cutting red tape
Source: Nick Free from Flickr.
  • NAB's CEO urged state governments to streamline approvals process to increase housing supply
  • This comes as the housing market is predicted to experience double digit growth
  • We asked REIA's President about the issue of red tape in the housing market

‘Cutting red tape’ is so often heard in the economic and political discourse, it’s become a cliché.

It refers to the removal of overly burdensome or excessive government regulations that stifle the operation of businesses or individuals in the market.

It was not surprising to hear calls for cutting red tape in the latest House of Representatives Standing Committee on Economics.

Addressing the Committee on Friday, NAB chief Ross McEwan urged state governments to speed up the development of land for residential construction to increase supply and cool house prices.

House prices have continued to soar above and beyond expectations, with the Commonwealth Bank of Australia forecasting a 16% rise over the next two years.

With the surrounding debate on whether the housing market is becoming overheated, Mr McEwan called on the states to streamline approval processes for land development and residential construction in order to offset the incentives for first-home buyers.

The NAB CEO noted that “it takes an average of five to seven years to get from a paddock outside a major city through zoned for development and for a house to be built on it.”

“That is an area I would encourage the states to have a serious look at,” he said, adding that it would potentially make a “big difference” to house prices.

“We need to get that land supply in circulation a lot quicker than the five to seven years.”

President of The Real Estate Institute of Australia (REIA), Adrian Kelly made similar comments.

We spoke with Mr Kelly recently, asking him about the current land-zoning and land-use regulations in Australia.

The Property Tribune asked him about the current approvals and planning permissions process.

“Across Australia, we have many different councils with many different planning approvals, and I suspect there are many thousands of those regulations,” he said. “It’s a bit of a minefield.”

Mr Kelly noted that as a result of COVID, many families have been moving away from major cities to regional areas. This is especially true in Tasmania.

“Now that COVID has proved we can work from home, Tasmania is exploding with housing demand. But the State simply does not have the excess supply to soak up the additional demand. Again, it comes back to the issue of supply and being able to build more housing.”

“There are a number of things which can be done around supply – unlocking residential land use is one of them. The old saying “reducing red tape” is quite true,” he said.

“It takes 12 months just for the average person to build a house on a piece of land, but that doesn’t include the time they need to get the appropriate approvals in place. That is crazy in a country like Australia.”

Adrian Kelly, President, REIA

The research looks to confirm the concerns of Mr McEwan and Mr Kelly.

A 2019 Centre for International Economics study found that greater delays from red tape were the cause of Sydney’s higher house prices.

Furthermore, it found that many housing developments could take decades to get off the ground, resulting in cascading costs from red tape and taxes.

Research from the think tank, the Mannkal Economic Education Foundation, cite the “absurd” complexity and unnecessarily restrictive zoning that contribute to reducing the supply of housing and increasing unaffordability.

Public policy think tank the Grattan Institute is also in agreement. Their 2018 housing affordability report recommended relaxing land-use planning restrictions to allow more homes to be built in inner and middle-ring suburbs of the country’s largest cities. In particular, they argued more small-scale urban infill projects should be allowed without council planning approval.

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