Like the dozens of previous housing inquiries before it, Falinski’s inquiry into housing supply will find that giving valuable rezoning development rights to well-connected property owners and developers is the housing policy we need.
The puzzling part is that the housing developers interviewed under oath during the inquiry said that they wouldn’t flood the market to decrease prices even if they could.
Falinksi: Is it not your view that, if we increase the amount of supply, prices will go down?
Mr Helmers: I don’t think that’s the case…
Mr Long: My view is consistent with Richard’s: rezonings won’t necessarily lead to lower housing prices…
…
Falinksi: …[d]o you think if state local governments rezoned more land to allow greater supply, that you could see dwelling prices drop by 20 per cent?Mr Warner: No. Straight out, I concur with some of the comments before. It’s not going to create that much of a difference.
For perspective, Australian capital city housing prices increased 21.7% in the year to September 2021. No housing developer thought it plausible that mass upzoning could get close to reversing one year’s price growth.
Instead, they all latched on to the phrase that mass rezoning will “will moderate price growth”. I have no idea what this means. If price growth is zero in the counterfactual, will it mean prices start falling? If it moderates price growth, why can’t rezoning moderate price growth down to a negative?
Because of this ambiguity, I expect “moderate” to be a popular word in the final inquiry report.
There were also no examples put forward where mass upzoning had a substantial price effect. The RBA’s Luci Ellis noted this fact.
Ellis: As we said in our 2015 submission, there are no examples internationally of large falls in nominal housing prices that have occurred other than through a significant reduction in capacity to pay, such as a recession and high unemployment.
The best chance to find evidence in favour of mass upzoning was the world’s biggest up-zoning experiment that played out in Auckland in 2016. Prices there have risen 53% since, more than any major Australian city, suggesting that the developers were very much right that prices wouldn’t fall. It’s not clear if price growth was “moderated” up or down!
We also have seen over the past two years that regional towns, previously held up as unconstrained locations that ensure prices don’t rise too much, have boomed.
These are the important facts in the housing supply debate. I expect them to be mostly ignored.
To be honest, I’m getting a bit tired of the whole charade.
I made a submission, appeared at the inquiry, and sent follow up evidence with further examples of how property owners aren’t foolish enough to minimise the value of their assets by flooding the market with new homes.
Journalists, please do not report the inquiry “findings” uncritically. Call me first. Let’s end the charade.
Dr Cameron Murray is co-author of the Book Game of Mates. His written work can be found at Fresheconomicthinking.substack.com.