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21 June 2024
In this Edition...
1. Budget wrap up – NSW Government risks killing the goose that lays the golden eggs!
2. Budget breakdown for the property sector
3. As night follows day - land tax hikes will lead to higher rents
...and much, much more.
4. Resolve poll on transport oriented development shows clear majority in favour
5. NSW Liberal Party – a house divided on housing supply
6. RBA cash rate unchanged – but where it goes next is uncertain
7. Federal redistribution - NIMBYs losing political representation with the seat of North Sydney set to be abolished
8. Study on why NZ has been able to successfully up zone
9. Federal Government dithering on housing leading to voter anger
10. Oxford Economics report – construction costs set to surge
11. Council Watch
12. Urban Taskforce in the news
13. Members in the news
1. Budget wrap up – NSW Government risks killing the goose that lays the golden eggs!
One thing made clear in the NSW Budget this week was the State’s reliance on revenue from property taxes, transfer duties, and other levies and fees like the Housing and Productivity Contribution.
Around $22 billion of the $118 billion the Government receives in revenue comes through these taxes and charges – around $1 dollar for every $5 received.
Yet what does the private sector get in return?
Economic headwinds are buffeting our sector – yet the Government has done nothing to reduce the cumulative impact of an array of State Government fees, taxes and levies imposed on new housing.
Acting CEO Stephen Fenn spoke with ABC Radio’s Tim Webster on the NSW Budget
In fact, for good measure, the NSW Government introduced a new fee – the “Strategic Biodiversity Component Charge” which will raise a further $50 million over the next 4 years.
The Australian picked up on Urban Taskforce’s concerns, quoting our response to the Budget
The Government expects to reap $3.9 billion in additional land taxes over the next 4 years and $2.8 billion in stamp duty. That’s not accounting for the Housing and Productivity Charges and other fees and taxes paid through the NSW property sector.
The increase in the foreign investor surcharge is populist short term politics that sends the wrong message to overseas investors. We need to stimulate investment, not dampen it.
All in all – the housing budget was a social housing budget. Good in itself, but will do little to address the broader housing supply crisis.
Talk of the “people’s developer” is all very good for back bencher media releases – but it raises questions
- Where are the 44 sites and when will they be announced?
- How will Landcom and Housing NSW deliver the 21,000 new homes in a timely fashion?
- When and how will the private sector be involved?
- What sort of zoning uplift will be needed?
- Are the resources of the state assessment planning team going to be tied up in these proposals?
- Has the Government considered the crowding-out impacts for the private sector and the dwellings it needs to deliver over the next five year?
- How will the lottery of the 400 subsidised rental property for public sector works be administered?
Urban Taskforce raised questions on the last point with the Daily Telegraph, questioning whether the $450 million could have been better used to stimulate more housing supply across the board:
*The below link may be paywall protected
At the end of the day, the Government alone cannot build its way out of the housing supply crisis.
To get anywhere near the 377,000 figure required under the National Housing Accord – Government's need to get behind the private sector. Taxing the one sector that you need above all else to reach your housing targets is not the way to go about it.
It’s not as though the private sector is asking for handouts – reduce the impost of taxation and fees, ensure the planning reforms are workable and can deliver the housing needed, be clear and coordinated in terms of your infrastructure spend and priorities (and talk to the market while you’re doing this!)
There are a few bright spots in the budget, a few good ideas – but the overall impression is a budget that fails to grasp the significance of the housing supply crisis and the need to invigorate the private sector and bring back more certainty and confidence.
NSW will need to revisit planning reforms, regulatory burdens and the cumulative weight of fees, taxes and charges on the property sector before the next budget is handed down in 2025.
2. Budget breakdown for the property sector
Infrastructure
Some positive steps locking in infrastructure dollar for key water infrastructure works in the Greater Macarthur growht area, and $1 billion for employment-generating road upgrades around the new airport – but much of the funding is being pushed back to the later years of the decade.
Timing and delivery is the challenge now.
The Government needs to review the timing of this funding to get more greenfield housing underway in Western Sydney, as well as ensuring jobs start to flow when the Western Sydney Airport opens in 2026.
Slicing the budget pie
Planning
$20 million for much needed upgrades to the NSW Planning Portal will be welcomed by anyone who uses the portal.
Funding for staff in the planning assessment division of DPHI is critical to turning around state led rezoning and assessment.
It appears this money is what’s known as “maintenance of effort” in the bureaucracy – its not for new staff but rolling over funding for existing staff whose funding was due to expire on June 30.
Nevertheless, we welcomed the funding as a good foundation on which to build capability and capacity within the planning assessment division:
Land and Environment Court
Another positive was an additional $2 million for resourcing the Land and Environment Court, including the appointment of an additional judge, to help fast-track development approvals where proposals are refused by councils. The Court will need all the support it can get with many Councils continuing to refuse development and leading to growing queues to resolve matters in the Court.
This, along with additional planning resources, was a key recommendation in Urban Taskforce’s pre budget submission to NSW Treasury earlier this year. The Attorney General, Michael Daley, is to be congratulated for listening to and understanding our concerns.
Freeing up finance?
Another pre budget announcement the NSW Government establishing a pilot project to look at ways of assist the development and construction sector obtain finance.
Options to be explored include:
- Whether the State Government should act as guarantor for some development loans when projects are assessed by financial institutions to satisfy debt requirements.
- Whether a government commitment to pre-purchase a specified number of houses could provide confidence to lenders, developers and builders to fund and start construction.
- Other options the state might adopt to support access to finance and improve materials supply and affordability.
It was an important recognition by the Government that besides planning regulations, construction costs and finance are significant hurdles to housing supply.
Urban Taskforce is willing to work with the Government on program design. It is important that the industry has input into how any support could be best configured.
NSW Productivity Commissioner appointed for a further 2 years
Finally, the NSW Productivity Commissioner, Peter Achterstraat, has been appointed for a further 2 years, with a commission by the Premier to investigate and provide “evidence based recommendations about the barriers impacting housing supply, including in the construction industry.”
Peter has been fighting the good fight within Government on the need to solve the housing- supply crisis and the implications if we do not. His reappointment and commission is a tacit statement from the Government that there is much more work to be done when it comes to housing supply.
3. As night follows day - land tax hikes will lead to higher rents
A bit of Economics 101 on the impact of taxation and rent in a market where demand far exceeds supply.
The housing supply crisis means that demand for housing is close to inelastic. In such a situation, a tax increase will be passed onto the consumer.
Here’s a graph which explains how land tax hikes in a market with inelastic demand is passed through to higher rents:
Here a tax increase causes an upward shift in the supply curve, and with inelastic demand (a veritical demand curve whichb is what you get in a housing supply crisis) the tax is fully passed on as a $4 rent increase.
Renters will end up paying most, if not all, of the tax. Is that fair??
The Daily Telegraph spoke with Acting CEO Stephen Fenn on the flow through of land tax charges to renters:
Watch rents explode in the coming months. Rent inflation is a big component of the CPI basket and if inflation goes up, so does interest rates. Who wins then??
The land tax grab will net the Government an additional $3.8 billion over 5 years. The Government will pay bureaucrats (not just teachers, nurses and police) an additional $6.2 billion over the same period.
It’s great to be a public servant under the NSW Government, there could be a nasty sting in the tail for renters.
4. Resolve poll on transport oriented development shows clear majority in favour
Killara Station - a precinct which should accommodate more housing
The SMH published a poll today surveying 1,600 voters, showing at least half of voters surveyed support higher density near train stations. 56% of uncommitted voters – those who quite often decide election outcomes- were in favour of density near train stations
Support was also higher for those paying a mortgage and renting/sharing a home. Amongst renters 54% were in favour with a mere 24% opposed. Younger generations are in this bracket.
The broader polling on support for the Government and opposition showed up a distinct age skew, with Resolve’s Kos Samaras noting on ‘X’
*The below link may be paywall protected
5. NSW Liberal Party – a house divided on housing supply
For the demographic realities noted in the preceding story, a number of senior members of the Liberal Party, not just its youth wing, are putting forward motions to its State conference in November that will rattle some of the NIMBY - loving members along the north shore.
Motions for the upcoming conference include zoning all land R4 (high density residential) within a 5 minute walk of a station, and R3 (medium density residential) within 10 minutes.
A solid basis for more well-located housing.
If the Liberal Party were united and more progressive in the housing space, it could push Labor into a bolder solution to transport oriented development, which to date, has seen the rhetoric conssitentlly whittled down through constant backsliding to council sensitivities (liek the TOD2 reforms and low and mid-rise “refinements”.)
Wiser heads in the Liberal Party are realising that pandering to an ever declining boomer set along the north shore rail line is not in the best long term interests of the party – which historically upholds market solutions to problems and maintains the virtue of home ownership.
Shadow Treasurer, Damien Tudehope MLC, and former State MP for Epping, stated in NSW Parliament this week:
Yet the NSW Liberals persist with a Bill to amend the EP&A Act to allow Parliament to disallow the TOD SEPP. This would underpin more uncertainty in the planning system, spook investor confidence, and delay housing supply.
Posturing before the local council election in September? Let’s hope that the Liberal Party sort out their position on housing soon. As we have consistently said, there needs to be an outbreak of bipartisanship over housing if NSW is to resolve the housing supply crisis.
*The below link may be paywall protected
Casting aside the fact they have a Bill in Parliament that would further impede housing around a number of train stations, the NSW Leader of the Opposition, Mark Speakman’s Address in Reply to the NSW Budget contained a few good ideas:
- Reintroducing the First Home Buyer Choice program – the first step towards phasing out stamp duty
- Stamp duty exemptions for older people looking to downsize, to free up larger homes for families.
- A program of at least $2 billion to support local councils meet and beat their housing targets.
- Retain indexing the land- tax thresholds.
- Easing taxes and charges that are making developments unviable (like the Housing and Productivity charge)
Ditch the Bill in the Upper House and focus on these initiatives – it will make a difference in the long run!
6. RBA cash rate unchanged – but where it goes next is uncertain
Public sector largesse, unaccompanied by productivity gains, is a serious risk to further increases in the cash rate.
With many State Governments engaging in old-fashioned tax and spend budgets, doing nothing to lift producitty and genuine tax reform apparently something governments did in the 80's and 90's, there is dwindling chances of any cut to interest rates.
Apologies to Shirley Bassey…
With genuine long term tax reform a pipedream, immigration and skilled migrants remains the one shot in the locker for Governments when it comes to productivity.
But that requires more housing. ABS data shows that in 2023 the housing needed to address population growth fell shortto the tune of 30,000 new dwellings.
We are behind on the run rate and what is needed over the next five years mounts higher and higher.
Government budgets and the absence of microeconomic reform are making the task of the RBA increasingly difficult, and a increase to interest rates this year cannot be ruled out.
The RBA's Statement on Monetary Policy makes for sober reading. The next move in the cash rate could be up:
7. Federal redistribution - NIMBYs losing political representation with the seat of North Sydney set to be abolished
Clinging to a village mentality and anti-housing policies, while Western Sydney delivers thousands of new homes for new constituents, eventually has political ramifications.
The principle of proportional representation underlying the boundaries of State and Federal seats is that each seat should try to represent approximately the same number of voters. They are reviewed periodically to ensure seats comprise of approximately the same number of voters.
NSW needs to lose a seat in the next redistribution, and Australian Electoral Commission has proposed the abolition of the Federal seat of North Sydney.
The current seat of North Sydney – headed for the axe
Like the partition of Poland in 1793 # – the seat has been torn up three ways - half the seat heads west to Bennelong (essentially recreating former PM John Howard’s old seat), the north goes into Bradfield, with the eastern third (North Sydney LGA) going to the Teal-held Warringah.
When you look at the housing data underlying the LGA’s that comprise the Federal seat, it is little wonder that a comparatively shrinking population base would inevitably be abolished:
UDP dashboard, combined activity for North Sydney, Lane Cove, Hunters Hill and Willoughby
Interesting times and some changes that if adopted could make seats like Bennelong one to watch on election night (whenever that is).
# The 1793 partition of Poland, building on the earlier carve up in 1772, saw the Kingdom of Poland and Lithuania split up three ways – eastern half to Russia, western portion to Prussia and the southern part to Austria.
A Polish uprising in 1794 was led by a certain Tadeusz Kościuszko, after whom Australia’s highest mountain is named.
Kosciusko
8. Study on why NZ has been able to successfully up zone
The impact of upzoning – Auckland
Worth a read this week is a paper by Eleanor West, Research Associate at Urban and Spatial Economics hub, University of Auckland, titled ‘Up-zoning New Zealand: the localisation of a globally mobile policy idea’.
The article presents a case study exploring the development of two up-zoning policies recently introduced in New Zealand: the ‘National Policy Statement on Urban Development’ 2020 which requires local authorities in major urban areas to raise building height limits within walkable catchments of urban centres and along rapid transit corridors; and the ‘Medium Density Residential Standards’ 2021 which require these local authorities to allow three homes of up to three storeys on any section by right.
Both the centre-left Labour Party and the centre-right National Party recognized the critical need to address housing shortages and affordability issues.
This consensus was crucial in overcoming the traditional opposition that often stymies efforts in NSW (see the NSW Opposition’s Bill to stymie TOD 2 SEPP)
9. Federal Government dithering on housing leading to voter anger
Federal Election polls continued to deliver poor news to the Albanese Government, with the preferred PM numbers (generally favourable to the incumbent), showing it neck and neck.
Both polls – Freshwater and Resolve, showed cost of living issues starting to bite and impact the Albanese Government – with the Coalition seen in both as superior.
Source: SMH
Responses were often reflecting a growing sense of anger and frustration around cost of living and housing:
Despite the billions being thrown around by the Albanese Government on infrastructure and a plethora of programs aimed at boosting housing supply, the Coalition lead in terms of which side is best to handle housing related matters. Although many are undecided – there are votes to be had in championing housing supply!
The emphasis on social housing and affordable housing by Labor may explain this. These only comprise a fraction of the total housing stock and will only deliver around 5% of the new housing needed under the Accord.
The majority need to purchase market housing or rent, or the kids and grandkids need to. The lack of housing supply and high prices and rents are what is driving the concerns and voting intentions of many.
The Federal election will need to be called within the next 12 months, chances of an interest rate cut is ever diminishing. And what is the Albanese Government going to report back on during the campaign when it comes to cost of living and action on housing supply?
*The below links may be paywall protected
10. Oxford Economics report – construction costs set to surge
A concerning report released by Oxford Economics this week predicting that construction costs would surge again on the back of ongoing demand for workers and construction material.
The report concluded that construction related inflation could surge by 4% after 2028.
*The below link may be paywall protected
11. Council Watch
Woollahra
On June 11 Woollahra Council resolved unanimously (N.B. local election 3 months away) to oppose the Minns Government's housing targets for its LGA.
The new targets require Woollahra Council to deliver 1,900 new dwellings over the next five years - up from a paltry 495.
Some vague mutterings about lack of local infrastructure etc, etc.
What does the Minns Government do now?
Urban Taskforce repeats its call to declare Edgecliff and Bondi Junction stations TOD Tier 1 accelerated precincts, with state led rezoning and assessment pathways.
That would help meet the 1,900 target.
Watch this space, particularly after the local government elections are done and dusted.
Ku-ring-gai
Another frequenter of Council Watch, Ku-ring-gai Council’s legal action against the State Government over the TOD 2 SEPP is reportedly on the grounds that there was no evidence the Secretary of DPHI consulted the Department of Climate Change, Energy, Environment and Water on the potential impact of flora and fauna.
The matter is listed for a directions hearing in the Land and Environment Court on July 5.
*The below link may be paywall protected
12. Urban Taskforce in the news
Population outstripping housing
2SM spoke with Acting CEO Stephen Fenn on the latest population figures which, together with the ABS completions data for 2023, showed that almost 30,000 fewer homes were delivered in NSW than were needed:
Property is the engine room of the NSW economy
The Urban Developer noted Urban Taskforce Acting CEO’s linking the fortunes of the NSW economy with that of the property sector:
13. Members in the news
*Please note these articles may be paywall protected
“… CBRE’s Cold Chain Logistics report highlights that Australia currently has 0.4 cubic metres of refrigerated warehouse capacity per urban resident, lagging the US at 0.6 cubic metres and the Netherlands at 0.9 cubic metres…
To read more, click here: Australian Financial Review, 16 June
“…St George Community Housing plans to add 111 rental apartments in the next stage of development for an inner-south Sydney block ...
To read more, click here: The Urban Developer, June 17
“… Western Sydney University has pulled off the remarkable feat of being first in the world in the Times Higher Education impact rankings for three consecutive years…
To read more, click here: The Australian, June 18
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