‘Abundance’ and why trickle-down housing economics just admitted what town planners always knew

For the better part of the past decade, trickle-down housing economics — embraced by YIMBY movements, think tanks and state treasuries alike — has reshaped the housing debate in Sydney and Australia around a deceptively simple premise: town planning is the problem. Cut red tape, housing will follow and become affordable. It’s a clean story. Politically useful. Intellectually seductive. But increasingly at odds with reality.

The book Abundance crystallised and mainstreamed the intellectual foundation of this movement. The argument is simple: deregulating planning controls will unlock supply and, through the magic of the market, eventually make housing “abundant” and affordable for everyone.

In a recent interview, Derek Thompson, one of the book’s authors, said something that deserves to be heard clearly in every state planning department, every treasury and every ministerial office that has spent the last five years dismantling strategic planning institutions in the name of housing supply.

He said the book “missed a very important ingredient” — conceding that zoning and planning permission is only one layer of a far more complex problem, and that the policy agenda built on it has run aground on constraints the book barely addressed.

The Abundance authors are journalists and policy wonks and, like much of the YIMBY movement, haven’t worked in the urban planning or development world. So, it comes as no surprise that the abundance movement — free-market fundamentalism masquerading as progressive politics — has missed most of what actually determines whether housing gets built.

The admission

Thompson now concedes that even where planning reforms have passed — to “legalise” housing — housing isn’t getting built.

Financing doesn’t pencil out. Construction costs are soaring. Labour is scarce. Interest rates have made projects that are legally permissible financially impossible.

His conclusion, offered with commendable candour: “I’ve definitely talked to mayors and others who say: ‘Look, I’ve got all these projects I want to see go forward, and we’ve made it possible for them to go forward. But the financing of the projects is not pencilling out, and we don’t have an answer to it’.”

Thompson says you have to understand that there is a “Russian nesting doll of problems” with housing.

It’s a 50-year story about regulation, a 20-year story about macroeconomic cycles following the global financial crisis, and a five-year story about the post-pandemic chaos of inflation, construction cost blowouts and financing crises. Zoning, he acknowledges, is only one layer of that doll — and not always the innermost one.

What planners have always known – housing supply depends on financial viability

For those working in planning, development or local government, this isn’t a revelation. It’s confirmation.

Housing supply has never been primarily determined, at an aggregate level, by what planning allows. It has been determined by whether projects are financially viable — by interest rates, construction costs, financing conditions, labour availability and developer risk appetite. These are the binding constraints. They always have been.

This is not a post-pandemic phenomenon. The same pattern — approvals responding to market conditions, completions driven by financing cycles rather than planning settings — has characterised Sydney’s housing market across every cycle for which data exists.

Booms and busts have tracked interest rates and credit availability, not changes to planning controls. The planning system has been a constant; the market has been the variable. It’s something I’ve argued for a long time.

The evidence in Sydney is unambiguous. The latest research by Bill Randolph at UNSW’s City Futures Research Centre has demonstrated that planning approval represents only about 15 per cent of the total development timeline, from land acquisition to strata subdivision.

The remainder is dominated by pre-lodgement, financing, pre-sales and construction phases. We also know that more than 95 per cent of development applications are approved.

Sydney just completed its biggest ever housing construction boom under the planning system that the trickle-down housing movement told us was strangling supply.

And right now, more than 100,000 approved dwellings are sitting unbuilt across New South Wales — not blocked by councils, not caught in red tape, simply not viable in current market conditions. The planning system approved them. The market didn’t build them.

The Reserve Bank’s own empirical modelling, published in 2019, found that a 1 per cent drop in interest rates increases house prices by 30 per cent, while a 1 per cent increase in dwelling stock reduces prices by just 2.5 per cent.

Given that new supply adds barely 1 per cent to existing stock annually, the supply-side arithmetic has never come close to explaining observed price movements. Those are explained by credit conditions, investor demand, migration levels and macroeconomic cycles — the demand-side levers that sit entirely outside the hands of council planners.

Filtering — the trickle-down theory of rental affordability — fares no better. A 2022 AHURI report on filtering in Australia concluded that the housing market dynamics of Sydney and Melbourne are “incompatible with filtering as a reliable source of additional affordable housing for low-income households.” Where it occurs, it is too slow and too interrupted to offset rent inflation.

Housing is also, fundamentally, a build-to-order product, not a build-to-stock one. Developers don’t construct dwellings when people need somewhere to live. They construct them when buyers can secure finance at a price that covers costs and returns an acceptable margin.

That distinction — between underlying demand and effective demand — is the key to understanding why record net overseas migration has not translated into record housing construction, and why it never will without a different kind of intervention.

For those inside the system — planners, developers, infrastructure providers, local government officers — this has never been a theoretical debate. It is visible in everyday practice: approved projects sitting dormant for years, sites trading without development occurring, proponents walking away from schemes post-consent, and changes to feasibility killing projects long before construction starts. These are not edge cases. They are structural features of the system. And they point consistently to the same conclusion: planning approval is a necessary condition for development, but it is far from sufficient.

The myth and the mechanism

There is a persistent myth embedded in the abundance narrative: that planning has been the primary brake on housing supply. If that were true, we would expect a straightforward relationship — loosen controls, observe sustained increases in completions. The reality is the opposite. We have large volumes of approved but unbuilt dwellings, and development pipelines that expand and contract with credit cycles, not with zoning regimes. Housing supply has always been governed by a complex set of forces — financing, construction costs, labour markets, macroeconomic conditions, developer risk appetite. Planning sits within that system. It has rarely, if ever, been the binding constraint at scale.

When approvals accumulate without construction, the market is telling us something the planning-centric diagnosis refuses to hear. Yet Commonwealth and state governments have doubled down — imposing wishful housing targets on councils, centralising decision-making, expanding fast-track approval pathways, and dismissing any critique as NIMBYism.

The cost of a useful myth

Thompson’s admission is not a minor footnote. It is a concession that the entire intellectual foundation of the trickle-down housing agenda — that planning is the primary constraint on housing supply — was, at best, incomplete.

At worst, it provided political cover for reforms that have weakened environmental protections, dismantled the strategic planning and infrastructure coordination institutions essential to building great cities and the design standards that create great place outcomes.

It’s gifted developers billions of dollars in rezoning uplift with negligible affordable housing contributions and no value capture, and handed governments the perfect excuse to avoid the one intervention that would actually help — large-scale investment in social and affordable housing.

What actually fixes it – how about social housing?

Thompson is now asking the right question: how do we finance construction at scale, particularly in a high interest rate environment? It is a good question, and it has an answer — one that planners and housing researchers have been offering throughout the deregulation debate.

Counter-cyclical social housing construction is the most powerful mechanism available to governments for matching housing supply with underlying demand, because it is not dependent on market conditions.

Governments can borrow and build when the private market cannot. They can smooth the boom-bust cycle that has characterised private housing construction for as long as records exist.

They can deliver housing for the nurses, teachers, aged care workers and essential service employees who are being priced out of the cities they serve, and for whom trickle-down has never and will never work.

This requires public expenditure. It requires political will. It requires a willingness to treat housing as social infrastructure rather than a market commodity. It is, for precisely these reasons, the intervention that has been consistently avoided in favour of “planning reform theatre” — which is cheap, visible, and can be announced at a press conference (or a developer lobby lunch).

And strategic planning — genuine, independent, well-resourced strategic planning — is what makes any of this possible. It is the framework that coordinates land use with infrastructure investment, ensures the public value created by planning decisions returns to public purposes rather than being captured as private windfall, and produces places people actually want to live in.

The Greater Cities Commission was the institution that did this work in NSW. Its abolition in 2023, and the subsequent emergence of the Housing Delivery Authority — a body empowered to approve unsolicited proposals from developers without strategic context, community consultation or meaningful affordable housing requirements — represents a profound regression in how we create our cities and shape our neighbourhoods.

The lesson

My geography professor used to say: for every complex problem there is a simple solution, and it’s always wrong.

The housing crisis is not simple. It is the product of decades of demand-side policy failure, the financialisation of housing as an asset class, inadequate public investment in social housing, population growth at rates the construction industry cannot absorb, and post-pandemic cost and financing pressures that have made even viable projects unviable. Planning is not the cause of any of this.

Derek Thompson has had the intellectual honesty to acknowledge, a year after publication, that his book’s housing chapter told an incomplete story. That honesty is worth acknowledging.

But the reforms his book helped justify are already in place — institutions abolished, controls stripped back, uplift given away, strategic plans undermined.

The Russian nesting doll was always there. Planners have been pointing to it for years. The question now is whether the governments that used the outermost layer as an excuse to avoid the inner ones will have the same honesty — and whether they will act on it. Simple solutions to complex problems. Always wrong.