Friday, December 15, 2006

More on "End of Australian Dream: Bring it on?


by Wendell Cox

Elizabeth Farrelly of the Sydney Morning Herald may have revealed the ultimate urban consolidation (smart growth or anti-suburban) agenda in a December 13 column entitled The End of the Great Australian Dream Cannot Come Soon Enough. The Great Australian Dream is the "down under" equivalent of the American Dream of home ownership. Farrelly is clearly outside the mainstream of Australian thought on the issue of home ownership, though may well be expressing the views of many in the urban planning community.

Home Ownership and the Democratization of Prosperity

In Australia, as in the United States, Western Europe, Canada, New Zealand and Japan, the suburbanization for which Ms. Farrelly and those of her ilk have such contempt has been associated with the greatest expansion of broadly distributed wealth in the history of the world. In short, for the first time, prosperity has been democratized.

Before World War II, most people in these countries lived in conditions that would qualify as poverty by today's standards. The less expensive houses built on suburban land made it possible for millions of households in Australia (and elsewhere in the high income world) to enter the mainstream of economic life. Instead of paying rent to landlords, they paid down their mortgages and accumulated equity. Their cars gave them access to employment virtually everywhere in the urban area, instead of to the few locations where there were decent mass transit connections. Australia would be a poorer nation today if its home ownership rate were at the 40 percent pre-war level instead of the current 70 percent.

Australia: Broad Consensus in Favor of Home Ownership

Home ownership has strong support throughout Australia. Through the years, the federal and state governments have enacted a number of plans to make it easier for people to buy their own homes.

Wealth Destroying Urban Consolidation (Smart Growth)

PoliciesHowever, problems have developed, as urban planning interests sharing Farrelly's views have taken control of land use policy in the states. The culprit is urban consolidation policies (called smart growth in the United States) and related urban planning policies. These have created severe land shortages in all Australia's state capitals, as state governments have banned development in large areas or allowed development only at rates that are much less than the demand. Of course, this rationing has led to much higher prices for housing, as land prices have skyrocketed. Before urban consolidation, land in Sydney accounted for one-third of the cost of a new house. Today land accounts for more than three-quarters of the cost. In contrast, the cost of constructing a house has barely changed over the same time (inflation adjusted).

The irony is that this government stinginess in land is in a country with less than 0.25 percent of its land in urban development. It is laughable that there should be a shortage of land in Australia. The land shortage exists only because of government contrivance, which has occurred because there is a shortage of economic understanding among planners and politicians.

The price of the median house in Sydney and Perth has risen to approximately three times the those of many US and Canadian urban areas, including fast growing as Atlanta, Dallas-Fort Worth and Houston. A typical Sydney or Perth household can expect to pay 10 years more of their earnings to buy a house than a household in Atlanta, Dallas-Fort Worth or Houston (including additional mortgage interest charges). The cost inflation has been experienced throughout the nation. Median house prices in Melbourne, Brisbane, and Adelaide are more than double the prices relative to incomes in Atlanta, Dallas-Fort Worth and Houston.

In short, state government urban consolidation (smart growth) and urban planning policies have destroyed housing affordability throughout Australia. The same situation has occurred in some Canadian and US markets, such as Vancouver, San Diego, San Francisco-San Jose and Portland. However, many markets in both countries continue to have housing affordability ratios consistent with historic norms, with a median multiple of 3.0 or less (median house price divided by median household income). All of this seems likely to place a drag on the Australian economy in the longer run.

"End of the Australian Dream: Bring it On?"

In a rant bubbling over with elitism, Ms Farrelly dismisses Sydney's suburban houses as chook (chicken) shacks. She concludes with "End of the Australian Dream? Bring it on." Ms. Farrelly may have emerged as the "Marie Antoinette" of urban consolidation or smart growth. "Let them eat cake" is her message and it appears to be the message (wittingly or unwittingly) of those who favor urban consolidation (smart growth).

Farrelly's prescriptions will mean fewer homeowners in the future, less household equity (wealth) and more money paid to landlords. Even those households lucky enough to purchase their own homes will find their lifetime purchasing power eroded by hundreds of thousands of dollars just to pay the artificially inflated housing prices that are the result of urban consolidation and smart growth. This will mean that, for the first time in decades, middle and lower income households are likely to live at a lower standard of living than before.

The Issue: Home Ownership, Not Urban Form

However, there may be a silver lining. Ms. Farrelly provides a welcome call to changing the terms of debate. The issue is home ownership, not urban planning.

Until recent years, the principal issues surrounding urban consolidation and smart growth were about cities, their shape and form. More recently, especially in Australia, the issue has become housing affordability, with the then Reserve Bank Governor, Prime Minister, Treasurer and other public officials pointing to land supply restrictions as the culprit. Now, Ms. Farrelly puts the issue squarely where it belongs --- home ownership.

Farrelly's opposition to home ownership message may be shared with some urban planners and some residents of eastern Sydney's luxury high-rise condominiums. However, few in politics and few in the real world share this elitist view. As a result, opposition to home ownership is electoral suicide in most constituencies.

Now comes Elizabeth Farrelly, saying that less home ownership would be better. That is exactly the issue that should be the focus of public discourse.

These issues are discussed in greater detail in my new book War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life
International housing affordability data for 100 urban areas is provided by the Second Annual Demographia International Housing Affordability Survey . -- Wendell CoxDemographia Wendell Cox Consultancy - St. Louis Missouri-Illinois metropolitan regionVisiting Professor, Conservatoire National des Arts et Metiers, Paris +1.618.632.8507 +

More letters not published

To Sydney Morning Herald 13 December 2006

Dear Editor,

"The end of the Great Australian Dream can’t come soon enough" – Elizabeth Farrelly – 13 December 2006

It is pleasing to see Elizabeth Farrelly realizes now that there is a great coalescence of agreement between the left and the right in Australia (and elsewhere for that matter) in that land must be opened up to allow people affordable housing.

By "affordable" we mean that people should not be required to spend any more than three times their annual income to house themselves. Not the absurd and artificial six to nine times their incomes, inept politicians and planners are forcing them to pay at the moment.

Amazingly, Ms Farrelly bemoans this and suggests instead that we should experience the "joy" of living with the Germans within their urban environment. Ms Farrelly and her supporters should seriously consider migrating to the one million vacated East German Soviet style slab developments. Following reunification in 1989, the East Germans couldn’t get out of them fast enough.

Yours sincerely.
Hugh Pavletich
Co author - Demographia International Housing Affordability Survey
18 Jane Deans Close
New Zealand
Tel ++64 3 343 9944

To Sydney Morning Herald 23 November 2006

(Not printed. However similar letter sent to other papers as a test were printed)

Energy Australia is stretching credibility by suggesting that the cause of the wide-spread power failures on the hot Wednesday was a small grass fire ("Power jitters as heat bites", Herald 23 Nov).

The reality is that the State Government has been forcing high-density into suburbs originally designed for lower density living. The infrastructure of our suburbs was designed for the density of dwellings then built. Higher density and power-hungry multi-unit structures must overload infrastructure. Energy use per person in high-rise is double that in detached houses due to lifts, airconditioning, common lighted areas and clothes driers.

We can look forward to more and more breakdowns as infrastructure spare capacity is eaten away.

Tony Recsei

Tuesday, December 05, 2006

Porkies and Paris

We hear more and more frequently the outlandish claim made by the high-density fanatics that high-density is good for our health. Naturally no proof has been provided for this assertion. For me the most memorable performance of this type was the seminar in September featuring Professor Howard Frumkin and Professor Anthony Capon.

SOS member Adrien Krebs writes as follows:

Due to my experience of living in both high and low density cities, I have to disagree with density advocates who argue that higher density promotes physical exercice, thus better physical and mental health.

When I was living in Paris where population density is 20 000 inhabitant per km2, I was doing less exercice. The reason is high density means your building is not by a park, but by another building, which is near another building and another and another...There are less parks in where one can jog, less fields to play ball games. When you are lucky enough to live next to one, it is most likely saturated and overcrowded. Roads are jammed with traffic and polluted so biking becomes impossible in town. The only way to go for a sane and healthy bike ride is to take your car and leave town to go to the forest. Footpaths are cluttered with people and going for a simple run around the block becomes a crowd dodging game. Sometimes you may not even pass as cars will actually park on the footpath since it is the only spot they can find close to their appartment. So even if you have the will to do sports, the only thing higher density will do to your health is build up frustration. Perhaps your best chance at exercising is to belong to a costly private club and exercise indoors.
Australia manages to rank 4th at the olympics with only 20 million people, just behind huge countries such as USA (300 million people), China (more than 1 billion) or Russia (150 million), because sports has become apart of our way of life. One of the reasons is that we have provided ourselves with a sport friendly environment in which to live. Other countries such as India which has cities of huge densities do not seem to be as sporty. I believe there are two main reasons to the amount of physical exercice people do: will and infrastructure. If ever there is a link between density and exercise, it is that density generally provides a less sport-friendly environment with less appropriate infrastructure and ultimately encouraging people to exercise less. If urban congestioners are not kicked out they will have succeeded in creating communities where youngsters do not meet for a rugby game anymore, but for a coffee and cigarette just downstairs from their box-unit.

Success with anti political donations campaign

The Save Our Suburbs anti political donations campain has travelled along a long road but we are getting there.

The newspapers have been full of the NSW Taskforce calling for a blanket ban on political donations "to tackle public concerns that money is corrupting the planning process". The misleading name of this organisation tends to hide the fact that it represents some of the biggest developers including Meriton, Multiplex, Macquarie bank and Hardie Holdings. So the situation now is that developers are asking for a ban on their political donations!
Six years ago the public were not generally aware of the issue of political donations by developers. However I spotted an article on the subject in the Weekend Australian, 5-6 February 2000. Having noted the undue influence developers exerted on the NSW Government, Save Our Suburbs began making donations a major issue, demanding a ban on developer donations. Our big chance came when I appeared in Quentin Dempster’s Stateline program of 30 March 2001. I criticised the policy of Urban Consolidation with the then planning minister Dr Refshauge defending it. After Dr Refshauge had said his piece Quentin Dempster said "But Tony Recsei smells a rat" and featured me bringing up the developer donation issue.

That program caused the facts to hit the fan, so to speak, and the next week Paul Keating and others took up the topic.

Save Our Suburbs subsequently organised a demonstration outside a fund raising dinner being held by Dr Refshauge for developers. In the "Naked City" column of the Sun-Herald by Alex Mitchell and Candace Sutton the following report appeared:

Fishy business

PROPERTY developers were thick on the ground at Aria Restaurant, No 1 Macquarie Street at Circular Quay, when Deputy Premier and Planning Minister Andrew Refshauge hosted a $1,200-a-plate fundraiser for the Labor Party last week. Tony Recsei, president of Save Our Suburbs, who is standing for the upper house at the State election in March on a ticket opposing overdevelopment staged a picket on the night and was on hand to offer guests a taste treat.

"We offered guests tins of sardines because the Carr Government is packing people into Sydney like sardines, " said Recsei. "No one accepted our gifts."

Subsequently the Greens took up the donations theme and organised similar demonstrations in which Save Our Suburbs participated. The Greens also conducted further research on the subject, the results of which can be seen on their website.

So now, six long years later, the topic has become so hot that the State’s biggest developers themselves want an end to the practice. It has been worth the effort.

Wendell Cox on 2 GB 30 October 2006

Wendell Cox was interviewed by Alan Jones who started off by saying we hear rents can go up by 40% as the number of homes being built drops to its lowest level for 30 years, proving Wendell Cox’s previous predictions correct.

Some quotes from Wendell’s reply:

"This is happening because, you have got, really I must say to be charitable, some of the most stupid public policies ever conceived of by mankind that are being undertaken by the New South Wales Government; not allowing growth on the periphery of Sydney by claiming there is a shortage of land in Australia, in a country that has less than 0.3% of the land area urbanised. They have created a shortage of land for houses and every time you create a shortage you have an increase in prices.

"Your government has destroyed the future of hundreds of thousands of young households. This is absolutely immoral."

He went on to say "while public transport is great for journeys to the CDB, but no good for anywhere else (87% of peoples destinations now are outside the CBD). The incredible myth that you can get people out of their cars into public transport (something that has not occurred anywhere) needs to be discarded. What needs to be discarded as soon as possible are these dreadful anti-child anti-prosperity landuse policies of your government.

"This unbelievably arrogant policy of the government that takes planning policy away from municipalities that don’t follow its rules for urban consolidation. Talk about anti-democratic. This should not be happening in a democratic nation like Australia.

"You have created a child-hostile city and I suggest a child-hostile city is a future hostile city.

Alan Jones quoted Wendell Cox previously saying we are "stealing the futures from hundreds of thousands lower income Australians because they can't afford to accumulate equity in a house".