According to a leading economist, NIMBY (Not In My Back Yard) attitudes and objections to high-density projects have driven up house prices and rents, keeping younger Australians out of the market.
In a speech last week, Grattan Institute Economic Policy Director Brendan Coates (pictured above) said politics of land-use planning favour those who oppose change.
“The key problem is that many states and local governments restrict medium- and high-density developments to appease local residents concerned about road congestion, parking problems, and damage to neighbourhood character,” he said.
“The people who might live in new housing – were it to be built – don’t get a say.”
While we need land-planning rules to ensure we don’t “build abattoirs next to schools or apartment buildings”, and for so-called externality costs such as pollution and noise, Coates said studies generally “conclude negative externalities are much smaller than the costs of existing regulations”.
While we have been successful building in the outer fringe, Coates said “it remains clear cities offer too little medium-density housing in their inner and middle rings” and that this is “not what mot Australians want”.
“Many would prefer a townhouse, semi-detached dwelling, or apartment in an inner or middle suburb, rather than a house on the city fringe,” he said.
“The stock of smaller dwellings – townhouses, apartments, etc – made up 44 per cent of Sydney’s houses in 2016, and 33 per cent of Melbourne’s. Yet, Australians say they actually want those numbers to be 59 per cent in Sydney and 52 per cent in Melbourne.”
Coates believes that as younger Australians struggle to gain a footing in the property market, federal and state governments must make tough decisions on housing policy to enhance affordability.
“Either people accept greater density in their suburb or their children will not be able to buy a home, and seniors will not be able to downsize in the suburb where they live,” he said.
“Economic growth will be constrained. And Australia will become a less equal society – both economically and socially.
“This is a problem we can fix, but only if we make the right choices.”
Coates said Reserve Bank researchers have estimated that restrictive land-use planning rules add up to 40 per cent to the price of houses in Sydney and Melbourne, up sharply from 15 years ago.
“More recent research suggests that planning rules have added substantially to the cost of apartments, where building height limits in and around the urban cores of our major cities prevent more construction,” he said.
“There are reasons to think of these estimates as upper-bound estimates of the size of the impact of land use planning.
“But they are consistent with a growing international literature highlighting how land-use planning rules – including zoning, other regulations, and lengthy development approval processes – have reduced the ability of many housing markets to respond to growing demand, adding to both rent and house price growth in a number of countries.”