Why a gritty federalism can fix housing affordability

Why a ‘gritty federalism’ can help fix housing affordabilityTackling Australia’s thorniest problems requires the cooperation of federal, state and local governments says the Property Council’s chief executive Ken Morrison.”Housing affordability crosses all levels of government and requires solutions that focus on the biggest causes of the problem,” Morrison says.House prices are a product of interest rates, population growth, the performance of state economies, as well as “the well-documented chronic supply problem,” he says.Referring to the statistics from the National Housing Supply Council, which Morrison says was “unwisely abolished” by the current government, Australia had a housing supply gap of more than 200,000 dwellings in 2012. “In simple terms, that’s a year and a half’s worth of population growth we have to catch up on,” he says.This supply warning has been echoed by the Reserve Bank, the Productivity Commission, the COAG Reform Council and other experts which have made the point that Australia’s planning and approval processes don’t work well enough, Morrison explains.”Not enough land and urban renewal areas are zoned for the growth we know is coming. Planning rules are overly complex and expensive to comply with. Approval processes are slow and uncertain. And too many infrastructure costs are pushed onto the end purchasers of new housing.”So, how do we tackle a complex problem which requires action from all levels of government? Morrison says the key is to “align objectives and provide incentives for action”.Federal Treasurer Scott Morrison recently signalled his intention to explore how competition-style payments to state governments could help modernise planning regimes and encourage more land release.Earlier this year, the Property Council commissioned Deloitte Access Economics to examine how national incentive payments could transform state and territory planning systems. Led by Professor Ian Harper, who also chaired the federal Government’s Competition Policy Review, the report found that unlocking state planning systems from unnecessary red tape and delay could generate $3 billion in economic uplift a year. Deloitte argues that this reform models should have five characteristics: agreed targets and metrics; accountability; modelled benefits; payments linked to action; and the involvement of all three tiers of government.Our planning systems, Morrison says, are “not geared for the reality of growth”.”We need planning systems that deliver faster approvals, clearer processes and that avoid unnecessary costs. We must also align the actions of federal, state and local governments in driving city and regional growth.”Such an approach demands “leadership and sustained effort” across all levels of government to make meaningful progress on housing affordability – but this is imperative if we are to ensure the next generation of Australians are not locked out of the housing market, Morrison says.