The Property Council agrees. So do major property developers such as Lend Lease and Australand. Town planning experts at RMIT express similar frustrations. The master plan to consolidate Melbourne's growth by developing higher-density living in inner to middle suburbs has stalled.
The State Government's release of large tracts of outer-suburban land for housing estates largely buried the planners' dreams expressed in the Melbourne 2030 strategy. The urban sprawl will continue.
What bought this about? The answer is in two words; "housing affordability". And it's official. International housing affordability studies report Australia to be the worst in the developed world.
State governments have control of housing policy. It's perhaps the biggest social and economic policy stick they wield. For example, they affect the price of housing through building design standards and taxes. But above all, they control the supply and therefore price of land by deciding how much land they release for development.
Melbourne's housing affordability is comparatively good on national comparisons. At the peak of the housing boom in December 2007, Melbourne's medium house price was $444,000. In the outer suburbs it was around $342,000. This bettered Sydney, Perth and Brisbane. But Melbourne is still worse than New York -- for example -- according to international studies.
The situation is set to worsen. Melbourne is expected to have 1million new residents by 2030. That's 620,000 new households to be accommodated. If adequate new housing is not built, demand pressure will force up house prices. The old, the unemployed and low to middle-income earners, particularly first home buyers, will be squeezed from the market. This is a recipe for social inequality.
The proponents of Melbourne's urban consolidation had some good points. A lot of middle and inner suburbs have low population densities by historical measures. Houses that once accommodated families of five or more now have older parents living alone as their children have moved out.
It makes sense to develop high-rise apartments in these suburbs, giving older but healthy couples the option of apartment living in the suburbs where they have long lived. This would make available the vacated residences for younger families or redevelopment.
These and many other housing scenarios should form a mix of market-driven options to meet Melbourne's population growth. But it has failed to happen.
Many may think it was local council and community activism against higher density developments that was the blockage. That's only part of the issue.
Developers have started blowing the whistle. Industrial relations in the construction sector is the problem. Subcontractors build houses. But to build anything above three storeys means union labour must be used. Under these arrangements, construction costs are $2600 a square metre. In comparison, detached housing using the subcontractor system costs about $1000 a square metre. Surprisingly, income levels for subcontractors and union workers are similar, as are safety outcomes. The difference is that subcontractors are hugely more efficient.
What's happened is that the practice of using union-controlled labour for high-density developments has made these developments in the suburbs too expensive. Retirees, for example, should be able to sell their houses, buy apartments and have cash left over as retirement bonuses. This cannot be achieved. It's an economic distortion that has killed the Melbourne 2030 strategy.
Developers are letting this fact be known. They are at pains not to criticise unions because they have to work with them. The Government knows the problem, having signed a contract to build housing for the Commonwealth Games Village that included around $50million in extra costs because they used unions instead of housing subcontractors.
The strange thing is that, since 2006, the forced use of union arrangements on any project has been illegal. The Federal Government even established a competition watchdog for the industry -- the Australian Building and Construction Commission (ABCC). So far developers have not turned the legal opportunity for truecompetition into commercial reality.
What is shaping up is opportunity lost. Melbourne could have sensible urban consolidation if higher-density dwellings could be built at competitive costs. This is not happening.
A little while ago, the State Government saw the signs and released large landholdings for housing development on the urban fringes; this is currently the only hope for affordable housing for the future.
The victim is urban consolidation. But consolidation can occur only if it delivers competitively on the housing affordability front.
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