How Canberra's most popular book might influence my hunt for a first home

Sydney Morning Herald

3 days ago

Abundance brings a fresh left-wing twist to a topic often seen as a buzzword of the right-wing anti-government crusade.
A lot of our regulation has important aims: protecting the environment, making sure workplaces – including construction sites – are safe, and stopping that big company from setting up a huge, noisy factory right next to your house.
When businesses need to comply with hundreds of rules at federal, state and local levels on where and how houses are made, it becomes a hugely time-consuming process that not only slows down construction but discourages would-be developers or builders from giving it a go.
Why, when we've become better and faster at doing so many things, have we seemed to become slower at building one of the most basic necessities of life?
It's like trying to send a truck to a flood-affected region, stocking it up with so much stuff – medicine, sandbags, food, tools, life vests – that it takes weeks or months to get there. You might get all the important aid there, but it will take so long it may have been better to leave some things behind.
The Productivity Commission warned this year that Australia is building half as many homes for every hour worked compared with three decades ago. Among the biggest handbrakes? Planning regulations have increased markedly and can even run into thousands of pages.
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This 'unambiguously' jacks up the cost of development and construction, and ultimately the cost of housing for Australians, the commission's experts said.
Even when all existing laws are met, minor objections from residents can cause delays to housing projects. And some regulations, as my colleague Shane Wright pointed out last week, just seem arbitrary: a bedroom by Victorian standards, for example, is not liveable if it's not at least 3 metres by 3.4 metres in size.
This build-up of regulation and processes comes with several costs. Economists are especially obsessed with one otherwise invisible problem called 'opportunity cost': essentially what we give up or miss out on by taking a certain path.
If you buy a boat, you can't use that cash to get a new car or renovate your house. Life, and economics, is about trade-offs.
By having lots of regulation we might ensure only 'perfect' buildings get built. The opportunity cost means we end up with fewer buildings that are built slower.
It's harder to recognise because it's not a cost most people can see. Even when you're shopping for a home and struggling to nab one because there's not enough of them, you probably don't realise that regulation has choked supply.
The growing pile of regulations is also a great example of what economists call 'diminishing marginal returns'. That's the principle that the more you have of something, the less benefit you tend to get out of adding more of that thing. One block of chocolate, for example? Delicious. By the time you've eaten two, it's probably getting a bit much. And by block five? You might be taking a queasy trip to the bathroom.
Regulation, similarly, can be great. But having too much can lead to more harm than good, including blocking the new housing we so desperately need.
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Of course, concerns such as environmental protection are important. But there are plenty of other cumbersome requirements and processes we can start to chop down. And as our American authors point out, there's an abundance of other ways, including investment in the energy transition, we should be looking at to preserve our environment (that's a column for another time).
Treasurer Jim Chalmers last month said Abundance had been a wake-up call for the left and that a roundtable on productivity he is organising in August would tap into the ideas outlined in the book. Just how much the government will get out of its own way as it pushes to build 1.2 million homes by 2029 is unclear.
If I manage to buy my own shoebox flat, I'll join the army of Australian home owners whose wealth is almost entirely locked away in housing, and whose self-interest will therefore be a continued surge in home prices. That cannot coexist with the vision to make housing more affordable. I probably won't be a direct winner of the government's long-term Abundance agenda. But I hope by the time I'm at dire risk of forgetting the struggle of buying my first home, the government has done what it takes to make it easier for the generations to come.