A typical greenfield ‘precinct’ slated for a brand new clutch of neighbourhoods on the fringes of the Sydney metro area might comprise 16,000 or more residential lots.
North of $10 billion would need to be invested to bring this residential precinct to fruition. This includes construction of the new houses themselves plus all the roads, drains, power, water, telecommunications, parkland, schools, hospitals and other infrastructure required to support a thriving community.
Creation of such a housing precinct is an infrastructure undertaking of the same order as mega transport projects like Metro Western Sydney Airport ($11 billion) and Metro City and Southwest ($12.5 billion). The investment required to build this new residential precinct would be the equivalent of the total capital spend planned by NSW Health for the next four years ($10.8 billion).
We demand that governments do their due diligence when undertaking a multi-billion dollar infrastructure project. We expect these projects to be carefully designed so as to be future-proof. We want them to be adaptable in the face of a changing climate. And we don’t want them to come loaded with time bombs, like cost blowouts because of half-baked engineering or premature obsolescence due to changing community needs. These projects are expected to deliver robust and reliable benefits for generations to come. Anything short of this would be regarded as an abject failure in government stewardship of the State’s resources.
With mega infrastructure projects, a ‘she’ll be right’ attitude, where we start building and sort out problems as we go along, won’t do. And yet this is the way most of Sydney’s greenfield development has been managed over the past several decades.
The erstwhile Design and Place Statement of Environmental Planning Policy (D&P SEPP) was a much needed and overdue effort to correct this situation.
The D&P SEPP would have provided clear and, where necessary, quantified design guidance for precinct development in both greenfield and infill situations. It would have required designers and developers to properly consider place characteristics and integrate Country, sustainability and resilience into their projects.
The new SEPP would have simplified and rationalized a bevy of planning regulations, replacing the BASIX SEPP and SEPP 65, updating the Apartment Design Guide and introducing a new Urban Design Guide. It would have complemented existing development control policies applied in the Growth Centre SEPP, Aerotropolis SEPP and any other SEPPs that require precinct or master planning.
Yet the D&P SEPP was unceremoniously axed by the NSW Government in April after 2 years of painstaking effort and consultation. No satisfactory explanation has been provided for this about turn, other than loose references to cutting red and green tape so that housing supply might flow more readily.
Red and green tape have become nasty weasel words in public policy. They connote useless, cost boosting, self-serving and self-propagating government interference in the work of markets.
One thing that all economists agree on is that markets cannot produce the best outcomes for the community in the face of externalities. These are the unpriced effects of market transactions. Things like bio-diversity, clean air, social ties, heritage and culture are outside of the purview of developers. These market agents are not directly rewarded for taking on the extra costs which advancing these benefits might entail.
Developers are as civic minded as the next Australian. But they don’t run charities. If they cannot demonstrate to their shareholders that a reasonable financial return will be forthcoming from designing in social and environmental benefits, they won’t do it. This means that in the absence of regulation to make them account for externalities, the community would be forced to do without these benefits, and we would all be the poorer, and regretful, as a result. In the jargon of economists, the market will be ‘inefficient’, it won’t ensure that the community gets the best value from the resources dedicated to urban development.
This doesn’t mean that governments should run riot with regulation. Too much regulation, or the wrong regulation, can also generate inefficient resource allocation. This is why governments over the past 4 decades have enforced rigorous tests on whether new regulations are economically warranted. Those proposing regulations have to show that the benefits gained versus business as usual will outweigh the costs.
The D&P SEPP was put through this test – twice.
The SEPP would have generated additional costs in planning, design, compliance and build expenses compared to business as usual. Deloitte Access Economics estimated the present value of these costs over 30 years at $2.3 billion. The benefits, however, were put at $3.3 billion. These included; creation of extra development capacity; lower development risk; reduced crime, heat island and car parking costs; improved green space aesthetics; increased walkability and health outcomes; lower housing operational costs; reduced greenhouse gas emissions; improved social cohesion; better connection to place; enhanced private amenity; and greater energy efficiency.
The D&P SEPP would have delivered a benefit cost ratio of more than 1.4 to 1, a more than solid rate of return in the mega infrastructure world.
Investing in urban infrastructure ought not be treated as a game of chance. Get things wrong, and the community pays the price for decades. The D&P SEPP demanded a step up in due diligence in building the city. Instead, the State is perpetuating a risky, ‘she’ll be right’ approach.