House everyone and save a billion

KIRAN MATHUR MOHAMMED

kmmpub@gmail.com

What does a palaeolithic club-dragging Neanderthal and an early-20th-century feminist author have in common? They both agitated for a room (or a cave) of their own. And they probably both still have applications pending for state housing, if our backlog of 176,000 is any guide.

A national award winner is among over 400 homeless people, as Newsday reported last week. Over a fifth of the population do not own their own home, according to a 2014 Central Bank report. And we spend just over $1 billion a year on subsidised housing.

Colonial-era planning rules are costly to comply with and make land expensive. Town and Country Planning has committed planners. But they have limited support and access to research. The current system closely restricts everything from lot sizes, to height limits and usage.

This means that building low-cost housing makes little business sense for private developers. And they need the business. Construction declined by 13.6 per cent since 2014, shedding 14,700 jobs in 2017 alone, according to the Central Bank.

We subsidise demand while restricting supply. This results in inflated house prices and a shortage of low-cost housing.

Rents are out of reach for most young people. Robin Harding writes in the Financial Times that regulations pit “young against old, redistributing wealth to the already wealthy, and denying others the chance to move to where the good jobs are.”

People are more productive in denser urban areas. Zoning regulations distort this by making them less affordable places to live. Economist Andrii Parkhomenko found that deregulation boosts growth by up to 3.8 per cent, reduces house prices by 20-30 per cent and narrows the price gap across cities by up to 24 per cent.

The Government has offered generous incentives for private developers to build social housing. This saves the State $400,000 per house.

The natural extension of this policy is to deregulate the planning system. How might this look? George Mason University economist Alex Tabarrok and Urban Kchoze point to Japan.

Between 1995 and 2015, house prices doubled in San Francisco and quadrupled in London.

Tokyo had just as many new arrivals: but house prices barely budged.

What is Japan doing right? In 2014, Tokyo alone issued more housing permits than England, and almost twice than the entire state of California.

Japanese zoning is national, not municipal. Its central government leverages the fact that it can deploy greater resources and expertise than individual municipalities. Even so, cities still have leeway and can intervene in certain cases, where historic conservation is needed, for example.

Take building heights. In most places (including North America), they are set in a totally arbitrary way by municipalities. Japan outlines clear reasons (airflow, light) and sets guidelines from there. The building can be higher if the street is wider or it is set further back from the street.

Japan also defines just 12 different zones, instead of hundreds as in other countries. This hands-off approach is typical. There is no government mandated distinction between types of residential uses. Either it is residential, or it isn’t.

In the Japanese system, each zone allows a certain maximum amount of "nuisance" (think commercial or industrial activity). Apart from that, anything else is allowed. If you want to build houses in a commercial area, you can.

Public transport (like buses) becomes more cost-effective as density rises. Harvard economist Edward Glaeser has found denser areas are more environmentally friendly. They use less land and reduce traffic pollution.

Lower building costs and restrictions can allow developers to try new models. Millennials marry later. They report feeling lonelier, and crave community. Co-living, where unrelated people share a space on a long-term basis, is growing rapidly. WeLive (a spin-off of WeWork) and The Collective have attracted professionals and young families drawn to the idea of community and cheaper rent or mortgage payments.

The white picket fence is no longer the dream. Netflix personalities like Marie Kondo urge people to downsize and throw out things that don’t give them “joy.” Jay Shafer has popularised “tiny houses” as micro-housing start-ups like Pocket take off. Locally, designers Frank Seales and Alexis Johnston have built a model micro-house in Couva.

Reform is under way. Last month’s planning bill created a national planning authority. A draft zoning code is in circulation. I spoke with prominent developer Emile Elias and urban planner Dr James Armstrong. Each agreed that reform should press on, stressing planning co-ordination and private involvement.

We should build on the momentum and liberalise urban planning. It will drive growth. After all, a (wo)man’s home is his (her/their) sustainable co-living castle.

Kiran Mathur Mohammed is a social entrepreneur, economist and businessman. He is a former banker, and a graduate of the University of Edinburgh