Performance Urban Planning.org

The pointy end of housing policy failure ... Miranda Maxwell ...Business Spectator
Just a day after the New South Wales Government launched a 10-year public housing reform program, Sydney was nominated second least-affordable major housing market in a major survey, pipped only by Hong Kong and exceeding the extremes experienced on the US West Coast during the housing bubble of the last decade.
Sydney scores a median multiple - the median house price divided by gross annual median household income - of 12.2 in Demographia's International Housing Affordability Survey, only topped by Hong Kong's 19.
There was a three-way tie for fourth least affordable middle-income housing between Auckland, Melbourne and San Jose, with a score of 9.7. That beat out San Francisco's 9.4 and Greater London's 8.5.
Demographia, which studies 87 metropolitan markets of over a million in population across Australia, Canada, Hong Kong, Ireland, Japan, New Zealand, Singapore, the United Kingdom and the United States, concludes that policy is a key determinant of housing affordability.
It is adamant that land supply, and not demand, is the culprit behind what it terms virtual spiralling out of control of affordability in places like Sydney, Melbourne and Auckland.
"Severely unaffordable housing has occurred only in major metropolitan areas that have strong land use policy, especially urban containment boundaries and variations thereof," emphasises the survey.
Historically, median house prices were two to three times median household incomes. In recent decades, house prices have been decoupled from this relationship in a number of markets, such as Vancouver, Sydney, San Francisco, London, Auckland and others.
Without exception, these markets have severe land use restrictions - typically "urban containment" policies that severely ration land for development on the urban periphery - that have been associated with higher land prices and in consequence higher house prices, Demographia says, adding that periodic reviews of housing supply, put in place to maintain housing affordability in these metropolitan areas, have generally not succeeded.
Recently, more encouraging developments have been implemented by governments in New Zealand and Florida, and there are signs of potential reform elsewhere.
Despite having perhaps the most land constrained geography of any major metropolitan area in the world, Singapore has been far more successful in controlling housing affordability than in markets that have followed the British urban containment model, Demographia says.
The Singapore government established a publicly sponsored housing construction program that sells houses to consumers, a program which represents nearly 90 per cent of the owned market in a country with 88 per cent home ownership, the highest of any country in the survey.
Buyers are free to sell their own houses, but there are restrictions on foreign ownership, which has shielded Singapore from the heightened cost escalation in global real estate markets.
Meanwhile, the public housing overhaul in New South Wales is focused not on home ownership, but on getting those in government housing into the private rental market, via the use of rental assistance products to help vulnerable households avoid or leave social housing.
It won't hurt the building industry, with a cool $22 billion in construction activity projected to be generated from the building of 23,000 new and replacement social and affordable housing properties.
This has of course raised concern that the demolishment of some existing public housing is premature in a rental market that is neither secure nor affordable in the eyes of many.
It is not helping that the government is reaping millions from property sales in Miller's Point after evicting public housing recipients. The latest site goes on the block in a month, with a guide of $6 million.
"The government's long awaited social (and affordable?) housing plan is all about pushing existing housing tenants into an unreliable private rental market," said shadow spokeswoman for housing Tania Mihailuk on her Facebook page.
"Once again the winners are investors and developers, not families and people in need of secure housing. This government is telling thousands of Housing Tenants to go out and try their luck in the private rental market. Apparently there are copious numbers of affordable rental properties in Sydney. We just haven't found them!," Mihailuk said.
The NSW 10-year public housing overhaul is the pointy end of what Demographia declares is "a profound policy failure" that has seen house prices double and triple relative to incomes in many metropolitan areas.
Those who place the blame squarely on land supply say this loss of middle-income housing affordability can only be truly mitigated by allowing quality new starter housing on the urban fringes at 2.5 times the gross annual median household income of that urban market, and allowing associated commercial and industrial development to be provided.

Welcome to Performance Urban Planning

As a long term commercial development practitioner and former industry leader in New Zealand, I was approached by colleagues back in late 2004, expressing concern that the public was not being provided with sound structural information on the state of the urban housing markets within Australia and New Zealand. [more]

... THREE YEARS ON ... THE GREAT CONSENSUS EMERGES ...

... FOCUS ON LAND SUPPLY & INFRASTRUCTURE FINANCING ...

There is an emerging consensus about the destructiveness of excessive land use regulation, both with respect to its impact on housing affordability but also its overall impacts on economies. This is most evident in a recent New Zealand commentary ...

In recent years, and especially over the last few months, economists and other public policy experts across the political spectrum have come to realize that zoning rules are a major obstacle to affordable housing and economic opportunity for the poor and lower middle class. By artificially restricting new construction, zoning and other similar land-use restrictions greatly increase the price of housing, and prevents the market from adjusting to increasing demand. ...

... UPDATE: As New Zealand-based economist Eric Crampton pointed out to me on Twitter, a similar cross-ideological consensus may be emerging in that country, as evidenced by this recent article co-authored by free market advocate Oliver Hartwych, and Labor Party Housing Spokesperson Phil Twyford. ...

Studies have shown that cities are an engine room of growth. Incomes in cities are higher than elsewhere. That is one explanation for high rates of urbanisation.

Research indicates that when planning rules prevent workers shifting to higher-productivity locations, then there is a cost in terms of foregone GDP.

It's only relatively recently that economists and politicians have understood the scale of those effects. ...

But Mr Wheeler this afternoon told MPs the faster house prices rose in Auckland, the greater the likelihood of a steep price reversal.

He (Reserve Bank of New Zealand Governor Graeme Wheeler) said Auckland house prices were not sustainable.

"The house price to income ratio for Auckland is at nine. It's twice that for the rest of the country," he said.

"A ratio of nine puts you, according to Demographia figures, in the top 10 most expensive cities in the world.

Few business people are good at democratic politics. They expect what works in business to work in democracy. They're frustrated by the messy necessity to maintain a working consensus, by multiple conflicting objectives, and by the unreliability of delegates.

They think that if only the right people were in charge, the best structures and systems would be like those in business, where everyone accepts single prevailing decisions from nominated rulers, and he who pays, rules.

Business people who get embroiled in politics commonly hate it so much they eject before they flame out. Those who survive and learn may be small in number but they are among the best we have, and we owe them a lot for their patience. ...

... That is not research evidence, but it is puzzling that business has not watched the Canterbury experience, and the extent to which Canterbury has been saved from presenting unrelieved incompetence by the safety valve councils of Selwyn and Waimakariri. You'd think they might have asked Hugh Pavletich to come up and report. Christchurch has been hostile to business ever since Christchurch City was jammed together as a prototypy 'super-city' two decades ago. ...

ARTICLES ... ABOUT / BY HUGH PAVLETICH

DEFINITION OF AN AFFORDABLE HOUSING MARKET

For metropolitan areas to rate as 'affordable' and ensure that housing bubbles are not triggered, housing prices should not exceed three times gross annual household earnings. To allow this to occur, new starter housing of an acceptable quality to the purchasers, with associated commercial and industrial development, must be allowed to be provided on the urban fringes at 2.5 times the gross annual median household income of that urban market (refer Demographia Survey Schedules for guidance).

The critically important Development Ratios for this new fringe starter housing, should be 17 - 23% serviced lot / section cost - the balance the actual housing construction.

Ideally through a normal building cycle, the Median Multiple should move from a Floor Multiple of 2.3, through a Swing Multiple of 2.5 to a Ceiling Multiple of 2.7 - to ensure maximum stability and optimal medium and long term performance of the residential construction sector.

HUGH PAVLETICH

CONTACT
+64 3 343 9944
Christchurch, New Zealand

IMPORTANT BOOKS

WILLIAM (BILL) & ALFRED LEVITT
The Fathers of Affordable Housing

New Zealand Government Affordable Housing Initiative

Demographia International Housing Affordabililty Survey

Shlomo Angel: Making room for a planet of cities.

Dr Thomas Sowell

Nick Smith Appointed New Zealand Housing Minister

New Zealand Prime Minister John Key

ANDREW ATKIN

ARE WE PAYING TOO MUCH TO BUILD OUR HOMES ?

CHRISTCHURCH COUNCIL SLOWING REBUILD

CHRISTCHURCH & HOUSING

Important Academic
Research

Christchurch: The Way Forward

KIWI ENTREPRENEUR ... STEPHEN JENNINGS
HOUSING AND AFRICA

... THREE YEARS ON ... THE GREAT CONSENSUS EMERGES ...

... FOCUS ON LAND SUPPLY & INFRASTRUCTURE FINANCING ...

ARTICLES ... ABOUT / BY HUGH PAVLETICH

DEFINITION OF AN AFFORDABLE HOUSING MARKET

HIGHLIGHTED ARTICLES

ARTICLES & SUBMISSIONS BY HUGH PAVLETICH & ARTICLES OF NOTE

CONTACT +64 3 343 9944 Christchurch, New Zealand

IMPORTANT BOOKS

WILLIAM (BILL) & ALFRED LEVITT The Fathers of Affordable Housing

New Zealand Government Affordable Housing Initiative

Shlomo Angel: Making room for a planet of cities.

Important Academic Research

KIWI ENTREPRENEUR ... STEPHEN JENNINGSHOUSING AND AFRICA

... THREE YEARS ON ... THE GREAT CONSENSUS EMERGES ...

... FOCUS ON LAND SUPPLY & INFRASTRUCTURE FINANCING ...

ARTICLES ... ABOUT / BY HUGH PAVLETICH

DEFINITION OF AN AFFORDABLE HOUSING MARKET

HIGHLIGHTED ARTICLES

ARTICLES & SUBMISSIONS BY HUGH PAVLETICH & ARTICLES OF NOTE

CONTACT
+64 3 343 9944
Christchurch, New Zealand

WILLIAM (BILL) & ALFRED LEVITT
The Fathers of Affordable Housing

Important Academic
Research

KIWI ENTREPRENEUR ... STEPHEN JENNINGS
HOUSING AND AFRICA