“Business as usual is broken” I’ll say to someone. Their
head nods in furious agreement. Whether that head belongs to a property
industry professional, a government minister, a senior bureaucrat or a tradie doesn’t
seem to matter. The realisation that business as usual is broken is now
universally accepted by all except the most ardent lovers of regulatory
overreach.
The question then becomes, if it is so broken, why do we
keep applying business as usual techniques to solve the problem? Why don’t we
discard the things we know are not working, especially the things that are
working against us, and adopt a different strategy?
The signs of a broken system are everywhere. Our housing
market is the most widely reported failing: median prices in capital cities are
now 10 times median household incomes – and still rising. That places us as
among the most expensive housing markets in the developed world. Sydney – at 14
times incomes – is second place in the world. Not a prize you want. Even
Adelaide – yes Adelaide – at 10.9 times incomes, is in the top 10 least
affordable cities in the world, relative to incomes. Most Australian capitals
are in the top 10 or 15 globally – ahead of cities like greater metro London, Singapore
or a host of US cities with bigger economies and populations.
Bringing new supply into a market at a speed which is
remotely close to meeting demand is now a task that is beyond us, using
business as usual techniques. Our performance could only be described as
miserable and – with the exception of national politicians who keep talking
targets as if they will somehow magically be delivered – no well informed
person seems remotely hopeful that our supply side mechanisms are up to the
task. To use the fad phrase, they are “not fit for purpose.”
One proposed ‘solution’ has been a call for more planners to cope with the increasing complexity of land use regulation and development assessment. But so far, the rate of growth in complexity is outpacing the growth of planners. Jonathan O'Brien of Inflection Points wrote an interesting piece relating the number of planners to the delivery of housing stock.
His graphs highlight the extent to which regulatory inefficiency is now baked into land use planning and development assessment. In fairness, the data seems to include planners involved in all aspects of planning outside housing – from utilities to renewables to tourism and all non-residential land uses, so a comparison with only housing is unfair. But as evidence of regulatory and process complexity it’s hard to argue against. Rather than interpreting this as a need for more planners to deal with more complexity (the BAU response) why not reduce the pointless regulatory aspects which have intelligent, university trained planners ticking menial boxes on application and assessment forms, and instead free them up to do what they trained for?
Another example of a broken system is in the costs of simply
readying a block of land for a house. Colliers Engineering recently released
a report which shows the average cost of civil engineering for a single
block of land is now around $180,000. That does not include the cost of
the land itself – just the various reports and professional fees, the
earthworks, drainage, internal roads (and often external ones too), water and
waste water, energy connections, project administration and so no.
That’s a frightening number. Add to that the infrastructure charges to government, plus the land cost itself, and other fees and charges, and the land ready for a house can’t be supplied for less than around $250,000 or $300,000. Then you get to build the house – with all the regulatory grief that now involves. In the post war period (1950s and 1960s), around one third of new homes were owner built, such was the minimal intrusion of policy regulation and compliance. The National Construction Code which governs building today, is said to number 3,000 pages.
Rather than pile on more regulation, why not look to reduce
the compliance burden? The answer there seems to be a reluctance to ‘wind back
the clock’ to a time of less onerous compliance. Utility companies, operating
as quasi monopolies, pursue increasingly high standards of engineering
compliance to guard against one in a hundred-year events, or even to safeguard
against climate scenarios for a largely unpredictable future. Some adopt ‘zero
complaint’ benchmarks as their performance KPIs, which leads to over-design (“gold
plating”). Local governments can adopt increasingly high-performance standards
which are referenced to third party professional bodies (such as the engineers)
to shift responsibility. Those professional bodies, not wanting to support moderate standards where there is an element of risk, respond with highest
standards as minimums, to mitigate risk. All this comes at a cost.
Alternatives – such as large scale off-grid utilities around
water and wastewater – are resisted because they don’t fit the BAU model – even
if they could substantially reduce costs and timeframes (which itself could
also expose the inefficiency of the BAU model, so another reason to say no).
And we are still rolling out NBN cable to new estates, even though an uplink to
a satellite is both wireless, cheaper and faster.
Alternatives to the financing and operation of
infrastructure for housing are also generally resisted. The upfront per-lot
infrastructure charge approach has become entrenched as the BAU model, despite
adding to the upfront costs faced by young buyers. To date there has been minimal
interest in exploring alternatives such as Municipal Utility Districts (MUDs)
which in the USA are widely used to fund and operate essential development
infrastructure, off the balance sheets of government. They work by raising a bond
to fund the delivery and operation of local water, wastewater and other
utilities (even including social infrastructure such as schools or health care
sometimes) which is paid off by the residents over time. It’s in effect a line
on their rates bill, paid off after 10 or 15 years (maybe longer), rather than an upfront hit
of an additional $30,000 or $50,000 in headworks PLUS the inefficiencies built
into the $180,000 worth of civils per lot. Imagine the idea of allowing a
developer to bring market efficiency to the planning and delivery of utilities infrastructure,
saving costs and time for homebuyers, rather than some bloated semi government
monopoly!
Even where things like prefab housing (modern methods of
construction) are a proven delivery model around the world, we are resisting
their deployment here - with the exception of mining camps or emergency shelters.
Our mandated standards (for electricity, plumbing, energy efficiency,
disability access, water efficiency and more) can prove difficult for foreign
manufactured providers to meet. Even when they are designed overseas to
Australian standards, we find local compliance or inspection agencies disputing
that the standards have been met because our habit of wanting to ‘tick off’ compliance
at every stage of the build is unrealistic (and defeats the point of efficient manufactured
housing). Once it’s built, you can’t pull it apart so a plumbing inspector can
say he’s happy with the internal connections.
So it seems we keep applying business as usual approaches to
the same problems that business as usual has created in the first place. There
is no logical explanation for this. “We’ve always done it this way” is the
usual response, and it’s not good enough.
I’m reminded of that scene in Fawlty Towers, where Basil –
who insists on driving a highly unreliable mini as his mode of transport – finally
loses it one wet English day when it chooses the worst possible time to break
down. Says Basil: “Well, don't say I haven’t warned you. I've laid it on the
line to you time and time again. I'm going to give you a damn good trashing.”
Which he does. Only to appear in subsequent episodes, still
driving the same car.
