Tuesday, July 12, 2016

Mining jobs: not much of a boom and not much of a bust?

Sections of the media, plenty of politicians and much of the commentariat have fallen into a lazy habit of bemoaning “the end of the mining jobs boom” or the “the resources bust.” Sure, these are big, capital intensive, high dollar value export industries for Australia when they’re firing, but the employment contribution of mining wasn’t what you might have been led to believe.

These two graphs show the various industries and the numbers employed in them, back from the mid 1980s until the latest figures (May 2016).  First, the Australian story. Mining I’ve highlighted in the thick red line. It trundles along the bottom. For more than twenty years this was pretty much our smallest employer. You can see the increase related to the resources boom, peaking in around 2012, and the decline since then. Even at its all time peak, mining remained one of our smallest employers. (Click on the graph to enlarge).

What about the engineering and construction industries, which relied heavily on mining? In the graph above, the thick green line (for ‘professional, scientific and technical services) includes engineers, and the bright blue represents construction. No calamity there.  

The big growth in jobs (mostly part time or casual) has been the health care and social services sector (dashed blue line above). It’s gone from third to being our largest industry employer in the period since the mid 80s. In that same time, manufacturing (thick purple in the graph) has gone from being the largest employer to sixth largest. But it’s still our sixth largest, and streets ahead of the mining sector. Why are we so downbeat on manufacturing and so preoccupied with mining? 

The relativities don’t seem to justify the weight of attention that’s given to job losses in mining when at the same time we seem to have written off manufacturing, despite it remaining a very large employer, currently up there with education, professionals and tourism and well ahead of finance and insurance industries.

So what about the States that have been more dependent on the resources sector? The graph below shows the same story, over the same period, but for resource rich Queensland. The mining ‘boom’ and the mining ‘bust’, compared with other industries and the jobs they account for, seem unremarkable in the wider industry context.

As with the rest of the country, health care related industries are both fast growing and now our largest employer. Manufacturing (bright green in this graph) is close to a tie for fifth spot, but still well ahead of the mining sector. Construction (thick pale blue) may have been pulled down with mining but for the time being is showing a positive bounce. How long that lasts is another thing. 

The point being in both these graphs is that the evidence doesn’t appear to support excuses about lost mining jobs being the cause of poor economic performance (although some regions have felt the impact much more sharply). Nor do they seem to support the general air of policy abandonment which seems to greet mention of manufacturing. Both of which run counter to the general flavour of mainstream commentary. 

I am not for a minute suggesting that the mining downturn hasn't hurt people and hurt particular regions and some industries. But it's also important to keep things in perspective. Next time you read something about the extent of job losses attributed to the mining boom, look carefully for references to other industries, so that the facts are kept in perspective and be very wary of percentage changes if coming off small bases. 

Tuesday, June 28, 2016

Why urbanisation is mostly a suburban phenomenon.

The world is rapidly urbanizing. The United Nations estimates that sometime around 2008, half the world’s population was urban, for the first time in human history. They estimate that by 2050 nearly two thirds of the world’s developing nation populations will be urban, while for the developed world, the figure will be a massive 86%. Australia fits this picture perfectly: some 80% of our population already lives in our major cities and half live in the three largest. But what’s not widely understood is that on both the global level and the Australian scale, this urban growth has been a suburban phenomenon.

This reality may come as a surprise to many and the cause might be in semantics. The term ‘urban’ has fallen into common use to describe higher density, inner city areas, while ‘suburban’ has typically been used to describe outlying areas of predominantly low density development (primarily housing). But when global statistics about urbanization are quoted, the meaning covers both inner and outer urban areas. Suburban is, after all, a subset of ‘urban.’

According to the MIT Center forAdvanced Urbanism: “While statistics demonstrate that the amount of the world population in metropolitan areas is rapidly increasing, rarely is it understood that the bulk of this growth occurs in the suburbanized peripheries of cities. Domestically, over 69% of all U.S. residents live in suburban areas; internationally, many other developed countries are predominately suburban, while many developing countries are rapidly suburbanizing as well… Suburbanization is a contemporary global phenomenon.”

The same is true for Australian cities. In terms of where we urbanized Aussies call home, for the vast majority it is suburbia. In Sydney for example, the proportion of people living within the prized 5 kilometre ring of the CBD is just 8%. A further 16% live between 5 and 10 kilometres from the CBD, a third live between 10 and 20 kilometres from  the CBD and 43% of people live beyond 20 kilometres from the CBD. Those proportions are broadly the same for other major capitals.  Rates of growth are similarly skewed to suburbia: despite some high rates of intense growth in inner areas, the broader metropolitan framework of our major cities continues to carry the bulk of the population growth workload.

What comes as an even greater surprise to many is that the bulk of jobs in our large metro regions are also suburban by location. The CBDs of Brisbane, Sydney and Melbourne account for 13%, 13% and 10% respectively of all jobs in their metropolitan areas. Adding in city fringe areas lifts this proportion to 19%, 15% and 14% respectively. This is an economic reality borne out by the Census but it doesn’t sit easily with much of our thinking about cities. Our perceptions and prejudices are formed by a concentration of media and planning debate on inner city areas. Impressive CBD skylines dominate news bulletins and vision of crowded commuters boarding mass transit lead us to conclude that this must be the norm for a majority of people. It isn’t.

The same is true of the United States. A recent article by Demographia’s Wendell Cox, writing in Joel Kotkin’s New Geography showed that, based on US Census Data, the CBDs of 52 major metropolitan areas contained 9.1% of jobs, and the inner rings a further 9.8% of jobs. “Early suburbs” (meaning those developed first in the history of urban growth) contained 44% of jobs while “later suburbs” and “exurbs” contained a further 37% of jobs. And in terms of jobs growth for the same 52 US metro areas in the period 2010 to 2014, CBDs accounted for 12.6% of growth, the inner ring a further 6.8% while suburban and exurban areas combined to create 80.6% of jobs growth. 

If the reality of suburbia is that it is the dominant housing and employment location for the majority of urbanites, it is also a reality that the changing economic landscape, enabled by rapid advances in technology, is going to continue to reshape both the suburban and inner urban landscape. There will always be a role for central business districts as the seats of government or as headquarters of large professional corporates, as well as centres for civic cultural investment, but the growing service sector and growth in new industries might increasingly exploit more accessible, lower cost suburban locations. There’s merit in this, as it may allow more people to live closer to their work, in more affordable locations. It may also prove cheaper from an infrastructure point of view, especially if car sharing and ride sharing and driverless technology begins to liberate us from the twin burdens of congestion and exorbitantly costly mass transit solutions designed around centralised centres of work.

This “new suburbanism” presents all manner of opportunities for economic development, productivity growth and property development. Identifying what those opportunities are and how to best capture them will require a new framework for thinking about what it means to be ‘urban’ and that thinking, I suspect, will increasingly turn to the suburban solution.

Monday, June 20, 2016

And the winner is... Sidonee.

The scale, magnitude and speed of economic change is such that policy makers today struggle to keep up the pretense that they are on top of things. Technology, social and demographic change, globalization and the race for efficiency are reshaping the economic landscape, and with that there are winners and losers. The winner so far in Australia’s case seems clear: Sidonee.

You either believe the economy is changing fast or you think that it’s pretty much the same as it was some years ago, and will continue to be the same for the foreseeable future. There are, in my experience, very few of you in the latter category. The days of when a largely predictable order of economic ascendency could be expected to continue ad infinitum are gone. Economic fortunes are changing rapidly. Nations once proud of their economic ranking are now mendicant states, reliant on others for their welfare.  The same changes in fortune are affecting cities, and despite the best efforts to counter the relentless economic forces shaping the business landscape through proactive economic development initiatives, the sheer weight of market forces is often proving too much.

In Australia, the largest beneficiary of that change in economic fortunes in recent years is without question Sydney. The Sydney economy, benefitting from rising fortunes of the state of NSW, is powering ahead. Its real estate markets – housing there is now more expensive relative to incomes than New York or London – are apparently unstoppable, undeterred by warnings of ‘bubble’ conditions from the Reserve Bank Governor to the World Bank, IMF or any number of world economic authorities.

Sydney is awash with capital and talent. It is increasingly a global city, attracting attention from speculative global property investors to emerging enterprises looking for a foothold in the Asia Pacific. Global companies wanting a headquarters presence in Australia typically look either in Sydney or Melbourne. It’s a close race.

Even at a domestic level, where companies once had multiple state presences in capital city offices, many are seizing the opportunity afforded by fast expanding digital connectivity to reduce most of their state offices to small outposts, with that headquarters functions increasingly centred on Sydney.

The elegantly simple map by Macroplan at the start of this article illustrates this in stark terms. It maps white collar professional business counts by employee range across the major capitals. The standout for growth is Sydney, followed by Melbourne. Not only that, but it’s also a standout for the growth in larger sized companies – coloured red and green within the circle. There have been relatively few declines in businesses of this type in Sydney in recent past, whereas other centres have suffered equal or larger declines than there has been growth.

The story is repeated in ABS data on unemployment. The graph below shows the trend. It’s perhaps unfair on Brisbane given the Brisbane local government area is a large metro wide area while Sydney and North Sydney are mere villages by geographic comparison. But in terms of economic muscle they are powerhouses of opportunity.

Commsec’s ‘State of the States’ annual assessment backs the story up further. On a range of criteria, NSW leads the pack of the various states. By implication, Sydney is the biggest beneficiary of the state’s economic performance. By comparison, according to Commsec, once proud Queensland has slipped down to the level of perennial wooden spooners like South Australia or (heaven forbid) Tasmania, dragging down its capital city economy with it.

Even growth industries like the much heralded tourism industry boom from China appear to be favouring NSW, and thus Sydney. Sydney is Australia’s iconic city and, according to the experts, Chinese travelers tend to favour urban attractions for shopping, entertainment and dining. Yes, they might visit the Great Barrier Reef but it’s where they will spend most of their money that really counts – and the winner on that score is fairly obvious, according to this graph on visitor expenditure from Tourism Research Australia.

This very significant change in economic fortunes also helps explain a massive shift in population movements. Queensland once attracted net interstate migration numbers of close to 1,000 people per week. Boosters will argue that interstate migrants were attracted by the climate and the housing arbitrage – with Brisbane region houses being so much more affordable than Sydney or Melbourne where most migrants were coming from.

Some are suggesting the same will happen again. I am not convinced. The sun in still shining, and the housing arbitrage is there again, but until the employment market and opportunities for economic growth and development once again become part of the Queensland zeitgeist, migrants know it is wise to stay where the jobs and the money are.  Queensland’s net interstate migration has slowed to a trickle – its lowest level since World War II – and there are predictions it could even turn negative for the first time ever.

So what are the forecasts saying? According to the Federal Department of Employment’s latest predictions, the economic trajectory of Sydney, followed by Melbourne, is expected to continue for at least a few years yet. This graph illustrates their predictions for a couple of key ‘knowledge worker’ employment categories for major centres around Australia to the year 2020. Combine the Sydney and North Sydney columns in your mind to see how this picture looks for the economic heartland of Sydney going forward.

Beyond these privileged inner city markets there are also wider forces at work. Many jobs in emerging industries have little need for costly inner city offices or the congestion and carparking hassles that go with them, and are instead settling in a range of suburban locations. Past articles have highlighted the fact that 80% to 90% of all jobs in our major metro centres are in suburban locations. But the inner city markets remain a useful indicator of how the high powered ‘top end of town’ is performing, and based on these predictions, Sydney will be where it’s at for some time yet.

How did this come about, and what will it take for fortunes to change again? Local Government in Sydney has been notoriously ineffective, divided and antagonistic to development - so you can hardly credit Sydney’s local political leadership with the region’s economic performance. It would seem that a progressive State Government is due the credit. Their latest state budget reveals a government with almost no debt, a surplus of $3.7 billion, a $20 billion infrastructure spend in the coming year which is part of a $73.3 billion spend over the next four years, much of it on a bevy of transformative ‘nation building’ projects.  Their Treasurer can boast about being the ‘engine room’ of the national economy, producing 63% of the nation’s new jobs off 31% of the nation’s population.  However you look at it, and whatever your political views, they are impressive figures.

Victoria’s second place status seems to pose no threat to the Sydney ascendency. Their decision to scrap Melbourne’s East West link road project – at a cost of $1 billion to taxpayers with nothing to show for it – is not a good sign. And Queensland’s – and therefore Brisbane’s – ambitions are constrained by limited state economic growth and a deteriorating budget position. Excluding the privately funded Queens Wharf Casino project, much of Queensland’s confirmed public sector infrastructure enthusiasm seems focussed on a new sports stadium for Townsville (population 180,000), or a cross river rail tunnel which is so far unfunded.

Will fortunes turn around? They inevitably do at some point but the economic winds of change are blowing harder every year, and right now they are blowing in Sydney’s direction. 

Saturday, May 28, 2016

Is heritage going too far?

The built form of cities reflects the demographics and economic structures of their eras. In the great age of rail, we built elaborate central train stations. In the age of mail, we built impressive post offices in central city and suburban locations. When cities functioned mainly as trading ports, we built wharves, warehouses and cargo handling facilities and CBDs effectively grew up around these functions. Many of these structures remain long past their economic use by date, and are often re-adapted to contemporary uses. The recent decision by Australia Post to sell its central GPOs for adaptive re-use is a case in point.

Re-purposing quality heritage structures ensures an ongoing economic role for these buildings, and in the process means they will be maintained and protected, as well as enjoyed by their tenants and the public. It allows cities to grow and develop and to adapt the built environment to the demands of contemporary economic life.  Preserving features of the past connects us all to our history and enhances the sense of place and belonging.

But is the drive to preserve past structures now going too far? Are we now locking down swathes of our urban landscape and preventing sensible adaption to modern lifestyles and economic change? Is it true that the notion of preserving anything ‘old’ has become so widespread that the merits of preservation go largely untested while any benefits of redevelopment are assumed to be nothing more than development profit for demonized ‘greedy developers’? Has it become, in the case of the preservation of built form, a matter of guilty until proven innocent?

This came into focus for me when some dilapidated pre-war homes in Highgate Hill – an inner suburb of Brisbane - which were approved for demolition suddenly became a cause celebre of a small but passionate and very vocal protest group. Yes, there was a local government election in the air but it’s a story that could be repeated in many Australian cities. Despite holding a legitimate license to demolish the properties in order to develop a five storey unit project - in line with the local plan for the area - the local and state governments succumbed to pressure and combined to issue a temporary stop order on any demolition.

Keep in mind these were dilapidated properties, allegedly riddled with termites and with significant amounts of asbestos. Any aesthetic value had long since disappeared after decades of being subject to multiple changes, partitions, and neglect. They had served their purpose for multiple generations of different types of occupants, but their use-by date was up.

They had sold in recent history to a developer with plans to follow the local planning scheme – a scheme endorsed by both local and state government. Evidently, when the properties were available for sale, our committed band of protesters did not buy the properties themselves. Concern for their protection did not extend to investing their own money in acquiring the properties and undertaking very extensive structural and design changes to restore them to some former glory.

What also became apparent from some media reports was that a number of the protesters, as nearby residents, were not ratepayers but renting houses or even just rooms in the area. You may think this too harsh, but it seems that not owning a nearby property (and hence not paying property taxes) is no obstacle to protesting that someone else’s property should be dealt with in a certain way. “No taxation without representation” was a slogan during the American Revolution. Now we have representation without taxation.  This group seemed to hold the view that a purchaser of these properties had some community obligation to undertake very extensive and costly renovations to restore derelict houses in line with what a small number of the nearby community believed should happen, irrespective of holding a valid license to demolish the properties and irrespective of the local community passing on the opportunity to buy the properties themselves.

And for what? Why this obsession with preservation even when it comes to structures that are clearly redundant or structurally deficient? We are not talking about highly significant heritage buildings of unique architectural or historic merit. We are not talking about public buildings in which the community has a legitimate say. We are talking about basic dwellings, privately owned, built of low cost materials available at the time and designed to suit a community and an economy that expired long ago.

The risk is that blanket preservation across swathes of our suburban and commercial centres prevents common sense rebuilding in line with contemporary needs. For starters, new housing tends to be more thermally and environmentally efficient. Anyone who has tried to cool, heat, or maintain an older style home will attest to that.  Further, modern housing is designed around the needs of today’s occupants – not households of more than 50 years ago. Plus, the local demography of many areas has entirely changed. Where once neighborhoods were busy with children playing in the street, some areas now house a large number of elderly who remain in homes that may no longer suit their needs because little is allowed to change (ie be redeveloped) in their neighborhood that might actually meet their needs. More important it seems to preserve dwellings that have outlived their purpose and insist that elderly relocate to somewhere else, than accommodate a changing community need.

Before you start sticking pins into a voodoo doll fashioned in my likeness, this is not advocating a ‘slash and burn’ of heritage properties. But it is trying to identify a clear difference between what constitutes a significant building or structure that is worthy of protection or adaptive reuse, and ones that are simply old.

It also raises a question about who should pay for this protection. Landmark public buildings are often paid for through adaptive reuse which identifies a new, alternate economic purpose. Failing this, taxpayers are generally willing to protect or maintain significant historic structures. But private homes are another thing. Only some are so significant that they have a market value which makes their preservation in private hands worthwhile to the owner. Run of the mill houses which are simply old may be more valuable for the land on which they sit than the structure above it. If these are to be preserved, unwillingly, by private owners – what compensation do we offer? None. Instead, the community is growing accustomed to the idea that they are entitled to have a greater say in what can and can’t be done with other people’s private homes in held in private hands for private use.

A city governed by excessive intervention in private property rights – all in the name of heritage protection – could find itself with large areas increasingly ill-suited to the modern world. We aren’t forced to keep driving around and maintaining old cars simply because they’re old – we are allowed to choose convenience and comfort and make fit-for-purpose decisions ourselves. Why is this increasingly not the case for the humble house?

Sunday, May 8, 2016

Cars or trains: which will win the commuting future?

Infrastructure investment is a hot topic and the focus of that discussion tends to lean towards transport infrastructure over other categories (like energy or water for example). When it comes to transport, trains seem to feature prominently on the wish lists of big investment or ‘nation building’ projects. But how far could billions of dollars in new rail infrastructure actually go in improving congestion across our cities?  Will cars inevitably win? If so, why?

‘We need more public transport’ is the silver bullet catch cry often heard in conjunction with debates about congestion in major cities. It has become so common that its validity is rarely tested. Even large scale commuter rail projects like Brisbane’s proposed $5billion (or $8billion – what a few billion amongst friends?) cross river rail can still maintain preferred project status – despite no business case after several years of discussion and now being in the hands of the project’s third state government.

As technology reshapes the nature of work - and with it where we work - and as Australia faces cities policy with renewed national interest – led primarily by our Prime Minister – it is timely to ask how infrastructure priorities might be shaped by evolving metropolitan form and the fast changing habits of urban inhabitants. Will old ways serve new days? Do we need more passenger rail, or will cars find a new purpose in decongesting our cities and serving a new economic model?

Some recent figures through Macroplan serve to highlight the role played by rail in urban life. In 2013–14, there were 178.5 billion passenger kilometres travelled on capital city roads in Australia and 12.6 billion passenger kilometres travelled on urban rail networks. I’ve written before that this share is unlikely to change for the simple fact that only around 10% of metropolitan wide jobs are based in central business districts of our major cities. Agreed, it’s an important 10% for public transport because PT best serves a highly centralized workforce as you find in CBDs. Commuter rail in particular relies on a ‘hub and spoke’ model, mainly designed to ferry people from into and out of CBDs.

For people who work in CBDs, a high proportion will use public transport – rail included. But that’s a high proportion of the 10% minority of people in a metro wide area. Even if every single person who worked in a CBD caught PT, the mode share can never rise very high because around 90% of the workforce work in suburban areas, for which rail is not well suited. There has been a lot of talk about Transit Oriented Development (TODs) particularly around suburban rail nodes but despite decades of discussion, we are yet to see many (any?) genuine examples.

And the reality is that the economy is fast suburbanizing. New employment engines in sectors like personal services or health and caring are not beneficiaries of industry proximity. Being close to others in the same industry might have been good for finance, property and business service industries in traditional CBDs but the fastest growing sector of our economy at present is health care related, where being close to the people being served is important. This is not the CBD. There is even evidence that technology startups in the US have tended to prefer suburban or high street locations, offering high amenity, ample low cost or free parking, and cheap (or free) premises. Steve Jobs and Steve Wozniak of Apple fame started in a suburban garage after all. And Mark Zuckerberg got started at a desk in his college dorm.

As this shift of the economy moves from centralized to increasingly decentralized models – aided by new and fast evolving digital technology which makes connectivity over larger geographic areas so much easier – do the foundations of commuter rail feasibility begin to crumble?

This graph, which shows the dramatic long term decline of the CBD as the dominant employer region in Sydney, could apply equally to other capitals:

Source: The Polycentric Metropolis – Sydney’s Centres Policy in 2051, Bob Meyer, Director of Planning, COX Richardson Architects and Planners

This shift is directly related to how public transport versus private has fared over a similar long term scale, as evidenced by this chart:

Source: Mode share of motorised travel (passenger kms) 1945-2014 for five largest Australian cities, public transport vs private transport (source data: BITRE), taken from Alan Davies writing in Crikey.

Adding to this shift has been the enabling factor of falling car prices. According to COMMSEC, in 1976 the cost of a new Holden sedan (back then it was Holden or Ford and that was about it) was $4,336 and the average male full time wage was $182 a week – meaning it took 24 weeks income to pay for a new car. Today, the average full time weekly wage is around $1,440 and there are plenty of good quality brand new sedans you can buy for $19,000 on road. In just over three months, you can own one. New cars are fuel efficient, emissions efficient, reliable, technologically enabled and comfortable.

Rubbing salt into the commuter rail wound is that travel by car – even across larger distances – tends to be quicker than rail. Here’s the picture in Melbourne:

Source: Average journey to work trip duration by mode and ring, Melbourne (source data: VISTA 2012-13). Taken from Alan Davies in Crikey.

In Sydney, according to their Household Travel Survey 2013-14, only 13% of car drivers took longer than 45 minutes to get to work, while 79% of train passengers took more than 45 minutes. 

So, given that commuter rail is best designed to serve an increasing minority of the workforce with jobs in traditional CBDs, how will spending extra billions on commuter rail infrastructure expansion solve congestion? How will it translate into more rail passengers, given the way the economy is changing?

Is there an alternative?

For me it’s actually not a case of one or the other. Sensible investment in commuter rail, given the existing investment in rail networks, makes sense provided there’s a valid business case and the alternative options for that investment have been measured.

It also strikes me that we may have a forgotten the massive sunken investment in metropolitan road networks which do most of the transport work in our cities. Some (not all) of these roads are congested for maybe 4 to 6 hours out of every 24. Our cars which move us around our cities spend maybe only 3 or 4 hours a day going anywhere. For more than 20 out of 24 hours, they are parked.

Talk about driverless cars is not just about a fictional scene from ‘Total Recall’ – it’s also about computer aided traffic management on a city wide scale. Squeezing more efficiency from the road network and from motor vehicles seems to make a lot of sense. Ride sharing apps like Uber provide an early insight into how disruptive technologies can impact on traditional, cumbersome and market protected transport thinking. There are also car sharing Apps like Goget and more are on their way. Technology is changing the way we do everything, from entertainment to where we work and how we get around. Would it not make sense for cities to be exploring how this wide scale urban economic shift can best served, rather than stubbornly sticking to mantras about public transport systems designed for traditional urban employment models?

And what about buses? Their great virtue is that they can use the metrowide road networks. It is easy to change a bus route to adapt to demand. You can’t do that with rail. Think how technology might soon morph public transport buses and private transport cars into a hybrid of some sort? Driverless buses are not new. Perth is already about to trial them. This is just a baby step. Think about where this could lead.

There’s no such thing, in my view, as a bad infrastructure investment. But there’s only so much money to go around. The decisions on infrastructure investment, when it comes to issues like urban economic productivity and reducing congestion, should focus on how to get the best bang for the buck. That can mean thinking more about the future and how patterns of work will shape what we need from transit systems, and working back from that to identify the best solutions.

Tuesday, March 29, 2016

New Economy, New Jobs, Old Thinking?

The changing nature of our economy is making itself felt across the business sector, and this in turn is changing the nature of work and where it takes place. But is our urban thinking keeping pace with this change or are we too sentimentally attached to old patterns of urban development to allow the new economy to thrive?

Urbanists (or new urbanists or their various incarnations) have celebrated the role of the city throughout history. They have been ardent supporters of urban development, particularly inner urban development, and have traditionally favoured century-old models of place-making, social collaboration, work and play.

Traditional European or US urban models of urban development have been studied diligently and even modern cities that developed well into the age of the private automobile have been urged to mimic initiatives that reflect traditional forms of the urban – be that in transit, housing form or other aspects of a city. The sentimentalism was the backdrop for the enigmatic movie "The Truman Show" – itself shot on location in a ‘new urbanist’ community of Seaside, Florida.

But then along came 21C digital technology and it looks like the urban party is at risk of being spoiled. The pace of growth in technology and its ready access has been responsible for everything from a rapidly ageing population (extended lifespans thanks in part to technological advancements in medicine, early disease detection and treatment) to the globalization of work, and lately for the increasing ability for work to take place where it suits us.

How is this challenging our traditional thinking about cities and urban development? The evidence is starting to appear in official employment data. Based on some analysis recently by Macroplan, if 2006 is taken as a base year, the changes since then are worth thinking about. 

Traditionally, cities (and particularly CBDs) grew off the back of white collar employment. Business, finance and property related professions were closely linked with growth of office space demand. But since 2006, the index for this category of employment across Australia is sitting at 63.7 as of January 2016. In other words, despite growth in the wider economy, this category of employment has declined. It is entirely possible that offshoring (via technological advance) has seen some of these jobs move to lower cost locations (perhaps driving office space demand in Delhi?) and also that technology has meant that fewer people can accomplish more tasks. There has also been a decline in ICT roles (sitting down from 100 at 87.2) and even legal, social and welfare professionals are down slightly at 94.

By contrast, medical practitioners and nurses are at an impressive 225.7 on the index. Similarly, health diagnostic and therapy professionals are at 207.8 and carers and aides are at 150.9. Health-related professions have been the big drivers of jobs growth in Australia, followed closely by hospitality and retail (123) or sales and marketing/PR roles (133.8).

This doesn’t mean that all the traditional white collar office job roles are disappearing – just that without growth in the health sector, our jobs market as a whole would probably be shrinking.  What does this mean for city development?

Health industries are unlike traditional white collar office industries. They rely on being close to the people in need of their services. Many services are increasingly mobile. They are certainly decentralized. They do rely on proximity to each other, other than some evidence of medical related clustering for consumer convenience.

Office workers and CBD jobs, by contrast, have relied on proximity to each other for the creative energy that follows and the professional networks that proximity thrives on. But it is precisely this type of function that is increasingly being liberalized from the need for proximity, either because the nature of work can be performed just as well elsewhere (in suburban centres or offshore) or because some aspects of technology are rendering it redundant altogether.

If this continues to happen, our CBDs will increasingly become less about ‘central business districts’ and more about ‘central amenity districts’ which are enjoyed for their access to recreation, entertainment, or cultural virtues. But this will also mean wholesale changes to our thinking about urban development are required.

Transport systems designed on 19th or 20th century models of suburban commuters clocking in at their CBD office may have to give way to widely dispersed models of employment where the place of work and the hours of work simply cannot be serviced by traditional public transit models. We may need to look to partnering with the Ubers of the world to make more of our investment in roadways without adding to congestion. We may need to rethink our planning mindset which allocated fixed uses to particular sites – such as retail – and instead encourage greater flexibility in land uses to respond to the fast changing nature and location of work.

The pace of technological change will demand nimble, responsive urban development and flexible approaches to land use planning if we are to grow our national prosperity. Our cumbersome governance structures, arcane planning laws and sentimental attachment to traditional forms of urban development might all need to change to allow that to happen.

Monday, March 21, 2016

Does town planning over promise and under deliver?

After several decades of increasingly sophisticated strategic town planning, community angst and confusion - along with industry annoyance - continues to test new lows. Things are getting no better and many would suggest that planning is increasingly becoming a process-ridden exercise more concerned with vague platitudes and politically correct language than delivering on outcomes. Is there something that could change this trajectory?

Urban development and urban growth in this country was largely a laissez faire model for much of the period since white settlement to perhaps the early 1980s. By this time, in response to community interest and also to try better manage growth, regulatory planning was having a greater say in land use and development permits. Town planning departments at various levels of government were still in the main small(ish) sections of the bureaucracy. Governments of the day were more interested in seeing things built and delivered than debated and delayed. Town planning was more focussed on granting permits than denying them.

But as the years progressed since, regulatory town planning has taken on a much greater role as a strategic ‘command and control’ centre within governments of all political persuasions. As community concerns and NIMBYism becomes more widespread, planning  has become much more focussed on process and on managing politics. Outcomes have become increasingly expressed as a collection of motherhood statements, often cobbled together to appease various politically active constituencies. It’s now less about laying out land use and infrastructure plans in a businesslike manner. Instead, it seems more about making promises for political purposes.

Modern town planning has some wonderful achievements to its name but  is it also now in danger of over promising and under delivering? Does this explain why the community and industry are losing faith in the process? I know many senior town planners are equally as frustrated that their profession is at one end becoming more about petty rule book regulation while at the strategic end, more prone to flights of esoteric fancy that promises more than it can realistically deliver.

By way of example of an over promise, take this statement contained in the 2013 version of the Draft Metropolitan Strategy for Sydney which promised: “A home I can afford. Great transport connections. More jobs closer to where I live. Shorter commutes. The right type of home for my family. A park for the kids. Local schools, shops and hospitals. Liveable neighbourhoods.”

Wisely, future versions of that set of heroic promises were expunged from the Sydney Metro strategy. Housing affordability, congestion and housing choice have all since deteriorated in Sydney to a significant extent, with little sign of improvement on the horizon. Why did town planners preparing that draft feel obliged to promise so much in the first place? It was an over reach, which only serves to raise community expectation to unrealistic levels.

Another example of a town planning promise that got carried away with the narrative is taken from a recent planning document that deals with an inner city neighbourhood of another one of our larger cities.  The ‘Vision Statement’ for the local Structure Plan promises to: “Provide for (the area) to become a higher density mixed use community that exemplifies inner city sustainability, social inclusiveness, sub tropical design excellence and innovation in its urban form. It will be attractive, affordable, public transport oriented, convenient and comfortable for pedestrians and cyclists, provide public spaces for local amenity and recreation and accommodate a diverse range of people. It will also take full advantage of its strategic location and maintain its role as an employment node.”

Wow. That pretty much covers everything. Perhaps the authors could have added: “Under this plan, no child will live in poverty” just for good measure?

This isn’t trying to single out either example because they are no longer exceptions but fairly typical of the sort of tone that seems expected from strategic planning documents. If these politically motivated sentinments aren’t included, political leaders are faced with potential community outrage from the semi professional objector lobbies. The problem is that measuring the performance of motherhood statements is impossible, and plans are frequently re-made (often in line with political cycles) before any performance assessment is carried out.

And this is the point: how often can you recall reading or seeing or hearing of any strategic planning document, strategy or paper being subject to any sort of rigid performance assessment? For example, “this plan promised to deliver “x” volume of new dwellings with y% of them at a multiple of four times average incomes for the area but it achieved only “z” number of dwellings and none of them were available for less than 6 times avarege incomes.” Or what about infrastructure targets? Plans that propose to collect infrastructure levies as a result of development activity in line with that plan, could also identify what infrastructure will be provided, at what cost, where and by when. Performance assessments could identify successes and failures on defined KPIs, and suggest explanations for the failures – with remedies in turn reflected in future planning schemes. A process of constant improvement based on performance assessment. Much like a business plan does.

This lack of agreed, measureable outcomes or KPIs in much of what passes for strategic planning today also means that performance assessment is limited to ambigous or fluffy language. How often do we now read things like “this has become a vibrant community featuring sustainable design principles and a cosmopolitan lifestyle which enhances livabliity, connectivity and inclusiveness.” Just what does that really mean? And how on earth could you measure it?

Perhaps our approach to town planning – and to being realistic with community and industry expectation – might benefit if we began to include measureable KPIs and objective outcomes as part of our planning schemes, along with the community consultation that goes with them? By creating a clear picture of the outcomes we intend, and the ability to measure progress toward those outcomes, is it possible that some of the “over-promise and under-deliver”  that seems to feature in strategic planning could be addressed? By treating strategic town planning as a business plan for a region or community, could we shift the focus from ‘vision statements’ as an end game to the nuts and bolts performance objectives that feature in good business planning models as the measureable outcomes of the vision?

It at least could be an idea worth exploring. If not, we must think the current trajectory is fine and that more of the same can only make things better. Who seriously believes that?

Tuesday, March 1, 2016

We are working less while living longer

The ageing of our society raises a host of difficult issues, most of which are studiously avoided by our current crop of populist political leaders. So while they’re building up the courage to confront some ugly economic realities of the ageing of our society, I’d like to add another consideration. It’s a set of numbers that aren’t often discussed but which add another dimension to the problems of ageing.

First, a quick recap on the ageing numbers. Australians aged 65 and over are the fastest growing age group in the country. There will, in the next 20 years, be another 2.8 million of them. Part of the reason is that we’re living longer, as life expectancy grows. Living longer is something we all wish for, but we’re yet to seriously work out how we can afford it.

Here’s the sobering picture which we all need to understand. Keep this in mind the next time some new medical advancement is announced which means we’ll likely all live a little longer still.

Take someone (the following numbers are based on males) who was born at the turn of the last century, around 1900. Their life expectancy was on average only 51 years of age. They went to school but mainly left school by the time they were 14, or even sooner. Then it was straight to work. With an average life expectancy of 51 years, most pretty much died on the job after working for 37 years. ‘Retirement’ was something largely unheard of, and certainly not something funded by welfare: families looked after their elderly until death. This generation spent, on average, 73% of their life in work.

Jump ahead to someone born in 1950 – a classic ‘boomer.’ Their life expectancy by now averaged 66 years. They attended school and many left at age 14, and retired at around 60. This gave them 6 years of ‘retirement’ and 46 years of work. They spent 69% of their life at work.

Jump again to 1975 and life expectancy rose to 69 years of age. But people born in this era were more likely to stay at school until say 17, to finish high school. They retired at around 60 and had 9 years of retirement before death. This generation spent 43 years at work – less than the previous generation – or 62% of their life.

And now to the millennials. Born in 2000, they can expect to live to 76. They will be at school and probably post school studies (and staying at home) to around 22, maybe longer if you throw in a gap year. If they still retire at age 60, they will have 16 years of retirement. They will work for only 38 years or just 50% of their life.

We have gone from generations who spent much of their life working (and thus supporting themselves and paying taxes) to a coming generation who, by living longer and staying as dependents for longer, will only spend half their life at work.

What is our plan for funding a life where half of that life is outside work? Even today, we are confronting a wave of retirees with minimal superannuation balances, certainly insufficient to fund their way into commercial retirement living or aged care housing. The majority of retirees, even today, will rely on the pension to some extent.

Coming generations are working less and - thanks to idiotic levels of housing affordability - postponing entry into the housing market, if at all. They are even postponing children, with the average age at childbirth rising somewhat. This generation will have had compulsory super for most of their working lives, but those working lives will only be 50% of their time on the planet. And they may not be retiring with a home that is owned outright, but retiring instead with a mortgage. Or no home at all.

So Australia, tell me this: if we are to preserve our standards of living and quality of life, what’s our financial strategy for doing so? By working for falling proportions of our time on earth, we are going to struggle to fund our own future retirement – let alone pay sufficient taxes to maintain infrastructure and provide funds for pension support for the many who have been unable to fund their retirement. Do we simply suggest that seniors have to work longer? This is about the extent of any wisdom from Canberra in recent years. But try telling that to a 60 year old on the job market. There are only so many Bunnings jobs to go around. 

It strikes me that longer lifespans is a double edged sword. While we may collectively want to celebrate the idea of living longer on this earth, we need to have a very serious discussion about how on earth we’re going to afford it. 

Wednesday, February 24, 2016

Don't mention the war (on negative gearing).

If truth is the first casualty in war, then the current ‘debate’ on negative gearing is the policy equivalent of World War III. There are lies on both sides but as arguments and accusations are tossed liked grenades from the trenches, the underlying problems of housing market dysfunction are forgotten.

There’s nothing new or inherently wrong about negative gearing but concerns about the extent of its use for speculative property investment use have been raised by economists for more than a decade. Those concerns were heightened when in 2014/2015, the value of loans to property investors for the first time exceeded loans to owner occupiers.  Further, it was obvious both from official statistics and casual observance that investors were fighting with first home buyers for established lower to middle priced homes in the suburbs: typically the types of homes sought by young couples and families.

We were eating our young. While on the one hand governments and various industry groups mouthed concerns about housing affordability, we at the same time applauded ever increasing housing prices and the wealth creation that on paper went with it. Mid last year, then Prime Minister Tony Abbott went as far as to suggest that he hoped prices were increasing – on the very same day that the head of Treasury expressed concerns about a housing bubble in Sydney. 

Fast forward to 2106 and a new Prime Minister: Malcolm Turnbull. In February, Bill Shorten - a Labor Opposition Leader (who few give any chance of actually winning the next election anyway) – suggests that negative gearing should be pulled back to apply to new property only and that the capital gains tax concessions should be pulled back from 50% to 25%. In response, PM Turnbull suggests this might lead to a form of economic Armageddon.

Supporters of the status quo are claiming that ‘average mums and dads’ are the biggest beneficiaries of negatively geared property investment, which many indeed are and have been. But equally, there are some obvious excesses which even the most ardent supporter would struggle to hold up as models of equitable tax or housing policy or lending practices or indeed economic policy generally. 

Take the now famous example of ‘Property Investor of the Year’ from Your Investment Property Magazine of 2012. Kate Maloney and her partner, at the age of just 24, won plaudits from various judges (some of them still high profile housing market commentators) for amassing a substantial property portfolio.  (The full copy of the article announcing winners and runners up is here).

“Three years later,” she now writes, “if we were to sell our properties, we would still owe the banks about three million dollars not including arrears interest and selling costs. We are currently in the process of sorting out the debts. The outcome at this stage is uncertain.”

Or what of the story in the Australian Financial Review of the 15th of February, which was intended to paint a picture of some ‘average mums and dads’ using negative gearing, who would presumably in the future not have the same opportunity should Shorten’s proposals get up? The story, entitled “Investors to lose under Labor’s gearing plan” profiled a young couple, Simon and Rebecca Cooney, with two young children and who “are nurses who both earn more than $100,000 and bought their first unit in Darwin in 2006. They now have four properties in the Northern Territory capital, Brisbane and Katherine and owe $1.7 million on the homes worth about $1.95 million.”

That’s right – this level of indebtedness is put forward as an example of people who will ‘lose out’ should negative gearing be changed. If owing $1.7m on a $1.95m portfolio when pulling in a combined $200k with two young kids is now a good thing, then everything I learned at high school economics and accounting was wrong. Everything my parents taught me was wrong. Plus the lessons of history are also wrong. Hell, even the leadership of the country is wrong. Yikes, what a dope I’ve been!

Another frightening yarn (unlikely to be the last) in the Australian Financial Review of the 24th February told the story of a hedge fund manager and an economist who posed as a gay couple with a combined $125,000 in income who toured the western suburbs of Sydney looking for property, to see what was really happening at the coalface. Like a scene straight from the movie ‘The Big Short’:  “both men encountered many investors who were able to get revaluations on their properties to increase their equity for speculative purposes. ‘We met one who was able to do this 20 times in a year with their portfolio… They (mortgage brokers) wanted to put you into 10 to 15 apartments… (and) the only way they could do that was getting the bank to revalue the property so you could revalue properties quickly.”

Yep, it’s all good. Nothing to see here. Move along.

Sadly, what has become obvious is that we have become a nation divided. There are those exposed to the property sector who will fight against any policies which could even hint at cooling markets and lowering prices. Our ‘battlers’ from Darwin would be just another round of casualties - like Ms Maloney - should that happen. But at the same time, we have a pressing problem with affordability and know that the very high prices of housing in major centres is leading young couples and families – including our own children - to defer entering the market, or to be entirely precluded from it. Their housing choices are being forcibly compromised by social engineers who have deemed it only fair that in the future, we raise families in (mainly small) inner city apartments and abandon private transport in favour of public (or cycling). Evidently, detached homes in the suburbs are now for high income earners or investors, actively accumulating ever bigger portfolios.

Meanwhile, the entire supply side of this discussion has (again) been pushed to one side. We have artificially inflated land prices by creating contrived growth boundaries around urban centres, intensifying competition for development sites to dizzying levels which flow directly to the consumer. Then we choke that limited supply with byzantine planning controls that even senior lawyers struggle to interpret, leading to high compliance and delay costs. For good measure we then tax that limited supply with excessive “user pays” levies for infrastructure that doesn’t yet exist, while buyers of established homes in pampered inner city areas are surrounded by quality infrastructure they pay comparatively little for.

Our housing markets, the policies that guide them and the way in which new supply is controlled, have been allowed for successive years to get progressively worse, with little intervention other than to add complexity. We stand idly by and ‘tutt tutt’ the mounting generational affordability problem, all the while clipping the ticket as our existing portfolios rise in value.

It’s as if the Property Council’s latest campaign to defeat even the mention of changes to negative gearing – posed as it was by an opposition leader that few give a chance of winning – was spot on by picturing our housing markets as one big collective house of cards. Touch or tinker with any part of it, and the entire house of cards might come crashing down. Even raising this as a proposal from opposition benches is apparently perceived an act of war.

I’m not sure whether that was the intention or not but it’s a scary thought to think that our markets might now be so distorted and vulnerable that even a discussion about changes to one aspect of housing policy is something to be attacked with hostile intensity. 

Better it seems to instead cry havoc, and let loose the dogs of war.