Sydney to Abandon Radical Urban Containment Policy

The New South Wales government has proposed a new Metropolitan Strategy for the Sydney area which would significantly weaken the urban containment policy (also called urban consolidation, smart growth, livability, growth management, densification, etc.) that has driven if house prices to among the highest in the affluent New World (Australia, Canada, New Zealand and the United States) relative to household incomes.

According to the Australian Financial Review, the state's Liberal-National government plans to allow the building of more than 170,000 new homes, with the vast majority being on greenfield sites, largely beyond the current urban footprint. Premier Barry O'Farrell and his party had promised in their electoral campaign in 2011 to liberalize land-use regulation and to moderate the previous Labor government's quota that required 70% of new houses to be built within the current urban footprint and 30% on greenfield sites. In fact, however, under the Labor government's administration, new house building had been produced at a well below demand level.

Among the major New World metropolitan areas rated in annual Demographia International Housing Affordability Surveys, Sydney has been the most unaffordable, along with Vancouver, in recent years. Sydney and Vancouver have had among the most stringent urban containment policies in the New World, and the resulting unaffordable house prices under such circumstances are consistent with economic principle.

Premier O'Farrell told the Sydney Morning Herald that the government wanted to "make home ownership a reality again." He continued, "The more blocks of land (lots) we can release, the greater downward pressure we can put on housing because it's been so high for so long." In a press release issued by his office, the Premier recalled that “Before the election, I said I wanted to ensure owning a home wasn’t a fading dream for young families" and noted that the massive housing package "will go a long way to delivering on that commitment."

In the longer run (by 2031), the government intends to provide for a total of 545,000 new homes, while abandoning the practice of allocating locations based upon planning theory. Planning and Infrastructure Minister Bradley Hazzard told the Sydney Morning Herald that the government intended to “look further afield” than the presently planned greenfield suburban growth centers. He continued: "We're trying to [be] less constrictive and restrictive and what we're saying is the marketplace should have far more of a say in what the mix of housing is and where it should be,'' adding that ''it doesn't matter'' what percentage was delivered in greenfield and established suburbs. He concluded: ''No one should be preoccupied by particular prescriptive formulas.''

The government also indicated its intention to encourage one half of employment growth over the next 20 years to be in Western Sydney. Western Sydney is virtually across the urban area from the central business district. This dispersion of employment, along with roadway improvements in the area, is likely to improve the metropolitan balance between jobs and housing.

The plan for greater job dispersion would, if successful, bring Sydney more into line with urban best practices, which are exhibited by the location of most new jobs in edge cities, as well as throughout the entire urban area. Sydney has among the longest work trip travel times in the New World. The one-way work trip travel time is newly reported in the Metropolitan Strategy to have reached 35 minutes. Work trip travel times are worse only in Melbourne, at 36 minutes. By comparison, Dallas-Fort Worth, with a larger population, a much lower urban area density and a mere fraction of the Melbourne or Sydney transit work trip market share has a far shorter one-way work trip travel time (26 minutes).

The Sydney developments are the latest in a trend toward liberalizing urban land use in four nations.

In October, the New Zealand government announced plans to liberalize land-use amid growing concern about the extent to which that nation's urban containment policies have destroyed housing affordability. In the introduction to the 9th Annual Demographia International Housing Affordability Survey, Deputy Premier Bill English said:

Land has been made artificially scarce by regulation that locks up land for development. This regulation has made land supply unresponsive to demand. When demand shocks occur, as they did in the mid-2000s in New Zealand and around the world, much of that shock translates to higher prices rather than more houses.

Recent polling has shown support, by an almost 2 to 1 margin for government action to improve housing affordability, with even higher stronger support in the 18 to 34 age group, where the margin was more than 3 to 1.

The United Kingdom Cameron government is also embarked on a program to liberalize that nation's restrictive land use policies, which former Bank of England Monetary Policy Committee member Kate Barker found to be the cause of severe housing unaffordability in a report commissioned by the Blair Labour government. Planning Minister Nick Boles has characterized the unaffordability of housing as "the biggest social justice problem we have."

In 2011, Florida repealed its statewide smart growth mandate and closed the administrative bureaucracy that had overseen the program. Before that, the government of the Australian state of Victoria substantially expanded the urban growth boundary of the Melbourne urban area.

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I partly agree, for 180 degree different reasons

If I was Wendell, I would be expressing concerns that all this "T.O.D." planning will fail to result in affordable housing. It is all very well to "increase the supply of zoned land", but there is a massive difference between a supply of "zoned" land, and the ability of developers to float a "MUD" (Municipal Utility District) and leapfrog "land banks", which is what keeps housing affordable in so many US cities. Developers can simply watch rural land coming up for sale on the rural land market, buy it, and develop it. There is so much within access of the urban economy by automobile, that the process remains "free market competitive". "T.O.D." by contrast, brings much smaller amounts of land into "supply".

The owners of greenfields land that has been "zoned" have been handed a "planning gain". If they are under no compulsion to sell it, it is necessary for developers to induce them to sell, and to out-bid each other in the process. The rising market causes land owners to act like speculators in a rising market, and withhold their land from sale in the hope of even higher prices. This is why, as I say in my other comment, there is such a massive difference in the price of land between cities running the two different types of policy.

The Netherlands urban planning system includes compulsory acquisition of land to prevent this. The designers of the UK's Town and Country Planning System in the 1940's also included this provision, but it was left out by the politicians, doubtless under pressure from the wealthy land owning class, who scored a major coup thereby. The fact that land prices in UK cities have been thousands of percent higher than they needed to be, for decades now, is something that needs to make advocates of urban growth containment all over the world, wake up to whose useful idiots they are. Certain Rockefellers were significant in "conservation" advocacy in California right from the beginning.

It should be made illegal for Local and Regional government to "contain urban growth" without imposing compulsory acquisition provisions, or very steep land taxes on rezoned greenfields land. Then we would see what would happen to the "support" that local politicians who support "smart growth" get from their wealthy backers.

Certain economists who should know better, argue that in the growth-contained, median-multiple-6-and-higher cities, urban land prices "find their own level anyway at what people are prepared to pay". Great. Would we accept this with bread, or milk, or water? Allow an oligopoly to charge "what people are prepared to pay"? Why is it acceptable with land for housing?

Can it be argued with a straight face that people in UK cities "choose" to pay two to three times as much for housing eight times as dense on average, as an undistorted market? This is like saying that because some people in the free world diet and exercise to be slim, everyone in North Korea also "chooses" to be slim.

msetty: There is nothing


There is nothing even remotely misleading about Cox's article.

Artificially choking-off land supply does, has and will continue to put house prices into the stratosphere. This is beyond argument - even the [more honest and informed] "smart growth" advocates admit this.

That high-density 'housing choice' you speak of is actually becoming housing compulsion - because when you choke-off land supply no-one (except the rich) can afford to live anyway else.

Here is the real question: If, say, 80% of the market wants to live in low-density, why then do we create plans that make that impossible (minus becoming a mortgage slave) by ARTIFICIALLY pricing them out of the option?