Land and Housing Supply Indicators – Australian Bureau of Statistics

A summary of research undertaken by the ABS investigating indicators to measure the relationship between land-use regulation and housing supply
The ABS received funding in 2018 to identify ways of measuring the relationship between land, regulation, and housing supply. This was in response to an indicator included in the National Housing and Homelessness Agreement (NHHA) which sought measurement of ‘an increase in the number of dwellings that are permitted by zoning in cities or urban areas’ (indicator k).
A broad interpretation of indicator (k) was adopted for the investigation, reflecting the view that relationships between land use, regulation and housing supply are complex. This resulted in consideration of a range of indicators offering broad insight into the impact of regulation on housing supply.
A comprehensive report was provided to the Housing and Homelessness Data Working Group (HHDWG) established as part of the NHHA. This paper summarises the key findings and recommendations of that report.
For more information, or to receive a copy of the full report, send a request to construction@abs.gov.au.
Fast and consistent growth in house prices and housing costs in Australia and around the world have resulted in demand for better and more timely information on the contributing factors.
The basic operation of housing markets is the same as many other markets, with prices moving up and down to balance supply and demand. However, the determinants of supply and demand, and time frames for adjustment in housing markets are unique. The table below summarises some key contributing factors identified in existing research on housing markets¹.
Household characteristics
Geography
Macroeconomic conditions
Location preferences
Land-use regulation
Market features
Housing preferences
Construction costs
Transaction costs
Financialisation
Development costs
Existing stock and ownership
 
The work conducted by the ABS looked at providing better data for one of these factors—the impact of land use regulation on housing supply. While the above table illustrates the wide range of factors that should be measured to understand what is happening in housing markets, land and its regulation have attracted  attention in recent research and policy discussions.
The relationship between land use planning and housing supply follows from the observation that land prices appear to be increasing as a proportion of house prices. This is reflected in the figure below as a growing wedge between property prices (measured in the Residential Property Price Index) and construction costs (measured with the Producer and Consumer Price Indices).
This is not surprising from a theoretical perspective. The things that make land attractive in cities (e.g. access to employment) primarily depend on where the land is. Since there is a finite, fixed amount of land in a particular location, higher demand will be reflected in higher prices.
However even where available land is limited, its relative contribution to dwelling prices depends on how it is used, and this is at least partly determined by regulation. Moreover, while other factors including existing use certainly play a role, land use regulation is seen as a clear area where government policy can influence future outcomes.
Land-use regulation is an area of public policy that helps resolve trade-offs in the use of land. It also helps governments plan for infrastructure and service provision to maximise their value for households and businesses. The development of land-use regulation is underpinned by urban planning, which informs decisions made about the optimal use of land. As a result, land-use regulation is often referred to as land-use planning, or the planning system.
Land-use regulation and planning in Australia is primarily managed by state/territory and local governments. In all states and territories, the system of land-use regulation is underpinned by key legislation. Additional regulations provide guidance on the operation of the system and inform regulation on related matters including heritage and environmental management. Together these enable the development of a mixture of instruments including high-level strategic plans, and planning schemes which are state/territory or local level plans outlining specific development controls and where they apply.
The most basic feature of planning schemes in Australia is the spatial application of rules through zoning. This is the process of dividing land into zones that outline permitted/prohibited uses and forms of development. Each planning scheme contains details on zones (usually in the form of a zoning table), and maps to determine where these apply.
Interpreting the requirements of zoning across the country can be challenging, especially for those not familiar with planning and development. Zoning generally outlines restrictions across three dimensions of development:
The main challenges associated with interpreting these include the:
These make it difficult to generalise the significance of a given zone without taking account of a range of other contextual factors.
Alongside the statutory instruments and strategic plans sit development approval processes. Exact pathways for development approval differ across the states and territories, however common principles apply. In general, the relevant approval pathway will depend on the:
To assess applications, a proposed land use and type of development is usually categorised as either:
Where developments are assessed on merit, this tends to involve more discretionary decision-making by planners in accordance with general principles rather than unambiguous rules. Additional decision-making requirements including community consultation can also be part of the process. While this allows greater and sometimes necessary flexibility in decision-making, it can increase uncertainty for developers navigating the planning system.
Local governments approve most development approvals in each of the states, while territory governments are responsible in the ACT and NT. Metropolitan, regional or state government approval boards may approve larger projects of greater significance, while ministerial approval may be required for projects of the highest significance. Where development approval was not granted, tribunals often exist to review these decisions.
The ABS’ approach to identifying potential indicators involved considering:
These questions were considered in relation to three closely related themes—characteristics of urban land, regulation, and housing supply outcomes. The below table summarises the types of indicators considered across these themes and the datasets they rely on. Additional detail on each of these themes follows.
Building, development and demolition approvals
 
Land-use regulation primarily impacts housing supply by limiting how available land can be used. The ABS considered a range of datasets giving information on characteristics of urban land, including the regulation applying and features that contextualise and mediate its role.
The integration of datasets identified was proposed at the land parcel level. This is the basic unit of land where development is carried out and regulation applies. Existing land parcels in Australia are recorded in a land information system known as a cadastre, and the data linkage process with other datasets can be accomplished spatially by reference to the cadastral map, or based on administrative identifiers (such as an address).
Key thematic datasets identified to characterise available urban land are given in the table below. While some of these datasets were more closely aligned with the scope of this project than others, the intention was to highlight the opportunities available through integrating them at a common level.
Cadastral maps
Planning maps
Planning instruments
Heritage/significant place registers
Administrative property registers
Surface cover mapping
Administrative property valuations
State/territory government transport mapping
Public transport network maps
Public transit feed data
 
The indicators of urban land characteristics and availability proposed as part of this work included descriptive measures as well as modelled estimates to infer the impact of various characteristics taken together.
Modelled estimates of the number of dwellings permitted by zoning were viewed as an intuitive way to capture the cumulative effect of different characteristics. However, the feasibility of modelling was shown to be limited by complexity in the application of regulation. While this approach may be suited to targeted areas/questions, the ABS did not feel it offered the best approach to developing consistent, nation-wide indicators. This view was supported by stakeholders involved with this project.
The descriptive measures proposed were counts of lots grouped by characteristics including size and zoning, as well as measures of change in these counts over time. Relative to modelled estimates, these were viewed as simpler, less reliant on assumptions and easier to interpret for users. Moreover, reporting these indicators separately was seen to offer more flexibility for users with different policy questions.
In addition to indicators that summarise where different regulation applies, the ABS also investigated indicators summarising features of the regulatory system more broadly. These included both structural and procedural characteristics of the systems, and the structure and content of regulatory instruments (e.g. planning schemes).
The primary sources identified for these indicators were administrative data and surveys. Administrative sources included planning policies, strategic plans, and planning schemes outlining the operation of the system and the controls used. Surveys on the other hand may be addressed to planning bodies (at both state and local government levels) or developers to ask questions about the type of controls used, decision-making processes, and the perceived impact of regulation on development outcomes.
Approaches to using these data sources to produce indicators included both content analysis of plans and construction of indexes to summarise survey results.
Analysis of plan content has primarily been used by planning academics to evaluate the quality of plans with respect to different objectives. In general, these look for policies that either support or impair the realisation of certain desirable outcomes. Examples include comprehensive planning, affordable housing, natural hazard mitigation and transportation. Elements of the plan like consistency and clarity may also be considered.
Consideration of indexes was based on identified work overseas, including the Wharton Residential Land Use Regulatory Index (WRLURI) in the United States, and the CIPUV Residential Land Use Regulatory Index in Argentina. For these, several sub-indexes were constructed to represent different regulatory themes. These were then aggregated into a single indicator for monitoring purposes. This was based on information from both surveys and review of system features. Surveys similar to those used were identified for Australia, however these have not been longitudinal and not yet used to construct an analogous index.
While these approaches would support a more detailed view of existing land use regulation, they were felt to be better suited to more specific questions rather than providing a broad snapshot. As such, the proposed indicators based on these were not recommended.
The ABS also recommended measurement of housing supply outcomes to ensure the impact of changes in land or regulatory indicators could be assessed.
One dimension of this was the supply of new dwellings, with Building Approvals collected by the ABS an existing and timely source of data. Integration of these with zoning was proposed to provide further insight into the relationship between new supply and regulation.
Dwelling demolition estimates currently being developed by the ABS were also suggested as an indicator of redevelopment. These are being developed by the ABS to support development of small area dwelling stock estimates, which would be useful in analysis of dwelling distribution and change.
The final dimensions the ABS proposed for measurement were dwelling and land prices. The ABS currently produce indexes of property prices for capital cities. In addition to this, potential indicators relying on disaggregated property price data, including estimates of price elasticities (relative responsiveness of supply to price changes), were explored. Disaggregated land value data was also highlighted as a key data gap for understanding how supply, demand and regulation interact.
The investigation resulted in two recommendations which were provided to the HHDWG.
The first was to work towards a suite of nine indicators that represent the best short-term opportunities for new data characterising land, regulation, and housing supply. These are outlined in the table below.
 
The second recommendation was to further explore sources of disaggregated data on land values. This would enable better modelling of the impacts of regulation and other factors on land price and use. Land value information could be further enhanced through integration with some of the other datasets identified.
The ABS is now working to produce a few of the recommended indicators from this work as experimental estimates. These are:
These will be published at a small area level for major urban areas and will allow stakeholders to better assess the value of these indicators for the work they do.
The ABS is also investigating the value and feasibility of acquiring disaggregated data from state and territory Valuers-General (or equivalent). This will support a range of new and existing work across the agency including the National Land Accounts and future urban land statistics.
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