Good news from Denmark

Denmark has a housing problem. Not Denmark the country, but Denmark Western Australia – population 2,375 – which happens to be the least affordable town in the state and “one of the most inefficient communities in WA when it comes to the balance between large family homes and smaller dwellings, with a ratio of 1.22 bedrooms per resident”.

It’s also stunning. Located right on the southern coast of WA, Denmark is very popular with tourists, especially during the summer months when people from Perth drive the 450km to ditch the city heat in favour of the cooler outdoors. That probably explains some of its “inefficient” bedroom ratio: large seasonal population fluctuations mean that during peak tourism season, the extra bedroom space is needed to accommodate them all.

Tourism might also explain why Denmark’s rental vacancy rate is just 0.2% and the town has just “one house currently available for rent”. The problem doesn’t appear to be rental availability per se – I did a quick search on Airbnb for “Denmark WA” and found 132 properties available next weekend – just long-term rentals.

But if there are people with “a government job and knowing so many people and having stable work”, who cannot find a long-term rental at any price, then the market clearly isn’t functioning property.

So, what’s going on? One reason the market isn’t working all that well is that Denmark’s planning and zoning regulations are extremely inflexible, artificially constraining housing supply. While I can’t say exactly why Denmark is so NIMBY, it does have a median age of 50 versus 38 for WA as a whole, and age is a well-known trait of NIMBYs:

“Older commenters tend to have stronger views against development which can be associated with NIMBYism. We find that a typical stance among this age group is wanting ‘to preserve the character of the neighbourhood’. This is often repeated in their statements. However, a shift against NIMBYism is also evident—among younger commenters, renters in particular, many of whom lament a lack of affordable housing.”

Ah yes, the classic ‘by the good fortune of being born before you I got here first, bought this property for peanuts, and now don’t want anyone else to come in and ruin its character’, argument. There’s nothing wrong with having those preferences, except when they’re used to capture local government and deprive potential future residents – who have no vote and no realistic ability to compensate residents to change their mind (those damn transaction costs) – from moving in.

But in all seriousness, not only does the Shire of Denmark release very little land for housing in the name of preserving “environmentally important vegetation or farming land”, but it also prevents almost any kind of density on land zoned for residential development. Of course it’s going to have a housing crisis! Have you seen the place?

But there is good news! Fortunately, attitudes have been slowly changing and in 2021 the town finally legalised granny flats. The cynic in me might think that was only because the NIMBYs wanted to cut themselves a slice of that sweet, sweet Airbnb tourist revenue; but it’s still better than nothing. And the Shire’s President looks like he’s trying to go a step further:

“Shire president Kingsley Gibson said the solution [to the town’s housing crisis] was to encourage more diverse, and denser, forms of housing to be built, such as granny flats and tiny homes.

“We’re very keen to see a move away from the standard 3x2 or 4x2 house to a diversity of housing types that will include apartments and small homes,” Mr Gibson said.

The shire’s draft Local Planning Strategy, which is currently open for comment, includes targets for a minimum of 10 per cent of housing lots to be high-density, and 25 per cent to be medium-density.

To do this, the plan includes reforms to Denmark’s zoning regulations and calls for the shire to investigate potential financial incentives.”

Denmark has a long way to go before it actually fixes its housing market, given its stock of housing is almost entirely made up of low density single-family detached homes. But if it succeeds in passing these proposed reforms (i.e., they don’t back down in the face of an inevitable flood of NIMBY ‘comments’) and finally allows the market to work even a little bit – 65% of the town’s new housing stock will still be single-family homes under these new rules, after all – then maybe, just maybe, Denmark won’t be the least affordable town in WA for too much longer.