Elizabeth, the problem in my experience is that state governments (in particular) embrace newsworthy initiatives either without a cost-benefit analysis or in denial of it - I doubt that any of the "sustainable" housing initiatives (except for an appropriate level of insulation) are cosrt-effective. Most states have requirements for CBA on regulation but make decisions regardless. I recall one piece of environmental legislation in Queensland with estimated costs to the community of $1 billion, and no obvious benefits.

I broadly agree with Elizabeth's concerns.

Note that developers recently got the NSW state govt to back down on its BASIX requirements for cost (i.e. profitability) reasons.

Note that most of the housing inflation problem of recent years is due to an arbitrary 'land value' being ramped up and up, not to increasing construction costs. This land value is free floating in the market place, and is tied to interest rates, tax breaks, increases in earnings, influxes of wealthy immigrants, and so on. In other words, it's a brave Western capitalist government which attempts to control housing prices for the benefit and welfare of its citizens, let alone countenance how to factor in sustainability costs.

In many ways, as building technology and methods improve, it has never been cheaper to construct a dwelling. Why, then, has there been a housing price boom? Because that's how that particular unregulated market works. The same is occurring in the UK, US, Netherlands, Spain, Eire, etc etc right now, mostly due to low interest rates and liberalised credit from lending institutions. The Australian Commonwealth government has added fuel to the fire with huge tax breaks for speculative investors, and done a lot of irreparable damage. (And then put out a 'green home' guide assuming unlimited capital and goodwill.) Consider that a Californian bungalow in Kensington, NSW, was originally bought by a police sergeant with a wife and 4 kids on a single wage in 1924. Now 2 doctors couldn't afford to buy it - it costs many multiples more.

There is simply no capital left for 'green' improvements without interventionary regulation by government to control prices. See my blog at http://www.housingaffordability.blogspot.com for the beginnings of a site addressing this question, to be expanded very soon into a full website. (I intend to be holding all indifferent, laissez-faire governments' feet to the fire for a very long time over this.)

In the meantime, the regime will continue to suit banks, billionaire developers, investors, speculators, the odd shrewd and greedy babyboomer, and be extremely unjust to the rest. The exploitation never seems to end.

Sean,
Talking to a long time speculative builder, when he first started in the industry, the cost of the block of land was only 10% of his total costs. Now it was about 30%, which means that either the cost of land has gone up, or the cost of building the house has proportionally gone down, or both.

However if demand is always above supply, then a lot of rorting or profiteering can occur, and this seems to be the case within the housing industry, and I would think that demand is going to be above supply for many years, due mainly to trends in household type. The number of couples without children, and the number of single person households will become a predominate factor.

EG
The number of Australians living alone is expected to almost double by 2026….In 2001 nearly two million Australians lived alone. That is expected to rise to almost four million by 2026…By about 2010 the number of couples without children may overtake the number of families with children. …By 2026 as many as 49 per cent of couples will not have children.
http://abc.net.au/queensland/news/200406/s1135299.htm

So there will be many more buildings required in future years, to house the same or fewer people, and that is likely to continue demand.

Further, I think the building industry is quite environmentally unfriendly. Many new subdivisions are eating up natural bush or farmland, and there is very little in a modern brick building that can be safely recycled.

So within the housing industry, there would be a lot of rorting, with enormous numbers of buildings required to be built for little or no population gain, and the housing industry chews up considerable amounts of natural resources. As well as this, many people have to spend long hours at work to earn enough money to afford a roof above their heads, and ironically that seems to be a common reason for family breakdown, thereby increasing the cycle.

Elizabeth, while I share your concerns about affordability I’m not satisfied that abandoning the small regulatory moves made to date toward sustainability is sufficient or necessary to have any serious impact upon affordability over the medium term. Nor do I agree that politicians that enact these regulations do so without due cause or consideration, sustainability wins votes because it matters to voters.

The fundamentals driving house prices are much more impressive than the 6% cost increase you quote from Victorian regulations for energy efficiency. Thats why the relative cost of land has increased. The earlier postings on this link discuss some important demographic and social forces impacting on supply and demand. A major factor that hasn’t been mentioned much is that land – flattish, flood safe, vacant land - is becoming scarce around our capital cities.

Before we blame koala-hugging conservationists for this, let us not forget that times change, cities get so big that it’s inconvenient to live on their edges and work in the CBD, demand outstrips supply in some markets, and the market determines price. What is a house worth? A house is worth whatever someone will pay for it (plus stamp duty). Why are so many Australians now unable to afford the price of a house? Not because of the solar panels on the roof, or the grey water system! Removing sustainability regulations is not sufficient to substantially affect affordability.

On the other hand many Australian cities face serious sustainability issues, particularly around water supply. Greenhouse, is a serious issue for our civilisation. Every sector of society must bear the cost of change, otherwise all we’ll continue to see is groups pointing at one another saying, “they should change first”. Of-course big polluters like power generators should be priorities, they are, and they’re responding. Governments must always consider impact upon affordability. Housing affordability is obviously important, but in this age of economic rationalism it seems a little petulant to criticise a report on sustainable cities for focusing on sustainability.

While stamp duty, regulations the building industry must comply with (reasonable or unreasonable) and the prices of materials are part of the equation, the most fundamental problem seems to be the location of the land the housing is situated on. You could lower or abolish stamp duty, you could give the building industry free rein but you can't alter the fact that people increasingly need to live in large cities to get jobs and preferably close to their work. That's why Sydney is the most expensive city in Australia to live in. That's why it's cheaper to live in Exeter than London in Britain. In regional NSW you will also find larger centres such as Newcastle are more expensive than remote communities such as Bourke.

This is globalisation at work like it or not. And in the US, the result of this increased need to find work in the cities (because there are few alternatives) is a homeless working class. Unless something happens to push prices downwards you will have a working homeless class of people here. Already bus drivers on the North Shore can't afford to live anywhere near where they work. British agencies advertise in Australian papers for teachers, social workers and nurses. They are some of the most underpaid professionals. And quelle surprise, they can't afford to live in the capital.

Unless we seriously address housing affordability more comprehensively, rather than just complain about environmental regulations and other tangential matters, these trends will continue and homelessness will become a way of life for more people and will be more visible.

Thanks for that comment, Timkins. Yes, poor developers, always losing money... : )

I hate to think where all the rorts are in the building industry, both in small-scale and large-scale developments, apart from the normal value-adding chain of supply of building materials, labour, etc. However, I argue that the process of selling land to the highest bidder is inherently inflationary and unnecessary and ultimately harmful to the social fabric overall.

My website and other writings suggest mandating a govt agency to try to do cost-controlled PPP development on a tender basis on a large scale, as a way around the inefficiencies of property transfers, infrastructure rollout, excessive market prices on land, etc, really to provide a break for the people, rather than for the industry.

I find it interesting that the NSW Labor govt can talk tough about wholesale resumption of land for a $2bn desalination plant 'if it has to', yet cannot provide any relief for land costs for ordinary wage-earning citizens in distress, cries limited budgets and powers, etc.

Regarding family breakups, unnecessary economic stress, excessive commute times, etc, yes, I agree. There's plenty of evidence for that, even for excessive housing costs causing obesity in 20-something year old women -- have a look at my blogspot on this.

Governments like people to be under constant economic stress, it keeps people 'productive' and prevents them from the luxury of thinking.

It's interesting about the percentage land costs your builder friend pays -- i don't know whether the equation is different for a commercial decision to buy a vacant block or do infill than the ordinary single suburban house construction. However, I see land costs in Sydney outstripping the house value by multiples, sometimes. It's often based on development potential. There is a fibro hut in Mascot on a largish (for the area) block of land in a noisy spot which is zoned at FSR 0.5:1, which is pretty limited, and there is no movement by council to rezone or allow subdivision. The building value of the fibro hut could only be $50 000. Asking price? $700 000.