There is currently something of a grassroots campaign being formed, around looking at changing the prevailing narrative of how we look at urban infrastructure and in particular, housing. It has the attractive name of "YIMBY" for "Yes, In My BackYard"; as opposed to "NIMBY" for "Not In My BackYard". I think that the campaign is blessed with all of the optimism and naivety of a sheep looking at a Mitsubishi Triton's lights, doing 67km/h towards it - it ends badly and we all get kebabs.
YIMBY has correctly identified what it calls the "missing middle" and I think that this name is apt and brilliant. The so-called "missing middle" which has been identified, is that section of medium density housing between free standing dwellings which make up the majority of suburbia and grand multi-storey apartment complexes, and which doesn't really exist in great swathes of this conurbation we call Sydney. To understand why this missing middle remains missing, it is perhaps helpful to consider how we got here.
Sydney is a relatively young city in terms of the cities of the world. Unlike the cities of the old world like London or Paris, which are wens upon the land with a series of orbital rings like a fungus, or cities constrained by geography like New York City or Tokyo, Sydney started as a single point which then had to claw outwards. Sydney grew along the rutted roads, then the railways, then infilled the motorways later. However this doesn't quite explain the missing middle.
The terraced housing suburbs to the east, were all sold off in blocks and/or built as government housing. IN the grand scheme of Sydney though, this is not normal. Sydney was mainly claimed by sprawly housing developments, with free standing houses on single blocks. This is where the story is.
Unlike England in the 1830s, or Paris in the 1880s, or New York after the imposition of the grid, or even Tokyo which forced houses into small spaces, Sydney never had to. When those places had to replace housing stock, in almost all cases it was like for like but in Sydney, it is not.
The way that land works in Australia generally, is that land is sold with the house. The only way that big apartment complexes happen is when a developer happens to wait and buy lots of free standing houses as a clump. Here's the rub. No developer in their right mind is going to build terrace housing, if they can build a big apartment complex. Why would they? Why build and sell six terrace houses, when you can outlay three times the cost but bring in ten times the revenue. Why build six when you can have sixty? Why replace forty houses with one hundred and twenty, when you can replace them with six hundred and thirty apartments?
And it shows. Medium density housing in Sydney, is unlikely because there is no economic incentive to build it. What used to be cute two bedroom houses in the 1940s, are never replaced with terrace houses, but ten storey archologies.
This is also partly the reason why housing is so ridiculously expensive in Australia. Not only do we allow idiotic taxation policy such as negative gearing and the 50% CGT discount but investment housing is held by property trusts which pay no tax at all and merely make distributions. The myth of the Chinese investor buying up all of the houses, is nothing more than racist claptrap and everyone who pushes it must be considered to be of extreme xenophobic character.
This has by itself created a feedback loop. As property is an insanely easy investment machine, owing to the fact that every single landlord without exception is either absent or derelict or both, then returns on property expressed as rent, are basically the second least effort of all the passive income streams. Banks already control the least effort of all the passive income streams by money lending. It is by no accident that the biggest companies on the ASX200 are mostly banks and property trusts, with a few dirt farming, data farming, and retail farming companies thrown in.
It also helps the feedback loop in that people who pay rent, are excluded from owning houses because they pay rent and money while fungible, still comes with an opportunity cost. In this case, the opportunity cost is forced upon renters and the entire rentier class then gets to plough that money back into buying more property. By the way, that is exactly how the game of Monopoly works, in that the rate of return of developed property is higher than salaries; so at the point when houses start appearing on the board, the game must have a conclusion.
As the eternal pessimist who knows just enough to know how badly the kosmos treats people, I have been blessed with exactly zero power to be able to do anything about it. The weird thing is that I am fine with it. The rich will do as they please and the poor MUST suffer what they must.
Sydney is going through the same kinds of public housing problems that England went through in the 1830s, that New York went through in the 1860s, that Paris went through in the 1880s, and that Tokyo went through in the 1890s. All of those places found an economic solution.
New York more or less suffers continual dereliction and regentrification, London and Paris ended their gilded age through the destruction of 100 million people across the battlefields of Europe in two bouts of unpleasantness, Tokyo solved its problem by helpfully being firebombed by the United States from March 1945 until August of that year.
The economic solution to a housing problem like this is simple and has been exacted in the past. Destroy people. Or destroy capital. Or destroy buildings. Economics which neither fixes nor solves problems but merely converts them from one problem into another, is completely apatheistic to the plight of people.
It does not help that Australia will elect openly tory government roughly 2/3rds of the time. Tory government generally refuses to address any housing issue because that offends their voting base, that is the people with money. This is why the missing middle exists. Pure economics and the rational selfishness of people with money dictates that this is the only solution.
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