Government needs to play the long game to boost housing supply
With the release of a major new report into policy settings that affect housing supply and development profitability, leading industry figures have condemned current planning practices and called for major reform.
Falling dwelling prices and rising construction costs are wreaking havoc on the ability of Australian developers to deliver housing supply, and a sector-wide hunt for solutions is underway.
The development industry’s complexity is matched only by the role of government policy in the development process, which tries with mixed success to manage risk and return.
No two projects are the same and a one-size fits all policy setting has not met changing market conditions.
These are key points outlined in an Australian Housing and Urban Research Institute (ARUHI) report released this month, titled Understanding how policy settings affect developer decisions.
Professor Steven Rowley, Curtin University
Conducted for AHURI by researchers from Curtin University, and the Universities of South Australia, Southern Queensland and Adelaide, the report examines how policy settings and new construction technologies and processes affect developer decisions to provide private sector housing supply and might improve affordability.
The research modelling found that planning and policy decisions can reduce the time taken to complete projects.
“To operate efficiently and deliver housing supply where it is most needed, the development industry needs a steady supply of sites that are financially viable to develop,” Curtin University lead researcher Professor Steven Rowley said.
“This requires long-term strategic thinking by all levels of government and a mechanism where investment in infrastructure is shared between government, landowners and developers,” he said.
Delays ... are poorly understood or appreciated by local government planners, who suffer no consequences for causing delays.
- Bruce Harper, General Manager Queensland, AVID Property Group
Bruce Harper, General Manager Queensland, AVID Property Group
AVID Property Group’s General Manager Queensland, Bruce Harper, oversees more than 12,000 residential lots across the eastern states in broadacre land projects, master planned communities, completed house and land packages and apartments.
He says government policy must do better at paving the way for feasibility.
“Everything from state government taxes, stamp duty, land tax, etcetera, to a multitude of council planning and development regulations, they all have a huge impact on every decision we take and every return we make,” Mr Harper told Australian Property Investor Magazine.
“If you add to this the policies like land supply and release, then you get to appreciate what a volatile environment developers work in — what we crave is certainty.
“For developers like us, certainty is being able to identify the level of costs and policies and how they affect our feasibilities for projects because most of our projects aren’t short-term, you’re not in one year and out the next.
“Some of our projects last 15 or 17 years, and the average life would be five to seven year-long projects, so to have costs and new taxes come in, or have costs that are unanticipated at the beginning of a project; if you can’t cover them with increased revenue costs then they’re simply just a reduction in your profit to the point where some projects may make losses,” Mr Harper said.
No government ramifications
ARUHI’s research modelling also found that a one or two-month reduction in a 24-month build time can mean the difference between a profitable and unprofitable development.
“Fixing housing supply is about state government and local government applying an adequate forward program of land supply, matched with appropriate planning for infrastructure like water and sewerage, and electricity and state roads,” Mr Harper said.
“Normally you need to have that plan 10 years in advance because that’s how long it takes for all of those specs to occur before you can even lodge an application to build a subdivision over it — it’s a very tricky thing for the states to do.”
While delays and development approvals and infrastructure costs impact a site’s design and a developer’s profits, they rarely stop a development completely.
Geoff Carter, Principal Buyers Agent, Premier Property Buyers Australia
“If you own a piece of land, you’ve still got holding costs, you’ve still got to pay for the land and if you have just got outgoings, a lot of the time, you really just have to get going on it, because you’re just continuing to burn money.
“Delays and development approvals are incredibly frustrating to the development industry but I think its fair to say it’s poorly understood or appreciated by local government planners, who suffer no consequences for their behaviour causing delays,” Mr Harper said.
Premier Property Buyers Australia principal Geoff Carter says the “who” of any future policy decisions has a big effect.
“We need industry, government at all levels and the public collaborating on a panel.
“It should have a carefully worked out agenda and be headed by a strong, almost dictatorial leader with administrative powers, so it doesn't get bogged down in personal opinion and the usual committee-style delays that take panels nowhere,” he said.
“Fixing the housing supply of Australia needs a holistic approach rather than the usual piecemeal approach.”
Time to evolve
It’s a view shared by Real Estate Institute Queensland CEO Antonia Mercorella.
“I would like to see simplification of the process so that it’s easier and faster and cheaper.
Antonia Mercorella, CEO, Real Estate Institute Queensland
“All levels of government need to get better at having conversations with the community that talk about long-term benefits, whereas I think a problem we have in this country is politicians, at all levels of government, are making decisions that are decisions only for today, to get voted back in — we need decisions that might have short-term pain but longer term benefits, explained properly.
“But if you just have the same group of people in a room, like if you just have a room full of town planners, you’ll always get the same outcome.
“I’m respectful of town planners, but town planners need to hear the perspectives of others.
“You need experts who can factor in things like accessibility and, increasingly, floods, and the emerging issue of erosion and being too close to cliffs; there’s such a wide array of issues at play that are relevant when it comes to planning laws and when it comes to what we’re building and homes for the future.
“You need a diverse group of people who see things through a completely different lens as well as obviously getting the community involved.
“That’s really the only way we’re going to get better at building homes for the future and addressing problems and it requires all of us to think a bit differently and see things through a different perspective.
“We need to evolve.”
