Should most redevelopment be in activity centres?

Maribyrnong Rd, before redevelopment and after (from Transforming Melbourne)

I noted yesterday that Melbourne @ 5 Million envisages just over half of all new dwellings constructed between now and 2030 – about 16,000 per year – will be located within the built-up area. The rest will be built in the fringe Growth Areas.

This is a significant reduction compared to the 69% share Melbourne 2030 envisaged would be built within established areas over 2001 to 2030.

My view is that the disadvantages of sprawl are routinely exaggerated and the fringe will necessarily be an important location for some of the expected future growth.

But I think home buyers’ preference for the outer suburbs is also commonly exaggerated. I expect many fringe settlers would prefer a location closer to the centre if only the market could deliver a better space/price compromise.

I think one of the reasons they can’t find that compromise could be the Government’s policy of prioritising redevelopment to strategic locations, like activity centres and along main transport routes.

According to Melbourne @ 5 Million, the focus of growth within the established suburbs is on “locating more intense housing development in and around activity centres, along tram routes and the orbital bus routes on the Principal Public Transport Network, in areas close to train stations and on large redevelopment sites”.

Assessing the success of this approach with publicly available data is hard. The strategy seems to work in the inner city, but that region only accounted for 18% of all dwelling approvals within the inner and middle suburbs in the year to March 31, 2010.

One piece of suggestive evidence is the 2009 Annual Report of the Urban Development Program. It shows that only four of the 26 designated Principal Activity Centres (including CADs) had more than 100 dwelling units under construction in projects with ten or more units (the largest was Coburg, with about 700).

Putting the main focus on a relatively small part of Melbourne means that most new development will inevitably be at high densities. Transforming Melbourne, for example, proposes that all of Melbourne’s future growth could be accommodated on just 3% of the area within the Urban Growth Boundary, primarily along bus routes. It proposes densities of between 90 and 400 persons per hectare.

However as I’ve pointed out before, it costs $100,000 more to build a small two bedroom apartment in a five storey or higher development than it does to provide a three bedroom house with a garden on the fringe.

Notwithstanding this premium, apartments are preferred by certain demographics who value accessibility to the city centre very highly, principally young, one and two person households. But it won’t attract the sorts of households who are currently settling on the fringe.

They want much more space for a family, access to a garden and they eschew the noise, pollution and congestion associated with development along main roads. I expect they would be prepared to make some compromises for a more central location in (say) the middle suburbs, but a premium of $100,000 simply slams the door.

I can see why the Government favours this approach. It ostensibly means that residents of these new developments will use public transport instead of cars. Government outlays will be lower because of spare capacity in existing infrastructure.

I’m sure it also hasn’t escaped the attention of politicians that it helps defuse political opposition to redevelopment within predominantly residential precincts.

But as I’ve pointed out before, the first two advantages are by no means certain. The likely mode shift arising from such developments is not high – increased traffic congestion is a more likely outcome. Spare infrastructure capacity is in many cases almost certainly a myth. In fact it is likely to cost more to provide additional infrastructure capacity in established areas than it does in the suburbs.

The introduction of policies to charge the full cost of car travel would make apartments on strategic sites more attractive relative to the fringe, but it’s not going to overcome the demographic mis-match or the price premium.

Activity centres and major transport routes will nevertheless have a role in meeting Melbourne’s future housing needs, especially in areas close to the city centre, provided issues like land assembly can be addressed satisfactorily. But if a larger proportion of the households who currently settle in the Growth Areas is to be attracted to locations within the established suburbs, then other options need to be considered.

I’d like to suggest the option of putting more effort into facilitating redevelopment opportunities in older residential suburbs with larger lots. Some, like Montmorency, even have lots that literally are “quarter acre blocks”. The advantage is that land assembly is easier, there aren’t competing commercial uses and the value of existing buildings is likely on average to be lower.

The kind of development appropriate to these areas would be small scale, two storey town house projects that can reap some of the efficiencies associated with our efficient cottage building industry, while providing residents with a small garden and attached garage. They are likely to be more attractive to developers in neighbourhoods where the value of existing buildings is not high i.e. areas that have not been gentrified.

The fact that many of these opportunities are not in areas that are within walking distance of rail lines or activity centres should not be a show-stopper. They should instead be supported by policies to speed up the transition to energy efficient, low emission cars. The expanding population should also help support bus services that give better connection to the Principal Public Transport Network.

This approach is not going to provide the sort of urban-romantic, European streetscapes envisaged in Transforming Melbourne. Nor is it going to create buzzy, high density, mixed use activity centres. But it would give more people the option of living closer to the centre and it might improve the quality of their lives, defined on their terms.

P.S. I’ve just noticed the ‘after’ shot of Maribyrnong Road in the graphic shows what look like office buildings – the intent, I’m sure, is they should be predominantly residential buildings (with ‘activating’ commercial uses at ground level)

5 Comments on “Should most redevelopment be in activity centres?”

  1. Ian Woodcock says:

    Alan, Michael Buxton has been doing work on this kind of thing for years, analysing where new development is actually occurring. His work shows that development in established suburbs has long been of the kind you are advocating, rather than of the type proposed in Melbourne 2030 (and its predecessors that have all had elements of transit-related development principles in them). Given that Melbourne is such a low-density city already, it would be relatively easy to accommodate all of the projected population growth in M2030/M@5M via block-by-block consolidation within the urban growth boundary (even the old UGB) without requiring any land to be released on the fringe. And given that, as you say, such development provides what (you believe) most people want, then why not advocate that, rather then further horizontal expansion?

    On another note, while Transforming Australian Cities may advocate a particular set of scenarios that are above 5 stories, it should be put in the context of an evolving set of understandings about what is possible for Melbourne’s future. There are many variables, and the relationships between density, building height, take-up rate, areal extent, location and cost/price are more complex than you portray. My own work on latent intensification capacity implied by Melbourne 2030 (see the July 2010 issue of Australian Planner) finds that the same population projections could easily be accommodated between 3-5 storeys while limiting development to activity centres, tram routes, one orbital bus line and about 10% of the land associated with rail – all within the old UGB, and without building on any land covered by heritage overlays or any other kind of development-sensitive controls. Significantly, over half of this potential lies within activity centres – suggesting that M2030 is right.

    The market is already building developments at and above the required average densities to achieve the above in activity centres and transit corridors, within envelopes of 3-4 storeys. But the development industry is currently rather too narrowly-focussed about the size and type of apartments it builds. Many families already do live in 2 bedroom apartments (just as they do in 2 bedroom units and houses) and there are plenty more families who would would live in apartments if there was greater diversity in the market. The apartment market would increase substantially if the industry spent as much time and money marketing ‘family apartments’ as it does on the current product. Saying that historic patterns of development show us what ‘people want’ is a bit like saying that the slick and seductive marketing by developers is merely ‘just giving people what they want’. Meanwhile, when planners advocate the advantages of higher-density dwellings of any kind, they are derided for being ‘elitist’, ‘europhiles’ and accused of ‘social engineering’. The streetscapes in ‘Transforming Australian Cities’ don’t look like European streets to anyone who’s been there, yet this is the way such attempts to generate a debate on the future of Australian cities is reduced to a game of ‘spot the un-Australian’ (as though Urban Australia isn’t a product of Europeans in the first place!).

    The biggest problem with expanding the UGB is that it provides no incentive for innovation – in activity centres, transit corridors or anywhere else for that matter. It allows developers (and everyone else) to carry on with business-as-usual. To say that a planning policy ‘is on the money’ when its projections mirror pattens of development is to see planning merely as a way of recording a whole set of other decisions than those supposedly aimed at shaping the future of our cities in the long-term public (and dare I say it, national interest). Planning as a documentation of what happens, not a way of regulating and bringing about what has been agreed should happen by a democratically elected state. Should most new development be in activity centres? All state policy says it should. Has it been thus? No. The state’s own audit of M2030 in 2007 told us so, but also said it was sound policy and should be implemented.

  2. Peter Parker says:

    Alan, I think there’s much to be said for this sort of development – anything from a semi-detached, to a terrace, townhouse or villa.

    There’s much to be said for the sorts of villas built in the 1960s – 1980s in suburbs like Reservoir, Carnegie or Chelsea. Though by modern standards they are sometimes dark, have poor solar orientation, are fairly small and may have a parking space rather than a carport/garage. Courtyards can range from unusable to huge. It should not be too expensive to replicate these.

    Modern townhouses seem to be about as dear as older houses on four times the land so don’t present as good a value to people on normal incomes. And tiny student apartments are equally unsuitable.

    For medium density to work the economics must be right. In other words building must be much cheaper than land.

    Some back of the envelope calculations follow.

    A house on a full-sized block in a nondescript outer suburb may cost $400k (though $300k is also (just) possible).

    Knocking it down and building three townhouses might cost $450-600k (assuming $150-200k per townhouse).

    So that’s total costs of $850k to $1k.

    Add profit for the developer and agents commissions, etc, the homes might go for $1 – 1.2m. In other words $330k to 400k each.

    So a new townhouse on a fraction the land can be built for about the same as it costs for an older house on a full block to buy.

    While the buyer can pay a premium for newness, they are getting less land for their dollar. For lifestyle reasons a low-maintenance townhouse might appeal, but if the purchase price is similar to a house, the house on the larger land is more likely to appreciate quicker.

    If land costs escalate, or building costs reduce, then the economics of medium density should improve. But ideally a decent unit (eg a 2br villa in a small group with a carport or garage) should be at 2/3 or less than the price of a house in the same area so it presents good value for purchasers.

    At the moment as you point out the value is not there, and, as Bernard Salt mentions, the $300k house in Werribee is still good value, especially if it is in those pockets where ownership of a second, third or fourth car is not necessary.

    • Alan Davies says:

      Peter, it’s worth looking at this book by Bob Birrell, Kevin O’Connor, et al Planning Rhetoric Versus Urban Reality.

      They say at Chapter 5, page 10, in relation to redevelopment opportunities in 1960s suburbs within Monash, Kingston, Whitehorse and Moreland:

      “The outcome of these supply and demand pressures is that the builder/investor can contemplate the prospect of a reasonable profit from purchasing a house at around $400,000 and investing in at least two dwellings which will ultimately bring a price of well over $400,000 each”.

      The book was published in 2005 so the figures aren’t up-to-date but the message still holds. In their view, buyers of townhouses aren’t looking for a 33% discount on the price of an existing house in the same area, as it would require renovation and would be relatively small.

      They go on to say:

      “For people with modest resources who are considering locating in these areas, the choice is between an established, perhaps dowdy, detached house and a new dwelling on a site half the size of a conventional block. The price difference is small, reflecting the positive and negatives of the two alternatives. The purchase of an older detached house usually implies considerable further investment downstream in order to upgrade it to contemporary standards. The medium density home provides less open space, but modern fittings and design”.

  3. Riccardo says:

    This is nonsense. Given the heat governments attract for consolidation policies it would be amazing they allow any infill development at all. Much easier to go for 100% sprawl.

    The reason they don’t is they believe their own treasuries, who tell them infrastructure is bad, debt is bad and people won’t pay tax.

    So they are more terrified of a bunch of bureaucrats than they are of the NIMBYists.

    But again, with a broken political system they jump at all shadows. The ALP can no longer count on a broad based union movement, can no longer offer their voters a bigger share of the pie. Libs can’t count on 100% business support any more.

    Reality is: everything costs, and it costs big time. The voters are apparently ‘complaining’ about the cost of living, yet they clearly expect a free ride. The middle class conned themselves into believing ‘middle’ equals ‘big’ yet systems have a habit of distributing everything, including money and brains, unequally. The sooner they realise this and suck it up, the happier they may one day be.

  4. […] planning function to developers”.  I’ve been critical of this idea myself (here and here) but I think his criticism is a gross over-simplification at […]

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