Australia “explodes”

“THE Australian population will explode to 35 million people in a generation” went the headline. Bloody hell, I’m gripped with a sense of panic before I read any further.

But there is no need to panic. The figures reported with such explosive rhetoric in the mainstream media (see here) came from some revised population forecasts released by Treasurer Wayne Swann. The numbers referred to the 3^rd Intergenerational Report which will be released soon.

The prediction now is for an upward revision of future population numbers. Our present population is 22 million people (a handy population clock can be found here). The new forecast is for a population of 35 million by the year 2049 – some forty years in the future.

That’s an increase of 13 million people or 325,000 people per annum. Hardly an explosion on global terms and not even an explosion in Australian terms.

In 1969 (forty years ago) our population was 12 million people. John Gorton was Prime Minister, the Rock musical Hair opened in Sydney and Apollo 11 was keeping us all enthralled with the moon landing. We weren’t gripped then with a sense of panic that Australia’s population would almost double in the next forty years to reach 22 million. In fact, the rate of growth in the forty years to 2009 was more than 80%, compared to the 59% predicted for the next forty years (not the 65% reported in the media).

So we’re actually slowing down! Maybe the headlines could equally have read “Australia’s population growth rate slows” but I suspect that’s unlikely to grab reader attention. Nor would it have inflamed Greens leader Bob Brown who was moved by the headlines to pronounce that “"This population boom is not economic wisdom, it is a recipe for planetary exhaustion and great human tragedy.” (Story here)

Calm down Bob, it’s not a boom. We haven’t run out of food, we haven’t run out of space, and we’re arguably more prosperous and more environmentally responsible than we were in 1969 or at any time since then.

The global population is, granted, growing to dizzying numbers but that growth is taking place largely in nations and continents where the term ‘sustainable practice’ is even more unheard of than it might have been in Australia in 1969. The point here is that growth in Australia can’t by any conceivable stretch of the imagination be compared with the sort of growth occurring elsewhere in the world. To call growth of 325,000 people per annum in Australia a “boom” is almost irresponsible in that context.

It might be handy also to calm the jittery nerves of the Malthusians and provide some global benchmarks. (Malthusians subscribe to a school of thought developed by Thomas Malthus in 1798, which predicted that food supply could only grow arithmetically while population grew exponentially, meaning a population disaster was inevitable. Much to the disappointment of the Malthusians, it hasn’t - after more than 200 years - happened yet).

Australia’s current population of 22 million compares with today’s estimated populations of the following countries: nations I have tended to think of a rather ‘small’ in geographic size and population:

Madagascar 20 million

Uzbekistan 27 million

Nepal 29 million

Morocco 31 million

Canada 34 million

Ukraine 46 million

Then there are the heavier hitters:

Italy 60 million

Turkey 71 million

Vietnam 86 million

And finally the A league:

Indonesia 230 million

United States 307 million

India 1,169 million

China 1,333 million

So here we are today with fewer people than Nepal and worried that we are about to “explode” to the size of Canada today or something less than the Ukraine today after another 40 years. At our current rate of growth, it will take 150 years before we reach the current size of Turkey.

This then begs the question: how do all these other places manage? They have water, food, energy. You would struggle to call Italy or Canada third world countries but they manage with larger populations than our own. Nor do places like this conjure up images of vast urban slums, as might be the unfortunate top of mind image of India. And the United States, with today some ten times what our forecast population will be in 40 years’ time, seems to bumble along in economic terms and even enjoy the occasional bouts of prosperity (recent performance notwithstanding).

Even the ‘lone star’ State of Texas in the United States holds more people than we do – at around 24 million. And Texas is predicted to reach 46 million by the year 2040. Yet here’s the incredible thing: they still manage to feed themselves and provide water. And when it comes to shelter – one of those other essentials of life – their housing costs are a fraction of ours. The median house price in Houston (second only to New York in Fortune 500 headquarters) is – wait for it - US$150,000. (Thanks to Wendell Cox for providing this information – you can find more at http://www.demographia.com/).

Maybe I am missing something here. Australia, population 22 million and with vast areas of land and natural resources at its disposal, and with the sort of governance systems in place that guide progress along more sustainable tracks than might be the case elsewhere, is worried that a growth rate of 325,000 per annum is some sort of explosion. Bob Brown calls it a calamity. Others will worry we will exhaust supplies of food and water.

And others still must wonder at what it possibly the most critical problem facing us with this growth, mild as it might be. We are currently some 80,000 dwellings short of what’s needed in this country. Our rate of new dwelling supply is at record lows. Our planning systems restrict the supply of land and mandate a style of new housing supply at odds with market preference and which is both difficult and expensive to supply.

Not helped by this housing shortage, we endure (practically celebrate) some of the highest housing prices in the world relative to average incomes - and prices are still rising faster than incomes, even when unemployment is rising. The situation is so chronic that we are now starting to show occasional signs of ‘slum lord’ behaviour, where shelter is at such a premium that students are being charged by the mattress and into overcrowded homes (story here). (Deputy Brisbane Mayor Graham Quirk was prompted to comment: "Brisbane is one of Australia's most liveable cities, making it totally unacceptable for students to be crammed like sardines into their homes." But surely until his own planners start to address the root causes of the housing shortage, overcrowding is inevitable and the liveability of the city at risk?)

The extra 325,000 people per annum are going to need around 150,000 new dwellings per annum – well above our current delivery rate. And that’s without catching up with the existing shortage. Ironically, we seem to have coped reasonably well in the last 40 years. But now, the regulatory systems have changed, and we appear to struggle with lower rates of growth when it comes to the supply of suitable shelter.

So while there may be no reason to panic at the ‘explosion’ of numbers we face in the future, there could well be a reason to be worried – very worried – about where, and in what standard of housing these people are going to live.

Not dead yet!

Despite what can read like attempts to will it to death, the family unit is proving resilient.

Let’s bust a myth. You’ll have read plenty of reports that the traditional family unit is in decline, and that single person households or group households are on the rise. This, we are told, is going to mean a fundamental change to the way we provide housing and lifestyle choices.

It’s true that there have been some marginal shifts in the rise of single person households. The proportion has grown from 21% of all households in 1991 to 24% in 2001. But this is a shift at the margin, the causes of which aren’t necessarily due to wholesale disgruntlement with the family unit but also to drivers like the ageing population (which invariably produces more widows living longer).

The biological urge to pair with a partner of the opposite sex and produce children is proving more stubborn than some forecasters and ‘trend spotters’ might like to believe.

Only this week came evidence from the ABS (‘Marriages and Divorces in Australia 2008’) that the number of marriages registered in Australia last year was at a 20 year high, while the overall divorce rate was at a 20 year low.

That sits at odds with what some commentators are saying, like this from KPMG’s Bernard Salt:

“There's gay couples, divorcees, married couples who don't have kids, singles, ex-pats, de facto couples and we can't forget that we have an ageing population”

“Those groups didn't exist 30 or 40 years ago, so there's different kinds of families now who have different housing requirements. There's less need for basic three-bedroom brick veneer homes in the suburbs.”

Really? Cause and effect are open to debate here. The shift away from the suburban detached house isn’t as much driven by changing family units or consumer choice but instead driven by deterministic planning policies which are restricting the supply of new suburban land in favour of high density living.

Salt again:

“We're talking density housing," he says. "There'll be less backyard cricket and more communal facilities like parklands. It's going to mean getting used to living close to people, which is a cultural shift for Aussies who are used to their own place in suburbia.”

The same Courier Mail article which quoted Salt also featured a lesbian couple, promoted as ‘the face of the future’:

“SARA Birtwhistle and Wendy Ellis are the faces of the future. No longer will a typical Australian family comprise mum, dad and two children,” went the introduction.

What, never again? I know same sex couples should no longer fear the sort of social pariah status of recent history, but I didn’t know they were soon going to be made compulsory. (The stats also say otherwise – of all couples, heterosexual couples still comprise 99.5% of couples). Quoting one of the couple in the article:

"We've lived in an apartment in the Valley and New Farm since we've been together, which is 11 years," she says. "It's a nice lifestyle with good restaurants, cultural facilities and like-minded people who inhabit the area.

"Being stuck in the middle of suburbia with families gives me the heebie-jeebies."

How awful! But the reality is that family units are not in decline anywhere near the extent predicted. This has some implications not just for housing styles, but also for ownership.

The Australia Parliamentary Library earlier this year produced an interesting summary of home ownership trends by family types. It concluded that:

One of the main demographic influences on home ownership is age. Rates of home ownership increase progressively with age, reflecting the different life cycle stages. The relationship between age and home ownership has meant that Australia’s ageing population has put upward pressure on the home ownership rate.

On the other hand it says:

Another demographic influence on home ownership is household composition. Rates of home ownership above the average for all households have been experienced by couple families while rates below the average have been experienced by one parent families and lone person households. Changes in the composition of Australian households from couple families to other family types have therefore acted to put downward pressure on the home ownership rate.

The reason for the latter is that non traditional household types are more likely to rent than own (with or without mortgage). But then it concludes:

Given the wide variety of factors that influence home ownership, their net effect has been, surprisingly, to leave Australia’s home ownership rate largely unchanged for more than 40 years.

That tends to support a largely status quo situation in terms of household composition. What is true, however, is that households are getting smaller. In 1960, the average household was 3.5 persons. It’s now around 2.7 persons. Some commentators have seized on that fact to predict (or more frequently, proclaim) that housing should get smaller, not larger. (The derision of so called suburban McMansions often raises this as its justification).

(For a detailed analysis of family and household types, this report by the Australian Institute of Family Studies is worth a read).

But standards have changed somewhat in that time also. I can’t think of any developer who would bravely build a new house of a 1960s design with only one toilet, three smallish bedrooms, and a relatively cramped kitchen and dining room. (A movie worth watching is a recent Australian flick called ‘Subdivision’ which weaves into the plot the tension between old and new style housing).

So while households are getting smaller, the trend has been to demand more space per person. And given that the majority of household types remain couples (with children, or without – the latter predominantly in the pre-child phase or empty nesters) it is just too early to predict the demise of the family home.

Households like the lesbian couple featured as ‘the face of the future’ do tend to dominant social and market commentary. But if the real bread and butter demand for housing is going to continue to come from couples planning children, or with children at home, or with children who have left home but who may want to visit, then how comfortably does that sit with the current crop of planning schemes which are directed to provide housing choice which is the inverse of housing demand?

Will there be enough families buying the proposed volume of high density living units to sustain the market? Or will these become temporary abodes, rented for a period until the family can move out to join their own ‘like minded people’ in the burbs, with children who have room for some backyard cricket and the pet dog?

It’s fine for the commentators to predict the demise of the family unit household. But it’s not dead yet – far from it. The challenge for the market is to avoid the distraction of predictions and forecasts based on changes at the margin, and to supply the housing needs of the majority, notwithstanding the constraints of planning schemes that may not align with majority consumer preference or needs.

HOUSE PRICES – AND WHY GLENN STEVENS IS RIGHT TO BE WORRIED

Glenn Stevens is the most influential banker in the country. As head of the Reserve Bank, when Stevens speaks markets listen. But do politicians?

Recently, Stevens made some telling comments about the shortage of housing stock and the prospect of rising house prices. Those comments have since fuelled a flurry of ‘housing bubble’ stories in the media, but typically the underlying problem of supply was glossed over.

For the record, here’s what Stevens had to say on the 28^th July to a Sydney business lunch in support of the Anika Foundation:

“A very real challenge in the near term is the following: how to ensure that the ready availability and low cost of housing finance is translated into more dwellings, not just higher prices. Given the circumstances – the economy moving to a position of less than full employment, with labour shortages lessening and reduced pressure on prices for raw material inputs – this ought to be the time when we can add to the dwelling stock without a major run‑up in prices. If we fail to do that – if all we end up with is higher prices and not many more dwellings – then it will be very disappointing, indeed quite disturbing. Not only would it confirm that there are serious supply-side impediments to producing one of the things that previous generations of Australians have taken for granted, namely affordable shelter, it would also pose elevated risks of problems of over‑leverage and asset price deflation down the track.”

Stevens was by no means first to identify the problems of undersupply. Industry groups and some informed economists have been pointing to the supply problem for some years. Almost two years ago, the ANZ Bank flagged a shortfall of 200,000 homes by 2010, in a warning issued in November 2007 (you can read it here).

The Federal Government’s National Housing Supply Council confirmed the shortage in its ‘State of Supply’ report in 2008, arriving at a ‘crude’ estimate of 85,000 dwellings in the then market of 2008. (The Exec Summary is here).

So the fact that there is a shortage is undisputed and the number is probably somewhere between 100,000 and 200,000 and getting worse. That’s a lot of rooves. But what got Stevens worried was that this shortage, combined with renewed activity in the market as a result of the increased First Home Buyer grant and the prospect of a ready supply of housing finance, would push house prices up without addressing the shortfall.

Evidence

The signs are already there. In Melbourne, a robust market is producing intense competition at auctions. New land releases are so eagerly anticipated that homebuyers are camping out to be first in line. As one agent described it “stock levels were so low buyers were being funneled into what is available and being forced to compete for it'' (full story here). Mortgage lenders have marginally tightened the amounts they will lend to first home buyers while typically leaving deposit ratios and LVRs untouched. (Story here). House prices generally have withstood the onslaught of the GFC, in some areas even rising marginally, leaving the IMF to suggest that Australian house prices remain 20% over valued – a sure sign that supply is insufficient for demand, and that even a global recession isn’t enough to cool people’s fundamental desire for shelter.

But public policy settings – the very things causing the chronic undersupply – remain unchanged. Queensland’s revised ‘South East Queensland Regional Plan’ will only exacerbate the shortage by setting hopelessly unrealistic targets for infill housing and limiting the areas capable of development for detached housing on the fringe. Councils are adding to the problem with unwieldy if not impossible approvals processes and usurious infrastructure levies.

The market reality now is that developers find themselves faced with a chronically undersupplied market – and are basically powerless to do anything about it. The first problem is obvious: a global credit squeeze and the retreat of lenders from the domestic market. Many developers can’t find the credit needed to proceed with projects while others have been hit with massive devaluations such that their existing debt ratios don’t exactly make the prospect of more debt something that would appeal to markets (or lenders).

A pricing floor?

But even if the credit squeeze was eased tomorrow, the raw price of land – a reflection of its scarcity – combined with the extortionate approach to upfront levies, has put a minimum cost on the price of new detached and attached housing. And that cost is currently above what many in the new homebuyer market can afford to pay.

I was quoted a figure this week of a minimum $500,000 per home unit for anything basic in Brisbane, given the land costs, infrastructure levies, planning compliance and build costs (which are higher for high rise developments than detached housing). A $500,000 home unit is roughly eight times average incomes, so the likelihood of finding a rush of buyers in that price range to ease the housing shortage isn’t good. (Assuming there are enough people wanting to live in units to begin with).

Detached house and land packages fare a little better although it would be difficult to bring any new supply onto the market for much under $400,000. Half of that, roughly, is the land cost alone. And that’s if you can find the land to begin with.

Conundrum

This creates the conundrum that has Stevens worried. New supply lead times are such that it would just about be easier to get a new coal mine happening than release a new housing estate. So supply is inelastic in response to the demand.

There is a price floor created by new regulatory weapons in the hands of public policy makers, which means that new supply is also very costly. Probably more costly than many people in the market can afford to pay. That being the case, developers will need to rely on second and third home buyers to make many projects stack up, or for the return of investors, provided rates of return remain attractive relative to alternatives (cash or equities).

So the chances of this nationwide undersupply being brought into balance by the rapid addition of new housing stock are looking pretty remote right now.

That being the case, you would imagine that the pressure of an undersupplied market will invariably find its way into the stock of existing homes. Evidence of that would be in the form of rising established house prices despite a climate of falling employment, or intensive competition for existing stock. Which is what we’re seeing now.

What happens next?

The shortage of housing is chronic but the willingness of public policy makers to do much about the problem is practically non existent. Given we can usually rely on policy makers to do the wrong thing (or nothing) when action is needed (other than perhaps hold an inquiry), the chances of radically changed policy settings freeing up land supply are remote, at best.

Economics 101 tells us that a shortage of supply relative to demand should equate to rising prices. And that’s quite possible in established markets, where competition for stock amongst those with secure incomes and the capacity to pay will translate into increasing prices.

But surely prices generally can’t increase by much – they are constrained by people’s incomes. If house prices rose much further, we would be facing housing costs on average at nine or even ten times average incomes, which on a global scale would make Australian housing the most expensive in the world (if it isn’t already). Incomes are unlikely to rise quickly for average workers and bank lending policies are unlikely to return the heady free for all of recent years. So that in effect puts a ceiling on price growth.

By the same token, prices are unlikely to fall, given the floor under the market created by public policy settings controlling the release of land (hence restricting supply) and the unrealistic approach to infrastructure levies.

The gap between that floor in prices and the ceiling is the space in which developers must operate to provide new supply. And it’s not a wide gap.

All of which means we are probably faced with a waiting game. Incomes need to rise faster than the increasing supply side costs created by policy settings, or those policy settings need to be relaxed so that relativity with incomes is restored.

In the meantime, Stevens has probably nailed what happens next. In his own words: “it will be very disappointing, indeed quite disturbing”.

INTERVIEW WITH A PLANNING MINISTER

Interviewer: So Minister, we’ve heard a lot about your new planning schemes, can you tell us what’s actually involved?

Planning Minister: Thank you, and might I say I am very proud to tell you about how much planning we’ve actually been doing. The plans are very comprehensive, and have been painstakingly developed over many years, so they’re extremely comprehensive and we’re very very proud of what we’ve done.

Thank you Minister, but what’s actually involved?

That’s an excellent question. As I’ve said, these plans are comprehensive and the result of extensive public, industry and stakeholder consultation. The plans cover a wide area of planning – I can assure the people of this State that no stone’s been left untouched by any of this planning. So what’s involved is a very comprehensive plan for planning the future of our region.

Yes Minister, but what does the plan actually contain?

I’m sorry, but you possibly don’t understand what’s involved ...

Clearly not.

Well let me say the plan has actually been refreshed and recharged and we’ve done away with the dated, inappropriate plans of the past and replaced them with a whole new set of plans for the future that ...

... contain what exactly?

I’m not sure your listeners would appreciate your line of questioning. Look, it’s a very comprehensive plan – in fact, there’s more than just one plan in case you didn’t get that message. We have plans for every contingency, for every possible scenario, based on the extensive review of our planning and consultation with leading industry and public groups. In fact, it’s fair to say we’ve never had so many plans available for so many contingencies and interests that have been, in themselves, very comprehensively planned out. The Premier has told me she’s 100 per cent behind these plans and what they mean for our region.

Does she know what’s in them?

Don’t be flippant with me, of course she does, she’s a very well-informed Premier, who’s been fully briefed on all of our planning activities and the plans themselves and the consultation process and understands that these are the best plans we’ve seen for a long, long time in this great State...

Can I change the subject for a moment?

Provided you don’t miss the point about our planning. I welcome any enquiry into our planning!

Minister, your Department employs many hundreds of public servants in the planning field. Are the public getting value for money?

Of course! (laughs). Haven’t you seen all the plans they’ve produced?

But what are the plans for? I mean, why all this planning? What’s it for, where’s it leading?

Because (irritably) you HAVE to have plan for things, you can’t just let growth happen all willy-nilly without a decent planning framework. And let me also say, which is something you need to appreciate: planning takes planning. You can’t just produce the sort of plans we’ve produced without lots of carefully thought out planning for the plans. It’s a subtle point sometimes lost on a cynical media, but producing good planning is an investment in our future and that in itself needs to carefully planned out, which I’m sure your listeners would fully want.

Minister, we’re running short on time. Can I wrap this up by asking what has actually been DONE with these plans and all this planning?

Done? I’m sorry?

Yes Minister, what’s actually been done?

Oh, I see, well that’s easy to explain, you’ll need to redirect your question – you see, I’m the “Planning” Minister, the “doing” is not part of my portfolio. But when anyone is ready to do anything, absolutely anything, I promise you we have the plans! I’m very proud of that.

Minister, I’m afraid we’ve run out of time – that’s all we have time for today.

You should have planned that better then, shouldn’t you?

Thank you Minister.

Planning Never Never Land?

The one thing you should expect from any half decent plan of any sort is that it should have at least some vaguely remote chance of actually delivering on its ambitions. Otherwise, it isn’t a plan because the end result is unrealistic and falls into the realm of fantasy.

The release last week of the revised South East Queensland Regional Plan brings into focus many issues, but one central assumption – that infill housing targets can accommodate future population growth in existing urban areas – suggests this plan might have about as much chance of realistically being achieved as Peter Pan being told to ‘think happy thoughts’ so he can fly.

The revised SEQ Regional Plan attempts to ‘manage’ the growth of south east Queensland by containing future population growth largely into existing urban areas, and limits expansion on the fringe by imposing an urban growth boundary. The philosophy owes much to concerns about ‘sprawl’ (a pejorative term which on a global scale is hardly applicable here) and has its roots in land use policies developed in parts of the United States and Europe.

Setting aside any critique of ‘smart growth’ policies and their impact on housing choice and costs, the attempt to contain future growth in SEQ into existing urban areas is perhaps the most contentious aspect of the SEQ Regional Plan. Put simply, it is hard to see how the numbers stack up.

The targets.

The plan proposes that half of all new residents are to be accommodated in existing urban areas via infill housing (medium to high density). Within the City of Brisbane, the target is even higher at 88% of new growth. That figure isn’t really surprising given there’s really no large parcels of land left suitable for detached housing. But when you start to look at the raw numbers of infill dwellings required to meet the plan’s targets, the credibility gap widens.

For south east Queensland, the plan acknowledges the need for 754,000 new dwellings to accommodate predicted growth. Of that, 374,000 dwellings are mandated as infill (townhouses or high rise units). Within Brisbane City there will be 156,000 new dwellings of which 138,000 will be townhouses and unit type dwellings, according to the plan.

That’s a lot of units. Some back of envelope sums are helpful here. Imagine a twenty level highrise unit block, with four units per floor. That’s 80 units. The 138,000 dwellings infill target, if it was all delivered as 20 storey highrise buildings, would equate to 1,725 such twenty storey unit towers across Brisbane, between now and 2031. That works out to roughly 78 unit towers, each year, for the next 20 years or so.

For south east Queensland, the 374,000 dwellings infill target equates to 4,675 twenty storey apartment towers or 212 per year, every year, for the next 20 years.

Now the SEQ Regional Plan makes precious little comment about how the planners expect this scale of infill to actually be delivered. It’s a bit like envisaging a Dubai-scale apartment boom right here in Brisbane.

Does this sound like a plan, or are we being asked to think happy thoughts?

So where will they go?

The revised SEQ Regional plan does at least suggest that there are some preferred areas for infill development activity, particularly around transit nodes – which makes sense. Transit oriented development exploits existing public transport infrastructure (however overtaxed it may already be) and mixed use development to create work-live-shop-play environments. It can be tremendously successful, and Brisbane has a couple of notable examples already, with more on the drawing board.

But bring the issue of scale back into focus – the hypothetical 1,725 apartment towers are for accommodation only. They do not include additional requirements for more office space, more retail space, more schools, hospitals, medical centres etc – it’s a long list.

Chermside, Indooroopilly, Carindale and Upper Mt Gravatt are some of the activity centres expected under the plan to accommodate this frenzy of building activity over the next twenty years. But within these centres, the plan again is silent on precisely where the activity is to take place. It seems fair to ask the question: have the proponents of this plan at any stage pulled out a map and decided which entire suburban blocks are to be demolished to make way for the 1,725 apartment towers needed for infill development, or is there some new approach to infill which somehow creates new development sites in built out neighbourhoods?

The credibility gap is actually much wider than this. Infill housing is usually delivered as a mix of medium (townhouse style) to high density. Medium density projects by nature occupy a larger footprint than a high rise tower. So the reality of the numbers is that the foorprint needed to achieve the infill targets will be much greater than our hypothetical 1,725 towers in Brisbane (or the 4,675 towers throughout south east Queensland).

Where exactly are these sites? I’ve had a good look at Chermside, Indooroopilly, Carindale and Upper Mount Gravatt, and even the wonders of Google Earth don’t reveal vast hectares of vacant land adjoining transit nodes just waiting to be developed as housing.

Has anyone asked the people?

The physical impossibility of the target numbers being delivered is one fatal flaw of the SEQ Regional Plan, and will remain so until the plan’s proponents explain – in precise detail – where and how these numbers will be delivered. Only with that sort of street by street analysis of available land can the credibility gap be closed.

But then there’s another, significant gap in all this. The SEQ Regional Plan proposes perhaps the most fundamental change in the way of life and urban environment for Brisbane and the south east ever proposed in the history of this state’s development. Did anyone actually ask the people if this is what they want? It is a democracy after all and we have debated and voted on lesser issues than this.

The reality is the community are highly likely to object strenuously to dozens of 20 storey towers appearing in their neighbourhood. Jim Soorley was once savaged by the Liberals for proposing a ‘sardine city’ but his ambitions for infill were miniscule compared to what the SEQ Regional Plan now proposes. The scale of community objection to the infill targets of the SEQ Regional Plan, once the community realises, could be sufficient to unseat local Councillors or State MPs, and the prospect of that is another fatal flaw for the plan. Politically, it is hard to see how it could ever be delivered.

Then there are other market realities to deal with. Families overwhelmingly prefer detached housing and backyards for the kids, so even if deprived of housing choice, will there be a big enough market to buy all the units and townhouses proposed? There’s an issue of cost also – high to medium density is expensive to deliver, inflated by infrastructure levies and build costs. So will there enough people who could afford to buy all the units and townhouses proposed? There’s an issue of planning polarity, in that while the SEQ Regional Plan is a state instrument adamant on infill, many local council planning schemes don’t support it. Once again, how that tension will be resolved adds yet another wedge to the credibility gap.

Never land?

Is it possible that such a comprehensive planning scheme which purports to deliver on so many noble objectives (preservation of open space, quality of life etc) actually failed to do the most basic maths on the key assumptions that underpin it? And if that maths was done, why is the plan silent on the answers?

The questions are already being asked and the answers are not forthcoming. At the end of the day, unless and until the Plan’s authors and proponents can answer the physical realities of ‘where’ and ‘how’ in fine detail, site by site, street by street and neighbourhood by neighbourhood, the SEQ Regional Plan is suffering a yawning credibility gap from day one.

In the meantime, a region with a demonstrable housing shortage could find the shortages worsen, affordability deteriorate and growth – the economy’s engine room – falter.

And that doesn’t sound like much of a plan.

[If you haven’t searched through the SEQ Regional Plan for all the details yet, this is a good place to start: Chapter 8 on ‘Compact Settlement’ sets it out. You can find it here - http://www.dip.qld.gov.au/resources/plan/SEQ/regional-plan-2009/seq-regional-plan-2009-part-d-dro-08.pdf ]

What was so ‘bad’ about the bad old days?

If the complexity and extraordinary difficulty of planning regulations today are really all about securing good community outcomes, that would mean that prior to all this complexity of legislation and regulation (not to mention taxes fees and charges) things must have been quite grim.

You’d be forgiven for thinking ‘old style’ suburban housing development was some sort of free for all – a sprawling Levitt Town of housing ghettos – so bad that something had to be ‘fixed’ or ‘done about it.’ But were the bad old days so bad? And has all the additional cost and complexity associated with housing really added much value that we can see?

The Brisbane region in the mid 1970s had a population of 980,000. Today it’s hovering around 1.9 million and by the year 2030, it will reach around 2.8 million. So over the space of 60 years we’ll have added around 2 million people, or roughly trebled our population. Put another way, the rate of growth since the mid 1970s is roughly the same as we’re experiencing now. The numbers are just getting bigger.

So, what’s new?

One thing has certainly changed. We now seem preoccupied (perhaps justifiably) with what this growth will mean for our future. Concerns about encroachment of urban form into rural areas are now commonly expressed in the media and community at large. To place some regulatory and planning ‘order’ around this growth, we adopted an urban growth boundary to contain that growth, the first incarnation of which was really the South East Queensland Regional Plan, which followed the Integrated Planning Act (1997) and was enacted in 2004. Since then, as a community, we appear to have accepted that ‘more controls are needed’ to preserve a quality of life and prevent reckless ‘sprawl’ (a pejorative term but commonly used) consuming swathes of land which (we have been told) is in precious short supply. [As an aside, it is possible to trace the rapid escalation of housing prices to the period immediately following the Integrated Planning Act, from which point planning began to disintegrate into a regulatory maze. The SEQRP may have accelerated that process but there’s no question that prior to IPA, house prices were much more affordable in relative terms than after – still only around four times average incomes in 1996. They are now over seven times average incomes. The extent to which IPA contributed this is a hot topic in its own right].

Take a step back for a moment though, to mid 1970s Brisbane. Rates of growth were roughly the same as now. In those days, there was no growth boundary and no plethora of controls on the development and subdivision of land for housing needed to accommodate the growth. Developers were buying rural holdings on the (then) urban fringe and cutting them up for development. New home buyers back then typically saved for and bought their vacant block of land, often from a salesman in a bad suit sitting in a caravan on site. They then saved some more, and borrowed some too, to build their new home.

Because land for housing was generally freely available, supply constraints weren’t the problem they are now. The median price of a home in Brisbane in 1975 was just $30,000. That sounds cheap by today’s standards, but even by relative standards, it really was cheap: $30,000 was 3.7 times the average incomes on 1975 wage and salary earners. Today’s median is somewhere around $450,000 – or more than 7 times average incomes. So roughly double in relative terms.

We have standards now you know!

So housing is relatively much more expensive today than it was then. Part of the reason might be that, if you believe the mantra, our standards have improved. New housing these days is subject to a tight regulatory framework. The supply of new land is highly regulated – and no new areas on the fringe of the artificially drawn urban growth boundary are released without exhaustive studies that can easily involve millions of dollars in planning and legal consultants fees, with no certainty that the planning decision will actually be feasible in terms of development.

In addition, approved land subdivisions are subject to weighty upfront infrastructure levies and other costs, which now add more than $150,000 to the market cost of a block of land. Then there are the contributions to open space and parkland, public transport (even when none exists in the area being developed and there are no plans to do so) and pretty much anything else the relevant local authority deems necessary before development can proceed. All of which slows progress and adds to costs.

And finally, increasingly prescriptive building codes for energy efficiency, water and other features mean that the actual bricks and mortar cost of the dwelling is rising by more than the real costs of the materials alone.

All of this and more is done in the name of ‘sustainable’ growth and the prevention of ‘reckless sprawl’ on the urban fringe. New standards are promoted as improving the quality of life for residents and ensuring that new communities are created in a planned, orderly manner, while green space is preserved and social order maintained.

The Jindalee experiment

Back to the mid 1970s and it was a different story. The bad old days saw urban growth corridors to the west, south and north of the city being recklessly delivered at a pace roughly in line with demand. Bill Bowden was sprouting his ‘Little Aspley – that’s Strathpine’ housing subdivision as a place you could build a home and grow giant zucchinis (because it was built on farm land). To the south, Browns Plains was opening up former forestry and grazing country where cheap blocks of land attracted hordes of young couples planning a new future.

And to the south west, Jindalee was the region’s first ‘experiment’ in large scale housing development, made possible by a bridge over the Brisbane river. The Jindalee project occupied land formerly used for dairying (surprisingly, despite the absence of cows in Jindalee, we still haven’t run out of milk). The 1416 hectare project was earmarked for housing around 1960 and the bridge completed sometime in the late 60s. The area was given the name ‘Centenary suburbs’ because it all kicked off in 1959 – the centenary of Queensland. Developed by Hooker Corp, the project was supported by the State Government who contributed $2million to the cost of the bridge. (That’s correct – back then, the government contributed to the infrastructure as part of their community obligation in support of growth. That balance of responsibilities has changed a bit since then).

Housing costs were only 3.5 times incomes and despite the absence of a 180+ page piece of planning legislation or equally voluminous building codes or local planning guidelines, the houses are still standing and the entire region has miraculously not become a socially disadvantaged sprawling suburb with little or no community infrastructure.

The same thing today

The same thing today would of course be tied up in planning consideration for many years, and at substantial cost. Any bridges, or roads, or local schools or basic infrastructure would be factored into infrastructure contributions and building standards would mean that all new houses were constructed to a much higher standard.

In theory, all this planning progress and regulatory complexity should mean that the modern suburb of today is vastly superior to the Jindalee’s of the mid 1970s.

Personally, I don’t see it. If the standards are so much superior, how is that reflected? Today’s Springfield or Northlakes looks to me very much like the Jindalee of old. Of course there’s a lot more by way of landscaping, the houses are larger (but on smaller blocks of land), and roads are all kerbed and channelled and footpaths and bikeways are in before the first residents.

But really, how much different are things now? Are today’s suburbs so much improved, thanks to the careful planning and regulatory environment which guides their creation?

The price of progress

Whatever you view on aesthetics, there’s no argument about cost. Today’s new suburban home is vastly more expensive than its 1970s counterpart.

The combination of supply constraints, infrastructure levies and compliance costs mean that every new house and land is roughly delivered with a $150,000 to $200,000 built in regulatory cost. [That figure is based loosely on a study by Urbis JHD for the Property Council, back in 2005, which examined infrastructure costs and government taxes. I’ve inflated the number a smidge because things have only worsened since then. The report can be found here. So if you crudely estimate today’s charges at, say $100k to $150k plus make an allowance for the effect of land supply constraints of another $50k or so, you get your total bill of $150k to $200k].

So the question becomes, are new homes today $150,000 or $200,000 better than their 1970s equivalent? (Bear in mind that these extra costs alone are worth around 3 times average incomes. If today’s home is something like 6 or 7 times average incomes, the base cost could be back around 4 times incomes which is roughly where it was in the 1970s and 1980s, so it roughly works out ‘back of envelope’ style).

The first wave of settlers in Jindalee could rely on a single income family to service their mortgage and other living costs. Today, young couples really need a dual income to cover the mortgage alone, and the childcare industry has grown off the back of that change in dynamic. Housing affordability has become a pressing social issue in that space of time but rarely does affordability rate a mention in modern planning schemes or legislation, let alone feature as a KPI of how that scheme or set of regulations are delivering for the community it allegedly is there to protect from the bad old ways of the bad old days.

[To be fair, the Office of Urban Management’s website still lists a six page Queensland Housing Affordability Strategy that was released back when Peter Beattie was Premier. It promised to “ensure that the state's land and housing is on the market quickly and at the lowest cost.” The strategy is a quick read – so work out for yourself how it’s performed. Then, take a look at the much more comprehensive strategy on the same website devoted to koala preservation. Now I love koalas like everyone and would like to see their habitat preserved where possible, but it’s an interesting comment on planning priorities that the issue of access to housing for an entire generation rates so much less mention in a key planning document than koala conservation].

With all that extra household income now going into servicing larger mortgages – inflated by the $150k or $200k additional costs of regulatory progress – that’s a lot of money not going into the real economy but instead feeding bank profits. Put another way, today’s homebuyers are borrowing an extra $150k or so to pay the extra tax bill on a new home – a bill that didn’t exist even just over a decade ago. That’s a lot of repayment dollars and a big chunk of affordability riding on taxes and regulatory compliance costs.

So what have we achieved?

Has it all been worth it? Is our quality of life through the march of planning regulation measurably better for new home buyers (typically younger families), given the extra costs involved and the strain on household budgets? Are we really delivering, thanks to the protective maze of regulatory controls, vastly improved communities and if so, what are those improvements and would young home buyers – if given the choice – happily trade them off against homes that were substantially less expensive?

It’s a fair question, and perhaps one that various regulatory bodies and governments of any political persuasion should ask before embarking on further ‘reform’.