It's all so easy, really

Poor Mr Bernard Salt, it is in some ways sad that an otherwise intelligent and perceptive demographic analyst can so readily swallow the snake oil peddled by Wendell Cox and the other members of the Demographica flat earth society of town planning-deniers (Australian March 23 2006). It’s all so simple really; those nasty planners all hate families and want to stop them buying cheap homes way, way out in the suburbs, where everybody really wants to live so they can commute their life away, two hours a day forever and ever amen. If there was unlimited land available for subdivision in all our cities then house and land packages like mum and dad had back in the golden years of the 1960’s would all be cheap again, backyard cricket would be compulsory, and we could all live happily ever after.

However the simplistic nature of this argument is revealed when you examine the basis on which this argument is made. The Demographica approach to how planning should be undertaken is to divide the median house price in a given city by the median income and the lower the ratio the more affordable housing is in that city. Implicit in this approach is the assumption that the land use planning approach that produces the lowest ratio is the ‘best’ and ignores all the particular circumstances of each city faces at it attempts to manage growth. Invariably, this approach maintains the fiction that urban growth boundaries are sole reason that cities which have them are more expensive to live in than cities that don’t. Growth boundaries have become the dastardly mechanism by which these evil family-hating planners use to drive up the cost of housing for ordinary persons and if they all got out of the way and let the market decide, the people in those cities would all be better off, better housed and ‘relaxed and comfortable’.

The reason they can carp on about it is, unlike planners, Bernard and company don’t have to worry about what the wider consequences of unlimited land release are, whether it be air quality so poor that respiratory illness drives up health care costs from endless gridlocked toll-roads, the loss of productive farm land, habitat destruction, and the pesky fact that once you build a new suburb, you then have to maintain it and supply it with all of the services that the people require forever and a day thereon. Anything that doesn’t neatly fit into the formula of one number (median house price) divided by another number (median income) is (in econo-speak) an ‘externality’ or in plain English, someone else’s (i.e. the taxpayer’s) problem.
There has been an unprecedented rise in the cost of housing in Australia over the last decade or so, nobody’s denying that for a moment. But growing cities is a complex, time consuming and expensive business, requiring careful evaluation of a wide range of community concerns and long term needs and simple measures and single indicators, such as housing cost are only a small (but important) part of a wider picture.

The preferred entry-level dwelling that Mr Salt alluded to, the 150sqm house on a 600sqm lot leads to an overall outcome of between 12- 13 dwellings per hectare, net (or about 35-40 persons/hectare). When multiplied out over the thousands of new dwellings required in a large, growing city, that equals a lot of hectares, most of which are currently used for other purposes and which currently lack urban services.

This brings us to the vexed question of infrastructure. It is essential, expensive, and there is only so much of it that a given society is able to build at any one time due to the technical, physical and financial resources available to it at any particular time. To properly plan for infrastructure, long lead times of many years are required and only so many development fronts can be serviced at any given time. Inevitably, there is a lag between when growth happens and when demand for the infrastructure (be it roads, rail, new schools, hospital beds or any other of the essential things a city needs) can be satisfied. Then there is the willingness (or otherwise) of residents (new and existing) in a given city to fund the provision of infrastructure to new suburbs (or even redevelopment areas) from rates, taxes, tolls or levies.

In the example above, that’s 12-13 households worth of future rate or tax income to fund the ongoing maintenance of the urban infrastructure and the necessary services that hectare of new urban land (including for example, around 150-200 linear metres of roads, footpaths, water and sewer pipes, street trees, and 1000sqm of park as well as wider services and roads, rail etc). Obviously, the tax and rate revenue from those households cannot pay for these costs exclusively. The rest of the money has to come from somewhere (be it taxes on existing residents, business or other broad-based charges). The cold, hard facts are that fringe development is always subsidised (often indirectly) and as a result, cities can only grow at the rate and in the manner that they can afford to; and that once they reach a certain size (based on their own locational characteristics), fringe growth becomes prohibitively expensive.

Over the past decade or so, governments (and those whose taxes fund them) have become increasingly unwilling to pay for new infrastructure to service population growth and particularly for infrastructure for new areas on the urban fringe than they have in decades gone bye. This has led to an increased reliance on the use of up-front infrastructure charges which invariably get passed on to the homebuyer. These charges have escalated in recent years, especially in Sydney, where a scarcity of suitable land (induced or otherwise) has escalated raw land values considerably, which in turn drives up the cost of new infrastructure as well as housing.

The reasons for high raw land costs are manifold, and are always linked to the specific circumstances of a particular city. The Demographica approach assumes each city exists on its own tabla rasa with nothing to stop the ever outwards expansion of a city except its eventual collision with another such city on a similar growth trajectory. In reality there are all manner of physical, environmental, scenic and land use constraints that exclude (either temporarily or permanently) land from further development for urban purposes. These constraints are usually decided by way of broad public consensus as being essential for the greater common good of society and therefore are upheld as being worthy of protection from individual economic want (acting collectively or otherwise). They include matters such as floodplains, natural hazard areas, steep land and mountain ranges, natural features and habitats, with and other areas distinguishing characteristics that make them necessary to ensure a healthy, safe and liveable environment.

The second group of factors that need consideration are the consequences of past decisions by people that remove areas from urban expansion, such as: water catchments, rural production areas (fertile and productive land), national parks, forestry reserves, areas of cultural heritage significance, and areas that have become unusable owing to previous activities that have rendered them either contaminated or unstable. All these matters have the effect of removing large portions of the urban fringe from development, and there is unlikely to be widespread community support for reversing most of the decisions that did so, regardless of rising home costs.
Then there is the effect of previous subdivision policies in rural areas (or in some areas, the lack of them). Brisbane and Sydney particularly are burdened with a lot of small rural and rural-residential subdivisions in urban fringe areas. Many areas lack large, easy to develop parcels and potential developers often have to assemble sites from numerous small (1-10 hectare) lots, which is a difficult, expensive and time-consuming process. The additional cost of land assembly inevitably gets passed on to the future home-buyer, and the delays experienced in getting numerous individual land owners to sign on the dotted line can often exacerbate supply shortages.

So, in effect, instead of a tabla rasa waiting only for someone to ‘turn on the tap’ and satiate our housing wants, we have often a limited set of choices, with no guarantees (other than conflict) when it comes to managing growth in our cities. In Western Sydney particularly, there has been widespread community anger from both new residents upset over infrastructure lags of up to 10 years and the inconvenience and costs that it imposes on them, and from residents in existing areas sick of their taxes being used to pay for it and putting up with the traffic heading through their suburbs to the city from the fringe. Increasingly, as shown in both the Sydney Metropolitan Strategy and the South East Queensland Regional Plan, and other strategies elsewhere, the community expectation is that infrastructure is delivered concurrently with the new growth, with budgets running into the billions of dollars.
Whilst it always seems attractive in the short term to release more land and build a few extra houses, the reality is that we really can’t afford to do so. That is the meaning behind the growth boundary lines- it is the land that can be realistically developed in the 20-30 year horizon without breaking State budgets- no more, no less. All cities are not created equal; some are more expensive and difficult to grow than others, and if the demand for fringe housing is greater than the collective ability and will to provide, then prices will inevitably rise and other housing choices may need to be made. If necessity is the mother of invention, then it can certainly count urban consolidation and ‘smart growth’ as among it’s brighter offspring. If the backyard cricket match has to relocate to the local park, then it is a relatively small price to pay for being able to get home before dark and actually have a game in the first place; in a city where such outdoor activity doesn’t automatically lead to an episode on the ventillator.