Democratising Prosperity: Global Perspectives on Housing Affordability. Housing Affordability Crisis in Australia EXAMPLE OF SYDNEY

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1 Swedish Dream Stockholm Japanese Dream Sapporo Nicolai Ceaucescu Father of Smart Growth Democratizing Prosperity Social Housing Bucharest Understanding Urban Sprawl Public Transport: Hopeless Rhetoric Not enough people going to the same place at the same time Don Valley Parkway & Commuter Rail Toronto Portland: The Reality of Failure New Sprawling Commercial Development Portland Suburbs The Role of Home Ownership Spanish Dream Barcelona Threatening the Dream Democratising Prosperity: Global Perspectives on Housing Affordability A BROADER ISSUE The issue is not Urban Consolidation Seminar By Wendell Cox 1 August 25 Australian Dream Land use Cities The issue is Quality of Life Social Equity Future of the Nation Housing Affordability Crisis in Australia EXAMPLE OF SYDNEY 16% 14% 12% 1% 8% 6% 4% 2% % -2% -4% Inflation Adjusted : Median House Price GDP per Capita (AUS) Housing Affordability in the USA THE RULE, NOT THE EXCEPTION The American Dream St. Louis 23 July 25 OUTLINE UNDERSTANDING URBAN SPRAWL The Anti-Sprawl Theology CONDEMNING WHAT THEY DON T UNDERSTAND PUBLIC TRANSPORT: HOPELESS RHETORIC PORTLAND: FAILED MODEL BACKGROUND: DEMOCRATISING PROSPERITY HOME OWNERSHIP AND PROSPERITY THREATENING THE GREAT AUSTRALIAN DREAM 1

2 NOT A BRIEF FOR SPRAWL LONE MOUNTAIN COMPACT German Dream Leipzig absent a material threat to other individuals or the community, people should be allowed to live and work where and how they like. Understanding Urban Sprawl Paris to Tourists & Urban Planners Sprawling Paris Paris: Avenue de l opéra Tourist Paris is Not Paris DIFFERENCE BETWEEN AUSTRALIA & EUROPE: HISTORY Paris Missed by Tourists & Planners Population 82% Outside City of Paris Employment 67% Outside City of Paris French Dream Paris 2

3 Tourist (& Planner s) Map of Paris Paris Atlas Where People Live and Work Milan Toronto Tokyo Portland MODERN SPRAWL = AUTO ORIENTED DEVELOPMENT Merriam Webster: the spreading of urban developments on undeveloped land near a city Sprawl is suburbanisation. suburbanisation. Sprawl is urban growth nearly all urban growth in the high-income income world has been suburban in recent decades. Sprawl = Automobile oriented development (especially in Australia, the US, Canada, Western Europe and Japan). Urban Sprawl is Suburbanisation HISTORY OF URBAN GROWTH IS HISTORY OF SPRAWL Australian Dream Australia: No Shortage of Land AGRICULTURE & FARM LAND: Hectares (x1,, Reduction= Land Area of Victoria, Tasmania + South Island (NZ) The Declining Human Footprint MIRRORS TREND IN CANADA & UNITED STATES 4, Urban Areas: Historical Densities Substantial Productivity Improvements Urbanisation 21 (<.3%) Human Footprint Reduction Agriculture & Urban 35, 3, 25, 2, 15, 1, 5, London New York Paris Los Angeles Population per Square Kilometer

4 Universality of Auto-Based Sprawl URBAN DENSITIES COMPARED TO PRE-AUTO ERA 2, 18, 16, 14, 12, 1, 8, 6, 4, 2, 19 Now Urban Population Per Square Kilometer Pre-Auto Japan W. Europe Australia Canada U.S. Suburbanisation in Barcelona Core Suburbs Suburbanisation in Athens Core Suburbs Spanish Dream Barcelona Suburbanisation in Tokyo Suburbs Core Urbanisation: 7, Square KM Greek Dream Athens 4

5 3, 2,5 2, 1,5 1, Urban Area Densities AUSTRALIAN & NEW WORLD SIMILARITIES Urban Population Per Square Kilometer SURPRISES More Sprawling than Los Angeles Los Angeles Least Sprawling in New World 5 Japanese Dream Tokyo Los Angeles Toronto Perth Brisbane Edmonton Adelaide Melbourne Auckland Atlanta Romanian Nightmare Bucharest Toronto Area Green Belt Plan MUCH PAIN, LITTLE GAIN 2 Land Area Additional 231 Smart Growth Ceaucescu: Understood Curbing Sprawl FATHER OF URBAN CONSOLIDATION Additional 231 Business as Usual 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% % The Automobile is Here to Stay NO ONE PROPOSES RETURN TO PRE-AUTO ERA Australia Western Europe Canada United States Share of Motorized Travel Urban Areas Over 3,, Asia Restore Public Transport City? REJECT AUTO BASED URBAN AREA? No serious proposals. Would require dismantling more than 85% of urban area & resettlement. Auto oriented urban area is here to stay. Densification worsens the quality of life. 5

6 4,5 4, 3,5 3, 2,5 2, 1,5 1, 5 Suburbanisation Dilutes Congestion TRAFFIC INTENSITY IN WORLD URBAN AREAS Vehicle Hours/ Square Kilometer By Population Density Under ,999 2,-3,999 4,-7,999 8, & Over Suburbanisation Speeds Up Traffic TRAFFIC SPEEDS IN WORLD URBAN AREAS 199: KM/H by Population Density Under ,999 2,-3,999 4,-7,999 8, & Over Suburbanisation: Faster Work Trips INTERNATIONAL EXAMPLES Minutes One-Way More Air Pollution at Lower Speeds Based Upon Index of 1. at Lowest Point for Each Pollutant By KM per Hour 1 Dallas-Fort Worth Houston Los Angeles Atlanta Paris Tokyo 5 CO NMHC VOC CO NOx NOx ROADWAY AIR POLLUTION PROGRESS IN EUROPE (EU-15) Gross levels down 6% or more in 11 years 6

7 Jobs-Housing Balance Myth Other Location 17.9% THE RECORD Hong Kong: Average Work Trip 7.7 KM Urban Villages: Insignificant & Futile JOBS-HOUSING BALANCE: THE RECORD Neighborhood 25.9% Job Location 17.9% Other Reasons 17.7% Average Work Trip Distance Welwyn Residents Welwyn House 2.5% Reason for Neighborhood Choice US Census Survey Example: London Area New Towns US SUBURBS LESS EXPENSIVE THAN CORES $35 >7 USA Municipalities $3 Fees/Capita: 2 $25 $2 $15 $1 $5 $ Exaggerating Suburban Costs Water Sewer Density 3.2 Density 1,88 Density 1,9 Density 8 Core (1939) Ring 1: 1959 Ring 2: 1979 Ring 3: Later Suburban Cost Research U.S.A. CANNOT AFFORD SUBURBANIZATION? How did we manage to afford the last 6 years? Bankrupt suburbs predictions: 196s Studies: Theoretical, not real data. $225 billion US cost claim (to 225) $3 per capita annually Impact Fees per Dwelling Unit TALE OF TWO CITIES: SYDNEY AND ATLANTA $12, Suburban Cost Research ILL INFORMED & DISINGENUOUS $1, $8, $6, $4, $2, $ $6,5 or Less Atlanta $1, if the urban policies were not so ill informed and presented in such a disingenuous way, there would not be a need for this contribution to the debate on Australia s s cities - Patrick Troy (The( Perils of Urban Consolidation). 7

8 NOT SINCE COPERNICUS has the conventional wisdom been so wrong. no imperative has been demonstrated. Factors Driving Suburbanisation IT IS MORE THAN POPULATION GROWTH Strong Post-War population growth People moving from rural areas to urban areas Housing growth well above population growth Average household size down 1/3 Larger, more efficient commercial structures Employment growth well above population growth Contributing factor: More women in the workforce Affluence Public Transport: Hopeless Rhetoric Public Transport Work Trip Share IMPORTANT TO CBD, A SMALL PART OF THE MARKET Not enough people going to the same place at the same time CBD: Work Trip Share Public Transport 7% Don Valley Parkway & Commuter Rail Toronto Area Employment Outside 87% CBD 13% Autos 9% Elsewhere: Work Trip Share Public Transport 1% Most Employment is not Downtown Auto Competitive Public Transport Auto-Competitive Public Transport ONLY TO DOWNTOWN Nor West Business Park Baulkam Hills 8

9 High or Low Density in Suburbs MAKES NO DIFFERENCE IN PUBLIC TRANSPORT Auto Competitive Public Transport SYSTEM DESIGNED FOR PORTLAND (8M GRID) Halle Neustadt, Germany Atlanta Graystanes () Urban Density & Transit Competitiveness HIGH INCOME WORLD URBAN AREAS OVER 3,, 35 Population/Square KM 3 CAR 25 COMPATIBLE DENSITY TOO DENSE 2 FOR CARS PUBLIC NOT DENSE TRANSPORT ENOUGH COMPATIBLE 15 FOR PUBLIC DENSITY TRANSPORT 1 5 1, 2, 3, 4, 5, Population (Millions) Urban Rail in the USA DEMAND DRIVEN BY AVAILABILITY OF FEDERAL $ Auto Public Transport LOS ANGELES 1 Metro Line 3 Light Rail lines 6 Suburban Lines 8 KM A$13 Billion Public Transport Auto Before Rail: 1989 Latest Data: 23 Misleading or Doubtful Information UNREALISTIC EXPECTATIONS FOR PUBLIC TRANSPORT 12% 1% 8% 6% MELBOURNE 23 PLAN Reduction of Auto Market Share in Percentage Points Goal is many times previous record Portland: Failed Model CHEERLEADERS ARE UNRELIABLE REPORTERS 4% 2% % -2% 22 Goal Since 198 Melbourne Boston Brussels Zurich Portland New Auto-Oriented Commercial Development Portland Suburbs 9

10 3, 2,5 2, 1,5 1, 5 Urban Area Population Density SYDNEY, LOS ANGELES EXCEED PORTLAND Los Angeles Portland 14, 12, 1, 8, 6, 4, 2, Portland: Most Growth Suburban METROPOLITAN AREA: , Suburbs Core +.8% Suburbs +9.4% 4, Core Public Transport Overall Market Share SYDNEY 5 TIMES PORTLAND 14% 12% 1% 8% 6% 4% 2% % Portland 18% 16% 14% 12% 1% 8% 6% 4% 2% % Public Transport Work Trip Share SYDNEY MORE THAN DOUBLE PORTLAND Portland 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% % Portland: PT Work Trip Share Drops BEFORE LIGHT RAIL & AFTER: % 7.6% Traffic Congestion in Portland ONE OF LARGEST INCREASES IN THE NATION Travel Time Index (Peak Travel Delay) Plan 58% Traffic Increase Already Exceeded Portland Medium Urban Area Average Kansas City

11 Portland v. Houston: Traffic : 3 MINUTE PEAK AUTO TRAVEL DISTANCE Portland: Transit & Compact City 1986 Houston: Highways & Market Among Greatest Congestion Increases 21 From Worst to 14 th Worst Congestion The Bloating Urban Growth Boundary PORTLAND RETREATS RESPONDING TO REALITY 45, 4, 35, 3, 25, 2, 15, 1, 5, Portland Urban Growth Boundary: Acres 1997 Actual 24 Plan Adopted 1997 Actual Trend to 24 6% 5% 4% 3% 2% 1% % -1% -2% -3% Portland Housing Prices Up Most 199-2: HOUSING MULTIPLE (US CENSUS) LA PRV WDC RSB SAC NY DFW BOS SAN SD VB PHI TSP SF ORL NO HOU MIA SJ BAL STL PHX LV ATL SEA CHI MSP KC PGH CIN COL IPS CLV MIL DEN DET POR Urban Consolidation: Not Sustainable RETREAT: PORTLAND AND ELSEWHERE Portland Anti-densification referendum (2/3) Property Rights referendum (2/3) Requirement to pay for economic loss from zoning changes Other Retreats Minneapolis-St. Paul New Jersey Maryland Suburban Washington, DC Background: Democratising Prosperity Every Society Has Rich Households Luxury Condos Near Rocinda Favela Rio de Janeiro Swedish Dream Stockholm 11

12 Affluent Economies Have Achieved a Democratisation of Prosperity What Distinguishes Societies is the Extent of Poverty Overwhelming Reality Rocinda Favela Rio de Janeiro History of the World is the History of Poverty Economic Progress is Not Automatic The Case of Argentina $4, $35, $3, $25, GDP-PPP Per Capita 199$A (OECD) United States Australia Japan $4, $35, $3, $25, GDP-PPP Per Capita 199$A (OECD) United States Japan Australia $2, $15, $1, $5, $ Western Europe US Poverty Threshold $2, $15, $1, $5, $ Argentina US Poverty Threshold Western Europe Home Ownership and Prosperity Japanese Dream Sapporo 1% 95% 9% 85% 8% 75% 7% 65% 6% 55% 5% Discontinuous Axis GDP/Capita: 199 1% 74% 72% 78% Purchasing Power Parity 8% 8% Australia UK USA France Sweden Japan 12

13 1% 95% 9% 85% 8% 75% 7% 65% 6% 55% 5% Discontinuous Axis GDP/Capita: 23 1% 76% 75% 73% Purchasing Power Parity 78% 73% Australia UK USA France Sweden Japan STRENGTH OF THE LIBERAL ECONOMIES Competitive intensity Examples: Less restrictive land regulation Retailing $12 Competitive Intensity HOME BUILDING: AUSTRALIA & EUROPE (199S) Competitive Intensity ECONOMIC FREEDOM AND AFFLUENCE $1 $8 $6 $4 $2 $ $1 Germany $75 Australia Houses: A Principal Share of Wealth ABS: 1996 Household 17% Savings 12% Home 43% Other 21% Securities 8% 5% 45% 4% 35% 3% 25% 2% 15% 1% 5% % Democratisation of Prosperity: Associated with Personal Mobility Real Per Capita GDP/Household Autos per Household

14 14 Democratisation of Prosperity is Associated with Urban Growth 12% Democratization of Prosperity is Associated with Suburbanization United States Growth x1,, Urban Rural % 8% 6% 4% 2% % Canada United States Canada from 1951, US from 195 Others from 1965 Western Europe Japan Australasia Democratisation of Prosperity: Associated with Rising Home Ownership 1% 9% 8% Renters 7% 6% 5% 4% 3% Home Owners 2% 1% % Spanish Dream Barcelona Threatening the Dream BASIC ECONOMIC PRINCIPLE SCARCITY & RATIONING TEND TO RAISE PRICES Rationing land for housing development tends to raise house prices. Higher housing prices lead to lower rates of home ownership. STRATEGIES Urban Growth Boundaries & Green Belts Down-zoning Excessive Development Impact Fees Smart Growth: Strategies & Housing Impacts EXAMPLES Australia Portland Denver London Toronto Northern Virginia, Boston Australia California IMPACTS Raises housing prices Raises housing prices Raises housing prices 14

15 Sun Rises in the West studies Italian Dream Milan ANDRES DUANY There is NO question that urban growth boundaries and that elaborate environmental public processes increase the cost of housing by creating scarcity. (And don t tell me otherwise, because I am not stupid, nor am I inexperienced, nor do I have underdeveloped powers of observation). our evidence suggests that zoning and other land use controls play the dominant role in making housing expensive. HARVARD STATE OF THE NATION S HOUSING 25 Development constraints drive up land and construction costs as well as prevent new housing from keeping pace with rising demand. WACHOVIA BANK We have identified three major factors which have worked to restrain supply over the past decade, all of which remain very much alive and well today. The first is the spread of the Smart Growth, Slow Growth and No Growth movements throughout the country. Land Rationing Raises Housing Prices REAL HOUSING PRICES IN THE UK & EUROPE 8% 7% 6% 5% 4% 3% 2% 1% % United Kingdom (Strong Land Rationing) EU Outside UK (Little land rationing) U.S. DEPARTMENT OF HOUSING & URBAN DEVELOPMENT REPORT A number of communities have used smart growth rhetoric to justify restricting growth and limiting developable land supply, which lead to housing cost increases. 15

16 LAND USE REGULATION RETARDS ECONOMIC GROWTH metropolitan areas with stringent development regulations generate less employment growth than expected given their Industrial bases AN ALARM ON PLANNING IN THE UNITED KINGDOM The nightmare scenario for the British economy could be that a tipping point was reached where the financial services industry of the city decamps to cheaper cities elsewhere in Europe. International Housing Affordability Ratings And Rankings 25.2 House Price/Income Multiple A SIMPLIFIED MEASURE Median house price divided by median household income. Permits ready comparison, national and international Simplified and understandable Kiwi Dream Auckland Historical value: Approximately 3. -1% -2% US: House/Income Multiple: GROWTH CONTROLS: LARGEST PRICE ESCALATION 7% 6% 5% 4% 3% 2% 1% % Widespread Land Rationing Average Mississippi North Dakota Arkansas Iowa Louisiana Minnesota Virginia Connecticut New Mexico Kansas Texas Alaska Wyoming Alabama Oklahoma Missouri Ohio Wisconsin South Dakota Nebraska New Jersey Tennessee Georgia Illinois Kentucky Vermont Florida Nevada West Virginia New Hampshire New York South Carolina Maryland Delaware Pennsylvania Indiana Idaho North Carolina Rhode Island Michigan Utah Arizona Maine Montana Hawaii Colorado Massachusetts Washington California Oregon Housing Affordability: US Urban Areas 2 CENSUS House Value: Household Income Multiple: 2 Census More Affordable Land Rationing SAN HOU DFW PGH STL KC TSP IPS PHI ORL VB CIN CPS ATL BAL DET COL PHX CLV NO MIL WD LV RSB CHI MIA PRV SAC DEN POR SEA BOS NY SD LA SJ SF 16

17 US House/Income Multiple: 2 CENSUS DATA: LARGE URBAN AREAS 2.74 Little Land Rationing 4.11 Land Rationing Land Rationing Raises Land Prices 5 TIMES INCREASE IN S.E. ENGLAND Land Price: 9 Hectare Farm Southeast England (Leunig, LSE) Development Not Permitted Development Permitted Housing Cost Multiple: 24 AUSTRALIA, NZ, CANADA & USA: OVER 1M METRO AREAS Housing Cost Multiple AUSTRALIA & NORTH AMERICA EXAMPLES 1. Median House Price/ Median Household Income 1. Median House Price/ Median Household Income Fast Growing & Affordable Atlanta Dallas-Fort Worth Houston Land Rationing BUF RCH STL IPS PGH DFW SAN KC OKC ATL AUS LVL SLC HOU COL OTT NVL CGY MON MEM NO RDU PHX PHI MSP VB POR ORL TSP TOR MIL DEN BAL CHI SEA BOS VAN WD PER SAC LV AUK BRS ADL MEL NYC MIA SF SYD SD LA 2.. IPS DAL ATL HOU OTT PHX PER Land Rationing BRS ADL MEL SYD Housing Affordability Crisis in Australia EXAMPLE OF SYDNEY Elements of Housing Price Multiple CONCEPTUAL MODEL 16% 14% 12% 1% 8% 6% 4% 2% % -2% -4% Inflation Adjusted : Median House Price GDP per Capita (AUS) DFW Example Using House US Price to Household Income Multiple: 24 ATL HOU PHI CHI SEA BOS WDC NY Land Scarcity Premium Speculation Underlying Housing Cost to Income Multiple MIA SF LA 17

18 Millions Metropolitan Area Population: 23 TALE OF TWO CITIES: SYDNEY AND ATLANTA Atlanta Metropolitan Area Growth: 2-23 TALE OF TWO CITIES: SYDNEY AND ATLANTA 4, 35, 3, 25, 2, 382, 15, 1, 132, 5, Atlanta House Price Multiple: 24 TALE OF TWO CITIES: SYDNEY AND ATLANTA Low Interest Rates Both Urban Areas 2.6 Atlanta 8.8 2,5 2, 1,5 1, 5 Urban Population Density TALE OF TWO CITIES: SYDNEY AND ATLANTA Population per Square Kilometer 7 Atlanta 2,2 Auto & Public Transport Share TALE OF TWO CITIES: SYDNEY AND ATLANTA 1% 9% 8% 7% 6% 88% 5% 99% 4% 3% 2% 1% 12% % 1% Atlanta Daily Travel Time per Capita TALE OF TWO CITIES: SYDNEY AND ATLANTA Minutes 72 Atlanta Similar Results for Dallas-Fort Worth, Houston Comparisons with 79 18

19 Conclusions TALE OF TWO CITIES: SYDNEY & ATLANTA Similar interest rates housing affordability much worse Atlanta larger Atlanta housing demand greater (faster growth) urban population density higher Both have high auto market shares, but has larger public transport share. Less travel time in Atlanta. 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% % The Democratisation of Prosperity is not Complete Home Owners Renters 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% % Land Rationing: Toward a Nation of Renters: Restoring Inheritance as the Deciding Factor Renters Home Owners 7% 4% Eventual Rates Based Upon Housing Price Multiples 15% Australia Now Perth Rate Rate STRONG ECONOMIC GROWTH: IS NECESSARY But Smart Growth: constitutes an assault on the economy. Canadian Dream Toronto THERE IS NO REASON TO STOP DEMOCRATISING PROSPERITY Living in the Future Tense THE UNIVERSALITY OF ASPIRATION Valencia (Spain) Suburbs 19

20 Australian Dream HAS BECOME THE GREAT UNIVERSAL DREAM Romanian Dream Bucharest Universal Dream VISITING THE NEW HOUSE IN BARCELONA Universal Dream EMERGING IN MEXICO Universal Dream EVEN IN HONG KONG Mexican Dream Guadalajara Chinese Dream Hong Kong (Fairview Park) People s Route Paris Suburbs Planner s Route PLANNING REFORM: Back to Basics: Not telling people how to live Rather, helping people live as they prefer 2