International housing affordability (and why planning is to blame)

****

The latest figures on the most and least affordable cities in now out. Unsurprisingly Hong Kong still leads by a country mile:

For the fifth straight year, Hong Kong had the least affordable housing. Its median multiple was 19.0. Sydney became the second least affordable, at 12.2, leaping by 3.2 points, the largest annual increase ever recorded among major markets in the Survey. Sydney displaced Vancouver, which had the third least affordable housing among the major markets, with a median multiple of 10.8. This is up from 10.6 last year. Each of these is the highest median multiple recorded in these markets in the history of the Survey.

Three metropolitan markets tied in fourth position with a median multiple of 9.7, San Jose, Melbourne and Auckland. San Francisco was the 7th least affordable market, with a median multiple of 9.4, followed by London (8.5). San Diego and Los Angeles, which both had a median multiple of 8.1 (Figure 1).

Now there are a couple of important concerns that sit along side this unaffordability - the first is vulnerability to real estate risk (as measured by the delightfully named UBS Global Real Estate Bubble Index:

Overall, the five cities rated by UBS as the most vulnerable are included among the eight least affordable in the Demographia Survey.

And next is that the driver of all this unaffordability, unsustainability and price volatility is the impact of urban containment policies:

Virtually all of the severely unaffordable major markets in this year’s Survey exercise urban containment policy. Meanwhile, no market without strong land use regulation has ever been rated as severely unaffordable in the 12 years of the Survey.

It is irrefutable that urban containment policies - green belts, zoning restrictions, development prioritisation and densification - are the primary driver of unaffordability. The sad thing is that politicians in the places that suffer from this lack of affordability simply deny that planning policies are in any way to blame.

So we can carry on ignoring the negative impact of planning with the resulting sky-high rents and property boom and bust, or else we can start to lift the straightjacket on development.

....