Yes to housing affordability, but don’t take my home
News that New South Wales may soon pass laws to enable land seizures for private housing shouldn’t surprise us.
It’s the latest in a series of alarming headlines about the state of urban development and planning in NSW.
Putting aside the benefits or otherwise of compulsory land acquisition – a tool for achieving public planning goals, already embedded within NSW legislation – it’s worth revisiting the core issues driving the latest proposal – and the range of options to address them.
Firstly, why are changes to current avenues for land seizure needed? Essentially, we’re told, to meet the local housing supply targets specified in Sydney’s metropolitan strategy. Much of Sydney’s new housing supply, so the story goes, must be delivered in existing urban areas, well served by transport and other urban infrastructure.
There’s nothing inherently wrong with consolidating existing urban areas to prevent unnecessary resumption of agricultural and bush land, and to avoid inefficient expenditure on infrastructure or services. Inner city urban renewal, and coordinated fringe development, are complementary strategies for accommodating population growth and change, standard now throughout the world.
But the story unfolds when we are told that developers can no longer assemble sufficient parcels of land to meet supply targets in inner Sydney and other highly accessible areas.
This is a serious and legitimate obstacle to new development, and selective land acquisition, under the careful management of a public development authority, may result in some additional new housing supply. There may even be affordability benefits, if acquisition contributes directly to public goals – like the supply of affordable housing.
Nevertheless a much broader strategy than what we’ve heard so far, is needed to address the underlying problem of housing affordability.
Housing analysts now agree that Australia’s housing affordability problem is structural, and won’t be solved by ad hoc or knee jerk measures. Nor is just more flats the answer, even lots of them. International evidence suggests that even a rapid acceleration of new housing construction can’t do much to dampen prices in high demand locations or secure affordable housing opportunities for those in greatest need.
This is bad news for Sydney, where affordability problems appear most intense, and a lack of workforce housing strangles economic growth.
Yet Sydney is not alone in facing affordability problems, and you don’t have to look far from our own backyard to find sensible examples of the ways in which this fundamental problem – a lack of affordable housing in the right location – can be addressed.
As demonstrated by recent history, government can use its own resources to accumulate land when prices are low, for later release when prices are high – countering the inflationary signals of sudden demand and reducing overall market volatility. In the 1970s, Whitlam’s Federal Government advanced funds to the States for this purpose, resulting in the establishment of land commissions, such as Landcom in NSW. In its heyday, Landcom acquired a substantial bank of Greenfield land, helping stabilise land prices along the urban fringe.
Two decades of economic rationalism later and today Landcom operates as a commercial development agency, despite its access to prime brownfield sites such as Green Square in inner Sydney. Any housing affordability objectives are marginal to its core business.
By contrast, in a brave back to the future move, the Queensland Government has established a new Urban Land Development Authority (ULDA) with a deliberate housing affordability agenda. Its task is to identify, coordinate and plan for, the development of major new residential communities within high growth areas.
ULDA declares special growth areas including both public and private land, and incorporating specific affordable housing provisions alongside coordinated infrastructure and planning measures to kick start new housing supply. Why not reinstate a similar agenda for Landcom or an equivalent body in NSW?
Another option, as demonstrated by numerous cities across the U.S, the U.K, and Europe, is for governments to simply reserve opportunities for affordable housing within new development, at the outset of any planning initiative. Back home, the South Australian government has a 15% affordable housing target for new development in both inner renewal and outer metropolitan areas.
Rezoning for new residential or higher density residential development occurs on the condition that the 15% State affordability target is incorporated within the new zoning requirements. This approach works to reduce the cost of land acquisition because the affordability obligation is known upfront and can be taken into account at the point of sale. The net result is more new housing on the market, at more modest prices, as well as a dedicated supply of housing for those in greatest need.
Unfortunately, we seem a long way from any of these approaches in NSW. Despite some recent and laudable incentives for certain types of low cost rental housing development, overall planning effort in NSW appears to have moved further than ever from an affordability agenda.
In its haste to implement widespread upzoning of land near trains and services for higher density residential development, the State Government has, deliberately or otherwise, generated a steep inflation in the value of such land.
This means a huge windfall to the land owners and speculators with holdings in these privileged locations, while at the same time making new acquisition in these locations far more expensive and complex.
Combined with failing demand for existing development opportunities in the neglected outer suburbs and urban fringe, this may explain the sudden plea for radically expanded acquisition powers to secure holdings in more desirable locations.
Rather than continuing to feed this monster, it’s time to switch tack. Priority government resources must help shift and spread housing demand to a wider range of alternative middle, outer urban, and regional locations – not just bolster an increasingly expensive ribbon of railside and transit zone flats.
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