Submission to inquiry into affordable housing by sustainable population Australia
24 March 2014
Sustainable Population Australia Inc (SPA) is a national environmental organisation that was established in 1988 in Canberra and now has six branches nationally. While primarily concerned about population from an environmental point of view, SPA is also concerned about the economic and social implications of population growth, which inevitably includes housing and its affordability.
This submission is confined to the relationship between housing (un)affordability and population growth.
High level of housing unaffordability in Australia
According to the 2014 Demographia Housing Affordability surveyi, Australia ranks as having one of the most expensive housing markets out of the countries surveyed. The report assessed 360 urban markets in nine countries: Australia, Canada, Hong Kong, Ireland, Japan, New Zealand, Singapore, United Kingdom, and the United States. Of the nations surveyed, Hong Kong has by far the most unaffordable housing, with Australia and New Zealand tied for second. All of Australia’s 39 markets were deemed ‘Seriously Unaffordable’ or ‘Severely Unaffordable’ and none as no housing markets ranked as ‘Affordable’ or even ‘Moderately Unaffordable’.
Release of land on urban fringe as solution?
Demographia contends that the rising cost of housing is because of the increased cost for land. It contends that a key reason for this land price escalation in Australia is that the market’s ability to quickly provide low priced new housing supply ‘is being hampered by restrictive land use regulations, many of which have come into effect since the mid-1990s (Sydney has had long-standing limits on housing development on the urban fringe)’. On the other hand, Demographia argues that ‘affordable housing markets, like Texas and Georgia in the United States, utilise open market-based land use structures whereby plentiful new housing supply is able to be built quickly and cheaply on the urban fringe, thereby preventing rapid house price escalation.’
Problems of urban sprawl
SPA does not support the view that housing affordability can be addressed simply by building on the urban fringe. Urban sprawl brings with it numerous environmental problems, not least loss of biodiversity when natural pasture or forest is replaced by housing and accompanying infrastructure such roads. Urban fringe development may also cover market gardens with significant implications for the provision of fresh fruit and vegetables for all city dwellers. Food needs to be trucked in from further away with ever more greenhouse gas emissions from extra fuel burned. Even Melbourne’s Lord Mayor Robert Doyle has recently expressed concern over the loss of market gardens from fringe developmentii. A 2012 editorial in The Age noted: ‘It is estimated 70 per cent of Victoria’s fresh vegetables are grown in and around Melbourne. Casey produces a quarter of the city’s vegetables; Werribee grows its lettuce, cauliflower and broccoli. These areas are in the front line of urban expansion now that the Baillieu government intends to review the growth boundary every two years.’iii
Building on the urban fringe also brings with it numerous social problems, not least those associated with long commuting times from increased traffic congestion and distances travelled. Breadwinners are separated from children for longer times through the day. Werribee is a classic case of housing being built but without the necessary infrastructure to make life fully viable: little public transport, shortage of childcare, libraries, shops and recreational facilities.
Urban densification as a solution?
A number of councils have pursued urban densification as an alternative to sprawl, not least Ku-ring-gai Council in Sydney’s northiv. It has met, however, with considerable community resistance. While concentrating higher density housing along transport corridors has a great deal of merit in terms of allowing people to free themselves from their dependence on private cars and to reduce greenhouse gas emissions, nevertheless, there are limits to this in terms of loss of visual and general amenity. A recent studyv has shown that people’s mental health is better when they have greenery – in parks and gardens – so adequate provision for those must be made if people are not to suffer mentally. In Canberra, developers appear not to be taking this seriously, at least not in the inner suburb of Braddonvi.
Homelessness is terrible manifestation of high housing unaffordability. There are currently 105,237 people, or 0.5 per cent of the population, in Australia who are homelessvii. It should be treated as a national emergency and governments of all levels should be building far more public housing to accommodate people in need of a roof over their heads.
Reasons for housing unaffordability
In simplistic terms, if demand exceeds supply, then prices will rise and become unaffordable for people on low incomes. Demand for housing in Australia has been artificially increased by three areas of government policies:
- population growth
- investment taxation and
- foreign investment rules
Population growth: According to the Australian Bureau of Statisticsviii, Australia’s population in the year ending June 2013, grew by 407,000, 60 per cent from net overseas migration (NOM = 244,400 people) and 40 per cent from natural increase (162,700 people), both higher than the previous year. Given NOM is immigration minus emigration and emigration is around 70,000 or so a year, immigration exceeds 300,000 annually. While some of these are humanitarian migrants and largely justified in terms of our international obligations, nevertheless, the overall immigration figure is excessive and swells demand for housing considerably. Natural increase is still inflated despite the limiting of the baby bonus but most governments take a pro-natalist attitude and encourage big families. SPA seeks an end to population growth, whether it has come through natural increase or immigration, and calls on state and federal governments to recognise that in these days of uncertainty with climate changeix and peak oil (which is by no means ‘dead’)x looming as significant challenges, that population growth must end. If for no other reason, ending population growth would ease housing demand and allow supply to catch up.
Investment taxation: Beginning in the 1990s, falling interest rates encouraged people to invest in the housing market, assuming that capital gains from buying then selling houses would generate significant profit. It added to significant housing inflation. There is no guarantee, however, that there will always be capital gains and, indeed, during the Global Financial Crisis, investors left the housing market prompting the Rudd government to encourage foreign investment to prop up what was essentially a pyramid scheme.
Foreign investment: This has not added to supply and only increased housing inflation. Indeed, as Paul Sheehan noted in a recent articlexi, wealthy foreign investors are forcing first home buyers out of the market.
The only way to increase housing affordability is to reduce demand until supply catches up. A capital gains tax would take a lot of speculators out of the market. Either putting a duty (15-20 per cent, say) on foreign investment or even disallowing it altogether in housing, would allow first home buyers a foothold in the housing market. Most importantly, however, is to reduce demand through ending population growth, by removing all incentives for families of more than two children, and cutting non-humanitarian migration significantly until immigration approximates emigration.
Melbourne’s salad days are over, says Lord Mayor Robert Doyle. Herald Sun, March 19, 2014
The Age editorial, Foolish planning forgets about food, 26 May 2012
Climate Council, The Angry Summer, http://www.climatecouncil.org.au/angry-summer
Cashed-up Chinese are pricing the young out of the property market, March 10, 2014 http://www.watoday.com.au/comment/cashedup-chinese-are-pricing-the-young-out-of-the-property-market-20140309-34f9k.html