The AFR is running an article claiming that “Millennials are a time bomb for the NSW property market”.
Citing a NSW Productivity Commission (PC) White Paper, The AFR claims that Peter Costello’s Baby Bonus generation will soon need their own housing, which will drive a chronic shortage of homes across Sydney in the second half of the decade.
Accordingly, drastic planning reforms are needed to increase density across Sydney’s suburbs:
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The commission argues incentives should be provided to encourage councils to approve more housing, approve development applications more quickly and set population-growth targets for individual councils…
Housing Industry Association economist Tim Reardon said the report appeared to suggest the Department of Planning share responsibility for the supply of land with the Treasury department,
“When you look at planning regimes, very few have as an objective to meet demand for housing,” he said.
The AFR conveniently leaves out that the NSW PC Report explicitly states that the housing shortage was caused by an unexpected boom in Sydney’s population when the federal government threw open the immigration floodgates in 2005:
Below are the extracts from the NSW PC highlighting this exact point:
Much evidence suggests that our State, and Sydney in particular, has not delivered enough housing over many years.
Of many possible contributing factors, two stand out. First, population growth has exceeded expectations. Forecasts made in 2005 predicted that Sydney’s population would reach 5.2 million by 2031. More recent projections are for a population of around 6.2 million by this time (NSW Department of Planning, Industry and Environment, 2019).
Second, housing supply policy has not achieved the desired results. Even during the more recent housing construction boom, the number of dwellings completed has, on average, fallen short of planning targets (see Figure 7.1).
Since 2006, NSW housing supply has not kept pace with demand or State targets. That has created an accumulated underlying shortage of dwellings. The 2016 NSW Intergenerational Report estimated an accumulated shortage of 100,000 dwellings. The high levels of completions since 2016, along with declines in net immigration due to border closures, have brought the estimated shortage down to around 54,000 dwellings in 2020 (Figure 7.2).
The shortage is expected to shrink further in the near term as border closures constrain population growth and hence housing demand.
Undersupply is expected to continue and increase if we do not change the way we plan for housing. If future undershooting of targets is assumed to be consistent with the past, undersupply is projected to gradually build again to more than 100,000 dwellings by 2038 (see the right-hand side of Figure 7.2). This highlights the urgency of unlocking additional housing, both now and into the future…
The NSW PC Report also forecasts that immigration and population growth will return to its pre-COVID level, which will obviously drive the predicted housing shortages over the second half of the decade:
Impacts of COVID-19 immigration restrictions mean the State’s population growth will ease over the next year or more. But later in the decade, population growth is expected to return to near previous levels.
Let’s get back to basics here. Sydney’s housing shortage could be solved with the stroke of a pen by the federal government. All it needs to do is reduce immigration back to historical pre-2005 levels. This would also negate the need to bulldoze Sydney’s suburbs into high density.
Without immigration, Sydney’s population wouldn’t even grow (see above chart). Thus, immigration is the primary driver of Sydney’s housing shortages.
Why won’t anybody acknowledge the bleeding obvious?