City versus suburbs or regions?

 

This week the Committee for Brisbane released its 2024 “Inner City Vitality” report, outlining how the various parts of the inner city economy were performing. The project came from an early idea of mine when, back in mid-2018, I suggested we needed more than just an office market report to assess inner city economic health. The 2024 Committee for Brisbane report does just that, showing a resurgent post-covid inner-city economy, with sectors like education and health doing a lot of heavy lifting. There are some impressive numbers in the report, and it’s the economic diversity of Brisbane’s inner city that distinguishes it from still languishing “office mostly” economies elsewhere around the world. I was happy to have this year supported the Committee for Brisbane and work with economists Urban Economics to breathe some new energy into this important piece of economic research.

If there’s any disappointing aspect to the work, it’s the response of some in the industry who question the idea that you can be an advocate for suburban economic development and interested in the life of the inner city at the same time. I’ve got news for them: I am also an advocate for regional and rural development, along with the suburbs and the city. It’s not just possible but very important that we are.

Imagine for example you’re a race car team and have developed a revolutionary engine which packs V12 power into a lightweight (electric of course) engine with record breaking acceleration, eye watering top speeds and 1000 kilometres’ range with a recharge in just minutes. You’re patting yourself on the back, self-assured of winning every race until you realise the chassis is rusty, the suspension is shot and the tyres are flat. You won’t win a race against a rickshaw in that thing.

Investing all your energy, plans, and capital into just one piece of the car isn’t going to win you any races. Likewise, if we continue to focus too much on one part of our economy while others are allowed to run down, we are never to going to realise our full potential.

There are suburban business precincts across southeast Queensland that are an embarrassment. Some of the privileged “inner-city-first” advocates may not have visited them to realise it, preferring instead to spend most of their lives surrounded by the sumptuous and refined vibe of a James Street or West Village. Both are wonderful places but both used to be run down industrial precincts. Why not aspire to similar outcomes for Salisbury, Northgate, Mt Gravatt, Caboolture, Ipswich, Beenleigh or Southport for example? Why not become advocates for places less well off?

Equally, there are regional cities in this state that generate a great deal of wealth for Queensland but see little of it returned. Gladstone, for example, is an economic powerhouse with a regional economic output of over $20 billion per annum. Yet only a couple of years ago it closed its maternity unit at Gladstone Hospital. ‘Can’t get the staff’ was the explanation. Maybe if Gladstone enjoyed some of the urban amenities that residents of New Farm take for granted, it might have been a different story. Access to quality health care and education, quality housing and an amenable built environment are the basics of business and talent attraction.

If it’s a case of “who in their right mind would want to move there?” then it’s an uphill battle. It shouldn’t be.

One of the secrets to a stronger Queensland economy will be equitable and targeted investment in our suburbs and regions – along with the inner city. We have in the past been guilty – in my opinion – of doing one and not the other. Nothing is more telling nor indefensible than this analysis by Suburban Futures of the past 12 years’ worth of successive state budgets.

Little wonder the inner city is in good health. And little wonder the Mayor of the City of Moreton Bay Peter Flannery sounds like a scratched record when it comes to inadequate infrastructure spending. Close behind him are the Mayors of Logan, Ipswich, Scenic Rim and pretty much every other Mayor of a regional city.  Been to Mt Isa lately? I haven’t, but it’s been described to me as Alice Springs 2.0. Their copper mine closes next year with a massive adverse community impact. And the plan for Mt Isa is what exactly?

None of this is accidental. In fact, it is arguably deliberate. Have a look at some more work by Suburban Futures which compared planned population targets across Southeast Queensland with expected future job numbers. Places like Moreton Bay, Logan, Ipswich, the Sunshine and Gold Coasts are expected to house a very high share of regional population growth but there seems no commensurably equitable plan for jobs near where these people will live.

These numbers are drawn from “Shaping SEQ 2023” – the official plan for southeast Queensland. It’s policy, but it’s not good policy.

This disproportionate allocation of resources and opportunity can lead to an ‘us and them’ rivalry where regions and suburbs will increasingly feel divorced from the economic and lifestyle opportunities so readily available to the inner city. This is only made worse when some of the very beneficiaries of this preferential treatment sneer at the suburbs or regions as somehow second-rate places full of second-rate people. In the USA Hillary Clinton once called them “deplorables.” Joe Biden this year let slip with “garbage.” How did it end for them?

We can still avoid this in Queensland. We do not want to be a class society based on a geography of privilege but instead one where our respective strengths are exploited and our weaknesses supported. There are very good reasons to support the continuing economic development of Brisbane’s inner-city economy. There are also very compelling reasons to invest in similar economic opportunity in run down suburban and regional centres. What is good for one may be different for the other – but the effort and interest to understand what is needed should be equally apportioned.

The suburbs and regions appeal to me because it strikes me this is where so much unrealised potential lies. It’s also where most of us work, live and play. Personally, I think it’s great to see our inner-city economy shake off the covid lockdown impacts and be bouncing back, as good as ever. I also believe we’d be a better city-region if we could say the same about our suburbs; we’d be a better state if we could say the same about our regions, and we’d be a better nation if we could say the same about us all sharing access to similar lifestyle and economic opportunities. 

There could be many more voices from the city calling for this.

Transit Oriented Development: a little less conversation a little more action, please?

Planners and politicians alike are enamoured with the concept of TODS – transit oriented development. Planners see it mostly as an opportunity to create housing density around train stations, on the assumption that most people who might live there will also want to travel where the trains will take them (the city centre). Politicians like to announce things, often without thinking them through. They like ‘silver bullet’ fixes to problems. Complexity and nuance is of little interest. TODs have therefore been both widely and frequently praised, stretching back some three decades. But despite all the hype, we’ve actually not built that many of them. Why?

The first challenge could simply be that the notion of living next to, above or as part of a train station relies a lot on where that train takes people. In all our major capitals, the legacy train network is typically a hub and spoke model, with the CBD as the hub. This is changing to a degree, and Melbourne’s suburban rail loop is perhaps the most ambitious if not Quixotic challenge to that design. The Sydney-Paramatta light rail is another more useful innovation.  But in the main, the assumption is that ‘most people want to commute to inner city jobs’ and that therefore living next to a station that takes you there is a good thing. Which it is, for the roughly 10% of people in a metro area who work in the city centre. What that means in effect though is that a train station based TOD can only appeal to a relatively finite market. The great majority of people have employment destinations which are not CBDs and which are not near a train station.

This hasn’t stopped politicians recently announcing significant policy changes to further support more transit-oriented (rail) development. In Victoria, Premier Jacinta Allen surprised many with her announcement of 25 “activity centres” around train and tram stops, with a further 25 to come. These 50 areas will allow high rise residential buildings close to the station infrastructure, scaling down to less intensive heights further away. The move has been welcomed by development industry groups but not by local residents who live in the affected areas and who were not consulted. Instead, they have been attacked as NIMBYs.

In NSW, Premier Chris Minns took a big swig of the kool-aid earlier this year and announced 37 rail station based precincts across the wider Sydney metro area that would be rezoned to permit high density housing next to the station. The hope is that the initiative will lead to 170,000 more “well-located, well-designed and well-built homes” across the region. The announcement came without community consultation and so far – other than promises – there’s no budget for improved infrastructure in these precincts: things like schools, medical and other things we humans tend to need.

“So, don’t we just need to get on with building more housing?” you might ask.

True, but consider that it will be left to the market (also known as ‘the real world’) to develop this product. Building high density housing is now the most expensive form of housing per square metre. Which means it will be expensive for people to buy. That limits the purchaser pool, whether as investors or owner occupiers. Investors paying more for a product will want a higher rate of rental return, so the idea that building more of the most expensive housing product is in any way going to improve affordability is actually quite bizarre.

It can also be difficult building near or on and especially over train lines. Rail authorities tend to have their own views about how much development should take place next to their rail lines. They don’t want residents moving into these new developments then complaining about noise, dust or vibrations. They can prove obstructive if their approval is required for development to proceed.

It's also worth asking why our policy makers seem to think that development oriented around transport infrastructure must just be housing. There are genuine opportunities to locate assets like schools, offices, medical centres and shopping centres in and around train stations, but these get scant attention in Australia – if any. Yet being big generators of people traffic, it would make sense to co-locate transport infrastructure that can move a lot of people with land uses that also generate a lot of traffic.

A recent visit to Tokyo highlighted for me what is possible. Under an elevated Tokyo expressway were strips of ground floor shops and restaurants, with offices above (immediately below the expressway). And a nearby elevated rail line made full use of the space underneath the line to house a variety of restaurants in what would otherwise be a void.

Tokyo expressway above, shops and offices below.

 

Rail lines above, restaurants below.

 

In Kyoto, the line between where the rail station begins and where the hotel, full department store, supermarket and shopping centre begin are indistinguishable. It’s a full integration.

This is also transit oriented development because it makes better use of the infrastructure. Sadly though I suspect we won’t see much of this alternative dialogue in Australia. We seem locked into thinking that transit oriented development is one thing and one thing only: high density towers offering high cost housing clustered around train stations which don’t necessarily take people where they want to go.

That might explain why TODs will remain something much talked about in planning and political circles, but when it comes to the market, there may be a less enthusiastic response.

The housing fix we actually CAN do something about

As someone who has spent the best part of their professional life involved with property markets and public policy, I reckon I’ve seen pretty much every type of lunacy at work. When it comes to housing, that lunacy frequently ascends new heights. The latest hysteria is nothing we haven’t seen before, and will see again – despite the many inquiries, task forces and talk fests proposing “solutions.”

Here's some bad news for those who think they have “the fix.” We basically can’t do anything about established house prices (typically measured by the median price). To make established housing in our major cities ‘affordable’ prices would need to fall by around 30%. This would likely collapse our banking and financial system which is heavily leveraged into residential mortgages. Along with wiping out incalculable personal wealth. Alternatively, incomes would need to rise by around a third. That would collapse the economy. And a lot of other things along with it. 

The established housing market – second hand homes if you like – is a function of supply and demand. Demand for capital cities is red hot and increasing supply is challenging (anyone who has tested their sanity by lodging a DA almost anywhere will attest to that). 

Politicians and other policy makers will tinker at the margins, usually with the net result of making things worse via grants and complex processes intended to target particular subgroups in the market. Stamp duty exemptions for first home buyers, grants and things like “shared equity” schemes are just some of the distortions they think will make things better. 

But what they continually refuse to do is focus on the cost of bringing new stock to the market, which we can do something about. Maybe they’re just stupid, or their advisors are stupid, or maybe entire government departments are stupid, or we are the stupid ones for not chucking them out of office for not getting this right. 

The simple fact is that the supply of new housing – detached houses or home units – is both taxed and regulated to a degree many many times that of the second-hand market. 

Leaving aside the very real challenges around the approval of new supply (be that a residential subdivision or new apartment project) the tax and compliance story alone should tell the knuckleheads in power in almost every state that we have things very badly wrong. 

Here’s a simple example. Let’s say I buy a second-hand traditional Queenslander style home with 5 bedrooms, two bathrooms, a two-car garage on a 1,000m2 block in the Brisbane suburb of Clayfield for $2.275million. The tax I pay on that will be 4.6% in stamp duty, or $104,162. Yep, that’s a big tax bill, and it would hurt. You know about it because it’s a separate payment to be made on settlement. It’s not buried within the purchase price. 

Keep in mind that Clayfield is a suburb with a lot of pre-existing amenity. There is good pubic transport, local libraries, shops, tree lined streets, a choice of local schools within reach and so on. 

Now compare that with buying a new project home – house and land package – in an outer suburb like Yarrabilba for $715,000. This 4 bed, 2 bath, 2 car house sits on a 400m2 block and while amenities are slowly coming, it’s still early days. Public transport is almost non existent, and most local facilities are a good drive away. My tax bill on this will be around 30%. That’s right, not 4.6% for a $2.275 million house in a high amenity area, but 30% for a new low set costing $715,000 in an area with fewer amenities. 

The total tax bill for our new house buyer is around $216,000 – but the buyer of the new home doesn’t know this as the costs are buried within the price. Yes, they will know about the stamp duty of $18,025 (which is separately billed) but they won’t realise their new home comes with around $65,000 in GST (which only applies to new housing), an infrastructure levy for the local council of $33,000 (which only applies to new housing), and a host other charges associated with delivering a new, humble dwelling which will add a further $100,000 to the bill. That includes by the way, a new $30,000 bill to comply with the latest round of energy efficient and disabled access guidelines which of course, like all the other charges, only apply to the new house and not the established Clayfield house. 

These are Brisbane examples but it’s the same across the country. Have a look at any number of HIA, UDIA, Master Builders or Property Council reports which all say the same thing. 

The inequity of this just kills me. Someone can buy a $2.275million second hand house in an established area and pay less than 5% tax, while someone buying a $715,000 new house is going to pay around 30% in tax. Not only that, but the total tax bill is just $104,162 for the $2.275m house but more than double that (around $216,000) for a new house which is one third the price. 

We can fix this. We could radically rethink the way each level of government is happily but secretly clipping the ticket on new housing, or is adding to compliance costs by promising ‘sustainability’ measures which only apply to the minuscule percentage of houses which are new in any year versus what’s already built (hence having almost no effect on housing sustainability overall). 

There is no equity argument which can stand scrutiny that would allow a young family trying to enter the market via a new house or apartment being forced to pay six times the rate of tax on their house compared with millionaires upgrading in established suburbs. 

A separate tax bill with each new house – disclosing the GST, infrastructure levies, and other compliance costs – would be a start but don’t expect politicians to support that idea. Imagine the uproar?

And rather than applying so many taxes and charges up-front for the new housing market, we need to explore more longer-term infrastructure bonds or similar arrangements which are paid off over time via the rates bill. Just like the way the established Clayfield house paid for its high amenity – not upfront, but over time. 

Finally, when the next politician who proposes a range of sustainability or other design changes which will add to the cost of each new dwelling, let’s have them ask why they aren’t applying those same rules to the entire housing market, as opposed to punishing just the new buyers? Don’t hold your breath. 

Reform is possible but as long as we entertain voodoo economics paraded as credible ‘solutions’ to our current housing challenges, be prepared to watch this tragedy get more re-runs than a B grade soap opera.

(Sale examples sourced from Real Estate dot com. July 2024).

Is the Premier reading my stuff?

 

After many years of applauding runaway population growth, Premier Miles recently called for a slowdown in immigration numbers under the Labor Albanese Government, at least to a pace we can manage. He doubled down on that by linking rampant population growth to congestion. This was labelled an “outrageous” claim, which is unfair. I happen to be (for once) in furious agreement.

Where did he get these ideas from I wonder? Maybe it was this article from September 2022 which pointed out that a housing shortage was only one symptom of rapid growth. Water, hospitals, schools even energy ought to be just as much a worry. Or this article from February 2023 which argued that the idea of population growth being something we can’t control is plain wrong. We can stop people coming to Australia by simply not inviting them. Population growth and immigration are directly linked. Then there was this article from August 2023 which showed that our rates of population growth – the speed at which we are trying to grow – is well in excess of developed economies but on par with third world ones. Or this one from January 2024 which pointed to the adverse consequences of very rapid population growth.

In terms of congestion, the link between population growth and traffic was highlighted in this yarn from July 2022 which warned that we don’t have a plan for the 1 million more cars that will follow population growth into south east Queensland. This article from September 2023 looked at the great urban mobility challenge and this article from December 2023 pointed out the futility of looking to heavy commuter rail as a congestion buster because we no longer have a heavily centralised economy (most people don’t work where trains take them).

There are many more, but that’ll do. Should I take some credit?

I doubt it, but just in case he’s reading this, here’s an idea. The solution to much of this lies in our suburbs and regions. Yes we need to slow growth to a speed we can manage. But we also need to think more about where that growth can go.

Our budgets and growth priorities are all out of kilter. We have run-down older legacy industrial precincts which, by some absurd notion, some argue need to be preserved so that they can continue to store boxes or caravans instead or workers or residents. Why not convert them into mixed use live-work-play precincts? Jobs and social infrastructure closer to where people live. It’s not hard. Older precincts where industry has left for very good reasons are the obvious choice.

Then there are the high growth regions. Even if we slow growth to a manageable pace, regions like Moreton, Logan or Ipswich are not blessed with legacy infrastructure which is underutilised. There isn’t much already below the ground by way of services in a cow paddock. Nor are they the focus for enhanced job and social infrastructure plans. Instead, they are grossly underfunded relative to the prosperous inner city, for which there seems no end to the largesse. How about instead of consigning these regions to poor dormitory status where residents will need to commute great distances to access work or social infrastructure, we instead match budgets to growth projections?

Then there are the regions. Why would anyone at family formation stage move to a regional city which has been notorious for not even having a maternity unit? Why would a business locate in such a place where attracting a qualified workforce is a huge challenge simply because it doesn’t measure up in terms of amenity or quality of life. Education and health are undercapitalised in many of our regional cities. Without considerable investment in social infrastructure and placemaking, they will continue to struggle to attract capital, talent or enterprise.

There is one graph which says it all. Twelve years’ worth of state budgets show a continued pattern of spending that is focussed in the city centre, while high growth areas and regional cities do not fare anywhere near as well. There is nothing wrong with investing in the inner city but spending across the state could be more equitable – and more focussed on aligning capital investment with suburban renewal and regional development strategy.

All the population growth being pumped into one place – which is what is happening now – is never going to work. The symptoms of this are becoming obvious.

Supermarkets, shopping centres and the weaponisation of planning

 

The current Federal inquiry into anti-competitive practices of our large supermarket chains in Australia could do well to ask how planning schemes have been mercilessly weaponised to minimise competition. The allegations are not new. Remember Kaufland? Back in 2018 it was talking up its impact on the Australian grocery sector, which was (and remains) essentially a duopoly. Plenty of opportunity to challenge market power and establish a third major presence in the grocery sector. Or so they thought.

There were no doubt a number of factors that led Kaufland to sensationally pull out of Australia in 2020, but finding suitable sites was certainly one of them.

According to this analysis by KHQ Lawyers: “Finding appropriate sites has been a challenge for Kaufland.  Although Kaufland has secured a variety of development locations, the fact that it announced its first store would be in South Australia (no offence, Prospect) indicates it was not an easy task.  The eastern states, with higher populations and greater spending power would likely have been preferable.

With a store footprint anywhere from 4000m² (i.e. larger than a standard Woolworths) to 20,000m², the number of appropriate sites is probably limited – and will generally be in the outskirts of town and often separate from existing retail developments rather than in areas with a more concentrated population and accordingly greater customer catchment. Australia’s highly restrictive planning laws and lack of development opportunities due to sub-optimal land use zoning (I’m looking at you, NSW) would have impacted any projected growth of the Kaufland network.  Accordingly, the benefits of economies of scale will take longer to achieve.”

There was also the problem that major suppliers to Woolworths and Coles felt intimidated that by supplying Kaufland, their existing contracts to Woolies and Coles would be jeopardised. The issue was investigated by the ACCC but nothing came of it. Kaufland left Australia, scalded by the encounter with our anti-competitive competition for the consumer dollar. The duopoly survived, and arguably grew stronger. The two now account for two out of three of all dollars spent in the sector.

The issue stretches back deep into planning law and the notion of a “retail hierarchy.” What this means, in simple terms, is that the established pattern of retail stores – from city centre, to regional, district, neighbourhood etc – should be maintained, and that “allowing” planning permission for rival centres to be developed within the same arbitrarily defined catchment should be refused. To protect competition, we need to prevent competition.

This double-speak is now daily bread and butter for an entire industry of highly paid lawyers, planners, economists and others – including someone called “Brad” - who will argue that black is white if it suits their cause.

A senior Westfield executive once said to me: “Ross, we would object to a competitor moving a plant pot if we thought it was in our interests to do so.” That was back in the late 1990s, during some heated debates about shopping centre trading hours. The arguments were put in favour of deregulation but in the end we did not end up with more competition.

Fast forward to today and the same allegations are resurfacing.

“There is a long-time pattern and behaviour, which is anti-competitive, which seeks to close out markets and remove competitors from the markets, and we’ve seen that happen over a long period of time,” said Grant Ramage, Australian head of IGA, giving evidence to the federal inquiry.

“Their sheer scale gives them the financial capability to do that. It gives them greater sway with developers, landlords and other parties, like state governments,” he said.

He was arguing that the duopoly were buying up new sites - not with a view to developing them, but to prevent competitors from buying the sites, or even prevent them buying another site within that arbitrarily defined future trade area. Hard to prove, and people like “Brad” will swear under oath it isn’t true. But the suspicion lingers.

Locally, our IGA Milton store was a recent victim of these aggressive tactics. A very well supported store, with local owners (who owned and ran a total of three IGAs including this one) and friendly staff, it was open 365 days a year. But some years ago, then centre owners Vicinity sold the small shopping centre to Coles Property. Not so that Coles could own an IGA of course. Coles just waited for the IGA lease to run up for renewal, refused to renew, and so the IGA was forced to close. Coles are now in the process of building a larger store, presumably with computers rather than checkout staff and certainly with no local owners anywhere to be seen. And if someone wanted to open a new independent grocery store nearby, you can bet that Coles will take them to court if they have to, arguing that to protect competition, we need to prevent competition, giving due respect to prevailing planning law and practice – and the retail hierarchy.

Good luck to the Federal inquiry but I fear it will go nowhere. There’s a conga line of self-interests masquerading as the consumers’ champions who will ensure it doesn’t.

The density dividend: smaller, worse, slower, less?

 

In 2005, a UK policy group “The Policy Exchange” published “Bigger, Better, Faster, More: Why Some Countries Plan Better than Others”  It surveyed four countries with similar demand side pressures to the UK, to explore what was being done well, and what wasn’t. Australia was one of them.

“Britain’s centralised system of planning restricts the supply of housing. As a result, Britain has some of the oldest, pokiest and most expensive homes in the world,” it said.

For Australia they concluded that it was “Death of a Dream: Planners versus the Traditional Australian Home”:

“The Australian desire to create a home away from ‘home’ (their European roots) has led to a strong cultural preference for spacious houses with big gardens – ‘the Great Australian Dream’. Various Australian (state) governments have threatened this dream by reducing the quantity of land released for housing and by levying homebuyers to provide infrastructure. Both policies have had a strong upward impact on Australian house prices…  land-use planning has actually created a shortage of land – in a country with a population density of only 2 persons per square kilometre.”

They  added: “In Ireland and Australia, with planning systems derived from the UK’s, restrictions on the supply of land, densification policies and central planning fail to provide the kind of homes people want, and lead to high real house price inflation.”

They were right. Our regulatory approach hasn’t changed but we have added to demand pressures via record immigration (the main driver of population growth). Now, as if taken by surprise, we find ourselves in a “housing crisis.”

Rather than “bigger, better, faster, more” we seem to be doing smaller, inferior housing which is taking longer to deliver plus we are delivering much less of it. Why?

Urban policies which preference density over sprawl are partly responsible – and before you start poking pins into your Rossco voodoo doll, hear me out. There are many compelling reasons to pursue higher density: a more efficient use of space and proximity to necessary infrastructure among them. My interest in suburban renewal precincts recognises that many of these potential renewal precincts historically carried more employment density than they do today: hundreds or thousands of workers used to work under saw tooth shed roofs which today store boxes or caravans and are overseen by two kiwis with a forklift. Returning employment density to these precincts, supported by housing density and social infrastructure, means more jobs and amenity closer to where people live, amongst other things.

However, density is difficult and not very popular. It is also more expensive to develop and takes longer for even simple development propositions to be approved.  

The lowest hanging density fruit is what is now euphemistically called “gentle density.” But try introduce this in the form of relatively benign townhouses into low density streets full of detached housing and you have a residents war on your hands. Write them off as NIMBYs if you like but they all vote and they are entitled to protect their single biggest asset – their home. If they are not convinced that broader town planning aspirations mean knocking down detached houses in their neighbourhood for the common good, they will let their elected representatives know of it. And they do, loudly.

Consider also that finding suitable sites for even medium density housing projects is not easy. Sites with the least risk of confronting community and local council opposition are either spoken for or - if available - demand a high price premium. Developers will tell you that finding sites at prices which work is a massive challenge.

Then you need your project approved. One site in inner Brisbane has just received development approval – a full decade after it was first lodged.

Neither is density affordable. A two-bedroom apartment struggles to be built (not including land) for less than $800,000 these days. A three-bedroom house can still be built for under $350,000 not including land. The greater the density of housing type the higher the cost per square metre to build.

It’s worse for social infrastructure:  a typical low-density school on a 7-hectare site in a new estate will cost around $15m to $20m to build.  Try to even find a 3ha site for an infill school where you won’t confront a phalanx of objections over traffic, noise etc. Then you have the build cost of a vertical school which will be closer to $150m for the same number of students. Ten times more expensive. And in all likelihood, many years before you get through all the planning applications, assessments, appeals, courts etc.

But surely there are infrastructure savings under the density model? That’s debatable. The cost of installing below ground water, sewer, power and telco infrastructure in a new housing estates is considerably cheaper than the cost of retrofitting older infrastructure in existing areas which may not have been designed to handle the increased demands of higher density models. Plus, you can even find that infrastructure providers in the form of utility companies may object to infill proposals which increase density if that means it risks over taxing the capacity of their aging network infrastructure. They become objectors to the very models of urban growth endorsed by their government owners.

Infrastructure such as public transport is more efficient under higher density models. But getting to the point where density becomes efficient for public transport includes many years of pain when it isn’t. Savings on one side of the density equation are often over-hyped, while the costs on the downside are frequently glossed over.

We need to accept the reality that higher density development, especially when being introduced into existing metropolitan areas, is more costly, more difficult and takes longer, whether that is housing, schools, hospitals or network infrastructure of some type. Given this, it should come as no surprise that our supply responses are slowing down. Stuff is taking much longer.

But density is our preferred urban development policy approach, and there are compelling reasons for it. Logically it should follow that, if we are to pursue higher density as the preferred metropolitan development model, we would also do so in a lower growth environment, in recognition of the delivery challenges.

Instead, we are promoting density as a solution to very high rates of growth. This is a bit like putting a tractor on the start grid of the F1. You don’t stand a chance.

If the objective is to address the “housing crisis” and other shortages, then doing things “bigger, better, faster, more” is how we need to be doing it. 

Instead, we are persisting with a policy and regulatory framework which has proven itself mostly capable of the opposite.

Something has to give. We either change the assumptions of underlying planning orthodoxy, or we moderate growth – slowing it down to the same careful snail’s pace that current urban planning regimes support. 

We can’t have both and expect anything to change.

Rapid population growth - and its consequences

 

“Rapid population growth – at rates above 2 percent, common in most developing countries today – acts as a brake on development. Up to a point, population growth can be accommodated… but the goal of development extends beyond accommodation of an even larger population; it is to improve people’s lives. Rapid population growth in developing countries has resulted in less progress than might have been – lost opportunities for raising living standards, particularly among the large numbers of the world’s poor.”

That’s an extract from a 1984 World Bank report “ The Consequences of Rapid Population Growth.” It defines “rapid” as growth above 2 percent and its focus was on developing countries. Advanced economies were not trying to grow populations at the same speed as those of the third world. Except for us. South East Queensland – promoted by growth boosters as a “hotspot” – is growing at 2.2%.  Sydney and Melbourne, while larger and growing numerically by more, are growing by around 1.5% per annum for comparison.

Unrestrained growth has many supporters in the big end of town. But the consequences of rapid growth – fuelled mainly by record immigration under Federal Government policies – are being felt acutely by many more others.

Source: Australia hits peak immigration: Macrobusiness, Jan 2024.

 The most obvious evidence of these adverse consequences is the current housing shortage. We simply are not building enough homes, fast enough, to accommodate these levels of rapid growth “hot spots.” Worse, new housing approvals are falling to record lows at a time of record demand growth. Rapid rises in interest rates, construction industry supply chain issues, trade shortages, regulatory burdens …. choose your explanation from a wide variety of options. They all mean the same thing: more demand than there is supply. Oddly, the “housing crisis” has been pigeon holed as a supply problem only. Few talk about the law of “demand and supply.” It seems it’s now just the law of supply.

The focus on housing shortages and people without homes is one thing. It is also leading to excessive costs for those with roofs of their own – whether rented or being purchased. Rents are surging and vacancies falling, causing significant cost of living pressures for the third of our society who rent, while those with recent mortgages are similarly stretched. As a result, consumers are cutting back on spending across a range of discretionary items. So where demand growth exceeds supply, costs increase – leading to consumer cut backs. There’s an adverse rapid growth consequence few talk about.

Other rapid growth consequences are far less discriminatory. In January, large parts of South East Queensland suffered power outages during a period of intense heat. The heat was nothing out of the ordinary for a Brisbane summer, and it wasn’t (we are assured) the energy grid that failed due to generation shortages, but local infrastructure which couldn’t cope with demand (air conditioners, mainly). Policies of accommodating an increased population via increased population density have been around for a long time. But policies to upgrade local infrastructure to support those local density increases haven’t. The “density is destiny” mantra - parroted for more than 30 years - has almost entirely been around population and housing: little has been said about the wider infrastructure consequences of putting more people in the same space. As the World Bank noted 40 years ago, the objective of growth should be to improve people’s lives, not worsen them.

Hospital shortages are another obvious sign of rapid growth consequences with ambulance ramping times increasing as the hospital system is stretched by rapid increases in demand. Hospitals are expensive things to build or to expand, and they take a lot of time to build. Keeping pace with rapid population growth is a Sisyphean challenge.

Schools will also soon be a telling pressure point. I reflected on a possible looming schools shortage nearly two years ago. On latest population projections for South East Queensland, there could be another 500,000 school age kids looking for classrooms. We either move to much bigger class sizes or build new schools. Independent Schools Queensland (non-government and non-Catholic) estimates the need for a new P-12 school of 1000 students each year for the foreseeable future, just within their network. Finding sites within urban growth boundaries won’t be easy. Vertical will probably be the answer but that’s a lot more expensive than traditional lower density designs.

Congestion is another obvious adverse consequence of rapid growth. Mostly we are using the same roads and transport networks that supported a population of half our current size. We are now looking at doubling that population again within another 20 years, all getting around on (largely) the same network. Local Governments do what they can, but with only 3.6% of taxation revenue (the Federal Government, responsible for population via immigration, collects 82% of tax revenue) their ability to fund and manage transport infrastructure needed for a rapidly growing population is severely constrained.

Water shortages will also emerge: more people require more water to drink, wash clothes, fill pools, and so on. The same water infrastructure that comfortably supported a population half our size is simply not going to be able to support a population double our size.

Two ironies emerge from all this. First, those voices most loudly in support of continued rapid population growth are also those least likely to bear responsibility for the consequences. Think apartment developer Harry Triguboff: high growth helps demand for more apartments but he isn’t around for discussions on hospital or school shortages, rising congestion, over stretched energy infrastructure or water shortages. It’s also true that people with financial security (high income earners) are best placed to insulate themselves from the adverse consequences of rapid growth: they simply pay more, where demand exceeds supply. Whether that is private health, private education, well located real estate … money talks and buys your way out of problems if you have enough of it.

The other irony is that the density mantra was originally intended to make use of under-utilised urban infrastructure, most typically in inner urban areas which were at risk of “hollowing out” (as happened widely in the US). With falling inner urban school enrolments, for example, it made sense to increase the local density to make better use of existing infrastructure than build entirely new infrastructure on urban outskirts. But that’s no longer true. A new vertical school in an established urban area targeted for more density is vastly more expensive than a “traditional” build; retrofitting below ground infrastructure (sewer and water) in existing locations is more costly than in new areas; apartments are more expensive to build than detached houses; building tunnels (whether for public or private transport) below existing areas is a great deal more expensive than surface networks in new areas… and on it goes.

In adopting the density model to accommodate rapid increases in population, we have now not only committed to a more expensive urban form, but one that also takes longer to deliver.

Hardly the formula for enhancing standards of living in a rapid growth scenario? Surely we either moderate our rates of growth, or we adopt new models? Or, as the Planning Institute has sensibly suggested, we adopt a national settlement policy that ties the Federal Government – whose immigration policies are driving record growth – to the local consequences of that rapid growth.

We need to get off this magic roundabout (it's going nowhere)

Heavy commuter rail is a frequently mentioned “solution” to congestion. But just as frequently, it is revealed as horrendously expensive to build, expensive to operate and seemingly incapable of moving the dial on mode share: that is, it doesn’t succeed in getting many cars off the road.

Explosive cost blowouts are all around us. In Melbourne, the proposed “suburban rail loop” was promoted by then Premier Andrews as costing $50billion. It was later revealed the cost has already ballooned to four times the original estimate to $200billion – which exceeds the entire state debt of Victoria.

In Queensland, the Cross River Rail was persistently promised to be delivered for a fixed $5.4 billion but it is understood to be over budget by $1 billion at around $6.3 billion. It’s hard to work out what this includes as related works like yards are understood to be under separate budgets.

Then there’s the Queensland Train Manufacturing program, which was originally budgeted at $7.1 billion but which is now estimated at $9.6 billion – a blow out of $2.4 billion.

Add to that the Logan and Gold Coast Faster Rail project, which duplicates lines over an 18klm section of the network with station upgrades and better alignment. That was to cost $2.6 billion but has now been revealed to cost an estimated $5.75 billion – an increase of $3.1 billion, more than double the original costs.

Prior to all this was the new Moreton Bay Rail line to Kippa Ring, a new 12klm line with 6 stations which opened in 2016 at a cost of $1.15 billion – roughly $100 million per kilometre. That almost looks cheap compared with over $300 million per kilometre just up upgrade the Logan-Gold Coast line.

Undeterred, we are now also canvassing a new 37 kilometre line from Beerwah to Maroochydore, with perhaps 7 new stations and a tunnel section. No costs for this yet and its fate is hard to determine. But if we used the per kilometre upgrade cost for the Logan-Gold line, and multiplied that by 37 kilometres, we could easily be looking at a project costing $12 billion. My bet is that an initial estimate will come in closer to $20bn BB. ("BB" = before blowout). 

Are your eyes starting to water? Worried about where the money is coming from? Maybe consoling yourself that this is all necessary to support transport infrastructure in a growing state and to “solve” congestion. With better and more train services, loads of people will happily give up their cars and use public transport, and all this is supported by rigorous business cases which are readily accessible by members of the taxpaying public. No?

Here are some numbers for context.

The population of the greater urban conglomeration of SEQ (Greater Brisbane plus Sunshine and Gold Coasts, Ipswich and Toowoomba) was 3.6 million people (2021 Census). Of that number, 1.58 million went to work – somewhere. 280,000 worked at home. How many of the 1.58 million caught a train or light rail as at least part of their journey to work? Only around 44,000. The 2021 Census was taken in the midst of Covid so an unfair year to sample train travel. The comparable figure from the 2016 census was around 64,000 people catching a train.

With Covid behind us, passengers are returning but are still at only around 80% of pre pandemic levels. Because rail people like to use trip numbers (which are much bigger numbers to talk about given just one person can generate more than 10 trips in one week) direct comparisons with actual numbers of people are hard to find. But if you assume current passengers are around 80% of the 64,000 pre pandemic, there might be around 55,000 people using a train to get to work in South East Queensland today.

Why do more people not catch the train? And will all this investment mean it becomes a more attractive proposition?

Sadly, heavy commuter rail for Australia is battling against a changing economic geography and a changed society. An “all roads lead to Rome” centralised economic model (much like mega Chinese cities, or mega centres like NYC or London) can work for heavy commuter rail. But in our region, only around 10% of jobs are in the inner city, for which rail is well suited provided you can access a station with convenience. The greatest growth in jobs is not in the inner city, but across suburban centres. These are not typically serviced by rail.

Little wonder then that there is a high correlation between proximity to the CBD and use of public transport. Why? Because people who live in middle and outer suburbs do so because they don’t work in the CBD. People with jobs in the CBD prefer to live closer to it, and are also more likely to use a service which is CBD centred. It’s not rocket science.

(As an aside, proposals by The Greens to make public transport free would therefore most benefit inner city residents who already earn higher incomes and own more expensive real estate. And who work in the CBD. It will be of no benefit to lower income suburban workers who would in all likelihood need to pay for it via higher taxes).

Plus, once those tracks are in the ground, the wires overhead and the stations in place, there’s no changing that route - ever. Irrespective of how demand and economic geography might change, you’re stuck with that network. Buses and projects like the Metro can be re-routed, but not heavy rail.

In addition to that is social change. Trains are fixed route, schedule-based services. They were suited to a time when the trip to work did not involve any side trips and you scheduled your trips around the train timetable. For many, those trips now change every day – dropping kids to school, picking up from sport, gym classes, shopping for groceries… any number of reasons why a fixed route, fixed schedule service doesn’t appeal to as many people as it once did.

You might think the basic numbers and reality is sinking in? Not it seems with any number of economically illiterate politicians who offer nothing more than glib phrases and vague promises about “congestion busting” while proposing projects that are budget busting, and supported without transparent business cases due to “commercial in confidence” reasons.

So we are spending tens and perhaps hundreds of billions of dollars on a mode of transport which is best suited to a minority of inner city workers, and which currently carries fewer than 100,000 people in the region, and which, despite spending many many billions more, is possibly unlikely to carry many more people in the foreseeable future.

Who wins in this? Loads of consultants doing multi million dollar business cases which will never be put up for scrutiny, sheltered industries and work practices, and a very small number of commuters who will get better service at the expense of a majority who won’t.

 

The government giveth, and the government taketh away

Much of the news media lapped up the surprise announcement that Queensland will double the first home buyer grant to $30,000, effective immediately as of the weekend. The new grant, which applies only to new builds of up to $750,000, is intended to help stimulate supply rather than boost the overall market. To that end, despite being what economist Saul Eslake has labelled “bullshit”, I can see some merit in it.

But what the media and many commentators seem to have missed is that while the government giveth, it also taketh away. Only recently, there was a proposal to introduce changes to the National Construction Code in order for new homes to meet higher energy efficiency standards, along with increased accessibility standards.

Those changes were estimated by Queensland Master Builders to add – wait for it - $30,000 to the cost of a new home.

"It's the first homebuyers who are most impacted, who are struggling to get a deposit together, to make the repayments, and then the cost of construction goes up," Master Builders CEO Paul Bidwell said. "$30,000 is a significant amount."

Yep, it sure is. The same amount in fact as the increase in the first home buyer grant. Other estimates suggest the code changes could add up to $70,000 to the cost of a new home. There was a predictable outcry from industry – which argued increasing the cost base at a time of worsening affordability especially for new home buyers who are typically younger families was a very bad idea. The outcry won and the introduction of the code changes has been deferred to May 1, next year. So as of May next year, the increase in the first home buyer grant will be cancelled by the increase in code compliance costs, if not outweighed by them. Savvy first home buyers will want to get in before that happens.

But there’s another reason the proposed construction code changes are a seriously bad idea: they will impact most the people who can least afford it, and make little to no difference to household energy or water consumption, because it only applies to new builds and not to the established market, which is responsible for nearly all domestic energy and water consumption.

There are around 2 million dwellings in Queensland. At present we are building around 35,000 new dwellings each year. So that’s just 1.75% of stock that will affected in year one, rising of course the more years it’s in effect. But who is driving that 1.75% of the market? 60% of these starts were houses and the balance units. We know that new detached houses are some of the cheapest forms of housing, and are typically favoured by younger families on lower incomes. Apartments, especially in this market, are expensive to build and that market is drifting quickly to the wealthy end (a new mid spec two-bedroom apartment now needs to sell for over $1 million for an apartment project to be viable). Who do you think is going to be more impacted by a $30,000 cost increase?

As ideas go, can it get any worse? Yes it can! And the reason is because the biggest consumers of household energy and water are not the young families living in detached homes but the wealthy – irrespective of whether it’s a detached home or apartment. Because the wealthy more typically congregate around inner cities, this is also where the greatest excesses of energy and water consumption are. Don’t take my word for it: this was proven some years back in a study by the Australian Conservation Foundation in conjunction with the University of Sydney.

“Inner cities are consumption hotspots” the report declared:

“… despite the lower environmental impacts associated with less car use, inner city households outstrip the rest of Australia in every other category of consumption. Even in the area of housing, the opportunities for relatively efficient, compact living appear to be overwhelmed by the energy and water demands of modern urban living, such as air conditioning, spa baths, down lighting and luxury electronics and appliances.”

Back in 2007 I was running the Residential Development Council and we commissioned a report to investigate this in detail. “Housing form in Australia and its impact on greenhouse gas emissions” was the result. Lots of graphs to explore if you’re interested but this one helps tell the story:

Think it through. The wealthy inner-city resident in their $2m plus town home or apartment has no access to a hills hoist to dry their clothes, and is unlikely to worry about leaving the lights on when not in a room, or running the air con on a semi-permanent basis. Long showers are not a problem either. They can afford it.

So how can an increase in energy code requirements that will most affect lower priced homes favoured by young families on lower incomes make any discernible difference to the biggest energy and water wasters? It won’t. By applying only to new builds and ignoring the majority of the market, particularly those households in established dwellings in inner urban areas, this is a highly distorted and regressive policy which ultimately favours the inner urban wealthy and penalises the suburban working- and middle-class families.

If we were genuinely concerned about reducing household energy use, we’d wake up to the fact that buildings don’t consume the energy or the water: it is the habits of the occupants that drive that.

So celebrate while you can the increase in the first home buyer grant because from May next year it’s going to be worth nothing thanks to new energy codes for buildings which don’t even touch the biggest energy consumers but which will make new detached homes for families even more expensive, for no environmental gain. 

The great urban mobility challenge

Each major Australian capital city is faced with predicted population growth of millions more people within just the next 25 years. In Brisbane it’s over 1.5 million more, Sydney will cop another near 4 million and Melbourne over 3 million more people. Here’s a scary fact: at current rates of cars to people, Brisbane will also have another 1 million more cars, Sydney will have around 3 million more and Melbourne around 2 million more. Unless we ban personal ownership of cars, what are the future choices we need to be thinking about, now?

Before we run through a list of the various options, first a challenge: whatever the “solution” to an imminent urban congestionastrophe, let’s try agree that whatever succeeds needs to provide a personalised mobility solution: it needs to be available on demand (there when I need it), offer infinitely variable routes (takes me where I want to go and when I want to go, which differs every day), and can carry my stuff (from groceries to whatever). Ideally it’s also expandable (can carry more than one person when I have someone travelling with me) and offers good range and rapid recharge/refuelling.

Sounds a lot like a personal car doesn’t it? This probably also explains why they have proven so successful in meeting community needs. But what are the other options in the future? Here goes…

Shared car ownership. It’s been touted as something of a solution to car ownership but doesn’t seem to address congestion so much. Plus, things like Goget (car sharing app) have struggled. Perhaps having one parked in our garage, ready and waiting, is still just too convenient?

Passenger rail. The great hope of many but, in my opinion, never to repeat its historic 19^th and 20^th century popularity. The routes are fixed, the overhead wires are fixed, the stations are fixed, and the schedules fixed. It struggles to serve the realities of modern life with multiple trips and different routes daily. It isn’t convenient for carrying our stuff and mostly suits the 9 to 5 centralised office worker market, which is shrinking globally. The average CBD share of metro wide jobs for a city in a modern western economy is around 13% - and that was before the ‘work from anywhere’ thing started to take off post Covid. It actually carries very few people (just 10% of work trips across capitals in Australia using pre-covid numbers from 2016 – the 2021 journey to work numbers being Covid affected) and is frightfully expensive – especially underground. At over $100million per kilometre on surface, you’d struggle to find a more expensive and less popular mode of travel. Worldwide, infrastructure projects with massively blown budgets and under performing passenger numbers often feature passenger rail (except China, where everything is different).

Buses. Not as popular as rail (5% of passenger in Australia capitals) but more popular than trains in Brisbane - possibly because they service a wider variety of routes using the road network? Buses can be re-routed with ease and bus stops are low capital intensive investments. But they are still not “on demand” or offer personalised routes, nor are they very convenient for doing the shopping. They have been around a long time but the mode share has stubbornly not moved much. Unlikely to do so in the future either.

Metro. Trackless trams or metros are a modern solution which may gain a lot of support. They don’t require permanent rail or overhead wires, they are electric, and potentially autonomous. They provide a higher level of comfort than buses and can be rerouted using the road network if needed (all of which makes them much cheaper than trains). They can also turn corners (which trains struggle with) plus in Brisbane they are promised as a high frequency service (so no need to check a schedule). Metro stations are more capital intensive than traditional bus stops, and like other public transport modes, aren’t exactly the preferred way to do the groceries, visit the doctor or get the kids to school. Still, in all likelihood, a big step forward in the future.

Ferries. “Believe me, my young friend, there is nothing – absolutely nothing – half so much worth doing as simply messing about in boats.” So said Ratty to Mole in Wind in the Willows. Ratty was right – a more pleasant way to travel is hard to find. But when it comes to solving congestion by providing a meaningful alternative to cars, ferries aren’t the go-to choice. They are confined to water ways for starters. And they don’t usually go near shops or schools. They are expensive to operate and maintain (ferries need terminals and require a lot of maintenance) on a per passenger basis. The lucky few who can make use of these on a regular basis can count themselves very fortunate.

Cycling & walking. Fun fact: three times as many people walk to work (3.2%) as bicycle (around 1%).  The numbers on active transport are an interesting read. Active travel works for people when their jobs are close to where they live. Any more than a few kilometres away though, and walking or cycling drops right down. Hint to urban planners: don’t segregate future housing from future work places and you might see more active travel. On the downside though, climate (too hot, too cold, too wet or too unpredictable) are factors difficult to overcome. It’s also difficult to carry your shopping bags any great distance (unless you steal the supermarket trolley which the visual evidence says happens a lot). Unlikely to ever make a big dent in urban congestion, however appealing the idea.

Uber buses. Yet to gain a lot of traction here are Uber buses – a way of tailoring schedules and routes to users. It’s working overseas and I witnessed a non-tech version in Vanuatu a few years ago (the bus driver asked where you were going and, based on where all passengers were going, worked out the route from there). The Uber bus is typically a smaller bus which varies routes and schedules around user demand. Sounds great in theory, provided they don’t cancel on you, or hit you with a surge. The technology platform that makes this possible ought to be something public transport agencies look into further. Will it bust congestion? Unlikely, but with support it could make an impact.

Flying cars & taxis. They’re coming, and I want one! Brisbane has announced the promise of flying taxis by the time of the 2032 Olympics. Other cities will follow. The technology is proven and trials of various personal flying cars are underway with some already available – if you have the cash. One thing promoters haven’t counted on is Australia’s love of regulation, and I fear that Federal aviation authorities will pose so many constraints on operations in the sky that it will be decades before private users will be buzzing around like George Jetson. As for parking one at your local shops… yeah, nah – that just takes shopping centre parking to a third dimension!!!

Scooters & e-bikes. Love them or hate them, there’s no denying they’ve been rapidly adopted where they’ve been allowed. For shorter trips they are brilliant. But they aren’t cheap to hire, and scooters are useless for carrying anything more than the wallet in your pocket, and have the same climate issues as active transport. Plus, regulators are introducing so many geofencing limits that their appeal is being limited. However, privately owned e-bikes that make use of extensive bikeway or active transport networks could potentially see a rise in popularity – shopping baskets included. Provided the lithium battery doesn’t burn your house down, these could be useful to have in your garage.

Autonomous, electric vehicles. This is a serious proposal, being explored by leading institutions and thinkers including my friend Prof Alan Berger from MIT, and the Toyota Mobility Foundation. To quote from the Toyota Mobility Foundation: “Imagine how self-driving vehicles and derived mobility services might impact every aspect of life in the future. From how and when we move about and how we design cities, to how we enhance environmental sustainability with this technology. As we approach this new era in urban/suburban planning and transportation, can we develop models and guidance that will help us address issues such as congestion and affordable universal access?” The beauty of the work that people like Alan Berger are doing is that they realise real solutions involve a lot more than magic wands and glib sayings like “get people out of cars.” They involve the redesign and retrofit of urban and suburban domains – from housing to work to physical and digital networks. If you’re genuinely interested in exploring some advanced thinking (it’s not a big club) start with a look at https://www.alanmberger.com/next-generation-suburbs#7 and also https://toyotamobilityfoundation.org/en/research/suburban/

As for me, I think the maths is undeniable. Millions more people will mean millions more cars (for now) so it will get a lot worse before it gets better (if it does). Which is why you’ll continue to find me on the one form of transport that’s ready when I am and is able to sneak through traffic snarls while bringing a smile to your dial. And if it rains? A small price to pay.

Keep the rubber side down!