1. There is a a small, but significant and growing population of international students in places like Adelaide that are putting significant pressure on rental vacancies. The number of international students a few years ago was a few hundred, now it’s 20,000 and there’s talk it will be 30,000 in a couple of years time. In a town like Adelaide that’s a significant proportion of the rental housing stock. I’ve heard stories of students having to share rooms the market is so tight.

Solution: universities should be “encouraged” to build affordable specialist accommodation for international students as part of the deal in increasing numbers. Some places exist but are so expensive students prefer to use the private rental market.

2. The boom in rental accommodation encourages investment housing and negative gearing only makes it worse. Negative gearing is a double edged sword – I’ve lived in the UK where it doesn’t exist and paying rent is significantly more expensive than paying off a mortgage. So NG does bring rents down somewhat. But what about phasing out negative gearing over a number of years so that it is only allowed for one property per person?

3. Any new outer suburb developments should have well designed energy efficient housing, public transport links, services like shops, doctors clinics. Medium to high density housing should be encouraged on infill inner city industrial sites (we have a few of those in Adelaide).

Yep, agree with all of that. Transport IS important, and for all the reasons you listed like freight, and allowing people social opportunity.

But in terms of commuter transport, I think we’re better off moving jobs closer to people, preferably as far as their homes where we can, for as much time as we can. Our current transport networks (in Sydney, anyway) – road, rail, the rest – all work fine in the school holidays with just a fraction of the workforce not commuting on any given day. Get those people to stop commuting permanently, or just one or two days a week, and we’ve solved the problem, nationwide, for less than the price of a single new railway line, not to mention the benefits of allowing decentralisation to ease pressure on the housing market as we’ve been discussing.

I think that’s one of the problems when people contemplate projects that cost billions – it’s hard to wrap your mind around just how much money that actually IS, so we sort of think of all these projects as just costing “lots”, and so all end up seeming a bit interchangeable. But to get the same effect on the housing market from high-capacity, high-speed, medium-haul commuter transport as you would get from VDSL &/or FTTH, you’d have to spend 10, 20, maybe 50 or 100 times as much, nationwide, and you still haven’t invested in a model that meshes well with our increasingly entrepreneurial model of work, where individuals derive their income from an ever more diverse range of sources.

But you do hear a lot of alarmist sentiment that if negative gearing was abolished and investors fled the market then houses could fall from, say $400k to $300k, and rental shortages could see rents on similar houses go from $400/wk to $500/wk. My point is that most people who could afford $500/wk in rent would just go out and buy a $300k property instead, thus solving the problem. Not to mention how many people would be attracted by rental yields pushing 10%. The market would correct itself – any situation where it’s cheaper to buy than rent is not sustainable unless people see the market steadily declining for decades, and I think we’re a long way from that.

But it’s just as well that I don’t make public policy, because if I was king for a day I’d ban the holding of non-owner occupied residential property as collateral against a loan. Leave investment properties to those who actually have enough of their own money (or other mortgagable assets)to invest in one. Bugger the inflationary speculation of “investors” who are aren’t actually investing any of their own capital, and simply taking a punt on the capital gains using borrowed money. Why a bidding war between these spivs (who are all receiving the “tenth home buyer’s grant” – oops, I mean “negative gearing deductions”) should be allowed to price coming generations out of home affordability is beyond me. And why as a government you would go beyond allowing that, but actually encouraging that, and being proud of it, beggars contemplation.

You’re preaching to the converted over xDSL technology. If anything I would argue that we need to spend the extra few billion and install fibre to the home. (Plastic fibre is now coming of age.)

I’d agree that most work can be decentralized. However, I would still argue that there will always be physical ’stuff’ to move, process etc and that tends to have synergies of locality. Also, unless you get towards the half million mark (population), you will tend to find that people prefer places like Sydney purely for the variety and social opportunity. In other words, even with decentralisation and satellite cities, people are still going to want to feel part of a larger whole. And with that they will want to travel mid-level distances often.

Possum, here is an interesting thought for you. The growth of cancers and the growth of cities have some interesting mathematical parallels

-moo

Besides, if prices fell, that would improve yields (making investment property more attractive) even without an increase in rents.

Possum, I think the whole “investors abandoning a falling market” leading to a soaring rents is bunk. Do you have data from which you could work out whether there is a correlation between house prices and rents (possibly with some lead or lag)? Because I have a feeling rising property values have been the biggest drivers of rent increases over the years.

On the greater housing affordability issue, my only worry with the policy prescription given is that any measure which reduces the attractiveness of housing to investors will reduce the pool of available rental properties – thus improving affordability for purchasers, but eroding it for renters. So it’s essential that while cooling-off the money-fight between investors over the limited stock of existing houses, that they be definitely directed into building new housing instead of shifting their investment activity into a new asset class.

Of course, if housing affordability improves then there should eventually be a movement from renters into owner-occupiers, which will have a dampening effect on the rental market. How much of an effect is hard to say.

With so many interrelated variables, many of which act with a lag, not to mention an array of unpredictable external shocks, this is a pretty complex system that could well act in quite unexpected ways when prodded. Could be interesting to try and come up with a mathematical model of it a la Lotka-Volterra.

Remember we still have big open plan offices that staff phone sex workers :-s

Really? The only phone sex worker I know lives down the same dodgy smei-remote road I do

In any case, surely that sort of business would still be cheaper to run if you hired a big open plan office in a regional town.

We happily spent $20Bn+ on the Sydney to Newcastle freeway

No we didn’t. Seriously. Less than half that amount has been spent on the Pacific Highway upgrade between Sydney and Tweed Heads, let alone Newcastle. The Sydney to Newcastle Freeway was built decades ago, and was famous for being the first Australian road to cost a million dollars a kilometre. Last time I checked it wasn’t 20,000km from Sydney to Newcastle!

As for the figure you raised for a rail tunnel. Let me ask, was the price inflated by the need to have to go under an existing city? Or did someone encounter monsters from Doom in the process?

It’s not my figure, it’s Morris Iemma’s. As I said, I’m a bit of a transport infrastructure junkie – I don’t get the costing either – similar projects worldwide are being built for a quarter to half the cost (and light rail for one-twentieth the cost per kilometre, making it more sensible to build a light rail feeder network for the existing heavy rail lines, but I digress) Even if they built the NW Metro for half the announced cost this single metropolitan rail line would still be nearly twice as expensive as a national VDSL network.

The VDSL network would do way, way, way more to ease pressure on the capital city housing markets than one Metro link in NW Sydney. We really, really, really need to pull our fingers out and get the most effective projects funded first.

In terms of promoting housing affordability through decentralisation, national VDSL is the low hanging fruit. Compared to even modest transport projects, it is shockingly cheap.

To compare the cost with broadband is a bit like the space program versus starving people thing. It’s irrelevant because larger sums of money get spent on dumber things.

I don’t get it. Are you saying that transport is a dumber thing?

In this case I think it’s VERY relevant, because what we’re discussing is connecting people to their workplaces. Physically transporting people to a desk to work at is no longer necessary for a vast number of information-based jobs. But, by and large, we still do it. That will change, and it will change even faster with video-capable broadband. And as soon as corporations bend their heads around the thought that by letting people work from wherever they already are they could entirely eliminate the need to pay the rent, power bills, cleaning and maintenance on open plan call centres, they’ll stop building them. And about a decade or two after that, the public service will stop building them, too And then who’ll be catching trains from the urban fringes to the city?

Railways (and cities) were a necessary byproduct of the industrial revolution – factory workers can’t work from home.

Telecommunications networks are a necessary byproduct of the information revolution, without them my wife, for example, could not source regular work in both Dublin and Sydney as she does now. No amount of transport infrastructure can compete with that. Ever.

That’s why the comparison starts to become irrelevant. Transport and IT can each provide only a subset of the solutions for connecting people and work, but IT’s subset is growing explosively, and transport’s is shrinking.

As our economy moves from manufacturing-based to sevice-based and information-based, so the infrastructure spending needs to go with it, or else we’ll just get stuck doing things the old ways while the rest of the world moves on.

JP

PS: even in Europe, the road network is far more influential than rail in keeping cities small. Rail is more of a competitor to air over the shorter distances involved.