NSW is the epicentre of a long-term public policy disaster in housing that will have a major impact on Australia’s recovery from the recession.
The Federal Government can play a role at the margins, but the only solution to the problem lies in Macquarie Street and, perhaps, in the wider NSW electorate.
This graph shows housing and other dwelling commencements in NSW over the last thirty years. Despite wide variations, in the ‘80s and ‘90s housing commencements essentially moved around a band of 6-7,000 a quarter. The GST caused a spike and then sudden drop across the country, and NSW recovered like other states, but then, inexorably, began to decline. Non-house dwellings, which had been growing as a portion of the total NSW housing stock, similarly peaked and then began falling with housing commencements.
The problem lies in the lack of land released by the NSW Government and NSW’s disastrous planning regulatory system, which makes life immensely difficult for developers.
This is not intended as a defence of developers. The word itself is halfway to becoming a byword for corruption and links with organised crime in NSW, like “racing identity” was back in the 1980s. But that’s primarily because local and State Governments impose regulatory processes that depend heavily on subjective, case-by-case judgment by elected or non-elected officials, providing multiple points where unscrupulous developers are tempted to obtain a competitive advantage by interfering in due process.
It’s something of an Australian characteristic, actually: a tendency for governments to massively intervene in certain industries while both government and industry like to pretend it can continue to operate like a free market. Think health insurance, or child care. The outcome is rarely good for anyone.
There’s also a basic community resistance to development, except of course when the development in question is someone’s renovations, at which point all regulatory approvals suddenly become unnecessary “red tape” and “bureaucracy gone mad”. This reflects an ignorance of the connection between population growth and economic growth, which partly fuels the standards of living, and rising house prices, of people objecting to development. It also reflects outright NIMBYism.
The view – if I can generalise outrageously – tends to be that expanding populations can live in ever-expanding, ever more remote fringe suburbs, rather than in established suburbs. Watching protestors, including the requisite “television personalities”, from Sydney’s North Shore marching to Parliament House to protest the death of democracy a fortnight ago, one was left with the clear impression that it wasn’t so much the links between development and corruption they were worried about, as the likelihood of medium-density developments in their leafy suburbs.
The much-maligned Frank Sartor understood this as Planning Minister, having wrestled with such issues as Lord Mayor of Sydney for years. In a very good speech at Sydney University back in April, Sartor broke down the different components of the way development was regulated in NSW. He pointed out that the idea of taking politics out of regulating development was absurd, because resolving the conflict between differing community interests was innately a political task; the issue was at what point politicians played that role.
He also noted that the community rarely displayed any interest in the development of planning and building regulations until they got angry about a development directly affecting them.
Moreover, over the last two decades due to cases in the Land and Environment Court, as well as the actions of Councils, community expectations about their role in determining applications have grown considerably. So much so, that in some Councils political pressure has a greater influence on planning and development decisions than proper planning considerations. This has made planning and development decisions very unpredictable, and time consuming.
In short, who wants to obtain finance to develop property if planning decisions are essentially political arbitrary?
Sartor’s argument — partly reflected in the controversial changes to the NSW planning legislation he introduced – is that communities need to be involved in the development of planning and building regulation by local authorities, rather than waiting until a particular development raises local hackles; there needs to be greater uniformity both of building and planning regulation and public consultation processes, assessments need to be transparent and most of all need to be made by independent panels rather than by politicians.
Of course, the result will still be community anger because of the default position of voters against development. Much of the bitterness directed at Sartor as minister was over his “call-in” powers, where decisions were removed by local councils more easily influenced by angry communities. But transparency will remove the stigma of political interference, and independent assessment will provide greater certainty for developers and those who finance them.
Needless to say, that doesn’t address the core issue of the perceived corruption of political donations by developers. That can only be resolved by a ban on political donations of any kind and public funding for political campaigns. And that won’t be popular with voters either. But currently there is minimal public confidence in the relationship between politicians and developers at either local or State government level.
Sartor, of course, came a cropper not merely within the ALP Caucus but at the hands of Justice David Lloyd, who at the end of August launched a scathing attack on his role in “land bribes” in a housing development at Catherine Hill Bay. The judge concluded that Sartor had, as Planning Minister, failed to properly fulfil his duties because of his support for a swap of environmental land for development approval. Sartor has since strongly defended himself against the judge and argued that land swaps have a long and successful history under several governments.
Part of the reason Sartor wound up so despised as Planning Minister was because he refused to let NSW’s parlous performance on housing continue. Voters didn’t like it. But most voters will never like development. There are a minority of voters, usually Greens, who accept that cutting population growth will have consequences for economic growth, and welcome it. But most want the benefits of population growth without the costs. The NSW Government, regardless of who leads it, has a huge and critical task in reversing the constant decline over this decade of housing construction in that state.
I’m tempted to point out one solution – don’t live in NSW and, specifically, don’t live in Sydney. If the point of this analysis is that people in inner suburbs should continue to rent seek on valuable property while everyone else moves to ever expanding burbs then, frankly, just move out. Sydney is a train wreck – ironically enough given the lack of moving trains – because suburbs
It really is worth asking those “green voters” who Bernard says will welcome a contraction in economic growth, exactly whose “growth” they see as being contracted. It is most certainly not their own. In particular, the growth in the asset value of their real estate.
In the inner west of Sydney, where the Greens run the local council of Leichhardt, much to the delight of the Sydney Morning Herald, all development is regarded as inherently evil and refused as a matter of routine. Of course that means people are forced to live way out west, where their carbon footprint is far worse for our planet. But at least they’re not damaging anyone’s views, or taking valuable parking spaces. And of course refusing developments and restricting supply force existing property prices ever higher.
Nothing could be worse for a green voter than someone building anything anywhere near them. Especially on waterfront real estate. That, apparently is the will of Gaia.
And thank you Bernard, for explaining everything so succinctly. It’s why I just renewed my subscription to Crikey. I have buying and reading the Herald for 30 years and have never had it explained to me why the city they report on and are supposed to understand, is so stuffed. They’re part of the problem. I think now can now finally, break the habit of a lifetime.
This East versus West sledging within Sydney is so phoney. The fact is the East is highly dense and intensified and stressful in it’s own way to live in. Why should they have even more intensification? How much is enough? Sure they are richer and maybe even snobs often, though tell that to the public housing in Waterloo, Woolloomoloo, Randwick, Rose/Diamond Bay or Maroubra.
Fact is people in the East want some breathing space just like Westies want a backyard.
The reason it’s a phoney argument is Sydney is full. Sure there is a bit of extra capacity in re birthing of old industrial, and air space rights over heavy rail nodes and renovations. But the trajectory downward in the graph is probably as much to do with saturation and infrastructure capacity constraints.
The scenario you are getting here is a nationwide version of what Sydney likes to do to Bondi. All access little responsibility. Everyone’s playground but ratepayers pay the lion’s share of upkeep.
Similarly the country wants/likes Sydney as a global gateway. It likes Sydney doing all the multicultural induction work and stresses and strains of that. It’s happy to have 4 million people copping chronic air pollution 300 days a year. And they like to visit often enough.
But no way do they want to take the immigration load, or give up their extra GST subsidies from the largest population centre. Frankly it’s not just Green Party voters who are noticing the racket going on whereby certain rich folks (yes developers and mall owners) and their politician mates, all have holiday homes in Bowral and the Hunter a long way from Sydney while the rest are being crushed by their mortgage in the metropolis.
I always think it’s interesting that whenever the need for higher density in housing in places like those leafy north shore suburbs, no body ever mentions that for all the economists arguing that population growth and high immigration is the panacea of all ills, the reality on the ground for most people is lowered standards of living as urban space is squeezed, water rationing becomes necessary, traffic levels reach gridlock etc etc etc.
Intensification is at the heart of what makes cities interesting places to live. Manhattan did not attain its iconic status by insisting on restricting densities. Increased densities have the potential to make our cities more exciting.
Instead of fighting it we should ensure that real estate developments meet the highest environmental and aesthetic standards and the infrastructure is upgraded to the point where, for example, people no longer feel compelled to own a car but only need to hire one occasionally.