19 April 2010 – [Updated 19 April 2010] A Productivity Commission inquiry into development controls is set to raise a storm of controversy if it results in loosening zoning controls for residential and retail property, as anticipated.

Expect planners who have long argued for orderly and controlled zoning complete with infrastructure to be furious.

But in a stunning move announced today the NSW Government said it would move ahead anyway on the issue of protected retail zones and strip away restrictions on competition that currently prevent competing retail businesses encroaching on each other’s territory. (See our article here.)

Expect a fierce backlash from the shopping centre giants such as Westfield which launched a fury of challenges to protect its patch through tough zoning restrictions against encroachment by discount factory outlets setting up on low cost industrial land.

According to the Productivity Commission website the study will inquire into planning, zoning and development assessments.

It will look at “business compliance costs, competition and the overall efficiency and effectiveness of the functioning of cities.”

More critically, the commission will recommend “best practice approaches that support competition”, including:
measures to prevent “gaming” of appeals processes processes in place to maintain adequate supplies of land suitable for a range of activities ways to eliminate any unnecessary or unjustifiable protections for existing businesses from new and innovative competitors.

The Planning Institute of Australia president Neil Savery told The Fifth Estate on Monday that the proposed changes and scope of the inquiry was a case of  “proceed with caution.”

“First and foremost planning is there to protect the community interests,” he said.

Costs to the community and amenity of loosening the zoning and planning rules could be much greater than immediate economic costs, Mr Savery said.

At risk would be environmental, community amenity and infrastructure interests that cold not properly be planned for

Planning was “not just about providing land for commercial development or having zones in place that allow efficient types of development. They are there to enable infrastructure planners and transport planners [to carry out their roles] and for the community to understand where the demand for infrastructure is going to be required and what are the requirements for power grids and locations of services and car parking.”

“The concerns  we have to date is that the planing profession and the community hasn’t had a much of a voice in all of this.”  It was economic interests that had made the strongest case for change, Mr Savery said.

Executive director of the Shopping Centre Council of Australia, Milton Cockburn, said on Friday that the Productivity Commission inquiry was welcomed.

“We welcome this matter being examined by an independent body such as the Productivity Commission,” Mr Cockburn said.

“A lot of nonsense is spoken and written about the supposedly anti-competitive impacts of the land use planning system and this will enable the issues to be examined in a rigorous fashion.”

And Property Council of Australia chief executive officer Peter Verwer said the PCA would participate in the inquiry and oppose “a free for all.”

“We oppose a free for all – the critical issue is how one modernises planning systems. Many current systems utilise outmoded and inflexible tools. Others utilise them poorly,” he said.

“Few governments measure the impact of their planning systems, or their alternatives, on the communities they are meant to serve. For instance, planning laws are not subject to modelling for cost-benefit purposes.”

But the Urban Taskforce which represents a number of NSW based developers said it had worked hard to bring about the changes the inquiry could result in and “would participate strongly in the Productivity Commission review.”

Taskforce chief executive officer Aaron Gadiel told The Fifth Estate that the market needed “competitive tension” to allow land owners compete against each other to sell land for either residential commercial or industrial uses, land prices would drop and free up the development pipeline.

“The issue is a competition issue that that cuts across all the sectors. Land needs competitive tension between land owners when they are negotiating to sell land, Mr Gadiel said.

“That’s an issue in low density and high density, and an issue for potential retail development that there is such a stranglehold in the supply of land available for development which is regulatory induced.

“It’s a challenge to find good site with access for transport but when find the site you then find that because of regulatory construction it won’t ever be available.”

There was a “legion of detailed planning controls governing every aspect of urban development” and this had led to an undersupply of commercially developable land which had given land owners too much bargaining power when negotiating with developers.

“As a result, prime sites lie idle while land owners hold out for higher prices, safe in the knowledge that they are protected from lower bids by rival property owners and by town planning laws.”

Mr Gadiel said government planners needed to move away from the principle of orderly land release, which required one area to be taken up and developed before another is released.

But in areas such as Edmonton Park in Sydney, which had been approved for residential development, fragmented land ownership meant it was virtually impossible to amalgamate large blocks of land as land owners refused to sell.
It was also possible that there was no financial incentive because the highest and best use of land for the owners was exactly as it was now – up-market semi rural allotments, close to the city and with significant services.

Mr Gadiel said this was something that government planners did not necessarily understand.

The Taskforce is not alone in pushing for a looser attitude to zoning, but some residential development lobbyists have wanted it removed altogether.

For several years, Wendell Cox and his Demographia group, backed by the conservative Institute of Public Affairs, have frequently and prominently called for removal of zoning restrictions on residential land altogether.

The big argument pushed by Mr Cox in particular is that zoning restrictions create higher housing costs and that the battle against urban sprawl was wrong.

The Institute of Public Affairs said in its journal a few years ago said the opposition to urban sprawl had assumed “mystical respectability on a par with saving whales, stopping global warming and preventing [genetically modified] foods.”

However, Curtin University’s Professor Peter Newman said at the time that the arguments that lax zoning led to lower prices was misleading.

The market economy priced for demand, so that low prices in residential areas usually signalled that these areas were in decline, he pointed out.

Retail

The Productivity’s inquiry into the competition and protectionist element contained in zoning is set to be especially contentious for retail property owners.

Currently retail developments are generally confined to retail zoned land, which is more highly priced. Shopping centre owners argue that they must comply with tough standards for infrastructure within correctly zoned land and that factory outlets on industrial land do not, giving them an unfair price advantage.

In recent years, Westfield battled furiously in several court cases to prevent retail outlets such Direct Factory Outlets building on nearby land not zoned for retail.

But the Urban Taskforce wants the walls and protection to come down.

“In a report commission by the Urban Taskforce in 2008, Choice Free Zone, Professor Allan Fels found that shoppers are paying far too much for their groceries because of restrictive out-of- date planning laws,” Mr Gadiel said in a media statement last week.

“The report argued that an overhaul of town planning policies would allow greater competition, leading to consumers paying up to 18 per cent less for food staples and up to 28 per cent less for other household products.

“Professor Fels warned at the time [Radio 2GB, 19 May 2008] that “The planning laws restrict competition. They basically protect the big shopping centres.  … Australia is changing and we have got more and more competition in different parts of the economy. But in the retail area, we’re 20 years behind. With … the Hilmer Report … they got rid of a lot of anti-competitive restrictions, but retail is still  protected, particularly the retail landlords.”

tperinotto@thefifthestate.com.au

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