A New South Wales state plan to build apartments around Sydney train stations has run into local opposition.
Australia is grappling with a deepening housing crisis. Yet when it comes to the most obvious solution — constructing more apartments — city dwellers are pushing back against taller buildings.
Placards reading “Save Sydney’s Lungs” and “Wrecking Ball Coming to You” were waved by residents and councilors this week protesting a proposal from the New South Wales state government to boost density by allowing six-story apartment blocks to be built around suburban train stations. That will cause social problems, be destructive to the environment and the city’s heritage, opponents argue.
Yet a lack of apartments is causing problems too. Fueled by rapid immigration growth and insufficient supply of new dwellings, more and more people are being priced out of Sydney, where the average home now costs 13 times incomes and surging rents are adding to a cost of living crisis.
“Sydney’s density is so low, it’s just not funny,” said Philip Vivian, chair of the Council of Tall Buildings and Urban Habitat’s Australia chapter and managing director of Bates Smart. “The problem with the city as we have it is it’s clearly inequitable, with workers being forced to live on the periphery, being forced to pay more, travel further to work. It’s unsustainable.”
Sydney clearly has scope to grow, with one of the lowest population densities among major global cities, according to data provided by architecture and urban design firm Bates Smart, which has done planning work for the state government.
Sydney’s Density Problem
The government of Prime Minister Anthony Albanese, who pledged to improve housing affordability on the road to his May 2022 election victory, has called on states to come up with proposals to boost supply, such as the plan from NSW Premier Chris Minns to boost density. But in a nation used to backyard BBQs on quarter-acre plots, such ambitions are running into opposition.
“There is a history where good plans and approved plans have been derailed in the past, so they have a very good chance of doing that again,” Awais Piracha, urban planning academic and practitioner with Western Sydney University, said of the protests. “These are, by the way, white areas mostly. These communities are very strongly organized, very influential, and it is very difficult to implement planning reforms.”
The lack of affordable housing in Sydney is already driving an exodus of people in their 30s and 40s, raising fears from the state productivity commissioner that the harbor city could become a place “with no grandchildren.”
Sydney is the world’s second-least affordable market, after Hong Kong, according to data from Demographia, with the median house price coming in at 13 times household incomes, up from 11 times in 2019. Australia’s second largest city, Melbourne, is ranked ninth.
Sydney Homes Are World’s Second-Least Affordable
Highest median price/income multiples among metropolitan markets
The fate of Australia’s A$2.3 trillion ($1.5 trillion) economy is closely tied to housing, with nationwide home prices breaching all-time highs despite monetary policy tightening by the Reserve Bank since May 2022. Rapid migration together with an ingrained cultural desire to own a home has pushed the household debt-to-income ratio near record highs of 185%, making consumers vulnerable to further interest-rate hikes.
It’s also leading to an inter-generational divide, with the younger cohort increasingly getting priced out of the market and those who can afford to buy ending up with eye-watering mortgages, curtailing their ability to spend in the economy. That helps explain why Australia is in a per-capita recession, where the economy is growing even as households go backwards.
For the central bank, the nation’s housing crisis is a Catch 22. Higher interest rates have dampened dwelling investment — a desired monetary transmission outcome to take steam out of inflation — but that has exacerbated the housing affordability challenges, said former RBA official Luci Ellis. Now, as the central bank mulls when to begin cutting rates from a 12-year high of 4.35%, it’ll need to balance the need for additional investment in residential construction with the need to prevent a reacceleration in inflation.
“The potential wealth effect of a renewed upsurge in housing prices is unlikely to be the main concern,” said Ellis, who is now chief economist at Sydney-based Westpac Banking Corp. “Rather, the issue at present is the low rate of new production of housing in the context of high construction costs and ongoing, if more moderate, population growth.”
Last month, the pro-environment Greens Party launched an inquiry into the NSW government’s so-called Transport-Oriented Development plan, saying it will lead to “unsustainable and poor outcomes for local communities and environments.”
Inquiry chair and Greens member Sue Higginson, who was among protesters this week, said she had received dozens of requests from councilors and community members to challenge the proposal due to concern about the loss of tree cover and pressure on public amenities.
“This is a short-term plan,” Higginson told the roughly 100 protesters on Tuesday in the Domain, a park close to the state parliament building in Sydney. “It is a grab to the property development council and lobby and industry.”
The state’s Department of Planning and Environment told Bloomberg News it is consulting with affected councils and their feedback will “inform the finalization of the program.” The government is committed to implementing the TOD plan, a spokesperson said, which would see six-story apartment blocks clustered within 400 meters of train stations.
With buying out of the question, younger workers and lower-income households have little option but to rent. Those costs are surging too, and not just in Sydney.
Australian Housing Values, Rents Are Surging
“The stress surrounding trying to find a place is insane. That is an awful, awful feeling because it occupies your every waking moment,” said Morgan Sawell, 24, who saw his rent shoot up 41% last year to A$625 ($413) per week — half his income at the time.
“There was just not a chance in hell I was ever going to be able to afford that,” he said. So he looked for a cheaper option, facing serpentine queues for rental inspections with at least 25 other people in attendance, finally settling on a six-month lease for a dingy apartment with shared laundry in a different suburb further from the city center.
Not-in-my-backyard protesters aren’t the only roadblock to higher density and more affordable dwellings. The higher cost of finance, labor and materials have impeded the pace of new construction across Australia, and even when new housing is built, it’s often snapped up by wealthier people for investment or built in coastal towns and rented on platforms such as Airbnb rather than where it’s needed most.
That’s led to calls for more active investment from the government.
“We know the developers will provide housing at the price point at which they can make a profit, so they’re not going to oversupply the market, that’s just not in their interests,” said Patrick Fensham, partner at SGS Economics & Planning, an urban planning and research firm. “We need more government intervention in providing housing supply.”
And for a lasting fix that doesn’t involve ever-increasing sprawl to Sydney’s west, the city will need to embrace more apartments, according to urban planner Piracha.
“People have to realize that things might have to change if the city is to grow,” he said, as not doing so would see the average age of residents rise, reducing economic vibrancy. “Not growing is not a good idea.”
— With assistance from Spe Chen and Emily Cadman
