Chapter 14 of "The Great Housing Hijack"
My Favorite Quotes
“A first part of the misunderstanding is to confuse construction with property development. Construction companies build for property owners, and their interests are to build as many homes as possible. Property owners have a choice about when and how fast to build to maximise their return over the long term from owning property.”
“A planning approval comes next… it is only at this last step that a separate building approval is sought.”
“... the buffer stock of current planning approvals.”
“... it reinforces the picture that the planning system regulates the location, but not the pace, of new housing development.”
“... in 2022 there were planning approvals granted for 64,000 dwellings in Greater Sydney but building approvals for only 37,000. In 2023 it was 56,000 planning approvals and 33,000 building approvals.”
Find your favorite quotes. Book available at https://www.amazon.com/Great-Housing-Hijack-keeping-Australia/dp/176147085X
I love your book reviews/quotes of the great housing hijack. I highly recommend land is a big deal by Lars Doucet http://www.landisabigdeal.com/
It deals with the underlying cause of the housing crisis, high rent and stagnating wages
I have a few observations on the planning vs. development post Chapter 14. First, by background, I started my career in urban planning as a planning technician handling zoning, new development, etc. I was drafted into the Regional Planning Council when it was formed. After 5 years, I moved into the private sector and real estate appraisal for an S&L in the 70’s. We were a development company operating as a lender back in those days. Unlike Western Savings and others, we succeeded and eventually transitioned into a Federal Savings Bank.
Before the S&L Crisis, we operated in Nevada, California, and Arizona, building numerous major/minor projects as JV partners with large builders. That said, I’ve seen the planning/development debate from multiple sides, and one not presented here. Back in the day, I was doing a feasibility analysis (for the bank) on a large parcel of land owned by a regional builder.
He was a regional builder out of CA, with operations there and in Nevada. He had land banked the parcel for a few years, waiting for growth to reach him, and it had. I remember walking around the site with him after I had run preliminary numbers and (given how involved we were with other builders and the market in general) was very current on prices for raw dirt, super pads, merchant builder sites, etc., so much so it was easy to do the math in my head or with an HP12C, and so could he.
I asked him politely why he wanted to develop the site vs. simply selling it or even going through the approval process and maybe spinning off some merchant pads to other builders, spreading the risk or eliminating it, along with higher short-term profit vs. building the site out. His reply was simple. He said, “I’m a builder, and we employ a hundred or so people. Building is what we do and how I keep them busy. I’m not looking to grow, and if I sell the land to others, I’ll have to downsize and lay people off.
I had a conversation with a friend from a local builder. She told me they had delayed the development of a large site planned for several communities for a few additional months. I asked why, and she said to maintain a steady flow of future developments in this market instead of hiring more people and blowing through the land, which reminded me of my walk with Robert.
Acquiring land and getting it approved for development is time-consuming and costly. While building more homes would impact supply/demand, perhaps lowering housing slightly, eventually, the boom goes bust, as demand is driven by so many other factors (employment, the economy, etc.), any of which cannot be sustained at a high pace without fallout. Housing is cyclical for these and other reasons, mainly the inability to maintain balance in any market due to so many factors beyond the control of the many market participants.
That’s the reality of realty … builders also regulate pace because balance in the market demands it.
Patrick Egger