We need more houses, but at what cost?
How do we escape the housing crisis?
We need to massively expand the housing stock. And how do we do that at scale?
High rise apartments.
High rise apartments have to be part of the solution. A big part of the solution.
But there's a problem here. What we're stuck with is a trade off between quantity and quality.
With detached housing, if the builder takes a few shortcuts, it can be a hassle, but it's generally not a major drama.
But when it comes to high rise a couple of dodgy building decisions can create massive dramas.
A couple of weeks ago, The SMH reported that “four blocks of 900 new apartments in Macquarie Park are at risk of collapsing due to “serious damage” to the concrete in its basement”, according to the NSW building authority.
“The agency reported “serious damage and spalling of the concrete slab at the joint locations in basements and the ground floor”.
“This is a defect in a building product or building element that causes or is likely to cause the basement slab to fail, namely, to fracture and collapse, leading to the destruction of the building or any part, or the threat of collapse of the building or any part”, Matt Press, the acting assistant building commissioner, wrote in his published orders.
Pulling down a 200-unit apartment block is a bit more than a weekends work. It's a story.
And the danger is that its something that's going to become a common story. Last week, the AFR reported that regulators are concerned that they've got a crisis on their hands:
The failure of state and territory governments to better regulate apartment development more than five years after a major report laid out necessary reforms means up to half of all new units built could have “serious” defects, construction lawyer Bronwyn Weir says.
Apart from NSW, where new legislation gave Building Commissioner David Chandler powers to halt completion of substandard projects, states and territories had done little to implement recommendations of the 2018 Building Confidence report she co-authored, Ms Weir said.
“On current estimates, 50 per cent of what will be built will have serious defects,” Ms Weir told The Australian Financial Review.
… Part of the hurdle to reform is cost. Reforms to build better-quality apartments that will be more sustainable to operate in the longer term will add more costs upfront, adding to those that have already soared in recent years.
“It’s going to cost more but we’re not going to end up with buildings with defects that saddle owners for decades with cost and stress,” Ms Weir said.
Yeah no kidding! Building an apartment tower that doesn't fall down is more expensive than one that does!
But hey, some luxuries in life are just worth having.
But for me it's just another reason why the housing shortage is going to be with us for decades to come.
We just can't build ourselves out of this one.
JG.
Jack Yuen says
Hi Gian,
I get you BS Fridays in my inbox for years and have not unsubscribed!
Hope that gives you one incentive to keep going on these insightful nuggets that you produce.
I don’t normally comment on websites (although I like to read the comments on my own websites and you tube channels)…
But this time, I would like to ‘weight-in’ with my two cents.
The Building industry is digging a hole for itself – and the government is not helping.
Long ago, tradesmen passed on skill, knowledge and plain pride of workmanship down to the next generation.
When technology took over and higher IQ people migrated to white collar jobs, tradesmen no longer had smart young ones to train up. No one in their right mind wanted to work with their hands building something slowly.
Quick money and social status took over.
Tradies were now low class.
Guess what?
Tradies produced what was expected of them – low class work!
This is what the Australian building industry has become.
I think you follow my train of thought and have some of your own thoughts on how we need to pull ourselves out of this mess.
Look forward to a BS Friday with your take on this.
Have a great ‘Tiger’ New Year. Even though you are a long way from being Asian!
Rudolf Ruyter says
Hi…. I think you too quickly blame the tradesmen…
I know many who take great pride in their work….
Low cost materials, for minimum investment cost is generally NOT a trdy’s responsibility…. developers, architects and accountant should shoulder a significant portion of the blame, as should councils and inspectors…..
The problem spreads far wider than just the tradies…..
Rudolf Ruyter says
Hi Jon…
Affordable housing shortages and high rise quality is in trouble because everyone wants someone else to take responsibility and create solutions…..WITHOUT a basic guidance plan, and thus money (maybe greed too) becomes the main concerning factor…..
There are 3 basic rental housing requirements…
1/ Social housing…… which is definitely a very basic government responsibility..
2/ Affordable rental housing….for those on the lower income scale.
3/ Population housing ….. for those who can afford to choose their preferred rental type.
Unfortunately ….
1/ above looks to be only solved by strategically placed high rise apartment blocks, funded by the government.
2/above is where there is NO PLAN…. and neither government nor private enterprise wished to fund what is considered to be a low profit market for investing….
and
3/ of course is where everyone wishes to invest.
So… 2/above is where the problem exists…..
An easy solution for 2/ above requires a complex basic change in retirement funds investing and taxing…
Super funds currently invest massively overseas…. and still get preferential 15% tax rates., which I think is wrong…..They should only get the low 15% tax rate for income from funds invested in Australia….Make that money come back to Australia by increasing the tax to normal tax.
Superfunds have a total investment wealth of about 3.5 trillion $$$$$
Make the Superfunds invest 20% in Australian profit making infrastructure (that’s 700 billion $$)
Of that 20% make them invest 10% (of that 20%) in low rental cost housing (thats 70 billion $$) by investing in and building many low rise multi apartment blocks randomly throughout society’s general residential areas.
These apartment blocks must be built for a long life as there is no reason for the superfunds to sell them as newer member’s investments will replace retiring member investment.
That would/should ensure quality buildings, plenty of funds for such socially helpful housing investment, and greatly ease the pressure on unaffordable rents for many lower income families….. they will just not have a “dream house and backyard” to rent, but an apartment ……. which looks to be the way of the future housing.
and take the strain of the current/future rental shortages and maybe bring some sanity back into the rental markets.
What do you think…. it would be interesting the hear your thoughts on the above….