November 12th 2011

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Articles from this issue:

CANBERRA OBSERVED: What really lies behind the Qantas dispute

EDITORIAL: The carbon tax: Gillard's last stand?

THE ECONOMY: Australia must change to maintain its prosperity

MURRAY-DARLING BASIN: Next Basin plan faces further community rebuff

COVER STORY: Why families struggle to afford a home

ABORTION: Global initiative to protect the unborn

FOREIGN AFFAIRS: Russia enacts new law to restrict abortion

MIDDLE EAST: How the West misreads Middle East dictatorships

MEDICAL SCIENCE: Deaths from AIDS omitted from inquiry

OPINION: Housing regulations killing the Australian dream


BOOK REVIEW Visionary premier who transformed a state

BOOK REVIEW The history we neglect at our peril

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Housing regulations killing the Australian dream

by Jeffry Babb

News Weekly, November 12, 2011

Young couples struggling to afford the housing they want for their growing families are being kept out of the market by government regulations that are pushing up prices.

Not many couples with children want to live like battery-hens in high-rise towers in the inner suburbs, which is what planners seem to think is the solution for the housing shortage that afflicts just about every major city in the nation.

Most young couples want a place for their children to kick a football, have a barbecue or just run around. Forcing families back into working-class suburbs from which their parents gratefully escaped to the then outer suburbs after the World War II is not a solution to our housing shortage.

Experts estimate that the cost of a block of land could be cut by at least half if the layers and layers of regulations that encumber land-developers were removed.

Giving evidence before a House of Representative standing committee on August 18, 2006, former Reserve Bank of Australia governor Ian Macfarlane asked: “Why has the price of an entry-level new home gone up as much as it has? Why is it not like it was in 1951 when my parents moved to East Bentleigh, which was the fringe of Melbourne at that stage, and were able to buy a block of land very cheaply and put a house upon it very cheaply. Why is that not available? Why is that not the case now?”

He said: “I think it is pretty apparent now that reluctance to release new land plus the new approach whereby the purchaser has to pay for all services up front — the sewerage, the roads, the footpaths and all that sort of stuff — has enormously increased the price of the new, entry-level home.”

Macfarlane went on to say that it is obvious that supply-side factors are forcing up prices, because there are just not enough reasonably priced blocks for building and moderately priced starter homes to go around.

He cited the experience of the United States, saying: “If you really want cheap housing, go to Atlanta or Phoenix or to these US cities where they have no planning. Sure, they have urban sprawl, but they also have cheap houses. It’s much easier for people in those places to buy their first home.”

How do we put this into an Australian perspective?

Sir Rupert “Dick” Hamer was a Liberal of the type only Victoria can produce. When the Liberal Party ungratefully dumped Sir Henry Bolte, who had turned the Liberal Party from a fringe party unable to retain power into a natural party of government and transformed Victoria into Australia’s manufacturing powerhouse, they replaced him with the “progressive” Dick Hamer.

Some idea of Hamer’s policies and their popularity with many Liberal Party stalwarts can be gathered from the fact that one eminent legal counsel, who was heavily involved in the Liberal Party, was accustomed to arrive at his clerk’s office every morning and say loudly, “What’s Victoria’s number one socialist been doing lately?”, meaning not the Labor opposition leader, but the Liberal premier Hamer.

The Hamer Government has the reputation among political insiders of having been the most corrupt of any Victorian post-war administration, and several highly-placed Liberals were hounded from the party for saying so at the time. It is therefore not surprising, given all that, that Hamer’s so-called “achievements” are far more popular with readers of the Melbourne Age who tend to be left-leaning liberals living in comfortable, well-established inner suburbs with good public transport rather than with the battlers who read Rupert Murdoch’s Herald Sun, and who are more interested in affordable housing with some space to raise their children.

The places they can afford, and where they would like to live, tend to be on the developing fringes of Melbourne, as they are in any city in Australia.

One of Hamer’s great “achievements”, beloved of the Age, were his Green Wedges. The idea behind the Green Wedges was to prevent big parcels of land, often quite close to the city of Melbourne, from being developed, permanently. The justification was that they would allow some breathing space for Melbourne.

The last I heard, all you had to do to get breathing space in Melbourne was to stick your head outside a window, just as you do in every other city in Australia. The air isn’t too bad, especially compared to China and just about everywhere else I’ve been on earth.

The net result of the Green Wedges policy has been to push up the price of land all over Melbourne.

As such a policy reduces supply while demand is increasing, even a non-economist can appreciate that this must force up the price of land and of starter homes and is therefore responsible for keeping young families out of homes.

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