When economists speak of concentrated interests and dispersed costs, one example that is used—or at least, should be used more often—is the market for housing. Basically, there are two groups of people:
- future renters and homebuyers—most of whom don’t yet live in the neighbourhoods in question (some haven’t even been born); and
- existing residents—those who already own homes and have a direct stake in how their suburb evolves.
There’s a clear power imbalance between the two groups. As a country, Australia would be better off if the rules governing housing were reformed to allow more people to live where they want to, i.e. in suburbs near jobs, transport, and schools. A few hundred dollars saved on rent here, a shorter commute there, a young family finally able to live near jobs and schools. These gains are real and widespread. But they’re also diffuse. No one person gets the full benefits, so no one person has the same incentive to fight for them.
But the costs of unlocking those benefits fall almost entirely on existing residents, giving some of them a strong incentive to fight against them. Enter Judith Pearson, a resident of the affluent Sydney suburb of Mosman, where the median house price is now an eye-watering $5.8m (units are $1.35m):
“Judith Pearson is believed to be the first private citizen in NSW to launch court action against the NSW government’s low- and mid-rise housing reforms amid fears increased density will impose unacceptable impacts on some of Sydney’s most sought-after suburbs.
Pearson, who has lived at a home perched on the Balmoral slopes for more than 30 years, is willing to spend up to $500,000 in legal costs as part of her challenge, which commenced in the Land and Environment Court last week.”
Pearson’s stated hobbies include gardening and being a “community volunteer”, which presumably also includes attending local council meetings to object to any form of development.
Now, as frustrating as this may be for those of us who want to see more affordable, accessible housing across Australia, her response is perfectly rational, given the rules of the game. New people can change the character of the suburb, apartments can be visually intrusive compared to heritage homes, and if enough density is permitted, her house may even fall in value. These perceived costs, while small in aggregate terms, are clearly large enough in Pearson’s personal calculus to justify a $500,000 fight.
However, that doesn’t mean she’s right. In a democracy, the interests of the many should outweigh the preferences of the few, especially when the social costs are large, as they are with housing. The people who would benefit from more housing in Mosman—lower-income families, essential workers, young renters—are dispersed, unorganised, and often unaware they’re being harmed by restrictive zoning. They don’t show up to council meetings. They don’t fund legal challenges. But their interests matter just the same.
If we as a country want more homes built in better locations, we need to stop letting the most motivated, well-resourced members of the vocal minority veto the future for everyone else.