The Greens offered worthwhile housing affordability initiatives, but local government could also become more positive in finding solutions.
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We recently reviewed the housing affordability announcements from the Greens that included worthwhile initiatives and discovered, unsurprisingly, that it also attracted widespread and spirited criticism.
Unsurprisingly, because it has long seemed that too many benefit if the crisis continues, particularly property investors and developers who would prefer property prices and rents to rise.
The losers are a growing underclass of non-owners whose incomes have stagnated yet have no alternative but to pay ever higher rents and save for ever larger deposits.
Though some criticisms were reasonable, aspects of The Greens’ policy warranted serious consideration but were lost in the oppositional hubbub.
To explore what these aspects were four questions were proposed: who builds; for whom; what gets built; and where?
The first two questions turned on the commercial conditions under which affordable housing might be provided under The Greens:
Who builds – the Greens proposed that the for-profit sector NOT be the principal provider of affordable housing. This feature is significant but did not attract much criticism, which was directed instead at their suggested alternative provider – a specially established government agency funded from the national budget.
For whom – the Greens proposed that beneficiaries of its initiative would be restricted to owning one dwelling at any one time. The purpose would be to prevent the accumulation and resultant “financialisation” of affordable dwellings.
Going beyond The Greens’ announcement, the last two questions – the subject of this article – revolve more around the political and cultural conditions of existing and, by extension, new affordable housing, and suggest greater local government roles.
What gets built?
Of the tensions between developers and communities, perhaps the two most intense concern the type and relative scale of new development.
In housing debates suburban houses are typically contrasted with “flats”.
The former are commonly cast as more authentically Australian – this despite Australian apartment examples predating many well-established suburban counterparts.
There is extensive literature on the history of each type, the different urban forms each type gives rise to, different living styles accommodated, means of production and consumption; and the political cultures within which these types are set.
Such is the interdependency of these conditions it is difficult to describe meaningfully each element in isolation from the others.
However, one warrants further discussion here – the cultural “tug” of the suburban house.
In debates about increasing urban density, the single dwelling is supposedly under direct threat. Proponents of higher density tout the superior merits of apartment living with claims, like “we could become like Paris or Barcelona”. These claims have merit.
Yet we also need to acknowledge that such claims are more difficult to press in Australian cities, for a couple of reasons at least.
Firstly, the policy fork-in-the-road between these two settlement patterns often occurred in the distant past, under very different social, economic and political conditions; conditions that persist to the present day within different jurisdictions.
The second reason sits within the first.
Privately owned land, on which the suburban house is set, taps into and expresses deeply-held beliefs about personal freedom that some trace to the ructions of the Industrial Revolution.
Amusingly but well conveyed in the film The Castle, ideas of individual freedom expressed in land ownership were prominent in the founding of South Australia, which gave us the Torrens Title, but were also expressed more generally, and all-too-often violently, in European settlement of the continent.
Individual land titles accommodate a wide variety of dwelling types, from low-density settlements of large villas in spacious grounds to small townhouses settlements that vie with apartments in their cumulative density – some townhouses in Paternoster Row, Pyrmont, are on 40 square metre lots.
An almost visceral attachment to this idea of individual freedom turns many away from apartment living. Strata management is sometimes called “the fourth tier of government”.
Strata regulations are often complex, expensive, individually restrictive and invasive, gamed by unscrupulous developers, and subject to the petty machinations of squabbling neighbours in poorly functioning schemes. This reputation is recognised by the state as a source of popular resistance to higher density apartment development.
However, these beliefs can’t be swept aside at the whim of a planning caprice, which is why the alternative of “missing middle” housing on individual lots warrants greater support, particularly when existing examples are so good.
For example, local councils could do a lot more to explore and encourage this kind of density increase by incentivising individual home-owners to add more dwellings to their land, thereby preserving much of the prevailing neighbourhood character craved by their electors, yet achieving higher dwelling densities sought by state government.
Where is it built?
Following the first rule of real estate, location, what gets built is strongly linked to where it is built.
Two policy features of location warrant further exploration here.
The first concerns how the NSW state government has elected to address the housing crisis.
It seeks to increase dwelling density around almost 40 rail stations – Transit Oriented Developments (TODs) – a well-established urban development practice abroad but applied only sporadically in Australia.
With this initiative the state seeks to discharge two fundamental unavoidable overlapping obligations.
Land markets are much more complex and possess monopoly features, particularly that supply is manipulated to maintain prices despite growing demand
The first is to maximise the benefits of its rail infrastructure spend. Underground stations can cost about half a billion dollars, so maximising their usage is imperative, even for existing above-ground infrastructure.
The second is to increase total dwelling numbers, particularly affordable dwellings; an obligation that virtuously meshes with the first.
Unfortunately, housing debates are often marked by the slipperiness of concepts, data, definitions, and interests.
With this TOD initiative, the urgency of providing more “affordable housing” has morphed into the need for “increased housing density”, within which the affordable element has been reduced to a secondary contested component.
The for-profit development industry is the main beneficiary of this definitional ambiguity. It seems the state has been persuaded to identify more land, grant higher yield and more rapid development approvals as a solution to the affordable housing crisis despite the apparent market failure of the for-profit industry to fulfill growing demand for more affordable housing.
Predictably, community opposition soon emerged, reprising familiar themes – loss of local character; local democracy; good idea but better if somewhere else; future slums; developers getting freebies and riding rough-shod over the locals; traffic chaos; loss of heritage value; all dissolving into the usual “save-our-suburbs” versus “evil developers” vitriol.
Unfortunately for the government, it appears Sydney will not achieve its target of 170,000 new dwellings under this initiative due to the differences between the theoretical and practical maximum dwelling practical densities; those subject to practical real-life constraints.
For profit development affordability bonuses vary between 3 per cent and 15 per cent of total dwellings, whereas close to 100 per cent of NFP dwellings would be affordable
However, in the midst of this there are opportunities for local government to take a more constructive role in actively shaping their communities than paying lip service to the crisis yet resisting solutions.
For example, local government could seize the initiative by identifying in greater detail what could be built where within each TOD and in the process protect built-form qualities the community really cares about.
Better yet, it could even address the housing crisis more effectively and constructively than the state by working with, preferentially incentivising and fast tracking, not-for-profit (NFP) approvals.
If the state is simply not going to achieve the theoretical densities around its TODs, fewer total NFP developments in these areas may allay local density concerns yet would still deliver greater numbers of affordable dwellings.
For profit development affordability bonuses vary between 3 per cent and 15 per cent of total dwellings, whereas close to 100 per cent of NFP dwellings would be affordable, meaning that fewer NFP developments would still achieve equal or greater affordability than the targets the state seeks to impose on the for-profit sector.
Total suburb-wide dwelling increases might still be achieved within existing subdivision patterns, as explored previously.
An aside, are current policy settings based on flawed evidence?
Perhaps the most fundamental feature of current affordability policy is its dependence on economic theory, particularly that the housing crisis can be explained in terms of “supply and demand”.
Expressed crudely, the claim is that because planning regulations limit “laissez faire” development the capacity of housing “supply” to satisfy growing “demand” is impeded; ergo, solve the crisis by removing or diluting planning regulations.
Recent work by Emily Sims and Jesse Hermans, published in Australian Economic Papers, debunks the claim as lacking strong evidentiary basis.
Instead, they observe, land markets are much more complex and possess monopoly features, particularly that supply is manipulated to maintain prices despite growing demand – what a surprise!
If borne out by further analysis, solutions to the housing crisis should focus less on alleged regulatory impedance and more on the conditions surrounding housing supply with a particular focus on imparting greater competition from alternative housing supply sectors, such as by expanding the NFP sector.
Consequences, what consequences?
Now that the federal government has just sweetened the housing affordability offer, it is time to get on with solving the crisis, if only for the negative reason that significant trouble awaits by delaying its resolution.
We have long possessed the knowledge and tools to address the housing crisis within our governance and administrative machinery.
Just like the climate crisis, a striking feature of the housing affordability crisis hitherto is the almost determined lack of interest in the accumulating evidence and well-understood workable solutions.
City-wide residential rents have increased 50 per cent since the lows of the COVID lockdowns. Meanwhile, an eastern suburb family spent $11.6 million on a knock-down-rebuild.
Why do policy makers continue to pursue unworkable solutions like the use of superannuation funds; not recognise the evidence of monopoly practices undergirding the supply and absorption conditions that contribute to the current crisis; not turbocharge the not-for-profit sector to build affordable homes; not redirect some $27 billion of tax benefits and subsidies to the construction of social housing; not incentivise individual property owners to increase dwelling density on their own lots; waste treasure and inner-city land on vanity road projects; not address the so-called cost of living crisis by seeking to limit the largest contributor – housing costs – through rental and related controls; allow any more social housing to be sold off (UK example)? The list goes on and on.
The climate crisis is the most dangerous one we face, simply because our species’ failure to manage it will eventually expose us all of us to the implacable existential indifference of a fundamentally hostile universe.
However, the housing affordability crisis is perhaps the more insidious because it directly pits us against our better and future selves.
We should remember that demography is destiny.
Housing costs disproportionately affect the young and lower paid, on whose efforts the older and wealthier will increasingly depend upon in their retirement, yet we continue to accelerate the relative impoverishment of our youth and lower paid.
Almost daily they read anguished reports of their colleagues’ personal hardship and indignant reflections on the policy landscape alongside news of the wealthy purchasing multimillion dollars homes, many for the purpose of generating ever increasing rental income.
City-wide residential rents have increased 50 per cent since the lows of the COVID lockdowns. Meanwhile, an eastern suburb family spent $11.6 million on a knock-down-rebuild.
The heart-rending story of a reporter’s neighbour in Kings Cross preferring suicide to homelessness in the face of gentrification should anger us all, yet the reasons are not isolated. A nearby complex of 80 small but “affordable” apartments is set to be redeveloped into 31 luxury apartments.
As if to rub salt in the affordability wound, transformation of the Sirius building in The Rocks is nearing completion, from proud symbol of Aussie egalitarianism into deplorable icon of “stuff-you” social-fracture.
These juxtapositions are more than insulting; they are profoundly divisive and will over time be expressed in deeper, more unpredictable social and political rifts.
As a result, confidence in our representational government, as a defender of basic human rights and a “fair go”, is slowly declining.
There are few examples in our political history of profound policy failure generating social and economic turmoil, so we are lulled into complacency – endless sunny days.
We should not be so smug
The experience of other nations illustrates what can happen when social fractures steadily worsen.
America’s persistent inattention to growing inequality heralded its self-destructive descent into partisan conflict that could yet shatter the nation and its world standing.
That end point is well illustrated by Russia, whose GDP roughly equals Australia’s. Now led by a spectacularly deluded cabal of liars, thieves, and murderers Russia rapidly collapsed from the democratic and economic turmoil of the 2000s into an increasingly dangerous durable and bizarre medieval/fascist throw-back with a “love-us-or-we’ll-kill-you” foreign policy.
We should take note.
