Hugh Pavletich writes...
Housing Bubbles and Parkinson's Law
14.12.2009
Writing from Christchurch, New Zealand, Hugh Pavletich maintains www.performanceurbanplanning.org as a collection of his writing devoted to achieving housing affordability through planning.
Hugh collaborates with Wendell Cox at Demographia to collate and publish the Annual Demographia International Housing Affordability Survey, and these are posted on www.demographia.com
The housing affordability issue is a “political failure” in the widest sense of the term.
The Demographia surveys of the major urban markets of the United Kingdom, Ireland, United States of America, Canada, Australia and New Zealand employ the “median multiple” to assess housing affordability.
The “median multiple” is median house price divided by gross annual median household income, as recommended by the United Nations and World Bank. To rate as “affordable”, the cost of housing should not exceed three times gross annual household income.
The surveys are free to download from their website.
As the destructiveness of the current deflating global urban housing bubbles become more apparent to the wider public and policymakers the immediate focus will be on exploring ways to reverse the current decline of the residential construction industries – then take steps to ensure that housing affordability is restored over a reasonable and realistic time frame, within urban markets currently experiencing housing stress.
The reality now is that the finance sector globally will be in no hurry whatsoever, to provide the “fuel” for further housing bubbles to get underway – with “inflation based lending” a thing of the past as it is replaced with “income based lending” of around three times annual household earnings. So these issues must be addressed – now.
For residential construction industries to reverse the unnecessary current downward spiral – governments at all levels must explore with urgency, ways to allow the construction industries to supply new housing at around three times annual household earnings, so that the finance sector has the opportunity to participate with confidence as well.
The costs of unresponsive planning – in social, environmental and economic terms – with the destructive bubbles they have created can no longer be tolerated. The focus must now be on “performance” in planning systems.
The Performance Urban Planning website aim is to contribute ideas to assist in exploring realistic solutions to these issues.
The major goal should be to restore housing to three times household income and “allow” new starter housing to be built on the fringes at 2.5 times that city’s gross annual median household income – recognising that the fringe is the only major supply or inflation vent. Our cities are the growth engines of the economy.
Contact...
e-mail: hugh.pavletich@xtra.co.nz
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