Housing

We dive deep into a groundbreaking approach to solving the housing crisis by repurposing under-utilized big box retail spaces into thriving mixed-use housing developments.

House size differs markedly around the world, ranging from 9m² per person in India, to about 84m² per person in Australia. Globally, floor area per person is increasing.

Our study set out to examine the significance of this increase when it comes to home heating and cooling energy requirements in Australia. 

[…]

We found a home designed in 2022 had a 7.6% larger conditioned floor area than a home designed in 2018. And a home designed in 2022 was predicted to require 10% more energy for heating and cooling than a home designed four years earlier.

While negative gearing gets all the hate, it really was John Howard who destroyed our housing market by handing out a big tax-free gift to property investors.

Prior to June 2000, if you made a capital gain (ie a profit from an investment) you discounted the profits by the level of inflation over the period of the investment before paying tax.

Then Howard (and Costello) changed it to being a straight 50% discount.

If you bought a property for $500,000 and 10 years later you’re able to sell it for $1m at a profit of $500,000, rather than pay tax on the whole $500,000, you only pay tax on $250,000. The other $250,000 is yours, tax free.

That is about as sweet as it gets.

[…]

At some point you have to admit what you’re doing has not worked. Or perhaps we need to admit that the aim all along was higher house prices.

Howard infamously said in 2003: “I don’t get people stopping me in the street and saying, ‘John you’re outrageous, under your government the value of my house has increased’.”

The tax policies he put in place worked. They ensured house prices would go up much faster than income and reduce affordability. Maybe it’s time to admit that if we keep them in place that situation will continue.

Today, the FTC and Department of Justice took action to fight algorithmic collusion in the residential housing market. The agencies filed a joint legal brief explaining that price fixing through an algorithm is still price fixing. The brief highlights key aspects of competition law important for businesses in every industry: (1) you can’t use an algorithm to evade the law banning price-fixing agreements, and (2) an agreement to use shared pricing recommendations, lists, calculations, or algorithms can still be unlawful even where co-conspirators retain some pricing discretion or cheat on the agreement.

The agencies’ work in this space is especially important given rising residential housing rental prices. Rent is up nearly 20% since 2020, with the largest increases concentrated on lower- and middle-tier apartments rented by lower-income consumers. About half of renters now pay more than 30% of their income in rent and utilities, and rising shelter costs were responsible for over two-thirds of January inflation.

Meanwhile, landlords increasingly use algorithms to determine their prices, with landlords reportedly using software like “RENTMaximizer” and similar products to determine rents for tens of millions of apartments across the country.

In principle, there is no reason why population growth must push up the cost of shelter. Immigrants need homes — but they are also disproportionately likely to work in construction and, thus, increase the economy’s home-building capacity.

The problem arises when governments effectively prohibit the supply of housing from rising in line with demand. Between 2012 and 2022, Americans formed 15.6 million new households but built only 11.9 million new housing units. As a result, even before the post-lockdown surge in migration, there were more aspiring households than homes in America’s thriving metro areas.

This was largely a consequence of zoning restrictions. Municipal governments have collectively made it illegal to erect an apartment building on about 75 percent of our country’s residential land. In large swaths of the country, there are households eager to rent or buy a modest apartment, and developers eager to provide them, but zoning restrictions have blocked such transactions from taking place.

This creates a housing shortage. You can house 32 families much more quickly and cheaply by building a single apartment building than by erecting 32 separate houses. To require all of your community’s housing units to be single-family homes isn’t all that different from prohibiting the manufacture of all non-luxury cars. In both cases, you end up with artificial scarcity and unaffordability.

In short: Housing advocates fear the social housing sector is buckling under strain as more and more people are priced out of the private rental market.
The body representing tenants in housing disputes says its workload has almost doubled year-on-year.
What's next: The state government says it's tackling need with record investment in the sector.

To ramp up supply, cities are taking a fresh look at their zoning rules that spell out what can be built where and what can't. And many are finding that their old rules are too rigid, making it too hard and too expensive to build many new homes.

So these cities, as well as some states, are undertaking a process called zoning reform. They're crafting new rules that do things like allow multifamily homes in more neighborhoods, encourage more density near transit and streamline permitting processes for those trying to build.

One city has been at the forefront of these conversations: Minneapolis.

That's because Minneapolis was ahead of the pack as it made a series of changes to its zoning rules in recent years: allowing more density downtown and along transit corridors, getting rid of parking requirements, permitting construction of accessory dwelling units (ADUs), which are secondary dwellings on the same lot.

And one change in particular made national news: The city ended single-family zoning, allowing two- and three-unit homes to be built in every neighborhood.

Researchers at The Pew Charitable Trusts examined the effects of the changes between 2017 and 2022, as many of the city's most significant zoning reforms came into effect.

They found what they call a "blueprint for housing affordability."

By offering private companies more favorable financing terms, Montgomery County hoped to move forward with new construction that they’d own for as long as they liked. They had plans to build thousands of publicly owned mixed-income apartments by leveraging relatively small amounts of public money to create a revolving fund that could finance short-term construction costs. Eighteen months ago, this “revolving fund” plan was still mostly just on paper; no one lived in any of these units, and whether people would even want to live in publicly owned housing was still an open question.

[…] 

Since 2017, Boston has been working to redevelop some of its existing public housing projects by converting them into denser, mixed-income housing. Kenzie Bok, who was tapped by the city’s progressive mayor last spring to lead the Boston Housing Authority, said that existing work helped pave the way for leaders to more quickly embrace the Montgomery County model.

[…] 

“The default assumption is that affordable units are hard to build and market-rate ones will build themselves from a profit-motive perspective,” Bok said. “In fact, we have a situation now where ironically it’s often affordable LIHTC units that can get built right now and other projects stall out.”

Bok and her colleagues realized it’s not that mixed-income projects don’t generate profits — those profits just aren’t 20 percent or higher. Mixed-income affordable housing wouldn’t need to be produced at a loss, Boston leaders concluded, they just might not be tantalizing to certain aggressive real estate investors. By creating a revolving fund and leveraging public land to offer more affordable financing terms, Boston officials realized they could help generate more housing — both affordable and market-rate.

A report soon to be released by architects at Melbourne University spells out the environmental damage of demolishing the towers — including the thousands of tonnes of concrete sent into landfill and carbon released in producing replacement concrete — and details the benefits of retrofit as a tried and tested alternative. Work from the architectural practice OFFICE on estates in Ascot Vale and Port Melbourne demonstrates that refurbishment and infill can take place without relocating existing residents, at significantly lower social, environmental and economic costs.

The big housing demolition is not only costing the state a great deal; in the short term it massively reduces the affordable housing stock. In the middle of a housing crisis, this is bizarre. Contrary to Keane’s argument that our object is to keep public housing tenants in substandard housing, it is to ensure they remain close to home while more public housing is built. Those towers that can be refitted can be done so with minimal disruption to tenants, who move within the blocks while the work is done. Most public housing estates have expansive grounds. New public housing should be under construction on those estates now, so that when it comes time to demolish the unsalvageable towers, tenants can move into new housing next door. In what way is this a difficult idea?

As set out in JRF's recent report Making a house a home, the shifting balance of tenure has played a key role in myriad housing problems, from unaffordability and poor conditions to insecurity, and a plan for building a more equitable housing market must reckon with who owns our housing stock (Baxter et al, 2022).

This should take the form of efforts to shift tenure over time, and doing that directly through socialisation could play an important role. However, there are criticisms of this approach, and there needs to be a consideration of how acquisition may be best used within the housing system.

This briefing explores these criticisms, how they may be best overcome, and proposes the best way of deploying socialisation, arguing for a focus on:

• reducing the cost of providing temporary accommodation (TA), while supporting efforts to drive up standards in the sector
• growing a community rented sector in lower-cost housing markets that are otherwise plagued by poor conditions, poor management, and where rental payments are not benefiting local communities
• a wider plan to reform the Right to Buy scheme to arrest the decline of social housing and to keep subsidies in the system.