Hi Cameron, thanks for your great writing - I have been sharing with friends! As a non-economist, though, I wonder why you assume that loosening planning regulations reduces the average value of land. I don't quite follow your explanation in footnote 1. If loosening planning regulations now means developers can build 50 unit apartment blocks in Darlinghurst where before they could only build two story dwellings, why wouldn't it be profitable for developers to support such a loosening of planning regulations?
Yes, developers do support loosening planning regulations because it increases their property value by creating more valuable future development options.
But that doesn't mean that each property owner turns around and floods the market by building new homes just because the property they own is now worth more. The owner of the property was happy to own the investment at the previous value earning the previous return. Now, the value has suddenly jumped. Just like when share prices go up, it doesn't mean everyone sells out quickly.
It is helpful to think in terms of rates, not density
Wow ok - interesting. I've never heard anyone in the public sphere talk about rates over density. Being totally new to this issue, I am struck by the utter and total confusion in Australia around housing. It's really quite extraordinary given the preeminent social and economic imporance of housing. If you're right, I am struggling to understand how serious people in Australia have become so captured by the planning regulations argument. Because because the argument is simple and easy to make.
The response of the US industry to the public housing policy is up front and revealing. They dislike the notion of competition. Free enterprise is not something they really favour, or perhaps they think the government is going to supply a house at less than it costs.
The notion of the 'unworthy poor'. is also revealing.
Subordinated, marginalized and victimized, people (slaves) can adopt the [dominant] group’s ideology. They internalize their oppression, accept their subordinate status as deserved, natural, and inevitable and simply ‘put up with it’. Such is the case in the following instances.
1. Government debt to finance infrastructure required to reduce costs and enhance productivity increases the capacity to pay. But if debt is incurred to satisfy the impulse to ‘consume now’ it places a greater burden of those that will have to repay later. Low government indebtedness favours youth. Since 2008, Commonwealth debt has ballooned from zero to 60% of GNP and is likely to expand further due to the increase in interest rates and the myopia of citizens.
2. The unhoused accept ‘town planning’ that selects a fraction of the available land that is zoned ‘residential’ to support housing to be made available with a 'title' identifying an owner. It's not possible for the unhoused to rent a parcel of land on which to locate a 'tiny home' which is all they can afford, in either the residential (where the rules and the price of land excludes them) or the rural zones where land is cheaper and could be rented without any sort of title involved. In many places in the USA and Europe its legal, but not in Australia.
Its the planning system that results in homelessness. Without a home, people can't function in society.
A modest home, if appropriately sized and located on land that is not zoned residential, can be afforded by a single income earner on the minimum wage. It's neither a technical or an affordability problem if the price of the home can be reduced to 100K and it can be located on rural land. What is required is a transportable module efficiently produced in a factory.
Hi Cameron, thanks for your great writing - I have been sharing with friends! As a non-economist, though, I wonder why you assume that loosening planning regulations reduces the average value of land. I don't quite follow your explanation in footnote 1. If loosening planning regulations now means developers can build 50 unit apartment blocks in Darlinghurst where before they could only build two story dwellings, why wouldn't it be profitable for developers to support such a loosening of planning regulations?
Yes, developers do support loosening planning regulations because it increases their property value by creating more valuable future development options.
But that doesn't mean that each property owner turns around and floods the market by building new homes just because the property they own is now worth more. The owner of the property was happy to own the investment at the previous value earning the previous return. Now, the value has suddenly jumped. Just like when share prices go up, it doesn't mean everyone sells out quickly.
It is helpful to think in terms of rates, not density
https://www.fresheconomicthinking.com/p/a-housing-absorption-rate-and-upzoning
Wow ok - interesting. I've never heard anyone in the public sphere talk about rates over density. Being totally new to this issue, I am struck by the utter and total confusion in Australia around housing. It's really quite extraordinary given the preeminent social and economic imporance of housing. If you're right, I am struggling to understand how serious people in Australia have become so captured by the planning regulations argument. Because because the argument is simple and easy to make.
“I am struck by the utter and total confusion in Australia around housing”
Me too! This is why I keep banging on about it.
The response of the US industry to the public housing policy is up front and revealing. They dislike the notion of competition. Free enterprise is not something they really favour, or perhaps they think the government is going to supply a house at less than it costs.
The notion of the 'unworthy poor'. is also revealing.
Subordinated, marginalized and victimized, people (slaves) can adopt the [dominant] group’s ideology. They internalize their oppression, accept their subordinate status as deserved, natural, and inevitable and simply ‘put up with it’. Such is the case in the following instances.
1. Government debt to finance infrastructure required to reduce costs and enhance productivity increases the capacity to pay. But if debt is incurred to satisfy the impulse to ‘consume now’ it places a greater burden of those that will have to repay later. Low government indebtedness favours youth. Since 2008, Commonwealth debt has ballooned from zero to 60% of GNP and is likely to expand further due to the increase in interest rates and the myopia of citizens.
2. The unhoused accept ‘town planning’ that selects a fraction of the available land that is zoned ‘residential’ to support housing to be made available with a 'title' identifying an owner. It's not possible for the unhoused to rent a parcel of land on which to locate a 'tiny home' which is all they can afford, in either the residential (where the rules and the price of land excludes them) or the rural zones where land is cheaper and could be rented without any sort of title involved. In many places in the USA and Europe its legal, but not in Australia.
Its the planning system that results in homelessness. Without a home, people can't function in society.
A modest home, if appropriately sized and located on land that is not zoned residential, can be afforded by a single income earner on the minimum wage. It's neither a technical or an affordability problem if the price of the home can be reduced to 100K and it can be located on rural land. What is required is a transportable module efficiently produced in a factory.
Great arguments and logic again Cameron.