How much growth is going to the fringe?

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The Victorian Government set a target in its 2002 strategic plan, Melbourne 2030, that only 31% of new dwellings constructed between 2001 and 2030 would be located on outer suburban greenfield sites.

In fact, it envisaged that by 2030, the proportion would have fallen to just 22%.

This ambitious target reflected the conviction at the time that continued outward growth was unsustainable. The firm view was that a much higher proportion of growth would need to be accommodated within the existing built-up area.

The subsequent update released in 2008, Melbourne @ 5 Million, significantly downgraded the target.

Melbourne @ 5 Million “anticipated” that 47% of all new dwellings constructed over the next 20 years would be located in the fringe Growth Areas.

The new target simply reflected what the market was actually doing. There would be little danger now of getting caught out by a politically ambitious “stretch target”.

The most recent edition of the Government’s Residential Land Bulletin (March Qtr, 2010) indicates how prescient the authors of Melbourne @ 5 Million were. It shows that exactly 47% of dwelling approvals in the preceding twelve months were located in the Growth Areas.

But if you think we need less development in the outer suburbs and more in the inner and middle ring suburbs, it gets worse.

The Growth Areas do not include all new dwellings approved in outer suburban Melbourne. The Growth Areas only refer to six of Melbourne’s twelve outer suburban municipalities i.e. Wyndham, Melton, Hume, Whittlesea, Casey and Cardinia.

The other “non growth”, outer suburban municipalities are Nillumbik, Yarra Ranges, Knox, Maroondah, Frankston and Mornington Peninsula. They still have some estates that haven’t yet been fully built out as well as small greenfield developments.

If these other municipalities are also counted, 58% of dwelling approvals in the preceding twelve months were located in Melbourne’s outer suburbs.

All this is a far cry from the 31%/22% target set down in Melbourne 2030. It seems there wasn’t much “science” applied to developing the Melbourne 2030 target – the authors probably felt it was a reasonable “stretch target” given that over the four years from 96/97 to 00/01, only 38% of new commencements were on greenfield sites.

However it is dangerous to extrapolate from such a short period. One argument is that there was a large youth bulge in this period that boosted inner city construction. It was also a period of relatively low affordability compared to the boom that followed.

In the new decade, lower interest rates and increases in assistance to first home buyers from the Federal and State governments greatly increased demand for lower priced housing and hence for properties on the fringe. Close to three quarters of recipients of the First Home Owners Grant, which was introduced on July 1 2000, bought properties in the outer suburbs in the early years of the decade.

It’s hard to say what a reasonable target for greenfield development should be without in-depth analysis. If business continues as usual then Melbourne @ 5 Million might prove to be on the money.

However if the sorts of broader changes required to manage Melbourne into the future that I advocate are implemented – like charging cars and public transport their real internal and external costs and increasing housing supply in the established suburbs – then I think Melbourne 2030’s original target, or something approaching it, could be realised.

But the idea that there can be nil growth on the fringe, as suggested in reports like Transforming Melbourne, is fanciful. All that existing investment in roads and freeways, combined with more fuel-efficient and greener cars, will continue to make greenfield development a viable choice for a significant proportion of the population.

There are many households who work in the middle or outer suburbs – for example at the airport, in manufacturing or at a suburban university – for whom a much larger house on the fringe is as accessible to the sorts of opportunities they’re interested in as a smaller and older house in the middle ring.

A key priority should therefore be to make greenfield development work better. While it is far from perfect, Toolern is an example of the direction in which we should be heading. But we can go further – if we can envisage imposing a green tax on gas guzzlers, then we can think about taxing McMansions too.