Councils, Be Careful What You Wish For

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As many of the country’s local council’s head down the path of urban consolidation and adopt the principles of higher density over sprawl, a lesson learned in the 1970’s is coming back to haunt us. That lesson was the impacts of placing high numbers of welfare recipients in the one location and the subsequent creation of dysfunctional communities.

To this day we still see councils in the outer suburbs striving to achieve higher densities on often quite ambitious scales. Ninety percent of high density product is being sold to investors and rented to the bottom end of the market. Effectively the cycle is beginning all over again with the only exception being that the housing authorities are no longer the ones owning the properties, rather the investors are.  Socially speaking, the risk is that the socially dysfunctional communities of old are being created all over again.

When the government insists on driving planning policy, no matter how well intentioned, it typically goes against general market economics and fundamentals and often the outcome is not ideal.  To further compound this issue many developers know they are at risk of creating projects that will not be a legacy to their brand, in fact it could be quite the opposite.  Their fear is to walk into the council chambers and ask for a change to their DA.  This fear is grounded in the risk associated with a long turn around time and the potential that no D.A will be forthcoming. 

Whilst the market can be pushed and shoved into certain shapes, marketers learnt a long time ago that a market needs to be guided, not forced. The power of persuasion is a very impressive tool when applied correctly.  However marketers also learnt to understand the market, as well as the economic forces that work within it and how to use them to their advantage.  In using the term “marketers”, I am not specifically referring to the term property marketers or the investment property marketers who end up selling these projects to unsuspecting investors; I am referencing the general discipline of marketing.

If we look at a typical purchaser of new product in our outer suburbs, they are generally first or second home buyers with young families and dependent children, or couples looking to start a family in the near future.  These are people and households that are upsizing, not downsizing.  Some of the most successful medium and high density projects are found around our inner ring and middle ring suburbs where apartments offer the potential to upgrade to a new product instead of something that has been renovated within an inch of its life or is dated as 1980’s brick and tile. 

The composition of purchasers is often more highly skewed to the owner occupier than the investor in our near city apartments (depending on the developer).  However, for some reason we find it acceptable that a medium or higher density apartment project in the outer suburbs should be more heavily skewed to the investment community.  If the same ratios were applied to general residential housing, stigmas would be created immediately as 80% of houses would be rented. 

The point being, our double standards are fine for vertical communities, but not so for horizontal communities.  This is an outlook that needs to change quickly, particularly within the council.

When the government draws a line in the sand and suggests that our outer-lying suburbs should adopt higher densities, they are actually doing the residents in those areas a disservice.  Densities will be achieved in their own time when land supply diminishes and the services and amenity are there to support them.  To suggest that the need for higher density starts now is akin to putting the horse before the cart. 

The greater problem remains that we are building communities that will once again remind us of the lessons we failed to learn in the 1970’s, but feel compelled to revisit again.