WA Property Council executive director Joe Lenzo

27 March 2014 — Perth property developers have been left in limbo by the state and federal governments, both of which are back-pedalling on funding commitments for Perth’s light rail network, the Metro Area Express, or MAX. 

The $1.88 billion, 22-kilometre network had been planned to run from Mirrabooka in the north to the CBD, before splitting into two branches to Victoria Park Transfer Station in the east and to QEII Medical Centre in the west.

The plans were advanced to the stage that developers had purchased land along the light rail corridor for high-density residential, retail and commercial projects in order to take advantage of improved public transport connectivity. MAX also formed a crucial link between Lend Lease’s $1 billion Waterbank development and the CBD.

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Prime Minister Tony Abbott foreshadowed the cut of $500 million allocated by the former federal government for the Perth airport link and light rail system during pre-election policy announcements, reportedly stating in April 2013, “We have no history of funding urban rail and I think it’s important that we stick to our knitting, and the Commonwealth’s knitting when it comes to funding infrastructure is roads.”

This is a position his government has maintained post-election, resulting in the unravelling of a crucial part of the MAX funding base.

The Western Australian government has also reneged on its share of the financing, with the loss of the state’s AAA credit rating and budget pressures reducing the government’s borrowing power for infrastructure.

It all derailed suddenly, with a resulting lack of certainty about the timeframe for the state government to make good on its promises and leverage the funds to put the project back on track.

Property plans on hold or dumbed down

While the state government has announced it is postponing the project for only three years, and is still committed to delivering MAX in full by late 2022, the WA branch of the Property Council remains unconvinced that the timeframe can be relied on.

“There is no certainty; it might be three, five or ten years,” Property Council WA executive director Joe Lenzo said.

“The certainty has been taken out of the project and the [property] industry is looking to move on. If [the government] leave the situation as it is, they are quarantining an area of very high density development.

“We’re still grappling with a political decision [being made] about infrastructure; it’s easy to put on hold, but we are suffering from this.”

Mr Lenzo said there would be a “dumbing down” of some projects to be lower density, car-dependent residential developments, while other developers would most likely hold onto their land and “do nothing”.

The result, he said, was degraded public transport corridors.

Why MAX is a great plan for Perth

Because WA, and Perth in particular, has had population growth higher than the national average, road infrastructure, which was never designed for such intensity, is failing to cope.

“The solution is a quantum leap in public transport, and light rail is a logical solution,” Mr Lenzo said.

“Light rail encourages development around the route. It is a pedestrian rail, people get on and off and on and off and walk – it moves people [effectively] in high density areas.

“The light rail was one of the key planks in the government’s public transport strategy. It is important for property developers and investors, as a chance to increase the density of residential products along the route.

“While MAX was almost a given, developers were prepared. Local government structures were also in place, with 80R codes increased to allow more density. In the retail sector, Mirrabooka retail centre owned by the Perron Group looked at increasing the entertainment offer.”

Will halting MAX derail residential targets?

Stepping back from the light rail commitment runs counter to other state government policies, which included a target for residential developments that nearly 47 per cent of new builds comprise infill projects. Without the public transport, Mr Lenzo said the two possibilities were that the target won’t be met, or that there will be increased road stress.

“The government wants to get infill going, but the light rail decision is counter to that,” Mr Lenzo said.

“From the Property Council perspective, Western Australia has lagged behind other states on infrastructure planning and funding prioritisation.

“[The WA government] need to develop a better integrated approach to infrastructure.

One of the factors Mr Lenzo identified as contributing to the situation is the state’s image of being a “resource boom state” with substantial amounts of money to spend, such as the Royalties for Regions program.

However, that program deploys funds gained from mining royalties to much needed projects in the regional towns of areas such as The Pilbara, where the lack of housing and services has been an issue for those who work and live out in mining country.

And then there’s the LA-style carbon footprint sprawl

Meanwhile, Perth has expanded to what Mr Lenzo described as an “LA-type sprawl”, where the private car is the dominant form of transport due to lack of lower-carbon alternatives in many parts of the city.

This also, according to Mr Lenzo, makes the decision to shelve the plans a negative in terms of the city’s carbon footprint.

“There was an opportunity to take thousands of cars off the road. Development along the route [gives people] the opportunity to live closer to jobs and decreases need for [car] transport,” he said.

“Public transport is extremely important. [When you] look at what developers are doing with masterplanning communities, they are making them walkable.

“If we had good public transport that would move people to their place of work, it could decrease their need to [even] own a car. The property industry is making it easier by design to not have to drive everywhere, but if people do not have public transport [the average household] still needs two cars.”