MICHAEL KEATING. Urban and Regional Policy

Jul 1, 2019

Spatial inequality has risen dramatically over Australia in the last forty years, and our cities are in many ways becoming less liveable. This article draws on the recent CSIRO report on the Australian National Outlook to summarise the major policy shift that is required affecting urban development to enable well-connected, affordable cities that offer more equal access to jobs, lifestyle amenities, education and other services.

Perhaps the most obvious manifestation of increasing spatial inequality is that housing, and especially housing where people want to live, has become much less affordable.

Average house prices have increased from around two to three times average disposable incomes in the 1980s and early 1990s, to around five times recently. Median prices have increased from around four times median incomes in the early 1990s, to more than seven times today (and more than eight times in Sydney).

Most of the increase in house prices reflects increases in the price of land, which in turn reflects restrictions on the effective supply of residential land.

As a consequence, home ownership rates are falling, especially for those aged under 55. Young people are postponing marriage, but even for those aged 35-44, home ownership has fallen from about 75 per cent in 1991 to about 60 per cent today.

For many people buying their first home, the only home they can afford is on the city fringe. But the amenities in today’s outer suburbs are far less than in the outer suburbs of the 1960s, which were then only 20 km from the centre of the biggest cities – Sydney and Melbourne – and had reasonable access to jobs and services.

This lack of access is now affecting job opportunities. In 1976 the ratio of male employment to population was the same wherever you lived in Australia. But by 1991 the average employment participation rate in the lowest five per cent of neighbourhoods, ranked by socio-economic status, was only about 70 per cent of the employment participation rate in the top 5 per cent of neighbourhoods.

The disparity in incomes between neighbourhoods has equally increased. And this increasing relative advantage of neighbourhoods with high socio-economic status continues to this day, with more recent research showing that the proportion of professionals and managers is rising fastest in the post-codes with the highest incomes.

Spatial inequality is therefore growing, and major cities are becoming increasingly geographically divided as home-ownership in preferred locations becomes unaffordable for many people. Young people with less income and education are increasingly concentrated in the fringe suburbs, with poor access to the better job opportunities which are concentrated in the inner city.

The only way that many young people can afford to buy a home in the middle suburbs today is if they get help from their parents, but this risks an increasingly patriarchal society with even less equality of opportunity.

In addition, the increased urban sprawl is resulting in longer journeys to work, which are mostly by motor car. As a result, there is more congestion and more pollution, adding to carbon emissions and the risk of climate change.

Finally, this overall loss of urban amenity may also be risking our sense of community. Home ownership provides greater security of tenure, and strong communities are typically reliant on the engagement of home owners. As our suburbs are increasingly socially stratified, we also share fewer common experiences, and consequently have less common interests and outlooks.

Infrastructure investment

The popular response to our urban development problems is that there should be more investment in infrastructure.

In a recent article, Crispin Hull decried that 64 per cent of all journeys in Sydney are by car, and 74 per cent in Melbourne and 77 per cent in Brisbane. By comparison, only 12 per cent of journeys in Tokyo are by private car, and similarly only 23 per cent in Seoul and 29 per cent in Singapore are by car.

In Hull’s view, “the environmental and economic costs of those percentages are unsustainable”. The conclusion reached by Hull, and by many other pundits like him, is that we must improve public transport.

I can sympathise with Hull’s intent, but first we must ask why Australia doesn’t have this better system of public transport already? And the obvious answer is the huge difference in the population density of Australian cities, compared to most other major cities, and especially those in Asia.

The sad reality is that at current population densities, public transport, and particularly mass-transit fixed rail systems, struggle to make economic sense in Australian cities.

For example, past investments in Sydney’s urban rail network have failed to pay off, although Sydney is Australia’s most densely populated city with about 50 per cent and 470 per cent more rail passengers than Melbourne and Brisbane respectively (yet with similar network capacity). Of course, much of the benefits from an urban rail system are external because of the reduction in traffic congestion and pollution and the improvement in health and safety as cars are taken off the road. However, even after discounting 70 per cent of the costs of Sydney Rail because of these external benefits, the regulator found in 2008 that an economic rate of return was still not possible with the then fares.

A fundamental problem is that urban rail transit systems in Australia have only a very small impact on congestion, except for the main roads into the CBD. This is because these urban rail systems are focussed on transporting commuters to and from the CBD, but in Sydney for example, in 2008 these journeys amounted to only 4.5 per cent of all journeys and 11 per cent of the total person kilometres travelled in Sydney as a whole. In fact, the vast majority of the jobs, and even more of the retail trade are not in the CBD.

Instead, the low population densities in modern Australian cities means that most journeys are across town to multiple business premises. These cannot be served by the urban rail network, at least as presently designed. Usually modern bus services represent the best public transport option for Australian cities, yet so long as low population densities and the associated urban sprawl continues it must be doubted whether any form of public transport will get majority use.

Better urban development

The key to the resolution of Australia’s pressing urban development problems is to gain acceptance that we need to increase our population density in our capital cities. Furthermore, this should principally involve increasing population density in the middle suburbs of these cities, up to 20 kilometres from the CBD, where the density has hardly changed in the past 30 years, but where the present inhabitants may be most resistant to change.

Nevertheless, this increase in population density is central to the recommendations in the recently released report on the Australian National Outlook, where one of the five major policy shifts called for is to change the nature of future urban development.

In both the two contrasting scenarios developed in that report, Australia’s population is projected to increase to 41 million by 2060, compared with 25 million today, with the four largest cities increasing their share of population from 58 per cent in 2016 to 66 per cent (27 million) in 2060. However, in the preferred Outlook Vision scenario the average density in our major cities increases by 60-88 per cent, while urban vehicle kilometres travelled per capita are reduced by up to 45 per cent. Whereas in the business-as-usual Slow Decline scenario, cities continue to sprawl with little change in density, and average urban vehicle kilometres travelled per capita falls by less than 25 per cent.

In the preferred scenario, “Australia changes from low to medium density, with denser capital cities growing around multiple city ‘centres’, creating exciting, well-connected hubs with greater variety of housing types located closer to jobs, services and amenities”.

This desired policy outcome is achieved by three recommended changes.

First, we should plan for multicentre cities. According to the report, the evidence is that as cities become large “a single centre can become a stumbling block for better living, business and mobility”. For example, Toronto has large subcentres outside of the core city, and most major Western cities and Singapore have established multiple CBDs surrounded by complementary districts, with good transport links to and between these centres.

Second, in both capital and satellite cities there should be greater diversity of housing and land use. “Cities are made up of housing, services, employment and green spaces. Mixing these spaces in smaller areas creates … diverse local precincts that provide people of different occupations and incomes better access to jobs, services and recreation.”

It is not just a matter of increasing the population density, we also need more diversity if we are to break down the spatial polarisation in our cities. Thus, we need to revise planning restrictions “to allow more mixed development and more medium-to high-rise dwelling types, mostly within the current urban area, but further from the CBD”.

This sort of mixed development will make it easier for people to remain in their local area and maintain their social networks as their housing needs change over their life-stages. In addition, the increased mix of housing offers reasonable accommodation to the people on whom these communities rely, namely those working in essential services, education, health and personal services in particular.

Third, the change in urban density and diversity will make possible and require an enhanced transport infrastructure, involving not only mass transit, but also more people walking and cycling.

Population density and distribution make the critical difference to the economics of mass transit and make it economically viable to drop the traditional hub-and-spoke model. The successful uptake of autonomous vehicles also requires changes to density and diversity.

Together these changes can address transport inequality. “As more transport choices, and diverse travel routes criss-cross the city, ’30-minute cities’ can be realised, making work, shopping, socialising and services closer, increasing productivity.”

The challenge, however, will be to get Australians to make these changes. If the recent election tells us anything it is that Australians are resistant to change, even when that will benefit the majority. And nowhere is that resistance to change greater than when it comes to changing their neighbourhood, where NIMBYism is typically the immediate reaction.

So I don’t expect our cities to change as quickly as would be desirable, but the CSIRO report on the Australian National Outlook is a welcome start to a very necessary conversation.

Michael Keating is a former Head of the Departments of Prime Minister & Cabinet, Finance, and Employment & Industrial Relations. He is presently a Visiting Fellow at the Australian National University.

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