Lessons on megacity trends: Interview with Dr Parag Khanna

By Mia Kwok, UDIA NSW Media & Communications Manager

 

Despite our physical distance from our neighbours and colleagues at this time, our economic and geopolitical distance is still shrinking. We still rely on trade with our Asia- Pacific neighbours, we still share social networks and connect across the globe. Business knows no barriers. Dr Parag Khanna is an expert on global connectivity as Founder and Managing Partner of FutureMap, a data and scenario based strategic advisory firm. He has consulted on global trends, technological disruptions, market entry strategies and economic master planning to governments around the globe. He has been named one of the “75 Most Influential People of the 21st Century” by Esquire Magazine and was recently an adviser to the US National Intelligence Council’s Global Trends 2030 program. Khanna considers himself a citizen of the world. Shifting primarily between Singapore and New York, Khanna navigates the cities like a local but feels he has a different kind of relationship to a city than your everyday resident.

“I call every place home, but I don’t stay long enough to be a local… A true local has all their stakes [in a place]. I think of myself more as a stakeholder. I feel like a resident who belongs,” he said. Perhaps this is what gives Khanna his bird’s eye view of society; an ability to see the world as a tapestry of mass behaviour. Increasingly, this ability to understand and predict how people operate is falling under the remit of those who build our cities: the architects, planners and urban developers.

“I think that in most of the world, in most of the mega cities, [cities are] still organic and accidental. That’s why they’re so overcrowded, and unplanned,” said Khanna. Khanna shared his expertise with us on the key global trends which are impacting the way we create cities of the future.

Geopolitical boundaries are porous

The importance of geopolitical boundaries is shrinking as economies grow without regard to political borders. His greatest example is of cities near borders which have high volumes of trade and migration, such as the US-Mexico or US-Canada borders. Parag has captured this trans-political movement via satellite imagery. The web of light shows the intricate way we live and work; not bound by borders but sprawling organically from one city to the next.

“Where borders are meant to divide us, what you find is that human beings are voluntarily moving towards cities and not only any cities, but very often cities near borders,” said Khanna. “Those that can afford to do business across borders will prosper more.”

Unplanned cities are less equal

In Australia, like many countries, our cities draw huge amounts of rural migration as the attraction of jobs, wealth and a better lifestyle brings more people into urban centres. “The reason we have this inequality in our country is because of rapid urbanisation… cities don’t have the capacity to cope, and you have such bad stratification within them. We have to do a lot to build the capacity that’s essential to take care of all the people who simply want to be in these cities and won’t go away.”

Most cities, Khanna tells us, are organic and accidental. Without proper urban planning, these cities are causing major social stratification — further dividing the wealth gap. Particularly in the last decade, 50 per cent of the world has become urbanised. Without good planning policy, city infrastructure can rapidly become overwhelmed. “You’re a victim of your own success,” said Khanna. The divide between unplanned and planned cities can be all the difference to strong economic growth. The key, said Khanna, is having multiple growth engines and adequate connectivity between them.

Megacities as growth engines

“Every country has to think about distributing their growth. Why is America an economic superpower? It’s because it has not one, or two, or three… but 40 major urban metropolitan regions. A megacity, for Khanna’s purposes, is a conurbation of a primary city and second tier cities, like the Greater Bay Area in Southern China. Nationally, of course, we have growth centres in our state capitals but the concept of second tier cities is a relative measure. For NSW, this concept includes Newcastle in the north, Wollongong in the South and the Eastern, Central and Western cities in the Sydney metropolitan area: the polycentric city model which has been a critical part of Sydney’s growth strategy. If we want to be globally competitive and create strong economic growth we will need strong economic centres, and lots of them. “China has been doing the best job of distributing growth,” said Khanna. “Chinese growth began 40 years ago in coastal megacities, especially the Pearl River Delta. Now, what you have is growth spreading across the country. They explicitly plan to have 20-25 megacity clusters that are distributed drivers of growth.” Khanna’s newest book, The Future is Asian, dives further into the growing connectivity across all Asian countries giving rise to the Eastern cultural and economic systems.

Mobility as an economic multiplier

“When you have mobility – cheap, national mobility – you allow people to circulate efficiently and to build a better life…there’s macro infrastructure that has massive micro-economic benefit in terms of resilience,” Khanna said. Khanna believes that mobility leads to more affordability, less congestion and greater sustainability. He presents the notion that affordable housing, transportation mobility and sustainability are the three seminal priorities for city government. He goes on to elaborate on the huge economic benefits Europe, China and Japan have from cities connected by fast, cheap rail networks. “In the case of China, we have the financial crisis in 2008 and the shock of falling demand for exports in Southern China, and a contraction in the Western economy. A lot of people got on trains – they got cheap tickets and they got one way tickets,” Khanna tells us.The ability to travel easily and cheaply meant the same people could return when the economy recovered. That mobility acted as an economic multiplier.

But Australia, he argues, is different.

Like America, we have a greater reliance on airlines to move people while the demand for rail lies predominantly with freight given our mining economy. “You want to determine [mobility] with a long term vision in mind, taking into account climate variables, demographic patterns, where industry is located…it’s a very complex exercise,” he said.

Be a market maker

Khanna’s last point is perhaps a culmination of everything he has explained about cities so far. Cities aren’t successful when they’re a byproduct of whimsy or responding quickly to a need at the time. Financial viability, and indeed economic sustainability, operates in an ecosystem. We need to act strategically across the industry, as planners and developers and so on, to distribute the population more sensitively. To think big when it comes to our city.So often, we talk about Sydney in reference to our CBD, when really we should be thinking about the megacity from Newcastle to Wollongong and the Greater Western suburbs. Khanna shows how comparatively across USA, Europe and Asia, cities are increasingly blurring their boundaries. Even satellite imagery is telling, as cities span across borders.

A combination of rapid, cheap mobility and more enticing populous cities will grow our economic outlook for the better. The demand of youth culture, the impacts of global youth migration, are driving rapid change but seizing an opportunity like gentrification means years of planning. But the critical point Khanna makes is that the property industry can lead the way. “You see it in rich countries like Germany’s Berlin and you see it in poorer countries like in Bogota, Columbia. Neighbourhoods change and can be made cool and interesting and more populous.” Developers need to be market-makers: they need to know the broader social and economic landscape and bring about change through design and planning.

“The real estate industry shouldn’t be sitting on the sidelines,” he emphasised.

“Be a part of making that new market you know is necessary.”

UDIA NSW | DPIE Updates on COVID-19

COVID-19 is putting increasing pressure on industries around the world. The development sector is no different: uncertainty from declining sales, disrupted supply chains and delayed project launches. With unemployment rising across the state, UDIA NSW expects further challenges for the industry as potential buyers begin to think about income security.

Both the Premier and NSW Government have emphasised that construction and planning activities are currently essential services to continue. This will help support continued project delivery, even as sales will be increasingly challenging. The NSW Department of Planning, Industry and Environment (DPIE) are holding weekly meetings with peak industry bodies to ensure critical policy outcomes are delivered in line with industry needs

UDIA NSW CEO, Steve Mann met with Marcus Ray Group Deputy Secretary, Planning and Assessment, DPIE this morning who chaired a new weekly Peak Bodies meeting – Planning System COVID-19 Response (see summary notes attached) about the government’s response to COVID-19, so far:

  • DPIE has advised Council to continue all planning activities as essential services and is meeting with Council’s General Managers to reinforce this message.
  • The COVID-19 Legislation Amendment (Emergency Measures) Bill passed Parliament yesterday has clarified that physical presence is not required for planning exhibitions.
  • The Bill has given the Minister for Local Government the power to defer Local Government elections. Minister Shelley Hancock has indicated she intends to defer Local Government Elections until at least September 2021.
  • The Legislation also gave the Planning Minister power to make an order authorising development to be carried out on land without the need for any planning approval under the Environmental Planning and Assessment Act 1979 if the Minister is reasonably satisfied that the making of the order is necessary to protect the health, safety and welfare of members of the public following consultation with the Health Minister.

UDIA has continued to raise the need for accelerated approvals and certainty, and we are in ongoing discussions with government officials at all levels.

It is essential that we use this period to position ourselves for an economic recovery following this health crisis. UDIA NSW is collating examples of projects from our request for information to present stimulus to government as part of the project Bounce-Back Stimulus Action Plan that we will be launching to members this week.

We are continuing with our strong message that Planning Reform is Economic Reform. While, we will still be seeking strong reform outcomes. The first focus must be on using this period to set up NSW for success with a concerted focus on:

  • Minimise uncertainty by extending the Section 7.11 cap on developer contributions while investing in local infrastructure.
  • Accelerate development approvals and rezoning, using private sector resources and step-in powers to get assessment moving.
  • Invest in catalytic infrastructure projects that will deliver housing supply, as identified in UDIA’s Building Blocks Reports and to put in place an Urban Development Program to complete the missing piece of trunk infrastructure.

While, there will be inevitable impacts in the immediate term, the right actions now will ensure NSW can take advantage of a housing-led economic recovery.

UDIA has been focussing its advocacy on ensuring that we take these urgent actions, click here to read my article published in the Sydney Morning Herald on how recapping section 7.11 is the Government’s easy answer to jobs.

UDIA NSW Council and Secretariat will be reviewing further mechanisms to stimulate market recovery and will provide members with further updates as information comes to hand.

We are currently conducting an ongoing survey about the impacts of COVID-19 on members, and ask members to complete the survey linked here.

Op Ed: Sitting on a $2.65 billion ‘pot of gold’, while infrastructure delivery flounders

Opinion, 21 March 2020

Written by Steve Mann, Chief Executive, Urban Development Institute of Australia NSW


We most often think about infrastructure as the big, splashy projects: the Sydney Metro, the new stadiums or the WestConnex tunnel. But there is a type of infrastructure that desperately needs to be built in our cities and suburbs. It’s the infrastructure that keeps our roads safe by installing lighting, footpaths and bike paths. It’s the infrastructure in our local parks that gives the kids local sporting fields to play on. These projects are funded by local communities, local home-owners and firstly through property developers, to be delivered by Councils. Unfortunately, Councils are not delivering them on time, and our communities are missing out on amenities they have paid for.

UDIA NSW data released today, shows that Councils are sitting on $2.6 billion in unspent local infrastructure contributions across the Sydney megaregion. In this area, which stretches to Newcastle in the north, Wollongong in the South and the Aerotropolis in Western Sydney, Councils have collectively spent only 63% of their funds collected in the past three years. What makes this infrastructure different to big projects is that many of the projects could start tomorrow providing jobs and infrastructure during the COVID-19 crisis. There is $2.6 billion that we have paid for, now sitting idle.

The new home buyer is the one who hurts most in this system. Not only do the infrastructure contributions add to the cost of their new home, but they also must live without the promised infrastructure projects. In the Liverpool Local Government Area, there are temporary drainage basins in Austral which are scattered throughout the suburb and are dangerous to live next to. In the Maitland LGA, 500 new homes would benefit from a new lighted sports field, clubhouse and playground if the section 7.11 funds could be unlocked. But because of the way the system is structured, the infrastructure can’t be delivered anytime soon.

Developers pay these infrastructure contributions up front, under section 7.11 of the Environmental Planning and Assessment Act 1979. Since 2010, the NSW Government has capped these infrastructure contributions, so that any requests for additional funds from developers need to be assessed by IPART, and if found to be essential to the area, the Government will supplement the missing cost. At the time this policy began it provided a big boost to productivity and supply for housing the next generation of Australians.

But on 1 July 2020 in 80 days, the local infrastructure contributions are set to be uncapped. If this happens, the section 7.11 levy in Western Sydney can be up to $90,000 per home, but they are currently capped at $45,000 in greenfield areas in Sydney. This means higher infrastructure contributions will be required in an already broken system and it will reduce supply and make housing even less affordable and putting much needed jobs at risk. This is a critical opportunity to get shovel-ready projects on the ground and create essential employment opportunities.

The system is broken and there has to be a better way. Some councils are working hard to deliver infrastructure, but are blocked by a convoluted planning system that can slow delivery. Councils often find they are better off banking this money, leading to some sitting on pots of gold, while others are forced to come up with complicated planning measures to deliver infrastructure on the ground.

While the Government has promised to fix the broken system, they need to maintain the s7.11 cap in Western Sydney and regional markets to keep housing affordable. In the interim, there is up to $2.6 billion in economic stimulus that could be unlocked with state support either through coordination, prioritisation, or additional loans to unlock larger projects within an LGA. This stimulus would provide jobs now, faster recovery, and new infrastructure after the crisis.

-ENDS-

Media contact:
Mia Kwok – 0435 361 697
Email: media@udiansw.com.au

 

Download the Infrastructure Funding Performance Monitor here. 

The End of Local Infrastructure Growth Scheme

By Chris Avis, Infrastructure & Development Consulting

On 30 June 2020 the Local Infrastructure Growth Scheme (LIGS) will cease to exist. According to the NSW Department of Planning Industry and Environment website, the LIGS initiative “supports councils in the delivery of essential local infrastructure in high growth areas. The scheme funds the gap between the maximum contribution councils can collect from developers and the reasonable costs of delivering required local infrastructure”.

In simple terms, LIGS sees the State Government “cap” the amount a developer pays under section 7.11 levies (formerly section 94) and pays the gap to Council as a co-contribution to essential local infrastructure. Originally, the capped amount was $30,000 per dwelling in greenfield areas in metro Sydney, with $5,000 incremental rises up to $45,000 through to 30 June 2020 and uncapped from 1 July 2020.

Importantly, LIGS funding only applies to contributions plans which have been reviewed by the NSW Independent Pricing and Regulatory Tribunal (IPART), while plans that have not been reviewed are still subject to a $30,000 cap with no gap funding available.

Many s 7.11 levies in Sydney’s growth areas sit between $50,000 and $60,000 per dwelling, but others, particularly in the North West growth area are over $100,000. To see the effect of this change on a common development scenario in Sydney’s growth areas, take a 5-acre (2 hectare) lot with a density of 15 dwellings per hectare (i.e. 30 lots). The table overpage shows the total s7.11 contributions amounts for a few sample Precincts in the growth areas.

The hypothetical site in Austral is subject to the Austral and Leppington contributions plan which is currently in the early stages of being exhibited by Council prior to a review by IPART . It is therefore limited to $30,000 per dwelling until the review is complete.

It is clear that the upcoming changes will have varying effects on each precinct, but how it will affect supply and prices is unknown.

■ How long will it take vendors land value expectations to adjust downward?

■ Will the vendors be happy to remain in place and not transact given the relative cost to relocate to a similar lifestyle in surrounding peri-urban areas?

■ How much land under option will no longer be feasible to develop?

■ How drastic will this impact on land supply and the development pipeline?

It is likely that the effects of this will be felt more in fragmented precincts. Areas like Austral, Leppington, Riverstone, Box Hill, etc. are typically more reliant on Council to deliver green infrastructure (i.e. open space, drainage basins, creeks, etc.). If development stalls in these areas, insufficient levies will be available for Council to provide the infrastructure required to create liveable places for the communities that have started to grow. This means that the numerous temporary detention basins will remain in place, residents won’t have access to open space and kids won’t be able to ride their bikes to school on safe bicycle lanes or footpaths. This would be an absolutely awful outcome for everyone.

They say problem spotters are a dime a dozen so here are a couple of measures that can be implemented to help solve the issue.

Extend the $5,000 per annum Cap Raises

Safeguard against the risk of severe supply shortfalls by extending the $5,000 per annum increases until all Section 7.11 Plan amounts have been reached. This would allow land transactions to continue and avoid the major shock of some Plans doubling overnight.

Review Stormwater Management policies

The biggest difference in Contributions Plans across the various Local Government Areas is undoubtedly Stormwater Management and the biggest component of this is land acquisition. Here are a few measures that can help reduce the amount of land required for drainage purposes.

■ Extend the permissibility of online basins to 3rd and 4th order streams. Currently, online basins (basins that are situated “on” the creek line) are only permitted on 1st and 2nd order streams. These online basins are far more efficient and have a reduced land take requirement than offline ones.

■ Permit detention basins on sports fields. Not allowing detention basins on sports fields means that land must be acquired for open space and then again for basins, rather than a dual use sports field/detention basin.

■ Permit Water Quality Basins below the 1 in 100-year flood level. Again, this would reduce the amount of developable land lost to drainage and reduce the land acquisition rate per square metre by using flood affected land.

Anything we can do to reduce the land acquisition rates per square metre and the amount of land lost for drainage purposes means that the costs can be reduced and spread out over more lots, reducing the levies per dwelling

As we begin to see the green shoots of growth out of this last housing slump the continued development of the growth centres is imperative to ensure that the development industry and Government can work together to create great places, not just housing. We just can’t afford to lose this momentum that is slowly appearing.

Message from the CEO | UDIA NSW Operations | COVID-19

In light of recent developments around the COVID-19 (coronavirus) outbreak, UDIA NSW has decided to put in place appropriate health and safety measures for our members and staff. Effective immediately, we are suspending all our events and training services, normally attended in person. This is a challenging time for everyone in the industry and we are always working in the best interests of our members.

We are currently investigating how best to deliver our critical industry content through new online channels, such as webinars and webcasting.

We will continue to monitor the rapidly changing landscape, however, we are taking the following steps in line with government recommendations:

UDIA NSW Events Program

We will be suspending our upcoming events program from now until 30 May 2020. Our leadership team will be closely monitoring all advice to ensure the health and safety of our members. If you have purchased a ticket for an event, your refunds will be completed within the next week. All sponsors will be contacted individually.

Professional Development and Training

All face-to-face professional development and training sessions will be postponed up until 30 May 2020 or moved to a virtual classroom platform. If you have purchased tickets to one of our training sessions, our team will be in touch with you directly ahead of your booked training session.

UDIA NSW Committee meetings

Your contributions to our Committees remain invaluable. Going forward, Committee meetings will be held via teleconference only. Members will be provided teleconference details within calendar invitations by a UDIA NSW staff member for all scheduled and future meetings. These arrangements will be reviewed on a weekly basis.

Policy and Advocacy

Our operations will continue to focus on our key policy areas of:

1. Planning Reform 2020
2. Infrastructure Contributions Reform
3. Building Regulations
4. Western Sydney and Regional Cities
5. Diversity and Inclusion

We are continuing to work closely with government decision-makers and influencers to advocate for liveable, affordable and connected cities of the future.

We will amplify our online communications and content delivery so our members can continue to contribute to our policy and regulatory advocacy and stay informed about the policy agenda.

These are difficult times for our industry — who are our family and friends, not just our colleagues and peers. It is at times like this we must show leadership and resilience.

We have already set up a survey, to hear directly from you about the impacts of coronavirus. If you haven’t already, we ask you to complete this 5 min survey to support our advocacy efforts. We want to hear from you and support you through these challenges.

“Missing Middle” housing typologies are well overdue

Media Release: 16 March 2020 – The Urban Development Institute of Australia (UDIA) NSW today commends NSW Planning Minister Rob Stokes’ clear message to get on with the job and let the industry build for the “missing middle”. Minister Stokes has committed to 1 July deadline for any deferred planning proposals.

“Apartment approvals have fallen drastically and the ‘missing middle’ typologies are needed immediately to cater to both young families and our ageing population,” said chief executive Steve Mann.

The Sydney-based apartment stock will imminently dive off a supply cliff with apartment approvals down over 50 per cent from the peak.


Source: ABS; UDIA NSW 2019

“With an ageing population, low rise-medium density provides a greater opportunity to age in place, and provides an affordable option for those who moved into the ‘garden suburbs’ to remain near friends and neighbours,” said Mr Mann.

“The ‘missing middle’ also opens up more options for those seeking to start families using older stock in established suburbs, as well as renewal opportunities, which might provide homes for first homebuyers,” he said.

Councils have had five years to prepare for the ‘missing middle’ and yet 24 Councils have not pursued planning proposals, or they have pursued planning proposals to disallow low-rise housing.
“The medium-density code is a great piece of public policy to cater to the changing demographics of our society. Councils were given generous deadline by the Department, but now is time for decisive action,” said Mr Mann.

Around the country, other jurisdictions have allowed for a range of innovative housing typologies, including ‘micro housing’ in WA and the Gold Coast.

– ENDS –

Download PDF version

Media contact: Mia Kwok 0435 361 697 media@udiansw.com.au

Cancellation Notice – UDIA National Congress and Gala Awards Dinner 2020

Dear members,

As per my previous communications to Congress delegates, UDIA has been monitoring daily the extraordinary challenges posed by the COVID-19 virus and its potential impact on next week’s National Congress planned to be held in Sydney commencing Tuesday 17th March, 2020.

The physical and emotional health and wellbeing of our delegates, staff, sponsors, exhibitors and speakers is paramount. As a result, UDIA has made the decision to cancel this year’s National Congress and Gala Awards Dinner in Sydney.

We understand that this decision will cause inconvenience especially for interstate and international travellers for which we apologise.

We all remain optimistic that the current situation will resolve itself soon and we can all go back to “business as usual”. Once this occurs, we look forward to see you all at the many quality UDIA state events that are held throughout the year and welcoming you all to the 2021 Congress.

We will continue to communicate with you on matters arising from cancellation of Congress.

Regards,

We need a revolution, not an evolution – President’s Speech

Presented by President Michael Sheargold, UDIA NSW at the UDIA NSW February Luncheon, 20 February 2020.

Welcome everyone to the first UDIA NSW event for the year.

We start the year with the expectation that 2020 will be a watershed year for planning in NSW.

All cycles turn, homebuyers are back, and there is now clear evidence of a market recovery in NSW. UDIA NSW expects that demand will grow for new housing and we need to use this momentum to stimulate the broader economy.

Our state’s economic performance has been less upbeat. The RBA’s forecasts have been downgraded and we are faced with an unprecedent intersection of external forces that are battering confidence across the economy: extreme weather conditions, from droughts to floods to a horrific bushfire season; and the coronavirus, which has disrupted some supply chains and inhibited potential overseas investment.

There must be a galvanising drive for our governments to deliver more fiscal stimulus. NSW needs to see strong economic growth, more jobs and improvements to affordability.

The NSW Premier and Minister for Planning have recognised the need for change with the announcement in November of the need for major planning reform. We are greatly encouraged by the reform agenda to deliver ‘the simplest and most effective planning system in Australia’.

We are at a crossroads, where continuing with the status quo in planning will lead to lower supply and more housing affordability challenges. We need to see real change to a system which is struggling.

It currently takes 7-10 years to build a home because we have the most complex planning system in Australia.

It is critical that these timeframes are reduced, and our system is clear and simple to navigate:

    • We need to know that we can work within the strategic framework to secure a merit-based rezoning.
    • We need predictability in our developer charges because as a society we cannot choose to make development uneconomic or unaffordable.
    • We need transparency in our system, so we can submit Development Applications, and everyone can be accountable to timeframes. The number of DAs being submitted is dropping and the time it takes to process a DA is even longer – the average DA determination time has increased by 95 days since 2015 for DAs over $20 million in value taking an average of 357 days.

With continued lack of predictability, there are significant flow on effects to our economy. UDIA has recently completed research with EY, which shows the economic contribution of the NSW Residential Development sector contracted by $14.4 billion in 2018/19 and had an imputed loss of over 32,715 jobs. The planning system has become a key barrier to jobs and growth, and this is harming the State’s economy.

The Urban Development Institute of Australia (UDIA) NSW is the state’s leading development industry body, representing more than 500 member companies and agencies across the public and private sector.

Planning reform is economic reform. Government has a choice to invest in the industry, or continue to watch the downward trend in approvals and completions, which will lock a generation out of the housing market. With the NSW Government’s focus to “Kickstarting Productivity”, what better industry than the development sector which represents 7.2% of the NSW economy to deliver jobs growth and productivity gains.

There is now a large hole in NSW’s housing supply pipeline, which has fallen by 36% since the peak. It is led by the contraction in Sydney’s apartment supply pipeline, with approvals now down 57% and completions forecast to be only 15,000 dwellings in 2020 – half the number achieved in 2018.

And from a greenfield perspective, the Department of Planning’s Greenfield Development Monitor shows there are currently only 10,800 zoned lots remaining in the North West and South West Growth Centre. And this supply of zoned land is not getting restocked, there are currently 23,500 potential dwellings that have been released, but not yet rezoned.

Given this hole in the supply pipeline, there is one imminent deadline which is inhibiting growth in our industry. Currently, infrastructure contributions are due to be uncapped in 132 days on 1 July 2020. The uncapping has caused considerable angst in the industry, and we are pleased that the Premier has announced that she will fix the infrastructure funding system, but the extension of the contributions cap is needed now.

In Western Sydney, cumulative infrastructure charges will exceed $120,000 if we continue down the path of uncapped section 7.11 and the SIC charges. This increase would see section 7.11 moving from $30,000 to exceeding $90,000 in parts of Western Sydney in a period of 3 years, a 200% increase. The slide shows the work we did with SMEC to run the numbers for a subdivision in each state and an uncapped s7.11 in Western Sydney would be double the developer charges for the highest of the other states.

Even our regions are not exempt from exorbitant charges. The Western Corridor in Newcastle is facing a doubling of infrastructure charges with Council seeking to bypass the IPART process, and West Dapto, in the Illawarra is facing contributions of $52,950 per lot, a 150% increase from when the $30,000 cap applied.

There are only three possible outcomes from a hike in developer charges:

1. Residual Land Value decreases – but it’s unlikely wholesale land vendors will want to sell at a close to 40% discount, so supply will slow.

2. Developer margin decreases – in my experience this has already occurred to a certain extent but the is a floor on this as financing is conditional on hurdle rates, If the bank or financier does not see an adequate allowance for profit and risk then the money won’t flow and supply will not occur.

3. Or lastly and most likely – housing price increases and we continue with another generation locked out of the housing market.

Extending the contributions cap provides security and certainty. It will allow the market to properly adjust over the medium term to enable continued supply onto the market. As taxes and charges approach 35% of the price of a new home, we are seeking certainty in charges, with a cap of $60,000 for greenfield areas that includes section 7.11 and SIC for three years. With emerging and growing regional challenges, we also need a solution that will enable our key regions near Sydney in the Hunter, Central Coast, Illawarra, and Shoalhaven to continue to grow.
The Urban Development Institute of Australia (UDIA) NSW is the state’s leading development industry body, representing more than 500 member companies and agencies across the public and private sector.

We know recapping is not a long or a medium-term solution, however it is required to ensure affordable housing supply in the short term. And for the medium and long term my own personal view is that we require a revolution rather than an evolution of the current taxation, rating and infrastructure funding framework which is letting down the development industry as well as the broader community.

We have the opportunity to work with the government on their reform agenda and improve our system. And to that end we are campaigning to “Make Planning Work” this year, with a focus to:

    • Make Planning Responsive
    • Make Planning Fast
    • Make Planning Simple
    • Make Planning Predictable.

We contribute $101 billion in economic output for the State and over 246,000 jobs. We want to continue to grow the economy, to draw people back into the state who we have lost through interstate migration. Our planning system has been holding us back – UDIA is providing clear, well-researched policy to government and have been campaigning at the highest levels to deliver change.

It is a lofty goal, the government has outlined, to deliver ‘the simplest and most effective planning system in Australia’ and it is a goal that we applaud, and as the old saying goes if we shoot for the stars and miss, we may end up on the moon.

Well as long as the moon is zoned, serviced and has a bureaucracy with a can-do attitude that can turn around any DA in 60 days, then you can count me in.

– ENDS –


Image: UDIA NSW President Michael Sheargold at the February Luncheon.