hence the urgent need to boost immigration). Interest rates have been hiked up by the RBA, causing home  purchase prices to drop. But these drops are small compared to the mortgage cliff faced by those who are facing the end of fixed rate terms. Investors are offsetting their higher repayments by increasing rent. All of this has contributed to a crisis that planners should have seen coming.

This week began with the Community Housing Industry Association highlighting the impact of rising rents in Western and Southwestern Sydney, resulting in rapid increases in demand for social housing and significant levels of unmet housing demand.

The UNSW City Futures Research Centre data measured the number of low-income households in rental stress, living in over-crowded conditions, or experiencing homelessness and shines a light on the true scale of the housing crisis in Southwestern Sydney.

The findings are damning:

The housing affordability and housing supply crisis is having a massive impact on the rental market. A National Campaign for increased support for rental assistance, Everybody’s Home, this week called for a 50% increase in Commonwealth Rent Assistance (CRA) to deal with the rampant growth in households in rental stress:

Printed in the Everybody’s Home media release 24/1/2023

The cause
While the planning community, led by the most senior echelons of the planning public service, for years denied there was a problem with the number of planning approvals, and even lambasted those who dared to point out the looming catastrophe, this crisis has now well and truly landed.

Worse, the system became indulgent resulting in multiple layers of design review (even when top tier architects had been chosen after an international design competition) and adding years to the project approval timeframes.

We desperately need to increase housing supply. Increased social housing, increased affordable housing, increased market housing. In the meantime, there will be a growing volume of calls for rental assistance and crisis accommodation.

Make no mistake, the housing supply and affordability crisis has been a long time coming, was predictable and early action should have been taken to fix it. Instead, the Act was amended to increase the requirements for public exhibition and community consultation. If anything changes, this triggers a reexhibition. Again – this adds costs and time to the delivery of new homes.

Urban Taskforce pointed out to a room full of planners in 2019 (before COVID hit) that the increased
timeframes for assessments and the drop off in planning approvals and the growing timeframes for
planning assessments was going to cause a supply crisis. In those discussions, we noted that the low levels of new housing approvals left NSW exposed to the risk of an exogenous shock (as the economists call it) resulting in a delay in the delivery of housing and leaving no capacity for the system to catch up.

The impact of COVID – an opportunity squandered
Within months, the world was in shock, masks were on and cities closed down as COVID-19 hit, and spread.

Housing approval numbers tanked even further. NSW was in the worst position, as the level of public
consultation obliged under the EP&A Act was almost impossible in practical terms, so assessments were delayed for all but the most simple DAs.

Some good work was done early with legislation passed to free up planning rules to help deal with the impacts of COVID. Supermarket deliveries were allowed 24/7. Construction hours were extended. The payment of infrastructure levies was delayed till the completion of construction.

A special fast-track program was championed by the then Treasurer, Dominic Perrottet. Unfortunately, once it got into the hands of DPE and former Planning Minister Stokes, most of the projects that were fast-tracked were not new. It became a case of clearing the Minister’s in-tray and adding a few government sponsored infrastructure projects. While there were signs of revival, generally, housing approvals continued at a shockingly low level.

Worse, once the worst of the pandemic looked like it had passed, the NSW planners dropped all the
stimulus reforms like a stone, despite the protestations of the NSW Productivity Commissioner.

Even when the Delta strain of COVID-19 locked down Victoria completely in the second half of 2021, their planning system managed to significantly outperform that of NSW.

It took a new Premier, a new Minister for Planning and a massive shake up of the planning public service to begin the process of change. But it was too late. The seeds of the housing supply and affordability crisis had not only been sewn, the crisis was spreading like the triffids.

While some planners protested that there was no need to panic about housing approval numbers because COVID-19 had resulted in the immigration doors being closed for 2 years, housing prices were telling a different story. Years, even decades, of under supply was coming home to roost with low interest rates,

JobKeeper, HomeBuilder and other demand stimulus measures including stamp duty concessions, all
conspiring to push prices up. And who knew that once the pandemic passed, immigration might return, in even greater numbers, putting even more pressure on home rental and purchase prices.

Some solutions
The labyrinth of organisations responsible for planning in NSW only exacerbates the problem. The Greater Cities Commission (GCC) has been a disaster. Its function is unclear. Its actions seem to prioritise prolonged consultation over action. Its policies are vague, unenforceable and when it comes to housingsupply, have been a manifest disaster. A rationalisation of the planning system is the first place to start.

Under Minister Roberts, NSW DPE are slowly clawing back responsibility for the assessment and determination of major project assessments, having abandoned the field almost completely in 2020.

But the appetite of the NSW planning system for solving the crisis in housing supply remains weak –particularly if that threatens “the rules”! For far too long, suggestions for change were heard, and ignored. Only now are we seeing a drive for change from the top. But housing takes years to complete.

The cultural malaise among planners meant and means that there was institutional resistance to even the temporary use of empty CBD office buildings for temporary or permanent housing  accommodation. Rather than pulling a team together from the Office of the Building Commissioner, Fair Trading, DPE, LGNSW, Community Housing Providers and the private sector development community, such suggestions were viewed as heresy and perfunctorily rejected.

The cost of obliging all apartment parking to be underground adds tens of thousands of dollars to every apartment built. DPE seem oblivious to those costs and wilfully ignorant of modern car parking designs used world-wide resulting in perfectly aesthetically acceptable visual amenity outcomes.

Some communities have become so resigned to the delays in the planning system that they are looking to develop “meanwhile uses” to provide temporary accommodation while building awaits planning assessment.

This week I was interviewed by the ABC Illawarra where the crisis is so severe that rental vacancies have dropped to below 1% and it is common for over 100 applications to be made when any vacancy arises.

Potential renters camp out overnight hoping to get close to the front of the inspection line. In the
meantime, workers which local businesses desperately need are forced to sleep with friends and, in many cases, sleep in their cars while waiting for a home.

Of course, the situation is far worse for anyone suffering at the margins of society. These are the people who suffer most when misplaced policy paternalism is shirtfronted by the realities of economics.

The calls for something serious to be done about the NSW planning system will grow louder and louder as the State election draws closer. It is heartening that both major political parties are talking about increasing housing supply, focussing on the opportunities presented by investments in transport, infrastructure. More needs to be done in areas where there is existing infrastructure capacity.

Developers, Community Housing Providers and Social Housing providers (like LAHC) need to be seen as delivering a community good. Their efforts to build new homes, new commercial buildings, new entertainment and retail modes should be welcomed and encouraged.

Rather than taxing those producing new homes with an ever-increasing burden of infrastructure contributions, the development community should be seen as facilitators of economic growth – by housing those whose taxes will pay for the services our ageing population will inevitably demand.

A broom needs to be put through the massively over-regulated social engineering manifest through the zoning system and Local Environment Plans. Residential heights and densities need to be easily and quickly increased where there is social and physical infrastructure capacity. Increased height also allows for more ground level public green and open space to be created.

Mixed-use zoning should become the norm, with only high impact industrial and strategic uses isolated.

The COVID crisis has demonstrated that there is an urgent need to allow for much greater flexibility in changes to the use or configuration of existing buildings. Of course, it must be safe, but when you have a housing crisis, fretting over a non-compliance with the Apartment Design Guidelines is a sign of overindulgence of the planning community who would prefer to maintain the integrity of the rules they have established, even if that means there is a housing crisis and all the misery that entails.

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