Sydney: a housing system in acute stress
I’ve been busy. I’ve co-written (with a colleague called Sean Macken) a report on the supply and affordability of housing in Sydney. It’s called Homes for All:40 things to do about supply and affordability .
It was for a think-tank called the McKell Foundation named after a well-respected and pragmatic Labor Leader in NSW who was premier during the war years. It’s a non-political report and has been commended on all sides of politics. It expresses views on planning I have outlined before in work I am doing for the Committee for Sydney where I am strategic advisor. We ended up doing about 20 media interviews on Homes for All. The full report is available here.
Two things seemed to catch the imagination. One was that current planning policy has almost made impossible one of the most affordable, sustainable, well designed and popular style of homes:the Sydney Terrace. We called for a reinvention of the terrace for the 21st century.
The second thing which attracted attention was two stats. Currently 70% of 35 year olds and below in Sydney cannot access home-ownership. At the same time, 22% of all Australians now own 55% of the nation’s housing stock. This strange result has been caused by a combination of Nimbyism and over generous tax allowances to home-owners and the middle class which have fuelled home-price inflation and strangled supply. Essentially, renters are subsidising owners of 2,3,4 and 5 homes. This got a lot of attention.
Have a look at the introduction I wrote for the report below then have a look at the full report. British readers will have a sense of déjà vu and find that despite the differences of policy and scale Australia’s housing distortions are quite similar to the UK . And just like bad public policy caused supply and affordability problems in the UK as in Australia so too can good public policy sort the problem out.
Twenty years ago it took three times the median salary to buy a house in Sydney. Now it takes nine times, a higher ratio than London or New York at the peak of the market. It puts Sydney at the top of the wrong league table.
At the same time, home ownership is becoming something older people do. Housing stress, whether it’s the cost of a mortgage or rent, is now afflicting over half the population, with interest rates set to rise further. Many cannot get a home to buy or rent affordably or have to go to Sydney’s edges to do so. First time buyers now typically pay half of their income on mortgage costs.
But while two thirds of 35 year olds in Sydney cannot access home ownership a fifth of the population now owns half the homes – because the perverse demand incentives and shortage of supply are making multiple ownership available to the few, but sustainable home ownership is open to a declining proportion and increasingly at an older age.
The whole system is under acute stress
The knock on consequences affect the whole system. Rents in Sydney are rising four times faster than inflation. The squeezed middle which used to be able to afford to buy now has to rent, pushing lower income renters to find the fewer remaining
cheaper lettings – and again further out of Sydney to places with the fewest jobs. The pressure on public housing waiting lists grows unsustainably as there is not enough money to house those already in public housing let alone build enough new stock.
This is a housing system in acute stress. It is broken.
A comprehensive action plan to fix it is vital, Homes for All is it. The good news? Bad public policy caused these system failures. So, good public policy can fix them. But it needs to cover 6 areas at the same time:
1. the battle for more housing must be won – with politicians and the public;
2. new policies to increase supply constrained by anti-development planning rules and NIMBYism: we are at crisis levels in Sydney with less than half the supply needed;
3. new and better quality affordable housing supply is also vital but that requires new sources of private finance to be attracted to the sector – which can only come from a radical stock transfer policy, the growth of the community housing sector and a new regulatory framework;
4. new policies to reshape demand which has become distorted through incentives which give massive benefits to existing home owners, turned housing into a speculative investment and away from its prime role as shelter and actually increased home price inflation;
5. new housing and urban renewal agencies or special purpose delivery vehicles and a new active role for government: to work with the private sector to bring complex and large sites to market; and
6. strategic long term investment in the economic development and connectedness of Greater Western Sydney not just to take pressure off home prices near the CBD but also to enable the sustainable growth of what will be the biggest population centre in a Sydney of 7 million. We see this as requiring a special purpose delivery vehicle for Western Sydney. This would help plan and deliver town centres and large sites. It could also help promote the key game changing infrastructure investments that will open up denser, more and better housing capacity, and infrastructure such as a fast train to Parramatta from the CBD.
Politicians need to lift their game; so do we, the people
Our housing market is in crisis because successive governments, at every level, have choked off the supply of new homes while at the same time stimulating demand with the most generous of tax concessions, grants and exemptions. We pile burdens on developers and costs to first time buyers and wonder why Sydney’s population and economic growth has fallen behind other Australian cities which have pro-growth leadership.
The planning system in New South Wales, whose role it is to deliver new housing, has broken down. We are now building just over 43 new homes for every 10,000 people – and at around 15,000 homes a year we are building less than half what we need to catch up on earlier population growth projections which themselves were conservative.
A campaign for more and better homes
This has coincided with a growing NIMBYism which has exploited the lack of informed debate about the need for new housing – and leads to the position where people who own homes are effectively inhibiting the possibility of home ownership and shelter for others. We also need to rethink the type of housing we provide and revisit and reinvent some old models such as terraces and semidetached housing which served us so well in the past.
Inheritance is becoming the major way into home ownership in Sydney – which is neither right nor very Australian. We have to do better than this. Our recommendations start with us: we the people and our leaders need to understand our own dismal role in this crisis. We need a new civic dialogue on the needs and benefits of growth. A campaign for more and better homes. It starts here.’