Per Capita’s submission to the Productivity Commission’s inquiry into Housing Supply Regulation contains discussion of the following key points:
The impact of housing regulations on supply is contested, but probably significant
The intuitive case that housing regulations reduce supply is clear. When building new homes in a particular geographic area is restricted, whether due to height limits, floor-space ratios, or car parking requirements, it makes it impossible to increase supply beyond a certain point in that area. When those restrictions are commonplace across many suburbs, particularly those with established infrastructure, this could artificially restrict housing supply across a large geographic area.
However, there are a few assumptions underlying this logic, which need to be examined more closely. First, it assumes that development would not shift to alternative suburbs when supply is restricted in some suburbs. Yet some development is likely to shift because landowners would continue to supply housing until market demand is met, as long as supply is unrestricted in alternative locations. Second, it assumes that landowners would choose to develop immediately if they had the option. However, a landowner might delay development to engage in land banking. These are discussed further in our submission.
Deregulation should be combined with value capture
Removing some types of planning restrictions, such as zoning constraints, would lead to enormous gains in wealth for existing landowners. Without any value capture mechanism, this would be a giveaway for wealthy landowners and highly inequitable.
Deregulation should be combined with better community amenity and rental standards
The original intent of zoning was to preserve community amenity and protect residents’ health and wellbeing, such as preventing 10-storey apartments being built next to a single-storey townhouse, or a polluting factory built next to a quiet neighbourhood. These remain important constraints, but to a significant extent, zoning now serves to benefit existing residents in high socio-economic suburbs, at the expense of prospective residents. We need to strike the right balance between promoting residents’ health and wellbeing, without hindering supply.