Submitted to the Daily Telegraph (Sydney), 27 April 2014
According to the public policy focused McKell Institute, twenty years ago it took three times the median salary to buy a house in Sydney. Now it takes nine times, a higher ratio than in London or New York at the peak of the market.
This unaffordability crisis puts Sydney at the top of the wrong league table.
And if you do not own a home, rents are ballooning in Sydney, rising four times faster than inflation.
This is a housing system in acute stress. It is broken.
On the latest demographic projection of Sydney’s population increasing by 1.5 million over the next 20 years, we need 32,000 new houses or apartments a year.
Last financial year Sydney built 21,000.
Sydneysiders have been badly let down by the NSW planning system that makes property increasingly out of reach for average income earners.
There is not just one factor causing the escalation in housing costs and some factors we cannot do much about – such as the mining boom in Western Australia and Queensland that increased the cost of labour and material over the past decade. As demand for skilled labour, plant and equipment shifted to mining sites, this drove up prices in Australia’s major metropolitan regions.
But some factors are in our power to change.
Getting approval for building a home or a block of dwellings should not be as incredibly hard and cumbersome as it is. Delays add to cost. Extra cost hurts affordability.
There are two main sources of supply for new housing in Sydney – namely, greenfield development “out west” or infill development, such as greater density along transport corridors.
Both are taking too long to achieve.
It can take five to six years to rezone a site, followed by years gaining planning permission for a development approval that, in more detail, spells out what was already approved with the rezoning. Very few organisations, never mind individuals, can absorb the financial and time costs.
Councils have a monopoly power over rezoning, only rarely usurped by the NSW state government.
Despite all the efficiency drives, everything takes longer to consider and approve than twenty years ago.
The cost of doing business in NSW is much higher than in other state in the nation, approvals take longer, and creativity in planning approvals is rarer. One of the great myths of planning is that taking longer to make a decision produces a better, more considered, outcome.
There are some exceptions. Clover Moore’s City of Sydney sometimes displays imagination in promoting excellent design outcomes. The density and mix of development, including the hanging gardens of the CUB site at Broadway is an excellent example. The owners of the old Police HQ in College Street East Sydney gained improvement in height by retaining much of the old internal structure of the building – a green outcome. Such achievements ought to be more commonplace.
Many Councils shy away from making decisions. Yet Sydney has a real housing supply shortage that must be tackled.
Presently, the Department of Planning & Infrastructure sets ‘housing targets’ that each Council needs to reach. There are no sanctions It is a terrible system when central government determines the targets, but Councils face no consequences for their failure to meet them and no benefits if they exceed them..
It’s time to provide Councils with real financial incentives to for reaching and exceeding housing approval targets.
So, if a Council has 2,000 new housing starts per year as its target, it should be rewarded for meeting that target – with a bonus for exceeding it.
If a Council refuses to reach its target, it should be penalised..
Without this sort of market mechanism approach, we’ll keep on the same path as we are on now – too few housing starts, too little development approval.
Five years ago, an economist from the UK Treasury on secondment at the Department of Planning was shocked that hardly anyone he worked with was economically qualified. Economics is not a strong suit in the degrees of town planners.
Yet the Department is one of the key economic departments of the NSW government. A great deal of the of the state’s economic activity and viability hinges on the decisions made there. The Department’s top leadership know this. But the whole organisation needs a serious shakeup and wake up to think more creatively and dynamically along the lines of ‘what am I doing today to get NSW moving?’
This is not a recommendation for open slather. Good development needs rules and guidelines and their policing. It’s not about one or the other. It is about getting the balance right.
Every government, State and Federal, say they want to foster an ‘Open for Business’ attitude.
With numerous impediments to economic activity in NSW arguably now, more than ever, the State government should foster a pro-business economic climate. Getting more decent quality homes built sooner, is a sure sign that we are really making progress.
It is hit and miss writing articles for newspapers. You never know what will get published. This one did not make it.