Open door mindset needed for housing

Governments at all levels take enormous interest in housing -- and rightly so.  For most of us, our home is our most important investment.

Unfortunately, government regulations add to, rather than reduce, house and land package costs.

Demographia International examined house and land prices in some 80 cities in North America, Australia and New Zealand.  Melbourne was the eighth least affordable city for housing.  Relative to income levels, prices here are two and a half times those of comparable cities such as Dallas.

Though for high rise developments, union controls mean we suffer high costs, Australia's non-unionised housing industry builds as cheaply here as anywhere in the world.

It is planning costs, needlessly created by government regulations that are escalating house prices.  The government is demanding ever more information and requirements before allowing a new house to be built or modified.  It is also limiting land supply for housing.

In the case of planning applications, councils are supposed to process proposals within 60 days.  But they hardly ever meet this target.  They usually mask their failure to do so by asking for more information, which re-starts the clock.

The process can take years and stories are rife of land being bought for $700,000 and re-sold for an additional $500,000 after planning permission has been received.  While that looks like a windfall gain for the landowner, it is actually cost induced.  Interest charges alone at 10 per cent over two years amount to $140,000.  In addition there are the costs of the architects, the energy specialists, the arbourists, and others that have to be hired to steer the proposal through the regulatory shoals.

Restrictive zoning arrangements drive up housing land prices.  In Melbourne the urban growth boundary has been introduced as part of the mystical 2030 Strategy.  At a stroke of a pen, land brought inside the boundary, say at Whittlesea, which was previously selling at $150,000 to $200,000 per hectare becomes worth $600,000.

These regulatory measures constitute plain old fashioned cost impositions.  The main losers are younger people looking to get onto the lower rungs of the housing ladder.

There are, however, some hopeful developments.  Thus, the Victorian Civil and Administrative Tribunal (VCAT) recently refused Moreland City Council the authority to push regulatory demands beyond the State Government's costly 5 Star Energy requirements for new houses.

VCAT said that it was inefficient for a council to enhance these sorts of regulatory burdens.

Conscious of the impost the regulatory system imposes, VCAT has also markedly improved the speed at which it decides cases.  It has cut down the average time it takes to determine the 3500 planning disputes it hears each year by 27 per cent.

Time is money and these reforms are important.  But the main gains to be had are from forceful deregulatory measures that only the government can make.  Even though the government has been imposing additional economic controls, Mr Bracks has announced some lofty regulation-busting aspirations.  For the State's economy in general, and especially for people not yet on the home ownership ladder, it is vital to follow up these announcements with real action.

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