Remarkably attractive council housing in London is still being built and fits nicely within existing neighbourhoods. And Paris is undergoing something of a boom in high quality social housing that also fits within existing development patterns.
A Minister for Sydney: Whacko, at long last we’re going to get one!!! Ahhh, well, actually no; just support for one…
Speaking at a Committee for Sydney event, the Treasurer, Dominic Perrottet, said the state should have a dedicated Minister for Sydney. What might the Minister do? Well, the Treasurer sees a need “to talk up our city” because too often there is a reluctance to boast about it, apparently.
Investing in Sydney is good for Australia; it is high time the city is seen as being “on par with London or Paris”.
He added, rather confusingly, that despite its lack of profile, “when people around the world think of Australia they don’t think of Rundle Mall in Adelaide, they think of Sydney Harbour”.
Hmmm, so a putative Minister for Sydney would redress the current lack of boasting about Sydney – a surprising deficit to many Australians – by drawing attention to its Harbour and thereby establish conceptual parity with London and Paris so that global investment would increasingly flow into the state to the benefit of all Australia.
The thigh-squirming ickiness of this language recalls Australia’s ‘70’s cultural cringe, its naïve nervous and shallow pride skewered at the time (and ever since) by Barry Humphries.
So then, from the Treasurer’s job description the best fit might be the character in the title image.
But the Treasurer has a point. The idea of a Minister for Sydney, conceived as a cabinet position charged with cutting across existing ministerial fiefdoms on behalf of the city as a whole, has been around for a while. Making Sydney work better, to become more globally attractive, simply reflects its national economic significance.
What then might a newly minted Minister for Sydney tackle – that is, in the spare time between tours of international boosterism?
Well, one issue is at crisis point yet is essential to the global competitiveness of Sydney, cuts across existing portfolios, energises all shades of politics, has strong voter buy-in, concerns both public and private sector productivity, is essential to social and intergenerational equality, is a central pillar of the financial system, is affected by policies of all government tiers and most departments, and has featured in this government’s recent electoral pitch.
That issue is housing.
But isn’t there already a minister responsible for housing, Melinda Pavey? Well not quite; her responsibility only concerns the tiny proportion of social housing remaining in the State. We are concerned here with housing provision more broadly in Sydney.
Housing market failure
Conventional neoliberal ideology holds that governments exist only to address market failures.
In Australia, there is an established private market for the provision of housing and a persistent preference for home ownership. Over the last few decades, these conditions have persuaded governments to steer away from significant direct provision of housing.
However, this orthodoxy is now foundering against two recent market failures.
Firstly, the spate of recent apartment building faults appear to demonstrate that a less-fettered private market is less able to deliver quality fit-for-purpose dwellings, to an extent that it undermines the whole industry, as the developer Mirvac has observed.
If better building quality is the objective, reduced regulation is plainly not the solution.
Secondly and relatedly, the underlying policy objective to improve affordability through regulatory relaxation has also failed. If anything, Sydney housing unaffordability has only worsened.
If greater affordability is the objective, the for-profit business model is likewise not the solution.
That these twin conditions have arisen in the first place is being viewed as a spectacular fail of government, which now appears as duping the voting homebuying public in favour of narrow sectoral interests.
It’s a national scandal.
Two recent Royal Commissions exposed deep irregularities in other once trusted institutions. These events caused a dramatic shift in public expectations. Such breaches of public trust are now no longer tolerated.
Against this background the steady reduction of legislative control over housing provision now looks downright lurid.
How then might a Minister for Sydney possibly help? To kick it off, here are a couple of modest suggestions.
Better market information – the “RDI”
How best to address these pathologies is exercising regulators’ minds.
Ancient precedents may tempt some. As practitioners of notoriously harsh motivational techniques, such as “decimation”, the Romans supposedly killed three generations of any developer whose apartments collapsed. Thankfully, such measures are no longer tolerated.
Unfortunately, effective regulatory solutions are unlikely to survive the waning of public attention from ever shortening news cycles, “now-is-not-the-time” blandishments from self-interested opponents (the American NRA pitch), and the fundamental ideological opposition to regulation by conservative governments.
Yet a new Minister for Sydney could keep faith with these ideologies by noting that well functioning markets must first be well informed; consider this…
Loan applicants we are familiar with the significance of credit ratings.
Similarly, agencies such as Standard and Poors, have long rated companies to inform investment decisions.
A recent report from the developer Mirvac hints that a similar concept could be deployed for new apartment developments.
Despite recent declines in market take-up of new apartments, Mirvac reported increased interest, which it attributed to broad awareness of the company’s good track record.
It is therefore conceivable that the universal availability of comprehensive data on apartment and developer quality might achieve similar ends across the industry.
Many agencies already collect relevant information. This includes company records of developer directors (including any “Phoenix activity”); individual building subcontractors; the activities of private certifiers; Council approvals and notices;
defects in current and past apartment developments; the efforts expended by developers in rectifying those defects; statutory reports from strata corporations managing recent developments; complaints investigated by consumer protection agencies, and so forth.
All this information could be consolidated and summarised in the form of an index that would fluctuate in response to new information. Developers and developments could thereby be allocated risk and quality ratings, let’s call them a Residential Development Index score – an RDI.
The RDI could guide prospective purchasers of new development and inform lenders to both developers and purchasers. Lower RDI scores attributed to specific projects and companies might diminish the market attractiveness of particular developments and increase the costs of borrowing.
For example, even though a statutory liability limit of 5 years may apply to major defects there would be nothing to prevent an RDI from reflecting by a reduced score unaddressed defects that emerged, say, over 10 years.
Eventually, unscrupulous operators and practices would simply become uncommercial.
Most appealing to an incoming Minister for Sydney, the RDI could be readily monetised by the private sector through existing fee-for-service arrangements, such as occur with loan applications. The RDI would therefore not require significant government involvement, other than a little regulation granting access to and safeguarding currently dispersed information and to prevent through regular audit the“gaming” or other misuse of the index.
Market failure and competition – learning from London, Paris, Zurich, Vienna, Singapore etc
There is nothing wrong with providing housing for profit and many developers build well.
The problem arises when this model is applied to make housing more affordable.
The policy naivety of the proposition is pretty clear – what sane profit making enterprise operating in a market built around scarcity (fundamental land availability) would pass on savings and thereby reduce its profits?
The shortest path to improved housing affordability is to remove the profit component.
Simplistically put, a building costing the sum of its land price, consultant fees, and build price will be cheaper than one that also includes developer profit, which can approach or exceed an additional 20 per cent.
Though widespread globally, the not for profit sector already exists but is still small in Australia.
Nursed by a putative Minister for Sydney, the significant enlargement of the NFP sector would also provide the kind of competitive pressure essential to the proper functioning of for-profit markets.
The designs of new residential development in these European cities also seem to avoid the lumpen oafishness of much recent Sydney development
Lending institutions don’t fundamentally care if there is a developer, only that the loan is repaid. Indeed, lending risks favour the NFP sector because loan defaults are reportedly a fraction of those in the for-profit sector.
Furthermore, NFP construction quality is frequently much higher because the dwellings are built to rent and last, not flicked-on to uninformed purchasers.
The Committee for Sydney has long advocated and continues to argue for enlargement of the sector along with other models of housing types and provision.
A recent report in the Architectural Review explores recent examples of cooperative housing in Zurich, a type of development that has saved the city millions. Vienna and Amsterdam have long traditions of high quality public housing going back a century.
The designs of new residential development in these European cities also seem to avoid the lumpen oafishness of much recent Sydney development. In this regard, the Treasurer’s admiration of London and Paris is well founded.
Remarkably attractive council housing in London is still being built and fits nicelywithin existing neighbourhoods.
Indeed, Paris is undergoing something of a boom in high quality social housing that also fits within existing development patterns.
Likewise and despite predation since the ‘80s by both shades of government, remarkably attractive council housing in London is still being built and fits nicely within existing neighbourhoods.
A Minister for Sydney might also seek to bridge across other city-building interests of government and consider who best to develop around the new metro stations currently under construction.
For example, if the commercial industry considers it is unable to furnish more than 2 per cent of affordable housing in new developments, yet government policy seeks 10 per cent, why not earmark 10 per cent or more of any newly valuable government-owned land solely for NFP providers.
That way at least, the value uplift of government’s investment would flow more directly towards the achievement of adopted policy than it would if left to current for profit development models.
The minister might also like to champion new household models. Current low density suburbs are resisting any changes aimed at increasing densities, yet household types are evolving away from nuclear-family patterns.
The topic, need, and opportunity to attract public gratitude is almost endless…
The shortcomings of cities may appear on the surface to be the result of policy inaction, but they are perhaps better understood as being the result of dynamic forces held in stasis to the benefit of some parties, at the detriment of others.
Exciting policy initiatives can sometimes turn out to be cynical managerial tactics to keep in abeyance those forces threatening to disrupt an advantageous status quo.
Sometimes this cynicism become visible; compare recent interventions in favour of inner-city gambling interests with the suspension of medium density infill reforms that were pitched as addressing housing affordability.
Will a Minister for Sydney be a genuine reformer, or just another placatory agent for current policy and institutional settings?
If it turns out that the office is tasked only with promoting Sydney in a ‘70’s kind of way, the short list might more aptly not include the one in the title image – too old hat (pun intended) – but perhaps the following one.
Watch this space.
Mike Brown has worked in NSW local and state government in planning, urban design, and strategic roles for 15 years. He is also a graduate of the Masters of Urban Policy and Strategy program at the University of NSW.
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