If anyone wants to know why Australia has a land supply problem, despite being blessed with an abundance of land, the above video provides a clue.
Graham Palmer operates a sand blasting business on land that he owns near the City of Gosnells, south east of Perth. Despite owning the land, the City of Gosnells last year successfully prosecuted Palmer over not seeking prior approval to undertake industrial activity on land zoned for rural use only. In turn, the Palmers were fined $50,000 and ordered to pay $10,000 in court costs, but are now appealing the decision in the Supreme Court.
While I don’t know the exact specifics of this case, and certainly don’t condone Palmer’s forklift “attack” against the council workers, it does highlight some of the inherent problems with planning rules in this country.
Specifically, there are no “right to develop” laws in Australia, meaning that a land owner is unable to use or develop their land as they see fit, and must instead gain government approval to do so. This process, which is effectively a form of protectionism, stifles competition and contestibility in land market, and leads to a situation whereby landholders blessed with zoning permission are granted quasi-monopoly rights and able to force-up land prices.
The only thing that keeps any market competitive is the continual freedom of entry into it by new players. Remove this ability, and the market ceases to function properly allowing players to “corner supply”, in this instance via land banking, as is currently the case throughout Australia and other markets running urban containment policies.
Make no mistake, I am not advocating “open slather” development. If land needs to be preserved for environmental or social reasons, by all means the Government should do so. But it should not prevent an adjacent landowner or a landowner further afield from developing their land merely because it sits on the wrong side of an arbitary barrier (e.g. an urban growth boundary).
Subject to minimum standards being met, there should be nothing to stop a rural landowner from using their land how they see fit, whether it be for commercial use or subdivision into urban lots. Moreover, there should be nothing stopping a visionary capitalist from building a whole new city, attracting employees and businesses to it with very low land costs, as has occured with the award winning Woodlands development near Houston, Texas, but would be next to impossible here.
Open competition underpinned by the right to develop (subject to minimum standards being met), is key to lowering land prices and ensuring Australian housing becomes affordable and the economy competitive. Unfortunately, while most economists recognise the importance of competition in goods and services, they are mostly blind when it comes to land.
P.S. Hat tip to Phil Best for some of the ideas behind this post.
