In Australia, density means “smaller, worse, slower” housing delivery


By Ross Elliott from The Pulse:

In 2005, a UK policy group “The Policy Exchange” published “Bigger, Better, Faster, More: Why Some Countries Plan Better than Others” It surveyed four countries with similar demand side pressures to the UK, to explore what was being done well, and what wasn’t. Australia was one of them.

“Britain’s centralised system of planning restricts the supply of housing. As a result, Britain has some of the oldest, pokiest and most expensive homes in the world,” it said.

For Australia they concluded that it was “Death of a Dream: Planners versus the Traditional Australian Home”:

“The Australian desire to create a home away from ‘home’ (their European roots) has led to a strong cultural preference for spacious houses with big gardens – ‘the Great Australian Dream’. Various Australian (state) governments have threatened this dream by reducing the quantity of land released for housing and by levying homebuyers to provide infrastructure. Both policies have had a strong upward impact on Australian house prices… land-use planning has actually created a shortage of land – in a country with a population density of only 2 persons per square kilometre.”


They added: “In Ireland and Australia, with planning systems derived from the UK’s, restrictions on the supply of land, densification policies and central planning fail to provide the kind of homes people want, and lead to high real house price inflation.”

They were right. Our regulatory approach hasn’t changed but we have added to demand pressures via record immigration (the main driver of population growth). Now, as if taken by surprise, we find ourselves in a “housing crisis.”

Rather than “bigger, better, faster, more” we seem to be doing smaller, inferior housing which is taking longer to deliver plus we are delivering much less of it. Why?

Urban policies which preference density over sprawl are partly responsible – and before you start poking pins into your Rossco voodoo doll, hear me out.

There are many compelling reasons to pursue higher density: a more efficient use of space and proximity to necessary infrastructure among them.


My interest in suburban renewal precincts recognises that many of these potential renewal precincts historically carried more employment density than they do today: hundreds or thousands of workers used to work under saw tooth shed roofs which today store boxes or caravans and are overseen by two kiwis with a forklift.

Returning employment density to these precincts, supported by housing density and social infrastructure, means more jobs and amenity closer to where people live, amongst other things.

However, density is difficult and not very popular. It is also more expensive to develop and takes longer for even simple development propositions to be approved.


The lowest hanging density fruit is what is now euphemistically called “gentle density.” But try introduce this in the form of relatively benign townhouses into low density streets full of detached housing and you have a residents war on your hands.

Write them off as NIMBYs if you like but they all vote and they are entitled to protect their single biggest asset – their home.

If they are not convinced that broader town planning aspirations mean knocking down detached houses in their neighbourhood for the common good, they will let their elected representatives know of it. And they do, loudly.


Consider also that finding suitable sites for even medium density housing projects is not easy. Sites with the least risk of confronting community and local council opposition are either spoken for or – if available – demand a high price premium. Developers will tell you that finding sites at prices which work is a massive challenge.

Then you need your project approved. One site in inner Brisbane has just received development approval – a full decade after it was first lodged.

Neither is density affordable. A two-bedroom apartment struggles to be built (not including land) for less than $800,000 these days. A three-bedroom house can still be built for under $350,000 not including land.


The greater the density of housing type the higher the cost per square metre to build.

It’s worse for social infrastructure: a typical low-density school on a 7-hectare site in a new estate will cost around $15m to $20m to build.

Try to even find a 3ha site for an infill school where you won’t confront a phalanx of objections over traffic, noise etc. Then you have the build cost of a vertical school which will be closer to $150m for the same number of students. Ten times more expensive.


And in all likelihood, many years before you get through all the planning applications, assessments, appeals, courts etc.

But surely there are infrastructure savings under the density model? That’s debatable.

The cost of installing below ground water, sewer, power and telco infrastructure in a new housing estates is considerably cheaper than the cost of retrofitting older infrastructure in existing areas which may not have been designed to handle the increased demands of higher density models.


Plus, you can even find that infrastructure providers in the form of utility companies may object to infill proposals which increase density if that means it risks over taxing the capacity of their aging network infrastructure. They become objectors to the very models of urban growth endorsed by their government owners.

Infrastructure such as public transport is more efficient under higher density models. But getting to the point where density becomes efficient for public transport includes many years of pain when it isn’t.

Savings on one side of the density equation are often over-hyped, while the costs on the downside are frequently glossed over.


We need to accept the reality that higher density development, especially when being introduced into existing metropolitan areas, is more costly, more difficult and takes longer, whether that is housing, schools, hospitals or network infrastructure of some type.

Given this, it should come as no surprise that our supply responses are slowing down. Stuff is taking much longer.

But density is our preferred urban development policy approach, and there are compelling reasons for it. Logically it should follow that, if we are to pursue higher density as the preferred metropolitan development model, we would also do so in a lower growth environment, in recognition of the delivery challenges.


Instead, we are promoting density as a solution to very high rates of growth. This is a bit like putting a tractor on the start grid of the F1. You don’t stand a chance.

If the objective is to address the “housing crisis” and other shortages, then doing things “bigger, better, faster, more” is how we need to be doing it.

Instead, we are persisting with a policy and regulatory framework which has proven itself mostly capable of the opposite.


Something has to give. We either change the assumptions of underlying planning orthodoxy, or we moderate growth – slowing it down to the same careful snail’s pace that current urban planning regimes support.

We can’t have both and expect anything to change.

About the author
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.