Planning departments across the country have been crucified for decades, but no one has turned the mirror the other way to see what developers are doing to preserve their profits. Certainly, infrastructure planning and delivery could be improved, but even if planners produced approvals overnight, that would not change the incentive to maintain a floor below prices.
Forget red or green ribbons, developers keep supply behind a gold ribbon: they have to make sure there isn’t enough supply to drive prices down.
Promoters delivered an average of 3.8% of approved batches each year. Even in Willowdale, the main planned community in south-west Sydney where supply stood at 8.8%, supply made little difference, with prices rising 6.5% above inflation.
The reason is obvious. Why would someone in business keep building to undermine their own product? No other industry is doing it, but politicians are convinced it’s the key to solving one of the country’s most pressing problems.
Woodlea, northwest of Melbourne, was awarded Australia’s fastest selling community in 2015. This was heralded in media coverage, with some staged releases even selling out in less than a minute . In the first two years, they sold 13.8% of the total lots approved. However, once the prize was awarded, only 6.5% of the shares were sold over the next three years.
Springfield, near Ipswich in Queensland, was the largest development we analyzed, with 43,000 rezoned lots. At no time during its 20-year development window has all of this offering seen prices fall for more than a few months. They’re building an entire city from scratch and the prices have only gone one way: up.
During our study period, average lot prices increased by $194,010 for all of these projects. That’s a combined $5.9 billion price hike for homebuyers, with plenty more to constrain from the remaining 86,000 lots. This money could have been spent among local businesses, creating jobs. Instead, that money left those communities and went to those who promised the supply would matter.
If we are serious about solving the housing affordability crisis in this country, we need to start prioritizing supply delivery over land hoarding. Property taxes should be increased for developers who do not meet certain supply targets, with revenue being channeled into affordable housing alternatives.
Third market housing options such as community land trusts – a housing affordability tool used in parts of the world such as the US and UK, where any property gain is minimized and shared within the community – must be prioritized so that construction happens when people need it most, during downturns.
Looking behind the land supply curtain should divert our attention from tinkering with planning to the bigger issue at stake.