Low quality homes & the housing crisis.

Young family outside starter home in Levittown, USA, 1950.

 

If the objective of dealing with the housing crisis is simply to try get as many people into homes they can afford in the shortest amount of time, then “business as usual” will not get us there. The BAU approach is now mostly working for the upper end of the market and at significantly lower volumes than we’ve done in the past. So entangled has it become with building codes, regulations, housing taxes and planning ideology that our ability to produce affordable housing is now limited to just talking about it. Doing it is beyond us.

We need “un-usual” approaches. That could include allowing builders and developers to produce ‘low quality’ housing which sails beneath the plethora of green star energy, ESD, disabled access, trunk infrastructure and other standards which have piece by piece made entry level housing needlessly expensive. It also needs new approaches to the funding and design of infrastructure – from road standards to waste water.  Hence it isn’t being done. Instead, even so-called “affordable” housing is billed as “high quality” – with all the trimmings and a price tag to match. The entry level price for a new lowset 3 bed home – the cheapest housing we can now build (forget about apartments for affordability) – is now around $600,000 in many of the outer suburban housing estates.

The median household income in Queensland is now around $100,000. For new housing to be truly affordable for younger families (who may sit below the median income level) you ideally want to aim for product at no more than around 4 times incomes. That means somewhere between $300,000 and $400,000 for a young family that hasn’t yet reached median income levels.

Can this be done?

I believe it can, but it requires such a wholesale change of policy that I wonder if we have the resolve? Apart from the inevitable cacophony of voices from the regulators or industry professionals in design, planning and engineering who will argue that the standards they so vociferously protect are ‘essential’ (they’re not, besides try explaining that to someone living in a tent) – you will then have to wade through the screeching hypocrisy of the media, academic and political class who will decry lower standards for housing when at the same time pleading for more affordable options - all from the safety of their well appointed inner urban enclaves.

But it’s been done before. In post-war United States, tens of thousands of families sought to flee crowded, polluted, crime-ridden inner cities (all pre-gentrification of the urban environment) for a new life in suburbs, liberated by the motor car. Builder-developers Levitt & Sons developed new suburban estates with mass produced housing which was backed by the Federal Government and which offered low-quality (“basic’) housing of under 100m2 area with no garage or other features. It was massively popular with young families and massively derided by urbanists like Lewis Mumford who complained of  “…a multitude of uniform and unidentifiable houses, lined up inflexibly, at uniform distances, on uniform roads, in a treeless communal waste, inhabited by people of the same class, the same income, the same age group, witnessing the same television performances, eating the same tasteless prefabricated foods, from the same freezers, conforming in every respect to a common mold.” Mumford lived in a large home in a semi rural setting and his wife famously drove him everywhere. He was the 1946 equivalent of today’s privileged elitist. Not much has changed has it?

The lesson of the Levitts was that to deliver affordability, business as usual was not the solution. What was a radical approach at the time put tens of thousands of people into housing they could not otherwise afford.

The other lesson is that ‘starter homes’ are by definition just that. There’s no stopping the willingness or proclivity of homeowners wanting to add to and enhance their home over time. Garages were added. Extra rooms added, landscapes added and in time Levittown grew into a mature community as appealing as any other. Rather than build it all in at the start (with the price tag to match) it was added to over time, either through weekend endeavours or when budgets and incomes allowed.

In the midst of a housing crisis the extent of which we haven’t seen in more than a generation, why aren’t we doing something similar now? If we simply set aside the plethora of regulations, design codes and other instruments, how sharply priced could a new starter home really be?

This is unlikely to happen on a region wide basis: the voices of professional dissent would simply be too loud and would drown out the much quieter voices of young homebuyer families on a budget. But it could happen on a pilot project basis. Find me a site of 100 or 200 hectares just outside the urban footprint (so it hasn’t been already bid up due to artificially induced scarcity) and let me have a crack.

How might it look? First, you start scraping back cost layers. Only last year, the previous Queensland Government added $40,000 in costs via new Construction Code standards and a reported sweetheart deal with the Electrical Trades Union. You could start by winding that back. You could also replace upfront infrastructure taxes with a type of local area utility bond to finance essential (but not gold plated) civil infrastructure, repaid over time via the rates bill or similar instrument. There’s another $35,000 or so saved. Then there’s things like allowing large scale off-grid wastewater treatment rather than costly and sequenced connections to the grid. Big savings there. NBN? How about every home instead gets a Starlink deal? Way cheaper. Then there’s the actual dwelling design. No garages, lower ceiling heights, one toilet, basic kitchen. Designs that envisage future additions and renovations but leave this to people in their own good time. It’ll happen.

Sites removed from existing urban connections can be connected by a free but limited bus service, if required, to connect people to social infrastructure or workplaces. Alternatively, fund this as a shared service via the local area utility district mechanism. In reality, most people have cars and cars are much cheaper to afford than housing in established urban areas where public transport options are more widely available. This may offend anti-car urbanistas who think that cycling to work via manicured cycle ways on $10,000 carbon fibre pushies is the way of the future, but for young families looking for starter homes, that’s the reality.  

This isn’t fantasy and is all entirely possible. They’re doing very similar things in third world nations like Nigeria or India. “But we are NOT third world” I hear the indignant urbanists shout. Really? We have people living in tents and young families barely managing to get by given the globally high cost of our housing. Is that the sign of an evolved, advanced economy? Or a sign or policy and market failure?

Business as usual policy settings have failed us. Business as usual will not rescue us. Maybe history can.

Low cost housing in Nigeria. “… a multitude of uniform and unidentifiable houses, lined up inflexibly, at uniform distances, on uniform roads, in a treeless communal waste” is maybe the pill we need to swallow?

Modular, pre-fab, manufactured or built on site. Very basic but also very affordable housing is possible, but will we allow it?

Queensland Housing Commission house, Chermside, 1958.  Have we totally forgotten how to deliver basic entry level affordable housing at scale?

Levittown aerial – as it was in the 1950s. Also provided were community swimming pools, parks and basic recreation areas.

 

Levittown today. Generations of home improvements and civic investment have made this once entry level starter home development a mature community.

Housing crisis: more of the same in 2025?

 You have to wonder about some (not all) of our nation’s political leaders. They express heartfelt concerns about “the housing crisis” and clasp their hands preaching affordability at every media opportunity they can find. But at the same time, they quietly bring on new taxes or regulatory costs which ONLY impact the new housing sector – the very one favoured by young families getting started in life. Or they spruik urban policies which they claim will address the problem but which almost anyone who has ever laid a brick in their life will tell them simply do not work. Some (also not all) of the bureaucrats they employ likewise mouth the words ‘housing crisis’ but in terms of doing much about it, it’s business as usual. No pressing sense of urgency, or of time running out. Little evident willingness to explore radical policy change. No burning thirst to listen to what the people who work in this market are telling them, or to recognise that the very policy morass they manage is the cause of the worsening situation.

Weeks become months and months become years in this real-life version of the Utopia TV series.

It's hard to be upbeat about the outlook when, for example, just before the Queensland state election, the Miles Government introduced changes to union agreements with Energy Queensland which - according to media reports - will add $10,000 to the cost of a new home. That was after earlier in the year signing off on changes to national construction codes which added an estimated $30,000 to the cost of a new home for environmental efficiency and disabled access enhancements. Remember, this ONLY applies to new homes. For it to have any real impact, it would need to apply to ALL housing no matter when it was built. But that would be political suicide. Much better to bury an additional cost in the price of a new home. Who’s going to know? They get their moment in front of the cameras trying to look good for activists and marginal seats, and new homebuyers get another shit sandwich.

Do the sums on what that extra $40,000 added to the cost structure of a new home did for a young homebuyer’s mortgage. It equates to another $317 per month. All those young homebuyers looking hopefully for an interest rate cut should understand that if rates fell by a full percent from 6.5% to 5.5% (highly unlikely) they will only save what the former Queensland Government added quietly to the cost of their mortgage on their new home.

Neither is it encouraging to hear the comment by Federal Housing Minister Clare O’Neill: "We're not trying to bring down house prices," she told ABC's Triple J in December. "That may be the view of young people, [but] it's not the view of our government," she said.

For a further look behind the curtains for the current Federal Government’s attitude to housing, look no further than the Minister for Emergency Management and Cities. Yep, they lumped cities and emergency management together. Wow. That department last year released a “National Urban Policy: A vision for the sustainable growth of our cities and suburbs.” It’s over 40 pages of nice graphics and a meaningless word salad of motherhood statements, cobbled together without economic rigour or much understanding of what has driven the market to this point. If you can get more than a few pages into it without several eye rolls, you’ve done better than me. Have try – the link is here: https://www.infrastructure.gov.au/sites/default/files/documents/national-urban-policy.pdf Thank you Canberra, your ability to demonstrate how oblivious you are to the real world never ceases to amaze.

In Victoria – where they seem intent on wrecking the entire economy to bring house prices down – they’ve announced plans for 50 “activity centres” of high-density housing in and around train and tram stations. “Building more homes around 50 inner-suburban train stations means young people have more opportunity to rent or buy a place that’s directly connected to public transport,” the Victorian Premier Jacinta Allen said in October.

Which is laudable except for one inescapable problem: high density equals high cost. This is the most expensive form of housing you can build. Pinning your hopes on density-led housing affordability is a fantasy. A two-bed apartment now needs to sell for maybe $1.2 million or more for a project to be viable. Only high-end apartment projects stack up financially. As Max Shiffman, CEO of Melbourne based developers Intrapac said at the time: “Apartments would be great if they were an inexpensive housing product. But they are not - and nothing proposed will reduce the prices to a point where they become attractive and attainable to the broader housing market.” That is hardly going to help the young people the Victorian Premier claims this policy is going to help.

In fairness, the Victorians have been more amenable than some other states to allowing and approving new lower cost suburban development, but on the other hand their approach to taxing the property sector (which includes housing) is eroding margins and confidence. Investors are reportedly abandoning the Victorian market with 22,000 fewer rental properties in the last financial year – battle scarred by high land taxes and rental market policies which are imbalanced in favour of tenants.

The Sydney-Melbourne rivalry means an idea in one place must be matched in the other. Often the squabble is only about whose idea it was first. So the NSW Government late last year announced a new scheme to boost housing in and around transit nodes. The move was headlined by the ABC as: “Higher towers, smaller homes, fewer car spaces recommended to solve NSW housing crisis.”  How appealing. Was the ABC being sarcastic? The aim is to deliver 170,000 “well-located, well-designed and well-built homes” but there’s little insight into how this will happen.

Ironically, while there is good logic to support development around transit nodes, the evidence says this can be even harder than developing density away from transit. I made the observation last year that “rail authorities tend to have their own views about how much development should take place next to their rail lines. They don’t want residents moving into these new developments then complaining about noise, dust or vibrations. They can prove obstructive if their approval is required for development to proceed.”  Plus, like elsewhere in the country, density now equals dollars, and many more of them. It has become an upscale product and it’s hard to see how this will change.

Presiding over this mess of unhelpful policy, regulatory tangles and taxes is Prime Minister Anthony Albanese. His contribution? Despite saying when in Opposition that he wanted a “mature debate” on population growth, he has instead flooded the country with record levels of immigration which has seen latest population growth exceed 552,000 people in one year – the most ever and well above historic trends. It seems it’s no longer a subject he wants to debate.

To accelerate population growth via immigration (which is a deliberate policy decision, not an accident) at a time of housing shortages might seem reckless. But that’s OK – he has a plan - an “ambitious” target of building 1.2 million more houses over five years. That equates to 240,000 new dwellings each year. We are currently delivering nowhere near that level and only got close, briefly, back in 2017 when a massive surge in apartment projects took supply to 223,600 new dwellings. Many have observed the legacy of this 2017 boom are many thousands of poorly designed shoebox apartments with no cross ventilation, balconies, or other design amenity but instead “riddled with flammable cladding, structural defects, and leaks.” Remember Sydney’s Opal Tower?

These two charts from the team at Macrobusiness succinctly describe why more pain most probably lies ahead. I wish I am proven woefully wrong, but I cannot see how either affordability will improve or the housing shortage turn to abundance without some very fundamental changes of policy direction – both of the demand and supply side. Are we even ready for that, or will the situation need to deteriorate even further before we are?