- Boom bust cycles can significantly impact affordability and cause other issues.
- Almost one in five of metro residents are considering moving to regional Australia.
- Land supply is a major constraint in many local government areas, due to the high cost of infrastructure to get land ‘development ready’ and delays due to red tape.
Challenges around housing supply and affordability can be amplified in regional areas where boom and bust cycles, labour and materials costs and the tyranny of distance all have a significant impact.
A 2022 report published by the Regional Australia Institute (RAI) found that, despite the challenges, life in the regions remains an attractive proposition for many people around the country. Therefore, many regional towns and cities will need to continue to look at how they can accommodate a growing population.
The Building the Good Life, Foundations of Regional Housing report, found that across Australia during the pandemic, there was a lift in migration from the major cities to the regions, and while this trend is reverting to more normalised levels, the overall number of people moving is still much higher than pre-COVID levels.
Here in Western Australia, the focus is often on the mining towns in the Pilbara, where boom-and-bust economic cycles cause significant price fluctuations and housing shortages. However, there are several other regional hot spots around the state that are attracting people, with Greater Geraldton topping RAIs Regional Movers Index for the June quarter 2023.
Geraldton topped the ‘growth list’ with a five-fold annual increase in net internal migration flows, with areas closer to Perth, including Waroona coming third and York fifth.
In a supplementary report released in June 2023, RAI surveyed people living in metropolitan areas, including Perth, about whether they would consider a move to a regional area. They found that almost one in five (19%) of metro residents are considering moving to regional Australia despite a return to ‘normal life’ post-pandemic.
The ‘pull’ of the regions is what is sparking people’s desire to move, with factors such as a sense of space, overall improved wellbeing, affordability, and gaining more time in the day all attracting people to regional or rural areas.
RAI Chief Economist, Dr Kim Houghton, warns that while not all the survey respondents considering a move would necessarily end up acting on that desire, if just a portion of the survey respondents did commit to a move, that would have a serious impact on housing demand in many regional towns.
Interestingly, according to RAI’s survey, there is a large mix of people who are looking to make a regional shift and that has an impact on the diversity of housing that is required to meet their needs.
Significantly, there was a large proportion of higher income earners who would consider a move three or more hours from their current home.
“One of the challenges with our regional housing market is that they are not well developed, and they tend to be growing on the urban fringe with house and land packages that are not necessarily what these types of people are looking for,” Dr Houghton said.
“They are looking for something quite different, potentially medium density, rather than a five-acre lot. The market for larger lots is also there, but the needs of these people moving out of the cities is much more diverse than the markets they are looking to move into.
“There is a fair bit of catch up to do in terms of the mix of housing and where it is located, given we are not quite meeting the market currently, and that poses some interesting questions for the development sector.
“There seems to be a bit of a blind spot around what the market opportunities might be in some of those regional towns.”
Dr Houghton says there is a growing demand for smaller one- or two-bedroom homes to suit downsizers and professionals who come and go from small towns.
“It can actually hold back the ability to attract workers, if you don’t have those smaller housing options,” Dr Houghton said.
Some of the key challenges to getting a good mix of housing supply, particularly in the North West of WA, are well known including high costs, seasonality and the cyclical nature of the mining industry.
There are also numerous smaller local government areas with limited resources, many of which have experienced rapid changes in population trajectories in recent years.
“One of the challenges for regional WA in particular is understanding when these trajectories are changing, because it can change the whole makeup of places, changing from a static phase to a growth phase quite quickly is a challenge for smaller local governments in particular,” Dr Houghton said.
Infrastructure WA’s State Infrastructure Strategy, published in 2022, reinforces this challenge, stating that more coordinated and timely approaches to addressing infrastructure needs before they become a barrier to realising growth opportunities are required in regional communities.
Land in short supply
Dr Houghton says that land supply is a major constraint in many local government areas, due to the high cost of infrastructure to get land ‘development ready’ and delays due to red tape. For mining towns like Karratha, surges in demand due to mining uplift are particularly difficult to manage.
“We know that the cost of bringing good quality land to market is very high in these locations,” Dr Houghton said.
“Places like Karratha have put a lot of effort into social infrastructure and making the town more liveable to attract residents and try to limit fly in fly out (FIFO),” Dr Houghton said.
“But if you can’t get well priced, developable land, then FIFO does become the default option.
“Ideally you would have a bit of slack in the housing system so that you always have a bit of extra supply. But it is very hard to pin a developer down and ask them to build extra houses that might not be needed until a few years’ time.”
Mining towns are also grappling with rapid price escalations during peak periods which impacts on workers who are not earning the big wages in the mining industry.
Dr Houghton says that the problems are slightly different in inland northwestern towns, experiencing higher population growth rates than they’ve experienced in a long time. Particularly some smaller towns closer to Perth.
“A lot of people moving to these areas are millennials, and they haven’t got deep equity pockets like baby boomers. They are attracted by the relative affordability in some of these towns,” Dr Houghton said.
“That means you have relatively younger people looking for affordability and reasonable job prospects. But what happens to those other people in regional WA that end up being priced out of those markets because others have come in looking for that lower cost housing?
“This is when you get displacement and people moving further and further inland to find lower cost housing. It is an increasing issue in many regional towns.”
Considering the solutions
The issues are complex and that means there are no simple solutions when it comes to ensuring affordable and appropriate housing supply in regional areas. Being able to deliver housing quickly, in the areas that it is needed, has proven almost impossible in many places.
Infrastructure WA’s strategy provides specific recommendations in relation to regional housing including the preparation of place-based regional housing plans to enable strategic, targeted housing outcomes for each region and a consistent evidence base for future investment priorities.
The strategy also recommends the development of a sustained, social and affordable housing investment program to respond to diverse housing circumstances, informed by regional housing plans; the establishment of principles, criteria and models for government housing intervention in regional locations that are demonstrating market failure, informed by regional housing plans; and the review of regional officer housing assets and programs across the public sector.
Dr Houghton further suggests there is a critical need for both Commonwealth and State governments to rethink delivery models for affordable rentals in regional towns.
“We need to rethink what affordable housing looks like in regional areas. We have largely left it to the market and when it gets squeezed like it has in recent years the cracks begin to show,” Dr Houghton said.
“There is an imperative to rethink the role of the public sector in guaranteeing and facilitating the emergence of affordable rentals in particular.”
The emergence of alternative materials for home construction is also an area that could reduce building costs in regional areas. However, there needs to be economies of scale to make these housing forms stack up.
RAI’s report recommends that the role of state and local regulations and zoning to make temporary and relocatable housing more readily available to quickly respond to sudden increases/shocks to demand should be considered, particularly in the smaller, inland towns.
The report states that overseas experience suggests that further development of housing associations and other social housing providers in regional Australia may also generate significant benefits for these housing markets.
Both RAI’s report and Infrastructure WA’s strategy attest, that addressing the issues in relation to housing supply in regional areas is certainly complex and will require place based responses that are tailored to the different challenges and contexts across the broad landscape of Western Australia.
~~
This story was originally published in The Urbanist magazine, an official publication of the Urban Development Institute of Australia (WA). It has been edited for republication by The Property Tribune.
The Property Tribune thanks the UDIA WA for the opportunity to republish the work, and share thought leadership in relation to urban development and community creation with our readers.
Read the original copy of The Urbanist by heading to UDIA WA’s website under the News tab.
