Article – Housing affordability key to northern growth

by 18 September 2014

17 April 2014
John Shipp
The West Australian

Northern Australia is suffering a housing affordability crisis. But it doesn’t need to be this way. Recent media reports confirm this crisis. It was reported in this newspaper that Karratha and Port Hedland had a housing shortage of 1531 and 1402 dwellings respectively.

One father of three said that rent for his three-bedroom home recently rose to $1600 a week. “I’m a local person, lived here all my life, the kids were born here but I can’t afford to be in Port Hedland any more,” he said. “There will come a time when there will be no one left.”

There are critical housing shortages in Darwin, many towns in the Pilbara, in Aboriginal communities and in many other towns and cities across northern Australia.

One local council in the Pilbara has seen rental prices balloon from $350 to $2000 a week over a three-year period.

The key driver of these price rises is an increase in demand for housing. Most of this increase in demand comes from fly-in, fly-out workers.

In a submission to the parliamentary inquiry into FIFO workers, the Pilbara Regional Council concluded that “the proliferation of FIFO in a community can have an extremely detrimental impact on local housing markets, particularly when resource-based, associated service businesses operate on the FIFO model”.

The underlying cause of this housing crisis is restrictive land release policies and slow planning approvals.

While governments can’t end FIFO, they can increase land supply so that house prices don’t drive out existing residents.

The scarcity of housing resulting from restrictive land supply, both in the owner and rental markets, is artificial.

It distorts market activity away from housing development and towards FIFO.

So ultimately the cost of this market distortion is borne in higher labour costs, fewer jobs and lower take-home pay. This leads to a lack of economic diversity. For instance, according to the Pilbara Regional Council, FIFO has a detrimental effect on local tourism:

“Accommodation price pressures resulting from traditional tourist accommodation being used by FIFO workers have drastically reduced the financial viability of the tourism industry in the Pilbara.”

Solving the housing crisis does not call for special housing subsidies, price controls or public housing.

In order to reduce the cost burden of FIFO on businesses and communities, government agencies must free up more land for housing across northern Australia and let the private sector do the rest.

In this case, government agencies like WA’s LandCorp should release far more land for residential development.

Another way governments might allow the private sector to rapidly increase housing supply would be the creation of special economic zones with less restrictive planning laws. As part of the zones, governments should consider how crown land can be better used to encourage residential development.

Housing unaffordability is also partly responsible for the lack of population growth in northern Australia. Access to affordable housing is one of the vital elements in any attempt to build a town and encourage people to put down roots in a community.

Ultimately, the vision should be of a thriving north, with regional cities across the Pilbara, Kimberley, Northern Territory and Far North Queensland to rival regional cities on the south-eastern seaboard in terms of population and economic activity.

Fixing the housing affordability crisis in mining towns is just one part of a broader set of policy challenges that need to be overcome to develop Australia’s north and capitalise on its strategic advantage in the Asia-Pacific century.

But without affordable housing you will not attract human capital and without human capital, the north will never realise its full potential.

Unless pioneering southern Australians turning towards the north for economic opportunities have somewhere to live, they will continue to congest our major cities and fly thousands of kilometres for work. Encouraging permanent settlement of northern Australia is in the interests of both the south and north.

If towns and communities are to grow in northern Australia, tackling housing affordability must be given high priority.

Courtesy of The West Australian

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