Pricing the young out of ‘elitist’ housing market

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We, the middle-class, Labor and Greens-voting majority have effectively mandated that working-class people and low and moderate-income families in Canberra live in an apartment or otherwise move, as increasing numbers are, to NSW,” writes JON STANHOPE

“I HAVEN’T found anybody stopping me in the streets, shaking their fists and saying, John, I’m angry that the value of my house has gone up.” former Prime Minister John Howard is reported to have said in 2003.

Jon Stanhope.

Regrettably, it’s a pretty safe bet that no member of the current ACT Labor/Greens government will have faced a Canberra homeowner shaking a fist about the fact that Canberra is currently experiencing the highest growth in house prices in Australia.

Nevertheless, there are an awful lot of Canberrans concerned about what the increase in Canberra house prices will mean for their children’s and grandchildren’s chances of ever entering the detached-housing market in their hometown. 

It may be that members of the Labor/Greens government share these concerns, but I haven’t ever heard them say so.

I refer specifically to the “detached-housing market” because that’s where the price increases are, frankly, verging on the obscene. 

I was stunned by a recent estimate by a local real estate organisation that on the basis of the current increase of more than 10 per cent a year in the value of detached housing in Canberra that the median price of a detached house could increase from the existing $850,000 to about $3 million within the next two decades.

While there may be factors relevant to the runaway increase in the value of detached housing, the main cause in the ACT is undeniably the sudden and massive cut in the supply of land.

Without doubt, the law of supply and demand is the most brutal and predictable law in existence. If demand exceeds supply the price will rise just as day follows night.

The ACT government in 2013-14 reversed overnight the land supply ratio of 70 per cent greenfield for detached housing and 30 per cent for infill with apartments and townhouses. 

While a cogent argument, based on sustainability, can be mounted to support a change in the ratio of detached and attached housing, a change of this magnitude, namely a reduction of 40 per cent in land for detached housing, without a phase-in period, was guaranteed to produce the outcome that we are now seeing. Namely, the locking out of thousands of low and moderate-income Canberra households from the detached-housing market. 

Unfortunately, the situation has been exacerbated by the inability of the Suburban Land Agency to meet even the meagre 30 per cent target for detached housing. 

For example, in 2014-15 only 329 blocks, or 9 per cent of the land released, was for detached housing at a time when the “Winton Survey on Housing Choices”, commissioned by the ACT government, revealed that 91 per cent of Canberrans would, if able, choose to live in a detached house.

The current land-supply strategy is described in the Incoming Ministers’ Brief prepared, in light of the recent election, in the following terms: “The city’s growth is planned to be managed by 70 per cent being within the current urban footprint, with intensification around town centres and transport corridors and 30 per cent being greenfield development (new suburbs).”

The briefing paper (Minister for Planning, P7) also advises that it is proposed to accommodate about 55,000 new residents in the Molonglo Valley over coming decades. It is not clear if this includes the 11,000 people who will live across the border in NSW as part of the Ginninderry development.

The briefing paper also notes that Labor and the Greens will “continue to develop the ACT’s next urban development front, which is the western edge – 10,000 hectares of land bordered by the Murrumbidgee River and the urban areas of Weston Creek, Molonglo Valley and Belconnen”.

Surprisingly, the fact that this 10,000-hectare housing development bordering the Murrumbidgee River is being actively progressed did not feature in the election campaigns of either Labor or the Greens. Presumably, consistent with the new planning strategy, the Cotter Road will be reserved for high-rise development from Weston Creek to Casuarina Sands.

Obviously, I’m not supportive of the current land supply or housing policies of the ACT government. The reality is that the decision to deliberately reduce the supply of land in the ACT for a highly sought-after product, namely a detached house, has resulted in a large proportion of the community, possibly as high as 40 per cent, being priced out of the market. 

This is elitist and grossly unfair. It is pure Thatcherism and anathema to the Labor principles I have held dear for 50 years. We, the middle-class, Labor and Greens-voting majority have effectively mandated that working-class people and low and moderate-income families in Canberra live in an apartment, or flat, if they wish to remain in the ACT or otherwise move, as increasing numbers are, to NSW. 

The reduction in supply of detached housing has also resulted in massive windfall gains to those of us privileged to own a detached house or houses. Our gain is unarguably at the expense of young families and lower-income households. 

Current land supply and housing policies are driving a mammoth shift in wealth from lower-income households to the wealthy and a concomitant increase in inequality in the Canberra community.

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Jon Stanhope
Jon Stanhope was Chief Minister from 2001 to 2011 and represented Ginninderra for the Labor Party from 1998. He is the only Chief Minister to have governed with a majority in the Assembly.

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