Any effective policy response to the housing affordability crisis should avoid tweaking the current housing system, which is based on outdated and even harmful models that are deeply entrenched and fiercely defended, Mike Brown writes.
Instead, new pathways to provide affordable housing are required, firmly based upon an appreciation of our contemporary and future housing needs and an enlightened appreciation of the national interest.
In Part 1 of this series, we explored how tensions around housing affordability could jeopardise our political stability.
We now move on to consider if resolving these tensions could – or should – entail the national government dipping into Australia’s existing urban governance and policy settings.
Existing urban governance?
Typically, national governments regard urban policy as a state responsibility, preferring to confine weightier spatial issues like defence, economic policy, international relations, and social policy to national leadership.
“Typically”, because none of these issues cleave neatly along state vs. national lines.
For example, councils often develop sister-city relationships with international counterparts.
Increasingly, national productivity depends on hospitable and efficient cities, which motivates state appeals for national help in funding local urban infrastructure.
Likewise, the failure of states to provide for adequate housing rebounds on national social safety net budgets for those on low incomes.
Health and education are two areas notorious for squabbles over cost-shifting responsibilities between government tiers.
The national interest is expressed at the local level
These kinds of overlapping policy responsibilities often colour and distort national policy debates with parochial concerns and the grubby business of local political survival; features that are particularly evident in current housing affordability debates and the cosy urban policy settings at its core, as we noted in Part 1 of this series.
Yet these distortions have repercussions that are directly relevant to the established responsibilities of our national government.
Investment, innovation and projection of soft power
It must concern national government that the increased absorption of wealth in rising house prices limits our national capacity to innovate and invest in more productive activities.
As Eric Smidt reminds us, lessons from the Ukraine invasion illustrate a fundamental feature of success in modern international competition:
“…the defining new force of international politics: innovation power. Innovation power is the ability to invent, adopt, and adapt new technologies (that) contributes to both hard and soft power.”
He adds: “The ability to innovate faster and better—the foundation on which military, economic, and cultural power now rest—will determine the outcome of the great-power competition…”
Expressed in the negative, failure to innovate to meet rapidly developing challenges is a sure-fire way to national decline and is as relevant to urban development as it is to national challenges like defence.
As we previously touched on, the effective resolution of intra-national policy issues can also affect our soft power projection of superior democratic virtue.
This is not a theoretical issue. As Samantha Power argues, attention to the material conditions of those governed is essential to ongoing support of democratic modes of governance.
The Chinese Communist Party regime takes credit for the dramatic improvement of housing conditions it has achieved over the last two decades, though the authoritarian-governance-for-prosperity bargain it struck with its citizens is currently unravelling, with increasing indebtedness of the housing development sector threatening its current economic growth forecasts.
By comparison, the emergence of widespread housing unaffordability in Australia undermines our claim to superior governance, and the freedoms we attach to it, at a time when challenges to our democracy are currently escalating.
Workforce and urban productivity
Rapid national decline is a consequence of a failure to address individual constraints on productivity, as Russia is currently realising with so much of its younger population avoiding education, entrained in unproductive destructive military service, or leaving the country, taking their skills with them.
The Productivity Commission has released its five-yearly report, which projects that on current policy trajectories, we can expect a 40 per cent reduction – yes reduction – in income over coming decades, unless we lift skills, education, how and what we invest in, and our overall living standards.
The national safety net is largely based on the assumption that most of the population will be securely housed by retirement. Minimum retirement incomes generally provide for decent living with little or no allowance for rental payments.
If these assumptions are no longer valid, as is now the case for increasing numbers of Australians, then we face a future of unfunded retirement liability, the quantum of which will worsen if those then paying taxes do so from lower incomes.
There is a pressing need to locate and treat affordable housing as an essential infrastructural component of cities.
Our cities are increasingly significant contributors to our national productivity. Making cities work better, more productively, and more sustainably improves our national wellbeing.
Equally, if national productivity is increasingly dependent on efficient cities, then development practices that add costs to the expansion and development of cities harm the national interest.
Housing our population adequately leads to greater workforce participation and hence urban productivity.
Efficiently linking workers with work means both greater individual productivity and more leisure time, along with the material and social benefits that flow from these arrangements.
That is why the national government’s announcement of “well-located” affordable housing is so significant – it stakes a national claim on the planning and development practices of state and local governments.
This is particularly relevant to transport infrastructure.
Dispersed development, such as a never-ending peri-urban subdivision, increases the demand for more expensive roads and rail, the costs of which national governments are increasingly pressed upon to bear.
State failures to levy those costs against those that extract profit from subdivision, such as through value capture mechanisms, means this cost must be borne by taxpayers.
Low-density development also distributes these costs amongst fewer tax payers, an outsized burden that diminishes savings available to reinvest in our national future.
Thus, it would be perfectly reasonable for a national government, representing all Australian taxpayers, to withhold affordable housing funding from those states that persist in conceiving ever-wider peri-urban subdivisions as an affordability solution, on the grounds that those states know the eventual cost to taxpayers is some 4 to 10 times the cost of infill development, as we noted previously for South Australia and now seems likely for New South Wales.
Sustainability
As is well known, national commitments to limit greenhouse gas emissions are strongly linked to the sustainability of existing and new housing in our cities.
The for-profit industry is dominated by two types – subdivisions for single dwellings remote from city centres and high-density infill apartments.
Peri-urban subdivisions are notorious for their poor environmental performance, both directly in the nature of dwellings constructed and indirectly through the lack of tree cover and high transportation energy costs they impose on residents.
Equally, high density infill development consumes energy intensive materials in construction and even more energy in operation for mechanical services. Further, this class of development is strongly opposed by NIMBY activism because of its insensitive intrusion within existing neighbourhoods.
“Missing middle” development, like the townhouses commonly built in Sydney and Melbourne in the 19th century and that for which Peter Barber is well known, offer greater promise. Reduced less intrusive scale enabes them to be inserted closer to job centres and built with simpler construction methods.
Cultural barriers to policy change
The Australian cultural imperative of a home-of-one’s-own distinguishes it from those in, say, Europe and parts of Asia, where housing is conceived of as part of, not separate from, cities.
Housing in Australia is the defining personal asset par-excellence – one’s very own piece of paradise; a slice of the pie; the Australian dream.
Conceived thus, the connection of a home to jobs and urban centres is a second-order concerns, the significance of which only becomes apparent long after housing providers have departed with their profits, leaving their products in monocultural deserts of suburbia.
It then falls to governments to complete the urban picture by providing the costly infrastructure, which too often is then sold to investors as lucrative monopoly infrastructure investments.
The primacy of a wholly owned piece of paradise also underpins NIMBY opposition to densification. Yet, “missing middle” housing also offers individually titled land, a key feature of the Australian dream of a home of one’s own.
Political barriers to policy change
A significant political problem confronts national policy reformers.
The oversized political influence of vested development and investment interests in property is so well known as to be no longer newsworthy, yet still regularly generates headlines; consider for example the recent and ongoing upper-house enquiry into branch-stacking and developer influence.
In seeking to develop collaboration and partnerships – an essential feature of any affordable housing policy – the national government risks consensus by ceding policy innovation to prevailing narrow state-based interests that in consequence could dilute or distort any useful affordability initiative; a problem well-illustrated by the craven capitulation to property interests inherent in the recent South Australian subdivision announcement.
What is needed first, and rapidly so, is a national consensus on what “well connected affordable housing” should look like in order to meet all the new challenges our cities now confront.
That is why the urgent input of urban professional organisations – particularly those for architects, urban designers, and planners – is now so important, as suggested previously.
Industry barriers to affordable housing policy reform
There will no doubt be pious objections to these suggestions; responses like “any policy solution must of course engage with the existing housing industry”.
The simple riposte is “why”?
Aided and even abetted by light-touch regulation in many sectors, the existing for-profit housing system has hitherto resisted affordability reform, which got us into this mess and as we have reviewed previously.
It might also be complained that the building construction industry is, to use the economic descriptor, “inelastic” – it is unable to expand and contract its output in response to market demand.
In consequence, any policy change in favour of the NFP sector will not achieve greater housing affordability because the expanded building capacity is simply not available.
However, this account overlooks one feature. The “building industry” is not the same as the for-profit housing industry.
Typically, for-profit developers contract with the building industry on strictly and hotly contested commercial terms. If that industry is offered slightly better terms by the NFP sector then it will simply move its capacity across.
The net effect would entail a gradual shift of total dwelling output from the for-profit system to the NFP system – surely a desirable policy outcome – and might even prompt rapid ramping-up both skills and numbers of building trades – another desirable policy outcome according to the Productivity Commission.
Effective change or more same-same?
As many have noted, solutions to the housing affordability crisis have been known for at least a decade.
It remains to be seen if imminent legislative changes muscularly adopt those recommendation or merely entrench existing inequities behind superficial earnest measures designed not to disrupt the current housing system.
Following any policy adoption, expect young voters to have their pencils poised over ballot papers.