Everyone wants to have a ‘fair go’ at home ownership or have a roof over their head. Access to land and housing is one of the greatest intergenerational equity crises that we face as a country.
Why is it so difficult to provide housing for all Australians?
One popular theory is that housing remains expensive because the supply of new dwellings in accessible, desirable locations has not kept pace with demand due to planning constraints.
The suggested policy intervention is for governments to rezone more land from non-residential to residential uses, and at higher densities, as quickly as possible.
Removing regulatory barriers, rezoning and investing in enabling infrastructure such as transportation, is assumed to “allow” the market to be flooded with dwellings, depressing the price of housing.
But what about all the existing zoned land?
Housing developers often claim that they are building new housing as quickly as possible, for economic reasons, but that planning regulations are the limiting factor.
The Staged Releases Report investigates the rate of lot sales in nine major master-planned housing developments across Australia.
In this report we ask whether the private choices of property owners to supply new housing according to market conditions works against the stated public policy outcome of supply-driven affordability through rezoning.
We find an approach that responds to price growth but appears crafted to avoid creating supply-led price declines. It is our opinion, based on these findings, that we cannot rezone our way to housing affordability.
Stage Releases report challenges governments at both the Federal and State levels to appreciate that expanding privately held land supply is not enough to alter the trajectory of runaway land prices.
The findings behind the curtain
After an average 9.5 years of production time, these Master Planned Communities (MPCs) still held 76.2% of their land bank vacant across all forms of permitted housing.
Instead of prices falling with the supply capacities at hand, the average land price inflation rate was 5.5% annually in real terms i.e. after subtracting CPI. Wage growth ran at only 2.4%, some 55% less than the land price increase.
The complete record of over 25,000 sales in these nine sample subdivisions was analysed, revealing that sale rates in these large approved MPCs vary significantly according to the market conditions.
Markedly higher sales occurred when the market was running hot (mid 2015-mid 2017) compared to when the market cooled (18-19). The rate of sales, and hence the rate of new dwelling development, contracted 48.7% between the two periods as the promise of supply-led affordability was held at bay.
Other notable findings:
- Average lot sale prices increased $194,010 across these projects
- The rate of sales between boom and bust periods varied by 41.4%
- Yearly supply rates were delivered at a median of 3.4% of total lots approved
If we want to actually address the housing affordability crisis in this country, we need to start prioritising supply delivery over land banking. Land taxes should be ratcheted upwards for developers who don’t meet certain supply outcomes, with revenues hypothesised into affordable housing.
Third market housing options like Community Land Trusts must be prioritised so that building occurs when people most need it, during downturns.
Peering behind the land supply curtain should redirect our attention away from tinkering with planning to the bigger issue at play.