Speech to Per Capita Policy Exchange 2008 – Market Design and Housing: New Approaches
****Check Against Delivery****
I would first like to acknowledge the traditional owners of this land, the Turrbal people, and to pay my respects to their elders past and present.
Thank you David (Hetherington, Executive Director, Per Capita) for that introduction.
I would also like to acknowledge:
- Rt Hon Patricia Hewitt MP.
- Michael Cooney, Policy Director, Per Capita.
- Olaf Cramme, Director of Policy Network.
- Professor Bruce Muirhead, CEO Eidos Institute.
- Our friends in the Queensland Government.
It is terrific pleasure for me to be here today to speak at Per Capita’s conference.
A couple of years ago, driving south through beautiful Kiama in New South Wales, I stopped for a cherry pie and ran into someone handing out pamphlets for a candidate for local government.
The pamphlets urged an end to the expansion of Kiama – no new land release.
I got talking to the guy with the pamphlets:
- If he was not keen on more growth for regional towns, did he think cities should spread? Was it greenfields development he preferred? No.
- What about urban consolidation: did he think infill development was the solution? His party colleagues were at that same time opposing several urban infill projects in my own electorate. No.
I often think of that conversation when faced with the Gordian Knots that litter housing policy.
Home owners want the value of their own home to appreciate as much and as fast as possible – but they also want their kids and grandkids to be able to afford a home of their own one day.
Many Australians want a big backyard, but they want it close to the city, or to where they work, and they hate urban sprawl.
Existing residents want low rates; new home builders want low developer charges and levies; and both want better council services.
Given the complexity of the housing and urban development debate, why on earth has the Federal Government bought in?
Because it is too important not to.
Our homes and our suburbs support and shape our ability to participate in society: in work, in study, in recreation.
The previous Federal Government abrogated responsibility in this area.
Their view was that planning was a matter for the states, and the market would take care of the rest.
The housing market
The housing market works well for most Australians.
Sixty-nine per cent of Australian households own their own home either outright or with a mortgage, and most have seen the value of those homes increase over time.
A home is usually a family’s most expensive purchase – and their greatest asset.
It is also the most likely way to build financial security across generations.
Private housing is worth $3.4 trillion.
Buying, constructing and renovating homes contribute around 6 per cent to Australia’s Gross Domestic Product – about $72 billion.
The private rental market provides 28 per cent of Australians with a home.
Our housing market is mature and complex: taxes and charges, monetary policy, planning and development systems, and our own aspirations all interact like a game of ker-plunk: moving one piece of the puzzle can have unintended consequences in other areas.
There are not simple solutions to the difficulties that are easy enough to identify.
There are several areas of market incapacity, and market failure where there is an obvious role for government:
- Many Australians miss out on decent housing: 105,000 were homeless on Census night in 2006 – up more than 5,000 on Census night 2001.
- 26,000 aged and disability pensioners spend more than 50 per cent of their limited incomes on private rental.
- 180,000 are on public housing waiting lists around the country.
- The private rental market has vacancy rates below 2 per cent and in towns like Mackay, vacancy rates are as low as 0.02 per cent, meaning people who have lived their all their lives cannot afford to stay.
- The proportion of first home owners is declining – historically over 70 per cent of Australians have owned their own home.
I have said before that what troubles me most is the falling number of low and moderate income households – child care workers, shop assistants, mechanics, bus drivers and enrolled nurses – who are buying their own home.
This is a group of workers with stable incomes and good ongoing employment prospects.
Alongside superannuation, home ownership is how we plan for our retirement, and declining levels of homeownership would have negative consequences not only for the families involved, but for our nation.
We are not keeping up with demand in construction, and no-one can give you a clear answer about whether we are releasing enough land, or whether developers are land banking.
Planning systems can be unnecessarily slow, even for complying developments, and infrastructure charges, taxes and levies are blamed by developers for the sharp drop we have seen in affordability over the last decade or so.
State and Territory Governments have borne most of this load on their own in recent years.
The Commonwealth has decided to pitch in because cities, communities, neighbourhoods and how we live in them are critical issues for social cohesion and prosperity.
And because Australians were pretty tired of raising issues like public transport with the Federal Government and being told – ‘not my problem.’
We have pitched in with a variety of new programs.
Our $512 million Housing Affordability Fund improves the efficiency of the housing market itself.
The Fund provides other levels of government with the incentive to speed up planning and development processes and to reduce infrastructure charges – costs that typically get passed straight on to home buyers.
The $623 million National Rental Affordability Scheme will increase the supply of affordable rental dwellings by 50,000 homes.
It will do this by providing an annual incentive of $8,000 per dwelling for ten years.
Homes will be rented at 20 per cent below market rates to low and moderate income earners.
In the first round builders, developers, community housing providers and other institutions applied for 13,000 incentives over the first four years.
To help aspiring first home buyers save a deposit for their first home we have set aside $1.2 billion for First Home Saver Accounts which super-charge savings with a combination of government contribution and low taxes.
Since the launch of these new accounts on 1 October, 25 financial institutions have signed up.
Thousands of potential homebuyers have requested information and hundreds have opened accounts already.
We have also announced recently that the First Home Owner Grant will double for existing properties and triple to $21,000 for newly built properties.
Obviously that is a big help to aspiring home buyers, but its also a very necessary part of our Economic Security Strategy, keeping residential construction strong.
But there is one step more we need to take.
If we ask ourselves the two threshold questions, ‘do cities matter?’ and ‘do they benefit from big picture planning?’ and the answers to both are ‘yes’, then the role for the Federal Government in finding and leading iconic projects is clear.
When Tom Uren was Minister for Urban and Regional Development he had a mandate to influence both the shape of our capital cities and the sustainability of our major regional centres.
The Federal Government sought to build our regional centres – like Albury-Wodonga.
It sought to build local economies in these towns by creating jobs, enhancing local services and improving lifestyles.
In his second reading speech on the 1974 Bill to establish the Albury-Wodonga Development Corporation Tom Uren said:
‘The Commonwealth Government’s purpose is to develop a regional growth centre as part of its urban and regional development strategy.’
The Corporation sought to develop Albury-Wodonga into a major inland city by the turn of the century.
At the time Albury-Wodonga’s population was around 40,000 and it was hoped that the Corporation would oversee growth to around 300,000 people by 2000.
While the population did not boom to that extent (in 2006 around 90,000 people were living in Albury-Wodonga) this plan had a significant impact on the economic development of the area.
It is clear that our capital cities cannot and should not accommodate all of Australia’s future population growth.
Decentralisation needs to feature bigger in our thinking.
Just over 10 years ago, Pyrmont and Ultimo’s population was about 3,000.
In its industrial heyday, it had docklands, heavy industries and rows of 19th century terrace houses.
It had iron foundries, wool stores, refining mills and coal power stations.
It had three sandstone quarries, famously named Paradise, Purgatory and Hellhole.
One can only wonder what set Paradise apart!
In the past decade, Pyrmont-Ultimo has been recreated under an urban renewal plan – the Better Cities Program set up by the Hawke Labor Government.
Better Cities was a 30-year urban renewal plan that created new housing options for people wanting to live in cities.
Through the success of this program, Pyrmont-Ultimo’s population has quadrupled to around 13,000.
It is likely to rise to around 20,000 over the course of the area’s 20-30 year development.
With such massive population growth, it would be easy to envisage a concrete jungle in the making.
Far from it.
As the number of people living in Pyrmont-Ultimo has grown, so has the amount of land invested in public parks and gardens more than trebled in size in the decade between 1994 and 2004.
It went from around 7.7 hectares to 25.8 hectares, and there is a further 7 on the drawing board.
The New South Wales State Government has worked with the City of Sydney on a large new park on the old water police site, and the council has built the Ian Thorpe Aquatic Centre.
Heritage buildings identified for preservation have risen from 4 to 21, adding to the charm of the area and directly linking it to its working class past.
And the 15 kilometres of foreshore, previously inaccessible because of the wharves and factories, is there for the walking.
Herbie Shields, born in Pyrmont in 1932 and now a board member on City West Housing, says it all:
‘I remember the horse and carts pulling the sugar up along Harris Street. It was a poor suburb. When we were children we wanted to get out of Pyrmont to better ourselves. Now everybody wants to get back in.’
The point is that none of this has happened by accident – private developers have been vital to rebuilding Pyrmont, but the Pymont-Ultimo rejuvination could not have happened without the Better Cities Program and both leadership and financial contribution from the Commonwealth.
The Program itself was a tribute to Brian Howe, who used his time as Minister for Housing to remodel the future of our cities.
Better Cities was highly innovative, pulling together all the relevant players, including all levels of government.
It created a prototype for how a community can work, and resolved the practical problems that could have derailed it.
Issues such as consolidating the land, streamlining planning, agreeing on public space, redeveloping public housing – not to mention agreeing on the private/public mix.
This mix has resulted in a relatively high amount of social housing stock – 8 per cent – most of which is managed through the City West Housing Company.
City West itself was set up in 1994 by the Federal Government to develop and manage affordable housing in the area.
It is a sophisticated, entrepreneurial, not-for-profit company and has been instrumental in maintaining a socially diverse community in this inner city location.
City West is similar to the Brisbane Housing Company, which was developed by the Queensland Government and Brisbane City Council to provides affordable rental housing to low and moderate income earners – as an alternative to old-style public housing.
Without groups like Brisbane Housing and City West, low and moderate income earners would be crowded out of the housing market, forced to abandon their communities and their often long-term connections to the area.
That is obviously bad for social cohesion and connection, but its also bad for the economy.
The City of London, for example, has had to go to extraordinary lengths to keep key workers in London.
Governments can and should support quality of life and community cohesion by building strong foundations for development and renewal.
The Better Cities Program picked up on fundamental shifts in urban design thinking.
New Urbanism was a movement which started in the 1990s.
It exhorts shifting design focus from the car-centric development of dormitory suburbs and instead, creating vibrant mixed-use communities which are walkable and compact.
The idea was to decrease dependency on car and other vehicle transport.
But the solutions have a range of positive effects – mixed use development where people from different income groups can live, work, go to school and play, ideally all within walking distance.
This is smart city planning, and it is being done by some developers as they realise that these are the type of communities people want to live in.
But it goes beyond physical characteristics: it is about the development of cities where social equity and inclusion are as important as the bottom line.
And it is about the development of sustainable cities – that is, a city that ensures that its development and growth is not achieved at tomorrow’s expense, to borrow a phrase from the Governor’s Commission for a Sustainable South Florida.
It is clear that markets can build houses efficiently and effectively – but building communities usually requires something beyond the market.
Because we take the role of nation building seriously, and see a role for the federal government in building stronger communities, the Federal Government has moved beyond rental and other subsidies to a more active engagement.
To help us do this we have set up the Major Cities Unit in the Department of Infrastructure, Transport, Regional Development and Local Government.
The Major Cities Unit will provide a coordinated and integrated approach to cities.
It will look for and find opportunities – at the national level – where we can make a difference to the prosperity of our cities and the wellbeing of the people who live in them.
National Housing Supply Council
To get it right we need the evidence on which to base our decisions.
The Government has established a National Housing Supply Council to forecast future housing need and identify gaps between demand and supply.
The Council will improve the evidence base for housing policy development by providing research, forecasts and advice to government on issues such as the adequacy of housing and land supply to meet future housing needs.
It will bring together information on the demand side – population growth, demographic data about people movements, immigration information and household formation – and on the supply side, such as land release and availability, planning frameworks and the impact of infrastructure projects.
Currently no-one pulls all of this together to provide clear advice and forecasts so that we can get housing supply right.
If we can better target supply to meet demand, then we can go a long way to taking the pressure off housing costs – and improve housing affordability.
Meeting with mayors – how can we work together
In November the Federal Government is hosting a meeting with Mayors from around Australia to discuss how we can work together to improve the quality of life in our communities including to make housing more affordable and make our major cities more liveable, productive and sustainable.
Building Australia Fund
But creating a community requires an enormous coordinating effort, including effective and energetic partnerships between private interests and all levels of government.
The Federal Government has set up Infrastructure Australia to guide how Australia’s $76 billion investment program will be spent.
This includes the $26 billion in roads and rail infrastructure and the $20 billion through the Building Australia Fund.
One of the fund’s major priorities, as identified in the Budget this year, is to improve the quality of life within our major cities and major regional centres.
We are doing an unprecedented stock take of the nation’s infrastructure, prioritising future infrastructure investment and will commence construction on several new projects next year.
A focus on infrastructure will improve housing affordability, prevent water shortages, keep the lights on and the house warm and make it easier for people to get to and from work and leisure activities.
The closer we live to our places of work, the less we need to rely on transport, both private and public, and the better it is for the environment, for the community, and for individual’s peace of mind.
Yet Australians’ reliance on the car is only slightly less than in the United States and New Zealand.
In Sydney, for example, 70 per cent of all trips are made by private car.
In Melbourne, it is even higher, at around 75 per cent.
The Transport Data Centre in the New South Wales Government has estimated the average commuting times for people travelling from various parts of Sydney into the Central Business District.
If you live in the west, a two-way trip will take more than two hours out of your day – 76 minutes each way.
That works out to be more than 12 hours a week.
In 2005 the Australia Institute looked at the effect of commuting times on personal relationships and community life, and found that 35 per cent of Sydney fathers in full-time work spend more time commuting than they do with their children.
Obviously that is not good for the dads, it is not good for the kids and hard on mum who ends up responsible for even more of the primary care.
It is also hard on the family budget.
If families are spending $100 a week on petrol to and from work, it hits them just as hard as an extra $100 a week on the mortgage.
We need to consider not just the cost of rent and mortgage payments, but the cost of transport, when we think about affordable housing.
The Federal Government should have a role – not in making day to day planning decisions, but in doing the heavy lifting on big projects.
Making it possible to build the sort of cities, towns and suburbs people enjoy living in.
In these times of economic insecurity, rising fuel costs, and uncertainty in the face of climate change, the way we live will clearly change.
The successful design of our cities will necessarily be a sophisticated compromise of traditional desires, economic necessity and sustainable design.
The nation building agenda must lay the foundations for the communities we will want to live in tomorrow – not just new homes.
Greater connections will need to be made between housing and transport portfolios.
Communities should better meet the needs of all people, including the marginalised and isolated, offering mixed uses (that is, houses, recreation, retail and jobs) and mixed-income housing.
We will also need to continue to expand our regional centres, to take the pressure off capital cities.
The role of government needs to be active and inspirational, facilitating greater efficiency in planning, construction rates that do not fall so far behind demand, and suburbs that are healthy communities rather than incubators of dysfunction.
It is a big task, and one that requires all three levels of government to work together with one another, with business and with the community sector.
Thank you again for asking me to speak with you today, and I wish you a successful conference.