Chapter 5 - The challenge of housing supply
5.1
Put simply, the sharp increase in house prices in Australia reflects the
fact that the supply of housing has been unable to keep pace with strong demand.
Housing affordability cannot be adequately addressed without increasing the supply
of housing.
5.2
This chapter examines the current shortfall in housing supply in Australia,
and the problems and challenges facing developers and local and state
governments in addressing this shortfall. In so doing, it emphasises the need
for the future housing supply to be integrated into high-quality urban
environments and to reflect home buyers' and communities' needs.
Projected supply of new housing in
Australia
5.3
The table below is based on data from the Housing Industry Association. It
shows that new housing starts are expected to increase from 151 640 in 2006–07
to a little over 154 000 in both 2007–08 and 2008–09.[1]
Thereafter, the HIA forecasts strong growth in housing starts based on an
anticipated reduction in interest rates in 2009–10, the influence of national
housing policies to address low affordability and continued pent-up demand for
housing. As the last column shows, however, the HIA estimates that Australia
needs to be building around 170 000 new dwellings each year just to keep up
with increases in demand. HIA notes that its forecasts for underlying demand
are minimum estimates, a point that seems to be supported by the FaHCSIA forecasts
shown in Chart 3.15.
Table 5.1: HIA estimates of supply
and demand
|
|
Housing new starts ('000) |
Underlying demand ('000) |
|
2006–07
|
151.6 |
167.4 |
|
2007–08
|
154.3 |
169.9 |
|
2008–09
|
154.1 |
172.5 |
|
2009–10
|
163.2 |
175.2 |
|
2010–11
|
172.3 |
n/a |
Source: Housing Industry
Association, National Outlook March Quarter 2008, March 2008, p. A-14.
The underlying demand figures are minimum estimates based on available
population information.
Improving data on the supply
problem
5.4
One of the new federal government's first policy commitments on housing
was to establish the National Housing Supply Council to address the collection
of reliable data and forecasting. This body is responsible for gathering
information on both demand and supply side factors to guide governments and
developers on how many houses are needed, of what type and in which locations. It
will also be tasked with providing advice to government on a 20 year horizon on
factors affecting the supply of housing. This will include the effects of an
ageing population, internal and overseas migration, family separation, skill
shortages and planning delays.[2]
The Council will publish an annual State of Supply report to assess the
adequacy of construction and land supply. The first of these reports will be
released in January 2009.
5.5
As with the issue of housing data in general, there is currently
inadequate data on land supply, land release and land that has been released
but is not being developed. Mr Neil Savery, National President of the Planning
Institute of Australia (PIA), told the committee:
PIA agrees that planning delays result in holding costs, which
are then likely to be passed on by developers and will then impact on housing
affordability. However, the extent of development assessment delays and their
impact cannot be measured with any confidence, particularly at the national
level, due to the lack of publicly available, consistent, timely data. Publishing
and benchmarking would improve understanding of the underlying issues and
causes in order that they can be addressed, and that could be undertaken by the
National Housing Supply Council.[3]
5.6
The committee acknowledges the federal government's recent $30 million
initiative to establish an electronic development assessment system to track
planning processes. This system will inform the three tiers of government, as
well as developers and the community, where and why undue planning delays are
occurring. It remains to be seen as to whether providing this information
actually leads to faster planning decisions, given the shortage of planners
discussed later.
Audit of excess government lands
5.7
The federal government is currently in the final stages of an audit of surplus
government land available for housing. It has requested that the states and
territories undertake a similar process. The land audit is being coordinated by
the Department of Finance and Deregulation through a Council of Australian
Governments working group, chaired by the Minister for Housing. FaHCSIA told
the committee that the Commonwealth should have 'a fairly comprehensive
assessment' of the states and territories' surplus land 'by about mid year'
(2008).[4]
Supply-side problems and challenges
5.8
This section looks at the supply-side problems and challenges that
developers, local councils and state governments face in delivering affordable
housing options that suit the lifestyle needs of Australian households. It
identifies three particular challenges: the need for developers and councils to
establish a high quality urban environment with supporting infrastructure; clear
and efficient state government planning processes; and an adequate and skilled
construction workforce. The issue of housing diversity will be addressed in
Chapter 6 while the funding of infrastructure is the subject of Chapter 7.
The need for adequate
infrastructure
5.9
There is broad consensus that more new dwellings need to be built to
improve housing affordability in Australia. There is some conjecture, however,
as to whether limited or artificially constrained land supply has been the main
driver of higher house prices, and whether the main solution is to release more
land. Australia's capitals—with the exception of Canberra—all have the
geographic constraint of coastline; many are also restricted by mountains,
river systems and National Parks.[5]
There are significant 'greenfield' options on the fringes of the capitals which
state and local governments could access. Is the solution to housing
affordability simply to build more houses in these areas?
5.10
In a 2006 book titled The Tragedy of Planning, Dr Alan Moran, a Director
at the Institute of Public Affairs, took aim at what he saw as the
self-interest of state governments, planners and homeowners:
Planning systems...in place across all major Australian urban
areas...invariably...reduce the quantity of land that is available to conversion
into housing...the existence of the housing land shortage creates an unfortunate
vested interest among existing house owners to maintain it. Disconcertingly,
State governments may have an interest in ensuring high land prices since this
inflates their property-specific taxes.[6]
5.11
Dr Moran told the committee that the recent surge in house prices in Australia
is 'overwhelmingly' the result of land restrictions. He argued that:
The basic driver of affordability is this increase that we have
created in terms of the scarcity value of the land itself, which adds $100,000
to $300,000 to the price of a house...The key thing is to actually release more
land, and that will drive down the price...There is really no shortage of land
supply. There is a massive oversupply...of rural land, which sells for
peanuts...Governments generally have been constricting the amount of land that is
available for housing...[7]
5.12
Other witnesses, however, argued that the housing affordability
challenge is more complex and nuanced than simply releasing more land. They
argued new land releases need to be supported by adequate investment in
infrastructure, services and employment opportunities. It must also reflect households'
demand for different types of housing. A supply-side response cannot ignore
demand.
5.13
This point was well made by Mr Scott Chamberlain of the Housing Industry
Association. Asked whether the housing affordability problem stemmed from high
house prices or simply an inability to get the land and resources to build, he
argued that while land supply is constrained:
You have to be careful. It is not just land; you are talking
about affordable communities. So you cannot just sell a block of land; it has
to be tied into a community to be attractive.[8]
5.14
The point was put starkly by the Victorian Division of the Planning
Institute of Australia:
There will probably be people who will come and say, ‘It’s all
about land supply. We just need to unbridle the supply of land and that will
solve this problem.’ I think that will just create a bigger problem and the
next Senate inquiry we will have will be about poor health in outer communities
and children living for a shorter time than their parents.[9]
5.15
Chapter 3 noted that there is an estimated 30 000 annual shortfall
between the number of new dwellings built nationally and the potential
(population-based) demand for new housing. The committee asked Professor Burke
his view on the importance of new housing supply being affordable, as opposed
to simply providing the stock and 'letting the market sort it out'. He
responded:
The latter is called the filtering theory and I think that has
now been discredited. It does not actually filter right down to provide
adequate supply at the bottom end of the market. So you do have to explicitly
recognise, in various forms of policy instruments, that you have to get
properties on the ground at an affordable level.[10]
5.16
Professor Burke told the committee that his supply-side strategy is to
increase the stock of affordable housing in high-cost areas while also improving
the amenity in low-cost areas so that more people want to move into these
areas. He argued that greenfield developments would be more attractive to
prospective buyers as a result.[11]
He offered pointed criticism of the 'release more land' argument':
That is not the solution. You cannot resolve complex problems
with simple, one-dimensional solutions. We just have to look at where we are at
the moment. Releasing land in these outer urban areas is not the problem. The
problem now is the attraction of land in the inner and middle suburbs of our
cities because of the high amenity that they offer vis-a-vis the outer urban
areas and, I think, a growing perception of the long-term problems of petrol
prices and the lack of public transport in these areas. Releasing land in these
areas is going to do nothing to alleviate the intensity of demand in those areas
where the house prices are the greatest. You can release another 10,000
allotments out here and I would guarantee that it would not make a bit of
difference to the bulk of house prices anywhere in the middle and inner ring of
Melbourne. And it would not solve problems about the lack of amenity, public
transport and the impending issues around petrol prices—in other words, the
liveability of these areas. That is why in our paper we suggested that another
way of tackling the affordability problem is to improve the quality of amenity
in affordable areas.[12]
5.17
The issue of how the costs of providing essential infrastructure are
met, including local government rates, developer levies, and investments by
state and federal governments is discussed in more detail in paragraphs 5.47–5.59.
5.18
Mr Adam Farrar, Executive Director of the New South Wales Federation of
Housing Associations, also argued that increasing land supply was not in itself
the solution to housing affordability. He told the committee:
It is probably not true to simplistically say that the amount of
land release by state governments or indeed the planning system is going to
make the difference in that regard. After all, we do have land release which is
not being taken up. The state government in New South Wales has quite robust
targets for land release and intends to pursue those. Those alone are not
sufficient. One of the major reasons for that is location. Housing
affordability is not just about the price of the house, it is about the cost of
using that house. As you will be well aware, locate housing—even if it is
affordable—on the outskirts away from employment, away from any other services,
then in effect you have simply shifted the cost from the price of the house to the
price of transport and usually to the price of time taken in travel.[13]
Transport
5.19
Professor Julian Disney, Director of the Social Justice Research Centre
at the University of New South Wales, insisted that housing costs cannot be
looked at in isolation from transport costs and transport time. The long
distances and times that many people face going to and from work have
implications not only for them but for the economy:
If you take someone who is living now on, say, the Central Coast
north of Sydney and they are working in the central part of Sydney, they will
be spending two to three working days a week travelling. That is an enormous
cost to them and their families, but it is also bad for the economy.[14]
5.20
Transport has been argued to be an important determinant of the size of
cities. Some urban historians refer to the 'Marchetti constant'; that people in
cities on average spend no more than half an hour each way in commuting to
work.[15]
So for most of history, there were only 'walking cities', about 5 kilometres
across. From 1850–1950 'transit cities' emerged, spreading 20–30 kilometres and
clustered along tram and train lines. Since the 1950s 'automobile cities' have
emerged, spreading 50 kilometres in all directions. An implication drawn from
this analysis is that the larger Australian cities are reaching limits to their
expansion and if oil price rises start to reduce the feasibility of commuting
by car, unless public transport is improved, development on the fringes will
stall.[16]
5.21
This point was also made by Mr Michael Papageorgiou, Acting Manager of
City Planning and Sustainability at Brisbane City Council. He told the
committee Brisbane faced a 'real challenge' in terms of ensuring that workers
had access to efficient transport links:
If Brisbane gets priced out of the key worker market, then all
our new key workers for these new jobs will have to come in from surrounding
suburbs. If the transport system is very efficient that might not be a problem,
but we are already having transport problems, especially public transport
problems, at the moment. The studies suggest that there is a 45-minute work
travel threshold and that after that people start to make different decisions
in large numbers. It also suggests that it is not just a planning exercise of
rezoning land in other cities and sending the jobs there. If we do not leverage
off the concentrations that they are talking about, we will end up with fewer
jobs for the region; that is the forecast. So council’s objective from its
current planning strategies is to make sure we have enough affordable housing
within our boundaries so that some of those key workers can live in Brisbane
and not have to commute.[17]
5.1
The problem of long commuting times—and the need to prioritise transport
infrastructure—has been accentuated by changes in working patterns. Professor Disney
told the committee that among those on high incomes, the demand for good
housing locations (that are close to work) has greatly increased given the
trend toward more part-time and insecure work and the entry of women into the
paid workforce. As a result, many of those on lower incomes have been forced to
live further away from their work. Professor Disney has identified public
transport as the top infrastructure priority to assist with housing
affordability.[18]
The issue of the importance of the costs of travel and access to social
services and community infrastructure is also addressed in the context of decentralisation
and regional development policies in chapter 11.
Land and housing supply challenges
in western Sydney and south-east Melbourne
5.22
The following section looks at the dimensions of the land supply and
housing challenge in western Sydney and south-west Melbourne. The committee
received evidence from local councils and community groups (among others) in
both these regions. Both areas have large reserves of land and have the common challenge
of linking new residential housing to adequate infrastructure and services and
a quality urban environment.
Western Sydney
5.23
The committee heard from several witnesses that in western Sydney, the
key issue is not the supply or the release of land but the inadequacy of
infrastructure. In its submission to this inquiry, the Western Sydney Regional
Organisation of Councils (WSROC) argued that poor public transport, limited
employment opportunities and scarce community services have eroded the 'real'
affordability of housing in Greater Western Sydney.[19]
WSROC argued that the planning of housing developments in metropolitan Sydney
has not been properly coordinated with the planning of supporting
infrastructure. Mrs Sharon Fingland, Assistant Director of WSROC, noted that:
One of the problems has been that, to a certain extent, there
has been development happening all over Sydney, on numerous development fronts,
all requiring infrastructure to support it but with no sensible development
program in terms of wheeling out the infrastructure to support that. In the
absence of that, it is a very expensive way of undertaking development.[20]
5.24
The committee received evidence from the Campbelltown City Council that
there are significant opportunities to expand housing supply in both greenfield
and infill areas. Again, the housing affordability problem in Campbelltown
relates not to the supply of land but the type of housing. The Council told the
committee:
The issue that we have identified is that we have a significant
supply of existing zone housing opportunities in greenfield release areas,
brownfield sites throughout our holistic residential areas and, in particular,
the high‑density zoned areas around the major town centre of Campbelltown‑Macarthur
and Ingleburn. The zoning is in place, the land is in place, but the market is
not taking up that opportunity—even though there is really good access to lots
of facilities and services that exist and that are planned to exist in the future...I
would take the view that the paradigm that usually is spoken about by the
development industry—that housing affordability is significantly influenced by
the release of land, or limits on the supply of zoned land—is not a strong
point to be made in the Campbelltown submarket. We think it is the case that those
opportunities exist but they are not being taken up.[21]
5.25
Mr Paul Tosi, the General Manager of Campbelltown City Council, mentioned
two significant zoned opportunities in Campbelltown. To the north, there is the
Glenfield estate of roughly one thousand lots where prices range from $350 000
to $420 000. Mr Tosi noted that these developments had sold well. On the other
hand, at Macarthur Gardens near Macarthur Railway Station, a development of a
similar number of lots selling for between $490 000 and $600 000 is 'really
struggling' to sell.[22]
5.26
The committee received a submission along similar lines from Ms Julie Burke,
a Campbelltown City Councillor. Ms Burke recalled instances of seniors being
unable to find a one-bedroom unit and unable to purchase a two bedroom unit. She
noted that housing supply in Campbelltown is also unsuited to first home
buyers, who are priced out of the large market for 'quite grand residences'.[23]
5.27
The same point was made by Professor Bill Randolph, Director of the City
Future Research Centre at the University of New South Wales. He told the
committee that what the developers want to develop in south-west Sydney is more
expensive than what the market will bear. The real issue in western Sydney, he
argued, relates to the lack of housing demand: 'there is potential supply but
nobody is building that supply because the demand is not there'.[24]
Accordingly, Professor Randolph feared that:
Calls for releasing land on the fringe in Western Sydney will,
to my mind, only exacerbate that problem, because we have a failure of demand
in Western Sydney, not a failure of supply. If you look at the figures, that is
quite clearly what is happening. If you were to release more land, it would
only drive house prices lower, which would be even more of a deterrent to the
development industry to develop.[25]
South-east Melbourne
5.28
These problems of unsuitable land supply, planning and development are
not unique to western Sydney. In Narre Warren, 35 kilometres south-east of Melbourne's
central business district, the challenge of aligning development with
infrastructure is much the same as in Campbelltown.[26]
Mr Liam Hodgetts, the City of Casey Council's Manager of Strategic
Development, told the committee that while land supply is a crucial ingredient
to help address the housing affordability issue:
...just as crucial is that the land must be well located and well
serviced with supporting jobs, public transport and social and community
infrastructure. In most cases on the urban fringe this infrastructure is
provided by developer contributions. In this context, well-located,
high-density infill development in the inner suburbs of our city is just as
crucial an ingredient to housing affordability.[27]
5.29
Mr Hodgetts noted that the Council has developed several growth area
plans and development contribution charges 'which seek to synergise the
development fronts with the required infrastructure'.[28]
Still, he acknowledged that in a fast-paced growth area like Casey, the planning
system has occasionally been unable to keep up with infrastructure needs, which
has resulted in some funding shortfalls for infrastructure. The Council has
recently established a comprehensive greenfield master planning model.
Developers are bringing forward their contributions to release land more
quickly and assist them to save on holding costs associated with the
acquisition of the land.
5.30
Unlike in western Sydney, the City of Casey faces 'very steady demand'
for housing and the prospect of a shortage of available land. Mr Hodgetts noted
that the Council is currently developing about 2300 lots annually, which it has
done for the past six years. He argued that at the current rate of development
and demand, 'we are running out of land'.[29]
He also noted that the supply pressures are greater in Casey than in the west
and north-west of Melbourne where the other four growth corridors are located.
Asked whether there is currently a local housing supply problem in Casey, Mr Hodgetts
responded:
...there is a concern that the forward supply of zoned residential
land—because there is clearly a lot of lead-up to get the houses on the
ground—is in short supply. That is why we are working with the Growth Areas
Authority recently established by the state government, who are co-partnering
us in one of those development areas, which is the land east of the existing
area...for approximately 8,000 to 10,000 people. That has been effectively
fast-tracked, along with land on the western side of Cranbourne, for
residential zoning.[30]
5.31
It is also notable that the type of housing supply in Casey seems better
matched to demand than in the Campbelltown area, where supply does not seem to
have met the growing demand for different housing types. In Casey, demand and
supply of housing both remain focussed on large three or four bedroom houses on
a fairly large block. However, Mr Hodgetts did note that high prices of
these houses may have been a factor in strong sales over the past two or three
years of smaller blocks: 10 by 30 metres with one storey, three bedroom homes with
a single garage.
5.32
Dr Bob Birrell, Director of the Centre for Population and Urban Research
at Monash University, strongly doubted that people on urban fringes would want
a 300 square metre block. He did suggest, however, that smaller blocks would be
more acceptable if developers incorporated more open space into their design:
...if you move out to Casey, you are looking for a sense of open
space. You do not want to be cheek by jowl with neighbours—that is what people
are trying to avoid, and they will avoid it wherever possible. What I was
suggesting was that it is possible to have a reasonably good design of estates
with small blocks if you use the open space available creatively so that people
are not caught in a situation that we see in some of the earlier estates here,
where all they can see in their immediate environs are more small houses with
cars everywhere and no canopy trees. It requires a more centralised control
over the development process to get developers to get big estates so they can
integrate open space with the smaller lots. In those terms I think it can be
done in a more acceptable way. But at the present time there is no requirement
that this be put in place.[31]
5.33
Mr Hodgetts noted opportunities for higher density housing around
principal 'activity centres', consistent with the intent of the Melbourne
2030 plan (see below). He drew the committee's attention to the Cranbourne
East growth area where the Council plans to house 3,000 people. He did concede
that high density planning can suffer from 'substantial community resistance'
but expressed strong support for a model where people can live, work and play
within a tightly defined area.[32]
This, he argued, was not only consistent with the goal of more affordable
housing (the land sizes are smaller), but also with the challenge of developing
infrastructure that binds communities over the longer term.[33]
Melbourne
2030, Adelaide
and Urban Growth Boundaries
5.34
One of the key planning decisions in a major city's development is to strike
a balance between greenfield development and urban infill. Some state
governments have opted to limit the outward residential expansion of their
capital cities by imposing an urban growth boundary. New residential
developments are concentrated around targeted urban infill areas.
5.35
This was the Victorian government's intent in 2002 when it released its Melbourne
2030 urban blueprint. The plan stated:
The main thrust is to continue to protect the liveability of the
established areas and to increasingly concentrate major change in strategic
redevelopment sites such as activity centres and underdeveloped land. While a
good supply of land for development will be maintained in growth areas, over
time there will be a shift away from growth on the fringe of the city. This will help prevent urban expansion into surrounding
rural land.[34]
5.36
Some witnesses remain enthusiastic about the idea behind Melbourne
2030. The Victorian Division of the Planning Institute of Australia told
the committee that an urban growth boundary limits urban sprawl and improves
housing affordability by creating quality urban environments. The Division
urged faster action on all areas of the Melbourne 2030 plan to 'create
sustainable places because that is what the community now wants'.[35]
5.37
Others are not convinced that higher density planning and an urban
growth boundary will work. In 2004, the Productivity Commission noted:
...to the extent that an urban growth boundary is intended to
constrain development, it is inevitable that it will have some effect on
land prices. For this not to be so, people would need to be indifferent to
housing type and location, and the supply of dwellings would need to be just as
readily expanded from established urban areas.[36]
5.38
In his submission to the inquiry, Professor Patrick Troy noted that this
'densification strategy':
...was adopted often because state governments found that their
reduced circumstances meant that, in spite of the development charges for
infrastructure on fringe lands, they were short of capital for infrastructure
services. They were encouraged to the view that densifying suburbs would reduce
the demand for infrastructure investment. The view turned into a mirage.[37]
5.39
Indeed, six years after its introduction, Melbourne 2030 was the
focus of a state government review. It found that while Melbourne 2030
has not failed, nor has it been fully implemented.[38]
The auditors urged the state government to ensure that sufficient resources are
allocated to the plan and to engage communities in decisions on the application
of the new residential zones. On the Urban Growth Boundary, the review
recommended no alteration for 'at least the next five years' and a 'clear and
transparent process' for future reviews of the boundary.[39]
5.40
One reason for the review of Melbourne 2030 has been market
trends over the past five or six years. Developers have not identified
significant demand for urban infill; house prices in most inner Melbourne
suburbs are prohibitive for first home buyers; and roughly 60 per cent of the
growth in households has been locating in outer suburbia. As Mr Tony Powell AO
noted in his submission:
...'Melbourne 2030'...envisages 60-70% of new housing being located
in existing suburban areas with the remainder occurring in designated outer‑metropolitan
'greenfields' locations...In fact 61% of new housing completions are in the
metropolitan fringe...and there is scant new infrastructure, either state or
local government...[40]
5.41
The other major reason is that Melbourne's population is increasing at a
rate significantly faster than was projected in Melbourne 2030. The plan
anticipated the city's population to increase from 3.5 million residents in
2001 to 4.5 million in 2030. However, Dr Bob Birrell and Dr Ernest Healy from
the Centre for Population and Urban Research at Monash University project that Melbourne's
population will increase to 5.1 million by 2031. The increase is based on
higher fertility rates and immigration levels (than those projected by the
state government in 2001). Dr Birrell and Dr Healy urge the state government in
its review of Melbourne 2030 to 'take account of changes to Melbourne's
demographic setting'.[41]
5.42
Dr Birrell told the committee that the Victorian government has 'decided
essentially to ditch the core idea of Melbourne 2030'.[42]
Instead of a compact city design based on development around designated
activity centres, the government has opted to make the urban growth boundary
flexible. Melbourne has a distinct advantage (over Sydney) in having 'literally
boundless plains to spare' with no geographical constraints to the west, the
north or the south-east corridor.
5.43
Dr Birrell noted that in recent years the Victorian government has been
extending greenfield land to accommodate Melbourne's urban development. In
2005, the state government rezoned an additional 4500 hectares of land for
urban development within the urban growth boundary. It imposes very low
developer levies—compared to Sydney—which keeps the cost of developed land 'in
the $100,000 to $150,000 range'. Dr Birrell also told the committee that the
Victorian government has been assisting local councils to increase the rate at
which zoned land within the urban growth boundary is released.[43]
5.44
The committee is aware of a similar situation in Adelaide. In
2002, the South Australian government established an urban growth boundary to prioritise residential development in established suburbs with
significant infrastructure outlays, and to protect premium rural land from
development. In December 2007, the state government announced it planned
to rezone more than 2000 hectares for residential development outside the 2002
growth boundary. The state minister for urban development explained
the 2007 decision in terms of planning for the 'medium to longer-term'.[44]
5.45
Nonetheless, the South Australian Division of the Urban
Development Iinstitute of Australia (UDIA) foresaw ongoing challenges for
developers and councils in Adelaide to balance greenfield development with
urban infill, while improving housing affordability:
...putting an urban growth boundary in place without creating the
infill opportunities to compensate has created increased demand and forced
prices up. The Adelaide City Council has produced some good examples of
affordable housing in the city, but they are on quite a small scale; whereas
most of our inner urban and CBD housing has been at the upper end of the market
with prices starting at $500,000 to $600,000 for a dwelling, not in the
affordable range at all. Our concern would be that, if you are putting in place
an urban growth boundary, you need a process to review and update it from time
to time, but your policies that would allow and support infill need changing at
the same time.[45]
5.46
In the current circumstances related to housing affordability and
development pressures, the committee believes there is merit in the curtailment
of residential development to within specified areas. New growth would ideally be
concentrated in areas where infrastructure can provide for and attract new
residents. If large amounts of fringe urban land are released without adequate
attention to environmental impact, infrastructure needs and social impacts
there is significant potential for greater social problems, as evidence to the
committee has indicated.[46]
However, in setting this boundary, state governments must work more closely
with local councils and community groups to ensure that the broad objective and
specific proposals for higher density urban infill are supported. They must be
aware of the potential for changes in population forecasts to place pressure on
these limits. As discussed further in Chapter 11, they must recognise opportunities
to expand regional areas to relieve pressure from the capital cities
particularly given the enormous potential for regional growth in Australia.
Planning problems
5.47
The committee recognises the importance of efficient and effective
planning processes and the influence they can have on improving housing
affordability. It is aware that most Australian state and territorial
governments have undertaken reviews and reforms of their planning systems and land
release programmes in recent years. While it is too early to gauge the impact
of these initiatives, the committee notes that high costs, long delays and complexity
continue to be a problem in many jurisdictions.
5.48
The committee heard from several witnesses that problems of delay in
land release are most acute in New South Wales. Mr Harnisch from Master Builders
Australia observed that while similar land release problems are being reported
around Australia, 'what we are hearing from the industry is that New South
Wales seems to be the most difficult state'.[47]
Professor Robert Stimson, Convenor of the ARC Research Network in Spatially
Integrated Social Science, opined that the New South Wales government has 'probably'
done more than any other in Australia to restrict the opportunities for urban
growth on the urban fringe. This he attributed to state government planning
views and legislation, which, 'quite frankly, are ideologically based and do
not have any sound economic or social basis'.[48]
5.49
Not surprisingly, developers in New South Wales also reserve strong
criticism for the state's planning system. Mr Ross Blancato, the President of
the New South Wales Division of the UDIA and a developer for Australand, told
the committee that given the current cost structure and planning regulations,
'the risk of investment in New South Wales has gone beyond what is really
tenable'.[49]
5.50
This view was supported by Mr Tony Powell AO. His submission noted that
developer levies in New South Wales were as much as $165 000 per median price
house lot:
...which has turned out to be the 'straw that broke the camel's
back' as developers have simply stopped buying land and have withdrawn from the
outer-metropolitan housing market...because the overall cost of land acquisition
and servicing is more than the consumer can bear.[50]
5.51
In its submission, the New South Wales Division of UDIA recommended that
the Commonwealth government expedite the release, rezoning and servicing of
Commonwealth land with critical lead infrastructure to support the supply of
new dwellings to the market.[51]
Mr Blancato told the committee:
We are proposing that there should be an amount of land—a
forward train of land of maybe 20 years—that is released and serviced. The word
‘released’ is something that is very difficult to get a handle on. You will
have successive governments release the same patch of land five times but not a
dollar will be spent on infrastructure. When I go to my board and say, ‘I want
to buy this piece of land,’ I have to tell them when I am going to deliver the
revenue, how much it is going to cost and when I can start. If I have to say
that I have to build $10 million worth of infrastructure before I can turn my
first sod on my parcel then that is going to make the acquisition of that
parcel less viable. The government used to invest in it—20 years ago you would
go out to a release like Blacktown and the main sewer carriers were in and the
sewage treatment plant was built. You would go out there and you could develop
this five-acre parcel or that five-acre parcel. You might do a little bit of a
lead-in, connecting infrastructure, but it was affordable.[52]
5.52
The Queensland Local Government Association drew the committee's
attention to the complex and time consuming requirements imposed on local
councils by that state's Integrated Planning Act:
The process requires applicants to submit to councils their
application, with all of the related documentation. In many instances, apart
from the council’s consideration of the matters immediately under its control,
it is required to refer to the state government and to appropriate state
agencies for their consideration matters that are under their jurisdiction. The
management of this process of receipt, consideration, referral and then further
consideration of the assessment at a council level and assessment at a
government level obviously adds time to the process. If in that process there
are some deficiencies in the information received with the application, then
further inquiries are made of the applicant to receive that information and
then, where necessary, proceed to review what has been done to date. All of
this, as you would appreciate, can add quite a deal of time to the process.[53]
5.53
The South Australian Division of the Planning Institute of Australia
identified the same type of process-based delays in the state's planning
system:
...in some locations, in some councils or in some areas of
councils and for certain types of development the process can be unnecessarily
complicated, difficult and lengthy. This is often where public notification is
required and where government agency referrals are required. There is also a
large amount of minor type of development in the system here that is currently
processed but that could be dealt with in another way, such as a track based assessment
coming out of the Development Assessment Forum leading practice model. That
would reduce the impact on the development system.[54]
5.54
The Institute did note that the South Australian government is
currently conducting a planning review aimed at relieving the pressures in the
development system.[55]
5.55
The Western Australian Division of the UDIA also highlighted the potential
for delays in the state's planning process:
...when you come to the actual process of getting subdivision
clearance you have multiple agencies involved. Each of those can end up with
some delays. There is what we call ‘stop the clock’, where there is an issue or
clarification required, the statutory timeline stops and then sometimes it is
difficult to get it going again. So the delays become incredibly expensive for
the industry because of the holding cost and that adds to affordability
problems.[56]
5.56
Similarly the Real Estate Institute of Western Australia identified:
...one of the problems with the system in Perth is the very poor
interaction of the various processes that deliver land. There is a planning
process, which is reasonably pure and probably not that complicated, but when
it is meshed with the environmental assessment process it can cause long
delays. The other issue is the complexity of the planning approval process,
which can sometimes mean that a preliminary subdivision approval can attract up
to 47 separate conditions that have to be met before the land is deemed able to
be finally approved for subdivision.[57]
5.57
Dr Steven Rowley, Senior Lecturer in the School of Economics and Finance
at Curtin University of Technology, emphasised the need for Western Australia's
planning system to be more responsive to the needs of the market. He told the
committee that:
Anything that reduces the up-front cost for a developer will, or
certainly should, reduce the price of the final product, because of the holding
costs and the interest that they have to pay. So it should have an impact on
affordability. Anything that speeds up the planning system as well will have an
impact on the final price of land, and making the planning system more
responsive to market signals will no doubt have an impact on affordability. How
you do that is another question, but certainly in the UK we have gone through
the Barker review of housing supply, and it is all about making the planning
system more responsive to the market and to changes in market signals. I think
that is certainly the way that Western Australia needs to go. It needs to look
at streamlining the planning system, making it more responsive.[58]
5.58
In Queensland, unlike in other states, local councils cannot seek
developer contributions outside of the immediate area of development. According
to the Queensland Division of the UDIA:
We have seen planning schemes that have almost constrained land
supply, if you like, because of the inability to fund the infrastructure at a
local government level. Because of that constraint, the cost of raw land has
gone up, but also putting the burden of providing infrastructure onto the development
community, which essentially is the new homebuyer, means that there has been a
double whammy. So it has gone up at an accelerating pace.[59]
5.59
The committee emphasises the need for local councils to improve the
efficiency of their planning processes. In this context, it acknowledges the
federal government's proposal—through the Housing Affordability Fund—whereby
councils will compete for grants to cover part of their new housing
infrastructure costs on the basis of their proposals to cut red tape and reform
their planning process.[60]
That said, the amount of money allocated to the Fund is relatively small—an
average of $100 million a year—and the breadth of its application is limited. The
committee welcomes the state governments' reviews of their planning processes. It
urges action to speed up the planning system and make it more responsive to the
market.
Industrial relations issues
5.60
The committee received no evidence that industrial disputation was an
issue of concern in addressing the housing supply shortage. The Housing
Industry Association noted reports from the Australian Building and
Construction Commissioner (among others) that 'there has been a significant
increase in terms of industrial harmony, a significant increase in productivity
and a significant drop in construction costs'.[61]
5.61
The committee did receive some comment on the difficulty of the
construction sector using migrant labour under the Long Stay Temporary Business
Visa (subclass 457).[62]
The Housing Industry Association told the committee that:
The 457 visa program requires employers to give, I think, at least
a 12‑month employment guarantee. A small business that engages or
hires—as distinct from employs directly—cannot avail themselves of the 457 visa
program, and it is expected that we will change the structure of our industry
to accommodate the institutional arrangements in the department of immigration.[63]
5.62
Master Builders Australia noted that the construction industry is working
'very closely' with government and the immigration department to make 457 visas
more flexible and more streamlined.[64]
5.63
The Construction, Forestry, Mining and Energy Union argued the need for
better regulation of employment agreements in the construction industry:
In the building industry we have a horrendous problem with bogus
self‑employed, where workers are told, ‘You will only work in this
workplace or for this company if you have an ABN number, and we’re calling you
a subcontractor, whether you are or you’re not.’ It is a major problem in this
industry...We do not reject temporary migrant visas. They have been with us for
decades. The thing is that they were quite regulated until about five or six
years ago when they suddenly became heavily deregulated, which has led to a lot
of abuses.[65]
5.64
The broader role that migrants play in the Australian construction
industry is a matter of some contention. Dr Birrell argued that:
...we are getting a very limited benefit out of the overseas
migration program from the point of view of scarce construction workers. If we
focussed on the 457 visa program, which requires that a job be here and that
the employer designates that job and it is in construction type field, then it
is a plus. But 55 per cent of the settler program in Australia is going into Sydney
and Melbourne and very few of those people have construction skills.[66]
The shortage of skilled
tradespeople
5.65
As with many other industries in Australia's full employment economy,
the construction industry is struggling to attract and retain skilled
tradespeople. The committee heard from several witnesses that a lack of skilled
tradespeople is of concern in the context of addressing housing affordability.
5.66
The Housing Industry Association told the committee that in 10 of its 14
trades, there is a 'critical undersupply' of labour nationwide. It added that immigration
into Australia is fuelling demand at a much faster rate than it is helping the
housing industry build to meet that extra demand.[67]
5.67
Professor Andrew Beer told the committee that the shortage of skilled
labour is a key supply constraint and that there needs to be action on a number
of fronts:
...there is significant shortage of labour. We have not invested
enough as a nation in supply of skilled labour for the building industry. Is it
possible, for example, to reduce the apprenticeship times? Is it possible to
increase retention of apprentices? Many people enter apprenticeships but they
do not complete their apprenticeships and therefore they are not skilled labour
in the longer term available for the housing market. Is it possible to keep
people within the building industry for longer? At the moment many
subcontractors fall out of the building industry after a relatively short
period of time, for a whole raft of reasons. Those sorts of measures could be
taken.[68]
5.68
Interestingly, Master Builders Australia told the committee that in
their view the skills shortage is not the principal reason why more houses are
not currently being built. As Mr Harnisch observed:
I think the reason that there is underbuilding is really the
fact that housing is in many cases out of reach. There is also uncertainty
about where things are at. That is why the market is not reaching the
underlying requirements. The issue of underbuilding is not related to the
shortage of labour.[69]
5.69
That said, Mr Harnisch did identify an apprehension within the
construction sector about how it may cope in the future given the skills
requirements of other sectors:
There are already concerns being expressed by builders about
their capacity to secure labour to meet future housing demands. You may well
say, ‘Given that we are in a downturn, there should be plenty of labour
around.’ The reality is that state governments and this federal government have
a very ambitious infrastructure investment program. And of course the resource
boom is still going, which is where a lot of the trades and the skilled labour
is going—so the construction industry is competing with other sectors.[70]
5.70
Where this competition is on the industry's doorstep—as in Karratha—the
skills shortage in housing is all the more acute. Ms Gloria Jacob, Deputy Chair
of the Pilbara Area Consultative Committee, noted that there is not sufficient
skilled labour for housing in Australia, 'let alone trying to bring it over
here to the Pilbara, where we have no accommodation for them if they want to do
building'.[71]
The committee also heard that the Perth construction industry had suffered some
capacity constraints from the flow of workers to mining.[72]
5.71
Mr Brett Gillan, Vice President of the Queensland Division of UDIA, noted
that this year and next, the housing sector in Brisbane is likely to be in
competition with building activity for civil and social infrastructure. He told
the committee that 60 to 70 per cent of the overall cost of an urban infill
development is the cost of construction, which makes it very difficult to
deliver affordable infill projects. Mr Gillan anticipated double digit increases
in construction costs next year as a result.[73]
5.72
Mr Michael Scott, a past President of UDIA, told the committee that the
Association's members are 'expressing concern' at the difficulty of finding
workers. He noted that while UDIA did not have any numbers on skilled labour in
the industry, there are anecdotal indications of shortages and broader concern
at the industry's capacity to increase its future supply.[74]
5.73
These concerns about the construction sector's future capacity were also
evident in comments made by Dr Silverberg from the Housing Industry
Association. Asked whether the construction industry had the skilled labour to
satisfy underlying demand of 180 000 new dwellings each year, every year, his
response was frank:
No, it does not. There are issues around the supply of skilled
tradespeople. Of the 250,000 net permanent and long-term migration flow, about
800 people are residential construction tradespeople...The federal government has
made some significant announcements in respect of housing supply initiatives;
we are going to have to have more skilled labour available if we are going to
translate those policy announcements into bricks and mortar.[75]
5.74
Mr Harnisch told the committee that the construction industry has been
working closely with the government and the immigration department to make Section
457 visas more flexible and streamlined. He added that in the longer-term, there
is a need to focus on issues of reforming training programs, and attracting and
retaining skilled workers. Presently, the industry has a high dropout rate which,
if not addressed, will produce a shortfall of semiskilled and skilled labour of
about 40 000 people over the next five or so years.[76]
5.75
In his evidence to the inquiry, Mr Savery noted PIA's proposal for the
National Housing Supply Council to track skills in the construction industry
over time and assess the impact of actions taken to address skills shortages in
housing supply.[77]
The committee agrees. The new National Housing Supply Council should establish
a database which, on a state by state basis, monitors the available supply of
skilled labour in the construction industry. This database should also project
the construction industry's future skilled labour needs on a state by state
basis.
Recommendation 5.1
5.76
The committee recommends that the proposed National Housing Supply
Council develop a database of skilled labour in the construction industry
across all skill sets and in all states and territories. It should be tasked
with assessing the construction industry's future skilled labour needs based on
projections of other industries' workforce needs and forecasts of both
underlying and effective demand for housing. The Council should also record the
contribution of immigration programmes to the construction workforce as well as
the industry's retention rates.
The shortage of skilled planners
5.77
The committee received evidence from several witnesses that there is
currently a shortage of qualified planners in many parts of Australia. Mr
Savery gave the following overview of the current situation:
...the current planning profession skills shortage and the
shortage of qualified planning assistants that exist in many local, state and
territory governments are impeding the turnaround time frames within the
development assessment process. In PIA’s 2004 national inquiry into planning
education and employment, a vacancy rate in planning positions of around 16 to
20 per cent was established through a survey of employers. The national inquiry
made recommendations to address the full range of employment, workplace and
professional development issues facing the planning profession, including the following
recommendations to improve the supply of planners: increased overseas migration
opportunities; PIA to become an assessing agency after getting planning onto
the Commonwealth’s list of professions in demand; increase the number of
undergraduate and postgraduate planning places in universities; support rural
students and other special target groups, including through cadetships and
studentships; recognise the role of planning assistants and work with the
vocational education sector to ensure that certificate IV courses are producing
development-assessment-ready trainees; encourage the pooling of professional
planners in rural and regional Australia; and promote rural and regional
planning experience at universities.[78]
5.78
Mr Russell from the Local Government Association of South Australia told
the committee that the shortage of professional planners 'is probably the
biggest issue at the moment impacting on approval times in South Australia'.[79]
5.79
Mr Papageorgiou from the Brisbane City Council was asked to comment on how
the planner shortage has affected the Council's work. He responded:
It has been a real problem for the last three years
particularly. It looks like being a continuing problem. We are getting into
more complex areas of Brisbane to develop. The assessment planner requires lots
of project management skills. We have been losing our more experienced planners
over time to the very buoyant development industry. That then compounds the
problem of historical high levels of files to deal with. The relatively
inexperienced people who are placed on it perhaps lack confidence in some of
these key areas. That can lead to extended time frames.[80]
5.80
Mr Hoffman from the Queensland Local Government Association told the
committee that local councils have been losing a lot of their skilled staff to
the development sector. In response, the Association has focused on increasing
the attractiveness and the promotion of planning as a profession for school
graduates and university undergraduates. It has also developed a
paraprofessional planning course at a diploma level which is currently being
attended by 90 local government employees.[81]
5.81
The Brisbane City Council's submission referred to its 'RiskSmart'
program which outsources low risk planning applications to selected development
consultants. These appointed consultants can make the planning decision,
although the Council retains responsibility for the paperwork and for checking
the decision.[82]
5.82
Ms Winzar from FaHCSIA noted that the shortage of skilled planners was
an issue that had been raised with the department. She noted that the use of
paraplanners to approve basic developments would free up qualified planners to
work on larger and more complex developments:
...if you could get relatively simple things like pergolas and so
on approved by paraplanners, perhaps the more skilled planners could be devoted
to the larger and more complex developments. That should also speed up things.[83]
Recommendation 5.2
5.83
The committee recommends the establishment of a working group, chaired
by the Development Assessment Forum, to review the need for classes of
development to require planning approval. The focus of this working group
should be to demarcate those activities that should be performed by fully
qualified planners and those can be undertaken—at least initially—by less
qualified 'paraplanners'.
Conclusion
5.84
This chapter has highlighted the need for greater responsiveness of land
release and housing supply to market demand. Efforts to this end should occur in
a variety of contexts.
5.85
The Commonwealth government must deliver timely information on current and
projected industry needs for skilled tradespeople, as well as funding (and
perhaps operating) a tracking system of development assessment delays. State
and local governments must simplify their planning frameworks to reduce the
potential for delay in the land release and rezoning process. The Commonwealth
and state governments must continually audit their available land and ensure that
their planning frameworks provide timely and adequate provision of critical
infrastructure in greenfield sites. In planning for urban infill, state and
local governments must communicate with local communities to ensure that broad
objectives and specific proposals are supported.
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