Thankfully, Family First’s chairman and former home builder, Bob Day, was elected as Senator for South Australia and will assume his seat on 1 July 2014.
Already, Bob Day has began making waves on housing policy, delivering an eye-opening submission to the current Senate standing committee on affordable housing. Below are some key extracts from Bob Day’s submission, which raise similar concerns about Australia’s constipated land supply system as I have raised many times on this site:
For more than 100 years the average Australian family was able to buy its first home on one wage. The median house price was around three times the median income allowing young home buyers easy entry into the housing market.
The wholesale adoption of urban consolidation policy by those in the planning and legislative fraternities led to a rash of planning regulation responses that further stifled supply. Urban growth boundaries, zoning restrictions and a host of other planning and building instruments became the order of the day as governments, shire councils and their planning operatives sought to throw a corset around the body of our cities.
This policy of urban consolidation dramatically slowed land supply at a time when the market was demanding it. As happens when the supply of any valued commodity is constricted, the price went up. The land rush was on and land prices increased by astounding multiples…
The first, and major, step in restoring housing affordability lies in governments stepping aside from the land management role and allowing the natural forces of supply and demand to return to the market. It is only as adequate supply returns to the market that land prices will fall. Urban growth boundaries must be removed and the abandonment of the insane notion of “x” years supply of land available. The home buying public will decide how many years’ supply of land there is, not the government. The removal of urban growth boundaries and other restraints on land use is equally important for landowners. These boundaries and planning restraints effectively ‘nationalise’ their land preventing those with land outside the boundaries from obtaining a fair value for it. It further inflates the value of land within the boundaries resulting in wasteful lobbying to have land rezoned. Corruption of public officials in dealing with zoning changes is not uncommon.
Another factor that contributed to land price hikes during this period years was the way “up-front” infrastructure costs, fees, taxes and charges were applied by state and local governments. In some capital cities, these charges added more than $100,000 to the price of a finished allotment. The question of infrastructure costs of growing cities – in particular who should pay for new infrastructure on the urban fringe is often raised. The answer is obvious – home buyers. But this is the wrong question. The question is not “who should pay?” but “when should they pay?”
Local government believes home buyers should pay ‘up front’ for the cost of their infrastructure. Others, like myself, believe home buyers should not have to pay for their infrastructure “before” they use it but should be allowed to pay for it “as” they use it as was the case in previous generations. It is simply not equitable to expect young homebuyers – those least able to afford it, to pay for the cost of infrastructure before they’ve used it when existing home owners who live in established suburbs (many of whom do not even have mortgages) were not asked to pay for their infrastructure before they used it but were able to pay for it “as they used it” through their rates. First home buyers on the urban fringe are now subsidizing, through their electricity, water, sewer and council rates, the massive repair and upgrading of existing, older infrastructure in the inner suburbs in order to accommodate wealthier ‘in- fill’ homebuyers.
Leaving aside the fact that infrastructure developed to accommodate 1,000 to 2,000 people per square kilometre simply cannot now withstand housing densities double that number, the cost of upgrading existing inner suburban infrastructure is significantly greater than the cost of providing brand new infrastructure on the urban fringe…
One of the more pernicious aspects of high land prices ie high mortgages, is the forced misallocation of capital and family income into mortgage payments instead of higher standards of living, assets, goods, travel, children’s education, appliances or even foregone income to spend more time at home…
In creating the conditions for home ownership to become the privilege of the few rather the rightful expectation of the many, state governments have produced intergenerational inequity and breached the moral contract between generations…
To fix the problem for good and ensure that future generations do not suffer the same fate we need to do five things:
1. Where they have been applied, urban growth boundaries or zoning restrictions on the urban fringes of our cities need to be removed. Residential development on the urban fringe needs to be made a “permitted use.” In other words, there should be no zoning restrictions in turning rural fringe land into residential land.
2. Small players need to be encouraged back into the market by abolishing compulsory ‘Master Planning.’ If large developers wish to initiate Master Planned Communities, that’s fine, but don’t make them compulsory.
3. Allow the development of basic serviced allotments ie water, sewer, electricity, stormwater, bitumen road, street lighting and street signage. Additional services and amenities (lakes, entrance walls, childcare centres, bike trails, etc can be optional extras if the developer wishes to provide them and the buyers are willing to pay for them).
4. Privatise planning approvals. Any qualified Town Planner should be able to certify that a development application complies with a Local Government’s Development Plan.
5. No up-front infrastructure charges. All services should be allowed to be paid for through the rates system ie pay ‘as’ you use, not ‘before’ you use.
Given the vast social and economic benefits that flow from homeownership, restoring housing affordability should once again become one of our nation’s most important priorities.
Regardless of whether you agree fully with Bob Day’s submission, it is reassuring to have someone entering parliament that genuinely cares about housing policy and the issue of housing affordability. I wish him well.
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
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