As the cash rate moves closer to zero, the Reserve Bank of Australia is looking at other measures to get the economy moving again.
Exploring better planning controls is a great option that could encourage more building in our cities and get more people into affordable housing, which can only be good news for the economy.
Why lower rates aren’t working
It is becoming increasingly clear that monetary policy is no longer working as effectively as it once did. The official cash rate is currently sitting at 0.75% and interest rates have never been lower.
Yet right now, interest rate cuts are forcing up property prices in expensive suburbs, benefitting very few people except those who own expensive homes.
While we tend to celebrate strong price growth in the industry and in the media, the reality is that there are very few winners when prices surge 70%, as they did in Sydney during the last housing boom.
It is also very hard to get social housing constructed in cities that cannot even accommodate people on average incomes.
Why cities need to relax planning laws
Every Australian city that has an affordability problem, has a housing supply problem.
Fixing the supply of housing for renters at all income levels will not only make housing more affordable, it will also help the economy.Why millions of Aussies think they’ll rent forever
Reforming planning controls to get enough housing in the suburbs where people want to live is the key to making housing more affordable.
Build-to rent projects
We’ve seen a massive pull-back in investor finance and we’re not seeing as many offshore investors in the market which means that over the next few years, there will be fewer rental properties.
So we do need to consider how we’re going to provide enough rental properties for those who won’t end up buying a property.
A lot of Australians are interested in build-to-rent projects, but it’s hard to make the figures stack up without some kind of incentive.
If local or planning authorities gave these projects preferential status, it would help more build-to-rent projects begin.
There would also be a clear social benefit as build-to-rent projects often provide a higher proportion of social housing which would also assist renters on low incomes.
Height restrictions and subdivisions
Planning authorities should also look at increasing height controls to create high-rise developments in areas where there is a great demand for rental properties.
High-rise apartment building is needed in areas where renters want to live. Picture: Getty
We do need to look at densification in our inner-city areas and one way to increase that is to build more multi-level apartment buildings.
I know in some areas of cities like Melbourne, local residents have objected to multi-level buildings, but planners need to get better at correctly identifying which key suburbs actually need this kind of development. This would prevent buildings being created in areas where there is little or no demand.
Planners also need to allow for more blocks to be subdivided and townhouses or smaller homes built on smaller blocks in inner-city areas.
For many first home buyers, a townhouse in a highly desirable area is an affordable entry into the property market and it should be an option in more areas.
Encouraging multiple homes on a single block helps prevent urban sprawl.
Urban sprawl and better infrastructure
Better schools, public transport and road links in areas where people want to live is also really important.
Often when local residents push back against a development, it’s because they are worried a sudden influx will affect the liveability in their area.
Better transport links are vital when it comes to planning in areas where most people want to live. Picture: Getty Images
To prevent a seemingly never-ending urban sprawl state and federal authorities need to invest in better transit links as well as more schools and local medical facilities in these areas.
If you can make the social infrastructure of these areas better for everyone, residents wouldn’t object as much to new developments.
While I do think our cities will continue to spread out in the years ahead, we do need to look at how residents in these outer areas are going to get to work or study and how that might affect other developments at the edge of our cities.