Englobo IV: Land, Land, everywhere but not a place to sit

Victorian Planning Minister Matthew Guy has been out this week energetically pointing to fresh ‘land releases’ around Melbourne.  Growth, or the illusion of growth, is a powerful sedative that buys contentment and political support.  He will bang this drum hard.

Plan Melbourne – the Napthine government’s vision for development – forecasts a Melbourne of 6.5 million people by 2050, adding 2.5 million to our existing 4 million.

That’s an average 62,500 new residents each and every year who will increase the demand for dwellings by 25,000 a year, in addition to the orderly renewal of the existing housing stock (Plan Melbourne sees the population additions coming earlier rather than later, but we will overlook that detail).

Melbourne’s Urban Growth Boundary was enlarged three years ago to around 400,000 lots.  As with every earlier Melbourne planning scheme, there is plenty of prose and gestures ruling off any further enlargement forever and ever, Amen.  This objective has never been adhered to.

Within the UGB are local Precinct Structure Plans which lay out where the schools and pipes and parks are to go.  More have been gazetted, so 150,000 lots are shovel-ready.

MEL lot supply by development status 2004-2013 600

The planning department and its Minister can now argue they provide only a modest impediment to land supply. Yet something or someone stands between citizens and a home: last year, only 11,300 lots were produced in Melbourne.

Boroadacre lot onsrtruction  600

In an orchestrated act of sheer bastardy – and I am as polite as my seething anger will permit – the planners and developers have conspired to shrink new lot sizes dramatically.  90 per cent of all new lots are smaller than 650 square metres and 70 per cent less than 500 square metres. This is inflating mightily the value of land per square metre, to the further benefit of landbankers and developers. It is a policy failure of the first magnitude to allow private interests to continually jack up the price of land and pocket the proceeds.

Vacant land cost m2

Not only are new home buyers presented with poor infrastructure as the schools and transport only follow construction after big delays, the lot sizes on offer prohibit a garden or space for the kids.  And buyers are supposed to be pleased!

MEL broadhectare lot consrtuction by lot size 2005-2013600

The government’s ‘clean hands’ on land supply means the choke point is elsewhere: existing landowners content to simply sit on zoned land anticipating price rises driven by population growth, and developers drip-feeding the market to maintain their desired cost profile and profit margin.

Their rational self-interest drives up the price of land everywhere and impoverishes us all.

The Napthine government is a willing participant in the landbanking game.  Last year, it exempted these landowners from State Land Tax, removing a small but insistent incentive to put land to use – never mind the owners are already enjoying windfall gains from the zoning lottery.

We, the citizens, need to rethink our land priorities. In land-rich Australia, easy and inexpensive access to this essential resource should be recognised and valued as a key national advantage.  Under current economic settings, landbankers, developers and the debt-issuing banks enjoy the fruits of our efforts.

It appears every government agency from the Commonwealth Treasury down is straining at every sinew to maintain high land prices.  They say they fear a bubble burst and sudden economic reversal.  Their concerns are misplaced. The diversion of  millions of  lifetimes’ income to buy the land under any home is a greater sacrifice, a greater tragedy, than the cost of land prices reverting to mean.

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https://prosper.org.au/2014/01/24/englobo-iv-land-land-everywhere-but-not-a-place-to-sit/