How much housing can brownfields sites supply?

Examples of former industrial zoned sites now currently zoned residential. Images in clockwise order: Cardinia, Mornington Peninsula, Maribyrnong and Kingston (graphic from DPCD)

Governments like to point to disused industrial sites as a significant source of land for expanding housing supply within the established suburbs. Only recently, for example, the Victorian Government talked up the potential of Melbourne’s Fishermans Bend as a new “Growth Corridor”.

So-called brownfields sites can make a useful contribution to housing supply but the available evidence suggests their potential is over-stated. One of the risks of taking too-optimistic a view of brownfields is that the formidable obstacles to other sources of supply – like higher density housing in activity centres and infill developments – will tend to be neglected.

The potential of brownfields sites is limited by a number of factors. They might be in locations that are unattractive to the market (e.g. deep within an industrial area) or are expensive to service. Some have been contaminated by industrial processes and it’s possible another use might be preferred over housing.

Challenge Melbourne, the discussion paper prepared to kick-off the Melbourne 2030 process, estimated brownfields sites could contribute 65,000 dwellings over the period 2001 to 2030. While useful, this was well short of the estimated number of new dwellings that need to be constructed – for example, the latest edition of Victoria in Future projects the number of households in Melbourne will grow by 825,000 between 2006 and 2036.

Now the Planning Department has produced a new study which throws further light on the likely contribution brownfields sites could make to housing supply in Melbourne.

The department estimates more than 400 ha of industrial land was rezoned from industrial to residential in Melbourne over the last ten years. The exhibit shows new housing constructed on former industrial sites in Cardinia, Mornington Peninsula, Maribyrnong and Kingston.

That’s an average of 40 hectares each year over the last ten years. If each hectare was developed at a net density (say) of 20 dwellings, that would mean brownfields sites have contributed on average 800 dwellings p.a. to Melbourne’s housing task.

Compared to Victoria in Future’s projection that the number of households in Melbourne will grow by an average of 27,500 p.a. between 2006 and 2036, that 800 dwellings p.a. seems a decidedly modest contribution. In fact, it’s not certain that rezoning always leads to development and, where it does, what proportion of the site is used for housing. Many of the lots identified by the Department are in suburban locations so even my assumed net density of 20 dwellings per ha might be optimistic.

There are of course other non-industrial sites that could potentially be used for housing. For example, a major housing development was proposed for the former Coburg High School site in Bell St (although it appears to have fallen over). The trouble is there are likely to be many fewer such sites available than industrial sites. I’m not in any case aware of an estimate of their likely supply potential and the associated timing.

I applaud DPCD for producing this new study. There are still many questions around the supply potential of brownfields and other major sites, so I would like to see the department continue with this work. As it stands, the existing evidence suggests the Government should be very wary about over-selling the contribution brownfields can make to housing supply in Melbourne.

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Can Melbourne depend on infill housing?

Geography of infill developments in City of Monash, 2000-2006 (source: Phan et al, 2008 - graphic via Grattan Institute)

We know that the inability to increase significantly the supply of dwellings within established suburbs is a key failing of strategic planning in Melbourne. Simply put, there’s not enough housing to make established suburbs affordable for all the people who would like to live in a relatively accessible location.

We also know that activity centres aren’t pulling their weight in the task of increasing supply (see here and here) and that the burden of supply is instead falling on small-scale infill development, much of it dual occupancy projects. So it’s worth looking further at the nature of infill housing.

A study by Monash University’s Thu Phan, Jim Peterson and Shobhit Chandra , Urban infill: the extent and implications in the City of Monash, examined new developments in the municipality over the period 2000-06. They defined infill primarily as projects where two or more new dwellings were constructed on sites formerly occupied by detached houses. A total of 1,483 projects were identified, ranging in size from two dwellings to 178.

The study revealed a number of interesting aspects about this middle suburban municipality.

First, it found new dwelling supply is dominated by small projects. One project built more than 178 dwellings and three built between 40-77 dwellings, however 98% of projects involve just 2-7 seven dwellings (and we can be pretty confident they’re heavily weighted toward the smaller end).

Second, projects are dispersed, not concentrated. As shown in the exhibit, proximity to major trip generators is uncorrelated with location of projects. Just 5% are within 400 metres of a Principal, Major or Specialised activity centre, and only 10% are within 400 metres of a rail station. Moreover, the authors found projects located within 400 metres of an activity centre are smaller on average than those in more distant locations.

Third, developers tend to be opportunistic rather than strategic – they wait for properties to be offered for sale and assess each one on its potential for redevelopment. Thus the geography of infill development is shaped largely by what comes on the market rather than by any sort of deterministic planning policy.

Fourth, the size of lots and the age of the existing house is a more important influence on the location of infill development than proximity to an activity centre or rail station. The average infill site is relatively large (700 to 900 sq m) and the majority of existing dwellings are relatively old i.e. built between 1945 and 1965. Lot sizes close to rail stations are smaller – and hence less amenable to redevelopment – than those further away, probably reflecting the different periods of development.

Thus not only are activity centres failing to expand housing supply in accordance with the precepts of Melbourne 2030, but the great bulk of new housing being built in Monash isn’t located close to activity centres but rather is dispersed (relatively uniformly too judging by the exhibit i.e. non-randomly).The dispersed pattern will worry some, but I don’t see it as a big issue. Read the rest of this entry »


Can activity centres supply enough housing?

Average annual growth in population of centres (%) - data from BITRE

Melbourne 2030 envisaged growth of high density housing and office employment within established suburbs would be located in activity centres, especially those with a rail station. In fact it specified that 41% of all dwellings should be constructed in activity centres over the period 2001-30 (with 31% in Growth Areas and the rest dispersed in small projects throughout established suburbs – at present though, about half of all new dwellings are constructed on the fringe).

Locating more intensive development within strategically important activity centres makes a lot of sense. In particular, it means a larger number of people will be within walking distance of frequent public transport, giving them an alternative to driving. Bigger activity centres should be more sustainable and might even cost the public sector less in infrastructure outlays and operating costs.

Yet it doesn’t seem to be happening – outside of the city centre, only a small number of activity centres are experiencing significant growth in multi-unit housing. Moreover, according to research by BITRE, Melbourne’s six Central Activities Areas (CAAs) and 25 Principal Activity Centres (PAC) only accounted for 3.6% of all population growth in the metropolitan area between 2001 and 2006. The number of people living in CAAs fell (by -0.3% p.a.) over the period and the number in PACs grew by just 0.8% p.a. – much lower than the growth rate for the metro area and the CBD (see exhibit).

Nor are activity centres generally successful in attracting employment – BITRE found jobs growth was actually negative in the CAAs, falling by 0.5% p.a. between 2001 and 2006. Jobs grew by 1.25% p.a. in dispersed areas outside of centres over the same period, but by only 0.5% p.a. in PACs.

There are reasons why it’s hard to attract developers to larger centres. Assembling land is difficult – existing holdings are in diverse ownership, values are often high and lots may be small. Moreover, Planning restrictions mean suitable sites are in short supply or have constrained redevelopment potential. But perhaps the key issue is opposition to development from existing residents.

As the strong reaction to Banyule Council’s proposed structure plan for Ivanhoe shopping centre shows, many residents don’t like the idea of redevelopment at up to 4-8 storeys in their local centre. They fear higher housing and employment densities will increase traffic congestion and noise and they expect the character and familiarity of their local centre will change for the worse. They see few, if any, upsides for them personally from a higher density centre.

It seems putting most higher density redevelopment eggs in the activity centres basket isn’t paying off. The politics of dealing with existing residents is simply too hard for all levels of government, whatever their colour. That’s not surprising given residents generally feel redevelopment makes them worse off and the planning system emphasises the interests of local residents.

Economists like Edward Glaeser and Ryan Avent have proposed ways that in theory might give existing residents an incentive to be more accepting of redevelopment, e.g. residents could buy the right to remain living at low density. These are novel and interesting ideas but at the present time they’re simply not going to fly politically.

Any redevelopment within established suburbs is going to be difficult. However the level of opposition can be reduced, although by no means avoided, where more intensive development is proposed for disused industrial areas. Even so, “brownfield” sites come with their own set of issues, like potential contamination and possible alternative uses.

Further, there don’t actually appear to be many brownfield sites. The authors of Challenge Melbourne – the discussion paper prepared in 2001 as part of the Melbourne 2030 process – estimated suitable brownfield sites within established suburbs have a total potential yield of 65,000 dwellings. That’s impressive, but even if all of that estimate could be realised, it’s not a big enough contribution, given the number of households in Melbourne is now projected to grow by 825,000 between 2006 and 2036. Read the rest of this entry »


Are infrastructure costs higher on the fringe?

Capital costs per dwelling of infrastructure provision - inner suburbs vs outer suburbs (from Trubka et al)

The exhibit above purports to show that the cost of infrastructure associated with building a new dwelling within 10 km of the CBD of a city like Melbourne is, on average, $50,503. In contrast, it costs $136,401 to provide infrastructure for an outer suburban dwelling i.e. located more than 40 km from the CBD. That’s a huge difference: $85,538 per dwelling.

The figures come from a 2007 report, Assessing the costs of alternative development paths in Australian cities, written by three Curtin University academics, Roman Trubka, Peter Newman and Darren Bilsborough. I’ve mentioned this report before, but that was primarily in the context of The Age and some public sector agencies tending to conflate economic costs with infrastructure outlays (they’re not the same!).

The figures above however are solely infrastructure outlays (not economic costs). Judging by the extent to which Trubka et al’s report is cited by government agencies, there appears to be strong demand for this type of information. It seems, however, that these are the only numbers on this topic around. That’s unfortunate because they have some very serious shortcomings as an indicator of the relative cost of providing infrastructure in inner and outer locations.

The key deficiencies are they’re old; they don’t relate to Melbourne; and they’re not transparent. Trubka et al sourced them from a 2001 report, Future Perth, prepared by the WA Planning Commission to assess infrastructure costs in Perth. Future Perth didn’t calculate its estimates from first principles but rather surveyed 22 earlier studies, some dating from as far back as 1972 and some relating to costs in the USA and Canada.

Future Perth is a working paper and hasn’t been published – hence the rigour of its methodology and those of the 22 studies it drew from hasn’t been tested. Unfortunately, Trubka et al provide scant explanation of their infrastructure estimates, relying instead on a reference to Future Perth.

I can’t say for sure the Trubka et al estimates are wrong, but I can say they’re unlikely to be right. I can also say they’re far too flaky to be relied upon to guide significant policy or investment decisions here in Melbourne. There’s clearly a demand for this sort of information so it would be sensible for the State Government to undertake its own rigorous and up-to-date assessment of the costs of metropolitan infrastructure provision.

Although not as decisive as the shortcomings discussed above, I also have some issues with how Trubka et al have set up their cost comparison. Actually, because the report doesn’t elaborate much on the various infrastructure items, I’ll treat these as questions, or areas that need clarification. Read the rest of this entry »


Why do outer suburban streets look so bland?

Manna Gum Drive, Ventnor, Phillip Island

Critics are gunning for Victoria’s Planning Minister, Matthew Guy, following his decision to rezone 5.7 Ha of farmland at Ventnor, Phillip Island, for residential use despite the opposition of Bass Coast Shire Council. The rights and wrongs of the Minister’s decision is no doubt a fascinating topic, however my present interest is in the way this land is likely to be developed.

I got to thinking about that after reading a letter in the paper on Saturday from the owner of a beach house at Ventnor, expressing the “hope that this natural wonderland does not become transformed into a home of little courts, high fences, and narrow streets filled with the McMansions of suburbia”.

I wouldn’t be holding my breath if I were him – there’s got to be a much better than even chance that any new residential development will end up looking more like nearby Manna Gum Drive (see exhibit) than the more traditional ‘beach houses’ of Ventnor. In fact even that seems optimistic – given the enormous decline in average lot sizes in recent years, a more probable scenario could be this development in Melton.

He can probably rest easy about his fear of McMansions though. Two storey behemoths are likely to be too expensive for most Ventnor newcomers – it’ll probably be single storey brick veneers with low tile roofs and two car garages.

Being near the beach doesn’t faze the standard suburban form – it’s ubiquitous. Drive 100 metres back from the beach in large parts of the sub-tropical Sunshine Coast or Gold Coast, close your eyes, and you could as easily be in the bland streets of Melton or Campbelltown. You’ll even have the same experience in tropical Cairns.

I expect they all look much the same because the economics of land development and cottage building produces the same solution everywhere. Affordable lots are 500–700 sq metres with high fences for privacy. The houses look more or less the same because the home building industry is pretty efficient at churning out economically priced detached houses in low-maintenance brick veneer.

As with most mass produced items built to a price, the scope for differentiation isn’t high, often just a tweak of the front facade. Buyers can have something markedly different if they want – they might, for example, commission an architect – but they’ll have to pay a lot more for the advantages of a bespoke design. But that’s just not an option for the vast bulk of buyers in areas like Melton and, I daresay, Ventnor.

A key reason streets in fringe suburbs look so boring and nondescript to sophisticated eyes is their relative youth – trees planted in the nature strip haven’t had time to take off and residents haven’t yet established front gardens. Many streets in established suburbs were bland once too. The streets of Eaglemont and Ivanhoe doubtless looked pretty insipid at first with their small brick and tile houses, but generations of zealous gardeners cultivating their front yards and nature strips have created, in effect, a completely new streetscape.

Yet there are many streets in established suburbs like this one in Keysborough which are still pretty uninspiring despite the advantages of maturity. This relatively young street in Melton looks like it’s lost some street trees already and parts of the nature strip have become a parking lot. Here’s another newish one in Melton where the front yards don’t even pretend to be gardens – they’re all driveway and low maintenance ground cover. And most of the houses on this street on the Sunshine Coast were built at least 30 years ago (in fact some have been redeveloped) yet apart from a few desultory palms, trees with scale aren’t very common. Read the rest of this entry »


Have buyers abandoned McMansions (forever)?

It only seems like yesterday we were told Australia had the largest new houses in the world (e.g. see here and here). Now it seems we’ve seen the error of our ways. According to this press report, the head of residential communities at property developer Stockland, Mark Hunter, has no doubt  the era of ever-growing McMansions is over – he expects home sizes to shrink as fast as they grew in the first decade of this century. Mr Hunter is reported as saying three-bedroom, two bathroom houses are the new sweet spot in the market:

With power prices increasing, people want more efficient homes and are happy to sacrifice extra bedrooms, rumpus and media rooms and make do with a single open-plan living and dining area opening onto an outdoor area.

Stephen Albin, the chief executive of the Urban Development Institute of Australia, says the trend to shrinking new home sizes is only just beginning:

I think there’s a massive shift going on and we are at the front end of it. People are starting to realise a five-bedroom house has other costs, from the amount of leisure time you lose maintaining it, to heating and cooling, and you are going to start to find we are at the front end of that shift

He sees a permanent change in Australians’ preferences. “The McMansion’s days are numbered”, he asserts, “just look overseas and see what’s happening”.

In a recent address to CEDA, the CEO of Stockland, Mark Quinn, argued that people are choosing less debt over having five bedrooms and a separate dining room they use once a year at Christmas. People are more patient now, he said, and rather than seek instant gratification they “prefer to wait and have less debt”.

Have Australian fringe buyers really lost their taste for big houses virtually overnight? And is this really a permanent change – is it a “paradigm shift”? Only a few months ago we were debating in these pages home buyers’ preference for seemingly ever-larger dwellings!

I’m hard pressed to see it. Sure, electricity prices – which really could drive a permanent shift toward downsizing – look like they’ll keep rising, but as I’ve pointed out before, there have been massive improvements in the operational energy efficiency of new detached houses over the last ten years. The per capita operating energy required by the average new greenfield dwelling in 2008 was about a third lower than it was in 2000. In fact it was lower than it was in 1960, nearly 50 years earlier, notwithstanding the size of the average new greenfield dwelling more than doubled over this period.

The latest edition of Property consultant Oliver Hume’s Survey of purchaser sentiment in Melbourne’s Growth Areas doesn’t suggest buyers tastes have changed. When the  company asked land buyers what size house they intended to build, the proportion who said greater than 279 sq m was the same in June 2011 (30%) as it was in December 2010 (Oliver Hume say the actual size buyers end up building is about 50 sq m smaller). Read the rest of this entry »


What type of housing do we prefer?

Comparison of preferred housing, existing stock and current supply (Grattan Institute)

The Herald-Sun reported last week that “the great Australian dream of owning a home on a quarter-acre block might no longer exist. Instead, Australians want more town houses and apartments in the more desirable areas”.

The important words are the last five – “in the more desirable areas”. Australians still love their big, detached houses but they also value location. The baby boomers could have a detached house on the suburban fringe and still have reasonable access to the rest of the city, but those days are vanishing. Now, people who want to live in an accessible location increasingly have to forgo space and accept a smaller dwelling, often a town house or apartment. As illustrated here, those leading this trend are young, small households without dependents – they’re less sensitive to space than families and place a higher value on density.

The Herald-Sun’s interest in this issue was sparked by a new study by the Grattan Institute, The Housing We’d Choose, on the housing preferences of residents of Sydney and Melbourne. It shows that more than half of households in these cities would rather live in a multi-unit dwelling in the right location than in a detached house in the wrong location.

This presents a serious problem for policy – the existing stock of housing no longer matches up with resident’s changing preferences. The Institute finds that a whopping 59% of Sydneysiders and 52% of Melburnians would prefer some form of multi-unit living. Yet this type of dwelling makes up only 48% and 28% respectively of the existing housing stock in the two cities (see first exhibit). Moreover, in Melbourne, developers are continuing to under-provide medium and higher density housing, leaving households with little choice other than to live in sub-optimal locations, albeit in a detached house.

I must admit I was disappointed with the Grattan Institute’s first report in its Cities series, The Cities We Need, so I wasn’t expecting a lot from The Housing We’d Choose. It’s not that there was anything technically wrong with the first report, it’s just that it seemed a curiously pointless exercise – as I noted here, it’s so high-level it didn’t take the debate on urban issues anywhere or advance the cause of better policy.

This time however the Institute has applied all those brains and resources to a meaty and relevant issue and, moreover, gone about it in a logical and determined way. While The Housing We’d Choose has some flaws, it shows up the limitations of the research being churned out by some of our local universities and lobby groups. This is the kind of study they should be examining closely.

The headline finding – that people are prepared to trade off dwelling size and type for greater accessibility – may seem self-evident, but the Institute has attempted the important task of measuring this preference. The researchers sought to simulate real life. They gave a sample of households in the two cities a range of real location, housing type and dwelling size options and asked them to make trade-offs in order to arrive at their preferred combination. The smart thing is the trade-off was constrained by real-life prices and the real incomes of respondents. Read the rest of this entry »