The Fifth Estate
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Sydney and other regional New South Wales towns should build more medium density housing in established areas to solve the state’s housing shortage, according to the NSW Productivity Commission.
In a report, Building Homes Where People Want to Live, the PC said Sydney had expanded too far to the west in recent years, far away from job opportunities where they create long commutes that add to air pollution and driving up the need for expensive new infrastructure.
To allow Sydney and the broader state to play its role in the National Housing Accord which calls for 1 million new homes to be built around the country by 2022, urban areas close to public transport and amenity need to densify, the report argued.
It called for apartment building heights to be raised, more development around transport hubs and encouraging townhouses and other medium-density development and dual occupancy uses such as granny flats where increased density is not possible.
The benefits of more development in established areas would reduce the cost of infrastructure provision, bring people closer to facilities and provide options for people where they want to live. Increased density also has environmental benefits because less land is needed for housing and transport pollution is less if commute times are shorter.
The report also said new homes in established areas might cost more, but they would create a “filtering” effect because when a high-income family moves in to one it makes an existing home available for a medium income family, and this creates another home for a family on a lower income, and so forth. “This filtering can assist with reducing the burden for social and affordable housing.”
However, housing experts refute the filtering theory. Professor Bill Randolph, director of the City Futures Institute at the University of New South Wales, says this process can take up to 60 years to achieve and while it may free up housing, it would not on its own create more affordable housing.
An Australian Housing and Urban Research Institute paper released last year also debunked filtering as a “reliable source of additional affordable housing for low-income households”.
“The market doesn’t produce affordable housing. The only way to get more affordable housing is to build it,” Randolph said.
NSW’s housing supply crisis is particularly acute. Since 1992, the state has built around six dwellings per 1000 people each year, compared with eight to nine dwellings per 1000 people in Victoria and Queensland. Fewer than 20 per cent of new dwellings were built within 10 kilometres of the CBD between 2016 and 2021.
The Department of Planning and Environment forecasts that another 900,000 more dwellings will be needed in the state by 2041. The commission said the department needs to consider the location of present infrastructure and where people want to live, in deciding where the new development should be.
A consequence of an undersupplied market is constantly rising house prices and rents. This is evidenced by comparing a teacher’s salary to the median cost of a dwelling in Sydney. In 2000, this was six and a half times a mid-career teacher’s gross salary, but in 2022 it was 14 times.
Worsening housing affordability is limiting Sydney’s economic potential by reducing household spending power because so much of a family’s income is used to service rent or mortgage repayments. Labour productivity is compromised because people can’t afford to live near the best employment prospects, which is particularly the case for essential workers such as hospital staff, teachers and police officers.
But above all, it “lowers residents’ quality of life because so much of our cities’ populations end up too far from the amenities which made NSW cities such great places to live in the first place,” the report noted.
Lower income people are worst-affected by housing affordability because they may have to sacrifice spending to pay the rent, be forced into overcrowded housing, or locked out of the housing market altogether.
The commission refers to a wealth of evidence from both here and overseas that a boost in supply will reduce house and rental prices. A rule of thumb is that a 10 per cent increase in the housing stock will reduce costs by 25 per cent. This theory is contested by many experts, including Randolph. A separate study on rentals found that a 10 per cent increase in the housing stock lowers rents by one per cent within 152 metres of a new dwelling.
To fix the undersupply situation, an additional 82,000 apartments would be required across Sydney to meet current demand, as well as 350,000 to support a growing population, according to a recent report by Peter Tulip for the Centre for Independent Studies who has consistently called for more liberalised planning controls as an answer to affordable housing.
The Productivity Commission report recommends building in locations with the highest sale price to construction cost ratio because they have the highest unsatiated demand – in Sydney this is the eastern suburbs and the lower north shore, and to a lesser extent the inner city and the inner west.
The report calls for more medium density housing, such as terraces and townhouses that were so ubiquitous to the inner suburbs in the Victorian era. NSW attempted to fast track “missing middle” developments with a Low-Rise Housing Diversity Code but it has not been considered a success, partly because councils often “undermined medium density” by outlawing multi-dwelling housing in general residential zones.
Craig Baudin, a director with architecture firm Fender Katsalidis, says the decision making process on developments within councils is often to blame. “For example, there are heritage listings of buildings that have very marginal heritage value – councils trying to mobilise against development.
Of course, there can be inappropriate development, but it’s going to be pretty hard to get a denser more compact city if we have councils actively fighting it. If we are to achieve good sustainable outcomes in compact cities, all sides need to do some of the lifting.”
Randolph said developer economics have favoured high density on the fringes of the city. “There is a very good case to be made for moderate density in many low-density areas. There’s a reason why we don’t have it. It has everything to do with the development sector and their preferred method of operation.”
He supports mandatory inclusionary zoning – which is used in overseas countries to specify a minimum level of affordable housing in developments. But he cautioned that “notion that simply increasing supply will increase housing affordability is too simplistic. This is not a panacea for affordable housing.”
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432,000 extra apartments. To achieve just a fraction of that number by creating medium density housing in the eastern suburbs sounds difficult, especially since each development would only add 1 or 2 extra dwellings.
Michael Baird had the right idea, we need to rezone the councils into one monolithic body and then build monolithic developments in the eastern suburbs.
Thanks, this covers the bases. Remembering always, the number of new roofs required, bears limited relation to the number of new persons seeking roofs.
As zoning expert Dr Peter Tulip implies, stakeholders are not advised to modify, this simple rule of thumb. See under Dutton, Peter, Budget in Reply.
Delivery of services? Can St.Vincents be extended upwards? Multi-level schools? Multi-level parks? Be there be any room at Bondi Beach? Will people give up their cars? Is there really a skills and labour shortage? Too many more questions (BTW I don’t live in Sydney or anywhere near it).