New CIS paper: rewrite heritage laws that are worsening the housing crisis

Australia’s heritage legislation is entrenching the housing crisis by protecting hundreds of thousands of low-value buildings without weighing the economic cost, a new Centre for Independent Studies paper warns.

In Reform of Heritage Legislation, economist Dr Peter Tulip argues that current laws need to be overhauled as they fail a basic public policy test: they do not compare the costs of heritage listing with the benefits.

“The result is that heritage controls lock away large areas of unremarkable suburban houses. This blocks higher-value uses of land and worsens housing affordability,” Dr Tulip says.

The paper finds:

• Vast areas of inner-city land are locked up by heritage restrictions. 21% of residential land within 10 km of Sydney’s CBD is estimated to be heritage protected. In Melbourne, 29% of residential land within 10km of the CBD is covered by a heritage overlay. Character Residential zones account for 12% of Brisbane’s residential zoned land area.
• The cost of listing often runs into millions of dollars per site in forgone development value, yet these losses are ignored.
• Community willingness to pay to preserve ordinary buildings is modest, suggesting benefits are frequently dwarfed by costs. A survey of Victorians found the average willingness to pay to preserve a locally significant house was only $68.
• Delisting is costly, slow and procedurally onerous, even where circumstances have clearly changed.
• The burden of proof falls unfairly on property owners, even when the original listing was supported by minimal evidence.

A case study from Ku-ring-gai in Sydney shows heritage-listed homes valued at around $4 million sitting next to newly upzoned sites worth $10 million. Owners of listed properties are effectively ‘stranded’, unable to realise comparable value, even where surrounding development undermines the original heritage rationale.

Dr Tulip argues that the deeper problem is misaligned incentives. Those who benefit symbolically or politically from heritage listing do not bear the financial cost. Property owners, future residents and renters do.

“Heritage listing should occur if, and only if, the benefits exceed the costs,” he writes. “At present, there is no requirement to test that proposition.”

The paper recommends rewriting heritage listing legislation, focusing on two central reforms:

1. Mandatory cost–benefit analysis for all listing decisions, including explicit consideration of forgone housing supply and effects on affordability.
2. Compensation for owners of listed properties, as previously recommended by the Productivity Commission, so that communities internalise the true cost of preservation.

Under a compensation model, listing would proceed only where the community is willing to pay for the heritage value it seeks to preserve. Lower-value listings would fall away, and genuinely significant sites would receive clearer justification and stronger public support.

The paper argues that current criteria do not reflect community priorities. While opinion polling consistently ranks housing affordability among voters’ top concerns, “losing built heritage” ranks near the bottom.

“Eyesores, like a multi-story carpark in Carlton, Victoria or a widely-loathed civic centre in Dee Why, NSW, are preserved because a fringe of architecture enthusiasts thinks they are distinctive.  The City of Melbourne recommended listing a service station due to its “rarity, aesthetic and technical significance to the city”,” Dr Tulip says.

He concludes that reform is overdue. “Preserving buildings of exceptional historical importance is widely supported. Preserving thousands of ordinary suburban houses at enormous social cost is not.”

Dr Peter Tulip is Chief Economist at the Centre for Independent Studies.