Tuesday, 20 September 2016

The root of a housing crisis: we’re building the wrong thing

I am not sure to what degree this problem is relevant to the rest of the world, but it is an urgent discussion in relation to Melbourne and Sydney, Australia.  Writing in the Conversation,   of the The Australian Population Research Institute leads off:
As is well known, the shortage of affordable separate housing in Sydney and Melbourne means that most first home buyers and renters cannot currently find housing suited to their needs in locations of their choice.
Summarily setting aside the building industry's insistence that the market will continue to demand more apartments for small or single person households for a younger demographic, Birrell suggests the contrary conclusion.  His research suggests that in the medium term, immigration in particular will drive a greater need for homes for family formation.

But then Birrell criticizes current industry and academic research for using crude extrapolations of present assumptions about dwelling types, only to do exactly the same himself. Simply put, he assumes that family formation will continue to be identified with single detached dwellings, regardless of their decreasing share of the new build housing stock, and the continuing loss of older detached housing for apartment development sites.

A more sophisticated analysis would acknowledge that, as the populations of Sydney and Melbourne recognise the advantages as well as compromises of genuinely urban city living, there is likely to be a very significant growth of demand for family accommodation in apartments.  If that simple proposition is reasonable, then Birrel's headline still holds true, but for a subtly different reason.
The problem is not that we are failing to build single detached dwellings in places families want to live now.  The real problem is that all the best sites where families will be happy to live in the future, are being more or less permanently rendered unavailable for larger apartments.
It has to do with the nature of the land title for ownership of apartments in Australia.  Title is overwhelmingly the fragmented 'strata' title, where once a building is subdivided into individual apartment lots for sale, it is extremely difficult to re-consolidate, or even to reconfigure.  Profit in the current Sydney and Melbourne markets is maximised by building an overwhelmingly large proportion of single bedroom and studio apartments.  And there seems to be no truly effective planning instrument that prevents this outcome, with local government consistently unable to enforce its requirements for more forward looking mix of apartment sizes.

Read the Conversation article here:

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