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City Limits: The Urbanisation Challenge
The document summarizes a presentation about challenges facing Australian cities. It notes that Australia's economy is increasingly dominated by services produced in major cities. While jobs are concentrating in city centers, new housing is primarily on the outskirts, leading cities to near their limits. Planning and tax policies need reforms to address changing work patterns and falling home ownership rates, especially among younger, lower income individuals.
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City Limits: The Urbanisation Challenge
- 1. City Limits: Urban economicdevelopment and its policy implications John Daley, CEO, Grattan Institute Presentation to Auckland Conversations 1 September 2015
- 2. 2 City limits Australia’s economyis increasingly dominated by services produced in cities Australian cities are nearing their limits Planning policy needs to adjust to changing patterns of work Tax policy should encourage rather than discourage home ownership
- 3. 3 City limits Australia’s economyis increasingly dominated by services produced in cities • Services are growing much faster than other sectors • Big cities now dominate the economy • More jobs are concentrated in the centre of big cities, while new housing is primarily at the edge Australian cities are nearing their limits Planning policy needs to adjust to changing patterns of work Tax policy should encourage rather than discourage home ownership
- 4. 4 0 20 40 60 80 1960 1965 19701975 1980 1985 1990 1995 2000 2005 2010 Goods Services Source: ABS5206 table 8 Notes: Excludes “rents and dwelling costs” and “other goods and services”. Based on seasonally adjusted current prices data People are consuming more services Share of total nominal household expenditure
- 5. 5 0 10 20 30 40 50 60 70 80 90 1890 1921 19341947 1960 1973 1986 1999 2012 Mining Construction Manufacturing Services Agriculture Sources: 1. 1890-1980 Australian Historical Statistics: Labour Statistics, by G.Withers, T.Endes, L.Perry 2. 1984-2012: ABS6291.0.44.003, table 4 Note: 1981-1983 are interpolated using 1980 and 1984 data Consequently, more people are working in services Per cent of workforce, Australia
- 6. 6 0 5 10 15 20 25 30 35 40 45 50 1970 1980 19902000 2010 0 5 10 15 20 25 30 35 40 45 50 1970 1980 1990 2000 2010 1970 1980 1990 2000 20101970 1980 1990 2000 2010 Manufacturing has steadily declined in Australia, “leading” international trends Per cent GDP Median 90th percentile Australia 10th percentile Median 90th percentile Australia 10th percentile Export volumeValue-added (current prices) Grattan Institute, The mining boom
- 7. 7 0 10 20 30 40 50 60 70 80 90 100 $bn Australia’s economy isdominated by its big cities Australian economic activity, 2011-12 Per cent of State total NSW Vic Qld WA SA Other Sydney Melbourne Brisbane Perth Adelaide 0 100 200 300 400 500 600 700 800 900 1000 1100 1200 SE Qld Grattan Institute, Mapping Australia’s economy
- 8. 8 Some context: Aucklandis a mid-size “Australasian city Population, millions Infrastructure Australia, Australian Infrastructure Audit, Auckland City Council, Unitary Plan 0 1 2 3 4 5 6 7 Sydney Melbourne Brisbane Perth Adelaide Auckland 2015 2031 (estimate)
- 9. 9 Economic activity ismost intense in inner cities Economic activity by location, 2011-12, Melbourne CBD: $39.1b Southbank: $6.5b Docklands: $8.2b Dandenong: $5.9b kilometres 0 10 Height of bar indicates total economic activity Bar not shown for economic activity less than $1 billion Grattan Institute, Mapping Australia’s Economy Height of bar indicates total economic activity Bar not shown for economic activity less than $1 billion
- 10. 10 Parramatta: $68 Macquarie Park: $81 NorthSydney: $91 CBD: $100 Airport: $65 kilometres 0 10 >$90 $80-90 $70-80 $60-70 $50-60 $40-50 <$40 Insufficient data Economic output per hour is highest towards the centre Economic activity per working hour, 2011-12, Sydney Grattan Institute, Mapping Australia’s Economy
- 11. 11 City limits Australia’s economyis increasingly dominated by services produced in cities Australian cities are nearing their limits • Big cities are dividing geographically – Inner cities have much better education levels, access to jobs, high incomes – The divide is increasing, particularly disadvantaging women • Many people want to make different housing choices • Home ownership is falling for all ages under 55, particularly those on low incomes Planning policy needs to adjust to changing patterns of work Tax policy should encourage rather than discourage home ownership
- 12. 12 0 10 20 30 40 50 60 70 0-10 km from CBDs 10-20km from CBDs 20+ km from CBDs Most new jobs are towards the centre, while most new homes are on the edge Jobs per resident, 5 largest Australian cities, 2011 0.0 0.2 0.4 0.6 0.8 1.0 0-10km 10-20km 20+km Employment and population growth, 5 largest Australian cities, 2006-11 Distance from CBD Net employment growth Net population growth Distance from CBD % Grattan Institute, City Limits
- 13. 13 Inner suburbs havemuch high levels of tertiary education Tertiary education levels by suburb, Brisbane 2011 Grattan Institute, Productive Cities
- 14. 14 Most Brisbane residentshave good access to jobs by car … Percentage of Brisbane jobs that can be reached in 45 minutes by car Grattan Institute, Mapping Australia’s Economy
- 15. 15 … but Sydneyshows how there can be real problems Percentage of jobs that can be reached in 45 minutes by car Grattan Institute, Mapping Australia’s Economy
- 16. 16 … and publictransport leaves many of Melbourne’s outer suburbs under-served Percentage of Melbourne jobs that can be reached in 60 minutes by public transport >50 40-50 30-40 20-30 10-20 <10 Airport CBD Dandenong kilometres 0 10 Grattan Institute, Mapping Australia’s Economy Residents living in the darkest shaded suburbs can reach more than half the jobs within a 60 minute public transport trip. In the lightest shaded areas, residents can access fewer than one in ten of those jobs >50 40-50 30-40 20-30 10-20 <10 Airport CBD Dandenong kilometres 0 10
- 17. 17 Differences in maleand female workforce participation by suburb, Sydney 2011 Grattan Institute, Productive Cities Women in poorly-connected areas face more difficult compromises
- 18. 18 Grattan Institute, ProductiveCities Poor access to job leads to poor social outcomes Percentage of disaffected youth, Perth, 2011
- 19. 19 The divide betweenpeople and jobs has big consequences In outer suburbs people earn lower incomes on average, and are more likely to be employed on casual basis. Harder for women caring for children in outer areas to participate in the workforce. Longer commutes result in: • Higher living costs of thousands of dollars a year • Pressure on family life • Lower well-being
- 20. 20 1 2 3 4 Many people wantto trade off location against price and dwelling type Inner Inner-Middle Outer-Middle Outer TOTAL Detached 9% 9% 12% 10% 41% Semi- detached 4% 7% 7% 6% 25% Up to 3 storeys 2% 4% 4% 5% 15% 4 storeys & above 5% 5% 6% 4% 20% TOTA L 20% 26% 30% 25% 100% Desired trade-offs between location and house type - Sydney Grattan Institute, The housing we’d choose
- 21. 21 1 2 3 4 4 – ‘Outer’Zone Shortages of: • c.60k semi-detached dwellings • c.60k apartments in buildings up to 3 storeys • c.60k apartments in 4 storey + buildings 2 – ‘Inner-Middle’ Zone Shortages of: • c.80k semi-detached dwellings • c.80k apartments in 4 storey + buildings 3 – ‘Outer-Middle’ Zone Shortages of: • c.80k semi-detached dwellings • c.80k apartments in 4 storey + buildings The market is supplying less medium density than people want Comparison between preferences and availability - Sydney Grattan Institute, The housing we’d choose
- 22. 22 Composition of household wealth,2010 40 50 60 70 80 90 Home ownership rate by age Per cent Home Wealth is dominated by home ownership, but home ownership rates are falling Super- annuation Other financial Bank deposit Business Shares Other property 25-34 35-44 45-54 65+ 55-64 Grattan Institute, The wealth of generations
- 23. 23 -40% -30% -20% -10% 0% 10% Income quintile Lowest 2nd 3rd 4th Highest 25-34 35-4445-54 55-64 Percentage point change in home ownership rates, 1981 to 2011 Home ownership rates have fallen fastest for young people on low incomes Grattan Institute, The wealth of generations
- 24. 24 City limits Australia’s economyis increasingly dominated by services produced in cities Australian cities are nearing their limits Planning policy needs to adjust to changing patterns of work • Planning policy results in developers failing to build people the housing they want. • Planning policy is economic policy: middle ring medium density development is probably the largest single lever for both economic growth and social equality • Residential tenancy policy needs to adjust to lower rates of home ownership Tax policy should encourage rather than discourage home ownership
- 25. 25 Renting closer tojobs is a worse option than owning in Australia International comparison of rental conditions Notice period for landlords Reasons lease can be terminated Typical lease term Pet ownership Minor alterations (hanging pictures, laying carpet, painting) Indefinite 6-12 months2-3 years Non-payment/misconduct only Any reason with noticeLandlord selling/moving in Tenant entitlement Only with landlord’s consent Subject to restrictions Permitted – considered normal use Only with landlord’s consent 3 months or more 30 days2 months Grattan Institute, Renovating housing policy
- 26. 26 City limits Australia’s economyis increasingly dominated by services produced in cities Australian cities are nearing their limits Planning policy needs to adjust to changing patterns of work Tax policy should encourage rather than discourage home ownership • CGT discounts and negative gearing are encouraging investors rather than occupiers • Property taxes are a better means to raise revenue than the alternatives, and would improve housing affordability
- 27. 27 -12 -10 -8 -6 -4 -2 0 2 1989 1991 19931995 1997 1999 2001 2003 2005 2007 2009 2011 Total net rent $ 2013-14 ($bn) Source: Grattan Institute analysis of ATO Taxation Statistics 2012-13. CGT discount introduced Collective losses became large after the CGT discount was introduced
- 28. 28 Financial year ending Source:Grattan Institute analysis of ATO Taxation Statistics 2012-13. Number of people Average net rental loss $2014 Number of people negatively gearing residential property (LHS) Average loss (RHS) More landlords are negatively gearing and average losses are growing 0 2000 4000 6000 8000 10000 12000 14000 0 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
- 29. 29 Limiting negative gearingin the 1980s did not appear to increase rents outside Sydney -6 -4 -2 0 2 4 6 8 10 1983 1984 1985 1986 1987 1988 1989 Sydney Melbourne Brisbane Adelaide Perth No negative gearing Source: ABS, Consumer price index, cat. no. 6401.0, table 12; see also Greg Jericho, Negative gearing: a legal tax rort for rich investors that reduces housing affordability, The Guardian, 19 March 2015. Real change in rents, percentage change from year earlier
- 30. 30 0% 1% 2% 3% 4% Source: OECD (2014),Revenue statistics, updating Grattan Institute, Property taxes Property taxes Taxes on property and transactions, per cent of GDP Transactio n taxes Australia has lower property tax revenues than some comparable countries
- 31. 31 • Australia’s economyis more knowledge-intensive than ever • City centres are vital for knowledge-intensive activity and economic growth • Our cities have not adjusted well to these changes in the economy • This is bad for the economy and bad for opportunity • Housing, transport, and tax policies can support or hinder access to jobs, and choice for both employers and employees Conclusions
- 32. 32 City limits Australia’s economyis increasingly dominated by services produced in cities • Services are growing much faster than other sectors • Big cities now dominate the economy • More jobs are concentrated in the centre of big cities, while new housing is primarily at the edge Australian cities are nearing their limits • Big cities are dividing geographically – Inner cities have much better education levels, access to jobs, high incomes – The divide is increasing, particularly disadvantaging women • Many people want to make different housing choices • Home ownership is falling for all ages under 55, particularly those on low incomes Planning policy needs to adjust to changing patterns of work • Planning policy results in developers failing to give people the housing they want. • Planning policy is economic policy: middle ring medium density development is probably the largest single lever for both economic growth and social equality Tax policy should encourage rather than discourage home ownership • CGT discounts and negative gearing are encouraging investors rather than occupiers • Property taxes are a better means to raise revenue than the alternatives
- 33.