Environment and Planning A: Economy and Space

On the world stage, Australian cities have been punching above their weight in global indexes of housing prices, sparking heated debates about the causes of and remedies for, sustained house price inflation. This paper examines the evidence base underpinning such debates, and the policy claims made by key commentators and stakeholders. With reference to the wider context of Australia’s housing market over a 20 year period, as well as an in depth analysis of a research paper by Australia’s central Reserve Bank, we show how economic theories commonly position land use planning as a primary driver of new supply constraints but overlook other explanations for housing market behavior. In doing so, we offer an alternative understanding of urban housing markets and land use planning interventions as a basis for more effective policy intervention in Australian and other world cities.

This paper argues that the housing affordability and wealth inequality crises facing advanced economies are driven by the emergence of a feedback cycle between finance and landed property. The cycle has been created by the increasing policy preference for private home ownership coupled with the liberalization of bank credit and accompanying financial innovation. Under such conditions, landed property becomes both the most attractive form of collateral for the banking system and the most desirable form of financial asset for households and investors. The housing–finance cycle emerged in Anglo-Saxon economies in the 1980s but has since spread to most advanced economies. Demand-side reforms, more than the supply-side reforms that dominate policy discussion, are required to break this cycle. Two reforms are discussed: (a) structural and institutional reforms to banking systems, including central banks; and (b) land policy reforms targeted at reducing the potential for rent extraction and speculative profits from property ownership.

Whether appraising development projects or underwriting bonds to finance infrastructure, municipal governments rely on “time value of money” (TVM) techniques to discount and convert hypothetical future cash flows into objects of knowledge in the present. I analyze these calculative techniques through participant observation and interviews with professionals involved in redevelopment projects funded by Tax Increment Financing (TIF) in the Midwestern United States. I find that the TVM assumptions used in models to estimate future values help embed financialized modes of futurity into governance, leveraging the tax base for entrepreneurial urbanism. I describe the contexts in which these techniques are used and, drawing on the literature on the social construction of value, the future imaginaries they perform. I explain why the local state adopts the private sector’s low discount rates and the material effects of this mimicry: inflated estimates of future property values, which are capitalized into larger amounts of public subsidy and, possibly, higher actual values. Future values are also the basis for co-rent-seeking, whereby the state attempts to repay debt on infrastructure through the production of surplus value in land. With institutional support, the techniques and assumptions underpinning these land value capture strategies intensify development and create a reinforcing spiral of asset appreciation.

This article identifies the evolution of, and critiques, unsolicited urbanism—a project of city-shaping favouring powerful market actors but inconsistent with the neoliberal tenet of competition. Marked by predetermined outcomes, unsolicited urbanism legitimates secretive monopolies over specific sites and the normalization of planning-as-deal-making. Such features are not uncommon globally, as circuits of capital seek rent opportunities latent in urban land, and as market actors increasingly exercise power over development decision-making. But following casino-led mega-development in Melbourne (Southbank/Docklands) and Sydney (Barangaroo), Australia, unsolicited urbanism has coalesced as a clearly-identifiable project, inflected by relationships forged in the Asia-Pacific. The project, promoted by coalitions of developers, global capital, state government, and real estate, engineering and financing consultants, targets not just new sites for development, but the planning system itself. At its heart is a novel urban planning instrument, Unsolicited Proposals, that codifies and legitimizes bold and secretive bids for sites and assets over which governments and communities have not signalled intent or need for change. Unsolicited Proposal guidelines solicit premeditated, commercial-in-confidence bids to redevelop key urban assets without outside competition. Originating in two high-profile waterfront sites in Australia, the formalized Unsolicited Proposal planning process has spread elsewhere as a ‘fix’ to ‘unlock’ urban spaces for casino development, infrastructure financing and quasi-privatizations, with foreboding signs of its rapid mobility. The project of unsolicited urbanism connects money and power in new ways to reshape cities, and this analysis shows how a suite of regulatory-technical processes has been reconfigured to make this possible.

What becomes of class when residential property prices in major cities around the world accrue more income in a year than the average wage worker? This paper investigates the dynamic of combined wage disinflation and asset price inflation as a key to understanding the growth of inequality in recent decades. Taking the city of Sydney, Australia, as exemplary of a dynamic that has unfolded across the Anglo-American economies, it explains how residential property was constructed as a financial asset and how government policies helped to generate the phenomenal house price inflation and unequal capital gains of recent years. Proceeding in close conversation with Thomas Piketty's work on inequality and recent sociological contributions to the question of class, we argue that employment and wage-based taxonomies of class are no longer adequate for understanding a process of stratification in which capital gains, capital income and intergenerational transfers are preeminent. We conclude the paper by outlining a new asset-based class taxonomy which we intend to specify further in subsequent work.

The growing significance of housing to wealth inequality in Western societies is now well recognised and widely debated. This paper argues that understanding of the nature and causes of this problem and discussions of potential approaches to addressing it through progressive policy responses are both hampered by adopting a partial perspective on the housing question. Focusing singularly on ownership – how it has been idealised and subsidised, how it might be democratised and so forth – has led to scholars and policymakers tending to neglect the other main tenure form, in strict relation with which ownership always exists both materially and discursively: rental. We can neither understand why and how today’s asset-based inequalities have materialised nor plot realistic and meaningful policy responses unless we conceptualise and approach ownership and rental relationally. Using the United Kingdom and Swedish cases as exemplars, and examining how relevant national policy realities and logics have been constructed over time, the paper further argues that the emergence of significant asset-based inequalities in recent decades is rooted in the policy-driven emergence of significant inequalities – ideological as much as economic – between tenure forms, whereby ownership has increasingly been privileged over rental. If Western societies are to have any credible prospect of reducing existing property asset-based inequalities, preventing those inequalities from being reproduced within younger generations and limiting the likelihood of the re-emergence of comparable inequalities in the future, (re)instituting principles and practices of tenure equality should be made a primary political and policy objective.