crowd walking in george street sydney

News from the front, issue 515: Planning minister Rob Stokes released a lovely new human-centred planning policy last week.

But two weeks before another change to the planning controls went unannounced. Few people outside the inner circles of planning knew what was going on.

The first SEPP (state environmental planning policy) last week was loudly and proudly promoted. It topped the front page of the SMH on the day it was released.

It’s all about people friendly urban planning now, no more putting buildings and vehicles first. And that’s always going to sound like a good idea because it is a good idea. Perhaps everyone’s discovered Christopher Alexander’s human centred design book A Pattern Language from the 60s; we know Landcom has.

The second planning control is about allowing build-to-rent housing in commercial zones. So, in the Sydney CBD’s B8 zone, and in the commercial centres of Waverley, St Leonards and Parramatta, in their B3 zones.

The councils, other than Sydney maybe, are not impressed.

They’d worked hard to carve out the commercial zones, done studies, committed. Now their good work has been thrown out the window.

Don’t we want more mixed use and friendly, people-centred buildings in easily accessible centres of activity?

And what could be more people-friendly than apartments? Especially the types we’ve been clamouring for years to get. Where you can have a five or 10 year lease and the landlord doesn’t throw you out next time the market spikes.

Where the quality is better, because the landlord finally is invested in the asset long term, in the same way as commercial building owners.

In apartment buildings, and most other residential property, poor outcomes occur – this includes defects, and almost always substandard sustainability – because the developer doesn’t care much.

It’s a build and flick proposition. You build for the cheapest possible price; sell for the highest market rate and then it’s “goodbye Charlie”.

In offices and other commercial assets the developer is responsible for producing an investment that’s long term. So it needs to be optimally maintained because the tenant/occupier is part of the value proposition.

But with longer term leases and longer-term ownership, all that changes. Suddenly there’s an incentive for better quality and improved sustainability because this adds up to lower running costs and happier tenants.

Residents get a chance to put roots down, commit to things.

In our post-Covid/Covid-sensitive world, developers/investors are thinking about how to blend in some nice communal facilities such as shared workspaces and other facilities. The idea of the village keeps evolving.

People inside the planning tent knows these new planning controls contain unexploded ordnance.

A bit about planning: to laypeople the planning profession looks to be one of the most the most boring – all procedure and bureaucracy.

Except it’s not.

Those inside the planning tent know it is increasingly ruling our lives. And a big chunk of the economy. Which means there’s a lot at stake.

As cities become bigger and more complex (and trust us, they will) we need to pay a lot more attention to planning. Especially zoning.

Enter the Reserve Bank of Australia and the productivity commissions, NSW and federal.

Each of these bodies has waded into zoning issues to call for more deregulated zoning. They say let the market rule and allocate resources in the most efficient way.

So best and highest use of our assets, and so on.

You get the drift: the market is the Grand Poobah of our worldly life, so if it says this piece of land has the highest value by becoming a residential site, then let it be so.

The NSW PC has recently put out a green paper to this effect.

Be aware, too, that we understand that the NSW PC has been heft from a cell within NSW Treasury by which we mean nerdy well-meaning boffins, good for taking care of our economic/monetary/fiscal concerns, the RBA in particular.

You see where we’re going with this, right?

Zoning is a Big Ticket Item.

The problem is that land use management is not the same as tweaking interest rates or the government’s economic spend and income. It sets a path for the future of the country, sets up the rental structures and the available lower cost land that can nurture economic strength, which is particularly important at a time of great upheaval.

Zoning steps in where the market fails.

Why zoning is important is because it artificially preserves land at lower costs and thereby lower rents. That means giving a leg up to start ups, bio-tech, med-tech, robotics, electric vehicles, whatever…

If key industrial land, in particular, is allowed to be used for higher value residential or retail, it’s unlikely to ever revert.

The big push from the residential developers who are putting the pressure on governments, their treasury departments and the RBA, is to allow rezoning.

There’s nothing wrong with BTR

The normally sanguine NSW Planning Institute of Australia betrayed serious frustration with the new BTR planning controls.

“The policy announced is a missed opportunity as it does not offer sufficient benefit to the community by requiring any units to be affordable,” it said in a media statement.

Allowing BTR in B3 Commercial Core zone is endangering “critical employment land” which will never return if it goes to residential.

BTR is not the problem, it said.

“PIA NSW strongly support financial and planning measures which facilitate build-to-rent housing in the right locations.”

A sticking points is that BTR provisions were meant to be part of an “integrated package of measures intended to make boarding houses affordable, deliver innovative housing typologies, and improve seniors housing and student housing standards.”

The PIA made submissions, it was not listened to.

Planning Institute of Australia’s national planning manager John Brockhoff says for “whatever reason” the BTR controls were subtracted from a suite of reforms and dealt with individually.

“We think BTR is a great thing. But not at any cost.”

The diversity question

The NSW Urban Task Force chief executive Tom Forrest is unapologetic about getting more resi into the city.

It’s critically important to enhance activity, he says, and yes, it’s because so much office space will be empty. There’s not enough development going on and we need more buildings, he says.

The future is maybe a tower with retail on the lower levels, resi in the middle and workspaces above.

Tim Williams a leading urban commentator and frequent contributor to these pages says diversity is key.

There’s no way we know how the pandemic will affect cities but it’s possible that lower rents will work a treat to attract the minutiae of small time but animated activity that makes cities exciting and an irrepressible drawcard.

The most interesting prospects he says, and which he’s written about for The Fifth Estate here, is that “cheaper rents attract younger start ups; that’s the more optimistic scenario.

“It could lead to an economic Renaissance. Less Masters of the Universe, more family restaurants.

“In the past rents have been twice those of Melbourne; Melbourne’s diversity is not based around its laneways, it’s based on its rents.”

The residential sector was born with a silver spoon in its mouth

Residential property is already the asset class born with a silver spoon in its mouth. It has no capital gains tax, is able to negative gear and now build to rent housing has been able to snare a 50 per cent land tax holiday in both NSW and Victoria.

“There’s enormous advantages for residential and it creates a very skewed playing field,” John Brockhoff says.

So, when you apply the financial strength of residential against other uses, it dominates.

And build to rent is NOT affordable housing.

In Melbourne, Kris Daff, who runs innovative developer Assemble, has allocated a minimum 20 per cent of social housing in his apartment project at Kensington. But he didn’t have to.

Why the governments – in NSW as well as Victoria – can’t get something back for the community in exchange for the community’s largesse to the BTR developers through a big tax holiday, is unclear.

Daff told The Fifth Estate he’s called on the Victorian government to “attach a minimum requirement for the provision of affordable housing to be delivered by schemes that wish to access any concessions, such as the recent 50 per cent land tax concessions announced for Build to Rent developments.

“Such measures will offer fair access to secure tenure housing for more Victorians and help us meet this critical shortfall,’” he says.

There’s a structural shortfall globally for this kind of housing, he says and in Australia, we need over 1 million of these dwellings by 2036. BTR can do the “majority of the heavy lifting to provide these dwellings”.

Daff says that Assemble allocates the balance of its apartments to affordable housing.

Both NSW and Victorian governments should study what Assemble is doing.

The Urban Taskforce

The NSW Urban Taskforce’s Tom Forrest said we need the planning system to deliver more supply of housing because this will lower prices.

We counter: the asset bubble is a global phenomenon and fuelled by the unprecedented pandemic stimulus and cheap money. (Watch what happens to housing prices when rates rise in response to inflation)

Besides, we say, apartment sales were languishing , so where is the lack of supply there? Forrest says the NSW Building Commissioner has led to a loss of confidence in apartments.

But Forrest is looking ahead. He says net migration is now negative even with more than 500,000 expats returning to Australia.

The immigration tap will soon be turned on again and then we will have a dearth of supply.

If we don’t offer cheaper housing “we will continue to lose Sydney’s best and brightest to Melbourne, Perth and Brisbane”.

Forrest says the freed up zoning is needed because there is not enough development activity in the CBDs. He says Chatswood CBD has not had any commercial investment for 20 years.

“The desire to preserve the commercial core for commercial is a planning obsession that is not [justified] by anyone investing in that outcome,” he says.

What he fears is that if commercial buildings don’t stack up we’re going to end up with potholes in the ground such as those caused during the “Paul Keating Recession” in ’92. All left dormant for about a decade until Sydney mayors Lucy Turnbull and Frank Sartor got cracking with the Living Sydney plan and encouraged residential buildings.

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  1. Why don’t they ask an experienced property development manager how to get affordable housing into CBDs- all CBDs not just Sydney? (Hint: the solution will be driven by financing, planning and operational aspects). Customer buying or renting is a binary choice BTW. To make this socially and culturally and economically sustainable, the affordable customer must either be able to buy, or rent with an option to buy. If we lock millions of people into renting, we will lock in the attendant social and personal ills that go with it.