Changing the culture of a planning system is a massive challenge

The National Housing Accord has caused all states across Australia to look to opportunities to improve their planning systems.  One consistent theme has been the reluctance of planners to give approvals to applications which are feasible.

So what does this mean?

Since pre Covid, late in 2019, construction costs have broadly risen by 40% – and in some locations much more than that.

ASIC records show that almost 30% of all company insolvencies are from the property development and construction sector. This is disproportionately high. So the idea that developers are sitting on rivers of gold is way off the mark.

Before a bank will offer a developer finance to construct, they insist that the developer show that the project can be sold at a price that covers the cost of the land, the cost of the preparation of the DA, as well as the massive cost of all the associated consultant reports.  These amount to thousands of pages: detailed architectural designs, landscape design, flora & fauna impact assessment, social impact, cultural impact, economic impact, traffic and transport impact, resilience to natural hazards and often many ,many more.  All this takes time and with interest rates up, all this must be covered – along with a margin which reflects the risk associated with the loan.

If you can’t show this on a feasibility sheet to the bank, they simply won’t give you the money to start construction.

But why should planners care?

Planners have an obligation to ensure that there are enough homes approved for construction to house the population.  The consequences of failure are unaffordable housing prices and sky-rocketing rents along with record low rental vacancy rates … and here we are.

As noted above, the costs of construction (skilled labour, general labour, increases in fees, taxes and charges, increased compliance costs and materials costs) have risen by 40% since late 2019.  The sale prices for new homes have not risen by that much.

To ensure projects are feasible, planners need to increase yields (height or density) or find other ways to ease constriction costs.

But many planning assessors are extremely reluctant to do this.  They do not see the production of housing as a “social good”, even in the midst of a supply crisis.  Many planners see a DA approval as a gift to property developers.  As a result, planners, and some State Government officials, feel an obligation to claw back this “ill-gotten gain”.  They apply affordable housing levies; they insist on design review from a panel of architects, even where a top tier architect has been used; they demand involuntary “voluntary planning agreements” to pay for upgrades to community facilities; they mandate ever increasing contributions towards both local and state infrastructure.

All of this pushes the cost of development up and this must be covered by the new home buyer – or, as noted above, the banks won’t provide the finance to build new homes.  Even the Superannuation Funds baulked at getting involved in housing supply until the Federal Government’s Housing Australia put dollars on the table to ensure the super funds got the return they needed.

Planning systems across Australia have tied themselves in knots by focussing of the concerns of existing communities (who are frequently “objectors” to changes as proposed through development applications).  Planners have completely failed to consider the needs of the broader economy; the needs of new arrivals into Australia (who are coming at record numbers); the needs of a generation of millennials who are living with their families well into their 20’s and beyond.

Some choose to move interstate.  Some head for the bush.  But the fact is that across all of Australia, housing supply is simply not keeping up with demand and that reflects a collective failure of our planning systems.

State Governments are perennially confronted with the failure of council planners to ensure that supply meets demand for new housing.  And its not the fault of councils.  They are not responsible for the economy.  They are often small and are more focussed on the concerns of local electors.

In NSW, part 3A of the EP&A Act was brought in to fast-track the assessment and determination of high-yield, high-value projects through a State Government assessment and determination pathway, as its property sector stalled in the mid 2000’s, only to see it abolished when Premier O’Farrell chose politics over policy.

Interestingly, both Victoria and Queensland have recently introduced new State Government led planning pathways which are very similar to part 3A and even have the Planning Minister, or the Minister’s delegate, making the determination.

Even NSW has, under both the former Coalition government and now under Labor, moved to re-established state government led planning assessments.  The difference now compared to when Part 3A existed is political donations are banned from property developers and planning panels (Local, Regional, or the IPC) are the determining authorities – not the Minister.

Perhaps it’s time we took a look at the imbalance of fiscal responsibility across the tiers of government.  Is the mix of responsibilities right?  The Commonwealth has all the powers of taxation.  The States have very limited opportunities to raise revenue and local councils have next to none.

But it is the States who hold the responsibility for public transport, main arterial roads, for local schools, for hospitals, water supply and drainage, police, family and community services.  And it is councils who bear the burden of providing local roads, water services in many regional communities, libraries, garbage collection, playgrounds, public open spaces, local playing fields and a sense of community.

Perhaps its time we took a re-think on the structure of funding for local government.  After all, if the Commonwealth is going to bring in migrants at record numbers to boost the economy, and in so doing, boost their own taxation revenue, surely it is incumbent on them to help the states and councils with the costs associated with the social and physical infrastructure needed to support the new houses they will live in?

A better approach to the funding of infrastructure might ease the concerns of planners and result in a greater willingness to approve more height, more density, more homes?