Much of the news media lapped up the surprise announcement that
Queensland will double the first home buyer grant to $30,000, effective immediately
as of the weekend. The new grant, which applies only to new builds of up to
$750,000, is intended to help stimulate supply rather than boost the overall
market. To that end, despite being what economist Saul
Eslake has labelled “bullshit”, I can see some merit in it.
But what the media and many commentators seem to have missed
is that while the government giveth, it also taketh away. Only recently, there
was a proposal to introduce changes to the National Construction Code in order
for new homes to meet higher energy efficiency standards, along with increased accessibility
standards.
Those changes were estimated by Queensland Master Builders
to add – wait for it - $30,000 to the cost of a new home.
"It's the first homebuyers who are most impacted, who
are struggling to get a deposit together, to make the repayments, and then the
cost of construction goes up," Master
Builders CEO Paul Bidwell said. "$30,000 is a significant
amount."
Yep, it sure is. The same amount in fact as the increase in
the first home buyer grant. Other estimates suggest the code changes could add up
to $70,000 to the cost of a new home. There was a predictable outcry from industry
– which argued increasing the cost base at a time of worsening affordability
especially for new home buyers who are typically younger families was a very bad
idea. The outcry won and the introduction of the code changes has been deferred
to May 1, next year. So as of May next year, the increase in the first home
buyer grant will be cancelled by the increase in code compliance costs, if not
outweighed by them. Savvy first home buyers will want to get in before that happens.
But there’s another reason the proposed construction code
changes are a seriously bad idea: they will impact most the people who can least
afford it, and make little to no difference to household energy or water consumption,
because it only applies to new builds and not to the established market, which
is responsible for nearly all domestic energy and water consumption.
There are around 2 million dwellings in Queensland. At present
we are building around 35,000 new dwellings each year. So that’s just 1.75% of
stock that will affected in year one, rising of course the more years it’s in
effect. But who is driving that 1.75% of the market? 60% of these starts were houses
and the balance units. We know that new detached houses are some of the
cheapest forms of housing, and are typically favoured by younger families on
lower incomes. Apartments, especially in this market, are expensive to build
and that market is drifting quickly to the wealthy end (a new mid spec two-bedroom
apartment now needs to sell for over $1 million for an apartment project to be
viable). Who do you think is going to be more impacted by a $30,000 cost
increase?
As ideas go, can it get any worse? Yes it can! And the
reason is because the biggest consumers of household energy and water are not
the young families living in detached homes but the wealthy – irrespective of
whether it’s a detached home or apartment. Because the wealthy more typically
congregate around inner cities, this is also where the greatest excesses of energy
and water consumption are. Don’t take my word for it: this was proven some
years back in a study
by the Australian Conservation Foundation in conjunction with the University
of Sydney.
“Inner cities are consumption hotspots” the report declared:
“… despite the lower environmental impacts associated with
less car use, inner city households outstrip the rest of Australia in every
other category of consumption. Even in the area of housing, the opportunities for
relatively efficient, compact living appear to be overwhelmed by the energy and
water demands of modern urban living, such as air conditioning, spa baths, down
lighting and luxury electronics and appliances.”
Back in 2007 I was running the Residential Development
Council and we commissioned a report to investigate this in detail. “Housing form
in Australia and its impact on greenhouse gas emissions” was the result. Lots
of graphs to explore if you’re interested but this one helps tell the story:
Think it through. The wealthy inner-city resident in their $2m plus town home or apartment has no access to a hills hoist to dry their clothes, and is unlikely to worry about leaving the lights on when not in a room, or running the air con on a semi-permanent basis. Long showers are not a problem either. They can afford it.
So how can an increase in energy code requirements that will
most affect lower priced homes favoured by young families on lower incomes make
any discernible difference to the biggest energy and water wasters? It won’t.
By applying only to new builds and ignoring the majority of the market, particularly
those households in established dwellings in inner urban areas, this is a
highly distorted and regressive policy which ultimately favours the inner urban
wealthy and penalises the suburban working- and middle-class families.
If we were genuinely concerned about reducing household
energy use, we’d wake up to the fact that buildings don’t consume the energy or
the water: it is the habits of the occupants that drive that.
So celebrate while you can the increase in the first home
buyer grant because from May next year it’s going to be worth nothing thanks to
new energy codes for buildings which don’t even touch the biggest energy
consumers but which will make new detached homes for families even more
expensive, for no environmental gain.
