This is a Guest Post by commenter Tim Robinson
Fixing Auckland’s housing problems is rightly high on the local and national agenda. Barely a day goes by without the Herald trumpeting the one side or the other of the real estate prices argument, and Auckland Council acknowledges that the issue is a key consideration in the Auckland Plan.
At national level, the Productivity Commission report into Housing Affordability could have been an opportunity to deal with issues, but with the ACT-initiated background to the study it was always going to recommend staid and predictable pro-sprawl recommendations, blithely dismissing critical issues around supply mechanisms, finance, taxation and pricing. Fortunately, following the cue of another ACT agenda, a quick glance across the ditch provides us with an example of how to really approach the tough challenges of housing affordability.
The McKell Institute’s “Homes for All – the 40 things we can do to improve supply and affordability” offers a very different analysis and recommendations for Sydney, a city renowned for high prices, in a manner that is characteristically Australian in it’s directness. Sydney clearly has a problem of a magnitude worse than Auckland’s, and really needs to deal with it:
Sydney’s failure to build enough homes has a consequence not just in terms of house prices or affordability. It affects Sydney’s economic position adversely, reduces its contribution to the nation’s GDP and damages its international competitiveness.
As you might expect, there are some strong similarities between the drivers and parameters in the Sydney and Auckland. Homes for All is therefore quite relevant for taking action here, setting aside specific details arising from differences in the government structures and taxation systems.
In fact it is the issue of social attitudes to housing that gets escalated to the top of the agenda in Homes for All. This is an approach that I think is right in responding to the very human and social issues around housing. After all, housing is more than just a by-product of land use and transport planning. Concept. Most people have a deep attachment to the concept of Home, and this drives significant social and economic outcomes.
Due to the high cost of housing in Sydney, we are now seeing some workers spending up to 16 hours a week, the equivalent of two additional working days, travelling to and from their jobs because they can’t afford to live any closer.
Homes for All suggests it is people’s attitude towards homes as a cash cow that pretty much drives both the market and the regulatory systems that have made housing costs out of touch with incomes in Sydney. Rather than going in search of pseudo-technical evidence from lots of graphs and data, I am inclined to agree with this critique, which perhaps resounds at a gut level with what lots of people feel and experience.
Tax breaks and incentives for those in housing have distorted demand, had perverse consequences on supply and given massive benefits to those who are lucky enough to be ‘in it to win it’.
As Australians became addicted to the capital gain windfall of residential property, and as demand generation measures went up in step with supply restriction measures, the original goal of providing a place for everyone to live in became sidelined, with the complicity of the political class and of course of we existing home owners.
Despite the rhetoric of growing home ownership, the emphasis of public policy for decades has really been on the ownership not the home. Although in the hierarchy of human needs, shelter is up there with clean water and food – a fundamental and basic human need – in reality the thrust of policy has been to build capital gains rather than social capital. It has also been to stoke up demand without increasing supply, indeed, while constricting it.
These policies have driven prices up and people out of home ownership, particularly people 35 years and under, and created a wealth gap between the housing ‘haves’ and ‘have nots’. But the wealth gap is both a generational and a geographical one. While all areas have seen great increases in home prices in the last 15 years, some areas have seen prices quadruple while others doubled.
Beyond the economic consequences, the failure to build enough homes in a variety of sizes, types and locations across Sydney has resulted not just in price inflation. It has reduced the livability of Sydney due to long commutes and congestion and the separation of families. It pushes new migrants away from the historic reception areas in denser inner-city neighbourhoods.
With inner suburbs closed on cost grounds to the many, this also means that the traditional reception neighbourhoods for migrants are no longer available and the cultural networks and labour markets they are offered long gone. Today they are forced to the edge of our city where prices may be lower but also where densities are lower thus services are fewer and farther between, public transport is notable by its absence and community integration is more challenging. With long commutes to jobs, these communities are also the most vulnerable to rises in mortgage and transport costs, as we have seen.
In response, Homes for All is pretty positive in it’s plan of action. It makes the point early on that the specific circumstances that Sydney has created for itself contain the seeds of opportunities to make things better.
The good news? Bad public policy caused these system failures. So, good public policy can fix them.
We believe that the policies to achieve the increase in supply – and the suppression of the wrong kind of demand, itself a key source of dysfunction in the housing market – are relatively easy to design and implement. We also believe that there is not just a need for such policies but an opportunity.
This is partly the opportunity of a Federal Government which has shown itself to be innovative in terms of public and affordable housing, and of a new State Government with the proverbial blank sheet of paper to fill with potentially far reaching reforms on planning, supply and demand management.
It is also about local councils stepping up to the plate to show leadership around the aims of housing the many not feeding the self-interest of the few. Also the development industry, aware of the need to be a better partner for the public sector in achieving higher quality as well as quantity outcomes, is also looking to innovate.
It is also the opportunity provided by a banking sector not as able as previously to supply either cheap project finance or mortgages, looking to new business models, new housing tenures, new products and new partners to invest in.
But there are also opportunities due to the context we are in – where house price inflation has paused in Sydney after the rampaging easy money years, giving us a new opportunity to see a value in housing other than the bottom line. So it is also fundamentally about we the people reassessing our attitude to housing need and returning to the original principles that drove earlier generations to work so hard to ensure our society had a place for everyone. In housing, what happened to the ‘Fair Go for All’?
Their approach identifies 11 key areas for action, under which are 40 specific actions.
Each of the actions, whose inspiration is beyond ideology, will make a difference to supply and affordability. Collectively they will make a transformation.
At a high level, the agenda really is quite familiar. The Productivity Commission report contemplated the same headings – land use & transportation planning, homebuilding mechanisms, finance and taxation, and social housing delivery. The one area that is conspicuously missing in the Australian report is that of industry productivity. I suggest it is not included because it is not a real challenge in Australia, where the size of the market has naturally created more competition and innovation. The Productivity Commission correctly identified how far behind our business models are in delivering cost-effective products, with much higher costs on this side of the Tasman.
Land use Planning
Sydney clearly suffers from some similar issues to Auckland when it comes to land use planning and development.
…the citizens of New South Wales, and Sydney residents in particular, have proven unable to engage in a meaningful discussion about providing new housing for our population. There has been a break down in trust between people and the planning process.
The rancour and animosity which greet each new proposed development or plan has been allowed to crowd out a proper discussion on how and where to provide housing. What discourse there is has broken down into mistrust and suspicion. People point to ugly or badly designed developments of previous years and vow never again. Residents are mistrustful of developers and the property industry that they see as profiting from overdevelopment or exploiting loop-holes for private gain.
They also have a planning framework that has been failing to perform, and which needs attention.
THE PLANNING SYSTEM IS BROKEN
The biggest constraint on providing new housing in New South Wales is the overlay of planning restrictions and regulations which have made developing new housing a difficult, risky, costly and uncertain process.
Homes for All also points towards some uncomfortable realities that stem from well-meaning policy approaches.
THE NEED TO BREAK THE ‘GREEN/NIMBY NEXUS’
Some of those approaches have seen well-meaning environmental concerns and ambitions for compact cities, with new development meant to be restricted to Brownfield sites near public transport, in effective alliance with NIMBY (Not In My Back Yard) forces seeking to protect property values.
To be clear, the report supports sustainable housing development, energy-efficient homes and green infrastructure. It supports the delivery of quality, well-designed homes in properly planned places. But it also supports building dramatically more homes than are currently being delivered, at prices which make them more affordable to those on average salaries, with the infrastructure that creates homes as well as just units.
ENSURING PLANNING REFORMS DON’T ACCIDENTALLY DETER DEVELOPMENT
The changes pioneered by former Premier Bob Carr to address poor design in residential flat buildings included SEPP 65. This has improved the quality of new apartments, however not without increasing the cost of construction and often resulting in reduced yield. This was a good policy which had unforeseen consequences for housing supply. Another well- intentioned initiative which had unfortunate consequences for supply was the introduction of BASIX’s sustainability requirements for new construction. Building for sustainability and energy efficiency is clearly a laudable policy and the authors are not suggesting it be removed. However, its interaction with other policy objectives needs to be understood and the consequences for housing affordability taken into consideration. In many new residential developments the BASIX requirements can contradict the design objectives of SEPP 65, increasing constructions costs and reducing density and yield.
These comments should make uncomfortable reading for some Auckland audiences, particularly some politicians and groups who play both positions: promoting urban containment and urban transport investment while at the same time acting to block positive central developments.
There are other aspects of the planning system in Sydney that further complicate matters – multiple levels of plan-making that often don’t play together, and what sounds like widespread consultation powers across lots of public agencies.
Not surprisingly McKell are in favour of a new approach to plan making, with attention to how policy priorities are taken into account when making decisions, supported by a re-think of how much it costs to submit applications. Auckland has at least managed some reform through the single Supercity model, but I’d be amazed if we see any real progress on improving consenting costs and the clarity / simplicity of the system. Here’s hoping – prove me wrong Council!
McKell also chuck in a couple of easy wins. One sounds like it needs careful handling – rear lot infill, which sounds like it was banished in Sydney a while back, but is still the backbone of infill housing in Auckland. The other is a key proposition familiar to Transportblog readers – enabling small-lot (read: medium density) subdivision in areas close to transport nodes and looking to reapply traditional models such as the terraced house, currently denied in Sydney through minimum lot size requirements.
Transportation / Infrastructure – the long term fix
Where Homes for All really gets interesting for Auckland is in it’s identification of the long term, strategic fixes for housing affordability.
There are short, medium and long term fixes to overheated housing markets. In the short term, the shortage of cheap mortgage money can put an immediate dampener on home price bubbles. In the medium term, the tax and levy changes we argue for will reduce land prices. In the long term, it is critical to ensure that a big city has concentrations of jobs in more than one location and that commuters can access them as easily as – if not easier than – travelling to the CBD.
Sydney has an urban structure that is similar to Auckland’s in that the CBD that dominates the economy and transport structures, and geographical constraints that limit the catchment close to the CBD – large areas that would be occupied densely in other cities are water.
Polycentric Sydney having been announced several times now needs to be realised – for the good of those needing homes as much as to increase the effective job density of Sydney. Yes, we need policies to densify established areas and suburbs but we also need to recognise that having our capital city’s sole CBD on its eastern edge, leaving a commute of 30-70 kilometres for Western Sydney inhabitants, distorts the housing market as well as narrowing the economic base for the high value added jobs the city needs to grow.
The transport and economic development focus on the CBD ends up exacerbating home price inflation and adding to the unearned gains of existing home owners in those areas.
The imbalance of Sydney can be summed up in one big fact, one massive trend and one serious problem. Currently as many people now live west of Parramatta as east of it, and when Sydney becomes a city of 7 million towards mid-century, 4 million will live in Western Sydney. The problem? Presently, two thirds of the jobs are in central and east Sydney. Bill Clinton once said that the best welfare policy was a job. Likewise we believe that that policies to grow jobs – and good jobs – in Parramatta and Western Sydney overall amount to the best long term strategic investment in housing affordability for the city.
The report discusses how positively reinforcing a polycentric city model through transport investment directly affects housing affordability.
If the State Government and local councils can collaborate to really identify and deliver the strategic infrastructure and connectivity required to raise the effective job density of Western Sydney and reinforce its attractions as a market, then, together with the reformed planning and tax regimes we advocate, a new more decentralised, diverse and even housing market can develop in Sydney. This also means that strategic transport investment is the best housing investment.
Three cheers for the last statement! Achieving an outcome in one sector relies on investment in another medium is the reality of an urban market.
Homes for All also makes the critical observation that it is really transformative transport investment that is required to effect major changes in the housing market.
We see little evidence of game-changing transport investment being delivered or even planned to make a reality of the ‘city of cities’ and to ensure for example that Paramatta realises its potential as a second tier CBD for Sydney on a par with North Sydney.
As a comparison, London has made east London its development focus for the last 10 years and the next 20. This is based primarily on investment in light and heavy rail infrastructure, which reduced journey times by half to central London. This hasn’t just brought the centre closer to the east: it has made the east part of the centre, and made the east a new destination for London’s housing growth. The fast train to Parramatta, a journey feasibly travelled in 10 to 12 minutes by transport means currently available in international cities, would achieve the same result as east London.
Although welcome, even the North West Rail Link is essentially business as usual as it reinforces commuting trends into the existing CBD rather than creating new economic geographies.
This highlights a whole range of interesting questions arising from the City Rail Link proposal for Auckland. We know that the tunnel link will massively increase access into the CBD – but to what extent will we actively embrace the reverse opportunities it offers? What are the opportunities for New Lynn, Henderson and centres along the southern line arising from faster, more regular access to potential jobs in these centres? Are we actively planning for rail-accessible employment along these corridors? Do we even want to disperse jobs, or are we still such a small urban economy that we want to maintain a singular focus on CBD employment creation? Getting more pointed, can we afford for the CRL to potentially increase the inequity of house price distribution – or do we genuinely think it will do the opposite?
While the CRL is now able to proceed under the unified city structure in Auckland, Sydney clearly has some struggles in it’s authority structure that are posing barriers.
But who is planning it? Through what agency will this happen? It is more than just a transport project.
The governance and capacity gap in Sydney for enabling projects of metropolitan significance has grown ever wider. A planning system which today we believe would reject development applications to build the Harbour Bridge or Opera House, let alone the Snowy Mountain project, virtually makes such grand projects impossible.
But even if the fast train to Parramatta were acceptable in planning terms, who would promote it and deliver it in the absence of a metropolitan wide authority? Given the reluctance of successive state governments to reorganise local government in Sydney or give it a metropolitan governance, the answer must be that the State Government needs to innovate structures and governance which can conceive of and deliver development projects and enabling infrastructure of this scale to transform the prospects – and place – of Western Sydney.
We add: merely freeing up planning restrictions and speeding up land release in themselves – as has been mooted by the State Government – will neither deliver the number of homes needed or the quality of places needed to transform Western Sydney. A more strategic approach is required to rebalance the city to provide the range of jobs, social and cultural facilities, homes, transport and town centres that will make Western Sydney a place of choice, with homes for all.
That will not be achieved without a coordinated governance and policy focus as well as targeted planning and investment by all government agencies and councils collaborating with top quality private sector partners.
In our view, the market, planning reform and speeding up land release will, without this coordination and public-private partnering, deliver low density, dispersed, detached homes and inadequate supply in places with little identity, when the need is for a range of homes in well designed and well connected communities near agglomerations of jobs. Something else is required.
I have shared enough detail from the Homes for All report for now. It has more to say that is relevant to changes taking place in Auckland today – delivery mechanisms such as land development agencies, how social housing provision can be diversified – and I recommend reading the report in full.
What really encourages me about reading this report is that Auckland is actually heading in the right direction to improve housing affordability through transport investment. The national government may have unwittingly enabled this through creation of the Supercity, opening the door for a mayor with locally-based transport vision, and so I’m really not worried that the quality of our local “investigation” by the Productivity Commission was so poor. What we do need to keep actively debating and shaping within our city’s community is the detail of just where and how the opportunities for growing employment and housing capacity will be achieved.