Keeping the suburbs affordable

State Governments are struggling with how to accommodate urban population growth and rising demand for more accessible locations. One of their big challenges is how to deal with residents of existing suburbs who don’t want multi-unit developments in their street or in their local shopping centre.

For example, according to the draft metropolitan strategy, Plan Melbourne, the Victorian Government has to manage projected growth of 2.5 million people and one million dwellings in Melbourne by 2050.

Over the last eight years, 46% of new housing was constructed within established suburbs (see exhibit). However current residents are unhappy about this. There’s a lot of them and they’re voters, so a key objective of Plan Melbourne is to “protect” established residential areas from new multi-unit developments.

Plan Melbourne anticipates at least half of all residential-zoned land in the metropolitan area will be subject to the new and highly restrictive Neighbourhood Residential Zone recently introduced by Planning Minister, Matthew Guy. It permits no more than two dwellings on a lot.

Councils will have the option of applying the more permissive Residential Growth Zone in locations deemed more suitable for development. However as the example of Boroondara shows, many Councils in established suburbs will apply the ‘no-growth’ Zone to the great bulk of their municipality.

Development will instead be directed to activity centres and urban renewal sites like disused factories. Yet even here Councils will be encouraged to limit the scope for change by introducing mandatory building height and local character controls in Neighbourhood Centres.

More of the supply of viable multi-unit development will have to come from a limited number of key activity centres and urban renewal sites.

The Government recognises these constraints will reduce the supply of new dwellings in established suburbs. As the exhibit shows, Plan Melbourne forecasts they will accommodate 38% of the expected growth in dwellings to 2050. That’s a very large reduction on their current share of 46% (1).

The city centre and the fringe Growth Areas are consequently expected to take a much bigger share of forecast growth than they do at present.

The proportion of all new dwellings accommodated in the city centre will increase substantially – from the current level of 15% to 20%. The great majority of these dwellings will be in high-rise towers in areas like the CBD, Southbank and Fishermans Bend.

What hasn’t attracted much attention though is the large contribution expected from the Growth Areas at the edge of the urbanised area. Their share of new construction is forecast to increase markedly – from the current level of 39% to 43%.

That sounds at odds with the promise in Plan Melbourne to lockdown the Urban Growth Boundary, but it’s easily explained. In part it’s because the average density in Growth Areas is expected to increase over the period from around 15 dwellings per Ha at present to an average of 18 dwellings per Ha.

The main reason though is former Planning Minister Justin Madden extended the Boundary in 2010 in order to bring an extra 430 sq km into the Growth Areas. There’s now more than enough land to cater for growth out to 2050 without having to extend the Boundary again. It’s an empty promise.

Some observers will be very concerned about more high-rise towers in the city centre and inner city. I expect they’ll also be concerned about increased sprawl. I’m more worried about the diminished opportunity for people to find affordable housing in the established suburbs.

Suburban activity centres outside of the inner city have generally made a disappointing contribution to dwelling supply over the last 10 years. That’s been due to a number of factors including high land values, difficulties in assembling land into usable parcels, and opposition to high density from residents/councils.

While some argue only a very small percent  of the city’s established suburbs need to be redeveloped at higher densities to meet forecast growth (e.g. along transport corridors), this hasn’t worked in the real world. For a given supply target, it seems there needs to be a substantially larger pool of land that is capable of being redeveloped.

The Government says it will increase supply by introducing a new multi-unit development code planning assessment tool to facilitate development but it’s hard to see how that will be enough.

Urban renewal on disused industrial and institutional sites sounds easier, but last time I looked at this aspect there didn’t seem to be many identified opportunities. Plan Melbourne doesn’t give much guidance on the number and location of these sites either (2). There’s plenty of industrial land on the map, but that doesn’t mean it’s ready, or viable, for redevelopment.

Inadequate supply in the established suburbs already has a big negative impact on affordability. But it could also affect the mix of dwelling types across the metropolitan area.

Plan Melbourne forecasts detached houses will comprise a minority (43%) of the new dwellings added across the metropolitan area between now and 2050; town houses will comprise 34%; and apartments 23%. However given the restrictive policy settings for established suburbs envisaged in the Strategy, apartments might be the most cost-effective option for developers.

The Government needs to demonstrate how Plan Melbourne will deliver the forecast number and mix of dwellings in the established suburbs. It also needs to show that the reduced share of dwellings anticipated in the established suburbs will not have a deleterious effect on housing affordability and choice.

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1. When I say the “current” level, I’m referring to the shares over the period 2004-12, as per exhibit.
2. There are some potential opportunities for renewal (e.g. see Should suburban universities be redeveloped?) but the strategy doesn’t recognise them.