If housing depends on a vision for our cities, try ‘opportunity urbanism’

Suburbia: reports of its death are greatly exaggerated 

A much quoted assertion in the housing debate came from Rory Robertson, financial analyst at Macquarie Bank. ‘There’s this never satisfying compromise between proximity, being close to the action’, said Robertson, ‘and the size of houses and yards and as our cities get bigger, literally, there’s less room for everyone to be living in nice houses with big yards’.

Presumably, by ‘bigger’ Robertson means more populous. Hence population growth, according to his formula, plus wanting to be ‘close to the action’, equal the end of home ownership for the masses.

Australians have again been subjected to a round of claims and counter-claims about housing affordability. The issue is now deeply entangled in a pre-election web of partisan and federal-state rivalries. Clearly, the contenders are partial to one economic doctrine or another, but they also bring clashing assumptions, if not to say prejudices, about how cities work.

A champion of the ‘land-supply-is-irrelevant’ school, Robertson expresses a timeworn, monocentric conception of urban development. He imagines a single core ‘close to the action’. There is little sign he fully understands how fast this pattern is fading away. Writing that ‘what most of us aspire to is better-located homes - homes that are closer to the centre of the city‘, Ross Gittins, the Sydney Morning Herald’s economics editor, is stuck in the same time warp.

Like many others, Robertson and Gittins lurch from the incomplete premise that inner suburbs are attractive to home buyers, to the flawed conclusion that most are choosing medium to high density living or renting over low density ownership. The initial question, though, isn’t where buyers want to live, but how. Analysts and commentators, mostly well-paid professionals, presume too much about consumer preferences.

Surveys and historical experience confirm that most Australians aspire to own single family, detached dwellings on sizable blocks. This majority may be defined by parameters like age, family size and employment status.

Only then comes the question of where buyers want to live. In an ideal world without constraints, purchasers would opt for upmarket, well-serviced localities close to established infrastructure. In the real world, this is beyond their reach - at least in most cases. It doesn’t follow, however, that they are content to rent, or settle for high density units or town houses. They will pursue their preference to the periphery - especially low and middle income earners - providing, and this is the crucial condition, price levels justify the trade-off.

This brings us to the current state of the market. The likes of Robertson and Gittins assume prices won’t ever warrant the trade-off. They cite the case of outer western Sydney, where developers are struggling to attract buyers though values have been sliding since 2004. At the same time, inner suburban prices are stable or rising.

The crucial point, however, is that outer suburban prices have declined from historically high peaks (also high by world standards, as the Demographia survey makes plain). And prices remain unpalatable to borrowers, especially in a phase of escalating interest rates. New houses are still coming onto the market for at least $350,000 in western Sydney. That’s too high for low and middle income earners. Why are prices unacceptable when the market is so weak? If there is ‘no demand’, as the NSW Government puts it, why haven’t prices collapsed? Why haven’t supply and demand produced an equilibrium price? These are the great unasked questions.

The answer, of course, is that zoning regulations, resulting in artificial scarcity, state and local government charges, and developer on-costs have placed a floor under prices. According to Alan Moran of the Institute of Public Affairs, Sydney zoning controls invest greenfields lots with a value of around $115,000, while charges come to $122,000 and development on-costs range from $40,000 to $60,000. The Housing Industry Association’s estimates are comparable.

These claims are contested by the NSW Government. Nevertheless, there is a compelling case for review, not just of the amounts estimated, but, more importantly, of the planning philosophy behind them. It’s true that housing is different from many other products. Supply comes to the market on certain conditions. Lots must be connected to roads, electricity, water mains and sewerage. But current zoning restrictions, charges and on-costs go far beyond these essential amenities.

Over recent decades, the field of town planning has embraced a distinctly paternal agenda. According to this worldview, the traditional suburb was a wasteland of social isolation, alienation and dysfunction, not to mention sheer ugliness. For a variety of reasons, state governments have, on the whole, bought this line. Forget that it doesn’t match the experience of millions who flocked to suburbia during the post-war era. Residential development must only proceed, according to the planners, on sites enveloped by a full-blown network of infrastructure and services.

Any responsible government will aim for equal access to social services over time. But there is another powerful consideration. Is access to full-blown infrastructure and services compatible with general home ownership? Is it reasonable for governments (state and local) to say the public can have home ownership with the full suite of infrastructure and services or not at all?

Debate is raging on whether developers and buyers or consolidated revenue should cough up for these expenditures. There is a more basic objection, however. When charges and on-costs are earmarked for discretionary priorities like ‘community facilities’, libraries, swimming pools, playgrounds, child care centres, public transport and certain energy and water saving devices, government is pre-empting lifestyle decisions that rightly belong to home buyers themselves. It’s also foreclosing on a trade-off between superior amenities and the prospect of home ownership.

People should be free to make their own choices.

‘Engines of upward social mobility’

Our housing affordability crisis emerges from the debris of a failed planning ideology, embodied in the term ‘environmental, social and economic sustainability’. This common, if nebulous, phrase denotes a seamless garment of mutually reinforcing wisdom. In practise ‘environmental sustainability’, as conceived by most environmentalists and planners, is far from compatible with social and economic sustainability (whatever that may mean).

The economic success of our cities rests on different foundations than it did two decades ago. Aside from the special case of zones directly plugged into the global economy, like the concentration of advanced business services and high-tech innovation known as Sydney’s ‘global arc corridor’, economic vibrancy is associated with geographical dispersion. The impact of globalisation on regulation, taxes, and the growth of the services economy, together with modern communications and transport systems, have liberated businesses. Today economic opportunity is more often a function of mobility, abundant cheap land and population growth.

Urban theorists have long discussed ‘globalisation and the rise of city-regions’. According to this line of thought, ‘a world-wide mosaic of large city-regions seems to be overriding an earlier core-periphery system of spatial organization’. The world’s growth cities display polycentric and decentralised patterns of commercial development and residential settlement. Recent commentary in Forbes Magazine pointed out that the fastest growing localities in the United States, recorded in the latest census, were suburbs of sun-belt cities like Sacramento, Phoenix and Dallas-Fort Worth, where ‘geographic growth is almost completely unregulated’.

Examining another booming sun-belt city, Houston, urbanist Joel Kotkin proposes a theoretical perspective he calls ‘opportunity urbanism’. ‘Opportunity cities’, he explains, ‘generate economic opportunity across the entire income spectrum, for all racial and ethnic groups, and across all education levels’. The crucial ingredients are job growth and basic affordability, especially housing affordability. ‘In contrast, as other communities become built-out and reach their development boundaries, the lack of available land constrains their ability to provide new, reasonably-priced housing options’.

The notion of an urban core ‘where the action is’, as Robertson puts it, is misconceived. ‘During the last half-century’, writes Kotkin, ‘telecommunications and transportation revolutions have made it possible for [major corporations] to locate themselves away from traditional business centres’. Increasingly, this trend is observable across our major cities.

Earlier this year the Australian Financial Review reported that ‘average office rents in the nation’s suburban office precincts rose 8.4 per cent last year’, and recently ran a report of ‘32 office buildings changing hands in the Sydney suburban market during the financial year at prices in excess of $5 million - a total turnover of $900 million’. Last month the country’s largest general insurer, Insurance Australia Group, announced plans to relocate a number of divisions from Sydney CBD to Parramatta.

Contrary to the myth of desolate, dormitory suburbs, reached by tedious commutes from a distant city centre, more outer suburban residents are working closer to home. Kotkin points out that

…for most residents of newer cities, such as Houston, the automobile will remain the prevailing means of transit. One explanation is that most jobs are not clustered around a rail line or bus route, but rather are scattered throughout a metro area. This makes the kind of point-to-point travel offered by the automobile particularly helpful.

These dispersive trends have accelerated during recent years, leading to the phenomenon that The Brookings Institution’s Rob Lang has called “edgeless cities”, where employment becomes more spread out and less accessible to traditional mass transit.

Contemporary fringe suburbs are more diverse, both socially and economically, than their counterparts of the early post-war era. This is as much a function of economic trends as of planning measures, if not more so. And residential development is vital to their prosperity, along with spin-off industries.

Reporting on the downturn in Sydney’s growth over 2006, William Mitchell and Anthea Bill of Newcastle University stress that ‘the housing boom stimulates economic activity as households renovate and expand their consumption of household items (as they feel wealthier)…Then as the housing market slows the broader activity associated with it (construction, retailing, finance and insurance, manufacturing, etc) also slackens’. Just as resources are driving the northern and western states, residential development is integral to the whole south-east Australian region. In this economy, restrictive planning can generate ripples of social distress.

Inevitably, planners will retort that opportunity urbanism just isn’t environmentally sustainable. Some will misapply the concept of ‘ecological footprint’, the amount of land area required to sustain a particular lifestyle. It is often said, for instance, that Sydney’s footprint is equivalent to forty-nine per cent of New South Wales. Yet this shibboleth has been slammed, as it wrongly assumes a portion of land can only be used for one purpose at a time.

Others claim suburban growth will send carbon emissions soaring. In a field where pseudo-scientific notions jostle for attention, ‘ecological footprint’ has lost ground to ‘carbon footprint’. Bear in mind that Australia produces only 1.5 per cent of global emissions. Also consider that Patrick Troy and Bill Randolph of the City Futures Research Centre found ‘tenants and those in flats are in less control of their immediate accommodation and have much less capacity to effect a meaningful transition to lower energy use’. Little wonder that according to the Australian Conservation Foundation’s consumption atlas, ‘people living in Australia’s wealthiest inner-city suburbs are responsible for more than double the amount of greenhouse pollution than households in less affluent areas’, such as low density fringe suburbs.

None of this will detach planners from their dreams of compact European-style cities.

Elite objections aside, however, most Australians will agree there are lessons from the success stories of the American sun-belt, considering similarities in climate, population densities, land resources, values and lifestyles. After all, Australians too have cherished their cities, in Kotkin’s resonant phrase, as ‘engines of upward social mobility’.

 TNC  8 August 2007                           Like to respond?                                       Top