Sunshine Coast Has Most Unaffordable Housing in the Western World

An internationally accredited demographic research company, Demographia, has just released the findings of its fifth annual international housing affordability survey.

The survey covers Australia, Canada, Ireland, New Zealand, United Kingdom and USA. It compares regional housing affordability by calculating the median house price divided by the median household income for each region. A quotient of five or higher is considered to be ‘seriously unaffordable’. A quotient below three is considered to be ‘affordable’.

Affordability has improved in some regions over the past 12 months as house prices have weakened, however there remain some unacceptably unaffordable regions such as the Sunshine Coast, Australia (9.6), Honolulu, Hawaii (9.1), Gold Coast, Australia (8.7) and Sydney, Australia (8.3), all rated in the top five locations in the western world for unaffordability.

Many USA regions became more affordable over the past 12 months due to the severe downturn in house prices, which had occurred there. The USA had nine out of the lowest ten rankings (1.8 - 2.1).

The findings of this survey should ring alarm bells throughout Australia, and in particular Queensland.

The high levels of housing unaffordability are attributed to the lack of supply of serviced land in affordable locations, in particular town planning policies which aim to constrain housing development to areas within existing established areas. These policies are generally referred to as ‘urban consolidation’ or infill development, and are fundamental objectives of all State Governments.

Given that all of the States in Australia (except Western Australia) have Labour governments, it is difficult to understand why they would each seek to install planning policies which act against the best interests of their traditional constituents, i.e. higher house prices.

State Government planning ministers argue that there is sufficient land allocated within the ‘development footprint’ to satisfy demand for 20 years or more and therefore land supply is not restricted. But what they don’t say is that the allocated land is more expensive because it often has existing services which require upgrading, to accommodate increased density. Where existing services need to be amplified or new pipes laid under existing roadways, the cost of that work is very high, much higher than in ‘greenfield’ locations.

Additionally, infill sites are more expensive because they are better located. Hence, the stock of ‘entry level’ housing has diminished, and potential first home buyers are often forced to rent. Not surprisingly, the proportion of renters in Australia has increased from 25% to 32% over the past decade. This is the undesirable outcome of these State planning polices, quite the reverse of what Labor governments should be trying to achieve.

The answer is for Councils to permit more ‘out of sequence’ development where the developer funds the majority of the infrastructure. Examples of this are Forest Lake (Inala, Brisbane), Springfield (Ipswich) and Yarrabilba (Waterford), but there are not enough of these types of projects to satisfy demand for affordable housing in Australia. With a surplus of developable land this should be able to be accommodated with developer subsidies.

Population ‘caps’, such as is applied to Noosa on the Sunshine Coast, only exacerbate the problem of affordable housing because limited supply means higher land prices. Even though Noosa has yet to reach its ‘cap’ of 60,000 people, the expectation is there, and land has been valued accordingly.