One factor behind Australia’s surging property prices may be the attitude of local residents in inner city suburbs towards development, says one leading economist.
With local councils constrained by their constituents’ wishes, a ‘not in my back yard’ (NIMBY) approach was stifling construction projects in the inner city, Princess Ventura, economist at urban development consultancy Urbis, told Australian Broker
Although housing and meeting population growth is a metropolitan-wide issue and should be treated as such, in Australia this issue is primarily dealt with by local councils, she said.
“In terms of delivering dwellings, whether a proposed development goes ahead or not is really in the hands of the local council. They are elected by residents in the local electorate, so they really have a vested interest which lies in ensuring their current residents are happy and will vote for them in the future.”
She speculated that the higher the average household income found in a particular area, the lower the number of additional dwellings being constructed in those areas – a trend that is particularly prevalent in areas such as the Inner West and Chatswood in Sydney and Stonnington in Melbourne.
This NIMBY attitude stems from a number of reasons, including a fear that additional dwellings will increase supply and put downward pressure on surrounding property values.
However this is not always the case, Ventura said. Case studies created by Urbis show that an increase in supply caused by urban renewal will not cause prices to drop if the effect is outweighed by added amenities brought in by new residents and developments.
Other reasons for this push back against local development are traffic, the concern that new residents will crowd out local schools, shopping centres, etc, and the belief that additional dwellings will bring the wrong kinds of residents to the area, Ventura said.
Although population growth is generally seen as healthy for the national economy, in cities like Sydney, most of this growth is driven by international migration.
“People have to live somewhere. This is why I think NIMBYism is an issue in my mind. It’s a metropolitan-wide issue – people are coming from overseas – and this attitude is really not helping. It’s stifling the delivery of our housing supply.”
One way to combat NIMBYism was through the amalgamation of local councils, Ventura said, pointing to Brisbane where this has been recently achieved.
“The Brisbane local government area covers pretty much the entire metropolitan area. It is a very large council so therefore in a sense they have a metropolitan-wide approach to delivering dwellings. It’s therefore less susceptible to the vested interests of people not wanting development in their backyards.”
This idea behind the amalgamation of local councils in Sydney is to similarly move away from the lack of development in inner city areas, Ventura said.
“You need a metropolitan-wide strategy for the delivery of dwellings and housing that is based on the merit of places. We should push for new dwellings in areas that have high public transport levels, are close to jobs and are close to amenities.”
Furthermore, local councils could also be penalised or incentivised for not delivering or over delivering on the dwellings targets which have been set.
Ventura concluded by saying that the current method of boosting housing supply in outer suburbs may be easy but it isn’t strategic or cost effective.
“Now we have to follow these dwellings with train stations, water, schools and other social and economic infrastructure. Whereas if we build as much as possible and develop residential within already established areas, we don’t have to follow on with those services. It’s a much more cost effective way to grow.”
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