Elizabeth Taylor, RMIT University

The housing market vs. the planning system: Has planning contributed to a housing affordability crisis in Melbourne?

During the recent boom period, the price of housing in Australia’s major cities, including Melbourne, rose to unprecedented levels and appreciably ahead of incomes. In this climate there has been an increased policy interest at all levels of government with falling levels of housing affordability – with this interest tending to focus on the barriers to entry into home ownership faced by first home buyers. Amongst the discourse in this area, an increasingly influential body of opinion has attributed house price inflation to a distortion in the supply and price of land caused by land-use planning controls. Particularly in the United States, empirical studies have sought to isolate the impacts of planning regulations on housing affordability, for example, Fischel (1990), Glaeser and Gyourko (2003), Green (1998) and Quigley and Raphael (2004). The framing of the problem is fundamental to the tradition of research – at a most basic level, economists uphold the efficiency of markets. So, where problems are identified in markets, research is concerned with identifying interventions that may impede their operation and efficiency. It is in a comparable vein that recent material – for example, the Menzies Research Centre (2003), Moran (2005) and Cox (2005) – has emerged which is critical of the role of planning controls in creating a housing affordability problem in Australia’s cities, and which either implicitly or explicitly advocates the relaxation of regulatory intervention in the development process.

The suggestion of a link between planning mechanisms and reduced housing affordability has not entered as widely into the planning discourse. Unlike economics, land-use planning is not wholly concerned with the operation of markets, and it is likely to adopt a different perspective of how planning mechanisms may interact with the housing market. The Melbourne 2030 metropolitan planning strategy seeks to ‘increase the supply of well-located affordable housing’, and at the same time introduces and reinforces the type of growth controls (including an Urban Growth Boundary) that critics suggest impede the supply of affordable housing. Within the planning discourse there is also a cynicism regarding the history of, and political motivations for, the interests of neo-liberal economic perspectives in reforming the development process. There is also a diversity of planning mechanisms, which economically based studies do not always adequately distinguish between. For example, whereas traditional statutory zoning controls may openly seek to preserve existing home values through exclusionary mechanisms, the more recent ‘smart growth’ strategies which seek to strategically direct peripheral growth are far more often the subject of housing affordability criticisms.

As there is not a strong basis of Australian evidence in this area, the proposal is to undertake and, ultimately, integrate two courses of research. Melbourne during the most recent boom period will be the focal point. A discourse analysis (including aspects of political economy and institutional capacity analysis) will track the way in which housing affordability has developed as a policy concern, and articulate differing apparent assumptions about the nature of the problem. The analysis will ask how a housing affordability discourse has developed in Melbourne – when, why and by whom – and how a suggested link between affordability and planning has been established within this. The quantitative work will be structured around the use of GIS to look at the ‘natural experiment’ of recent housing market and planning policy changes in Melbourne. This methodology will be facilitated by access to the confidentialised forms of property-related administrative datasets which can be integrated into GIS to point-level locations. These datasets will be used to build a spatially disaggregated database of property sales and characteristics, also integrating indicators of the planning mechanisms applicable to individual properties. Advantages of the administrative data (and of using it within GIS) include its coverage, minimal attrition levels, ability to identify repeat sales and quality differences between properties, and the level of spatial comparison enabled.
The quantitative work will build in detail from the descriptive, to a series of quasi-experimental enquiries looking for the possible influences of selected planning on (spatially and temporally) differential housing affordability outcomes in Melbourne.

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