Answer to housing affordability problem is more supply

24 January 2011

Policy-makers should take action in response to a new housing affordability report, but the prescription advocated by the Greens Party would make the situation worse, according to the Urban Taskforce. The 7th Annual Demographia International Housing Affordability Survey has found that Australian housing remains the second most unaffordable in the world, (trailing Hong Kong). According to the report, Australia’s major markets have a severely unaffordable median multiple of 7.1, nearly two-and-half times the affordability standard.


The Urban Taskforces chief executive, Aaron Gadiel, said that a rising share of the population is being priced out of the housing market.


Just 28 per cent of homes sold Australia-wide are affordable to moderate-income households, Mr Gadiel said.


Melbourne, with its relatively robust housing supply, has the highest proportion of homes affordable to moderate-income households at 39 per cent – while in Sydney only 26 per cent of homes sold were affordable to moderate-income households.


Mr Gadiel said that reduced affordability has contributed to falling levels of home ownership.


In the twelve years to 2007 the proportion of the community who were owner-occupiers fell from 71 per cent to 68 per cent, Mr Gadiel said.


Home ownership in the 25 to 34 year old age group has plummeted from 52 per cent to just 43 per cent.


In the 35 to 44 year old band, home ownership dropped from 72 per cent of households to 65 per cent.


In the 45 to 54 year old age group the level of home ownership fell from 82 per cent to 76 per cent.


Mr Gadiel said the housing affordability problems were a direct consequence of Australias dilapidated town planning laws.


Australias housing shortfall is close to 200,000 homes, with a projection for it to grow to 308,000 dwellings over the next four years.


The sweeping prohibitions and restrictions, together with inefficient infrastructure charges, have crippled Australias housing supply, Mr Gadiel said.


Mr Gadiel said that there was a shortage of detached housing in outer suburbs, as well as apartments in the inner suburbs of major cities.


Its wrong to blame the lack of new detached housing on infill development the shortage exists across the board, he said.


Generally speaking, local councils are dominated by not-in-my-backyard (NIMBY) agendas.


Many councils will actively undermine efforts to provide compact pedestrian friendly communities around good transport links.


In outer suburban areas, a reluctance by all levels of government to invest in urban infrastructure has been a real blockage.


Mr Gadiel said that necessary reforms must include:


¢ a genuine commitment by government to implement rezonings, in-line with clear strategies adopted by state governments;


¢ planning authorities should be obliged to approve development proposals that meet the goals of the strategy;


¢ local and state development levies should be significantly reduced to a lower, more stable, rate; and


¢ public urban infrastructure investment in areas of high growth should be significantly increased.


Mr Gadiel said that proposals by the Greens Party in NSW were not the answer.


Theyre advocating a system of rent control for new housing development.


This will only further undermine the economic viability of new home development, and make the supply situation even worse.


The Urban Taskforce is a property development industry group, representing Australias most prominent property developers and equity financiers.


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