Walking past a building site in Sydney recently, I was struck by the pitch for the new homes under construction. “Outrageously spacious”, proclaimed a hoarding spruiking apartments with “2 living areas, 2 dining areas, 3 car parks, 4 bedrooms and 4.5 bathrooms”.
I’m not sure what you do with half a bathroom, or why anyone needs dual dining rooms and lounge rooms – though some multigenerational households could use all that space. With one of the apartments reportedly “snapped up” for $24m though, I reckon it will be rich-list empty nesters – not growing families – who eventually move in.
I was reminded of my stroll by the Productivity Commission’s recent reporton how to fix declining productivity in the residential construction industry. The commission found “the number of dwellings completed per hour worked” by construction workers has fallen by a whopping 53% over the past 30 years.
The commission found “the number of dwellings completed per hour worked” by construction workers has fallen by a whopping 53% over the past 30 years.
My first thought was: “Any wonder!” It takes a lot longer to knock up an apartment with four-and-a-half bathrooms than to build your average flat.
When the Productivity Commission controlled for changes in the size and quality of new housing, the fall in building productivity was only 12%. Much better, but still lagging the 49% gain in labour productivity in the broader economy over the same period.
controlled for changes in the size and quality of new housing, the fall in building productivity was only 12%.
still lagging the 49% gain in labour productivity in the broader economy over the same period.
The commission made a bunch of recommendations to improve matters, such as streamlining planning approvals, reducing barriers to innovative construction methods such as prefabrication and improving the lot of apprentices so they don’t quit before they qualify.
Yet it failed to recommend the obvious: build more smaller homes and fewer big ones. That would surely produce “more outputs” with “fewer inputs” – and the outputs would be homes people live in, rather than extra bedrooms that are often empty.
At the last census, more than 1.2m Australian households had three or more bedrooms beyond what was necessary for “typical sleeping arrangements”. A spare room for visitors plus a home office is generous; three or more spare rooms seems excessive.
My analysis of census data since 2006 shows we’ve been building homes with more bedrooms even though, on average, there are fewer people to sleep in them because households are getting smaller.
While we may not have built enough homes to keep pace with population growth, we have built enough bedrooms. Perhaps the new owners of those “outrageously spacious” luxury apartments I mentioned earlier will take in some lodgers to ease the housing crisis? Somehow, I doubt it.
While we may not have built enough homes to keep pace with population growth, we have built enough bedrooms.
A block of 1990s flat was demolished to make room for their luxury project. It had more than three times as many homes as the building replacing it.
You might think these disappearing flats are just a few drops lost from Australia’s big housing bucket.
Yet we are constantly told that the root cause of our housing crisis is a lack of supply, so surely every home lost or gained matters. Besides, such “downsizing” is not an isolated phenomenon. I recently chanced across the excavation work for another multistorey residential development. In this instance, where 12 flats once stood, there will, in future, be just six – five “whole-floor” apartments and one double-storey penthouse.
Nor is it only a Sydney thing. On my regular commute in Melbourne a few years ago, I watched a stylish block of about 20 modernist flats give way to a clutch of luxury apartments.
The Productivity Commission does not question the size of the houses we build or whether it’s right that some projects result in fewer homes, rather than more. Perhaps it regards pronouncements on the size of homes as value judgments – a no-no for conventional economics.
Private developers can reasonably object that they are not in the business of building affordable housing, or even adding to housing supply, but of making a profit. If wealthy people want to rattle about in huge homes, then developers will build them. Fair enough.
But we should not pretend that market decisions are value-neutral if the end result is housing fewer, richer people.
Amid all the calls for planning reform, one idea rarely gets a look in. A “no net loss” requirement would block developments that fail to maintain or increase the existing number of homes.
A “no net loss” requirement would block developments that fail to maintain or increase the existing number of homes.
Back in December, there was an intriguing development in Elizabeth Bay: the New South Wales Land and Environment Court knocked back a proposal to replace 28 dwellings with 20. The commissioner noted “adverse social impact of reduced housing supply which meets community need”.
I doubt that will be the end of the matter. But if we’re serious about tackling the housing crisis, then we need planning rules that support such court decisions – so projects that produce fewer homes, rather than more, do not go ahead.
