Affordable housing in plentiful supply

Australia’s ongoing (some would say interminable) debate about housing affordability was given fresh impetus last month when Federal Treasurer Scott Morrison weighed in with calls for liberated land supply and planning reform by state and local authorities. Scott’s call closely followed a less edifying observation by demographer Bernard Salt that young people simply needed to change their breakfast preferences to afford a house. 

Predictably, discussion swirled around the excessive cost of housing in the inner city markets of Sydney, Melbourne and Brisbane, the declining rate of first home buyers entering the market, the rise of a renting class and the push for higher density apartments of limited size as a means of gaining a foothold in the market. It’s a familiar conversation and one that’s been repeated for a long time now. The same arguments were being thrashed around in the lead up to the 2007 Federal Election: release more land, reduce up front development levies, and free up a notoriously dysfunctional planning system. At the time, I was National Executive Director of the Residential Development Council, and to make the point, we famously sent every Member of Parliament a rubber banana, likening housing to the price of bananas (which when in short supply, rise in price).  The debate got a lot of traction and both then Prime Minister Howard and Opposition Leader Kevin Rudd made a number of statements on the issue.

Fast forward ten years and nothing has happened on the policy front. What’s worse, the level of market analysis in the debate hasn’t improved. One of the realities which ought to get serious attention is that Australia has plenty of affordable housing. It’s just not where the jobs are.

That might sound simplistic but if we continue to push for greater concentrations of employment in the inner city areas of Sydney, Melbourne and Brisbane we will only make the affordability problem worse. And this is what we are doing. Prime Minister Turnbull’s ‘Smart Cities’ plan has been much celebrated by the inner urban cognoscenti but in reality it is mainly an inner cities plan. Infrastructure priorities by State and Local Governments continue to lavish inner city regions with transport and social infrastructure in a vain but futile attempt to keep up with the pressures of further economic centralisation.

More economic centralisation is the last thing we need. It will create an infrastructure challenge we simply cannot afford and will never win. It will add to competitive pressure for housing near city centres and lead to social and economic inequity as wealth splits into the sort of ‘haves and have nots’ more typically associated with the British aristocracy in the 19^th Century.

Yet in all the debate about housing affordability and urban planning, there is a consistent implication that centralisation is the objective. Governments at all levels (with the partial exception of NSW’s Mike Baird) have centralised their considerable departmental operations in central city locations.  Business is encouraged to do the same – via a planning regime which promotes centralization in high density employment zones. Costly transport investment is focused on servicing the needs of a centralized workforce.  Housing increasingly focusses on limited land opportunities as close as you can get to centralized employment areas which often means dwellings that are both idiotically small for a country the size and population of Australia and prohibitively expensive.

Where in all this is the realization that the affordability problem is confined mainly to the inner and middle ring areas of mainly three cities. (Perth is sorting itself out via the deflation of its housing market bubble, as is Darwin. Adelaide firsts need an economy before seriously worrying about affordability and the same largely goes for Hobart).  There are dozens of larger regional towns and cities where affordability is not a problem. Jobs are.

In an era when digital technology has all but obliterated the tyranny of distance, why continue to live with this tyranny? Why don’t we have a genuine strategy to encourage employment growth and opportunities in regional cities and towns? In the US, this has been happening for years. It’s not the New York’s or San Francisco’s but the middle cities like Austin (Texas), Salt Lake City (Utah) or Denver (Colorado) that are the fastest growing economies. Here in Australia however we seem hell bent on ever greater populations and densities in a small handful of cities while we allow regional centres – many with more than adequate infrastructure, good climates, and plentiful and affordable land for housing – to languish.

Australia does have a housing affordability problem but that problem is largely confined to three or maybe four cities, and then mainly to the inner and middle areas of those cities – because that’s where we insist on putting the jobs. Rather than fretting over this dimension of the problem, perhaps instead our debate could turn to expanding and distributing the economic and employment footprint into outer urban and regional centres, where housing is affordable and land plentiful. What’s needed is a slightly larger share of the economic pie. Not only could this alleviate the affordability problem but it would reduce the impossible infrastructure burden associated with even greater concentration of economic activity in a select handful of inner urban areas.  

Footnote: the property featured in the above image is a current listing, in Orange, NSW. The median house price in Orange is $340,000 so this is representative. Orange has a population of around 50,000 within a region of around 100,000 and has quality educational and health infrastructure plus it's a very scenic city and region. (A video is here if you're curious). 

Just consider the difference between being able to earn $100,000 in the Sydney metro region but paying close to $1million for a house and enduring an irksome commute every day, to having the same income, a house for $340,000 and little congestion in Orange. All that's really missing is the job, which is overly simplistic I know, but all that extra money not going into a mortgage that feeds bank profits would find its way into either household savings or productive non-housing investment in the economy.