No evidence of supply-side constraints in approvals data

Possibly the central lesson of my previous post was that planning controls and development approvals by local councils are not a factor that limits the quantity of new homes constructed. Council behaviour in these areas could limit housing supply if councils began a system of quotas for approvals. But they don’t. They provide limitations on the location of new supply in their planning instruments, and they approve the quantity of homes demanded by the development industry - which is a reflection of the number of new home sales. Sales volumes of new homes and land determine the rate of supply of new dwellings. 

In my last post I provided no evidence for my assertion apart from logically examining the process of development in a hypothetical scenario.

So is there evidence that councils are limiting the supply of new dwelling through their planning controls and approvals processes?

No.

Let’s look at my home town of Brisbane. The following table shows the stock of approved house lots in Brisbane and surrounding local council areas that are yet to be developed (All data from here - Table 1. Excludes building units and retirement homes).



In Brisbane, where broadacre land is arguable more physically constrained, the stock of approved housing lots has remained relatively constant. And as you would expect, in the fringe areas, the stock of new house lots has grown far more rapidly than sales of lots or construction of housing. This indicates that councils approve far more housing lots than the market can absorb.

Yet it is this development approval that many claim is a hold-up to development.

In Brisbane, this reserve stock equates to about two years supply, while in surrounding areas there is between 3 and 10 years supply (Logan City and Somerset respectively) already approved. Of course, there are many thousands more lots that could be approved under existing planning schemes should demand arise.

Remember, this is just the stock of new land developments. If data were more readily available for unit developments there will no doubt be a similar story (in Brisbane attached homes are about 50% of new stock).

The clear message that comes from actual data on planning approvals is that they are not a constraint to supply. This might be one reason why these figures are never mentioned by ‘supply-siders’, even in the most detailed documents outlining supply side concerns in the housing market such as the 2003 Prime Ministers Taskforce on Home Ownership Report.