Wednesday, 22 February 2012

Build it and they will come - eventually

http://smh.domain.com.au/real-estate-news/build-it-and-they-will-come--eventually-20120203-1qxjo.html



Build it and they will come - eventually

Matthew Moore
February 4, 2012

Mayor Mr Greg Burnett of The Hills Shire Council  in Foxall rd Kellyville that has been approved for sub-division development but isn't going aead due to no facilities such as water sewage.
"It’s absolutely mad" ... Hills Shire Council mayor Greg Burnett. Photo: Brendan Esposito
Councils say there's more to building houses than plans and promises.
'Drastic times, drastic action," is how the NSW Planning Minister, Brad Hazzard, justifies the government's radical move to kick-start Sydney's moribund housing construction industry.
Revelations this week that the government has invited developers and landowners to nominate where Sydney's new suburban housing estates should be built means conventional planning practice has been turned on its head.
Previously, Sydney has expanded from a top-down approach, with government planners concentrating new housing estates in two huge "growth centres", one each in the city's north-west and south-west.
It looked good on paper, but many fields in the growth centres remain whisper quiet, with Sydney's new home construction levels stuck at about 17,000 dwellings a year, at least a third less than the minimum of 25,000 new dwellings needed to house the city's burgeoning population.
More than 80 per cent of those built recently are in urban areas, with new home development on greenfields sites slowing to a trickle.
With the new government promising to boost housing levels to the 25,000 minimum required, it has quietly adopted a completely different approach, writing to scores of landowners last year inviting them to nominate mainly rural holdings suitable for large-scale residential developments to be rushed ahead, preferably within three years.
Forty-three answered the call nominating more than 12,000 hectares, mostly on Sydney's fringe, as ideal locations for the city to expand.
While developers have praised the move, predicting it will speed up delivery, it has stunned councils and surprised housing experts who wonder whether a shortage of suitable land is really the reason Sydney's produces no more homes than Adelaide.
Greg Burnett, the frustrated Liberal mayor of the Hills Shire Council is one who believes the new approach won't make much difference.
He cites the case of the North Kellyville development in the north-west growth centre where land for 5200 new homes was rezoned in 2008 with areas for parks, roads schools and shops all marked out.
But it took until December 2010 before water, sewerage and other infrastructure needed for home building to begin was finally installed, and that was only for half the lots.
The second tranche of home sites is not due to get pipes and power until 2016, he said, eight years after the land was rezoned.
"It's absolutely mad: you have people who take government in good faith, they make their plans and investments, council has fulfilled its part and it's time Treasury and Planning fulfilled their part," Burnett said.
The way he sees it, Sydney will never lift its home construction rates until the government massively increases funding for infrastructure for developments like North Kellyville, so the water and other services essential for housing can go in without everyone waiting for years.
"If the minister is decisive on infrastructure then there's no problems, but the government needs to step up to the plate,'' he said. ''I'm not old enough to know when there was this movement away from government investing in infrastructure."
If anything, the government's new approach could delay developments like North Kellyville even further.
According to the guidelines for the new housing strategy, new sites are to be developed at "no additional cost to government".
That means either the developer pays for infrastructure and then recovers the cost in the sale of the homes or the government agrees to "reprioritise existing capital programs". In theory the second option could see Sydney Water push back plans for sites like North Kellyville so water and sewerage can be rushed into some of the new sites.
The no-extra-cost-to-government provisions have infuriated councils with the Western Sydney Regional Organisation of Councils, an umbrella group of 11 western Sydney councils.
"This makes it clear they [government] have no intention of supporting these developments with roads, transport and other services," said WSROC president, Alison McLaren.
"It also implies they expect councils and ratepayers to pick up the costs of making these housing sites liveable … the policy is an insult to the residents of western Sydney and to the government's own planning department," she said.
A former housing research academic, Jon Hall, reckons the big issue in the new process is that many of the sites appear to be well away from infrastructure.
Rezoning land in this ''leapfrogging'' fashion, where rural land becomes residential home sites, risks delivering windfall profits to developers with the community meeting the extra costs involved in servicing housing estates far from existing centres.
He also believes new home prices in Sydney are simply unaffordable for first-home buyers and while rezoning these new sites might ease price pressure a little it won't make make them affordable.
"All the fringe development now is not for new home buyers, it's all second home buyers because the prices are in the $500,000 to $600,000 range,'' Hall said. ''The plan is not going to alleviate the problem for first-home buyers even if they drop prices $75,000 … you need to be talking $240,000 for a first-home buyer."
And the only way of getting prices anywhere near that level is for major investment to reduce the backlog of infrastructure.
"There is not a solution in Sydney's basin without the public paying the price for infrastructure,'' Hall said.
''There's nowhere in the Sydney basin you can produce houses for $500,000 if you recover the costs of sewerage, water, electricity and roads."
In Melbourne, new housing is much cheaper.
One developer is selling a home and land package in Sydney for $575,000. The same house in Melbourne costs only $345,000, a reflection of cheaper construction costs and greater government contribution to infrastructure in Victoria.
Hall agrees with Burnett and says the government must find more money for infrastructure so new home buyers don't carry all the cost.
"Governments just don't tax appropriately,'' he said. ''We need a metropolitan tax - we already have one with with the environment levy.''
He said Sydney Water already imposed a $200 a year environment levy. A similar flat levy imposed on homeowners would allow government to borrow for infrastructure.
''But no-one will mention the tax word,'' he said. "The whole of Sydney's growth and development falls flat at the cost barrier.''
Stephen Albin, chief executive of the developer group the Urban Development Institute of Australia, is optimistic that some of the new sites will be more commercially viable than those in the growth centres, but he agrees with Hall's view on infrastructure.
"He's 100 per cent right; there's a major infrastructure challenge in NSW and when you have areas like Camden growing to cities like Canberra in the next 30 years you can't expect that without a government contribution to infrastructure.
Developers now pay about $20,000 to government under the state infrastructure charge scheme for each lot of land they develop.
That scheme is being reviewed and the UDIA wants the current scheme replaced with a low annual levy imposed on every NSW household similar to a charge the former Victorian premier Jeff Kennett imposed in Victoria.
Hazzard says it's a ''truism'' that government does not have the money to provide infrastructure and says it needs to find "innovative ways" to do so.
He's cautious on the idea of a tax, but leaves the possibility on the table. "We will consider anything at all as ways to raise funds for infrastructure," he said.
But he says this new plan is seeking sites for housing that are close to infrastructure like main roads and sewer mains so the cost of developing can be kept down.
"The condition I put on developers is the land must be immediately connectible to infrastructure, adjacent to infrastructure or they be prepared to install infrastructure," he said.
How many of the 43 sites meet that criteria won't be known until the sites are assessed by a committee of departmental heads in the next two months.
That committee will report to new housing taskforce of ministers that includes the Premier, Planning Minister, Roads Minister and other ministers with service portfolios, before cabinet considers any decision to rezone land. If nothing else, establishment of the first such committee for 20 years shows the government is taking the issue of housing seriously.
Lifting the level of housing development and keeping councils on side is quickly proving a delicate balance with Hazzard sensitive to suggestions the government might rezone land after promising repeatedly that councils are best placed to determine what happens in their areas.
He stressed that councils would be consulted widely and their views considered but at the end of the process it would be cabinet, not councils, that finally decided.
"It would be a bit silly to push forward without councils' concurrence,'' he said. ''But at the end of the day the State Government, and I as planning Minister, have the capacity to rezone without concurrence.'
''But I have not done it and I'm not enthusiastic about it.''