New Geography

Author: John Muscat

  • Deindustrialisation in Sydney

    According to property analysts CoreLogic, the Sydney median vacant land selling price has hit $450,000, a massive 20.5 per cent higher than the same time last year. This follows the New South Wales Valuer-General’s January announcement that in the 12 months to July 2016, land values across the city’s north-western and south-western corridors rose by around 25 per cent. Yet a general reluctance to identify out-of-control land values as the prime cause of our housing crisis is matched by a strange indifference to their distorting effects on Sydney’s economic structure. One exception is Michael Cook of Investa Property Group, who recently captured the essential problem. “South Sydney, once the domain of the industrial juggernaut Goodman, is now dotted with high-density Meriton apartments,” he writes. “Where once ‘office’ or ‘industrial’ was the highest and best use, residential is now commanding the big bucks.”

    Cook’s observations are consistent with this account of classic “deindustrialisation” from land economist Alan Evans of Reading University, applicable in many respects to conditions in Sydney:

    It has already been argued that the high price of land will have led to the substitution of other factors for land where this is possible. Where substitution is more difficult, industries will face higher costs, and competition from countries where land or other prices are lower will force them to contract. The net result will have been a shift of production and employment away from some activities which use a lot of space, primarily in manufacturing industry, and towards activities which use relatively little space, primarily services. In this way the planning system will have contributed to the so-called de-industrialisation of Britain over the last 30 years or so.

    While most of our civic and opinion leaders contemplate a “truly global city” for the world’s best and brightest, processes of contraction and dislocation are reshaping Sydney’s industrial base. “The broad trends being observed within Metropolitan Sydney, amplified over the past two years”, said Sass J-Baleh of Colliers International in March, “has been the shift in preference for industrial users, particularly those large users within the manufacturing and logistics industry sectors, to locate further west of Sydney, and the urban renewal of industrial-zoned land in pockets of inner and middle ring areas.” By ‘urban renewal’ she means the conversion of industrial land for residential and ‘mixed use’ purposes, and ‘pockets of inner areas’ means, mostly, the old industrial transportation axis of South Sydney, stretching from Sydney Harbour down to Central Station, Alexandra Canal, Kingsford-Smith Airport and Port Botany.

    In a 2015 report to the NSW Department of Planning, consultancy Urbis note that “industrial land users traditionally located around Sydney’s East and South subregions (ie Botany, Mascot, Banksmeadow etc) have progressively moved west as the city’s population and urban footprint expanded and competition from alternative land uses increases.” Urbis found that in the east and south industrial development has been “priced out … because of their diminishing industrial base (a function of increased inner-city residential densities and planning pressures).” South Sydney industrial land values for larger sites reached $700 per square metre in 2012, say Urbis, while south west and outer south west values were as low as $300 and $250. In the case of industrial development that differential has a large impact, since it’s “delivered at lower margins than development for other land uses.” In other words “land value has a greater role in determining the overall feasibility of development.”

    Colliers report that South Sydney land and capital values achieved a record growth rate of 19.4 per cent over 2016.

    Across metropolitan Sydney, 35 hectares of industrial land was rezoned for other uses in 2013, of which 18.3 hectares was rezoned for medium-density housing. Unsurprisingly a high 79 per cent occurred in Botany Bay LGA (Local Government Area), the lower sector of the old South Sydney hub closest to the port, encompassing Mascot, Botany and Banksmeadow (renamed Bayside LGA in September 2016). While local industrial land values reached $850 per square metre in 2014, the equivalent figure for residential values in Mascot was $1,385. Hence the observation by Colliers’ Edward Princi in 2015, that “residential approvals and rezoning have reduced the traditional industrial base of the city’s south by about 2 million square metres.” CBRE Research estimate that South Sydney will lose 210,000 square metres of industrial stock over the next 5 years. In contrast, the residential populations of Botany Bay LGA and City of Sydney LGA were forecast to grow by 23 and 30 per cent respectively.

    From the gentrified, inner-city band around the CBD, City of Sydney LGA extends down to the industrial zone’s northern Alexandria-Waterloo-Zetland sector. Here residential land values are more than triple those of Botany Bay, as much as $4,751 per square metre in the old factory suburb of Waterloo, just 4 kilometres south of the CBD. “Greater high density development and ongoing gentrification are underpinning the evolution of South Sydney from a blue collar, industrial working class area to an upmarket, mixed-use precinct with a rapidly growing local population”, say agents Jones Lang Lasalle. In June 2015, City of Sydney Council rezoned what are officially called the Southern Employment Lands (“employment lands” are roughly equivalent to industrial lands in NSW planning jargon) to allow for a range of other business activities and housing (parts like Green Square were already the subject of special arrangements). This may just be a case of responding to pressure from landowners, but Lord Mayor Clover Moore’s “green, global and connected” administration would have needed little encouragement.

    By the 1940s, Alexandria/Waterloo was the “largest industrial municipality in Australia”, 415 hectares crowded with 550 smokestack factories churning out products as diverse as soap, tallow, fertilisers, springs, brushes, aircraft, storage batteries, furniture, sporting goods, glass, matches, industrial gases, paper containers, paints and varnishes. “The Birmingham of Australia”, was its nickname. Today Alexandria, Waterloo and Zetland converge on a very different landscape. “One of the largest urban renewal projects undertaken in Australia”, Green Square is a complex of towers providing 20,000 new apartments around a Town Centre with two public plazas, at least one park, an ‘urban stream’, an aquatic centre, a library, and an underground railway station. With an estimated 2030 population of 61,000 packed into 2.78 square kilometres, it will be the country’s most densely populated urban area. The economic principle, elaborated by Evans and others, that “capital is substituted for land in the production of space as land becomes more expensive”, is thus borne out.

    Other parts of industrial South Sydney are being similarly transformed. In 2015 alone, no less than 1,701 apartments were planned or being built amidst the derelict factories and workingmen’s bungalows of neighbouring Rosebery.

    While South Sydney was the heartland of the old industrial zone, it also branched off along the south shore of the harbour west of the CBD, where waterfront sites attracted bulk commodity processing industries reliant on seaborne transportation. Among them the woolstores at Darling Harbour, timber sawing at Rozelle Bay, coal-fired power generation at White Bay, sugar refining at Pyrmont, then further west as Sydney Harbour becomes the Parramatta River, livestock slaughter at Homebush Bay, iron ore smelting at Rhodes, coal-fired gasworks at Mortlake, and oil refining at Camellia. Over the decades, these industrial hubs were uprooted by rising land values and rents, and factors like the availability of motorised transportation. For instance, Urbis point out that between 1993 and 2012 (before the most recent explosion in prices) standard residential land values within a 15 kilometre radius of Sydney CBD rose at double the rate of small industrial land values, by 8.38 per cent and 4.44 per cent respectively.

    Mostly, the old waterfront sites were rezoned for residential, commercial or recreational purposes, but not other industrial uses. Darling Harbour is now a convention, exhibition and entertainment precinct. Rozelle Bay and White Bay, along with Johnston Bay and Blackwattle Bay, are part of The Bays Precinct, an urban renewal plan for mixed use and 16,000 new dwellings on 95 hectares of derelict waterfront land. The small peninsula of Pyrmont is currently Australia’s most densely populated suburb following the completion of Jacksons Landing, a planned community featuring five massive high-rise apartment blocks. Redeveloped as the site of the Sydney Olympics, Homebush Bay is the subject of a 2030 Master Plan for several 45-storey residential towers housing 21,000 more people in 10,700 new apartments. At Rhodes, a project allowing up to five 25-storey buildings will take the expected population to 11,000, “making it one of the most densely populated areas of Sydney outside the CBD.” And Camellia has its own government Land Use and Infrastructure Strategy, proposing “a town centre … public plazas, high-rise apartments and parks.”

    Dislocating land values are having an impact beyond the traditional zones, however. Now they are rippling out to the secondary or middle ring of industrial sites in Sydney’s central west region. From the 1960s and 1970s, places like Blacktown, Holroyd, Rydalmere, Rosehill, Silverwater, Chullora, Villawood, Milperra, Smithfield, Moorebank and Wetherill Park emerged as industrial centres in conjunction with the shift of working class population to the western suburbs and highway upgrades. Urbis identify Smithfield, Wetherill Park and Chullora, along with South Sydney, as locations from which industrial operators are relocating to the outer west and south west.

    Ray White Commercial’s head of research Vanessa Rader explains that “the market extending from Enfield to Moorebank, taking into account regions such as Milperra, Villawood and Chullora in recent years, has been contracting due to competition from other uses such as retail and residential, resulting in increases in land value …” She describes the region as “home to manufacturing, fabrication and wholesale type uses.” Similar analysis came from CBRE’s Raj Chaudhary, who said “the withdrawal of about 100,000 square metres from the central west industrial market, due to rezoning and conversion to residential, is reducing supply in an already tight market …” Last year’s sale of 3 warehouse units in Holroyd for a price equivalent to more than $3,000 per square metre was “the highest industrial per square metre building rate ever achieved in the area.”

    These processes of contraction, dislocation and relocation have transformed Sydney’s industrial geography. According to the NSW Department of Planning’s last Employment Lands Development Program (ELDP) report, 79 per cent of Greater Sydney’s total zoned employment lands, and 93 per cent of the 22 per cent zoned but not yet developed, are now in the central west, south west and outer west subregions. This is up from 60 per cent of all employment lands in 1991, say Urbis. The question is whether planning authorities are supplying enough zoned land serviced with water, sewerage, electricity and road connections on the western periphery to meet demand from new operators and those driven out of other locations, and to relieve pressure on land values generally. While this will receive more detailed treatment on another occasion, the evidence suggests they are failing. “Under the average take-up rate of 163 hectares per annum there is only 2.8 years of supply”, says the ELDP report, “this does not meet the supply standard for undeveloped and serviced land (5-7 years supply).” Malcolm Tyson of Colliers warns that Sydney could run out of industrial land in just 6 years. Dreaming of “global city” amenities like dense housing, commuter rail, walkability and bike paths, our planning elites may be occupied elsewhere. But this is a crisis in the making.

    John Muscat is a co-editor, along with Jeremy Gilling, of The New City, a web journal of urban and political affairs.

    Photo: Derelict White Bay Power Station, Rozelle, Sydney, 2014

  • The ABC of Making Housing Unaffordable

    On 12 December, ABC Radio National’s Breakfast Program aired another group discussion on “Australia’s housing market”. Presenter Hamish Macdonald was joined by an “expert panel” made up of Ken Morrison, CEO of the Property Council, John Daley, CEO of progressive think tank the Grattan Institute, and Tom Whitty, managing editor of The Project, a television show pitched to the youth demographic. The conversation ran along predictable lines.

    All three panelists agreed that housing affordability was a real problem, especially in Sydney. But they took up positions on various sides of the issue. Generally speaking, Morrison argued for a supply-solution and dismissed demand-management or tax reform. Daley supported a supply-solution, but insisted that some demand-management and tax reform was essential. Whitty rejected a supply-solution altogether, and thought it was all about demand-management in the form of abolishing the tax concessions for negative gearing and capital gains. “We’re manipuating demand”, he said.

    Neither Morrison nor Daley acknowledged that greenfield development offered any advantages relative to inner-ring infill. Daley repeated his blinkered point that jobs growth is all in the centre. There was no mention of the land value impacts of limiting peripheral supply, a near universal policy across the country. Daley seemed to think all new housing should be concentrated within a few kilometres of the CBD. Bizarrely, he held up Vancouver and Portland (Oregon) as cities that got their housing location right, failing to mention that they are amongst the least affordable places on earth. Morrison made no objection to any of this.

    In terms of the system of interests set out in our last article, “Sydney lurches to housing affordability disaster”, Morrison expressed the position commonly held by the Big Projects coalition, while Daley and Whitty repeated views popular with the knowledge-welfare elite. Typically for the ABC, nobody argued for suburbanisation and greenfield expansion, policies of particular benefit to the worker-trader class of industrial and routine service workers and small traders.

    A striking feature of the discussion was how the demand-management crowd are utterly impervious to evidence. Morrison cited estimates by Grattan and the McKell Institute that abolishing the tax concessions would lower prices a puny 0.49 or 2 percent. Despite failing to offer any counter-evidence, Daley and Whitty were unmoved. Daley shifted onto the different point of whether the cost to the federal budget is equitable, and then started talking about the rental market. Whitty just fell back on anecdotes about the type of bidders succeeding at auction sales. Macdonald’s sympathies were clear all along, at one point becoming testy with Morrison for refusing to concede that the concessions are central.

    This feeds into the false narrative being built up by the ABC and other media outlets, particularly catering to a younger audience. It’s all the fault of greedy oldies or wealthy investors with their snouts in the trough. The impulse is to slap taxes on the scapegoats. In the meantime, the real causes go undiscussed and the problem keeps getting worse.

    This piece originally appeared at The New City Journal.

  • Sydney Lurches to Housing Affordability Disaster

    Now and again Australia erupts in controversy about housing affordability. Each time it follows the same course. Some new statistic or media story confirms that prices are out of control. A senior politician is prompted to call for deregulation and more supply, and is backed-up by the property industry. Then come progressive policy wonks saying no, the issue is high investor demand stimulated by tax concessions. Next emerge the welfare lobby, calling for tax reform as well as more social housing and “inclusionary zoning”. After a round of claims and counter-claims, it all fizzles out.

    From the surveyed general public to the Reserve Bank, almost everyone agrees Sydney has a critical problem. The wrangling isn’t over whether to reduce prices, but how. And that depends on where you fit in the city’s system of interests with a stake in property development and construction.

    Conflict of interests

    Generally, these fall into three groups, with their distinct agendas.

    First, the producers and beneficiaries of Big Projects; large-scale housing and urban renewal schemes, particularly high-end apartment developers, top-tier architectural practices, urban planners, rail transport engineers and “sustainability” consultants. Joining them are governments levying value-based property charges, financial institutions with large home mortgage books, and media groups dependent on luxury apartment advertising. “Three of the biggest forces pushing up dwelling prices (the banks, state governments and councils) are like drug addicts”, writes Robert Gottliebsen, “they are hooked on keeping dwelling prices at the current levels or increasing them further”.

    The high-land-value coalition’s agenda encompasses residential densification, preferably on infill or brownfield sites, transit-oriented-development (TOD), and a tendency to CBD-centrism. On the whole, they are supply-solution advocates and support tax concessions.  

    Second, progressive policy analysts and welfare advocates, closely aligned with the university system and highly educated knowledge-worker elite. They, too, promote inner-urban infill development, higher core and middle-ring densities, and public amenities associated with TOD. While the Big Project coalition is mostly driven by finances, cultural-lifestyle factors loom large for knowledge-welfare types. Hence their demands for more housing near “consumer city” localities crammed with trendy bars, pubs, nightclubs, restaurants, cafes, art galleries, theaters, museums and cinemas. This plays into “creative-class” perspectives on economic growth and an aversion to suburbanization as “unsustainable”. Some of them are supply-solution sceptics, leaning toward demand-management, and most are aggressive critics of tax concessions. They urge more social housing schemes and inclusionary zoning, which Big Project lobbies oppose (with good reason; the evidence suggests it reduces supply and raises prices).  

    Third, fringe or greenfield detached house builders, the mass of low-to-middle income industrial or routine service workers, low-level government employees, marginal small traders, in industries like retail, wholesale, logistics, transport, distribution, manufacturing, construction and trades. This worker-trader class is particularly sensitive to input costs, including the impact of high land values on commercial rents. Many rely on real estate as security for financing and gravitate to homes, offices and plant in low-cost, peripheral, auto-oriented regions like Greater Western Sydney.

    There is some overlap between the groups, with elements of the Big Projects coalition, architects, urban planners, sustainability consultants and engineers, crossing over to the knowledge-welfare elite. Apartment developers routinely deploy creative-class and green arguments for proposals which are integrated into broader densification—TOD zoning and infrastructure arrangements.

    Past affordability eruptions were blown off course by the tax issue. Eventually, Labor embraced reform of negative gearing and CGT concessions as policy, urged on by think tanks like Grattan Institute and McKell Institute, prominent knowledge-welfare voices. Yet according to their own estimates, prices would fall by a measly 2 and 0.49 per cent respectively.

    Considering that Sydney prices have escalated by a staggering 64 per cent since 2012, the focus on tax reform is a distraction. Economists like Judith Sloan and Stephen Koukoulas maintain that if there are any tax impacts at all, they are secondary to supply constraints rather than vice versa.

    Most of the Big Projects coalition and worker-trader class subscribe to a supply-solution in principle. But there are differences on what this means in practice. An explicit apportionment of new housing between brownfield-infill sites and greenfield development was dropped from the NSW Government’s A Plan For Growing Sydney. An outcome is achieved by focusing on 14 Priority Growth Areas and Precincts, only 5 of which contain substantial greenfield potential.

    Growth Areas inside established built-up localities are Rhodes East, St Leonards and Crows Nest, Greater Parramatta to Olympic Peninsula, Sydney Metro Northwest, Sydenham to Bankstown Corridor, Western Sydney Employment Area, Epping and Macquarie Park, Arncliffe and Banksia, and Ingleside Precinct. The outer, peripheral areas with most capacity for new land release or greenfield development are North West Growth Area, South West Growth Area, Greater Macarthur Growth Area, Western Sydney Growth Area and Wilton New Town, which lie within seven Local Government Areas (LGAs); Blacktown, The Hills, Camden, Campbelltown, Liverpool, Penrith and Wollondilly Shire.  

    Under A Plan for Growing Sydney, the authorities are planning for an additional 1.6 million people and 664,000 dwellings across the Sydney metropolitan region by 2031. According to NSW Department of Planning “state and local government area household and implied dwelling projections” to 2031, Blacktown LGA will have 48,300 new dwellings, The Hills LGA 28,650, Camden LGA 38,250, Campbelltown LGA 19,450, Liverpool LGA 32,400, Penrith LGA 20,900 and Wilton New Town, in Wollondilly Shire, 16,000 dwellings. In other words, these fringe priority areas are to accommodate an additional 203,950 dwellings, or around 30 per cent of the extra 664,000 dwellings across metropolitan Sydney.

    Of course, not all construction in the 7 peripheral LGAs will be on new land, so the share of total dwellings on greenfield sites will be even lower. The Urban Development Institute of Australia (UDIA) estimates that Sydney greenfield lot production is running at 11,600 a year and will reach 12,355 a year in 2017/18. If achieved, that translates to 185,325 or 27 per cent of the 2031 metropolitan dwelling forecast (equating a fringe lot to a single dwelling). 

    This month, the Department of Planning released accelerated forecasts totaling 184,300 new houses and apartments across the 33 metropolitan LGAs by 2021. Of these, 8,350 are assigned to The Hills LGA, 13,600 to Blacktown LGA, 11,800 to Camden LGA, 6,700 to Campbelltown LGA, 8,050 to Liverpool LGA, 6,600 to Penrith LGA and 1,450 to Wollondilly Shire. Together, these represent 30 per cent of the metropolitan total. Large increases are channeled into established areas, including 21,450 in Parramatta LGA, 18,250 in Sydney LGA (covering the CBD and surrounds), 12,200 in Canterbury-Bankstown LGA and 10,000 in Bayside LGA. NSW Planning Minister Rob Stokes boasted “we are getting the balance better … getting over the greenfield issue was the biggest thing that needed to be done”. The targets were to be fleshed out in Draft District Plans administered by a new planning politburo, the Greater Sydney Commission (GSC).  

    Within days, however, the GSC announced its own strategy and targets. The total housing target is distributed to 6 Districts across the city, Central, North, West Central, West, South West and South, rather than Priority Growth Areas. Based on a metropolitan total target of 725,000 dwellings for 2 million more people, each Draft District Plan nominates a 20 year target to 2036. The South West District contains 4 of the peripheral LGAs with most potential for greenfield construction, Camden, Campbelltown, Liverpool and Wollondilly. Its 20 year housing target is 143,000 dwellings, or 19 per cent of the metropolitan total. Of the other 3 LGAs with most greenfield potential, Penrith accounts for just part of West District’s target of 41,500 dwellings or 5 per cent of the metropolitan total, while Blacktown and The Hills are in West Central District, which is dominated by Parramatta LGA with minimal new land release capacity.

    Higher the density, higher the prices

    Suppression of greenfield development reflects a view that location and density don’t condition the benefits of supply. Yet this is contrary to a body of economic analysis on the land value impacts of urban containment. Citing LSE economist Paul Cheshire, commentator Phil Hayward gives a cogent account of this in “The Myth of Affordable Intensification”.

    Hayward explains that the more density allowed, the higher the average housing unit price becomes. Cheshire put this down to a bidding-war at the margins of each income-level cohort of society for slightly more space. The less average space available per household, the more intense is the bidding-war effect. Site development potential in an urban land market with a regulatory limit on land supply, writes Hayward, seems to capitalise into site values. When the market allows people to consume as much space as they want, the bidding-war effect is absent.

    Urban land economists like Cheshire and Alan Evans at Reading University consider housing a complex good … consisting of many attributes bundled into one composite good. The land base is a particularly important attribute. With rising population and incomes, restrictions on the quantity of land at the periphery ratchet up values across the whole urban region. The evidence that fixed urban growth boundaries put upward pressure on land and thus house prices is clear. While no formal boundary is proposed for Sydney, delimited Priority Growth Areas and GSC Districts have the same effect, operating as land value traps. Between 2009 and 2014, the Sydney median greenfield lot price ballooned from $269,000 to $339,750, reports the UDIA, even though lots released per annum rose from 2503 to 8597.

    To subdue prices, Cheshire argues in a 2009 paper, it isn’t enough to rezone and release enough residential land to meet anticipated demand:

    If we are to provide stable prices … what we need to predict is the effective demand for housing and garden space given that it is the quantity of land that the system allocates. Then we have to allocate not just the quantity of land predicted as being compatible with price stability but more. Not all the land allocated as available for development will actually be developed. One rule of thumb suggested is that this implies allocating 40 per cent more land than the estimated demand indicates is needed.

    In Sydney’s case, the authorities aren’t just failing to supply a buffer of land above population and demand projections. Worse, their targets and greenfield-infill ratio are shaped by bureaucratic value judgements on where people should settle, rather than land markets.

    On top of this, proximity to amenities is another housing attribute which capitalises into prices. Advocates of TOD demand more housing near public transport hubs, or, better coordination of land use and transport infrastructure, as they put it. But evidence from the US suggests that land values within 800 metres of mass transit can rise by up to 120 per cent. Adjacent property prices can rise by 32 to 45 per cent. 

    Opponents of fringe development object that the housing will be too far from jobs, assuming monocentricity or concentration of jobs in the urban core. Yet the Long-Term Public Transport Plan For Sydney found that of the jobs supposedly in centres, 37.1 per cent were actually spread over 33 dispersed locations. Only the CBD with 12 per cent and South Sydney with 2.5 per cent had more than two per cent of the total. The other 62.9 per cent were scattered randomly.  

    Investigating whether outer suburban workers have extra long commutes, in fact, Alan Davies concluded average commute times don’t vary a lot geographically within large Australian cities. Peter Gordon of the University of Southern California has researched commute times in American cities over decades, reporting remarkable stability of travel times across inner and outer metropolitan sectors despite population growth. Many individual households and firms ‘co-locate’ to reduce commute time, he explains, and this spatial adjustment [is easier] in dispersed metropolitan space.

    One advocate of inner-ring densification denied that it relies on price-hiking growth boundaries, claiming that relaxing floor space regulations in an Alonso-type model will give the same [densification] effect, with infinite city size. However, the Alonso model incorporates an artificial assumption of monocentricity. Higher paying professional jobs may locate closer to the core, on average, than lower paying jobs. But it’s lower paid workers who are most in need of cheaper housing. Recently, Grattan Institute’s John Daley wrote “it’s important that new supply is focused on the inner and middle rings – 2-20km out of the CBD – of our large cities … new developments on the edge tend to be a long way from where additional jobs are being created”.

    In other words, he propagates the myth of monocentricity and implies that worker-trader jobs don’t count.

    NSW Treasurer Gladys Berejiklian has announced that residential construction activity in NSW has hit an all-time high. But if that construction is funneled into increasingly expensive sites, Sydneysiders face a recurring home ownership nightmare.

    This is an edited version of an article first published on The New City.

    John Muscat is a co-editor, along with Jeremy Gilling, of The New City, a web journal of urban and political affairs.

    Photo: Photograph by Gnangarra [CC BY 2.5 au], via Wikimedia Commons

  • The Illusions of Charles Montgomery’s Happy City (Part 2)

    This is the second of a two-part series discussing Charles Mongomery’s Happy City. Read part one here.

    ‘The system that built sprawl’

    Montgomery faces the hurdle of explaining why, if low-density suburbs cause unhappiness, so many millions of people, over so many decades, across several countries, flocked to that way of life. As he writes, ‘since 1940, almost all urban growth has actually been suburban.’ He must account for this fact, even though it means little to him personally. For the green-tinged intelligentsia, working and middle-class people are pawns who rarely think for themselves.      

    Still, in Montgomery’s case the hurdle is high, since his objections to dispersion go much further than conventional gripes about fragile economic foundations. Happy City does peddle the myth, in passing, that the financial crisis brought suburbanisation to a crashing halt. There’s an assertion that ‘census data in 2010/2011 showed that major American cities showed more growth than their suburbs’, and a hope this points to forces ‘systemic and powerful enough to permanently alter the course of urban history’. Montgomery even compares buying a detached home on the urban edge to ‘gambling on oil futures and global geopolitics’. As it turns out, he misconstrues the available data. Suburbanisation barely missed a beat in the United States and continues in earnest. 

    Montgomery’s essential point, though, is that suburban life is contrary to deep-seated human yearnings. This endows him with an even more patronising attitude to working people than his forerunners Richard Florida – who endorses the book – and Edward Glaeser. One line of argument in Happy City, which also features in Glaeser’s Triumph of the City, claims dispersion was forced on people by greedy land owners and property developers in cahoots with weak-kneed or compromised politicians and officials.

    He puts it his way: ‘sprawl, as an urban form, was laid-out, massively subsidized and legally mandated long before anyone actually decided to buy a house there … it is as much the result of zoning, legislation and lobbying as a crowded city block.’ In another chapter, Montgomery warns of the challenge for pro-density New Urbanism: ‘the system that built sprawl – huge state subsidies, financial incentives and powerful laws – is still in place.’ Popular preferences don’t even rate a mention. Similar comments appear throughout the book, adding up to an audacious feat of historical revisionism.

    The standard interpretation of urban evolution, from the walking city to the monocentric and then polycentric metropolis, places breakthroughs in transport technologies first, most notably railways, streetcars (trams) and affordable motor vehicles, followed by mass shifts in transportation modes and population movements second, with land owners and politicians ready to exploit the new conditions. Of course, transportation technologies have such a powerful impact because of pent up demand for space and lower densities.

    Essentially, Montgomery reverses the causative sequence, claiming government and business interests dragged people to the fringes and this induced a transformation of transportation modes, which may or may not have been viable under prevailing technologies. This anomalous theory puts him at odds with some of the most recognised urban thinkers:  

    • Lewis Mumford in The City in History: ‘what has happened to the suburb is now a matter of historic record … as soon as the motor car became common, the pedestrian scale of the suburb disappeared …’
    • Peter Hall in Cities in Civilization, discussing Los Angeles: ‘the car was doing more than decentralize; it was decentralizing in a new way’.
    • Robert Bruegmann in Sprawl: A Compact History: ‘families wishing to live at lower densities could be seen as the primary cause of the growth in … the railroad, public transportation and finally the automobile industry … each of these means of transportation did, in fact, give families increased mobility.’
    • Joel Kotkin in The City: A Global History: ‘as automobile registrations soared in the 1920s, suburbanization across the rest of [the United States] also picked up speed, with suburbs growing at twice the rate of cities.’
    • Shlomo Angel in Planet of Cities: ‘a third and more radical transformation, from the monocentric to the polycentric city, began in the middle decades of the twentieth century with the rapid increase in the use of cars, buses, and trucks.’

    Such quotes can be piled up all day long.    

    Happy City is open to the same criticism as Glaeser’s book, namely that as a matter of chronology, urban dispersion took off before the interstate highway system, tax deductibility of home mortgage interest, the relative decline of inner-city schools, many development controls, and other factors cited by both as having pushed Americans to the periphery. In Downtown: Its Rise and Fall 1880-1950, Robert Fogelson explains that ‘by the mid and late 1920s, however, some Americans had come to the conclusion that the centrifugal forces were beginning to overpower the centripetal forces – or, in other words, that the dispersal of residences might well lead in time to the decentralization of business.’ And suburbs have been popular in countries other than the US, like Australia, where these sorts of factors are absent.

    Blinded by science

    For his part, Montgomery envisages an alternative past, in which demands for space and mobility hardly figure. ‘Well, the path that led … to today’s sprawl was not straight’, he writes, ‘it meandered back and forth between pragmatism, greed, racism and fear.’ Rewriting history may be audacious, but that’s just the beginning. The book doesn’t stop at denouncing suburbanisation as a form of organised compulsion. Montgomery’s ultimate purpose, drawing on ‘happiness science’, is to expose suburban life as a mass delusion. ‘We need to identify the unseen systems that influence our health and control our behaviour’, he writes.     

    Much of Happy City is devoted to a succession of studies and experiments by a range of neuroscientists, psychologists and behavioural economists on the conditions that stimulate feelings of well-being and contentment. Montgomery focuses on research into different spatial environments: densely or sparsely populated, high-rise or street-level, crowded or uncrowded, mixed-use or homogenous, auto-dependent or walkable, near or far from nature, and so on.

    Many people have no clue that their deeper inclinations are out of synch with their surroundings, he maintains, painting a less than flattering portrait of human nature. ‘The more psychologists and [behavioural] economists examine the relationship between decision-making and happiness,’ he repeats in various ways, ‘the more they realize … we make bad choices all the time … in fact we screw up so systematically …’

    Building a case that most of us are hobbled by delusions, Montgomery delights in claiming ‘we are far less rational in our decisions than we sometimes like to believe …’, and ‘we regularly respond to our environment in ways that seem to bear little relation to conscious thought or logic.’ Personal motives can be reduced to a stew of physiological and chemical stimuli, all summed up in a single paragraph:  

    Neuroscientists have found that environmental cues trigger immediate responses in the human brain even before we are aware of them. As you move into a space, the hippocampus, the brain’s memory librarian, is put to work immediately … it also sends messages to the brain’s fear and reward centres … it’s neighbour, the hypothalamus, pumps out a hormonal response … before most of us have decided if a place is safe or dangerous … places that seem too sterile or too confusing can trigger the release of adrenaline and cortisol, the hormones associated with fear and anxiety … places that seem familiar … are more likely to activate hits of feel-good serotonin, as well as the hormone that … promotes feelings of interpersonal trust: oxytocin.

    Nowhere is it acknowledged that if rational choice is devalued, people might end up being treated less like autonomous citizens and more like laboratory rats. Happiness ‘can’t be summed up by the number of things we produce or buy’, the book insists, ‘but the firing synapses of our brains, the chemistry of our blood …’

    Montgomery proceeds to grab hold of anything that discredits the real-life choices of suburbia’s teeming millions. One of many concepts he takes from neuroscience is ‘information propagation’. By operation of the hippocampus and other parts of the brain, we are told, our ‘concept of the right house, car or neighbourhood might be as much a result of happy moments from our past or images that flood us in popular media as of any rational analysis.’ From psychology he borrows the concept of ‘adaptation’, described as a ‘characteristic that exacerbates such bad decision-making [namely] the uneven process by which we get used to things.’

    He considers these important explanations for the appeal of suburban lifestyles when denser neighbourhoods are better for physical and mental health, at least according to his interpretation of studies and experiments on walking, cycling, social encounters, community activities, public space, streetscapes, grid planning, on-street parking and traffic velocity.  

    But his method of selecting a body of research, cobbling the results together, and equating this to the preconditions for a happy life, suffers from a fallacy of composition ─ the error of inferring that something is true of the whole from the fact that it is true of some part of the whole. Although Montgomery claims ‘most people, in most places, have the same basic needs and most of the same desires’, it doesn’t follow that research findings on parts of life should add up to a real whole life.

    Kirk Schneider, a prominent American psychologist, writes in Psychology Today that ‘prevailing studies of happiness … represent but a circumscribed range of how such phenomena are actually experienced on the ground, so to speak, in people’s everyday worlds.’ Schneider cautions that ‘those things represent only slices of life, not life itself.’

    There’s no reason why urban planning should start from abstract assumptions drawn from a bunch of controlled experiments, rather than from masses of people weighing up their full, lived experience.   

    In this and other ways, the book succumbs to a disturbing strain of authoritarianism. History teaches us to beware a state that deals with people through the prism of theories which second-guess their inner thoughts and feelings, rather than according to their outward conduct. Freedoms are at risk whenever powerful functionaries claim to know what people are thinking, because of ‘false consciousness,’ ethnic stereotypes, biological determinism, or whatever. And Montgomery is no freedom-fighter: ‘we are pushed and pulled according to the systems in which we find ourselves, and certain geometries ensure that none of us are as free as we might think.’  

    ‘Make them feel rich’

    In the end, Happy City fails to prove the assertions trumpeted in its opening pages. It fails to produce any direct evidence connecting flatlining assessments of well-being or rising rates of depressive illness to ‘sprawl’. Nor is there any indirect evidence from which a connection can be inferred. Just as research on parts of life don’t add up to a whole real life, neither can studies and experiments finding discontent in particular conditions translate to generalised disenchantment with a whole way of life.

    Montgomery’s style is to fill the gaps with a series of conveniently chosen anecdotes and vignettes, some designed to trash suburbia and others to wrap a glowing aura around transit-oriented density. Randy Straussner’s super-commuting horror story, which never goes away, is an example of the former. But the star of the book, and prominent case of the latter, is ‘The Mayor of Happy’.

    At the helm of impoverished Bogota between 1998 and 2001, Enrique Penalosa cancelled a highway expansion plan, used the funds for hundreds of miles of cycle paths, hiked fuel taxes by 40 per cent, banned drivers from commuting by car more than three times a week, introduced car-free days, dedicated a new chain of parks and pedestrian plazas, and built the city’s first rapid transit system. This made him a guru to green urbanists like Montgomery, who was inspired to write Happy City.

    ‘We might not be able to fix the economy’, Penalosa is quoted as saying in the book, ‘we might not be able to make everyone as rich as Americans … but we can design the city to give people dignity, to make them feel rich.’ Confronting an unemployment rate of 18 per cent when Penalosa left office, however, many Bogotans would have longed for the real thing. 

    John Muscat is a co-editor of The New City, where this piece first appeared.

  • The Illusions of Charles Montgomery’s Happy City

    This is part one of a two-part series. Read part two here.

    Striking a pose of defiance, contemporary urbanists see themselves as the last champions of happiness in a world plunged into quiet despair, and Canadian writer and journalist Charles Montgomery is no exception. Drawing on the emerging ‘science of happiness’, his new book Happy City, subtitled ‘transforming our lives through urban design’, joins a wave of anti-suburban literature spurred on by climate fears and the financial crisis. ‘As a system’, writes Montgomery, the dispersed city ‘has begun to endanger both the health of the planet and the well-being of our descendants.’   

    Happy are the poor

    Repeating the fashionable wisdom, he says ‘cities must be regarded as more than engines of wealth; they must be viewed as systems that should be shaped to improve human well-being.’ Soon enough it’s apparent that to this way of thinking, well-being and poverty are by no means incompatible. ‘If a poor and broken city such as Bogota can be reconfigured to produce more joy’, he writes, ‘then surely it’s possible to apply happy city principles to the wounds of wealthy places.’    

    Montgomery starts off with ‘the happiness paradox’, arguing that ‘if one was to judge by sheer wealth, the last half century should have been a happy time for people in the United States and other rich nations … More people than ever got to live the dream of having their own detached home … The stock of cars far surpassed the number of humans who used them’. But, he is eager to explain, ‘the boom decades of the late twentieth century were not accompanied by a boom of happiness.’

    For evidence, he refers to ‘surveys’ showing that ‘people’s assessment of their own well-being’ had ‘flatlined’, and cites a few others reporting rising rates of mental conditions related to depression. None of these inculpate suburban affluence, however, or suggest people yearn to turn the clock back to before they acquired it. And nor does he explore the problems surrounding measurement of these trends.

    Moreover, such direct evidence as exists points in the opposite direction. A Pew Research Center survey, for example, found that far higher percentages of suburbanites than inner-city dwellers rated their communities as ‘excellent’ (Montgomery does concede that ‘residents in America’s central cities report being even less satisfied and even less socially connected than people in suburbia’, but does his best to explain it away).   

    The book openly admits that the idea of a link between unhappiness in the affluent west and urban form came from the rhetoric of Enrique Penalosa, former mayor of ‘poor and broken’ Bogota. Mr Penalosa declares that the unhappiest cities are not ‘the seething metropolises of Africa or South America’, but places like Atlanta, Phoenix and Miami in the US, ‘the most miserable cities of all’. Montgomery acknowledges this ‘is not science’, and ‘does not constitute proof’, but still sets out to show that ‘the decades-long expansion in the American [and Australian] economy’ and sagging levels of mental well-being aren’t just simultaneous developments, but connected, especially on the plane of ‘migration … from cities to the in-between world of sprawl.’ 

    Suburban Straw Man

    Before such a connection is anywhere near proven, though, Montgomery rushes in to assume it exists. Early in the first chapter, he is already asking ‘everything … would suggest that this suburban boom was good for happiness. Why didn’t it work?’ The habit of asserting yet-to-be or never-to-be established conclusions is commonplace throughout the book, and shapes the structure of his argument. Opening chapters set the scene with a case study of outer-suburban life which turns out to be a terrestrial version of Dante’s inferno.

    We’re introduced to the hapless Randy Straussner, a ‘super-commuter’ who drives 4 hours each workday on a round trip between his home in exurban Mountain House, California and his job 60 miles away in the San Francisco Bay Area. Most days he hits the road at 4:15 am to avoid the rush, putting off breakfast until he gets to work, and makes it back home at around 7:30 pm if ‘he was lucky.’ We’re told Randy won’t drink coffee or listen to talk radio, since ‘those just made him angry’ and aggravated ‘the pressures of the freeway.’ On arriving home, he would sometimes ‘grab a hose and water the garden until he calmed down’. Often he would hop ‘onto the elliptical trainer to straighten out his aching back’. When ‘the drive calcified his fatigue and frustration’, he drove to the gym where he could ‘sweat out his aggression.’

    Further, Randy ‘did not know, like or particularly trust his neighbours’ who ‘didn’t get to know one another’, so ‘he disliked his neighbourhood intensely.’ Montgomery adds that Randy felt ‘his own family paid the price for his stretched life’. His first marriage failed and his son ‘slid off the rails’, ending up in the county jail.

    Assuming this accurately accounts for Randy’s circumstances, just how representative is he of the typical outer-suburbanite? Peter Gordon, an urban economist at the University of Southern California, refers to empirical studies showing that ‘dispersed spatial structure was associated with shorter commute times’, suggesting “many individual households and firms ‘co-locate’ to reduce commute time [which] can be more easily [done] in dispersed metropolitan space …’

    This is borne out by the surprising stability of commute times over extended periods. According to the US Nationwide Household Travel Survey, explains Gordon, the average metropolitan commute time was 25 minutes 2009, just one minute more than in 2001, despite relevant population growth of 12 per cent. The averages for sub-area types described as ‘suburban’ and ‘second city’ were actually lower than for the ‘urban’ or core sub-area. Analysing the INRIX Traffic Congestion Scorecard and urban density data, demographer Wendell Cox also finds support for links between higher population densities and longer commute times.

    What about Randy’s other travails, are most suburbanites so estranged from their neighbours? A study cited by geographer Joel Kotkin found that for every 10 per cent drop in population density, the likelihood of people talking to their neighbours once a week rose 10 per cent. What about marital failure? Writing in the mid-2000s, Sue Shellenberger noted that ‘couples from central cities are 9 per cent more likely to crash and burn than couples from the suburbs, according to the National Center for Health Statistics.’ How about the prospect of winding up behind bars? On the basis of Brookings Institution research, Kotkin and Cox say suburban areas generally have substantially lower crime rates than ‘core cities.’

    (With their painstaking attention to statistics, Kotkin and Cox are the bêtes noires of pro-density urbanists, who tend to fall back on anecdotal evidence).

    ‘The masses will still need suburbia’  

    Use of Randy Straussner’s plight to discredit life on the urban fringe constitutes a classic Straw Man fallacy.

    From there, Montgomery proceeds to zig-zag between the fictional extremes of super-commuting hell and an opposite notion of high-rise ‘verticalism’, which he claims to reject. This dialectical type of approach has the advantage of inoculating him against the charge of ignoring inconvenient facts. In coming out for ‘a hybrid, somewhere between the vertical and horizontal city’, he gets to concede many pro-suburban realities, while clinging to his firmly anti-suburban conclusions.

    Concessions to suburbia on job location, home ownership and affordability, the popularity of driving, and economic dynamism are scattered throughout the book, intermixed with the general tone of disapproval.

    After many pages railing against ‘super-commuting’ and ‘detached houses with modest lawns … far from employment’, for instance, Montgomery is ready to admit that: ‘the US population is projected to grow by 120 million by 2050. Where will those people live? Downtowns and first-ring, streetcar-style suburbs will be able to accommodate only a fraction of the new demographic tidal wave. Most jobs have already moved out beyond city limits anyway.’ Then, quoting, he writes ‘the masses will still need suburbia.’

    This is noteworthy, since other green urbanists hold fast to the myth that jobs are concentrated in the urban core. Data in the 2011 American Community survey suggests that the ‘job-housing balance’, measuring the number of jobs per resident employee in a geographic area, is ‘nearing parity’ in suburban areas of US metropolitan regions with more than a million people. This isn’t dramatically different from the position in Australia’s 6 major cities, which have some of the world’s most dispersed patterns of employment (and will share an estimated 20 million more people by 2050). It’s all consistent with Gordon’s co-location thesis.

    In one chapter, Montgomery applauds his home town of Vancouver, which ‘has spent the past thirty years drawing people into density in a way that radically reversed a half century of suburban retreat.’ But he is forced to admit that ‘in 2012 Vancouver won the dubious honour of becoming the most expensive city for housing in North America. This means many people who work in the city … can’t afford to live there … ‘

    More generally, he says ‘the forces of supply and demand have helped make housing in some of the world’s most liveable cities’ –  for which read dense cities – ‘the least affordable.’ Again: ‘as the wealthy recolonize downtowns and inner suburbs, and property values rise accordingly, millions of people are simply being excluded.’ (Always dialectical, Montgomery mostly heaps praise on dense places like Vancouver and Portland, usually rated severely or seriously ‘unaffordable’ in the Demographia International Housing Affordability Survey, while singling out dispersed Atlanta for rebuke, despite a consistent rating of ‘affordable’.)

    And noting the influence of Vancouver’s high-rise density, spawning the label ‘Vancouverism’, Montgomery feels compelled to mention that ‘people living in towers consistently reported feeling more lonely and less connected than people living in detached homes.’ Later he writes that ‘most of us also want to live in a detached home with plenty of privacy and space.’

    On driving, the book is full of complaints that ‘governments have continued the decades-old practice of pouring tax dollars into highways … while spending a tiny fraction of that amount on urban rail and other transit service.’ Yet there is also the qualification that: ‘drivers experience plenty of emotional dividends. When the road is clear, driving your own car embodies the psychological state known as mastery: drivers report feeling much more in charge of their lives than transit users or even their own passengers.’ Montgomery lets slip the truth on popular preferences with the comment, ‘roads left to the open market – in other words, dominated by private cars.’

    Accordingly, the American Community Survey reports that between 2007 and 2012, ‘driving alone’ increased as the dominant mode of commuting in the United States, rising from 76.1 to 76.3 per cent of work trips. This bears some relation to the co-location of suburban residents and businesses.

    ‘A marvellous thing’

    Amidst his oscillations, Montgomery sketches an overview that reads like an encomium to the blessings of suburbia:

    The rapid, uniform and seemingly endless replication of this dispersal system was, for many people and for many years, a marvellous thing. It helped fuel an age of unprecedented wealth. It created sustained demand for the cars, appliances and furniture that fuelled the North American [and Australian] manufacturing economy. It provided millions of jobs in construction and massive profits for land developers. It gave more people than ever before the chance to purchase their own homes on their own land, far from the noise and haste and pollution of downtown.

    Having acknowledged the housing, transportation, employment and wider economic advantages of dispersion and suburbanisation, Montgomery could have come to the conclusion that they offer opportunities for a better life to millions of people, and should be embraced as a legitimate option by officials and planners. But that’s not where he ends up. Insisting that the dispersed city is now ‘inherently dangerous’, he signs on for pro-density ‘new urbanism’, calling for an overhaul of zoning codes, approval processes, infrastructure planning, tax incentives and funding practices to stimulate denser and less car-dependent redevelopment, aiming for transit-friendly, walkable, mixed-use, town centres and clusters of attached town-houses and low-rise apartments.

    While ‘new urbanism’ sweeps aside the advantages of dispersion, Montgomery’s misconceived ideas show that it offers nothing better. Take housing affordability. At first he toys with the faddish notion of ‘a by-law stating that 15 per cent of dwellings in every new subdivision … must be suitable for people of low or moderate income’, a costly burden on new construction for developers and the majority of home buyers. As the Australian experience attests, this type of planning fails to offset the spike in land values which accompanies density.

    Then, sensing this is far from enough, his demands escalate to the socialisation of housing supply: ‘it’s not enough to nudge the market towards equity … Governments must step in with subsidized social housing, rent controls, initiatives for housing co-operatives, or other policy measures.’ The destructive impacts of these sorts of measures on investment, market efficiency, public finances, and freedom of choice are passed over.

    Later in the book, Montgomery discusses ways to draw developers into density and social housing, including changes to ‘infrastructure-funding rules, tax incentives and permit requirements.’ He contends that ‘if this sounds like a big fat bonus for property developers well it is … but the truth is, as long as we inhabit a capitalist system, the future of suburbia depends on them.’

    It’s just that this isn’t capitalism as much as rent-seeking at the expense of consumers and other businesses, suppressing economic growth, opportunities and living standards. But that’s not a bad outcome for someone who extols the joys of poverty.

    John Muscat is a co-editor of The New City, where this piece first appeared.

    This is part one of a two-part series. Read part two here.

  • The Myth of Green Australia

    Having collected the Nobel peace prize in 2007, Al Gore’s fortunes as a climate crusader slid into the doldrums.  But 8th November 2011 arrived as a ray of sunshine. On that day Australia’s parliament passed into law the world’s first economy-wide carbon tax. Rushing to his blog, Gore posted a short but rapturous statement, cross-posted in The Huffington Post. His fervent language echoed in progressive circles across the globe. Australians have been held-up as pioneering environmentalists ever since, putting Americans to shame.

    “This is a historic moment”, thundered Gore. “With this vote”, he blogged, “the world … turned a pivotal corner in the collective effort to solve the climate crisis”. He proclaimed it “the result of tireless work of an unprecedented coalition that came together to support the legislation”; he praised the “leadership of Prime Minister [Julia] Gillard and the courage of legislators”; and he declared “the voice of the people of Australia has rung loud and clear”.

    But maybe Gore’s enthusiasm was a bit misplaced. In September, less than two years later,   Australians seem likely, according to the polls, to hand the Gillard Labor government a stinging landslide defeat.     

    “A pivotal corner in the collective effort”

    As it turns out, and not for the first time, Gore’s analysis was wrong. For one thing, calling the carbon tax “pivotal” is pure hyperbole. Although a relatively large land mass, Australia is populated by just 23 million people who collectively emit a minuscule 1.5 per cent of the world’s greenhouse gases. Nor is the country influential in a broader political union or association beyond its borders.  Since climate change alarmists suggest that global emissions must fall by 25 to 40 per cent in 2020 compared to 1990 levels, Australia’s efforts must be seen as more symbolic than effective.    Currently, the tax and its post-2015 form as an emissions trading scheme (ETS) are adjusted for a trivial 5 per cent cut from 2000 levels in 2020; 5 percent of 1.5 percent of the world’s emissions barely registers against a few days increase in countries like China.   

    Environmentalists maintain that the important thing is not results, but setting a moral example of climate action. They argue Australia’s emissions may be tiny in absolute terms, but amongst the highest in per capita terms. Major emitters like the US, China, India and the EU, they argue, can be shamed into action by Australia’s noble sacrifice. Unfortunately for them, this argument, not very strong to being with, deflated like a punctured balloon since the shambles at Copenhagen.

    We’ve been here before. In December 2009 Australia’s newly minted Labor Prime Minister, Kevin Rudd, with a bulging entourage of 114 officials, descended on the Copenhagen conference to negotiate a successor to the Kyoto Protocol. He was awarded the task of preparing a draft negotiating text. Rudd played an active role in the lead up, having signed Kyoto and undertaken to legislate for an ETS in his first term, a serious step given Australia’s status as the world’s leading coal exporter. Before flying out to Denmark, he introduced the necessary bills into parliament for a second time.

    Copenhagen was a test of the ‘noble sacrifice’ argument driving Rudd’s activism but resulted in an epic fail. Rudd’s draft text was tossed aside and the conference collapsed into bickering between delegations from the developed and developing worlds. There was no successor to Kyoto, just a flimsy, non-binding accord the delegates “took note of” but didn’t adopt. Greenpeace called Copenhagen “a crime scene”.    

    The UN’s Framework Convention on Climate Change has stayed off the rails ever since. Later Conferences of the Parties (COPs) at Cancun and Durban did little more than kick the can down the road. Durban opened twenty days after the “historic moment” of Australia’s carbon tax, but delegates deferred all talk of a binding agreement to 2015, anticipating a possible start in 2020. Canada pulled the plug on Kyoto altogether, later followed by Japan and Russia. “This empty shell of a plan leaves the planet hurtling towards catastrophic climate change”, huffed Friends of the Earth.

    Under the non-binding Copenhagen Accord, parties were invited to submit emission reduction “pledges”, and most have done so. Even if achieved, though, they get the world nowhere near 25 to 40 per cent reductions on 1990 levels in 2020. Writing in Nature, analysts from the Potsdam Institute of Climate Impacts dismiss them as “paltry”. Amid rising emissions, Australia’s “pivotal” carbon tax is but a straw in the wind.

    “An unprecedented coalition that came together”

    At the end of 2009, Rudd’s ETS was rejected by parliament a second time, due in part from rising doubts about the climate agenda. As 2010 progressed, his popularity waned, battered by his inept handling of the contentious mining tax. Labor colleagues bristled at his secretive and high-handed manner, while powerful union bosses resented his indifference to their concerns. Taking advantage of drooping opinion polls, Rudd was sacked and replaced with Deputy Prime Minister Julia Gillard.

    This sent shockwaves through the country, which had never seen a sitting prime minister dumped in his first term. Fearing a backlash, Gillard hastily called an election for 21st August, hoping to exploit positive feelings around serving as Australia’s first female leader. She proved a poor campaigner, however, and a series of damaging leaks scuttled her efforts. Labor’s support faded and on election night Gillard was left with 72 seats, four short of a majority in the 150 seat House of Representatives. The Liberal-National opposition ended up with 73 seats, also short of a majority. The balance of power was in the hands of one Greens Party member and four independents.

    After weeks of negotiations, the Greens and three of the independents pledged support for a Labor Government under Gillard, the first minority government since the 1940s.  But it became increasingly clear that a fresh election would produce a solid Liberal-National Party majority. Returning to the people for a new mandate was never in Gillard’s interests. As for the Greens and independents, fortune delivered them more power than they ever had or would ever have again. Making the most of their time in the sun, they opted for Gillard, who wasn’t about to call another election. Gillard’s coalition may be “unprecedented”, in Al Gore’s words, but it’s untrue that they “came together to support” high principle. They were thrown together by electoral chance and stuck together out of grim self-interest.

    “Leadership of Prime Minister Gillard and the courage of legislators”

    After the second rejection of his ETS, Rudd shelved the policy indefinitely, to the dismay of the world’s environmentalists. The inner circle which advised him to take this course, according to later revelations, included Julia Gillard. On becoming prime minister she showed little enthusiasm for the climate cause, ruling out a price on carbon unless there was “a deep and abiding community consensus”. Her tokenistic policy at the 2010 election was “citizen’s assembly” to canvass options. The opposition also ruled out a price on carbon. Twice in the lead up to polling day, Gillard explicitly denied rumours of a hidden agenda, uttering the now infamous words “there will be no carbon tax under the government I lead”.

    Gillard entered the post-election negotiations desperately hoping to save her prime ministership.  The radical Greens would never have backed the conservative opposition. But when they demanded a carbon tax as the price of their support, she caved in a fit of panic, displaying little of the courage praised by Gore. The independents signed on to keep the minority government in business.

    Labor’s Clean Energy Future package includes a carbon tax, but also billions of dollars of compensation and credits to cushion the blow. In a massive money churn, around $5 billion of the revenue is disbursed to households in higher benefits and tax breaks, and $9.2 billion goes to industry assistance, including free permits for high emitting industries, $300 million to the steel industry, $1.26 billion to the coal sector, and $1.2 billion to manufacturing. Unhappy about these handouts, the Greens were bought off with a $10 billion Clean Energy Finance Corporation. Australians are left wondering how all of this encourages shifts to “cleaner” energy sources. The handouts muffle some damaging impacts of the tax, but they are hardly “courageous” from the perspective of Al Gore.

    “The voice of the people of Australia has rung loud and clear”

    Gillard made her plans for a carbon tax public on 25th February 2011. Her residual popularity sank like a stone. The Newspoll of 18-20 February 2011 recorded 50 per cent satisfied and 39 per cent dissatisfied with her performance. In the next survey of 4-6 March 2011, those figures were reversed: 39 per cent satisfied, 51 per cent dissatisfied. Labor’s support (first preference) plunged to 30 per cent in the March survey, from 38 per cent at the election. These results were consistent with a general fall in support for climate action. From a high of 68 per cent in 2006, reported the Lowy Institute Poll, it dropped to 41 per cent in 2011. Only 32 per cent of Australians supported the carbon tax when Gore wrote his rapturous blog post.    

    Gillard’s frantic attempts to recover have come to nothing, and calling an election for 14th September hasn’t helped. The latest Newspoll of 5-7 April 2013 had her satisfaction rating at a dismal 28 per cent, with 62 per cent dissatisfied. Labor’s support is still in the basement at 32 per cent, with the Liberal-Nationals at 48 per cent. Likely, the government faces a devastating loss of around 20 seats.  

    The opposition’s implacable campaign against the carbon tax has rocked Gillard’s time in office. They promise to repeal it, dismantle much of the Clean Energy Future package and even abolish the Department of Climate Change. Since the 2010 election Labor has suffered a succession of defeats at the state level, losing power in New South Wales, Victoria, Queensland and the Northern Territory, while the Liberal-National Coalition improved their majority in Western Australia. These elections were fought on state issues, but in every case the conservatives echoed Opposition Leader Tony Abbott’s anti-carbon tax message. Closer to home, Gillard was forced to stare down moves against her by colleagues to restore Kevin Rudd, once in February 2012 and again in March this year. Four senior cabinet ministers were sacked or resigned after the second episode. Labor limps forward in the worst possible shape.

    A Liberal-National victory would probably mean the end of climate change as a major political priority in Australian politics. Al Gore was mistaken. He didn’t hear “the voice of the people of Australia” on 8th November 2011; but if he’s listening he’ll hear it “loud and clear” on 14th September 2013.

    John Muscat is a co-editor of The New City Journal.

  • Green Office Towers Cast Shadow Over Sydney

    Known for her spiky hair, studded-collar and heels, Sydney’s Lord Mayor is the epitome of progressive chic. For a green activist, though, Clover Moore attracts some surprising company. Landlords owning 58 per cent of the CBD’s office space have rushed to join her Better Buildings Partnership, an alliance “to improve the sustainability performance of existing commercial and public sector buildings”. At first glance, the property industry’s enthusiasm for ‘green building’ seems strange.  Shouldn’t they be insisting on less costly design and materials?  Or despite their hard-nosed reputation, are they out to save the planet after all?

    As it turns out, the lure of green building has more to do with cash than climate. By virtue of the soft economy and creeping “sustainability” measures, green-rated office towers are a gilt-edged opportunity for investors fleeing stocks and bonds. The wave of change rolling over central Sydney displays a certain logic. Meddling officials get to wrap themselves in virtue while big landlords – local and global investment trusts and fund managers – get a new premium grade rating for their properties. How better to protect asset values in an unsettled world? It’s a cosy, CBD-boosting deal, even if it distorts job and investment flows in outlying parts of the city.

    The floor-space revolution

    Even before the crash of 2008, banks, insurance companies and other financial services were under pressure to extract higher value out of every inch of floor-space. The global debt meltdown only accelerated the process. Aggressive cost-cutting saw Australian banks reduce their cost-to-income ratios from around 60 per cent in the late 1980s to around 45 per cent today. This priority is turning Sydney CBD’s office core inside-out, a trend reinforced by pay-offs from the green-rating of building stock.

    One recent headline summed it up neatly: “Martin Place exodus”. The article describes how major banks like Westpac, ANZ and Commonwealth are all vacating large office blocks in stately Martin Place, “the heart of Sydney’s financial centre”. Linking George Street, the CBD’s commercial “spine”, to the city’s government office sector along Macquarie Street, near state Parliament House, Martin Place has hosted the cream of Australia’s banking and insurance houses since the nineteenth century. The Reserve Bank is based there as well.   

    Sydney’s traditional office core enclosed Martin Place within Clarence, King and Macquarie Streets and the waterfront at Circular Quay. In line with conventional CBD morphology, this lies just north of the longstanding, but expanding, retail core bounded by York, Park, Elizabeth and King Streets, where large department stores are concentrated around the conjunction of George and Market Streets, the CBD’s peak land value intersection (PLVI).  

    Driven to economise on floor-space, larger financial and professional services firms are leaving the traditional office core for outer blocks, which until recently were, in the parlance of CBD theory, “zones in transition”, low-grade areas on the periphery of the office and retail cores with potential for higher value functions. Some “see the axis of the Sydney central business district changing.” Typically, landlords are now expected “to work with Sydney tenants to address their concerns around relocating or redesigning … and help minimise costs and increase efficiencies in their work environment.”  Lest this be dismissed as penny-pinching, a new “workplace philosophy” has been invented to sell the floor-space revolution, and, predictably, that old chestnut “sustainability” has been pressed into service.

    Spreading from banks to insurance companies to professional services and other large white-collar workplaces, “activity-based working” (ABW) has been treated to rapturous media coverage. “Gen Y shuts door on open-plan century”, is how one headline put it. In progressive outlets, ABW is depicted more as a reaction than an initiative, a revolution forced on employers – and indirectly on property developers – by green, socially aware, tech-savvy Gen Y office workers. As the narrative goes, they reject confinement in the “assigned desks” of open-plan workstations or offices. 

    At one prominent bank, staff are “free to roam and work where and how the mood takes them.” Usually, we are told, “they start the day at an ‘anchor point’ where their locker is and which they share with about 100 other workers … they might stay around that area for the day, with a choice of work situations ranging from quiet spaces to conversation areas, or they may set up somewhere else depending on who they need to see.” Equipped with laptops, i-pads, mobile phones and wi-fi, they “can move from space to space and hardware isn’t an inhibitor.” Some organisations “have been … expanding a whole range of tools from [their] internal social-media platform to crowd-sourcing …” Spaces come in all varieties, including meeting rooms, “hush” rooms, discussion pods, team tables, cafes, “floor hubs”, “touch-and-go area[s] for short stays”, even “funky kitchens”.

    And topping off the semblance of a white-collar wonderland, ABW adapted buildings often have glass lifts and “a central atrium allowing views to other floors”, so “you really do feel part of a bigger whole, you can see everybody.”

    Touted in near-utopian language, ABW unites the high-end circle of developers, architects, interior designers, building managers, real estate agents and progressive media. Most of all, we are assured, it’s about values, lifestyles and the coming generation, invariably presented as model progressives. According to a Colliers International report, Generation Y “prefer to work for an organisation with a commitment to social causes than one without … [i]n relation to the built environment, being green as an office occupier will become more of a ‘must have’ than a ‘nice to have’ in order to attract and retain staff.” Amongst other things, this means “creating less hierarchical workplaces, which facilitate collaboration, personal accountability and flexibility.”

    Such are the times, that if a business announced ABW-type reforms to improve its bottom line, raise productivity or increase returns to investors, it would be damned as a “slave to neo-liberal dogma”. But if the very same measures were dressed-up in the garb of “sustainability”, it would be showered with awards and accolades.

    Notwithstanding the pushy New Age rhetoric, ABW is more an economic-cum-technological opportunity for employers, than a revolt by the young and restless. Focus on costs is inevitable when economic conditions are so tight, and information and communications devices so ubiquitous and portable. A popular measure of office space efficiency is the workspace ratio, explains a researcher at Jones Lang Lasalle, or the number of square metres occupied by each office worker. The typical ratio is 15 square metres per person, but technology is freeing up workers to leave the office, so occupancy is typically now between 40 and 50 per cent, which translates, on average, to each worker occupying 37.5 square metres. “That’s expensive space”, he says.

    Other research found that in a traditional office, between 55 and 85 per cent of desks are not used at any given time. Yet other studies indicate that “trading off individual territory for shared areas” can reduce floor space requirements by 20 to 40 per cent. This all leads directly to the bottom line. By cutting the amounts paid for rent and outgoings, says a Colliers researcher, ABW could reduce a firm’s total cost by up to 30 per cent.

    That’s reason enough to drive large organisations out of their digs in Martin Place and the old office core, mostly for state-of-the-art towers designed to accommodate ABW floor-plans and facilities. “Macquarie Bank was an early mover (to Shelley Street), as was Westpac to its vertical campus in the western central business district”, report Jones Lang Lasalle on the major banks, and “[m]ore recently, the Commonwealth Bank has moved to Darling Quarter and ANZ will soon move to Pitt Street.” One way or another, the larger financial institutions, whose head-office functions were scattered throughout the CBD, have “implemented strategies to consolidate their space requirements and build in [ABW] flexibility.”

    This isn’t happening to satisfy worker demands for “sustainability”, but recourse to “green ethics” no doubt helped prise the sceptical from their desks.

    Green-star trek

    Nor have landlords failed to gain from the floor-space revolution. Large and institutional players like real estate investment trusts and fund managers profited from a wave of demand for innovative, capital-intensive building stock. More unexpectedly, they encountered a rising class of green-tinged activists, designers and architects, whose obsessions with energy-saving and natural power came in useful. As climate change crept up the political agenda, progressives across all tiers of government soon turned to the built environment, churning out laws and regulations that defined and mandated ‘green building’ standards. The property industry’s peak bodies embraced the concept.    

    This is somewhat paradoxical. Despite its obsession with all sorts of metrics, ratios and indices, the property sector doesn’t seem to care that the object of these standards is unmeasurable. Their effect on the global climate system can never be known (it was always fanciful to suggest that Australian building styles would affect the climate, but anyone who believes it after Copenhagen, Cancun, Durban and Rio is deluded).

    On the other hand, the financial benefits are rather more tangible. The key is NABERS, the National Australian Built Environment Rating System. Administered nationally by the New South Wales Office of Environment and Heritage, NABERS is a rating scale from a low of 1 to a high of 6 stars (the “Green Star”) applicable to buildings or tenancies, based on criteria like energy efficiency, water usage, waste management and indoor environment quality. The federal and some state governments have mandated at least a 4.5 star rating for public sector offices, and 4.5 has generally become the minimum for image-conscious corporates. A building or suite designed or refurbished for ABW will naturally score well.

    The Commonwealth Bank’s new campus-style headquarters at Darling Quarter is in the CBD’s “western corridor”, formerly a “zone in transition” near the disused docks and freight yards of Darling Harbour. It achieved a coveted 6 star rating. Coming up with two curved-roof buildings of six and eight stories, “the designers have emphasised the natural light, air quality and water recycling … with features including a full-height atrium, single-pass ventilation, blackwater recycling, trigeneration power and passive chill beam air-conditioning.” Westpac’s new campus further up the corridor at 275 Kent Street achieved 4 stars, and the three towers underway at Barangaroo, a futuristic, mixed-use precinct at the corridor’s northern end, meet 6 star specifications. ANZ’s new headquarters at 242 Pitt Street (161 Castlereagh), towering over the CBD’s “mid-town” south of the retail core, also aims for 6 stars.

    The most vaunted 6 star tower is the oval-shaped, “flagship” tower at 1 Bligh Street. Using 3D software called Building Information Modelling or BIM, the designers conceived an edifice with “gas and solar panels reduc[ing] electricity consumption by as much as 25 per cent, while water recycling reduces mains water by up to 90 per cent …” But its “principal sustainability feature is a fully glazed doubleskin façade made from clear glass panels … allow[ing] for automated sunshading that dramatically reduces the heat load on the building, which means [it needs] less airconditioning and can have … better natural light.” First-tier law firm Clayton Utz is the building’s anchor tenant.

    To the extent that creative designers, developers and landlords have combined to meet a demand in the market, these buildings are impressive enough. That’s how markets should work. But on the pretext of “sustainability”, activist politicians and officials have, effectively, codified the product and marketing strategies of the most powerful players. NABERS does that by granting official recognition to a system mirroring the star scale long used in the hotel industry. Overnight, hundreds of thousands of square metres of non-rated office space was downgraded. Rent-seeking opportunities for the owners of rated space proliferated, to the detriment of smaller, more marginal players, their tenants and peripheral regions. “While the NABERS rating of a building is not the sole factor for corporate tenants”, said a CBRE director, “it is playing a significant role in selecting suitable office space.”

    Clover Moore, whose jurisdiction covers capital-rich Sydney CBD and surrounds, has actively boosted the interests of large and institutional landlords with a grab-bag of lucrative benefits. There’s the CitySwitch Green Office program, which assists landlords leasing more than 2000 square metres of office space to achieve a mandatory NABERS rating; there are “green loans” for “sustainable retrofits” to be repaid as a levy on council rates; there’s a scheme under the Better Buildings Partnership that enables commercial property owners to enter Environmental Upgrade Agreements (EUAs) and share the cost of green building upgrades with tenants; and there are exemptions from a levy on new construction for green initiatives. 

    All in all, NABERS effects have proven a boon to the high-end property industry. Particularly for listed real estate investment trusts (REITs) and fund managers, but also many unlisted investors, which value stable capital growth as much as income, and continually trade or “recycle” assets to manage their portfolios. By allocating capital efficiently for market-oriented purposes, these investors can play a positive role in urban development, as long as green distortions (amongst others) don’t get in the way.

    An Australian Property Institute study at the end of 2011 found that office buildings with a 6 star NABERS rating enjoyed a premium in value of 12 per cent, those with a 5 star rating 9 per cent, those with 4.5 stars 3 per cent, and those with 3 stars 2 per cent. In May 2012, the IPD green property survey found that “prime office buildings with high NABERS ratings – from 4 stars to 6 stars – outperformed the broader prime office market over the past year … the greener buildings delivered an 11.3 per cent total return compared with the overall CBD office return of 10.8 per cent.” Further, buildings with a high NABERS rating “significantly outperformed assets as having a NABERS rating of 3.5 stars or less … better-rated assets delivered 11.8 per cent compared with 8.7 per cent for the lower-rated properties.”

    Capital growth conscious REITs and funds must have been pleased to hear, from a principal of the IPD Green Property Investment Index, that “owners who improve the sustainability attributes of their buildings are more likely to experience relatively stronger growth in capital values and will mitigate downside risk in asset values.” That’s a bonus for such local and global investors who have poured billions into the “safe haven” of Australian – especially Sydney – commercial real estate for other reasons, like the diminished standing of other asset classes, stock market volatility, a relatively sound economy, a reputable legal system and links to the booming Asia-Pacific region. Sydney was the world’s fourth most popular destination for cross-border property investment in the 18 months to June 2010, while the spreading use of NABERS culiminated in November 2011, when a rating became mandatory for space above 2000 square metres.   

    This is how a mayor can spend her life cultivating a progressive persona, only to end up the unwitting tool of some canny fund managers.

    Regressive recentralisation

    Green building is promising to be a goldmine for the well-placed, and a dead weight for almost everyone else. In an April 2012 Market Overview for Parramatta, a second-tier CBD servicing Sydney’s western region, Knight Frank explain that “the gap between economic rents and market rents remains a constraint on new [office] supply.” In other words the cost of land acquisition, planning and building processes, construction and fitting out, and a profit margin, on a square metre basis (economic rent) exceeds the rent obtainable from prospective tenants (market rent). Not all the gap between economic and market rents can be pinned on green standards, now essential for investor interest. But they are an undeniable factor. On one estimate, by consultants Davis Langdon, achievement of a 4 to 6 star NABERS rating can add between 3 and more than 11 per cent to construction costs.

    If supply constraints are serious in Parramatta, where the federal and NSW governments have relocated several agencies and departments, apparently they are acute in more suburban locations. According to a newspaper report in April 2011, “the trend across the Sydney metropolitan markets is falling [office] supply … this is evident across all key markets including North Sydney, St Leonards, Parramatta, North Ryde, Rhodes and Homebush … at present there is no speculative development across these suburbs, so the problem of reduced A-grade space will only increase during the next couple of years, putting pressure on rents and incentives.” The only speculative office block started at the time was at Norwest, says the report, a specialised business park in north-west Sydney. The building was designed for a 4.5 star NABERS rating.

    These weak conditions have various causes, but green standards shouldn’t be underestimated. Investors have lost interest in non-rated projects, and the economics of rated projects are trickier beyond high-rent centres like the CBD or business parks. According to a CBRE director, as of June 2011 there was “more capital looking to invest in the office sector than was evident before the global financial crisis … however, the majority of this capital is only chasing prime assets with very few groups willing to consider smaller secondary assets and non-central business locations.” For their part, more demanding tenants are also retreating to the green citadels and ABW theme-parks of Sydney CBD. Noting the CBD’s low office vacancy rate, Jones Lang Lasalle explain that “any downsizing that has occurred in the financial services sector has been offset by tenant centralisation … [a]s companies continue to look to improve the environment and amenity for staff as a means of attracting and retaining the best talent.” They detect a “trend to centralisation”.  Similarly, a Colliers director observed that “tenants were being driven out of metro markets by tight vacancy rates for quality space and are attracted by a greater ability to attract and retain staff if located in the CBD.”

    Phrases like “attract and retain staff”, of course, suggest NABERS rated buildings adapted for ABW. The portability of communications devices should be liberating workers from fixed locations, not just assigned desks. ABW advocates love phrases like “work is a thing you do not a place you go” and “work is becoming a process not a place”. But green imposts are having a countervailing effect.

    This withdrawal of capital and tenants is bound to choke-off a range of suburban and peripheral businesses, the small to medium sized service operators, start-ups, microbusinesses, consultants, franchisees and sole traders which rely on freely-available space and low rents.  

    To all but the greenest ideologues, it should be clear that the decentralisation of offices – as well as factories and warehouses – over recent decades has fuelled Sydney’s prosperity, enabling the city to absorb an extra 1.5 million people since the mid-1980s. Equally, it should be clear that decentralisation offers better outcomes on access to affordable housing, traffic congestion and employment dispersion. On average, peripheral Local Government Areas (LGAs) still experience higher unemployment rates than central LGAs. That’s why the centralising forces unleashed by green planning and building codes pose serious dangers to economic vitality across the greater metropolitan region. Plenty of attention has been lavished on the pampered few in their ABW playgrounds. Some should be spared for the vast majority who seek to make a life in Sydney.

    John Muscat is a co-editor of The New City, where this piece originally appeared. 

    Photo by Christopher Schoenbohm.

  • From California to Canberra, the Real Class War

    Just under a year before she crawled over Kevin Rudd to claim the Prime Minister’s office, Julia Gillard visited the United States in her then capacity as Australia’s Education Minister. Her stay in Los Angeles took in the Technical and Trades College, where she brushed up on the teaching of “green skills,” a subject close to her heart. “Here in Los Angeles," she told the media that day, “under the leadership of Governor Schwarzenegger, this is a state that is looking to the future; this is a state that is leading on climate change adaption; and this is a state that’s leading on green skills and I’ve seen that on display today at this college.”

    The date was 5 October 2009. As far as dud forecasts go, these platitudes don’t match Lincoln Steffens on the Soviet Union – “I’ve seen the future and it works” – but they’re bad enough. Today Schwarzenegger has gone, his reputation in tatters, and California, reduced to issuing IOU’s to pay its bills, teeters on the brink of bankruptcy.

    Australians have long seen California as a trend-setter, given the common Anglophone culture and semi-arid climate on the Pacific Rim. There’s also the shared love of motor car mobility and suburban independence, and a voracious appetite for tech and entertainment products pouring out of Hollywood and Silicon Valley. But these days the Golden State is just as likely to fill Australians with unease. They find themselves infected with a strain of the green-welfare-utopianism that brought California to its knees.  

    Sure, this doesn’t show up in official statistics; at least not yet. Gillard and Treasurer Wayne Swan never tire of reminding Australians they are “the envy of the world”: unemployment at 4.9 per cent, GDP growth of 3 percent (or more) this financial year, government debt to GDP ratio of just 23 percent and a projected budget surplus in 2013. In April, the IMF predicted that Australia would be the best performing advanced economy over the coming two years. The government and its allies in the elite media are hyper-vigilant about containing discussion of the nation’s affairs within this bounteous frame.

    It’s hard to reconcile Australia’s position with the plight of California, which routinely attracts phrases like “basket case.” Unemployment is running at around 11per cent, significantly above the national US average of 8.2 percent, and Governor Jerry Brown is struggling with an intractable budget deficit of around $US20 billion. Thousands of teachers and other public servants are being laid off, and revenue imposts are driving businesses to other states. One commentator went so far as to say “California’s situation is in some ways more worrisome than Greece’s,” since it represents 14 per cent of the American economy, while Greece only accounts for 2 per cent of the EU.

    But if any of this is supposed to make Australians feel good about their lot, it doesn’t. However benign the headline figures look, they’re in a restive mood. The Westpac-Melbourne Institute index of consumer sentiment continues to languish in negative territory, and the latest Roy Morgan Monthly Business Confidence Survey recorded a 57 percent fall in businesses which believe “Australia will have good economic conditions in the next 12 months”. Astonishingly, the recent Boston Consulting Group consumer sentiment survey found that Australians feel less financially secure than the average European, even less secure than Spaniards, whose economy is in meltdown.

    Nor is much love flowing to Gillard and Swan. Stuck in opinion-poll hell – support for the government has been around 30 percent for over a year – they would be thrown out in a landslide if an election were held today.  

    Why are Australians so low when their economy is so high? The chattering classes are in a funk over this conundrum. People should be showering this fine progressive government with praise, they insist. In patronising tones so familiar around inner Sydney and Melbourne, one columnist scribbled “we are, as a nation, chucking a full-on, all-screaming, all-door slamming teenager temper tantrum … Maybe it’s time we grew up and realised how good we’ve got it.” Others suggest more sober explanations.

    Topping the list is Gillard’s absurd $23 a tonne carbon tax, effective from 1 July this year. Most pundits are loath to concede that, in international terms, the measure is quite radical and Gillard only embraced it to appease the Greens. From the comfort of their armchairs, they dismiss fears about the tax as irrational. After all, Treasury modelling indicates that the effect on growth will be minuscule and, under the government’s package, households will be over-compensated for cost of living increases. If only the Opposition would drop its inflammatory attacks, they maintain, the pessimism would disappear.

    Some blame the negative wealth-effect of sliding house prices and shrinking superannuation funds, battered by stock market volatility.  

    No doubt, such factors do contribute to the malaise, along with loss of faith in a parliament hit by financial and sexual scandals implicating the Speaker and a Labor MP. But opinion-makers who refuse to look beyond the headline figures are concealing the larger story. Across a range of traditional industries, workers grasp that the economy is shifting in directions that could erode the foundations of their mobility and independence. Understanding more than they are given credit for, they fear that the current Labor Government, beholden to Greens and academic elites, and hiding behind stodgy rhetoric, is driving or exploiting those shifts. The most visible manifestations of this are the carbon tax and other green agendas.

    These workers have cause to be worried, if they glance across the Pacific. In his close analysis of the California crisis, US demographer Joel Kotkin starts with the premise that “California consolidated itself as a bastion of modern progressivism.” Drawing on extensive evidence, Kotkin exposes the suffocating influence of radical environmentalists, progressive high-tech venture capitalists, Hollywood moguls, and civil rights attorneys, who have given California escalating energy costs – 50 per cent above the US average and rising – and dwindling fossil-fuel energy exploration and production, America’s sixth highest tax rates, also rising, coupled with proposals to skew the tax system in favour of the super-rich against microbusinesses, the third heaviest tax burden on business out of the 50 states, enormous subsidies and tax breaks for solar and other renewable-energy producers, and complex labour laws.

    “California’s green policies”, says Kotkin, “affect the very industries – manufacturing, home construction, warehousing, and agribusiness – that have traditionally employed middle and working class residents”. With reason, Kotkin calls these developments The New Class Warfare. There is indeed a class dimension to discontent in the United States and Australia, and it has nothing to do with the confected class-war rhetoric coming out of the Obama Administration – “we must all pay our fair share” – and the Gillard Government –“spreading the benefits of the [mining] boom”.  

    John Black, a demographic profiler and former senator, points out that since Labor came to power in 2007, “public administration, education, and health sector jobs have accounted for almost six out of ten of the 760,000 jobs created, instead of the longer term two out of ten.” The health industry alone has grown by 260,000 jobs in four years, a figure that equates to some 2.6 per cent of the whole workforce. Over those years, manufacturing, which accounts for 8.3 of total employment, lost close to 100,000 jobs.

    Last year, “health care and social assistance” replaced “retail trade” as the largest occupational category profiled by the Australian Bureau of Statistics, while “manufacturing” along with “agriculture, forestry and fishing”, traditional blue-collar hubs, were the only categories to contract. "Education and training" and "public administration and safety" ranked higher than "transport, postal and warehousing" and "wholesale trade".

    Job-shedding by a succession of manufacturing, retail and construction firms has dominated recent news bulletins. According to Black, if not for growth in the publicly-funded sector, the employment rate would be closer to 7 than 5 percent.

    If Gillard and Swan are to be believed, such shifts are beyond their control. In a major address on the economy in February, Gillard explained that “the level of the dollar – and the pace of its rise – has broken some business models and forced economic restructuring”. Displaying Marie Antoinette levels of indifference, she declared “these are powerful, economy-wide transformations, perhaps best thought of as ‘growing pains’.” If you thought this posed a complex challenge, think again. “The equation is simple,” she said, “skills brings jobs, and skills bring job security.”

    Here Gillard genuflects to the progressive dogma that education is the answer to every economic problem. It’s hardly surprising that a movement dominated by academics, researchers, educators and university administrators should claim ownership of the path to salvation. But Gillard has it back-to-front. In activities like manufacturing, economic growth brings jobs, which bring skills, not the other way around.

    It’s true that the mining boom and Australia’s safe credit rating have driven the dollar to near or above parity with the greenback. It’s also true that this has exerted pressures on the export and import-competing sector. But government action has intensified these pressures. Labor is ideologically committed to social gentrification and expansion of the white-collar professional classes, particularly in social services, even if this means transferring resources from productive industries that will slow down, stagnate, shrink or vanish.

    While Gillard and Swan would never be so candid, their allies in Australia’s bulging university system, the public sector unions and the Greens aren’t so inhibited. Nor are Labor figures like former Prime Minister Paul Keating, who criticised the Opposition’s attack on the carbon tax in these startling terms:

    … in this country, 80 per cent of people work in the tertiary economy, in services, in the industry like – as we are tonight, in the service economy. And, the new industries, the green industries, are service industries, not the old manufacturing. Manufacturing’s moved to the east [meaning East Asia]. It’s the service industries that are the new growth industries. So, to turn your back on the mechanism which allocates the capital out of the old industries and into the new ones is to turn your back on the future.

    If Gillard Labor cared about blue-collar and other routine jobs, not to mention the small business sector, they would switch to policy settings that spur growth in industries like manufacturing, retail, transportation and logistics, construction and forestry. Cutting spending, reducing company and other business taxes, junking green taxes and green tape, withdrawing from the debt market and liberalising industrial relations would hand employers more flexibility to cope with the high dollar and low cost competitors in Asia.

    Clearly, this isn’t the government’s priority. Instead they have introduced a carbon tax and a mining tax, and in last month’s budget dropped a proposed cut in company tax, they are throwing at least $2.7 billion at various green schemes, not including the “winner picking” $10 billion Clean Energy Fund, they have adopted a Renewable Energy Target of 20 per cent by 2020, they are pouring vast sums of money into higher education to the tune of $5 billion a year including an additional $5.2 billion in the budget, some of which will find its way into a maze of “sustainability institutes,” they have lifted the cap on university places and embarked on a radical plan to expand the proportion of 25 to 34 year olds with a bachelor’s degree to 40 per cent by 2025, they have re-regulated the labour market and imposed a system which, according to the chairman of BHP-Billiton, “is just not appropriate and doesn’t recognise today’s realities,” they have laid the groundwork for new multi-billion-dollar programs in aged, disability and mental health care, employing tens of thousands of new carers, and they have endorsed an industrial tribunal decision that boosts the pay of these workers by up to 65 percent.

    California here we come.

    John Muscat is a co-editor of The New City, where this piece first appeared.

    Photo of Australian Parliament House by BigStockPhoto.com.

  • The Use and Misuse of Glaeser’s Triumph of the City

    Appeals to authority are now the stock-in-trade of progressive pundits across a range of public controversies. In the face of popular discontent bubbling up from forums on the net and elsewhere, their fall-back posture is heavy-handed ‘expertism’. Policymaking is the prerogative of those with the right qualifications and credentials. Ordinary citizens should butt-out, no matter how self-interested the experts may seem. So too in the field of urban policy, encumbered as it is with a green-compact-city orthodoxy, do appeals to authority hold sway.

    Over the course of 2011 a book title kept cropping up in some of the media coverage of urban issues – Triumph of the City by Harvard economist and New York Times blogger Edward Glaeser. Arguing that successful cities should be “urban theme parks” or “playgrounds” for the benefit of “smart inhabitants” – as progressives like to conceive themselves – while the energy-wasting populace must be brought to heel, Glaeser is, for the pundits, an authority figure from central casting.   

    The Sydney Morning Herald’s urban critic, Elizabeth Farrelly, claimed the book “instantly became flavour of the month amongst the cognoscenti”. Proceeding to deliver another full-throated hymn in praise of density, she abridged Glaeser’s argument in typically hyperbolic terms. If only we lived in “dense urban centres”, miracles would abound: cheaper housing, better transport, protected wildernesses, no climate change, decent coffee and “a choice of walk-to tapas”. 

    Her colleague Ross Gittins, the paper’s economics editor, was equally impressed. “Glaeser’s observations seem of obvious relevance to Sydney”, he wrote.  “Our sky-high house and unit prices are partly the product of … excessive government restrictions on development”, wrote Gittins, before adding, without a hint of irony, “there are limits to how far Sydney can be allowed to sprawl”. He resolves this contradiction with the phrase “Sydney needs to go up”, echoing a warning of Glaeser’s which serves as the new slogan of green urbanism: “If cities can’t build up, then they will build out”.  

    This is sweet music to the green-tinged intelligentsia, for whom there is no worse crime against the planet than a bulging ‘human footprint’. Before weighing-up the merits of Glaeser’s build-up-not-out pitch, though, it should be said that many of his Australian fans either misrepresent or misunderstand his position. Farrelly’s diatribes against developers and suburbs are commonplace. She is all in favour of rigid ‘urban growth boundaries’, prescriptive urban consolidation and other features of the anti-sprawl agenda adopted by state and local governments over recent decades. So apparently is Gittins.

    Glaeser’s views are more complex. “The government should not be in the business of enforcing lifestyles that we happen to find appealing”, writes Glaeser, “[t]he government’s job is to allow people to choose the life they want …” He takes care to explain that this perspective accords with sound economic thinking:

    “[A]t the heart of economics is the belief that businesses work best by competing furiously in a market that the government oversees as impartial umpire. The same is true for cities. Competition among local governments for people and firms is healthy … The national government does no good by propping up particular places, just as it does no good by propping up particular firms or industries.”

    Identifying this principle as ‘spatial neutrality’, Glaeser is indifferent to the type of ‘growth boundaries’ so popular with Australian town planners and their green theorists, commenting at one point that “greenbelts may serve to check urban growth – which may or may not be desirable”. Indeed, it’s hard to see how any form of coercive zoning can be consistent with his position.

    Glaeser’s core argument is that the principle of neutrality has been systematically violated in the United States. “Cities [by which he means inner-cities] can compete on a level playing field”, he says, “but over the past sixty years, America’s policies have slanted the field steeply against them”. These policies include inner-city development controls, especially height restrictions, the home mortgage interest deduction, the Interstate Highway system, inferior inner-city schools administered by local school boards and inadequate gasoline (petrol) taxes. Remove such “artificial barriers” and “everybody, not just the privileged few, can enjoy the pleasures of Manhattan or Paris or Hong Kong”.

    Lurking behind Glaeser’s sedate prose, but never quite breaking out, is some kind of ultra-centripetal theory of human settlement. Human beings maximise their satisfaction by living in the centre of the world’s leading city, measured by size, wealth and amenity. It’s just that economic and legal barriers fix most of them in various grades of less desirable places. If the whole world could, in other words, they would pack up and move to Manhattan (“New York is still a paradigm of urbanity”, says Glaeser). In the years between 1880 and 1920, when millions of people from all over Europe swarmed into the crowded tenements of New York’s lower east side, such a theory might have had some plausibility. But the world changed. Since at least the middle of the twentieth century, the statistical and historical evidence points in the opposite direction. Countries like the US and Australia saw massive population shifts to the suburbs and attracted millions of immigrants hoping for their own suburban lot and house.

    However much Glaeser’s “artificial barriers” may have contributed to suburbanisation in the United States, the key issue is how important they were relative to one of the great transformations of the twentieth century: the unremitting growth of motor vehicle ownership and motorised commercial transportation. Even Glaeser concedes that “transportation technologies shape our communities, and modern sprawl is the child of the automobile”, though he insists the convenience of car ownership can be diminished.  

    The problem is that the trend towards urban dispersion started well before Glaeser’s so-called barriers came into existence. In his book  Downtown: Its Rise and Fall 1880-1950, Robert Fogelson writes that “by the mid and late 1920s, however, some Americans had come to the conclusion that the centrifugal forces were beginning to overpower the centripetal forces – or, in other words, that the dispersal of residences might well lead in time to the decentralization of business”. And the trend shows no sign of abating. Having analysed the 2010 US census, Joel Kotkin and Wendell Cox find that during the 2000s, just 8.6 per cent of the population growth in metropolitan areas with more than a million people took place in the core cities, the rest took place in the suburbs. “America continues to suburbanize”, they say. This is despite the financial crash, which would have blunted some of Glaeser’s pro-suburban incentives. Could it be that most people just prefer space over density?

    As for Australia, Glaeser’s core argument simply doesn’t hold. Most of his “artificial barriers” have no direct equivalents here. Our advanced motorways are intra-urban rather than interstate networks, and attract significant toll charges, our schools are subject to state rather than local board control and home mortgage interest is not tax deductible. No reasonable person would claim that our governments have “slanted the field” in favour of suburbs over recent decades. The very notion of spatial neutrality has been anathema. Urban consolidation is all the rage, suppressing land releases while driving up values to the point that Australian houses are consistently ranked ‘severely unaffordable’ in the annual Demographia survey, due in no small measure to a crushing mix of developer and infrastructure contributions and utility levies.  

    Still, Australian Bureau of Statistics figures show that four of the five strongest growing Sydney Local Government Areas (LGAs) in the year to 30 June 2009 were in the outer west: Blacktown, Parramatta, The Hills Shire and Liverpool, which offer home buyers the best prospect of owning a detached house and provide many industries with the cheap land, low rents, extensive space and proximity to major road junctions they need to thrive. According to the Department of Finance, 90 per cent of the containers passing through Sydney’s Port Botany originate in or are destined for the city’s outer western region. In its recent decision to abandon some of the previous state government’s residential zoning restrictions on Sydney’s fringe, the current government is just coming to terms with reality.

    Following Glaeser’s logic, if, in conditions of “a level playing field”, or even a “field slanted” against outer suburbs, residents and businesses still “choose” to locate on the periphery, government officials have no right to interfere, and will cause economic damage if they attempt to restrain these choices. Contrary to the impressions of his green-tinged admirers, Glaeser offers, in the Australian context, a powerful argument in favour of hands-off planning, decentralisation, suburbanisation and urban growth. 

    John Muscat is a co-editor of The New City, where this piece first appeared.

    Chicago photo by Storm Crypt / Flickr

  • Australians Are Getting A Carbon Tax They Don’t Want

    Within weeks, the Australian government is expected to announce a package of measures including a carbon tax to stimulate renewable energy sources and abate carbon emissions. Officials, activists and journalists around the world will hail Australia as a courageous and forward-looking country, ready to take its responsibilities seriously. Some will rebuke their own governments for being less bold. Yet they will ignore an inconvenient detail. According to opinion surveys, at least 60 per cent of Australians strongly oppose the tax. Since it was flagged in February, support for the ruling Labor Party has fallen to its lowest level in 40 years. Only 27 per cent of Australians now nominate Labor as their first preference. Nor did they vote for it. In the lead up to last August’s federal election, both major parties ruled out a carbon tax. Prime Minister Julia Gillard declared, just hours before polling day, that “there will be no carbon tax under the government I lead”. Her job approval rating is 31 per cent.

    So why is this happening? The current malaise can be traced to a combination of long and short term causes. Like other western countries, Australia was profoundly changed by the 1960s social movements. In the decades after World War II, as Britain lost its empire and turned to Europe for an economic future, Australia shifted its agricultural and mineral commodity trade to Asia, admitted growing numbers of immigrants from outside the British Isles, and came to rely on the United States for security. Elites in the professions, judiciary, churches, universities and bureaucracies conceiving Australia as an outpost of British civilisation, found the ground moving under them.

    Radicalised by Australia’s participation in the Vietnam war, baby boomers poured out of an expanded university system to spearhead a range of movements, over time supplanting the old elites. By the 1980s, universities, schools, many professions, the media, and most of the public sector were dominated by left-progressives. Their “long march through the institutions” was perhaps more thorough-going than in the United States, since anti-leftists had yet to find a substitute for British imperialism.

    One of the social movements was environmentalism. Australia is an isolated, sparsely populated continent with hauntingly beautiful landscapes and unique natural species. Late-coming westerners found a pristine wilderness, populated by aboriginals with close spiritual ties to the land. Since European settlement, these features have, in various forms, injected a romantic strain into the country’s transplanted British culture. That strain was mostly confined to the arts and radical fringe movements. In large part, the colonies, federated in 1901, evolved a practical outlook shaped by nineteenth-century liberalism and the blessings of trade, industry and commerce.

    The 1960s saw a fusion of the romantic strain with ideologies shaped by streams of Marxism, left-wing anarchism and revivals of Counter-Enlightenment Romanticism. Sharing a preference for ecological protection over economic growth, inner-city-based activists, including many socialists, current or former communists, Trotskyites and others from counter-culture circles, like hippies, together with aboriginal peoples, campaigned to lock up remnant bushland, native forests, wetlands and traditional aboriginal sites in “green-belts” or national parks. They targeted urban expansion and industries like logging, cattle-grazing and mining, which boomed in a mineral-rich arc across northern Queensland and Western Australia. Conflicts over mining projects were routine in the 1970s and 1980s. Uranium was particularly contentious.

    But it was in Tasmania that the new environmentalism came of age. State government plans for a hydro-electric dam on the Franklin River became a cause celebre, attracting strong opposition from environmentalists, and wide public interest. Many leading-lights of the movement, including the current Greens Party leader, made their name in that struggle. Ultimately, the activists came out on top, winning support from federal Labor just before the 1983 election, at which they returned to power.

    The Franklin tussle cast a long shadow over Australian politics. Many analysts thought it contributed to Labor’s victory. Nature conservation crept onto the mainstream agenda. In 1984, various green lobby groups, including some of the more hard line activists, came together to form Greens parties in New South Wales and Queensland, modeled on the German Greens. Other states followed, and in 1992 a national Greens Party emerged. Over time, Greens gained a presence in state and federal parliaments. Some were ideological refugees from defunct communism. Before joining the Greens, for instance, one serving Greens senator was a member of the Socialist Party of Australia, a successor organisation to the Communist Party.

    While open to compromise on environmental concerns, Labor never embraced green ideology. A moderate party in the British tradition, built on craft trade unionism rather than socialism, Australian Labor was essentially pragmatic. Its environment agenda was adapted to job security, rising living standards and the interests of mining, forestry and transportation workers. For most Australians, the environment was still a marginal issue.

    Then came the climate panic. Australia is a land of climate extremes, where severe drought alternates with devastating floods. By 2006 the continent had been in the grip of drought for virtually a decade. Water restrictions even hit the major cities, as morale began to sag under fears of interminable dryness. That year also saw some unseasonably hot days. From their posts on the “commanding heights” of academia, politics and media, green ideologues sensed a chance to ramp up their rhetoric on global warming, claiming the drought would persist until carbon emissions were cut. Now they hoped to impose their anti-growth philosophy on the whole economy, not just individual projects.

    This time their message fell on fertile ground. Surveys began to show majority support for strong action on climate change. Conservative Prime Minister John Howard, who was lukewarm on the issue, and had refused to sign the Kyoto Protocol, was caught off guard. Looking to the election due in 2007, Labor succumbed to opportunism. They took to spouting green rhetoric, promising ratification of Kyoto, an emissions trading scheme (ETS) and a renewable energy target. Come 2007, the sense of exhaustion around Howard’s eleven year government was enough to tip Labor into office. But the party’s green chickens eventually came home to roost. Having hyped global warming as a great moral cause, Prime Minister Kevin Rudd suffered the indignity of returning empty-handed from the failed Copenhagen Conference. By this time the drought had broken, and the Liberal-National opposition changed course, defeating Rudd’s ETS in the senate.

    Public support for climate action began to slide. According to the authoritative Lowy Institute Poll, it is now down to 41 per cent, from 68 per cent in 2006. Workers grew nervous about the implications for trade-exposed or energy intensive industries like mining, steel production and power generation. They shifted back to former attitudes on the environment, leaving the government stranded. Following advice from his inner-circle, including then Deputy Prime Minister Gillard, Rudd deferred the ETS until after the election scheduled for late 2010, but he suffered a crushing loss of credibility. His colleagues dumped him for Gillard.

    For city-based progressives, especially in the publicly-funded sector, climate action became a vehicle to burnish their moral authority and claim a larger share of the nation’s wealth, reversing two decades of market-oriented reform. Prompted by Labor’s turmoil, more of them defected to the Greens. At the election hastily called for 21 August 2010, neither major party won a majority in the House of Representatives. The balance of power was held by the Greens and four other independents. In the senate, the balance went exclusively to the Greens. Desperate to survive, Gillard signed up to a formal alliance with them. After weeks of negotiation, the Greens and enough independents sided with Labor to form a minority government. Their price was the carbon tax she ruled out just hours before election day.

    When the dust settled, Australians found that, by pure chance, their country was in the hands of a climate junta, euphemistically called the Multi-Party Climate Change Committee, consisting of Gillard, the Treasurer, the Minister for Climate Change, the Greens leader and his deputy, and two independents. Posing as an open-minded enquiry into Australia’s climate options, the Committee is driven by an inescapable political logic. None of them can break ranks without bringing down the government, ending the most power any of them will ever have. This logic overrides everything, even rising public anger. The opposition’s line, that “Labor may be in government but the Greens are in power”, resonates widely. Few think Gillard really believes in the tax. Moreover, it comes at a time when consumer confidence is weak, and cost-of-living pressures dominate surveys of public concerns.

    Never has such a gulf opened up between elite and popular opinion. Nothing has turned around opposition to the Committee’s tax, not Gillard’s promise of compensation for low to middle income earners, not favourable media coverage, not reports by scientific experts, not declarations signed by eminent citizens, not even an advertising campaign fronted by Oscar-winning actress Cate Blanchett. Urging Australians to “say yes”, the ad unleashed a wave of resentment towards the globe-trotting star, who owns a $10 million “eco-mansion” in one of Sydney’s exclusive suburbs. Tabloid newspapers dubbed her “Carbon Cate”.

    Most opinion-leaders will applaud Gillard’s carbon tax package. They will ignore the real story: Australians are being made to walk the climate plank, with a cutlass at their back.

    John Muscat is a co-editor of The New City.

    Photo by MystifyMe Concert Photography