Housing affordability is a political hot button at the moment, but visiting American public policy guru Wendell Cox believes we’ve only got ourselves to blame.
Housing affordability is a political hot button at the moment, but visiting American public policy guru Wendell Cox believes we’ve only got ourselves to blame.
For too long, Mr Cox believes, we’ve accepted that we’d all be better off living in smaller houses and using public transport, and submitted as planning policies pushed the community that way.
The result is cities choked on traffic, consuming more energy, and housing costs beyond the reach of many.
“The next generation will need to inherit their home if they are going to own one,” warns Mr Cox, who was in Perth to address the Australian Property Institute’s state conference.
But it’s not too late, he believes, to solve the problem in Perth, which his consultancy, Demographia, lists as the 11th most unaffordable housing market in the English-speaking world.
Using a simple matrix of median house prices and median household income, Mr Cox says Perth had rocketed from one end of the affordability spectrum to the other in just a decade.
Anyone familiar with house prices here will know they have grown at a pace that far exceeds income growth for the same period.
Perth is the second least affordable city in Australia after Sydney and is worse than places such as New York, London and Vancouver.
Mr Cox said it was a simple matter of supply, with policies around Australia aimed at focusing the growth of cities inwards as infill, and demanding new suburban areas pay significantly more for the privilege of development.
He said the cost of housing was hitting those who needed it most, and those whom growing economies needed most.
“This is not a passing problem,” Mr Cox said.
He said the additional costs, largely due to government charges and developers’ costs from added regulation and development delay in the past decade, had added $540,000 to the cost of a median Perth home over the life of a typical mortgage.
“You are taking that out of the family for their life,” he said.
“That has to be wrestled with.”
Mr Cox said the issue plagued all Australian cities, with only Brisbane showing signs of altering its planning policies to alleviate affordability issues.
In contrast, the US has cities at both ends of the spectrum, with those in the west coast such as Los Angeles and San Diego losing population to those where urban sprawl had been unrestricted.
About four million people had moved to cities such as Dallas-Forth Worth and Houston, where the contrast in values of neighbouring agricultural land and fringe urban areas is much less.
“There is an exodus of people to more affordable areas,” Mr Cox said, suggesting the impact of rising land prices hits growth by as much as 20 per cent.
He acknowledges that solutions are likely to be painful because so many people and companies, including big land developers, now had so much invested in land that was expected to grow quickly in value.
However, he said Perth and Brisbane were better placed than most to ease their way out of the problem because their natural and rapid economic growth would help counteract the impact on land prices by releasing the supply side of the equation.