Has spare infrastructure capacity in the inner city disappeared?

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The received wisdom is it costs much less to provide infrastructure for an inner suburban dwelling than for one in the outer suburbs. However, as I noted last time, we don’t know how big the difference is or even, for that matter, if it’s positive or negative – we simply lack reliable evidence.

There are reasons, however, to suspect the savings in infrastructure outlays associated with urban consolidation might be much less than is widely thought. It’s plausible that the popular claim of an $85,000 per dwelling saving could be well off the mark (note I’m only talking in this post about the capital cost of infrastructure, not the economic costs and benefits of a fringe vs central location).

From the time urban consolidation was first seriously put on the table in Australia as a policy option, a key premise was the availability of ‘spare’ infrastructure capacity in the inner city. This part of the city had previously supported larger working class and migrant populations, so there was ‘free’ infrastructure to be had in support of a restoration of earlier population levels.

There’s not much sense in assuming any capacity is free (it all has to be paid for) but looking from the perspective of 2011, there are reasons to question if there actually is any spare physical capacity left, at least in relation to some types of infrastructure.

A key reason is a lot of whatever spare infrastructure capacity existed has already been used up by gentrification. At the 2006 Census, there were 36,488 more residents in the inner city of Melbourne than there were in 1976 (and 76,422 more than when the inner city was at its lowest ebb in 1991). In fact of the 31 municipalities in metropolitan Melbourne, only the City of Moreland and the adjacent City of Darebin had significantly fewer residents in 2006 than in 1976 – Moreland had 14,585 fewer and Darebin 17,137 fewer. That is not a lot in the context of projections Melbourne will grow from a current population of four million to seven million by circa 2049.

Even where there are fewer residents today than in the past, they might still have a much larger “infrastructure footprint” than their predecessors. Modern households have many more resource-intensive devices like flat panel TVs, air conditioners, heaters, computers, spas, and so on, than their predecessors. They have more cars than former residents, so there’s less room for parking. They also have higher standards – the primary school that used to accommodate 300 kids in six or seven classrooms now has to build twelve to handle the same enrolment.

Moreover, households today are smaller on average, so they have fewer ‘economies of scale’ in resource consumption than earlier generations. Two households of three persons each use more gas for heating than they would if the same six residents shared a single dwelling. Gentrifying households are also wealthier on average than the sorts of households who used to live in the inner city and inner suburbs 30 to 40 years ago. On a per capita basis, wealthier households consume more of just about everything worth having. Again, that will require more infrastructure capacity.

Thus it’s possible infrastructure in some locations could be at or above capacity even with a much lower population than those places housed in the 1970s.

Another consideration is that some infrastructure no longer exists – it’s been  closed down or sold off. For example, four high schools have closed in Melbourne’s north over the last twenty years:

The troubled Moreland City College closed in 2004. Coburg High School shut its doors in 1993 and is now the site for a planned 510 apartments. Newlands High School, now part of the Pentridge Prison development, folded in 1993. Moreland High School taught its final class in 1991 and is now Kangan Batman TAFE”

With recent gentrification, the Coburg community has called for the construction of a new junior high school in the area to meet rising demand. Given higher land prices and the greater expense of building on a potentially constrained site, providing a new school in Coburg would very likely be much more expensive that building a comparable size school on the fringe.

This case also highlights some other potential difficulties with the idea of spare infrastructure capacity. The Department of Education says there’s spare capacity in other nearby schools, but the residents of Coburg don’t see these as adequate substitutes. They’re either too far away, too big, don’t offer the right subject selections, or the demographics of the school populations is unpalatable. In other words, so far as the new population of Coburg is concerned, there is no spare capacity – they have different and more costly standards than earlier generations. Of course even spare capacity (as defined by the Department) in these other schools will eventually be consumed as Coburg continues to gentrify.

A related complication is ensuring relative infrastructure costs in inner and outer areas are assessed on a comparable basis. Sometimes claimed available capacity isn’t ‘spare’ at all but rather represents a reduction in standards, for example when new classrooms are built at the expense of playgrounds. Additional classrooms are a good thing, but some allowance needs to be made in comparing costs for the reduction in open space.

These observations don’t necessarily apply to all infrastructure, in all locations, at all times. A rigorous evaluation of infrastructure costs is the only way to determine to what extent infrastructure outlays – particularly those incurred at public expense – differ by location. However to the extent they rely on the assumption of spare capacity, there’s good reason to think that the sort of cost advantage central areas had over fringe areas even twenty or so years ago, might be much diminished today. That doesn’t mean urban consolidation isn’t a good idea – it is! – but it may need to be justified primarily on other grounds like economic benefits and enhanced housing choice.

In conclusion, it should be noted that spare capacity isn’t the only rationale for the idea that infrastructure costs less to provide in the inner city and inner suburbs. One argument is the combination of a central location and higher density lessens (endogenously) the need for some infrastructure, specifically roads, compared to the fringe. It’s true that residents of inner areas tend to use cars less, but account would need to be taken of the additional costs of public transport infrastructure they require, such as additional rolling stock and in some cases new tram and rail lines (there could also be a higher operating cost to government).