Beware the housing elites

If there is one thing in this world that drives me crazy, it is social engineering based on ideology rather than an objective examination of facts.

A classic example was on display in two related articles recently published in the mainstream media. Both articles relate to recent work undertaken by Dr Robert Crawford, an academic in the Faculty of Architecture, Building and Planning at The University of Melbourne.

Dr Crawford laments the so-called proliferation of ‘McMansions’ in the outer-suburbs of Australia, and is pressing the Government to take action to ensure that new homes are built smaller and closer to the Central Business Districts (CBD) of Australia’s capital cities.

Here’s an extract of what Dr Crawford had to say on Friday at news.com.au:

PEOPLE who want to build energy-guzzling McMansion-style homes should pay more taxes, an academic says.

And taxes should also be used to make owning multiple plasma TVs prohibitive, says Melbourne University construction expert Dr Robert Crawford.

Rapidly increasing suburban house sizes, more reliance on cars and a rise in demand for consumer goods had wiped out many of the benefits of building energy-efficient homes, he said yesterday.

“The most dominant characteristic of the new houses in these estates is their size … new residences are well over 200sq m, more than double the average of the 1950s,” he said.

Releasing a faculty of architecture, building and planning study on the impact of housing on greenhouse emissions, Dr Crawford said one option was to penalise those who built big houses.

“Indirectly through the price of materials and things like that, if you make it more expensive in some way to build larger houses then that might encourage people not to do it,” he told the Herald Sun.

“Once you get towards a certain level, things become more expensive or you pay higher taxes or something like that.”

Not happy to only attack the size of new homes, Dr Crawford also takes aim at homes located on the urban fringe. From Fairfax yesterday:

While there is evidence to show that smaller, more energy efficient houses can help to considerably reduce housing-related energy demand and emissions, the location of this housing can be a key factor in achieving the most substantial energy and emission savings.

Poor transport planning means that many of our cities’ outer suburban areas lack an adequate and reliable public transport network. People rely heavily on private car transport to get to work and school, travelling further distances than ever before. This form of transport is at least half as energy efficient as train travel…

Transport-related energy demand and emissions of new outer-suburban housing now represents the greatest share of a household’s total energy demand and emissions. This is a result of increasing travel distances and reliance on private transport and a steady decline in energy and emissions associated with household heating and cooling due to increasing building envelope efficiency standards…

More people living closer to work and existing transport networks would avoid the heavy reliance on private transport and this translates to a need for significant investment in new transport infrastructure… Inner-city or inner-suburban households may consume up to 70 per cent less energy than the average household on the fringe of our major cities.

Leaving aside Dr Crawford’s call for greater infrastructure investment, which I broadly agree with, lets focus on his other claims, in particular: that Australian homes are too big and are located too far from the centre of Australia’s cities. As such, outer suburban households are consuming too much energy and are creating excessive waste and pollution.

And Dr Crawford’s solution: let’s tax these greedy households out of existence… That’s right, we should make Australian housing – already amongst the least affordable in the world – even less affordable.

The key problem with Dr Crawford’s critique of outer suburban living is that it does not match the data of the Australian Conservation Foundation’s (ACF) Consumption Atlas, which found inner city residences to be the most polluting and the outer suburban areas least polluting. Here’s an extract of the ACF’s main findings in relation to urbanisation [my emphasis]:

Inner cities are consumption hotspots

Urban living patterns offer many opportunities for efficiency and reduced environmental impacts, compared to more dispersed populations. For example, access to public transport, as well as shops and facilities within walking distance, help make inner city dwellers less car dependant.

Further, the prevalence of more compact housing such as apartments in urban centres could lead to lower per person electricity and heating costs.

Yet despite the lower environmental impacts associated with less car use, inner city households outstrip the rest of Australia in every other category of consumption. Even in the area of housing, the opportunities for relatively efficient, compact living appear to be overwhelmed by the energy and water demands of modern urban living, such as air conditioning, spa baths, down lighting and luxury electronics and appliances, as well as by a higher proportion of individuals living alone or in small households.

In each state and territory, the centre of the capital city is the area with the highest environmental impacts, followed by the inner suburban areas. Rural and regional areas tend to have noticeably lower levels of consumption.

These trends in are closely correlated with wealth. Higher incomes in the inner cities are associated with higher levels of consumption across the board.

So according to the ACF, it isn’t the wasteful ‘McMansion’ dwellers on the fringes of Australia’s cities that are causing the most environmental damage, but the inner city elites. Yet I don’t hear Dr Crawford lambasting their behaviour or calling for greater taxes on them. The owners of pre-existing mansions in Toorak or Point Piper are free to carry-on in their profligate ways.

Another factor that Dr Crawford doesn’t mention is that government policy has encouraged the proliferation of larger sized dwellings. For starters, limited new land supply (the result of artificially imposed growth boundaries), compounded by new and exorbitant levies on new housing (the combination of which can exceed $100,000 per dwelling), and high compliance costs created by complex and uncertain planning regulations, have combined to significantly increase the price of fringe land, whilst reducing its size (see below UDIA chart).

With the land component now comprising 50% to 70% of the total cost of new houses, compared to around 30% in the 1970s, many buyers are incentivised to ‘upsize’ into larger models. After all, what’s an extra $30,000 for a few extra rooms when the total cost of a modest home already exceeds $350,000?

Then there are the state governments’ punitive stamp duties – which can cost up to half a year’s salary – which encourage home buyers to buy big now in order to avoid having to upgrade later and paying the tax again in the future.

There are also the perverse outcomes caused by the urban growth constraints themselves. For instance, the building of large houses on tiny blocks, with narrow footpaths and roads (because of the excessive land prices), allows little room  to plant trees or veggie gardens. It also means that homes are so close together that many do not contain roof eves or verandas and have poor air flow, thereby requiring greater air conditioning in the summer. The lack of backyards and open space also encourages children to remain inside playing video games and watching TV, which of course uses more energy.

Finally, as shown previously, there is the inconvenient fact that urban growth constraints force lower income households to ‘leapfrog’ the growth boundaries into far-flung ex-urban towns in the search of more affordable housing. Such behaviour contravenes the intent of the growth constraints by actually increasing ‘sprawl’, travel times and energy use.

Perhaps the most sad part of Mr Crawford’s critique is this part, in which he appears to denigrate the younger generations for being greedy:

One of the most critical challenges in the push for environmentally sustainable cities will be lowering expectations to a more realistic level, particularly with younger generations.

Apparently it’s okay for empty nesters to occupy family homes with large backyards in quiet neighbourhoods, but not okay for younger families to expect the same. Pot meet kettle…

Please don’t misinterpret this post as an attack by me on inner-city or apartment living. It’s not.

Rather, it’s a deconstruction of the assumptions of housing elites who denigrate other people’s way of life and try to force their ideals onto others.

Cheers Leith

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Unconventional Economist
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Comments

  1. Not bad for a public servant derivative, credentialist statist whose major claim to a portion of his income is the government run student loan ponzi scheme.

  2. “try to force their ideals onto others through ill-conceived policies, including punitive taxation arrangements”

    You mean the carbon tax?

    • Hi 3d1k, maybe he’s thinking how to construct his utopian metropolis with discarded shipping containers aka “the kennels.”

  3. PurityOfEssence

    He reminds me of a friend of mine who considers himself intellectual by rights of taking part in academia. This automatically validates his theory that Aliens visited our cave dwelling ancestors, and helped develop early civilization.

    You can interpret the “evidence” that way, but come on…

  4. If there is one thing the suburbs of Australia lacks, it is choice in the kind of dwellings that are offered to the market. Town planning has become a means of imposing uniformity when what we need is diversity – diversity of lot-size, dwelling types and population densities.

    It is also pertinent to recall why cities succeed – why they are the habitat of choice for most people. That is because cities are efficient environments: they provide least-cost life-opportunities for housing, work, education, health-care, recreation, social connection, personal freedom and mobility.

    Instead of trying to think of ways to tax people into submission, the professor should devote himself to trying to create cities that function more efficiently, offer more choices to their inhabitants, reduce costs and improve the substance of daily life.

  5. Never mind discussions about size. As someone looking for a house I am appalled at the generally poor quality of Australian housing stock.
    Houses are not sited on blocks with any regard to prevailing breezes, the afternoon summer sun, the position of the winter sun. Houses are typically poorly insulated, glazing is poor quality, external doors have gaps top, bottom and sides, the recent trend to black roofs and no eaves in Perth, is laughable. And yet people are complaining about their heating and cooling bills?….the good professor and other architects should be doing more to promote sensible design in Australian homes.

    • Very true, simply building new homes with the long axis aligned E-W would cut air conditioning costs.

      • Unfortunately 90% of Australian housing has no input from Architects or other design professionals, which I think is a large part of the problem from a sustainability point of view.
        I actually was looking a plan from one of, if not the biggest home & apartement builders/developers yesterday and it was so BIG and so CHEAP but without the most basic understanding of the passive design principles mentioned above. Frankly it made me shudder.

        • And even when it is, they may not understand the climate implications. My mum lives in a house apparently designed by a decent Sydney architect (for the previous owner). It’s sited on the edge of Waterloo bay in Brisbane. 2 story house, with all bedrooms upstairs and NO ceiling insulation when they bought it. It was a very stifling plice in the summer. Gorgeous views though.
          They have since insulated the roof and installed shading so that the north facing kitchen is usable in the summer months.
          They bought for the location, not the design

    • Russell
      If you thought the houses in |Perth were poor quality, you should try the newer apartments in Sydney! In addition to issues around eaves, aspect, insulation etc, the use of private certifiers and the complete absence of any oversight by local Councils means that most newer buildings do not comply with either the Building Codes (which are bare minimum) or the relevant Standards. Of course no one notices this until after the apartments are sold.
      Toni

      • Interesting, thanks Toni,
        We keep hearing that one of the reasons there is no housing bubble or danger of a fall in prices is because of the high quality of Australian housing stock….frankly I don’t believe it.

  6. I’m glad you brought this up. Dr Crawford objects to the large size of houses in new estates, however he doesn’t seem to be objecting to the large size of houses in established wealthy suburbs. I don’t see him complaining that houses in Toorak should be smaller and more energy efficient. In other words, all the focus of criticism is on ‘McMansions’, while normal mansions are apparently above criticism (regardless of their environmental credentials).

    It seems to me that this backlash against ‘McMansions’ for their alleged environmental vandalism is more about scorning middle and working classes who dare to think that they might be able to own something that was once the preserve of the very rich, ie a big house. If plumbers and nurses suddenly decide they can afford a 300sqm house, rather than say “whatever” or be pleased with economic development, the term ‘McMansion’ is bandied about, in an attempt to shame the middle classes into purchasing something more in line with their station.

  7. The Prof. Crawford comments and conclusions reflect the decline in status of Melbourne University, in my opinion.

    And the education bubble or ‘ponzi’ scheme is another disaster on the radar.

    Leith, are the (notional) debts of HECS and now VET fee help, on the national ballance sheet? Because at just under $45,000 income before any repayment begins, these loans are gifts.

    • “Because at just under $45,000 income before any repayment begins, these loans are gifts.”

      How do you figure?

  8. With enough outright disinformation (you know these guys don’t care about the facts) the public will become confused and not know what to believe. The planners will get their forced urban intensification in the end.

    And maybe it is all based on the facts – just not the facts we are supposed to know about.

  9. As the ACF points out (in the quote above) energy use is correlated with wealth, so lets just tax the energy (rather than tax McMansion owners) and compensate low income earners. Oh wait…

    FWIW, I don’t think “urban growth constraints” are entirely to blame for all of this. If Melbourne was allowed to expand out to Ballarat I dare say we’d have the same-sized houses on bigger blocks, the commutes would be much longer, and transport infrastructure stretched more thinly.

    Yes there’s been poor planning, but removing growth constraints is no panacea. You’d just end up with more sprawl, like Leith’s beloved Dallas.

    Now if you happen to believe that oil will become fantastically expensive in coming years, sprawl is probably not such a good idea, especially when there’s no alternative transport.

    One of my favourite quotes:

    “Suburbia is the greatest misallocation of resources in the history of the world”
    — James Howard Kunstler

    Naturally I say all this from the comfort of my energy-guzzling inner city terrace, over a latte just produced from my designer imported coffee machine.

    • “Now if you happen to believe that oil will become fantastically expensive in coming years, sprawl is probably not such a good idea, especially when there’s no alternative transport.”

      Exactly. Oil was pretty much stable at $20-40 (in today’s prices) a barrel for the entirety of the 20th century. Even the oil crisis of the 70s never saw oil above $100 a barrel.

      That suburban living system works really well at $40 a barrel oil, but it isn’t going to function very well if you expect oil to be $200+ a barrel in the future.

  10. Good article Leith.

    Another aspect is the sort of economy we are creating. So he wants more and more of us close to the city centres. Presumably this is because we want an economy in which no one actually produces anything but we all work as solicitors, accountants, Government employees, coffee shop owners and waitresses.
    It’s a symptom of everything that is wrong.
    What would be wrong with having factories that produced things and aren’t in the centre of cities? Such factories are more scattered in the outlying suburbs. I won’t start on again about regional areas 🙂

    The stupid theory at the moment is we don’t have to produce anything. We just import everything and continue our programne of national asset sales and foreign borrowing!

    • elite consumers

      “stupid theory at the moment is we don’t have to produce anything” – kind of like an elite class of zombie consumers.

      Others can do ‘the work’, we will just borrow and spend. How much longer for I wonder.

    • 2 Things.

      1. A really great article – and some great replies.
      2. I really like the way you think flawse.

  11. well, Leith, I have really liked your blogs on the housing bubble up until now, but this blog completely misses the point, and your half-baked analysis of inner-city energy consumption compared to McMansion energy consumption – you are comparing lifestyles of income groups, not the houses per se, so you are way off the mark on that one. McMansion mentality needs to go and is a blight on society. Please stick with what you know and understand.

      • I made a few suggestions above Leith, but you ignored it. I’ll repost here…

        As the ACF points out (in the quote above) energy use is correlated with wealth, so lets just tax the energy (rather than tax McMansion owners) and compensate low income earners. Oh wait…

        FWIW, I don’t think “urban growth constraints” are entirely to blame for all of this. If Melbourne was allowed to expand out to Ballarat I dare say we’d have the same-sized houses on bigger blocks, the commutes would be much longer, and transport infrastructure stretched more thinly.

        Yes there’s been poor planning, but removing growth constraints is no panacea. You’d just end up with more sprawl, like Leith’s beloved Dallas.

        IMO, the real problem is all these extra people we keep importing to maintain the illusion of economic growth. We might need more people (temporarily) in the Pilbara or Karratha, but why do we need so many people in Melbourne?! To prop up house prices?

        • Alex Heyworth

          Some people (eg Bernard Salt) would say we need immigration to avoid the dependency ratio getting out of hand. But it is a choice, we can have lower immigration, a higher dependency ratio and the higher tax rates that go with it.

          • Having greater immigration rates to stop the dependency ratio getting out of hand just delays the problem until the immigrants themselves get old. The only long term solutions to reducing the dependency ratio is to have people die at a younger age or have an exponentially growing population forever. Since both of those strategies are not really a good idea people and governments need to adapt to having higher dependency ratios which really should not be a problem with all of the improvements in productivity which have supposedly been happening.

          • Jarrod, you say

            “The only long term solutions to reducing the dependency ratio is to have people die at a younger age or have an exponentially growing population forever.”

            Erhh no. The upper end of the dependency ratio isn’t a natural law, it is a prescriptive law.

            They are only dependent because we allow people to cease work, and offer them income support.

            When first devised in the late 19th century, only 2% of the population comprised the elder end of the dependcy ratio due to life epxectency.

            With increased life expectency, but little recalibration of the retirement age then the uper end boosted.

            If we lowered the retirement age to 40, then the ‘upper end’ of the depenecy ratio would be excessivley high.

            However the example is the same issue that we face now with the retirement age of 65 (and 67), incorrect calibration.

          • Good point Rusty, I was thinking of a fixed retirement age when I wrote that. I am in support of increasing the retirement age as that should help.

    • I don’t really care either way … but it IS easy to criticise, Sue, and much harder to actually construct a valid, robust arguement.

      Over to you!

  12. Growing up as a teen on the sunshine coast in the 90’s I vaguely remember talk of greenies wanting to somehow cap growth around Noosa.

    My Father used to comment on the topic asking “whats the definition of a greeny?” – Someone who has already built their house!

  13. rational investor

    Tonydd, good question, with JGs plans two have 45 percent of 25 to 35 year olds with a bachelor, this is a pressing issue.. I see a lot of bachelors of McDonald’s and supermarket checkouts in the future.. the initial hecs threshold is now over 47k now too, could be quite a large amount of debt building up there.

    • $47k per annum is only $22.50 per hour on a full time wage. Mean income i believe is somewhere in the $65k p.a. range, i don’t think we’re in danger of tanking the national balance sheet on uni courses.

      Heaven forbid we educate our young people rather than just flog rocks to china.

      • rational investor

        Fair point d, I’m not too sure what the mean income is. I do know however in the last two years since I looked at the hecs brackets theyve jumped about 8k each bracket, when I realised that I was a little worried about inflation.
        My real point is that there is a real trade shortage, many young people are doing arts degrees, or similar, possibly with the lofty ambitions of one day being a public servant. This in my view is not a productive use of debt. Were not allocating that debt in educating enough productive professions like engineers or similar.

  14. rational investor

    Not to mention in an aging society convincing 45 percent to hold off a few years from contributing to society, what a great idea…

    • yes – put them to work in the mines as soon as they can carry a pick so they can support the baby boomers retirement !!

  15. I can speak from experience on this one as I live in one of the good Doctor’s ideal developments. Close to city (20 mins drive from Sydney CBD), good public transport, high density. There’s a few problems though:

    1) Nearly everyone drives, despite having ferries and buses to get you to most places
    2) The buildings themselves have lights and lifts running 24/7 in foyers, hallways and carparks
    3) Energy efficiency is ordinary, so in summer you need aircon and in winter you need the heater.
    4) A lack of balcony space means drying of clothes must be done with a tumble dryer

    The lack of efficiency is staggering. I’ve tried to do my bit by swapping out all the 12v halogen down lights to LED’s and bus or ferry my way to work, but my wife still has to drive to work, and our electricity consumption is still uncomfortably high. So much for wasteful McMansions……

  16. Leith,

    I happen to be pretty familiar with Crawford’s work (I references him heavily in my Masters thesis http://eprints.qut.edu.au/27655/1/Cameron_Murray_Thesis.pdf)

    His argument that residents of large outer suburb homes consume more energy FOR A GIVEN HOUSEHOLD INCOME LEVEL is valid. If you moved, on average, the same household from a large outer suburb house to an inner suburb attached dwelling, they would consume less energy (much of saved from commuting).

    The ACF consumption atlas does not contain rigorous statistical analysis. And the property industry has perpetuated the ‘low energy outer suburbs’ myth –
    http://ckmurray.blogspot.com/2009/10/lobbyists-if-they-are-always-wrong-why.html

    The unfortunate conclusion from the data is that the best way to reduce energy consumption (if you believe that is a good thing) is to be poorer. Work less, produce less, earn less and spend less.

    But we avoid this striking conclusion and focus on the second best, which is to reduce energy consumption for your given income level.

    His prescriptions seem sound. Plan for less sprawl, improve efficient public transport provision, and promote energy efficient building design. Pretty much every city in Europe follows these principles, in particular many of the cities voted the world’s most liveable.

    • “in particular many of the cities voted the world’s most liveable.”

      LOL

      There are a million of these surveys, funnily enough with criteria commissioned by cities looking to pursue a political agenda.

      Melbourne gets in the top 3 according to one survey year after year, the Age sure lets us know, yet subscribes to few, if any of the propositions of less sprawl, increased public transport efficiency or improved energy building design (not that I am denouncing the latter 2).

      I would say the bellweather of a liveable/sucessful city is what draws people to that city, the type of people, the existing opportunities and the outlook for future opportunities.

      Now most Australian capital cities draws in speculators. We incentivise them with absurd supply restraints as it allows opportunities to price gauge.

      I would fathom that with a carte blanche removal of supply restraints we would have no increase in demand, perhaps a decrease in demand because there would be no speculators to compete with.

      Also, what tends to be the areas of our capital cities serviced best by public transport and culturally the most vibrant tend to be the inner city areas, areas built up during an time of few, or even no planning restrictions.

      • Great comment RP. Many commentors denigrate Texas for its sprawl, yet guess which state attracts the largest amount of internal migration in the USA… Texas. It is also creating the most jobs. Like it or not, Americans are voting with their feet and chosing to live in Texas over the over-regulated and expensive coastal states.

  17. Cameron
    Perhaps ALL the energy consumed by a close-in household is total waste in that they produce nothing. In fact many of us would argue that their contribution to production is negative.
    Maybe many who live further out do actually have productive work so the energy they consume can at loeast be offset by their productive contribution.

    Further, again, aren’t you presuming that everyone, no matter where they live, is bound to be travelling to the inner city.

    One last comment from my observation of dwellings closer in, as Delraiser said, they are mostly badly designed for the environment demanding constant air conditioning and heating. This is not a factor of household wealth. It goes with the territory of living in this environment. Houses furhter out tend to have eaves, windows that can open etc.
    I don’t think anyone is arguing against better designs of both houses and cities as such. However before we do that we ought redesign the economy so that we are productive and aren’t on a road to nowhere needing to borrow more and more foreign money.

    • flawse,

      There are no assumptions about where people work in the data or their behaviour.

      The estimate of energy use works essentially as follows.

      Data on national energy inputs is ‘matched’ using an input-output table methodology to final products. Some background here http://en.wikipedia.org/wiki/Input-output_model and the guys who actually do the analysis are here http://www.isa.org.usyd.edu.au/research/lca.shtml

      The energy embodied in final products is then matched to household expenditure patterns in the ABS HES-SIH survey, to estimate the energy embodied in the goods consumed by different households.

      It is real data on the actual spending patterns of people in Australia, and the associated energy consumption. It does not assume residents in outer suburbs commute to the CBD regularly. In fact the data only knows how much people spend on fuel and transport, and how much energy is embodied in a $1 of petrol/bus ticket etc on average, and where people live. It just so happens that residents in outer suburbs spend proportionally more on these high energy items.

      I’m not sure what you mean by inner city household producing nothing (perhaps that they are bureaucrats, academics etc). If that is the case it is even better for reducing energy – since, as I said, the best way to reduce overall energy consumption is to produce less.

      Remember, it doesn’t matter how the income was earned in this model. The energy use from productive activities (eg working on an oil rig) is attributed to the people who actually consume the oil in the products they buy.

    • Oh, I think Crawford might be a little bit extreme when he suggests taxing mcmansions etc so that people don’t buy multiple plasma tvs. Wouldn’t a carbon tax provide incentive for anyone living in any home, at any income level, to be more energy efficient?

      • Exactly. Direct pricing will always work better than indirect regulations aimed at only one segment of the population.

        Dr Crawford’s article reeks of elitism. He has focussed on outer suburbanites and ignored the more wasteful majority that live in pre-existing areas. He also conveniently ignores the role played by continuous population growth.

        • it could also be that his ideas are valid for a given income range paradigm, but what is the distribution?

          I would be more interested in energy use per unit time per unit house area figures (in engineering, this is called “Flux”, and the notion is analogous valid here, IMHO).

          Hence, it’s nice, in a sense, to have constructed valid arguments based on income brackets, but I question have relevant the income bracket-geographical paradigm is to the real world – partly since the extrapolation of its conclusions beyond the immediate (IMHO, small) sphere of intent seem to yield fairly ridiculous conclusions, IMO.

          I would have thought that income brackets as a parameter is far less real-world accurate, relevant and “extrapolation worthy”, than, say, a parameter such as energy use per person per geography.

          That way, you get the house-type parameter incorporated implicitly via geographical consideration (as house type is strongly correlated with geography) without axiomatically forcing the frame of reference to income bracket, which is much more weakly correlated with geography than house type (IMO).

          Anyhow, i see Leith’s analysis as more valid than the academic’s – even if Leith’s has some deficiencies – as he has, IMO, a better set of real-world parameters, which are more strongly/validly correlated with actual outcomes when extrapolated from the axioms.

          Anyhow…my 2c

  18. Hi Leith,

    Good article.

    It sounds like Dr Crawford has a bad case of “the creeping police state syndrome”. Legislate against everything eventually.

    If we had efficient city transport it would make things a whole lot better. The Labour government want a big Australia by stealth so how’s that going to happen without infrastructure?

    The building standards here are so far behind Europe/US it’s not funny. Our houses leak excessively, and you can install double glazing at high cost for little effect if you don’t cover all the other aspects of energy efficient design. That is another topic however.

  19. Often, people choose a large new house in an outer suburb over a small run down house or flat in an inner suburb because they see them as better value for money. They are the better of available options for many. There are 2 previously undiscussed forces at work that make these “macmansions” the best of a limited range of options:
    1 the mass home builders do not supply many homes under 200sqm of floor area. This seems odd, as you can easily get a great 3 bedroom house in less than 150sqm with good design. Now it’s Not that burbank homes et al are too stupid to hire good designers and design smaller homes. And there are many publicly available small home designs out there – architects have been providing affordable solutions for a long time – from Robin Boyd designs for the “Age Small Homes Service”, designs published in the Age every week in the 50s to the 2005 vicurban affordable small (project) house competition which attracted more than 100 designers. I think the problem is geometric. A 300sqm home is much cheaper to build – per square metre of floor area – than a 100 sqm home, as it has a much smaller proportion of (expensive) perimeter wall. You get roughly 2x as much floor area per sqm of perimeter wall in the 300sqm home. It doesn’t make much difference whether the home is 1 or more storeys (assuming similar simple shapes or both floor plans). So the developers can offer better value for money, and make more money from larger homes. Long term, a way around this perhaps is innovation in cost effective construction materials and systems, to bring down costs to a level where this economy if scale is not such a big deal.
    2 a lot has been said about the urban growth boundary, and the damaging speculation occurring at the boundary, and the restriction of supply it creates. What seems to not get a mention is the effective VERTICAL urban growth boundary occurring across our existing suburbs. Under Rescode (melbourne) most properties have a maximum 9m height limit. This is barely enough to build 3 (minimum ceiling height) storeys. (Incidentally under the good design guide – rescode’s predecessor – the default limit was 10m – imagine the furore if the UGB was reduced by 10%). And in most cases, council planning restrict height to 1 storey where visible from the street in order to “maintain streetscape”. I see this as preserving the appearance of the past at the expense of the future. Dwellings have “natural” height limits – defined by the site geometry, social responsibility to neighbours (probably requires codes), the economics of stairs vs lifts, and so on. Proscriptive building envelopes stifle innovation and also create damaging speculation (eg around suburb centres when a new council strategic plan is in the offing), and are an enormous restriction on supply, perhaps larger than the horizontal limits.

    • Spot on. Perhaps another reason why developers build larger homes is the fact that land blocks have become so expensive (due to supply constraints), so It is much harder to sell a modest sized home for $350k than a larger home for $380k. People feel like they are getting far better value for money with the latter.

      And the prescriptive height limits and NIMBYism in the inner areas is also significantly restricting supply and driving up prices. In fact, the Vic Government is now looking to put in place a 40 storey limit on all new buildings in and around the CBD – a retrograde step in my view.

  20. I have to disagree at least with the first part.

    The problem is this article compares people and their spending/living habits and expectations to the efficiency of smaller vs larger houses and transportation.

    Of course wealthier/more spoil people will use air conditioning more, buy more expensive electronics, etc.

    This however has nothing to do with the fact that it is much more efficient (especially in terms of transportation) to live in denser housing (at least townhouses), closer to work and school than on city outskirts.

    Of course there is a host of other problems that occur with poorly planned cities like Sydney, which are mentioned in the article such as poor airflow in some dense areas requiring air conditioning, the lack of park space, the lack of vegetation, etc.

    However fundamentally, the study is correct to say that people should live in denser housing closer to where they work and study, as it is more energy efficient.

    There are other factors and they need to be addresses as well, but it’s incorrect to mix everything into one pool and make the conclusion that it’s more energy efficient to live in suburban fringes.

    • When did I make the conclusion that it is more energy efficient to live on the suburban fringe? I merely noted that Dr Crawford’s elitist attack on suburban McMansion dwellers is way off mark, particularly given that they are in fact emitting less GHGs than their inner suburban counterparts. I also noted that Government policies are contributing to the problem.

  21. If you are going to have suburban living that relies heavily on urban areas for education/workplace/services our oil problem needs to be addressed urgently.

    The Jamison Report released by the NRMA in 2008 gives an insight into our current predicament.

    http://www.mynrma.com.au/about/jamison-report.htm

    Also a high quality broadband network that lets more people work and shop from home may reduce overall energy and liquid fuel use, and allow people to live further from urban centres.

  22. Ugh, people like this make my blood boil. Elitist nonsense and the belief that they are somehow superior to the rest of us, simply because they have a PHD.

  23. …and you get each sqm floor area of a 300 sqm house with around 80% of the surface area needed per sqm floor area of a 100 sqm house. Commune, anyone?

  24. Alex Heyworth

    Crawford seems upset that houses now are twice the size they were in the 1950’s. I don’t think anyone in the 1950’s was complaining about house sizes being twice the size they were in the 1890’s. Heck, even in the 1910’s there was a huge tent city in La Perouse. Anybody visited Blundell’s Cottage, on the foreshores of Lake Burley Griffin, near the Carillon? Imagine bringing up six children in a two room cottage, each room about 4 square metres, with 1.2 metre ceilings. In Canberra winters!

    It’s called progress. Sure, we could all have plenty of living space without the need for Mcmansions, but we haven’t seen the alternatives being built. Crawford and his ilk are as much to blame for that as anyone else. NIMBYism in inner city areas, supported by inner city elites, is one of the main culprits.

  25. In light of the robust discussion regarding academic opinions on Australian real estate, I just received the following links as part of the UNSW Australian School of Business – Knowledge at ASB Series.

    Home Ownership: How to make it a reality for Generation Next
    http://knowledge.asb.unsw.edu.au/article.cfm?articleid=1418

    Measuring Up: What’s the right way to gauge housing prices?
    http://knowledge.asb.unsw.edu.au/article.cfm?articleid=1419

    I still much prefer reading the content here on macrobusiness.com

  26. One thing everyone is missing here. Urban land values tend to slope upwards from fringe to core. Hence the “sorting” of income levels by location.
    Urban growth constraints and prescriptive planning forces up the prices of all land. Besides “swamping” the price signal for house size (as Leith usefully points out) inflated urban land prices swamp the “transport costs” signal as well.
    Anthony Downs discusses this very thoroughly in his seminal book “Still Stuck in Traffic”. He points out that the higher the median house price goes in a city, the MORE rational it is to drive further and further to save money, because the money saved on land prices (mortgage) is less than the extra cost of transport.
    If you really want people to locate closer to work, you need to force urban land prices DOWN, not up.
    The studies of Paul Cheshire and various co-authors from the London School of Economics, point out that after 50 years of heavy handed anti-sprawl planning in Britain, the cost of urban land is so high that the “sorting by income” effect is worse for inequality than the initial income disparities. Lower income earners are getting smaller and smaller homes further and further away from anywhere, in worse and worse neighbourhoods; while the higher income earners retain relatively reasonable size homes in efficient locations, for which they pay a higher and higher cost, but which only they can afford, granting them more and more neighbourhood exclusivity.
    It is odd indeed that “left wing” economists seem to overwhelmingly favour this situation.

    • “One thing everyone is missing here. Urban land values tend to slope upwards from fringe to core. Hence the “sorting” of income levels by location.”

      Well that’s a recent phenomenom.

      Up until the 60’s/70’s the poor were relegated to the inner city. Think areas such as newtown, Surry Hills and Pyrmont. 100+ year old rented housing for the most part. 1980’s gentrification saw this reversal.

      Since the advent of urban rail systems and later major raods, and the freeways, until this reversal in the 1980’s, the aspirational tended to consider the suburbs a lofty goal to pursue.

      • True. It IS a recent phenomenon. The poor were relegated to the inner city, in WHAT living conditions? This represented a last hold-over from the Victorian era. The evolution of urban areas has been long and slow.
        The trend to suburbanisation was actually driven in the first instance by public health concerns. The initial phases of sprawl based on rails and horse drawn public transport (and bicycles), were actually a major portion of the total sprawl occurring during the evolution of the modern city. The amounts of sprawl that occur today are tiny by comparison.
        Rail based sprawl was “ribbon” sprawl, inefficient, and easily able to be captured by rent-seeking property owning interests.
        Cars and roads enabled major efficiency gains through “infill” sprawl between the “spokes” of the rail infrastructure. The rapid development generally pursued after world war 2 in most countries, for the first time ever broke the stranglehold that rent-seeking property interests had had over the population; land ownership was democratised as never before.
        Karl Marx and Henry George were proved wrong by MOBILITY and “freedom to build”, not exactly by “free markets” per se. The poor DID indeed get poorer, where urban areas were constrained by the distance a man could walk to work, and all property could be owned by a few. Income increases simply capitalised into land rents and accomodation expenses.
        Ten times the proportion of the population today own a car, as what once owned horses.
        There is a lamentable lack out there of good solid analysis of all this. I have pieced all this together from reading Colin Clark, Robin Best, Jane Jacobs, Robert Bruegmann, Fred Foldvary, and Jesse Ausubel; among others.

        • “True. It IS a recent phenomenon. The poor were relegated to the inner city, in WHAT living conditions? This represented a last hold-over from the Victorian era. The evolution of urban areas has been long and slow.”

          This is an economics issue related to income distribtion, moreso than town planning.

          “Rail based sprawl was “ribbon” sprawl, inefficient, and easily able to be captured by rent-seeking property owning interests.”

          I would foresee that ‘ribbon’ spawl was a by-product of original rail.

          These ‘ribbons’ tended to be the original railways, inter-urban transport moving produce long distances. it was easy to append a city railway station to already existing infrastructure.

          Very few rails have been designed purely for mass transit, but the ones that have such as various lopp lines in the tube, the entire paris metro and singapores system are great, specifically designed for mass transit.

          • Yes, but we can’t expect to replicate those cities “success” with rail transit. We are half a century and more further down the track of urban evolution now.

            Back to THIS point:

            “This is an economics issue related to income distribtion, more so than town planning….”

            You completely fail to grasp the effect of small urban footprint with most land ownership captured by a small number of people. Of all the various political methods by which land and home ownership has been “democratised”, I will run with free market “sprawl” any day. Do you prefer the Vladimir Lenin method?

          • “Yes, but we can’t expect to replicate those cities “success” with rail transit. We are half a century and more further down the track of urban evolution now.”

            Sydney was very successfuly serviced by its railway up to the 1960’s. Only the extension out to Bondi Junction, and the extension from East Hills to Glenfield has been added since, if my memory serves me correctly.

            The lines to Penrith, Hornsby, Campbelltown and Wollongong were built in the 19th century. The Bankstown loop line I believe was linked to Lidcombe in the interwar period. The city circle loop was built in the 30’s. This serves a vast majority of Sydney and is irreplacable.

            All of this has been well ahead of Singapore, which probably only had Singapura Sentral, a line feeding to the Malay Penisula.

            I don’t believe this ‘urban development’ argument is a strong one.

            Now,

            “You completely fail to grasp the effect of small urban footprint with most land ownership captured by a small number of people.”

            I am currently reading an Andrew Carnegie biography, I have contemporary memory on railway robber barons at this point in time. However you’ve now moved the goalposts in terms of context. You were decrying the living standards on the poor in Victorian times and are now somehow relating this to railways rather than income distribution.

            I know what rent seeking behaviour can do, but the less disparity there is in regards to income distribution, the more empowered poor people are to overcome such rent-seeking behaviour.

            “Of all the various political methods by which land and home ownership has been “democratised”, I will run with free market “sprawl” any day. Do you prefer the Vladimir Lenin method?”

            You put me in a false dichotomy.

            I don’t decry the option for sprawl, I am perfectly happy to see it occur. My argument is that fixed trajectory rail is not obsolete as you argue, and that it is a perfectly fine method of transport. In some cases I would argue ideal.

  27. I have a name for the planning ideology that wants to make people live at higher densities closer to the CBD, and forces up the price of doing so to impossible levels as well as forcing the price of suburban location up to nearly impossible levels. I call it the “Marie Antoinette School of Urban Planning”.
    “Your majesty, the peasants can’t afford houses”. …. “Then let them live in multimilliondollar condos”.
    Time to say “off with her head”, I suggest.

  28. Another important consideration is that decentralisation of employment is a natural free market mechanism by which urban efficiency is enhanced. One of the commenters above made this excellent point:
    Flawse says:
    June 8, 2011 at 8:15 am

    “Good article Leith.

    Another aspect is the sort of economy we are creating. So he wants more and more of us close to the city centres. Presumably this is because we want an economy in which no one actually produces anything but we all work as solicitors, accountants, Government employees, coffee shop owners and waitresses.
    It’s a symptom of everything that is wrong.
    What would be wrong with having factories that produced things and aren’t in the centre of cities? Such factories are more scattered in the outlying suburbs. I won’t start on again about regional areas….”

    Exactly. Different industries have different requirements for land, and most cannot possibly out-bid competitors for CBD land that have less requirements for land per worker. It is the summit of hypocrisy to lament about industry going offshore, and yet support “urban consolidation”.

    Agglomeration efficiencies are often used as a rationale for high density single centres. This misses the point that complementary industries can far more efficiently agglomerate somewhere OTHER than where ALL the NON complementary industries are. Agglomerations, in fact, tend to comprise complementary industries with similar requirements for land. Of course a factory cannot pay the same land price as a skyscraper magnate with multinational legal firms as his tenants.

  29. Furthermore, in spite of the said “agglomeration efficiencies” in a single urban core, famous economist Colin Clark identified in a 1967 book, the major drivers of decentralisation from such centres. This is, congestion, and high land prices. Land prices in urban cores tend to go higher and higher until they start to “price out” employers; then a trend begins towards other nodes of agglomeration (which have the advantage of low congestion, low land prices, and proximity to workforces with lower housing costs). “Downwards sticky” CBD land prices means that the process continues uninterrupted until the CBD has lost most of its former employment.

  30. @ue – most likely – to your developer economics. Anecdotely there is an under met market for smaller houses on outer suburban or country town blocks – for people who like gardens, or don’t like housework I guess.
    Land is expensive, but so is building – in the order of $1k/sqm for mass housing, and $2-4k/sqm for ‘bespoke’ housing. Cheaper construction materials and methods would make a big difference to affordability and supply. If smaller and custom designed houses were cheaper to build, people could afford to buy smaller/more constrained blocks of land to put them on. About 80 sqm land is enough for a small 3 storey 2-3ldk with car and 40sqm garden (about as much open space as the average contemporary project home). Just to illustrate the vast potential for supply in our existing suburbs, (and how it doesn’t have to mean loss of open space). Be interesting to see what happens under Bailieu’s new Urban Renewal Authority.

    • Richard, you say

      “Cheaper construction materials and methods would make a big difference to affordability and supply.”

      Well so would a recession.

      It is naive to think much of these costs aren’t a result of a boom.

      During the Tulip bubble, where peak prices for a bulb sold at 3 times wages, say $195k in today’s terms, you can’t think that the seedling grower still sold them at 50c, the wholesaler sold them at $1.20 only for the retailer selling tham at $195k.

      Everyone took ‘their cut’ along the way.

      Materials and labour involved in construction are at abnormal highs, and voluntary cuts from a ‘feel good’ factor don’t arise.

      This is why a recession is needed to adjust prices. A sector that has had 20 years wages in 9 years shouldn’t be crying poor from this adjustment.

  31. The way to improve urban transport efficiency under the realities of decentralisation of employment, is:

    1) improve the road connections between metropolitan area “nodes”
    2) minimise the cross-traffic conflicts which are the new congestion problem (as opposed to everyone going the same way at the same time). This means intelligently located flyovers and interchanges.
    3) abandon MASS public transport which depends on an urban form which is now obsolete. You need owner-driver buses and vans, not fixed-guiderails and single monopoly providers.

  32. “3) abandon MASS public transport which depends on an urban form which is now obsolete. You need owner-driver buses and vans, not fixed-guiderails and single monopoly providers.”

    LOL

    See the;

    Paris Metro
    London Tube
    Singapore whatever

    and then be convinced it’s obsolete.

    Unless of course you subscribe their urban forms are obsolete, and cities bound to decline.

    Look at property prices hugging railway lines in our capital cities, they are a sought after commodity.

    • Even in those population densities, rails do not even break even. And what percentage of people STILL happen to use cars? I quite coincdentally just stumbled across this little GEM from Robert Bruegmann:

      “….In virtually every affluent nation on earth, the old Nineteenth-century industrial cities have exploded outward, allowing densities to plummet at the core as residents move further and further out into low-density suburbia and a very low-density exurban penumbra around that. The city of Paris today has a third fewer residents than it did a century ago, and the suburban and exurban territory around it leapfrogs more or less from the English Channel to Burgundy. In this process, the very distinction between urban and rural has all but disappeared as citizens in almost every part of affluent societies are able to participate in what is essentially an urban culture…”.

      Paris has an admirably efficient system of ringroads, flyovers, and interchanges for its suburbs. It also happens to be close to as decentralised as a typical US city. The legendary traffic congestion is in the centre.

      Another factor is that cities where “international capital” is competing for CBD space, much higher CBD densities and land prices are sustainable than in the vast majority of cities where only local and national “capital” is involved.
      As we were saying before, we can’t base an entire national economy on offices only. We can even LESS base an entire economy on international law and accounting firms only.

      • “Even in those population densities, rails do not even break even. And what percentage of people STILL happen to use cars? I quite coincdentally just stumbled across this little GEM from Robert Bruegmann:”

        Well that’s just failing see the trees from the forest. It’s not to say they can ever break even in a user pays system, or in that regard they should.

        The failure of ‘user pays’ is that it can not capture payment for all those that benefit. people who live near railway lines get great benefit in regards to mobility and property values, yet it is hard to extract payment out of them for rail. Likewise rail emits less pollution than the comparible number of petrol fueld vehicle, yet we can’t extract a cost from those that breathe the air.

        It is borne out of a governmetn subsidy from general revenue. The ‘value’ placed on the level of subsidy is an ideological issue, and should be determined at the ballot.

        That said, the level of subsidy rail receives is nowhere near the subsidy that roads users receive.

        “Another factor is that cities where “international capital” is competing for CBD space, much higher CBD densities and land prices are sustainable than in the vast majority of cities where only local and national “capital” is involved.”

        Parking stations competing for land is more detrimental than an underground railway station.

        “As we were saying before, we can’t base an entire national economy on offices only”

        Yep…. that’s a statement not an argument.

        • “the level of subsidy rail receives is nowhere near the subsidy that roads users receive.”

          I don’t agree, at least in a purely financial sense (i.e. ignoring externalities). Public transport runs at a significant loss and is subsidised by all taxpayers (including outer suburbanites that do not use it). Road taxes (fuel excise and rego) far outweigh road investment and maintenance.

          • You’re picking in flaws in one argument that are completely valid in the other.

            Roads definately run at a loss.

            based on this

            http://www.ptua.org.au/myths/petroltax.shtml

            now sans all the externalities,

            We have cost to taxpayer.

            Road construction and maintenance, $14bil,
            Land use, $6bil
            tax concessions for car use, $7.4bil

            These are direct outlays, or foregone receipts for the roads.

            $27.6 billion.

            Against revenue of

            Excise receipts, $10.3bil.
            GST on fuel, $5bil.
            Vehicle rego, $3.5bil
            Tolls of $2bil

            We can bundle in other of $2.4bil.

            $23.2 Billion

            I would argue that in a purely financial sense, it is subsidised infrastructure.

            The externalities in that argument are much more subjective, but add futher weight to the subsidies received by roads.

          • It’s a bit rich to include tax concessions for car use (e.g. FBT) when you also do not count tax receipts from car sales, driver’s license fees, speed camera revenue, parking fines, etc. Further, the land cost would fall considerably if land-use constraints were removed.

        • “Parking stations competing for land is more detrimental than an underground railway station.”

          I am not arguing for the preservation of inner city parking “subsidies”. I am arguing that the modern urban economy has evolved around “decentralisation” for good sound economic reasons. Abolishing the inner city parking “subsidy” will speed up the decentralisation process, not cause a mode shift to commuter rail transit. This decentralisation process will render mass public transport, especially of the fixed guiderail type, even less viable.

          Similarly I am not arguing for wider and wider freeways into the CBD. I am arguing for urban planners to accept decentralisation as natural and efficient, and to run with that instead of trying to trap economies in the 19th century.

          Leith has kindly pointed out that car ownwers do in fact pay taxes that more than cover the externalities. Not just petrol taxes, but all sales taxes from car sales, parts and tyres and repairs and maintenance. But what is most destructive about all these skewed debates we have, is that the massive positive externalities of car use have been forgotten.

          Your last sentence is senseless. If this is a statement, it is one that advocates of highly centralised urban form need to get real about fast. You are completely failing to engage with my point. There are good reasons that we cannot turn all the hundreds of cities in the world into replicas of Paris, London, New York, and Singapore. Part of the reason they are what they are, is because they reached high population levels IN THE 19th century and urban form changes very slowly. And they have “international capital” competing for CBD land.

          • “I am not arguing for the preservation of inner city parking “subsidies”. I am arguing that the modern urban economy has evolved around “decentralisation” for good sound economic reasons.”

            Then what issues are causing business in Australia to resist this decentralisation?

            You argue railway lines? The rent-seeking behaviour of landed interest near railway lines being a disincentive for business?

            I would argue it’s critical mass of talent and its dispertion. To overcome this dispertion would involve moer Stalinist tendencies than anything I have proposed.

            “Abolishing the inner city parking “subsidy” will speed up the decentralisation process, not cause a mode shift to commuter rail transit. This decentralisation process will render mass public transport, especially of the fixed guiderail type, even less viable.”

            Business has to move, it has to opt to decentralise, the labour follows.

            Now are trying to assert that business is captive to centralisation because of railways?

            “Similarly I am not arguing for wider and wider freeways into the CBD. I am arguing for urban planners to accept decentralisation as natural and efficient, and to run with that instead of trying to trap economies in the 19th century.”

            The talent of labour is too dispersed for business not to centralise. The major disincentive to labour to relocate is stamp duty, nothing to do with railways.

            “If this is a statement, it is one that advocates of highly centralised urban form need to get real about fast. You are completely failing to engage with my point.”

            I’m not, it’s become increasingly clear you are taling about statist intervention about a decentralised environment of industry, a futile argument becuase industry is not opting to decentralise.

            My basis is that business is centralised, and because of this centralisation we need rail to service it.

            And my argument doesn’t stretch beyond that.

            It only falls apart if a premise exists that business is captive to centralisation because of railway.

            “There are good reasons that we cannot turn all the hundreds of cities in the world into replicas of Paris, London, New York, and Singapore. Part of the reason they are what they are, is because they reached high population levels IN THE 19th century and urban form changes very slowly.”

            Exempt Singapore not reaching it until the 1970’s, it is a false dichotomy, why can no other city reach these levels of population and density from this point forward? Peak oil would indicate it’s likely going to be a model to replicate in the future, or something very similar.

            “And they have “international capital” competing for CBD land.”

            So did Vienna when the hapsburg empire was at it’s zenith. These are irreversible.

    • “Look at property prices hugging railway lines in our capital cities, they are a sought after commodity.”

      NOT railway lines, railway stations. There IS a difference.

      But this is a classic case of land rent seeking and wealth transfer. If the owners of the favoured land had to “pay in” to the cost of the rail infrastructure, commensurate with the disproportionate gain they make compared to all the other taxpayers who do not gain, you would soon see a lot of the pork-barreling in favour of rails evaporate.

      Roads, on the other hand, disperse the value gains far more commensurately with their costs. You need to read Colin Clark and Fred Foldvary on urban land rents.

      • “NOT railway lines, railway stations. There IS a difference.”

        While those close to the railway stations are more valuable than those just hugging the railway lines, those near the lines are more valuable than those completely barren of rail facilities.

        “But this is a classic case of land rent seeking and wealth transfer. If the owners of the favoured land had to “pay in” to the cost of the rail infrastructure, commensurate with the disproportionate gain they make compared to all the other taxpayers who do not gain, you would soon see a lot of the pork-barreling in favour of rails evaporate.”

        i) They can only receive this rent once. I don’t suffer that much envy and decreasing the scarcity, such as in paris where a metro station is no more than 500m away anywhere in the city, reduces the value of the rent received.

        ii) Pork-barrelling can only occur without a transparent process. Perth has been the major player in rail with the increase of 3 to 5 rail lines in the last 20 years. The two new lines were picked on population growth, and they have been outstanding successes.

        Perth’s problem however is all 5 lines are ribbons, but this correlates to its spawl issue due to poor town planning procedures.

        • Every study I have seen says that proximity to stations increases value, and proximity to rail LINES absent proximity to a station, DECREASES it.

          “Rent” is NOT something you receive “ONCE”. I am starting to realise how little you understand economics. But then you talk about “decreasing the scarcity” of railway stations which would spread the “rent” more like what roads do. But the more intense a rail network gets, the lower the ridership on EACH LINE will get. One study I remember, said that a railway line GRID spaced at 1km intervals with services at 10 minute intervals, will ALWAYS cost more to run than the total potential GDP of the area. Not 10% of GDP, not 20%, not 50%. More than 100%.

          “Pork-barrelling can only occur without a transparent process. Perth has been the major player in rail with the increase of 3 to 5 rail lines in the last 20 years. The two new lines were picked on population growth, and they have been outstanding successes…..”

          Oh, and where did the 2 new lines converge? No pork barrelling involved on the part of CBD property owners? Cough cough cough.

          “Outstanding successes” in rail-planner-speak means “subsidies kept to within two thirds of system cost”.

          • The 5 lines are “ribbons”. Fan me.

            Please explain to me how urban land and house prices and business premises costs can be contained if a 5 ribbon urban form is “contained”. Heck, the inflation of urban land rents is bad enough even with the homogeneity of roads and automobility. You don’t mean to try and institute a “grid” of rail lines? See my comment above about that.

            The planners of the former USSR had full power to make people live in apartments and catch trains everywhere. The result CONTRIBUTED to the low productivity of their economy, their low productivity was NOT “in spite” of those “efficient” apartments and railway lines.

          • “Every study I have seen says that proximity to stations increases value, and proximity to rail LINES absent proximity to a station, DECREASES it.”

            Did that study make any mention of being close to a railway line but out of earshot of the rail traffic?

            ““Rent” is NOT something you receive “ONCE”.”

            In land with no benefit of rail, then attracting a rent component due to the implementation of rail, will transplant itself into the price. The benefit received by landed rent-seeking can not compound.

            “I am starting to realise how little you understand economics.”

            yeah thanks for that.

            “But then you talk about “decreasing the scarcity” of railway stations which would spread the “rent” more like what roads do. But the more intense a rail network gets, the lower the ridership on EACH LINE will get.”

            If the population is fixed, yes. But that’s not the point when addressing transportation needs by rail. Rail is often used as a means to address the transport needs of a growing population.

            i.e Sydney, other than the line from Townhall to Bondi junction, and the line from East Hills to Glenfield, was the rail network required when it had a population of around 2.4 million people. If this population had remained at 2.4 million, there’d be very little demand for lines to the Hills, and from Parramatta to Epping. However 1.6 million extra people may be a factor.

            “One study I remember, said that a railway line GRID spaced at 1km intervals with services at 10 minute intervals, will ALWAYS cost more to run than the total potential GDP of the area. Not 10% of GDP, not 20%, not 50%. More than 100%. ”

            Sounds like a biased study, a very biased study. Obviously it never considers alternative forms and opportunity cost.

            Take Tokyo and remove all trains, make it 100% car based and see the impact to GDP due to the ensuing congestion. But then It is unlikely to have stations 1km apart and 10 minutes between services. It sounds like that ‘study’ can’t be uniformly applied.

          • “Oh, and where did the 2 new lines converge? No pork barrelling involved on the part of CBD property owners? Cough cough cough. ”

            LOL

            So there’s no obvious benefit to draw labour in from the sprawling suburbs into their places of work?

            Any argument of pork-barrelling can be drawn that fine, that’s like say Perth international airport in pork barreling the miners to aloow FIFO ooperations, and not considering any other facet.

          • Please explain to me how urban land and house prices and business premises costs can be contained if a 5 ribbon urban form is “contained”.”

            It’s not the role of rail to contain house and land prices.

            “Heck, the inflation of urban land rents is bad enough even with the homogeneity of roads and automobility.”

            ??

            What argument are you trying to make?

            This would be applicable to land rents if the consumer was captive. They are not.

            “You don’t mean to try and institute a “grid” of rail lines? See my comment above about that.”

            No, I’m saying the 5 ribbons means that every station is a terminus point to the hub of the CBD station(s). It’s a population density issue as well as a centralisation of businesses issue.

            “The planners of the former USSR had full power to make people live in apartments and catch trains everywhere. The result CONTRIBUTED to the low productivity of their economy, their low productivity was NOT “in spite” of those “efficient” apartments and railway lines.”

            I’m not for forcing people to do anything, nor am i up for building railway lines from the Melbourne CBD to the Mornington peninsula “just ’cause”.

            What I am saying is that the productivity of citiies like Sydney, Melbourne and Perth is enhanced by this form of transport, one that is far from obsolete.

    • RP

      You’re right. Phil’s not. I wouldn’t bother to argue the case.

      Although, did I miss mention of peak oil…

      Cheers.

      • Well funnily enough abuot peak oil, Warren Buffet made his largest ever capital investment in 2009, in was in American Railways.

        Reading the Andrew Carnegie biography right now, it was what propelled the telegraph. Rail lines would build concurrently parallel telegraph cables.

        Now post-peak oil looks to implement hydrogen. Something that is very inefficient to delivering portable tanks by automobile, but very efficient by reticulating pipes everywhere.

        I can see hydrogen pipes being built in parallel to railway lines.

  33. Rusty, I’m green not to realise that we “need” a recession as you say, but what I know is building is very labour intensive, and it increasingly expensive to meet contemporary living standards and building codes (such as new acoustic and energy efficiency requirements) with what is essentially century old – or more – technology. Btw I’m over how everyone complains about how much a tradie charges. Have you smelt the toxic “f***wit paste” (trade nick) we blithely pay a plumber to glue up the pipes for the new ensuite? They should get danger money!

    • “They should get danger money!”

      They do, virtually their entire wage is a danger money component.

  34. Interestingly, philbest and rusty, your points converge in some of the biggest cities – Tokyo, London, Paris where the rail system is like the road system here – a net (rather than an octopus). It offers enormous flexibility to the user, which doubtless contributes much to the ongoing life of those cities (i’d hazard that more flexibility probably allows more transactions -social, money- to happen). Trains are fast and don’t make much pollution. Why abandon them? Why reduce our options? Better do some work. Thanks for writing about this report, UE.

  35. I grew up on a 1400m2 block with chooks and the odd cricket game and a small pokey house.
    IF I was forced to live on a 500-600m2 block in Kellyville, I too would build a McMansion the same as everyone else. The reasons are many:
    * Such small blocks cannot have a decent garden. Better to just have house.
    * The neighbouring houses are built right up to the boundary. No privacy for a garden. Better to just stay indoors.
    * The weather in summer is unbearable. The heat island effect and lack of wind means that air conditioners must be used. Best to close the windows and stay indoors.
    Another factor is that councils make it so expensive to extend a house. Why build small now and bust a gut to extend later, when you can build the maximum size now and save all that expense and hassle?

  36. How do we pass a law saying that buildings should be ecologically sustainable, beautiful and functional? They aren’t that hard to build.

    • When you pass that law please attach another law to it saying that all women must be beautiful, compliant, and never grow old and narky.

  37. Oh man, someone’s been drinking the Wendel Cox Kool Aid. I might not agree with everything Crawford suggested but I think we need to stop labelling this sort of stuff “social engineering”. A call for smaller, more compact housing, even if it were supported by government policy is no more social engineering than a system that produces a mostly homogenious building type at the fringes.

    And the implication that anyone who makes this suggestion is only doing so because they are some sort of elitist? That’s the sort of analysis best left to a true expert. I suggest this guy

    http://macrobusiness.com.au/author/Boganomics/

    • K,
      Firstly let me compliment you on your moniker (very creative).
      You appear to come from the same social engineering school as the others. It is idiot govt and elitist experts who have created the problem with McMansions far from work. Elitist experts and idiot govt are not the solution to it.
      I’d like to see some compact housing close to workplaces. Why aren’t you or I building it?
      Because of idiot govt following elitist experts. They invite in 100,000 immigrants, approve more offices in the CBD, refuse more housing near the CBD to please NIMBYS and then zone more plots in Kellyville that suit only McMansions. How surprising that McMansions are built and more people must commute long distances. Social engineering at its worst.

  38. Dr Crawford started off by saying “PEOPLE who want to build…..”

    The whole piece would have read more honestly if he had said “Federal and state tax systems have encouraged….”

    Look at the builing code and it’s “star rating” energy approach and you could be back in the 70’s. Contrast this to the ADR’s used in Car design.

    Restricting emissions and enforcing safety has lead to cars that are unrecognisable to those from 30 yrs ago. Leading edge technology such as seat belts, efi, catalytic converters, ABS, and side intrusion bars are rolled out over 24 month design cycles.

    The Global Automotive industry has been able to achieve radical technological innovation in very short time lines. It seems to be able to do this in a financial structure that the government and customer are prepared to support.

    Cars must comply with repeatable, instrumented tests for emissions and Highway cycle consumption. If a manufacturer is found to have misrepresented these tests they must recall. If they can’t justify meeting the reqirement, they exit the market place.

    Why have housing standards escaped the same rigor?

    And here’s another crazy idea, what would the emission trading scheme look like if it was intended to be implemented by car makers, not beurocrats and traders?

    • Nah.
      Idiotic govt regulations regarding pollution resulted in pollution-control disasters in the 1980’s. The govt got ahead of what was technically possible.
      However by the late 80’s fuel injection and computers made higher standards possible. Now consumers are demanding and manufacturers are supplying better cars than govt requires. Makers are ahead of govt.
      Consumers demand safe and clean cars. You can still buy old bangers but the consumers are driving them off the road – not govt.
      Exceptions to this are the regulations that removed lead from fuel. Govt was needed to do this as consumers did not care sufficiently to suffer the loss of power from lead-free fuel.

      • Claw: Google search “Bern Grush; The US$10 gallon”. It is online as a PDF. You will love it.

  39. The threads above have got too skinny to respond to “Rusty Penny”. I am pleased to see 3d1k’s comment, it is like an endorsement in this context.

    Light has dawned. Rusty Penny THINKS decentralisation is NOT occurring in Australia:

    “…..Then what issues are causing business in Australia to resist this decentralisation?
    You argue railway lines? The rent-seeking behaviour of landed interest near railway lines being a disincentive for business?…..”

    And

    “….My basis is that business is centralised, and because of this centralisation we need rail to service it. And my argument doesn’t stretch beyond that…..”

    Rusty, Australian employment HAS decentralised almost as fast as in US cities. Go back now, and read my various discussions of the reasons WHY decentralisation happens, and re-think your whole position.

    “Sydney was very successfuly serviced by its railway up to the 1960′s.”

    EXACTLY. It is now 2011, employment in Sydney has decentralised, and a LOT more people own their own house and yard.

    “…..I don’t decry the option for sprawl, I am perfectly happy to see it occur. My argument is that fixed trajectory rail is not obsolete as you argue, and that it is a perfectly fine method of transport. In some cases I would argue ideal.”

    OK, the only way in which I differ from that, is that it has become, and is still becoming, ideal in less and less real life urban evolutions.

    • There is a “New City” blog in Australia, in their 14 Mar 2010 editorial, the following was stated – the writer of this is among a rare minority of people today who have such an advanced grasp of the issues:

      “……Writing in a publication of the 2008 9th World Congress of Metropolis, Sydney University’s John Black observed that “apart from some noticeable peaks, employment density is quite uniform across the [Sydney metropolitan] region”. According to the NSW Department of Transport, only 12 per cent of Sydney’s jobs are in the CBD and second tier centres like North Sydney, Chatswood, Parramatta, Hurstville and Penrith have less than 2 per cent each. David McCloskey, Bob Birrell and Rose Yip of Monash University (demographers, not urban planners) report the same about Melbourne. The CBD hosts around 20 per cent of jobs and the rest are scattered all over the metropolitan region.

      Platitudes like “we must locate people close to where they work”, or “we must locate jobs close to where people live”, have little basis in reality. They infringe another immovable law of economics, relating to economic rents or bid-rents. This mechanism determines how industries and firms are distributed. Put simply, a parcel of land will go to whichever use delivers the highest profits. Centrally located land (near major transport or infrastructure hubs) commands high prices, and goes to the most profitable uses. Peripheral land goes to less profitable or marginal activities.

      Over the last thirty years, economic deregulation, flexible transport, advanced communications and population growth have raised up a sector in the latter category, extracting value from cheap outer-metropolitan land and low rents. It includes industries like transport and distribution, building and construction, food, consumer products, personal services, wholesale and retail. They depend on favourable location costs and proximity to urban markets and labour pools. According to the Greater Western Sydney Economic Development Board, “prime industrial land with direct access to transport infrastructure is 75% cheaper [in GWS] than other areas of Sydney”.

      Ultimately, green planning will phase out cheap urban land, undermining this sector and destroying jobs in the process…..”

      This guy should be a Cabinet Minister in charge of Australia’s urban and transport policy.

  40. Rusty Penny:

    “…..why can no other city reach these levels of population and density from this point forward?…”

    Because EVERY mechanism by which density can be increased, forces land prices up at the spot where density is increasing. Anthony Downs in particular, has been pointing out for decades, that the effect on land rents, of rail infrastructure, is and always was, “concentrated”, wheras the effect of road infrastructure and increased automobility (including through falling real cost) on land rents, is “dispersed”. He points out that “planners” seem to be oblivious to the monopoly advantages that they hand to the owners of property at the locations that they wish to force people to live, at higher densities/close to railway stations (or perhaps we have a serious hidden corruption problem here). Anthony Downs himself is an advocate of “collective control of land”, and is rare among left-wing economists in actually having the intelligence to identify the incompatibility of grand plans concerning urban development and transport modes, and still-free real estate markets.

    Our whole urban economy is based on land prices being kept LOW by people NOT having to compete for the same spot of land, for ALL potential uses of it. Otherwise what happens is that the wealthiest people and the least land-intensive businesses win all the bidding processes, and everyone else (low income earners, industry) has to miss out.

  41. I said: “….the inflation of urban land rents is bad enough even with the homogeneity of roads and automobility.”
    Rusty Penny said:
    “….What argument are you trying to make? This would be applicable to land rents if the consumer was captive. They are not….”

    They ARE when there are urban growth boundaries and low elasticity of development “supply”. What have median multiple house prices been doing in the last few years? Have you noticed?

    Any bunch of young people could form a co-op, buy a farm, and develop new houses for a total price of $180,000 each or even less; if it was not for the regulations.

  42. Rusty Penny said: “….I know what rent seeking behaviour can do, but the less disparity there is in regards to income distribution, the more empowered poor people are to overcome such rent-seeking behaviour…..”

    Under conditions of less DISPARITY, the capitalisation of rising incomes into rising land rents and accomodation costs, will merely be watered down in terms of its impact on the bidding wars between people for amount of space and location efficiency. But as long as there is ANY disparity, there will be an income-related “sorting” of these factors of (artificially scarce) land supply.

    Besides, it is becoming more and more obviously ridiculous to expect everyone to earn similar incomes, and more and more obvious that every attempt to do so “kills the goose”.

    Here is a scientific genius analysing the question:

    http://phe.rockefeller.edu/PDF_FILES/LiveLikeAmerica.pdf

    • If we were to analyse the amount of “income redistribution” that is already taking place in all first world nations, the question would have to be asked, how much more could the economy stand without killing the goose that lays the golden eggs? It is not just a matter of cash transfers via social welfare; every one of us carries a price tag of millions of dollars in State spending from birth to death; most of us will never pay back in tax, what has been spent on our health, education, public safety, infrastructure and amenities. Even those of us who never earn their own income and never pay tax, are millions of dollars ahead of around 50% of humanity.

      Sir Roger Douglas pointed out years ago that if everybody got simply “given the money” and then paid their own way in free markets for health, education, and transport at least; even the poorest could live like kings. Instead of beating up on Sir Roger, we could seriously look at “value for money” in all the spending of “transferred wealth” that already IS taking place. And we could look seriously at the causes and pre-indicators of inequality. Marriage and the traditional family were powerful forces for equality for several reasons: marriage and subsequent “inheritance” that crossed socio-economic group boundaries being just one obvious reason.”

  43. Something leaped out and hit me, from Wilkinson and Pickett’s analysis of “inequality” in their famous book “The Spirit Level”. It obviously hasn’t hit them or any other of the cultural relativists who infest our commentariat.

    The correlation with culture and religion is glaring, confirming the already numerous studies of academics like Iannoccone, Stark, Fincke, Barro and McCleary.

    The nations with the least inequality happen to be numerically dominated by a single culture that works this way. The nations with the highest inequality in the world, that are not shown at all on the graph, happen to have a dominant single culture that tends powerfully towards inequality. Saudi Arabia, for example. The more “multicultural” a nation is, the more confusing the results will be; as some cultures tend to inequality within them, others tend to a high rate of success among their adherents, and others tend to a low rate of success among theirs.

    Look at Japan, number one, with its monoculture with a strong work and savings ethic. The Scandinavian nations next – Lutheran and Calvinist “social capital” at work there. Nations whose predominantly Protestant past has not yet been significantly watered down by mass immigration and multiculturalism occupy the next few positions.

    The USA is of course the most multicultural nation in the world. No surprises at the inequality there. Another factor is the high proportion of poor recently-arrived immigrants, in which the USA leads the world; the USA also leads the world in the rate of “remittances” sent back to their countries of origin, by immigrants, many of whom remain quite poor in USA terms, but wealthy in their “country of origin” terms.

    By the way, this is nothing to do with “race”. Culture is not race. Anyone can change their culture. We all had miserable pagan ancestors somewhere back in our past.

    The UK is a special case, apart from its relatively high level of multiculturalism. Recent studies from the London School of Economics have stated that Britain’s 5 decades of “Town and Country Planning”, and the resulting high land prices; have been a more powerful force for social inequality than income disparities themselves. Maybe NZ and some other nations are also starting to suffer from this effect. Academic studies have certainly pointed to this effect in California, where they have operated similar policies of “urban planning” for not quite as long as the UK.

  44. Last point to address, Rusty Penny:

    “…..I’m saying the 5 ribbons means that every station is a terminus point to the hub of the CBD station(s). It’s a population density issue as well as a centralisation of businesses issue……”

    Right. You are saying that this is a natural thing to continue to provide for continued existence of “most” employment in the CBD area. I am saying that it is illogical to continue to provide for “most” employment in the CBD area, when it is NO LONGER THERE and is still decentralising.

    I am also saying that it IS a kind of pork barrell attempt to shore up strength of the CBD, by capturing funding that is paid into by all, and strangling the funding that should be going to the inter-nodal roading development between the nodes to which employment IS moving. CBD property owners do not mind if the cost benefit ratio is $8 of cost to every $1 of benefit; as long as THEY are paying 50 cents of the $8 and capturing 90 cents of the $1.

    “…..What I am saying is that the productivity of citiies like Sydney, Melbourne and Perth is enhanced by this form of transport, one that is far from obsolete…..”

    What I am saying is that the most BALANCED economically competitive cities in the world, are the ones with “sprawl”, roads, and “automobility”. They are the ones where ALL users of land operate at maximum productivity. You should read the McKinsey Institute Report on Productivity in Britain. Even way back in the 1990’s, they described how the productivity of many industries was being undermined by high land prices and lack of available locations for HIGH-LAND-REQUIREMENT industries to affordably agglomerate at. They specifically said that Britain simply could never have a “Silicon Valley” while their regulations on land use remained as they are.

  45. “…..So there’s no obvious benefit to draw labour in from the sprawling suburbs into their places of work?…..”

    Read Randall Crane and Daniel Chatman; “As Jobs Sprawl, Whither the Commute”?

    As a city grows, if it remains monocentric, it becomes more and more expensive for ANYONE to locate closer to work. Ultimately, this form breaks down (re-read what else I said about this above), and with dispersed employment, the “price premium” anyone has to pay for “location” “close” to a particular centre, becomes less and less, because there are so many centres. This anables MORE people to afford location close to work than under the monocentric model.

    Also read William Wheaton’s “Commuting, Ricardian Rent, and House Price Appreciation in Cities with Dispersed Employment and Mixed Land Use”.

  46. I strongly recommend the white paper and European Parliament Conference on Transport Policy entitled “Liberating or Strangling Europe’s Potential” – MP’s Ari Vatanen and Malcolm Harbour being the authors.

    Here are some of the conclusions:

    “90% of travel in the EU is by car”.
    “Transport modes are not simply
    interchangeable”.
    “Public Transport operates effectively withinspecific niches”.
    “In the great majority of cases, travel by road cannot be made any other way”.
    “The smooth running of modern economies
    relies on road transport. Cars play a large role in economic productivity and the enlargement of markets”.
    “The high costs of public transport subsidies weighs heavily on Europe’s economy”.
    “The “external costs” (air pollution, etc) of vehicle use is covered many times over by the net taxation revenues specifically levied on road users”.
    “Since 1985, emissions levels of each new vehicle coming to market have been
    reduced by a factor of at least 10, and even though traffic volumes have increased, air quality in Europe’s cities is improving spectacularly”.
    “Investments in Rail would take 10,000 years to recoup in terms of reduced CO2 emissions”. i.e. never.