NIMBYs are costing Australia billions and it’s simply not sustainable

So-called ‘nimbyism’ is stunting the growth of Australian cities and remains at the glowing centre of the housing affordability debate. 

Now an astronomical price tag has been associated with the zoning laws guarding against suburban development by the Reserve Bank of Australia, in a report set to fuel a gear shift in conversation about the future of Australian cities.

Home buyers in Sydney must hand over $489,000 above the marginal cost of their property – what the house costs to build and how the market would otherwise value the land – not because of a physical land shortage, but an “administrative” scarcity of land channelled through restrictive zoning laws.   

Along with Sydney’s almost half-a-million-dollar excess, zoning restrictions have raised detached house prices by $324,000 in Melbourne, $159,000 in Brisbane and $206,000 in Perth, according to research by RBA economists Ross Kendall and Peter Tulip.

The “zoning effect”, as it is named in the RBA report, isn’t restricted to houses, with about $400,000 added to the price of an average apartment in Sydney, and over $100,000 in Melbourne and Brisbane.

With a reluctance from NIMBYs in middle-ring suburbs to see increased development, while housing affordability supposedly becomes the fastest-rising national concern for Australians, something is about to give.

Either the housing affordability “care-factor” will retreat – the two-thirds of the voting population that already own homes would decide the next generation is on their own – or those owners will welcome some changes to rules dictating minimum lot sizes and maximum build heights on their own neighbourhood. 

In cost-benefit terms, it seems those aiming to relax zoning restrictions should – and will – win the battle, according to recent analysis from the Grattan Institute.

“Of course land use planning rules benefit other land users by preserving the views of existing residents or preventing increased congestion,” Grattan Institute CEO John Daley, fellow Brendan Coates and associate Trent Wiltshire wrote this week.

“But studies assessing the local costs and benefits of restricting building generally conclude that the negative externalities are not nearly large enough to justify the cost of regulation.”

Increasing urban density is a fine idea until it means a 25-storey monstrosity goes up next door, but research shows the majority of higher-density apartment blocks being built in the middle ring of Australia’s cities are a more-acceptable four-to-nine storeys.

Melbourne and Sydney currently house 4.7 and 5 people per hectare, compared with 2.7 in Rome and 3.7 in Berlin, and while population density within 5km of Sydney and Melbourne has shot up in the last 40 years, the middle-ring has noticeably lagged.

Suburbia will soon become more crowded, and with a clear and eye-watering price now associated with resistance, zoning laws are likely to be relaxed to allow it.

An ugly and scattered approach to housing Australia’s growing population will come next if it turns out Australian homeowners are just paying lip-service with their concerns for the affordability issues faced by the next generation.

Then again, with new and compelling information in hand, those homeowners might be willing to put their garden or view on the negotiation table. We’ll soon see.