RBA president Philip Lowe
After the Grattan Institute this week shined a light on how NIMBYism has punished low-income earners and young people by locking them out of established suburbs, the Reserve Bank has produced some startling figures on just how much zoning decisions increase the cost of housing.
A research paper by Ross Kendall and Peter Tulip attempts to identify the gap between the market value of land, reflecting zoning decisions, and the actual physical value of it in different cities. “[L]arge increases in values as a result of zoning changes are inconsistent with the view that a physical shortage of land itself is the main cause of high land values and housing prices — and instead point towards a high ‘shadow price’ of government permission to build dwellings as a likely explanation.”
According to Kendall and Tulip, the average detached house in Sydney costs an extra $489,000, due to zoning decisions by local councils — 42% of the total price. The comparable figure is $324,000, or 41%, in Melbourne, 29% in Brisbane and 35% in Perth.
What the authors don’t say is that the beneficiaries of this “shadow price” of regulation are the existing homeowners in established suburbs who are able to influence local government bodies to prevent medium-density development, often using canards such as “local character”. While property developers are often (rightly) linked to corruption at the local and state government level, it’s hard to find a different word to describe residents using local government regulatory processes to inflate the value of their properties by 40%.
Unrepresented in zoning decision processes, of course, are the lower-income and young people who would benefit from being able to purchase housing in established suburbs with infrastructure links and proximity to jobs and economic opportunities, who face either having to pay the extra 40%, or live many kilometres away from jobs and spend far greater time commuting, or rent from property investors. They’re unwilling participants in this class war, and they’re losing.
Is it NIMBYism to have a few islands of original character housing left standing? In Queensland “Queenslander” houses are disappearing to the point that few remain as a suburb identity. I was in Sydney recently and rejoiced at the sight of original terrace houses. Where we had them in my hometown they are now all gone.
I am not arguing for locking people away in the outer suburbs, but of all the answers to address the housing crisis this seems pretty low fruit. Get negative gearing sorted first then you can talk about demolishing old suburbs for box apartment living.
Fing is, even if Crikey had a sub editor, they would still have to be literate, else they’d happily allowed through something like “… shined a light” as they drived a coach & fore threw.
EWINism more likely the problem…….
Eye Watering Immigration Numbers.
Maybe build a few more cities?
Or maybe we should quit the federation to regain control?
No it’s easier to glare with envy at others.
There are bloody towers popping up everywhere. What bullshit is the RBA talking? If you look at the map, it is the inner city and the posh Liberal suburbs in the north shore and Turnbull land where the problem lies. (Where the likes of RAB board members live too to be sure). There is no zoning impediment in the way of much of Sydney, but there are a bunch of structural impediments, such as crap public transport and no decent green space, horrendously ugly towers and, what neither Bernard nor the RBA admits, massive apartment complexes on old public housing sites, but the apartments are very costly and very poorly built. Then there is the RBA’s interest policy and the negative gearing. Tosh I think.
I can’t speak for Sydney. I can speak for Melbourne and what Bernard says resonates with me. Even among ALP voters there ends up being a split between the older property owners who rail against those bloody property developers and talk passionately about “local character”, and the younger crowd who quite understandably don’t give a fig about local character when it is used to maintain property values and ensure that only someone with rich parents can buy a property closer to the city that Caroline Springs. Hell, Caroline Springs was the edge of Melbourne when I was a student- it’s probably pretty posh by current 20-something standards, I need to update my references.
I do own a property in a nice suburb, and so I know firsthand how expensive it was and how fast the property values have grown even since I managed to get a hand on the ladder. I do not EVER oppose medium density housing in my area, being frozen in the past and refusing to accomodate the future is a conservative trait.
What used to particularly irritate me when I lived in the Melbourne CBD was people objecting to towers IN THE CBD, as if rundown piles of crap in the north and west of the CBD had “character” and “heritage”. Pure NIMBYism.
I live in the inner west of Sydney, where the median for a house like mine is $2.3m. 42% of that (the RB figure for the cost of Nimbyism) is a cool $1m.
Last time BK raised this issue, many Crikey readers took him to task. Many, like me, most likely live in the Greens voting inner suburbs of Sydney and Melbourne. We are all massive beneficiaries of our council’s and local politicians (mine is Greens MP Jamie Parker) efforts in keeping those medians rising ever upwards by zoning for scarcity. But I shouldn’t zero in on the Greens (although they are the Nimby champs, and are way more active in keeping outsiders out than Labor or Lib); all local politicians know that this is the only game in town. If they fail to vigorously oppose development, they will be voted out.
Those who claim their objections to increasing housing supply are about “amenity” or “local character” are talking in code. In their hearts they KNOW it’s about that cool $1m they are pocketing. Oddly enough, many of them will also have stickers on their cars and properties that claim, “Refugees welcome here.” Errrr…. no, they don’t mean that. Just watch all hell break loose if someone dares to propose an “affordable housing” project in their hood!
Rubbish. Anyone who is pleased that their house is worth $1 million is economically illiterate.
If they sell, they’ll have to buy another house – at the same high price.
Plenty of economic illiterates.