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Sydney councils still not in the zone in housing delivery. Undersupply will create long term upward pressure on house prices

Property Markets / Planning, Zoning, Infrastructure

Nov 17 2017

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“New home construction is crucial to the state’s economic fortunes as it underpins growth, jobs and affordability.  For a number of reasons, Zoned Out shows us that councils are not taking up the challenge of meeting the demands of a growing population and without better strategic planning, the community will suffer.”

Late last year the Property Council of Australia released a report into Sydney councils handling of residential rezoning to meet population and housing needs.

The report findings made for sober reading. “Many Sydney councils are asleep at the wheel and are not providing for the housing a growing population,” the Property Council of Australia report claimed, warning NSW risks a deficit of 190,000 homes by 2024. The report blamed a 42 per cent rise in Sydney house prices over the last five years on “constraint on supply caused by poor planning systems and the inflationary impact of excessive taxes and charges contribute significantly to rising house prices.”

According to Property Council NSW Executive Director Jane Fitzgerald the research underlined the fact that there is a worrying lack of forward thinking at a local level when it comes to providing housing to a growing population and connecting it with infrastructure investment.

“In nine of the councils we surveyed, (private) developers led no less than 70 per cent of rezonings for all large residential developments,” Ms Fitzgerald said.

“The strategic vision encapsulated in the District Plans is a positive contribution to Sydney’s future, but if we’re not seeing leadership from councils and the District Plans do not translate to action– then it will all be for nothing,” she said.

“We need residential developments that provide housing for a greater number people – if not, prices will continue to rise, targets will slip and the dream of home ownership will be dashed for thousands of people.”

Critical of the fact that the majority of rezoning applications are instigated by private developers or landowners rather than councils, the research illustrated the stark reality of a planning system that creates significant and prohibitive financial risk for developers and will struggle to meet Sydney’s future housing targets.

According to the report, if councils continue to fail to up-zone land we are in danger of falling far short of the number of new houses we need – 725,000 over the next 20 years according to the Greater Sydney Commission.

Across the Central and South West districts of Sydney, 64 per cent of residential Local Environment Plan (LEP) amendments, used to assign land for development, were led by private developers whereas only 29 per cent were led by councils.

The gap is greater when it comes to larger developments that will deliver more than 100 dwellings for the community – 81 per cent were developer led whereas only 15 per cent were council led. This is despite many councils undertaking discussion papers, master plans and project plans.

Tom Goode, Director of Ethos Urban, who undertook the research to support the Zoned Out report spoke to MP Report about the challenges facing Sydney councils and why the issue of zoning is still not being adequately addressed.

Why are many councils failing to rezone land at the rate and level required to meet population growth?

A big aspect of all this is the load on Councils… there has been an even bigger load placed on the local Government sector from implementing the Standard Instrument LEP through to amalgamations and record high development application loads.  We advocate that councils should be ‘setting the direction’ for an area better and then the DA process should be easier.  This is anticipated somewhat in recent amendments to the Environmental Planning & Assessment Act – however we will need to wait and see how it pans out.

Since the report was published in November 2016 has there been any major changes or developments?

Not really – apart from ever-increasing loads on Councils with surging DAs being received. The Greater Sydney Commission has released revised draft District Plans which, until implemented, will not trigger the need for Councils to drive LEP amendments as foreshadowed in the Act amendments.

Why is it an issue whether rezoning comes from the private or public sector? Does it matter so long as it’s addressing the housing shortage?  

It is cost and risk to the developer.  A rezoning might cost anywhere from $100k - $200k plus excluding any possible voluntary planning agreement that might be required as well as any holding costs to that land that the developer may have… and it just adds risk to the development process. Ultimately, (I believe) this risk is then passed on to the end consumer – being the house purchaser who will be paying more for each dwelling in a climate where housing affordability is a real concern.

Where in Sydney is there best alignment between infrastructure, planning and housing? Can you provide specific examples? 

We have seen a clear paradigm shift in the alignment between infrastructure delivery – specifically rail infrastructure – and integrated land use planning.  The State Government State Significant Precincts program has been a really important tool to ensure new housing supply comes on line in well-serviced locations.  Of course other key services and infrastructure such as schools and open spaces also have to be delivered.

This is supported now with the State Government planning and transport strategies being well aligned as well.  Hopefully this will set a strong direction for integrated planning going forward.

Any particular Councils that stand out as being progressive and efficient? 

We have seen some key Councils take the lead on strategic planning their local Government Area such as the City of Sydney with the Central Sydney Planning Strategy and CBD focused Planning Proposals (rezonings) in places like North Sydney and Parramatta.  However overall, the rezoning process is a private sector led process in general. 

Is there an example or model Sydney councils should be looking at to improve processes and address housing shortage issues? 

We’ve seen some change come about in the amendments to the Act, however these are not as far reaching as those anticipated in the 2012 Green Paper to overhaul the entire NSW planning system.  Our office in Brisbane seems to have it better in terms of utilising ‘as of right development’ and assessment codes and we’ve hear from our Melbourne office that there is a far less ‘adversarial’ relationship between the development sector and the planning authorities.  I think a lot can be done to find some common ground in this respect in NSW.

From a developer perspective, where are the rezoning hotspots at the moment? 

I think it is clearly going to be aligned to new and augmented transport infrastructure and as this infrastructure investment moves west to support Parramatta and the Western Sydney Airport, then so too will the focus for the more intensive use of land.

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