Sunday, March 16, 2008

THE UBIQUITOUS RATIONALE OF GROWTHISM Vancouver and Melbourne victimized by the same sophistry

It’s uncanny. Two cities on two continents, but Growthists in Vancouver and Melbourne seem to be reading from the same playbook.

Lance Berelowitz, an urban planner who chaired Vancouver’s planning commission, praised the Mayor’s so-called “Eco-Density” initiative as the answer to the city’s ever-increasing house prices. Given that between 800,000 to one million new residents are expected to come to Greater Vancouver in the next 25 years, it can be assumed that developmental pressures on the city’s limited land base will steeply drive up land costs. It follows then, that “housing prices in Vancouver will keep going up, unless we substantially increase the housing supply to match the aging demand.”

For Berelowitz it is unconscionable that Vancouver, currently representing about 27% of the metro area’s 2.2 million citizens, continues to throw up a kind of cordon sanitaire around its perimeter and not “shoulder its load” by accepting its share of growth. To do this he offers several European solutions to shove more innovative housing units into the area. But what is interesting about his plan is that he failed to mention Vancouver’s housing surplus. Between 1991 and 2006 Vancouver grew by 126,000 people who required 15,000 new dwellings to house them. But developers built 69,000 units. According to activist Randy Chatterton, judging from BC Hydro statistics, 18,000 units are unoccupied, andMLS listings are up 26% while sales are down 10%. Now there are seven unoccupied apartments for every homeless person in Vancouver.

“Accepting our share of growth” is a standard line of urban planners and politicians. What they never reveal is their role in not only accommodating growth but promoting it. Developers build houses on spec. They are built on the expectation that compliant governments will continue to provide international clientele (migrants) and the monetary and tax policy necessary to lubricate investment in real estate. It is a case study of Say’s Law---supply creates its own demand. Berelowitz never once thought to question the necessity for Vancouver to grow by 45% in the next quarter century. He never thought to consult Dr. Michael Healey’s landmark 1997 study of the Fraser Basin ecosystem that recommended a halt to immigration and a Population Plan defend the region and others like it from runaway population growth. That’s because the ideology of urban planning is not growth-control but “growth management”.

Former real estate developer and media mouthpiece Bob Ransford recently “despaired” of those in Vancouver with, are you ready for this old chestnut, a “drawbridge mentality”, that is, “who think we can resist the global flow of population and somehow sustain our lifestyle.” One wonders what kind of lifestyle Ransford imagines for the Vancouverites forced to live like sardines in a sardine can just so more migrants can move in and buy the bachelor suite closets that his developer friends would obligingly sell them. It seems logical that the law of physics would place a limit on the process of densification that Berelowitz, Ransford and the Mayor would set in motion, but so far they have shown no apprehension of it. And the law of “livability” would surely fall well short of that physical limit.

One wonders how Ransford would behave if he were the last of ten passengers on an elevator that safety regulations set at ten. Would he hold open the door for more people in the lobby who wanted in because he feared being accused of “Nimbyism” or having a “drawbridge mentality”?. Would he suffer an urban planner who insisted that the elevator could hold 12 or 15 people, or a real estate developer who sold tickets to more people than could safely ride on the contraption? Would he listen to a human rights advocate who said that every person of colour from another country had a right to jam on board regardless of the elevator’s carrying capacity because it was a matter of social justice? If it was a matter of profit, one suspects he would. Growthists can’t grasp the concept that existing passengers, existing residents, be they of a city, or a nation, have a moral right to set limits .

Ransford ices his argument with more tired clichés. Cliché Number One: “Our kids will not be able to afford to live in a city where no new housing is built.” Trouble is “our kids” aren’t buying that new housing. In Greater Vancouver 85% of new housing is occupied by immigrants, while 70% of new housing in other Canadian urban centres is occupied by “New” Canadians. Cliché Number Two: “If we halted growth we will have a real labour shortage with our rapidly aging population.” Fact: the C.D. Howe Institute demonstrated that it would take an unsustainable immigration rate 28 times higher than its present rate for the next 50 years for Canada to maintain its present age structure. Postponed retirements and higher productivity will greatly lessen the impact of this over-hyped bogeyman.

Lastly, Ransford recruited the words of retired planner Peter Oberlander who said that compact settlement patterns were an inevitable feature of urban growth especially where we were committed to preserving agricultural land. “The city is humanity’s supreme achievement”, he maintained, in dismissing fears about continued growth. Apparently Oberlander never heard of the failure of “smart growth” in America or the compromise of British Greenbelts by developers or he might be less confident in his “compact settlement patterns.”And when it is recalled that a Greek polis was ideally imagined to consist of 5,000 citizens, one shutters to think that today a city of five million is considered a “supreme achievement”.

In a speech that could have been ghost-written by any of the aforementioned Canadian growth-a-holics, Premier John Brumby of Victoria spoke of his Government’s plan to “manage growth”, because you see, growth is inevitable, and growth projections must be treated as, if anything, “pessimistic”, ie. conservative. Thus Melbourne is going to grow at least 44% by 2030, with 6.2 million people by 2020. “Demographer Bernhard Salt has projected we will regain our title (sic) as Australia’s largest city within 20 years.” Note that the Premier treats a population growth plateau like a sports trophy to be raised aloft in triumph. Melbourne will regain its “title” like Muhammed Ali regained his title against George Foreman. Similarly when Victoria was “losing” people in the 1990s, presumably the state of Victoria was a “loser”. But now “the exodus has been turned around and people are now voting with their feet in favour of Victoria.” It is as if Premier Brumby is fighting an election campaign and people moving to Victoria are casting a vote for him. A commonplace illusion among Premiers, Governors and Prime Ministers

But he does acknowledge the strain that in-migration places on infrastructure and states that a million extra residents will require 380,000 new houses or apartments. Given Melbourne’s growth rate, he projects only a 17 year supply of land, and housing affordability, planning and supply issues demand full attention. He confesses that “the faster we grow the greater the demand on land supply.” Yet the one option that Brumby will not consider of course is to lobby the federal government for a severe cutback on immigration. Out comes a variant of Canadian Cliché Number Two: “we are facing a skills gap of 123,000 jobs over the next decade, which could curb our ability to benefit from the climate change economy.” Victoria attracts 27% of Australia’s skilled migrants, and Melbourne 25% of migrants of all categories. It is curious that the Premier would think that the importation of workers would be key to fighting climate change, when research clearly indicates that the best climate change fighting strategy is reducing population growth.

Certainly the Vancouver experience leads one to question the party line of housing lobby groups that releasing more land is requisite to housing affordability. Australian Property Monitors operations director Michael McNamara argues that “demand for housing is extremely flat and developers haven’t been able to sell the projects that they’ve got, let alone launch new projects—so we totally dismiss the argument that releasing more land on our cities outskirts is going to affect affordability.” ANZ Bank senior economist Paul Braddick says “there is no strong evidence to suggest that a lack of land supply has been driving up prices.” The proof of that is house prices have gone up across the board—indicating it is not just land availability that is the culprit here.” Macquarie Bank analyst Rory Robertson attributes the fact that city house prices have grown 75% faster than wages over the past 20 years to a halving of interest rates, the halving of capital gains taxes in 1999 and massive immigration which chose to settle in the eight capital cities.

Of relevance here is a study done by Bob Birrell and Ernest Healy of Monash University in 2003 entitled “Migration and the Housing Affordability Crisis”. While the authors acknowledge that Melbourne’s housing price spiral “cannot be attributed to recent migration levels,” they qualify their statement with significant findings. “The impact of migration varies sharply by metropolis. For Sydney the share of household growth attributable to net migration in 2001-2002 is 47.8% Migration makes the next biggest impact in Perth where it is projected to contribute 33.5% of household growth, then Melbourne where it constitutes 28.6% of growth in 2001-2002.” By 2021, however, migration will account for 63% of Melbourne’s household growth.

“Developers and builders are already heavily dependent on immigration to sustain their activities in Sydney. Within a decade those operating in Melbourne and Perth will be dependant on immigration for nearly half the underlying household growth. This will apply to Australia as a whole by 2021 when 48.4% of household growth will derive from overseas migration.” It is in this context that the idea advanced by population sociologist Sheila Newman that property developers are key lobbyists for the country’s ecologically suicidal policy of high immigration becomes very plausible. As Birrell and Healy state, “It is no wonder that the housing and property industries in Australia are so keen for high migration.”

That immigration has a crucial impact on housing affordability is not immediately apprehended in any correlation of housing price increases in six major Australian cities with a given volume of migrant settlers. From 1989 to 2002 Sydney increased 30.7%, Melbourne 20.5%, Brisbane 45.8%, Perth23.5% Adelaide 28.1% and Canberra 34.8%. What must be understood, however, is while certainly investors and speculators played a major role in the housing price spiral, immigration boosted their confidence, and without that the spiral would never have taken off. That is why, Birrell and Healy explain, Sydney’s housing bubble remained the strongest, for even if immigrants demanded mainly rental accommodations, “this is still vital to investors if they are to fill their properties with tenants.”

“In the case of Sydney, the intuition of residents and some politicians that immigration is a factor in the housing affordability crisis, is correct. The absence of the immigration component of household growth in Sydney would significantly reduce the underlying gap between demand and supply. There is little doubt that a reduction in the national immigration intake would improve affordability in Sydney.”

“The authors conclude by saying that “Immigration is an important underlying factor shaping growth in demand for housing prices because of its role in household formation…By 2021, according to our projections, the migration component of household formation in Sydney will be around 75%, in Melbourne and Adelaide 60% and in Perth 54%”.

As a rule of thumb, according to Albert Saiz of the University of Pennsylvania, “an immigrant inflow of 1% of a city’s population is associated with increases in average rent and housing prices of about 1% .” (Journal of Economics, Volume 6, Issue 2)

By that token then, immigration has added 18% to the price of Vancouver real estate, or to put it another way, it has reduced the supply of housing stock available to resident buyers and the price mechanism has adjusted accordingly.

The logic of Growthism calls for an increase in supply, for more housing units through more density and/or the release or development of more land. The logic of common sense, however, calls for a decrease in demand, that is, a decrease in tax incentives for real estate investors and speculators and a reduction in migrants.

Whether it be Vancouver or Melbourne, throughout the Anglophone world, the issues are the same, cloaked in the same euphemistic code language of Growthism. The choices are ours to make.

No comments: