Restrictive planning laws responsible for falling home ownership rate: Urban Taskforce

The Australian home ownership rate is declining and over-zealous planning restrictions are the problem, Urban Taskforce Australia has argued in light of new figures just released by the OECD.

The comments come as the weekend’s auction results show clearance rates have come in yet again at just over 60%, although the actual number of properties has continued to grow.

New figures from the OECD show while the home ownership rate increased in the United States, Britain, Canada and Germany between the 1990s to the first half of the 2000s, the Australian home ownership rate fell from 71.4% to 69.5%.

And the OECD points out in its report that “Australia’s homeownership rate would have declined further had it not been for a shift in the characteristics of the population towards homeownership”.

Urban Taskforce Australia chief executive Aaron Gadiel says the figures reveal home ownership is on the decline, despite the belief the level of ownership in Australia has remained relatively steady despite rising prices.

“The prevailing wisdom that is put forth is that home ownership is quite strong in Australia, and that any fall in home ownership rates is usually due to demographic issue,” he says.

“But the OECD has crunched the numbers and they’ve found that yes, while there is a demographic change it only accounts for a minority in the overall fall of home ownership levels.”

The OECD report says that only 0.7 of the two percentage point drop is attributable to demographic shifts, pointing out that in Australia and Italy, “other factors appear to have played a particularly important role in shaping homeownership patterns”.

“While the aging of the population has propped up home ownership, if you take them out you would have seen a full percentage point drop,” Gadiel says.

Gadiel says while the OECD report doesn’t pinpoint the issues for that decline in ownership, “separate reports clearly show the primary issues is that the Australian supply market is far less responsive to pricing signals”.

Building societies and representatives of the construction industry believe constraint of supply is driving up housing prices unnecessarily. The Housing Industry Association last year released figures showing it expects housing starts to fall by 4% to 159,393 by June.

Gadiel says the combination of a shortfall in housing starts and a decline in home ownership rates shows the Government needs to get to work on amending zoning laws and making it easier for developers to start projects.

“There are many issues here, but one is that in many areas there are laws about sequential development. They won’t allow person B to develop until person A has completed their building, and so on.”

“This can actually turn a profitable project into a loss-making project because of the effects it will have on delaying the development.”

Gadiel says the market needs to be more responsive, and it can only do this by changing the laws around divisions and zoning.

“With a responsive market, it sees that demand is changing and is able to react instantly. It takes time to build homes and sub-divisions, but there are vast regulatory approval procedures that inject so many more deals.”

“Developers are frustrated because they are unable to respond to clear market signals, and clearly the economy is worse off and nobody wins”.

Meanwhile, auction results show the property market is holding up, with Melbourne recording a 66% clearance rate. Real Estate Institute of Victoria chief Enzo Raimondo said in a statement the result was “very consistent”.

579 properties were sold from 881 auctions, with a total value of $324 million.

Sydney recorded a 62.2% rate with 255 properties sold, and a total value of $208.6 million. Adelaide recorded a 48.4% rate with 15 sold, while Brisbane recorded a 25% rate with six sold.