Welcome to Performance Urban Planning
<< Back to home
As a long term commercial development practitioner and former industry leader in New Zealand, I was approached by colleagues back in late 2004, expressing concern that the public was not being provided with sound structural information about the state of the urban housing markets within Australia and New Zealand.
We were all aware that most of the housing market information generated and relayed by the media, was too often self-serving.
Its only purpose was to sell more overpriced housing with grossly excessive mortgages and hopefully lift the advertising spend at the same time.
The wider public interest was never considered.
Some way had to be found to generate sound structural information about urban housing markets.
THE ANNUAL DEMOGRAPHIA HOUSING SURVEY IS CREATED
This is why I initiated the Annual Demographia International Housing Affordability Survey's with the support of my colleague and survey co - author Wendell Cox of Demographia. This public policy consultancy is an international demographer and urban transport specialist, based in St Louis, Illinois, U S A.
The first Annual Demographia International Housing Affordability Survey was released in early 2005 – the 9th annual edition will be released late January 2013.
These Annual Survey’s cover the major urban housing markets of what is loosely referred to as “the Anglo world”, being the United States, Canada, United Kingdom, Republic of Ireland, Australia and my home country, New Zealand, and Hong Kong too.
The surveys are based on what is termed the Median Multiple, which is simply the median house price divided by the gross annual median household income of particular markets.
The “median” is the mid-point of a range of numbers, and is preferred, as “averages” tend to move more dramatically over time, depending on the intensity of activity within market price segments. It is a measure employed by the United Nations and World Bank Urban Indicators Program’s.
It is a simple, robust and widely accepted measure.
HOUSING SHOULD NOT EXCEED 3.0 TIMES INCOME
It is clear from the Annual Demographia International Housing Affordability Surveys and the vast amount of other credible international research , that housing prices should not exceed 3.0 gross annual household incomes.
Further to this, households should not have to burden themselves, with in excess of the equivalent of 2 ½ times their gross annual household income with mortgage debt.
I explained this - and that total housing stock value should not exceed 1.5 times GDP (or GSP OR GMP) early 2011, within a Sydney Morning Herald article - Report: housing affordability out of sync with incomes
This is something people within Australia and New Zealand (and other countries too for that matter) were not aware of, until the Annual Demographia International Housing Affordability Surveys were generated.
DEFINING AN AFFORDABLE HOUSING MARKET
To be clear – as I explained within a November 2009 article The curse of politically engineered research, an affordable urban housing market is defined as follows –
“For metropolitan areas to rate as “affordable” and ensure that housing bubbles are not triggered, housing prices should not exceed three times gross annual household incomes.
To allow this to occur, new starter housing of an acceptable quality to the purchasers, with associated commercial and industrial development, must be allowed to be provided on the urban fringes at 2.5 times the gross annual median household of that urban market.
The fringe is the only sufficiently responsive supply or inflation vent for an urban market.
The critically important Development Ratios for this new fringe starter housing should be 17 – 23% serviced lot / section cost – the balance the actual housing construction.
Ideally through a normal building cycle, the Median Multiple should move from a Floor Multiple of 2.3 through a Swing Multiple of 2.5 to a Ceiling Multiple of 2.7 – to ensure maximum stability and optimal medium and long term performance of the residential construction sector.”
NEW ZEALAND PLANNERS SUPPORT DEMOGRAPHIA SURVEY
Following the release of the 2007 3rd Edition Annual Survey, the New Zealand Planning Institute publicly stated –
“The New Zealand Planning Institute strongly supports Demographia’s call for planners, local councils and developers to collaborate more proactively and effectively in the provision of an adequate supply of affordable new residential housing” adding “Importantly, this and other such partnerships around New Zealand will help ensure that affordable housing takes its rightful place at the heart of community planning decision making, alongside other key elements such as environmental sustainability.”
SUPPLYING AFFORDABLE HOUSING SIMPLE AND FORMULAIC
Supplying affordable new housing is indeed a very simple and formulaic business – and has been since Bill and Alfred Levitt created the modern residential production construction industry we know today following World War 11.
A truly remarkable achievement of entrepreneurial genius. The Henry Fords of the housing industry.
The Performance Urban Planning website is dedicated to the memory of these geniuses.
They supplied new affordable starter housing to young American families for about $US100 per square metre ALL UP. Today on the fringes of the affordable United States markets it is being supplied at in the order of $US600 to $US700 per square metre ALL UP. In bubble housing markets such as New Zealand, it has “skyrocketed” out to $NZ2,500 per square metre ALL UP...and often well beyond that.
It is simply a matter of “following the numbers” (employing the Definition above) to ascertain the problems and what the solutions should be.
HOUSING RESEARCH INSTITUTES MUST PROVIDE HONEST RESEARCH
Remarkably – since the time of the release of the first Annual Demographia International Housing Affordability Survey in early 2005, there has not been credible structural analysis carried out by any Government Housing Research Institute.
The reason for this is because they are not interested in clarifying and solving the issues, because it would “upset” their political paymasters and vested commercial interests. Talking around the problem is “the name of the game”.
HOUSING PROBLEM IS A LOCAL GOVERNMENT COSTS OUT OF CONTROL PROBLEM
Within informed circles however, it is well known that the housing affordability problem – which in historical terms is of very recent origin – is at its core a Local Government costs out of control problem. I outlined how this game is played back November 2011 within How Housing Bubbles Are Triggered.
With respect to Christchurch, New Zealand (the writers home town and where the earthquakes occurred) I have set out the solutions within Christchurch: The Way Forward .
NEW ZEALAND GOVERNMENT GETTING SOLUTIONS IN PLACE
Following over 8 years of public conversation of these issues, thankfully the New Zealand Government, under the leadership of Deputy Prime Minister and Finance Minister Hon Bill English, recognises the problem and is starting on the path of getting workable and pragmatic solutions in place.
The October 2012 announcements by Mr English are covered extensively on this website – and need to be read closely.
FOCUS IN LAND SUPPLY AND INFRASTRUCTURE FINANCING
The key messages here are:
- Local Governments must not be allowed to manipulate and “straightjacket” land supply and
- finance infrastructure inappropriately. If allowed to do so, they will only “mask” their failures and “trigger” housing bubbles.
It is clear Texas; USA has the most sophisticated land use law and infrastructure financing arrangements in the developed world. Properly – the “Texas model” should be adopted and adapted to housing markets experiencing housing supply problems.
As the Annual Demographia International Housing Affordability Surveys (coupled with the Definition above) clearly illustrate, housing markets that exceed 3.0 times incomes (Median Multiples) have political impediments to new supply that need to be dealt with.
RESPECT PEOPLES RIGHT TO AFFORDABLE HOUSING
Indeed – the United Nations within its 2007 World Population Report was very forthright when it stated –
“Once policymakers and civil society understand and accept the demographic and social composition of urban growth, some basic approaches and initiatives suggest themselves.
These could have a huge impact on the fate of poor people and the viability of the cities themselves.
Throughout the report, the message is clear. Urban and national governments, together with civil society and supported by international organizations, can take steps that make a huge difference for the social, economic and environmental living conditions of a majority of the world’s population.”
“ Three policy initiatives stand out in this connection.
First, preparing for an urban future requires at a minimum, respecting the rights of the poor to the city. As Chapter 3 shows, many policymakers continue to try to prevent urban growth by discouraging rural – urban migration…….
These attempts to prevent migration are futile, counterproductive and wrong – a violation of people’s rights.
Denying people affordable shelter or inflicting on them excessive rents and mortgages, is a very serious issue, and indeed, unnecessary.
ECONOMISTS MUST LEARN STRUCTURAL URBAN ECONOMICS
Over these past few years, I have at times been highly critical of the economics profession, as illustrated within the article Housing Bubbles & Market Sense from January 2009 – where in my view the profession is “seriously impaired” due to the influence of the late Professor Paul Samuelson in particular, with his emphasis on superficial modelling.
The sad reality is that if the current and previous generation of economists had been properly trained in structural urban economics, the consequences of strangling fringe land supply and artificially inflating raw urban land prices, coupled with inappropriate infrastructure financing, should have been “blindingly obvious” to them.
...AND TOO, THE URBAN PLANNERS...
The urban planning profession has also experienced inadequate training, as I explained within an article The Housing Bubble: The Planner's Role and Lessons Learned on the United States Planetizen website August 2008. Too often unfortunately, due to inadequate professional disciplines, it has lurched from one fad to the next, as the costs of the previous one, in social, environmental and economic terms, become so obvious.
The “costs” are always, of course, borne by the poor and the disadvantaged.
This website is an “archive” of my writings over these past years, with articles of note and down the left column, links I trust you find of interest.
Hugh Pavletich FDIA
Performance Urban Planning
November 27 2012
DEFINITION OF AN AFFORDABLE HOUSING MARKET
For metropolitan areas to rate as 'affordable' and ensure that housing bubbles are not triggered, housing prices should not exceed three times gross annual household earnings. To allow this to occur, new starter housing of an acceptable quality to the purchasers, with associated commercial and industrial development, must be allowed to be provided on the urban fringes at 2.5 times the gross annual median household income of that urban market (refer Demographia Survey Schedules for guidance).
The critically important Development Ratios for this new fringe starter housing, should be 17 - 23% serviced lot / section cost - the balance the actual housing construction.
Ideally through a normal building cycle, the Median Multiple should move from a Floor Multiple of 2.3, through a Swing Multiple of 2.5 to a Ceiling Multiple of 2.7 - to ensure maximum stability and optimal medium and long term performance of the residential construction sector.
ARTICLES & SUBMISSIONS BY HUGH PAVLETICH & ARTICLES OF NOTE
101026 - The Unconventional Economist - Don't forget New Zealand
101015 - Real Estate Buzz Australia - N Z RMA Reform: Nick Smith's confusion
101014 - Interest Co NZ - NZ RMA Reform discussion papers bureaucratic mush
101013 - Scoop News NZ - N Z RMA Reform: Nick Smith's Confusion
101012 - NZ Government - Planning reform needed for NZ cities to be competitive
101007 - Sydney Morning Herald - House building hits 18 month low
101006 - Demographia - American Dream under threat due to excessive regulation
100929 - Sydney Morning Herald - Fitch Ratings | Housing stress test spooks market
100926 - Seeking Alpha - The Great Australian Housing Bubble
100920 - Scoop News NZ - Christchurch: A Bureaucratically Buggered City
100915 - NZ Herald -Earthquake highlights need to open city limits - Hugh Pavletich
100903 - Sydney Morning Herald - Poor planning to blame for building slump, says report
100820 - Scoop News NZ - Australian Liberal Coalition Housing Policy Applauded
100819 - Australian Federal Liberal Coalition Housing Policy
100818 - Austin Statesman - Getting $US115,000 new houses on Austin's fringe
100717 - New Geography - How Texas avoided the Great Recession - Wendell Cox
100816 - New Geography - Year 1959 - Have we learnt much since? - Rick Harrison
100815 - Sydney Morning Herald - Housing bubble trouble for the middle class
100720 - Scoop News NZ - China: The Mother Of All Housing Bubbles
100714 - Mish (Mile Shedlock - Ponzi Shark Loans fuel China's housing bubble
100712 - CNBC - Texas top State for business
100711 - Australian Housing Blog - Housing Bubbles: Are the British waking up too?
100707 - Scoop News NZ - Americans Slow Learners About Housing Bubbles
100629 - Mish (Mike Shedlock) - UK Local Government employees antics
100628 - UK Daily Mail - UK Local Government employees rorting the system
100615 - Scoop News NZ - Housing Affordability: Financing Infrastructure Properly
100614 - Real Estate Buzz Australia - Housing Affordability: Financing infrastructure properly
100603 - Scoop News NZ - China's Housing Bubbles: Quality Research Required
100601 - News Com Australia - Sydney house prices worse than London and New York
100525 - Scoop News NZ - Australian Housing Bubble: California Repeated?
100522 - The West Australian - New Minister wants to flood WA with land
100505 - Scoop News NZ - New Zealand Local Government Initiatives Welcome
100503 - Gov Monitor - Melbourne's expanded growth boundary
100428 - Scoop News NZ - Australia's Housing Shambles
100416 - Real Estate Buzz - Housing affordability – Hugh Pavletich response to journalists
100426 - The Press NZ Editorial - Regional Council (ECan) Council dismissed Commissioners appointed
100425 - Wall Street Journal - An economy of liars - Gerald O'Driscoll Jr
100424 - The Fifth Estate - The expected reaction of the urban stranglers to Productivity Commission Study
100423 - Australian Productivity Commission – Urban Planning Study Underway
100422 - The Age Melbourne - The impossible dream
100421 - The Age Melbourne - In 1955, $7000 bought a house
100420 - New York Times - Paul Krugman: Georgia on my mind
100418 - New Geography - Unaffordable housing in Hong Kong - Wendell Cox
100417 - Sydney Morning Herald - The China Bubble: Edward Chancellors perspective
100407 - The Economist - Bubbles: A Texas Mystery
100402 - NZ Institute of Architects - Government killing the Kiwi dream?
100330 - Scoop NZ - Leaky Homes And An Architect’s Musing’s
100329 - Interest Co NZ - Houston, we have a (housing affordability) problem
100321 - Scoop NZ - Urban Planning: It’s A Cultural Problem
100320 - OnLine Opinion - Urban planning: it’s a cultural problem
100318 - The Age Melbourne - Huge Land Bank Puts Squeeze On Property Buyers
100317 - UK Guardian - How going green may make you mean
100316 - The Age Melbourne - Dazzled by housing's magic rise - Tim Colebatch
100315 - UK Mail OnLine -Flat smaller than a snooker table is worth £200,000
100314 - NZ Herald - It's hard labour to own a house
100308 - Scoop NZ News - Urban Planning: An Academic Who “Gets It”
100303 - Interest Co NZ - Housing affordability: Is there a solution in the wings? - Rodney Dickens
100302 - Scoop NZ - Housing Bubbles: Jumbo Mortgages = Jumbo Problems
100301 - Strategic Risk Analysis - Housing affordability: Is a solution in the wings? - Rodney Dickens
100230 - Financial Times - How long has the lucky country got? - Edward Chancellor
100229 - Herald Sun Australia -They're homing in on our houses - Andrew Bolt
100227 - Greater Fool Canada – The Troubled Future of Real Estate - Garth Turner
100222 - Scoop NZ - Housing Bubbles and Dumb Denial
100221 - Aussie Home Loans - Australian homes worlds least affordable
100215 - Planetizen - Resisting Dickensian Gloom - Tony Recsei, SOS Sydney
100212 - New Geography - Unlivable Vancouver - Wendell Cox
100202 – Mish (Mike Shedlock) - Reports on the Australian housing bubbles
100201 - Mish (Mile Shedlock) - Reports on this years Demographia Survey
100129 - SBS Australia (Croatian) - The Great Australian Nightmare
100127 - ABC Perth - Hugh Pavletich discusses housing affordability
100203 - Interest Co NZ - N Z Government Housing Affordability focus welcome
100128 - NZ Government - Dr Nick Smith - New work underway on Phase II of RMA reforms
100126 - New Geography - Housing Unaffordability as Public Policy - Wendell Cox
100125 - Save Our Suburbs, Sydney, Aust (SOS) - Demographia Survey Media Release
100124 - 2010 6th Edition Demographia International Housing Affordability Survey Media Release
091218 - Interest Co NZ - Housing Bubbles & Parkinsons Law
091204 - Interest Co NZ - The curse of politically engineered research
091203 - Scoop NZ - The curse of politically engineered research
091125 - New Geography - Housing Bubbles: Why are Americans ignoring reality
091124 - On Line Opinion - Housing Bubbles: Why are Americans ignoring reality
091113 - Scoop - Why are Americans ignoring reality
091112 - Interest Co NZ - Housing Bubbles: Why are Americans ignoring reality
090708 Bill English - Government considers local body ‘bond bank’
090706 Interest Co NZ - Local Government failure led to housing bubble behaviour
090706B - Scoop: Housing Bubbles - Economists ‘Cart Before The Horse’ Problem
090526 - Interest Co NZ - Housing Bubbles are a local issue
090526B - Scoop: Housing Bubbles Are A Local Issue
090524 - Atlantic Online - United States Bubble Cities with map
090524B - NZ Sunday Times - Cheaper borrowing for local authorities
090514 Govt looks at 'city limits' as house prices stay high - Environment - NZ Herald News
090508 - Hon Dr Nick Smith Speech to the NZ Planning Conference
090503 Interest co nz: NZ vs Australian housing policy; the need to focus on structural issues
090503B Scoop: Housing : Focus on Structural Issues
090417 Interest co nz: What if NZ and others were issuing building consents at the US rate?
090417B Scoop: United States House Building Below Replacement
090407 Interest co nz: Housing Bubbles & Deceit
090407B Scoop: Housing Bubbles & Deceit
090320 Interest co nz: New Zealand's pragmatic political approach welcome
090320B Scoop: New Zealand's pragmatic political approach welcome
090306 - Wall Street Journal "You cant spend your way out of a crisis" -
Hon John Key, New Zealand Prime Minister
090225 Scoop: Housing Bubbles: Learning From Houston
090225B Interest co nz- Housing Bubbles: Learning from Houston
090209 Scoop: The Dangers Of Superficial Knowledge
090206 NZ Herald: There are no perfect measures - so lets stop quibbling
090204 Beehive - Affordable Housing Enabling Territorial Authority Act to be reviewed
090202 Scoop: NZ Herald ‘Home Truths’ Article Confused
090202B Interest Co NZ : NZ Herald Home Truths article confused
090130 Scoop: NZ Government Housing Commitment Applauded
090126 2009 5th Edition Demographia Survey International Release
090126B 2009 5th Edition Demographia International Housing Affordability Survey
090126C New Zealand Housing Minister Heatley response to Demographia Survey
090109B Interest Co NZ - Housing Bubbles and Market Sense
090109 Scoop: Housing Bubbles and Market Sense
081218 Scoop: Open Letter: NZ Local Government & Housing
081215 Scoop: Discussing Global Deleveraging
081215B Interest Co NZ: Discussing Global Deleveraging
081205 Scoop: New Zealand: Local Government Focus Required
081120 Scoop: Housing Bubbles: Learning To Grow Up
081117 Scoop: United Kingdom Housebuilders Face Market Implosion
081112 Scoop: ‘Performance Urban Planning’ Website Launched
081024 Scoop: Deflating Housing Bubbles - The Reality
081016 Scoop: Housing Bubble Induced Severe Recession
081007 Scoop: “Kiwis Pay Price For ‘Cullen Housing Bubble’”
081006 Scoop: The California Housing Fiasco
080930 Scoop: “Housing: Taking A Bubble Bath To Reality”
080922 Scoop: Housing: Affordable Fringe Land Required Urgently
080922B The property bubble - ABC Radio Counterpoint (Michael Duffy)
080918 Scoop: The Last Global Housing Bubbles
080912 Scoop: Waitakere City Council NZ Housing Plan Too Vague
080909 SBS Television Australia "Bursting the Bubble"
080905 Scoop: United Kingdom House Building Collapses
080901 Scoop: Bank Economists At Sea On Housing
080829 Property Institute of New Zealand Seminar
080826 Scoop: Does The Economics Profession Understand At All?
080826B Scoop: US Association Of Realtors July 2008 Report
080825 Scoop: Housing: The Disaster Zone Of California
080821 The Housing Bubble - Frontier Centre for Public Policy, Canada
080811 The Housing Bubble: The Planner's Role and Lessons Learned | Planetizen
080810 Scoop: Understanding Housing Bubbles
080808 Affordable housing no accident in Houston - Houston Business Journal:
080807 Nelson Property Investors Meeting
080804 Scoop: Housing Information: The Geeks Lead The Way!
080729 Scoop: Govt Inaction Collapsing House Building Industry
080721 Scoop: Housing: Dealing With Real Structural Issues
080518 Houston Preserving the American Dream Conference
080428 Scoop: Urban Planning Degrades Housing Productivity
080413 Scoop: Housing Affordability Requires Action Now
080406 Scoop: Foreclosure reality in the United States
080327 NZ Housing Policy Forum - Conferenz
080325 Scoop: Housing Affordability: Good Progress in NZ
080307 Scoop: Housing Affordability: Australia Wins – NZ loses?
080304 Scoop: Australian PM Rudd Housing Initiatine Pathetic
080224 Scoop: Latest NZ Poll Results A Wake Up Call
080211 Scoop: REINZ Applauded for Housing Supply Information
080211B Scoop: Poor Analysis, Reporting of Urban Property Bubbles
080205 Scoop: Housing Affordability: Lessons From California?
080202 Restoring the Housing Opportunity - Op Ed NZCPR
080129 Scoop: Housing market comparisons - Message to NZ PM
080122 Scoop: Focus must be on fringe land supply
080116 Scoop: UK Financial Times Call for Finance Regulations
071220 Scoop: Housing Affordability – The Shift To Reality
071210 Scoop: Housing Afforability: Open Letter to Minister
071210B Scoop: Housing: Stop Playing Games – Focus On Real Issues
071205 Scoop: NZ Govt's Housing Affordability Package Pathetic
071121 The Need for Clarity - Message to the Housing Industry Associaion of Australia
071120 Scoop: Hugh Pavletich Response to Blair Dickie RMLA of NZ
071115 Scoop: Hugh Pavletich Comment - Housings High Water Mark
071111 Scoop: New Zealand Lifestyle Block Mythology
071108 Scoop: Housing - Learning About The Importance Of Supply
071107 Scoop: Planners Will Never Admit They Are Wrong
071004 Scoop: Letter To John Key - Housing Affordability
070718 Dallas Fort Worth / Sydney Fringe Starter Home Cost Comparison
070615 Submission to New Zealand Housing Affordability Inquiry
070614 OUR YOUNG NEW ZEALANDERS DESERVE AFFORDABLE HOUSING
070423 Scoop: Auckland Housing Report Must Be Acted On
070222 Scoop: National Party showing leadership over housing
070215 Scoop: "Demographia Urges Quality Housing Research"
070212 Scoop: New Zealand Planning Institutes – Demographia
070212B Scoop: International Housing Availability Survey (New Zealand Planning Institute)
070129 Scoop: Refugees from Urban Areas thank to Smart Growth
070129 Counterpoint ABC Radio Interview (Michael Duffy) Australia - Housing affordability
061127 Scoop: Export Western Planners to China?
061106 Scoop: Draft Greater ChCh Urban Strategy Destructive
061031 Scoop: Housing Minister Applauded for Focus on Supply
061017 Scoop: Closed cities of despair or open cities
061006 Scoop: Housing Suggested Solutions Won’t Work
061002 Scoop: Open Letter To Alan Bollard Re Household Savings
060904 NZ and UK Labour Show Aust ALP the Way - The New City, Sydney
060902 The Housing Affordability Issue in New Zealand - NZCPR Guest
060822 Scoop: Supply In Addressing Housing Affordability Issue
060822B Scoop: PM Howard Urges States To Release Land For Homes
060811 Scoop: Minister Congratulated - Land Supply Investigation
060510 Scoop: Global Urban Experts Available to Speak
060504 Scoop: Real Estate Institute Needs To Talk Public Policy
060403 Scoop: NZ Treasury Housing Affordability Paper
060320 Scoop: Pavletich Response To Muriel Newman Online
060213 Scoop: Waitakere City Applauded For Land Initiatitive
060125 Scoop: NZ Local Government Needs To Face Reality
060126 Scoop: NZ Economists Need To Better Understand Housing
060123 Scoop: Demographia Int. Housing Affordability Survey
051128 Scoop: Putting The “Local” Back In To Local Government