Poor processes inflate housing cost: RBA

13 Sep 2012, 7:24 pm   -   Source: AAP

Reserve Bank of Australia researchers say government planning and approval processes are delaying and pushing up the cost of housing developments.

Inefficient government processes are restricting the supply of housing and raising its cost, Reserve Bank of Australia (RBA) researchers say.

A research paper published in the RBA's quarterly bulletin, said it took an average of six years for developers to convert farmland to new dwellings, largely because of inefficiencies and delays in planning and approvals processes.

As a result, developers had not been able to build the number of new homes needed to keep up with rising demand, the Supply-Side Issues in the Housing Sector paper said.

"The uncertainty and time typically taken to settle planning issues can increase the cost and risk of housing development," it said.

"(And) increases in costs due to a protracted planning process can make new housing developments unviable."

The paper said participants in the housing industry cited a lack of coordination between various agencies involved in the planning process - local councils, planning and environment departments and infrastructure providers - as contributing to the delays.

Other factors included insufficient council resources, local opposition to urban expansion and high density developments and uncertainty about planning standards.

The cost of installing infrastructure to new housing developments had also impacted on the economic viability of some projects.

In 2010, the average price of providing infrastructure including sewage, water and electricity to a new three bedroom home in Sydney, was an average of $44,000 per lot, the paper said.

But the researchers noted the New South Wales government had since capped the cost of infrastructure levied on the developer to $20,000.

Meanwhile, other state governments and councils had attempted to simplify planning processes, while others had established a centralised authority to deal with major new development proposals.

The research paper lends support to industry claims the housing sector has been under-building for several years, creating a housing affordability crisis.

Master Builders Australia chief economist Peter Jones on Wednesday called on governments to abolish policies which he said restricted the supply of new housing.

"Policies that prevent the residential building industry meeting the serious undersupply of housing must be addressed," he said.

"Poor land release strategies and inefficient developer charges should be the first place to start."

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