Well hello Resi. All these years we’ve been hangin’ with the commercial crowd but all the while the real action shaping our cities has been simmering away in the resi sector, where things are getting hotter and hotter.
Last Friday at the Property Council lunch in Sydney was a window into that evolving world.
First impression to hit the senses, though, was a kind of flashback to the past – a thick soup of grey suits clustering around the narrow entrances to the main function room at the Westin. So many men, so few women. Was this the 90s? Ah yes, this topic, “Rapid Development and the Future of Sydney” was bound to draw out the agents, developers and their advisers, overwhelmingly blokey (and a entire segment of industry up for the taking, gals).
But whatever preconceptions the audience profile might have had or provoked, content on stage was a departure from the past.
First to speak was Fabrizio Perilli chief executive of TOGA development and construction, a mid range residential developer and hotelier who was still beating the same old fundamentalist drums, but from a more informed and understanding position.
Perilli started with the usual siren call of all developers: we need more dwellings, lower development levies, taller buildings and kinder community attitudes. Wasn’t it interesting, he said, that the same members of the community who fought a project almost to the death (Toga’s Bondi project for instance) were first to throng its enclaves when completed.
At Macquarie Park the company was about to build a 23 storey apartment tower but only a few years ago it was derided vehemently for going to 12 storeys in the area. What a wasted opportunity the earlier project had been, Perilli said. That’s 200-300 additional units that could be in that building.
There was a touch of dissonance around the housing shortage argument though. It came just days after the Sydney Morning Herald’s front page story on 90,000 empty dwellings in Sydney, probably owned by investors waiting to cash in on the rise in prices, that would be driven, at least partly, by – wait for it – a lack of supply.
Researchers Bill Randolph and Lawrence Troy from UNSW’s
City Futures Research Centre attributed the trend to tax dodges but you need to be actively trying to lease a property to claim negative gearing. The more realistic driver is using the apartment as a bank deposit. You wait a few years and then withdraw the value, in triplicate hopefully.
On affordability, the other big theme that developers give a nod to, Perilli noted that the price of housing was a simple formula made up of three components: the cost of construction made up of materials and labour, the cost of land and infrastructure or development levies, or Section 94 payments. The latter had jumped dramatically in recent years.
If you want more affordable housing, you need to change the formula, he was said.
The sub-text is that developers, of course, don’t really care about costs; sure, big costs make projects riskier but in all cases developers are simply a vessel, a delivery mechanism: costs will be passed on, meet the market, whatever the buyer can bear.
That’s the model.
Perilli had lots more to say – on infrastructure, the need for holistic transport that avoided the 94 hours on average that motorists spend in congestion, driverless cars pushing out the need to create permanent parking on site and the growing trend for families to buy apartments, meaning better amenities needed to be factored in.
He skirted around all the issues, but not once did he use the word that sums it all up, sustainability.
Next came architect Philip Vivian a director of Bates Smart, who did.
While Perilli had expounded on the developer’s view – the frustrations and calls to realistically meet the market – Vivian captivated the imagination with as aspirational model of how Sydney could look by blending decent connected transport and development along its nodes.
Assisted with fabulous imagery Vivian had the audience rapt with visions of higher density developments clustered along transport nodes. Precincts bookended by tall buildings, interspersed with more human scale buildings, in their midst a compelling amenity mix of green spaces, gardens, activated streets and commercial strips (instead of boring shopping centres).
In other words a place to live that is aspirational instead of cringe-worthy. Density and sustainability all the same time, like magic, like walking and talking all at once. And yes he used the word sustainability. Several times. And in its green sense, by which of course, we mean holistically.
Vivian said what would be brilliant is for the government to take a big picture view. Increased density along transport corridors, increased funding for transport initiatives and “the city no longer expanding outward but inwards.”
He used Artarmon as a model, a suburb that would be brilliant as one of the nodes. Currently, he said, the metro would pass by Artarmon but with no station. Give it a station, rezone the land, and create a place that could resemble the images he was showing.
“Density is sustainable, a metro is sustainable transport and value capture can fund sustainable transport,” Vivian said.
Later came a panel discussion where chief economist from Urbis Nicki Hutley showed the interesting thinking you get when you bring an urban planning sentiment together with economics.
Hutley broached the topic of value capture that had been mentioned by both Perilli and Vivian.
Value capture is also flavour of the month, seen as a way of funding infrastructure.
A discussion paper due to be released by federal major projects minister Paul Fletcher soon will stoke the fires of interest.
But Hutley showed what happens when you properly use the discipline of economics to build bridges between rationalist financial systems on one side and human desires and needs on the other.
How would value capture work in practice? she wondered. Would only those who lived, worked or owned land nearby be asked to chip in? What about the benefits that accrue to people who are not in the area, the wider community? Do they get the benefits for free?
The Property Council has been warning the idea needs to be examined closely lest it be yet another tax on property.
Morrison told us recently the better version of value uplift was the so called Manchester Model or US style tax increment financing where future tax streams are used to pay for the infrastructure that delivers the extra tax value, rather than a tax on development or landowners.
It’s a nuanced difference but a difference.
Hutley at the lunch dismissed both options and said there was never a better time to borrow by government.
There was no budget emergency and rates had never been lower. Better still the borrowings could be long term with low rates locked in.
It was a powerful point. Who’s idea was it anyway to say governments should balance the books, like a household?
Governments are meant to do precisely what households cannot – invest in important items that require big long term views and deep pockets.
“Social housing or affordable housing will become synonymous if we don’t have better outcomes,” she said.
The misfortune of Barangaroo, she said, is that there is so little key worker accommodation.
So what’s the objective, Huntley said, “do we want the best mixed use outcomes or the best economic outcomes? Because those two objectives don’t always sit well side by side.”
Perilli had also touched on affordable housing and said it was important to accommodate key workers but land was in short supply.
“When we look at the land in inner and middle suburb it’s is a challenge to find the right sites,” he said
That’s an idea that the state government has started to tackle, pointing to the potential to use government owned land to yield affordable housing. But unfortunately numbers released so far by UrbanGrowth NSW point to fractional proportions – just 11-13 per cent over the whole Central to Eveleigh development lands, for instance. And a long way from the 40 or 50 per cent for social and affordable housing achieved in UK regeneration sites.
Hutley said a good idea would be government working in a more co-ordinated way so that, “we don’t talk about economic policy, environmental policy, social policy” as separate items.
The Redfern Waterloo Authority had that model, she pointed out. But it was disbanded.
So in some things at least, we need a “back to the future”.
Images from the Bates Smart presentation by Philip Vivian and audience at the Property Council lunch in Sydney on rapid growth