NIMBYism, building costs, consumer tastes, regulation and taxation will keep Victoria’s housing supply low, despite efforts from the Allan Government to power ahead with new developments.
Despite the best efforts of the Victorian Liberal Party, the political winds are indeed changing in Victoria, and Jacinta Allan has laid out her plan to rise from the ashes of a heavily indebted and incompetent government. The plan is currently three-fold:
- Release new land for greenfield development
- Adopt an Auckland-style relaxation of restrictions on subdivisions or development on existing blocks to encourage a proliferation of townhouses and granny flats
- Most controversial – to develop various ‘activity centres’ within suburban Melbourne, including affordable high-density housing.
Perhaps the silver lining is in middle suburban townhouses – less objectional to nearby residents, attractive to prospective buyers and profitable for developers.
We aren’t talking about large-scale social housing construction by government. The policy is very much an open invitation to developers and homebuyers in Victoria. However, those key groups are not really interested in building or buying affordable, high-density housing, no matter how good the location.
The Covid 19 pandemic, along with the work from home arrangements prompted by it, created a wave of demand for housing in regional/rural areas with larger blocks and dwellings, given the reduced value of city amenity while locked at home. As both the public and private sector attempt to re-establish on-site work, Allan hopes to revitalise Melbourne by concentrating new housing around transportation and employment hubs.
But the fact is, Australians don’t really like living in apartments or units. Indeed, if recent demonstrations in Brighton are anything to go by, we don’t like living anywhere near them! For years now, unit prices in cities such as Melbourne have virtually flatlined as supply has increased but demand has tapered off. The price of free-standing houses, on the other hand, has skyrocketed.
The cultural attitude towards apartments in general is one of suspicion. While houses and residential land are revered as sound investments, apartments are known to attract less capital growth, are expensive to own (strata fees, etc), and prone to defects. No matter how many trains go past a day, Australians will happily pay a premium for a detached house.
The policy is very much an open invitation to developers and homebuyers in Victoria.
But what really brings Labor’s proposal to its knees is the economics of building high density housing. Developers are facing increased material and labour costs due to inflation and competition from major government infrastructure projects, while also navigating a myriad of regulations and taxes. As a result, apartment blocks are typically developed for the boutique and high-end market. Affordable high-density housing simply isn’t worth it in the current economic environment.
As for greenfield sites, they have issues of their own – not least that Allan’s proposal will see many future sites not delivered for another decade. Basic road, water and sewerage infrastructure costs are higher, and increasingly Melbourne is eating into its nearby food bowl and placing new residents at the mercy of increased fire and flood risk at the urban fringe.
Perhaps the silver lining is in middle suburban townhouses – less objectional to nearby residents, attractive to prospective buyers and profitable for developers. This approach will allow for controlled infill – not flooding existing suburbs with hordes of new residents but still making better use of existing infrastructure and space.
Allan’s government and other Labor divisions have sensed the need to differentiate themselves as the party which will genuinely increase housing supply, whilst labelling any opposition from the Greens and Liberals as ‘blocking’. If the recent Queensland election results are anything to go by, the strategy might be a cunning one in metropolitan seats.
However, if Allan is serious about adding new supply to Melbourne’s housing stock, she ought to ask herself why she has made Victoria the most unattractive state for housing and business investment in the country. Only by removing onerous property, land, and windfall gains taxes, easing the regulatory burden on new builds and slowing their bungled infrastructure program, could she hope to actually stimulate new home building.
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Max Payne is the Australian Program Associate with Students For Liberty, a global non-profit that spreads the values of libertarianism on campus. He is also a twice former candidate with the Libertarian Party and maintains a keen interest in Austrian economics, classical music and organic gardening.
