To the Editor: Sydney Morning Herald

Re: Co-operation essential to great Aussie dream (21 February)

ALP Housing Shadow Minister Tanya Plibersek notes that the scarcity of land in Sydney does not explain why costs are high in other parts of Australia. True enough. However, house costs are high elsewhere in Australia because similar land shortages exist elsewhere in Australia. This is documented in reports by the Urban Development Institute of Australia and the Residential Development Council. Costs are high in Perth, Brisbane, Adelaide and Melbourne because of planning induced land shortages in Perth, Brisbane, Adelaide and Melbourne. Land for development has escalated in cost more than any of the 90 elements of the Consumer Price Index and more than double that of petrol. Prices do not rise with such a vengeance where supply is permitted to respond to demand.

In turning their backs on the Great Australian Dream, state governments have driven the cost (including interest) of the median price house up by from six to 11 years of gross annual household income (median), and that in just 10 years. The mechanisms vary. In Sydney, there are direct and ideological urban consolidation plans, while in Perth, a less direct, yet just as destructive bureaucratic morass is the cause of the land shortage. There is simply no hope of restoring the Great Australian Dream without dealing squarely with the problem of government strangled land supply.

Wendell Cox
Co-author, Demographia International Housing Affordability Survey
Visiting Professor, Conservatoire National des Arts et Metiers, Paris

Posted by Wendell Cox at 01:36 AM | Permalink

Two recent reports from Australia raise concerns about the health impacts of smart growth (called urban consolidation in Australia).

The first, a report by Griffith University and the Australian Alliance for Children and Youth raises concerns about the welfare of children living in the higher densities required by Australian urban consolidation policy. The paper is a case study, which notes a relationship between higher densities and disadvantage, a lack of exterior space for physical activity, social isolation and insufficient security at parks in high density neighborhoods.

The second, by Archicentre (the building advisory service of the Royal Australian Institute of Architects) raises concern that Australia’s destroyed housing affordability is leading to more substantially more stress that could lead to major “health and welfare blowouts” in future years.

Australia’s unprecedented loss of housing affordability is principally the result of state government urban consolidation policies. Urban consolidation policies have seriously restricted land on the fringe of urban areas for development and sought instead to force many more people to live in dense, inner city environments, especially high rise buildings. In some cases, such as Sydney, Adelaide and Melbourne, urban consolidation policies have been enshrined in detailed metropolitan strategies, while in other cases land for development has been severely rationed by bureaucratic processes rooted in urban consolidation ideology (Perth and Brisbane). This shortage has driven the price of land up substantially, while the construction costs of houses have remained constant relative to inflation.

Housing costs have risen so much relative to incomes in Australia that in all major urban areas it now takes at least five more years of gross household income (median) to pay for the median priced house than 10 years ago, including interest. In Perth, the figure is more than 11 years.

The 3rd Annual Demographia Housing Affordability Survey documents housing affordability in six international markets (the United States, Canada, Australia, New Zealand the United Kingdom and Ireland). It summarizes research pointing to land use policies as the cause of housing cost escalation relative to incomes. Some markets, in Canada and the United States, have retained housing affordability by not implementing smart growth or urban consolidation policies.

Posted by Wendell Cox at 10:43 AM | Permalink

One of the most juvenile claims of smart growth and urban consolidation advocates is that urbanization is reducing the supply of farm land and that this threatens food supplies.
In fact, however, the farm industry has become considerably more efficient in recent decades and is producing considerably more on considerably less land. The rate of agricultural land withdrawal has been many times that of the increase in urban land use.

United States: In the United States, the land taken out of agricultural production has been greater than that of the state of Texas, Oklahoma and Vermont since 1950 (see U.S. Agricultural Land: 1950-2000. This is after accounting for the increased urbanization that has taken place over the same period. If all of the net land taken out of agricultural production were to be urbanized at U.S. urban densities, it could accommodate all of the urban population of China and India.

Australia: From 1981 to 2005, more land has been taken out of agricultural production in Australia than is covered by the state of Victoria plus New Zealand. Yet agricultural production is up. All of the Chinese urban population could be housed in the withdrawn Australian agricultural land, at Australian urban densities Australia Agricultural Land: 1981-2005.

Posted by Wendell Cox at 08:12 AM | Permalink

For years what has passed as transportation planning in the Portland, Oregon area has been based on little more than ideology and virtually no reality. Portland has engaged in building light rail lines with the intent of attracting people out of cars, but its highway market share remains unchanged. Portland planners naively thought that people would rush to switch to better transit, not realizing that few are prepared to spend longer traveling or to use transit to go places that it does not go. Portland’s reward has been development of the worst traffic congestion of any primary urban area its size. Last year a report prepared for the planning agency indicated that firms were leaving and avoiding the Portland area due to its traffic congestion.

Now, the Federal Highway Administration has leveled strong criticism at Portland’s regional transportation plan (see: FHWA criticizes Portland planning). The agency commented:

“It is difficult to find the transportation focus in this opening chapter of (the) Regional Transportation Plan.” Instead, the plan focuses on bike trails, light rail, and expensive skyline transport.

FHWA further noted:

“The plan should acknowledge that automobiles are the preferred mode of transport by the citizens of Portland. . . . They vote with their cars every day."

This is a particularly unusual development, since government agencies are reluctant to criticize one another. This shows how desperate the situation has become.

Posted by Wendell Cox at 07:28 AM | Permalink

To the Editor:
The Age, Melbourne

Re: Australian dream just a recession away (17 February)

The Rory Robertson/Macquarie Bank criticism of the Demographia International Housing Affordability Survey and diagnosis of Australia’s severe housing affordability misses the mark. Macquarie uses US markets, astoundingly confusing local authority areas with metropolitan housing markets, while misclassifying low demand markets as high (examples San Francisco, Boston, New York) and higher demand markets as low (examples Indianapolis, Kansas City). Just ten years ago virtually all US markets were affordable or moderately unaffordable. Increasingly limited supply has caused the problem.

Markets with overly restrictive policies are unaffordable, whether high-demand (such as Brisbane and Perth) or low (Adelaide and Hobart). Markets without such policies remain affordable, both high and low demand. Macquarie labeled “dull” Atlanta, Dallas-Fort Worth and Houston have demand 250% to 350% that of “sexy” Sydney yet remain affordable. This is the reward for not materially constricting supply, while observing strong environmental standards. Macquarie apparently believes in a “law of demand,” rather than the “law of supply and demand.”

State policies in Australia have more than doubled house prices relative to incomes. It now takes years more of additional income to purchase and finance homes in Australia than just 10 years ago. No amount of rationalization will change that.

Wendell Cox
Co-author, Demographia International Housing Affordability Survey
Principal, Demographia
St. Louis, USA

Posted by Wendell Cox at 05:46 AM | Permalink

To the Editor:
The West Australian (Perth)

Re: Shared equity scheme for WA home buyers (12 February)

It is hard to imagine a more ineffective, even counter-productive approach to the housing affordability crisis than the state government’s “shared equity” program. The scheme meets the fundamental criteria for all too many public programs today --- rhetoric claiming “we care” and a program that indicates nothing of the sort. In the absence of substantial new supply of land for development, shared equity is likely to drive up demand, and prices even higher. The problem is land supply. Housing is unaffordable in Perth because the state has not allowed enough land to be developed to keep prices reasonable.

Perhaps most cynically, the program will miss most of the first home buyer market. Only 1,000 households a year would be assisted, less than 20 percent of normal first home buyer demand. The tragedy of these policies is that it now takes 10 years more in gross median income to pay for the median priced house (including interest) than just a decade ago. No serious or sustainable relief will be obtained without substantially increasing the land available for development.

Sincerely,
Wendell Cox
Co-Author, Demographia International Housing Affordability Survey
Visiting Professor, Conservatoire National des Arts et Metiers, Paris

Posted by Wendell Cox at 09:10 AM | Permalink

To the Editor
The Daily Telegraph (London)

Re: Road tolls could be Labour's poll tax (13 February)

In his attempt to diffuse the growing resistance to road pricing, the Transport Secretary tells the nation, "We don't have the luxury of doing nothing, if we are not to see the kind of gridlock found in American cities." While fully comparable data are not available, indications are that "gridlock" is not so rampant in the United States. Average work trip times are less than in the United Kingdom. Average work trip travel times are less than in the United Kingdom. Even in Atlanta, with one of the worst road systems in the United States (considerably larger than any UK urban area outside London), average road speeds are faster than in any major UK urban area. Travel speeds are faster than London in the most congested US urban area, Los Angeles. It may be convenient to cite a "whipping boy" to justify the government's policies, but this one is simply not supported by the data. The Secretary would be better served to use Hong Kong or Jakarta.

Sincerely,

Wendell Cox

Visiting Professor

Conservatoire National des Arts et Metiers, Paris

Former Member, Los Angeles County Transportation Commission

Address

Conservatoire National des Arts et Metiers

Rue San Martin

75003 Paris

Posted by Wendell Cox at 12:31 AM | Permalink

Letter to the Editor
The Australian

Re: Bidding Wars as Rental Markets Shift (10 February)

It is hard to imagine a more distorted header than “thousands of people are forced into home ownership” (by higher rental prices) as was used in this article. It is akin to complaining that a rise in the gross domestic product forces more people into a better quality of life.

Rising home ownership has been a principal driver of the unprecedented prosperity that Australia and other high-income countries have enjoyed since World War II. Only recently has the Great Australian Dream been severely compromised, even destroyed for some, by urban consolidation policies that have created land shortages and predictably exploded housing prices. Where such policies have not been adopted, for example in Canada and the fastest growing markets in the United States, the Median Multiple (median house price divided by median household income) is less than one-half that of Australia.

It is not surprising that this effect should ripple through to rental markets. State land use policies must be changed to restore the balance between household incomes and house prices. The renters “forced into home ownership,” like others, will find that home ownership in the new Australia is more the form than the reality. Today, seven more years more of gross income are required compared to ten years ago to pay for and finance a the median priced home. This cannot but help to be a significant drag on the economy.

Sincerely

Wendell Cox
Co-author, Demographia International Housing Affordability Survey
Conservatoire National des Arts et Metiers
Paris

+33 6 10 59 59 92
Conservatoire National des Arts et Metiers
Rue St. Martin
75003 Paris

Posted by Wendell Cox at 04:19 AM | Permalink