Podcast: How Nimby councils block new homes

Sue is back from Europe – Huzzah! And that means not just a return of her dulcet tones but an injection of common sense into the proceedings. 

And those proceedings are a discussion about the “missing middle” – low to medium rise apartment blocks and how some councils have managed to keep them out of their suburbs.

We look at the cute and occasionally evil tactics to which home buyers resort, in order to get to the head of the queue to purchase the house of their dreams.

We look at how efforts to curb the rampant spread of Airbnb and other short-term holiday lets have fared in cities that have brought in draconian laws.

And we wonder if game theory might help us to solve the housing crisis (as discussed here). 

That’s all right here in the Flat Chat Wrap.

TRANSCRIPT IN FULL

Jimmy  00:00

You’re back?

Sue  00:00

Yes, I am.

Jimmy  00:02

Our listeners will be glad to hear that they’re not just listening to me droning on.

Sue  00:06

You’ve had some good guests, haven’t you? Oh, that’s a current obsession of yours, isn’t it?

Jimmy  00:08

I had Paul Morton on the other day. We were going to have John Minns, the Property Commissioner, but he has asked us to put it off, until after the budget, so we’ll have him in a couple of weeks. But, we’ve got you! We don’t need other people, really. Today we are going to talk about the so-called ‘missing middle’ of the apartment, or strata-dwelling landscape. And you’re going to talk about the lengths that some people will go to, to get apartments. We’re going to talk briefly about D-Day for Airbnb in New York and next month, in Edinburgh, and the new restrictions that have been brought in there. And we’re going to talk about game-theory. It is a little bit, yes, and how that could be helpful, in sorting the housing crisis. That’s a lot to be getting on with. I’m Jimmy Thomson, I write the Flat Chat column for the Australian Financial Review.

Sue  01:06

And I’m Sue Williams. I write about property for Domain.

Jimmy  01:09

And this is the Flat Chat Wrap.

[MUSIC]

Jimmy

The missing-middle… What does the missing middle mean to you, Sue Williams?

Sue  01:29

It’s the difference between detached housing and high-rise apartments. So it’s things like townhouses; small complexes of townhouses, terraces, duplexes, and low-to-medium density unit developments… Kind of up to about 10-storeys high.

Jimmy  01:45

Really, I thought it was lower than that? I thought it was like, three-storeys high?

Sue  01:49

No, it’s actually about four-storeys high, but a lot of people feel that it should be 10-storeys high, because 10-storeys isn’t really very much at the moment. And we have a huge housing crisis. We’re getting a lot of huge, massive skyscrapers, and lots of greenfield sites, where new detached housing is and semi-detached housing is being built, but we just don’t have very much of these smaller developments. And lots of those are in infill areas, where there’s lots of infrastructure around them. They are near stations and town centres. There may be an old petrol station, which can be converted into a small apartment building, or an old electricity substation, which is now being converted, as well; lots of those kinds of things, or really old apartment buildings which are being demolished, or refurbished or extended.

Jimmy  02:39

We tend to forget that for many years, the two-or-three storey walk up was the standard apartment building in many suburbs. I mean, we still had the big (well, they are not that big now, but in the day, they were considered to be big high-rise), of about 10-to-15-storey’s high, if that. Out in the suburbs… I’m thinking about places like Randwick and Bondi and places like that; the inner-ring, basically, of the city, it was the two-storey walk-up, or three-storey walk-up and called that, because they had no lifts. And, of course, now they are falling into not just disrepair, but disfavour. But they’re not being replaced in a lot of cases, by similar-sized buildings, which are much more efficient, which are going to be likely to have lifts. They’re using the footprint of the building much more efficiently. But, as I was reading in the Sydney Morning Herald the other day, there has been a lot of resistance. The NIMBYs have got their eyes on these low-to-medium rise buildings, and they’re keeping them out.

Sue  03:51

It’s a shame really, because even if you’ve got a two-to-three storey walk-up, you could easily (often), convert that into say, a six-storey building. You just instal lifts, and you often find spaces in the buildings, which aren’t being used. Some of these old buildings have their own laundries and things and most apartments now have washing machines of their own. So you don’t need those laundry spaces. And some of the car spaces, you know…

Jimmy  04:18

Well, they can put them underground.

Sue  04:20

Yes, they can dig underground. And they’re often adding apartments on top, as well. So they have a much more efficient footprint really, because they’re supporting a lot more people.

Jimmy  04:32

However; now, I thought I was already to do a big rant, about how the government should do something to encourage developers to build these low -to-medium rise buildings, by offering fast-track development approvals, but apparently, they already do. The problem is, that they said that these fast-tracked approvals would apply only in areas where the local government authorities had already approved that style of apartment. And what happened was, half the local authorities in Sydney, for instance, brought in their own bylaws to prevent these buildings being built. So the potential has been huge and has been ignored, because of the nimbyism of local governments.

Sue  05:22

And also, it can be a cost problem, because the difficulty for a lot of developers realising these medium-density projects is that, they’ve got a piece of land and they’ve bought a property on it, and they’ve got to pay for it to be demolished. And then they’ve got to pay for another building to go up in it’s place. And they’ve got to build more apartments, or build them higher, or more dense, in order to make the money; to make it worth their while. So that’s an issue too, really. If they’ve got maybe, an eight-apartment building, and they want to get rid of that, and they want to build something more; if they just replace it with another eight-apartment building, they haven’t made any money at all, so there’s no financial incentive. Wow!

Jimmy  06:07

It sounds like (from what I hear), the government is planning to look at this whole thing, that allows local governments to basically, block any kind of apartment development in their areas, because that has to be the solution for building the numbers of new dwellings that we need, in the time that we need them to be built. It’s not going to be houses out in the suburbs; it’s going to be apartments. And if whole local government areas are saying “well, we’re not going to allow apartments in our area,” then that just cuts down the numbers of apartments that can be built. But apparently, according to Paul Scully, the Planning Minister for New South Wales, if just 5% of the local government authorities that currently are blocking low-to-medium rise buildings, if they changed their policies, we would immediately get approval for 67,000 new dwellings.  And that’s just 5%.

Sue  06:11

That’s incredible!

Jimmy  06:14

So expect some movement from the government on that, to get around the local authorities, who are just nymbying us out into the far suburbs, where nobody really wants more people to be living.

Sue  07:25

And when you go into those far suburbs, they say it’s four-times more expensive to provide services to a greenfield site, than it is to infill sites. That’s a hell of a lot of money.

Jimmy  07:30

That’s a big social cost. We’re having to build more roads and having to build more railways. Well, we don’t have to; we just have to tell some of these local authorities to get with the programme.

Sue  07:46

And often downsizers… The thing that’s inhibiting them from downsizing is that they can’t find a good apartment in the same kind of area that they’ve been living for the last few years in a big family home. And we’ve got to get them out of those big family homes, so we can actually get young families into them. If there were more apartments being built in those areas, they’d happily move. And I think often, people are a bit nimbyist, just because they can, really. It’s a natural human instinct, I think, to always say we don’t want change; we want things to be exactly as they are. There’s one developer, Tone Wheeler, of Environa Studio…  He specialises in missing-middle development. So he redevelops sites like former petrol stations and disused factories, and even once, a telephone exchange, and turns them into a small unit building. And some of them are really good-looking. But he says a huge enemy is not really just nimbyism; it’s also the emergence of ‘notes,’ not over there, either. And he said this drives him absolutely mad. It’s a shame that sometimes these immediate reactions that we have against new developments, are listened to by governments, because sometimes, it’s really not a good idea to bow to those pressures.

Jimmy  09:02

Well, you know, the local politicians, they go on the campaign trail, and people will say to them “what are you going to do to stop high-rise buildings, or multi-storey blocks?” They will go along with whatever it takes, to get themselves elected. That’s apart from the ones that are taking bribes from developers. They get elected on the strength of keeping medium-rise or high-rise buildings out of their areas. So obviously, they have to go along with that. Well, the government has to step in and say “no, I’m sorry. This is just not appropriate.” The government is looking after the whole of society and if that means that people in these NIMBY suburbs have to put up with a few low-rise apartment blocks, well, that’s just tough.

Sue  09:47

And also, it’s really important that we provide a greater diversity of apartments, as well. You know, we need bigger apartments for families. We need bigger apartments for people to share them. So therefore, to make them a bit more affordable. If you’re renting them out, and you can have four people sharing a bigger apartment, that’s cheaper than four people individually having their own apartment. And also, we’re much more of a multicultural society now. Some cultures love living with their extended families, so shared, larger apartments are important, too. So it’s great to have much more diversity, rather than the same kind of cookie-cutter vertical huge, high-rise apartments, that are all the same.

Jimmy  10:29

And you know, in some cultures, they like to have a meeting space, which a lot of apartment blocks don’t have. You know, just to hang out; just to come back from work and make a cup of tea and just sit around and chat with your neighbours, which is the garden fence thing, that people used to go on about, how it was great in the old days. Well, we could be doing that now.

Sue  10:49

That’s right. I suppose you see in lots of areas; say, in the eastern suburbs of Sydney, and in wealthier parts of Melbourne, you see apartment buildings with rooftop spaces. They’re the kind of places where people hang out and socialise a bit. And that’s a nice thing; it really creates a community atmosphere in a building, which is a wonderful asset to have.

Jimmy  11:09

Okay. When we come back, we’re going to talk about the lengths that some prospective purchasers will go to, to get themselves over the line, when they’re trying to buy an apartment. That’s after this.

[MUSIC]

Jimmy

And we’re back. Sue, you’ve been writing about the desperate measures that people will go to, to secure the purchase of an apartment… What kind of things are people doing?

Sue  11:37

Well, there is this new Domain research; they did a survey of people who’d bought in the last 12-months and they asked people what kind of tactics they deployed to try and get the property of their choice. People were very honest, because it was obviously anonymous, and came up with some really interesting things; things like buying slabs of beer, and baking for the seller, or the agent… Presenting homemade cakes, to try and get in their good books, to try and give themselves a better deal, really. One person admitted buying an agent a car, to try and get in with them, which is a bit bizarre. One good tactic, which was quite interesting, was prospective buyers were offering to pay a seller’s moving costs. Nice idea, isn’t it? But you know, I’m doing another story, about whether these tactics actually work. If you’re a seller, it’s kind of nice to have someone to come and offer to pay for you moving, but really, if at auction, somebody else is going to spend $20,000 more to buy your apartment than the next person, then you’re going to go for the money, aren’t you?

Jimmy  12:48

That’s what I was thinking. Okay, you know, you can bake somebody some scones, but you know, handing them a bigger wad of cash, would probably persuade most people. Is it a case of maybe, people getting in the good books with the agents, so that they get first dibs on apartments or houses when they come up for sale? I guess; I agree. But I guess if you’re in a house that you love, it’s a bit like when you sell a car that you’ve had for years and you love that car, but it’s time to move on… You want it to go to a good home, and maybe, you want your home to go to a good family. There is a negative side to all this; there are some dark arts at play in this too, aren’t there?

Sue  13:08

Well, that’s what they’re trying to do, as well. But the agents keep saying, it’s kind of interesting, these tactics, but at the same time, they actually work for their clients and their clients are the vendors. They’re legally obliged, to get their vendors the best deal possible. So really, even if they’re bought gifts by a prospective purchaser, it’s not really going to sway them at all. And sometimes the buyers have been resorting to things like sending really heartfelt notes to sellers of homes. If you’ve got a young family and you’ve set your heart on a house, you might write to the owner and say ‘look, my family love your house. We think you’ve got amazing taste, and it’s going to be so great for our family. We’ve had a terrible time and this is going to be a great new life for us.’ I talked to an agent about that and said would that sway a family? And he said “well, they tend to be really touched by those kinds of things, but at the end of the day, it’s the money.”  Yes, that’s right. We’ve had some people going into open for inspections and talking loudly about the neighbours who play loud music late at night and there actually aren’t neighbours who play loud music late at night, but they pretend there is. I mean, I remember going to lots of open for inspections when we were buying a long time ago and there would be tenants in the apartments and you’d walk in and the tenants would have deliberately made the place look really messy and be sitting around. It really does put you off; it really works.

Jimmy  14:58

And when we spoke to the agent, they were so annoyed. They said “look, those tenants actually want to buy the apartment.”

Sue  15:05

Yes, that’s right. There are tactics that really do get under your skin and can really work.

Jimmy  15:11

I did hear once about an auction, where in the middle of the auction, somebody stood up and shouted “why aren’t you telling these people that the building is dry rot and termites?” And the auctioneer, basically criticised the person who had made this outburst. They said “you are a disgusting human being, and you’ve got no right to say that, and there’s no evidence that this is there. But you’d have to think that some of the people who were thinking of bidding, would have been put off by that.

Sue  15:44

And especially with apartments, because you could easily get up and start saying “oh, this is really troubled apartment building. Nobody gets on; the owners corporation is really dysfunctional.” That would be a red flag to anyone, wouldn’t it really?

Jimmy  15:58

In 50% of the occasions you’d probably be right.

Sue  16:05

You kind of think some of these tactics would have an effect, but some of them are really quite evil in lots of ways.

Jimmy  16:11

I’ve got a feeling that the complaints about the noisy neighbours are going to have more effect than the baking of scones. Maybe that’s my cynicism coming to the fore.

Sue  16:24

Lots of these people; about one-in-five, admitted to searching the seller’s social media posts, to kind of see what kind of person they might be and to see how they could get to their heart much more effectively. So they’re kind of stalking them a bit on social media, as well.

Jimmy  16:38

I think I’m being stalked; we’re being stalked, by real estate agents, because every other day, I’m getting a phone call from somebody. Because an apartment in our building went for way over what anybody thought it should have gone for. And it was because it was a very substantial and inventive renovation that had been done, so real estate agents are phoning up and saying “we got a terrific price for this apartment; it’s just like your apartment. What would it take for you to sell?”  I try to be polite, but we talked about it and we realised that the kind of money that it would take for us to want to sell our apartment, would have to compensate for the huge disruption in our lives, not just the value of the apartment. And so I keep saying this to real estate agents over and over again. I think I’m getting to the point now that I’m just going to say “leave me alone.”

Sue  17:33

Or pay me $20 million and I might consider it. But it’s interesting, because some of these things that people have been doing are quite sensible. I mean, they often talk to the neighbours to find out what kind of place it is. That’s a really good thing to do. They often go into a local coffee shop and chat to people and kind of get a feel for the vibe of the place as well, which makes perfect sense and also, visiting outside normal inspection hours. Which is really good, because then you can discover that actually, it’s really noise of traffic, apart from those times on Saturday morning, when you’re meant to be going and looking and Wednesday evening. You would never know otherwise, that it’s incredibly noisy on Monday mornings and Tuesdays; all day, planes fly overhead.

Jimmy  18:21

A bit like the two guys who bought into that apartment building just around the corner, the Omnia. They’d only ever visited the place during the day and they bought their apartment and moved in and then complained to the council, because there was this big flashing light just across the road from them.

Sue  18:40

The Coca-Cola sign!

Jimmy  18:43

They hadn’t done their research properly. And it just shows that you should if, you’re seriously thinking of buying somewhere. You should at least take a drive past at night, to see what it’s like in the area.

Sue  18:57

I mean, some of them, they say they’ve sort of dressed to impress. They dress as if they can afford a property, when they really can’t. But you kind of think, well what’s the point of that, really? Because at the auction, or if something’s up for private treaty..

Jimmy  19:11

I suppose (and you know, every so often, auctions fall out of favour,) but a private sale is the one time when the baking of scones and things like that, might make a difference.

Sue  19:23

I do like scones, though.

Jimmy  19:25

I like a scone.

Sue  19:26

A good homemade scones. So if some of those agents just turned up with scones…

Jimmy  19:30

“Show me the scones,” I’ll say. When we come back, we’re going to talk about Airbnb and maybe we’ll talk about game-theory; that’s after this.

[MUSIC]

Jimmy

I know I go on about Airbnb a bit too much, but I’ve been keeping an eye on things. I’ve written a couple of articles about how globally, people are turning against Airbnb. Basically, the argument is yes, there are economic benefits for cities that allow Airbnb. But recently in Melbourne, they said, the social and economic cost of turning over too many residential homes to holiday lets is too great; it outweighs the benefits. And so a lot of cities have brought in new laws, and two of the ones that are about to come up; one has just come up in New York. They brought in a new law about Airbnb, and you’ve got to register your apartment. They’ve allowed a change in the law, so that landlords can ban their tenants from then putting the apartments on Airbnb, and Edinburgh in Scotland is the next big city; big tourist city, to come in with its rules. And there, you have to have planning permission to convert a residential dwelling into a holiday let.

Sue  19:31

I mean, that makes sens, because here we have zonings, but nobody takes any notice of them.

Jimmy  20:46

I was reading up on this. And it turns out that some of the cities where they brought in the harshest anti-short term letting laws have kind of had no effect, because people are going “well, this is ridiculous. I’m just not going to follow these laws.” And it turns out, the local authorities don’t have the finances to pursue them. If enough people (we found this with with Uber), just disobey the law, then they have to change the law, so that they’re not making half the people in the city a criminal. And that seems to be the tactic that’s happening in Copenhagen. There was a case that was cited, where they’d brought in draconian laws against short-term holiday lets, because of the number of people being driven out of the city centres; the number of local people. The people who were hosting the short-term holiday lets just kept on doing it. It’s something that I think we might see here in Australia soon. I mean, the laws in New South Wales, where you’ve got to be registered and  people can’t misbehave, or the two-strike law against hosts or properties, or guests… It’s been going for two years and there hasn’t been a single prosecution under it; not one. And you think, does that mean everybody’s behaving themselves, or does it just not work? And I’ve horrible feeling it’s the latter.

[MUSIC]

Jimmy

The other thing, just briefly… We were talking on the weekend about game-theory. It’s actually a mathematical theory; it’s not got an awful lot to do with games, per se. But it works on the principle that rather than having the loudest voice swaying the argument, it goes let’s look at the different issues here and what is mutually beneficial for everybody, to some extent. It involves looking at the consequences of decisions, and the consequences of those consequences, and so on, and so on. Like in a game of chess, where you sit there…

Sue  20:47

Always looking ahead at the next…

Jimmy  23:31

 Grandmasters are looking like, 12-to-20 moves ahead.

Sue  23:36

Really?! How could you possibly contain that in your brain?

Jimmy  23:39

They have different brains. And so this is part of game-theory and it just occurred to me, that when you look at all the elements that come in to housing… For instance, if the government says they’re going to build 600,000 new apartments in the next five-years, it’s going to have a profound effect on the availability of skilled labour, because they’ll all be busy. So one of the solutions for the shortage of skilled labour is to bring in more skilled migrants, which is going to put new pressure on the housing stock. So you know, it’s not a case of “well, we can’t do that, because of this.” It’s a case of, “well, if we do this, and this happens, then what do we have to do that’s different, to make sure that that doesn’t stop us from making progress?” And game-theory is a way of looking at this, where you look at all the consequences of these things happening. I’ve written about this, but I was struck…Years and years ago, a university in the UK ran a war-gaming weekend, where they had a hypothetical war. They did it over the whole weekend, but they brought in business people. They brought in social advocates, they brought in military, they brought in politicians and they all had to take a role in this war-gaming. And the one thing I remembered from it was that the military had a much lower casualty rate, than all the other groups.

Sue  23:48

Why was that?

Jimmy  23:51

Because the military realised that their major asset was the human population and their soldiers and their fighters and whatever. And so they were much more careful about how many people suffered casualties, than business people and politicians, who were just throwing cannon-fodder into the guns.

Sue  25:32

That’s weird… As you know, I’ve just been in Europe and on a part of my trip, I was in Belgium, going to all the World War 1 sites. The Generals; I mean, they almost had a callous disregard for life, in lots of ways. You know, sending all those young men over the trenches, just to certain death.

Jimmy  25:52

That’s what changed military thinking, to the way that they now look at battles. They look at battles in terms of the cost against the gains, because as you found in France and Belgium, tens-of-thousands of lives were lost, to gain just a few metres, so they don’t do that anymore. Alright. We covered the whole global conflict scenario here. We’ve got how-to-buy-a-house-by-baking-scones, and how-to-solve-the-housing-problem-by-bringing-in-the military. It’s so good to have you back, Sue.

Sue  26:35

Thank you; nice to be back!

Jimmy  26:36

And I hope you have all enjoyed listening to us again, and we will be talking to you again next week. Thanks for listening to the Flat Chat Wrap podcast, you’ll find links to the stories and other references on our website flat chat.com.au. And if you haven’t already done so, you can subscribe to this podcast completely free on Apple podcasts, Google podcasts, Spotify, or your favourite pod-catcher. Just search for Flat Chat Wrap with a W, click on subscribe, and you’ll get this podcast every week without even trying. Thanks again. Talk to you again next week.