The Guardian’s Peter Mares penned a spurious article claiming that building smaller homes would boost Australia’s productivity.
Walking past a building site in Sydney recently, I was struck by the pitch for the new homes under construction. “Outrageously spacious”, proclaimed a hoarding spruiking apartments with “2 living areas, 2 dining areas, 3 car parks, 4 bedrooms and 4.5 bathrooms”…
I was reminded of my stroll by the Productivity Commission’s recent report on how to fix declining productivity in the residential construction industry. The commission found “the number of dwellings completed per hour worked” by construction workers has fallen by a whopping 53% over the past 30 years.
My first thought was: “Any wonder!” It takes a lot longer to knock up an apartment with four-and-a-half bathrooms than to build your average flat.
When the Productivity Commission controlled for changes in the size and quality of new housing, the fall in building productivity was only 12%. Much better, but still lagging the 49% gain in labour productivity in the broader economy over the same period…
Yet it failed to recommend the obvious: build more smaller homes and fewer big ones. That would surely produce “more outputs” with “fewer inputs” – and the outputs would be homes people live in, rather than extra bedrooms that are often empty.
At the last census, more than 1.2m Australian households had three or more bedrooms beyond what was necessary for “typical sleeping arrangements”…
While we may not have built enough homes to keep pace with population growth, we have built enough bedrooms. Perhaps the new owners of those “outrageously spacious” luxury apartments I mentioned earlier will take in some lodgers to ease the housing crisis? Somehow, I doubt it…
Mares’ article fails the evidence test.
Australian Bureau of Statistics (ABS) data shows that building apartments is more expensive than building a detached house.
“Whilst all building costs have risen over the past five years, new apartment builds—regardless of type—have seen a rapid escalation in construction costs”, noted property analyst Michael Matusik.
“There are many reasons why, including union-related thuggery, a shortage of skilled labour and limited interest from tier one and two builders. Also there aren’t enough of these builders to go around these days”.
Moreover, ABC noted last month that the number of occupied apartments has grown by nearly 60% since 2006, easily exceeding the 22% growth in detached houses.
This apartment boom was driven by “an investor-driven proliferation of small, dark and stuffy apartments”.
“Spacious” three or more-bedroom apartments comprise only a tiny fraction of the nation’s apartment stock:
Most apartments in Australia are shoeboxes, negating Peter Mares’ arguments about the necessity of smaller housing.
Australians have already compromised significantly on housing space and it has not helped the nation’s productivity.
