IN AN ADDRESS ON THE 13TH FEBRUARY THE GOVERNOR OF THE RESERVE BANK OF AUSTRALIA SAID THAT “IN A COUNTRY WITH THIS MUCH LAND, IT OUGHT TO BE CHEAP TO GET A ROOF OVER YOUR HEAD.” INDEED LAND SUPPLY IS A MAJOR ISSUE, GETTING DEVELOPMENT SITES AT A PRICE THAT DELIVERS VALUE FOR MONEY OUTCOMES TO END CONSUMERS IS CHALLENGING, PARTICULARLY FOR INFILL.
In an address on the 13th February the Governor of the Reserve Bank of Australia said that “in a country with this much land, it ought to be cheap to get a roof over your head.”
Indeed land supply is a major issue, getting development sites at a price that delivers value for money outcomes to end consumers is challenging, particularly for infill.
Of far more importance however is the lack of understanding by some regulators of the role of housing as essential economic development infrastructure. This has two aspects, firstly the economic multiplier effect during the construction phase. In their 2010 Report, Property Insights estimated that for every million dollars invested in Western Australian dwelling construction there were 3.8 full time equivalent jobs in the industry and a total of 6.1 full time equivalent jobs when indirect employment was considered. According to the ABS $1.4b of housing construction was undertaken in December 2014 with $0.4b in non-housing (apartments etc) creating a power house of employment in the residential construction industry.
The second aspect is housing underpinning economic development in other sectors. Kwinana is a case in point where the establishment of the industrial zone was combined with the delivery of worker accommodation. The government of the day understood the importance of housing in securing the investment by BHP and delayed other state projects to raise the £4 million necessary to deliver the water, roads, electricity infrastructure, along with the dwellings necessary to house the influx of workers into the area.
Roll forward to 2015 and the financial limitations of government, policy has focused on a user pays approach to infrastructure that is pushing up the price of housing. Whilst late last week the Federal Minister for Communications announced the deferral of some of the new charges relating to the roll out of fibre optic cable through NBN Co, the proposed direct charging for infrastructure marks a watershed moment in Australia as it is the first time a Federal Government has charged for telecommunications infrastructure in addition to a household connection fee.
If you want the most common and successful piece of “infrastructure” paid over time, look no further than your mobile phone. If the phone had to be paid for upfront it would have inhibited growth especially if users had to make an upfront contribution to the mobile phone tower as well. We need to rethink infrastructure provision if we are to address housing affordability.