Why infrastructure levies are hard to justify

Upfront per lot infrastructure levies, in addition to raising the price of new housing (and hence dampening demand) are also highly discriminatory. They apply only to new houses or apartments and effectively transfer a community wide infrastructure burden onto the mortgages of new home buyers. This approach is hard to justify on social fairness grounds.

One way to highlight the manifestly unfair discrimination of per lot infrastructure levies is to contrast the cost impact on a young low to middle income family buying their new home, with a wealthy family buying an established multi-million dollar home.

If you thought the millionaires would pay more, you’d be wrong. Yes, the way levies are now applied means that the young family will pay more tax on their new home in absolute dollar terms, and in percentage terms, than millionaires. Little wonder the new home building market is at generational record lows, and little wonder new home buyers have been on strike.

Here’s a simple illustration.

Alan and Kylie have finally scraped together their deposit monies for a new project home (or it could be an apartment) and got their bank approval. The purchase price is $450,000. Built into that purchase price is GST (10%) plus a $30,000 infrastructure levy. Add in the additional compliance costs, application fees and related government costs and the total tax and charges figure reaches the $120,000 mark. That’s a conservative number.  Other estimates put it higher.

So Alan and Kylie, possibly on a combined income of around $70,000 per annum, are paying upfront a $120,000 tax bill on their new home.  That’s money they’ll have to borrow. Even at today’s low interest rates that’s an extra $848 per month they’ll have to find just to pay the upfront tax bill (calculated on the basis of the extra $120,000 borrowed at 7% over 25 years).  With that extra mortgage burden, they’re deferring having children until later in life.  They’re deferring a lot of things actually. If this is their first home, they are exempt from stamp duty and can get a $15,000 grant (in Queensland anyway). But this grant and exemption combined, however well intentioned, does little to offset the discriminatory tax regime which their new home is subject to.

Now let’s contrast this young couple with another couple. Let’s call this couple Will and Kate, who are buying an established home in an established inner city suburb. They’re on a high household income (Will’s income alone is enough to support a big mortgage plus private school fees for their tribe) and want to live close to the CBD for Will’s job and so their kids can get to the best schools. They’re forking out $1.5 million. They’ll be up for stamp duty, which is $59,600. And that’s about it in terms of property taxes.

Will and Kate’s home also comes with all the handy neighbourhood infrastructure they could want, already in place. There’s taxpayer subsidised rail, buses, libraries and they’re close to action of the CBD’s cultural and recreational attractions. They’ve paid their stamp duty and will only need to pay rates going forward.

So our first young couple Alan and Kylie have kicked the tin for around $120,000 in taxes on their new home. Even netting off the grant for buying a new build, they’re still up for around $100,000 on a $450,000 home.  Let’s call it 25% for simplicity.

Will and Kate by contrast have only had to fork out a touch under $60,000, or around 4%.

Now don’t for a minute take this as some sort of excuse to impose even higher taxes on established homes. Taxes on housing are already too high and we have an affordability problem as it is which is locking out a generation from home ownership. Increasing housing taxes further would be disastrous.

The better and fairer way is to scrap the upfront tax burden on new supply, stimulate demand and produce more lower taxed supply. Spreading the infrastructure burden across the entire community makes sense because the entire community benefits.

However you look at it, the impact of the current infrastructure levies approach on young families buying new homes is very hard to justify. I'd challenge anyone to try do so.

Footnote: Yes, there’s a first home buyer grant, but as it applies equally to new builds and second hand (established) homes, it’s left out of this for obvious reasons.

Infrastructure levies should go.

It’s an axiom of economics 101 that to decrease demand for something, you increase its price. The advent of upfront, per-dwelling infrastructure levies in the early 2000s had a direct price impact on new housing, as did the GST, along with a range of other additional ‘innovations’ in regulatory compliance, fees and charges introduced at roughly the same time. The result? Demand for new housing is now at generational lows.  That’s a high distinction for basic economic theory but an epic fail for public policy.

Depending on whose research you want to rely on, we now have the situation in Australia where between a third and 40% of the price of a new home can be attributed to taxes, fees, charges, levies and other regulatory compliance costs. In the main, these were all introduced in a period of planning ‘reform’ from around 2000 which also introduced urban growth boundaries and increased micro-management of the planning and development process. 

Former NSW Labor Premier (and now Australia’s Foreign Minister) Bob Carr was an advocate, famously declaring in the 1990s that ‘Sydney is full.’ He then presided over a planning and regulatory framework which taxed and stifled development to the point that the risk of growth in Sydney was reversed, and new housing went into a long slump.

In the Australian spirit of poor public policy spreading faster than good, urban growth boundaries and a more punitive approach to development quickly took root in other states. Upfront development levies, which replaced more reasonable headworks charges, were among these policy innovations. They were championed by states and local governments on the basis that new development had to provide for a wider infrastructure burden than an immediate connection to services. Developers, widely attacked as ‘greedy’ by governments, should - the argument went - pay for widespread community infrastructure and upfront levies were a means to this end.

For evidence on just how problematic this became, have a look at this depressing summary.

These per lot housing levies rose quickly to anywhere from $30,000 to $50,000 per lot, without any economic, mathematical or rational justification – beyond ‘developers can afford to pay.’ Combined with the GST (which only applies to new housing not the sale of established housing), it wasn’t hard to find $70,000 in new taxes applied to a $450,000 house and land package, or new home unit. These taxes, it must be remembered, pretty much all arrived in the post 2000 period. And it’s the post 2000 period that’s seen new supply fall to such chronically low levels.

In some jurisdictions, these levies are now being re-assessed. There is recognition that they have damaged the market for new housing and the industry with it. There is some recognition that they are making new housing needlessly expensive. But there is little evidence of a willingness to decouple governments’ appetite for tax revenue from an industry – and new home buyers – that are already very heavily and discriminately taxed.

More alarming is that the very governments (mainly local) who claim they cannot live without these levies, cannot (or will not) identify how much revenue they generate. They do not appear as line items in most local government budgets (itself odd, given how they are allegedly so critical to funding local government infrastructure needs). Neither is there any obvious connection drawn between the quantum of funds now being raised through these levies, and where or on what they are being applied. In the main it seems as though the levies are absorbed into general revenue, and spent on general commitments, infrastructure or otherwise.

I’ve queried industry bodies and searched various local authority budgets for information on these “critical” revenue sources, to little avail. Do they raise 1% of revenue? Is it 5%? 10%? More? I’ve been told that many councils don’t even know themselves.

The question therefore begs itself: if a source of revenue is so clearly damaging to the new housing sector and so clearly having an adverse impact on affordability, it should at least be able to justify itself. Plus, it should be able to demonstrate there is no alternative or at least allow the community the opportunity to weigh the benefits against the costs.

Governments cannot tell us what percentage of rates revenues rely on these levies. If we asked the question “by what amount would general rates for all ratepayers need to rise to offset abolition of per lot levies on new housing?” we would be told “we don’t know.”

There’s an unverified figure I’ve heard that the number is roughly $150 per annum. If true, upfront, per-lot housing levies on new houses or apartments could be abolished provided the general rates base were prepared to accept an additional $150 per annum in rates. That might be unpopular, but we can’t even have that discussion because it seems no one knows.

But if that $150 meant a circuit breaker for the housing industry, if it meant that young families would find housing more affordable, and if it meant that new home buyers would no longer be carrying a disproportionate burden in funding expenditure commitments which benefit all ratepayers generally, maybe it should happen?

At the very least, any government which wants to argue the necessity of a tax which is so clearly damaging to home ownership and housing affordability and which is so demonstrably inequitable, ought at least be able to tell us how much revenue it’s collecting from it. It could be that the revenue collected given the damage being caused simply isn’t worth it.

*Footnote: since penning this article, I’ve seen some data from Gold Coast City Council. In that jurisdiction, developer contributions constitute a paltry 3% of revenue. 

A suburban economic future?

The last four articles in this series on ‘the demography of employment’ have focussed on the evidence around suburban employment in our major metropolitan areas. This final in the series brings this together and poses a few thoughts about where it may all lead.

Without revisiting all the research in the last four articles, the basics about economic life of our metropolitan regions are that most of the jobs are in suburban locations. In part one, we reviewed how our CBDs – prominent though they are – account for only around 10% of all metro wide jobs. That rises to maybe 15% if you include inner city areas. But still, 85% of everyone else who calls Brisbane, Sydney or Melbourne home, works somewhere other than the CBD or inner city.

Not only that, but the proportion of jobs in the suburbs versus the city has been rising, marginally. This doesn’t mean that CBD job markets are shrinking (in the main, they’re not) just that suburban employment markets are growing faster. So CBDs are becoming, perhaps inexorably, less dominant.

In part two, the evidence also showed that suburban employment isn’t distributed evenly but in various concentrations. Some of these areas add to very large numbers – rivalling the totals found in CBDs – but they do so at much lower densities of employment. Concentrations of 2000 to 4000 jobs per square kilometre are dense by suburban standards but still only a fraction of CBD concentrations. For many suburban employment areas, concentrations are even lower at maybe 500 to 1000 jobs per square kilometre. While CBD office workers measure their space in square metres (roughly 15 to 20 per person) some suburban workers might measure theirs in hectares.

In part three, we looked at the income profiles of CBD and suburban workers. Across the three major centres of Brisbane, Sydney and Melbourne, the research shows that suburban workers, on average, earn considerably less than CBD workers earn. The top ten income areas city wide are nearly all inner city areas, and these workers earn more than double the average of the bottom 10 areas (which are invariably suburban). The average CBD worker, according to the census, pockets between $80,000 and $90,000 per annum. The average suburban worker pockets around $50,000 per annum. Given that suburban jobs account for around 85% of all jobs, the CBD is indeed a privileged centre of income earning ability. Having said that, there are still interesting pockets of suburban employment where above average incomes are to be found. The Brisbane airport and port region, for example, features in the top 10 income earning locations along with inner city locations, even though the majority of jobs (62% to 74% according to the Census) are blue collar.

And in part four, we looked at how work locations drive transit choice. For suburban workers, the private car is the overwhelming mode of transport (above 80% to 90%), not by choice or because of some ‘love affair’ with the car, but of necessity. The very nature of dispersed suburban employment makes public transport uneconomic, which is why only around 5% of suburban workers use it. For CBD workers though, public transport is more widely used because it’s more available and convenient: more than 50% (and more than 60% in Sydney’s case) of CBD workers make use of it. The evidence also shows that the closer you live to the city, the more likely you are to use public transport to get to your CBD workplace. The proportion of people with CBD jobs falls the further you live from the CBD: meaning outer suburban residents are highly unlikely to have CBD jobs and hence only around 3% to 5% use public transport. Ironically, given CBD jobs earn the highest incomes and are also more likely to use public transport to get to work, we have a situation where those with the highest paying jobs are enjoying the biggest benefit of publicly subsidised (and heavily subsidised) public transport. You could argue on this evidence that those on lower suburban incomes are subsiding the train and bus fares of their higher paid CBD workforce cousins.

Now for the future

The evidence is one thing but where it all leads can provoke any number of alternative scenarios. Just for the sake of discussion, here’s one possibility: that cost and convenience factors will increasingly work against CBDs and inner cities and more and more businesses will establish, grow, or relocate to, suburban employment locations.

It’s possible this shift is already underway. The evidence shows a slow diminution of CBD prominence. Technology is increasingly reducing the person to person immediacy and co-location advantages of a highly concentrated CBD environment. We communicate more and more through electronic means, which also means physical location is less and less essential to daily business contact.

Costs are another factor. CBD offices and retail space are expensive relative to suburban locations. They are worth it in terms of prestige where this matters, or where central location is important. But as costs via rents rise, the equation is constantly recalculated. Is it worth headquartering large numbers of staff in CBD offices when these staff have limited need for face to face business dealings outside the business? The cost/benefit analysis is an ongoing exercise and the business press contains plenty of evidence of companies who increasingly decide the suburban alternative is attractive. Rising car parking costs – for business visitors and clients along with staff - are just another factor in the falling competitive advantage for CBDs.

Employee costs could also be a factor. Even basic administrative roles in CBD locations command higher pay packets than similar roles in suburban locations, for whatever reason. If it is possible for administrative functions to be located in a suburban location where total employee costs are less, will this become a factor in the trade-off between CBD and alternative suburban locations?

Congestion may be another. As urban densities rise, especially around CBDs and inner city areas, congestion of all forms (private and public transport) will increase. Density is after all almost a synonym for congestion. Will businesses in increasingly congested CBD or inner city environments opt for suburban alternatives where congestion is less of an issue? It’s a moot point.

On the other hand, because CBDs and inner cities feature such a concentration of social amenity through public infrastructure (entertainment, cultural and recreational facilities) they may continue to appeal as residential addresses. Is it possible that as CBDs and inner cities develop their residential stock, we may find significant numbers of people who live in CBD locations for the inner city amenity, but who work in suburban locations? Time will tell.

Planning schemes would have to adapt to any of the above scenarios. Existing suburban economic areas may need their development density permission under city plans increased to meet demand. It may make sense to do so, especially around transit nodes. TODs may become places where people travel to a suburban workplace centred on a train station or bus interchange, as opposed the current thinking which is that people will live near suburban transit nodes in order to work in inner city locations.

Any number of other scenarios are possible and all this series has attempted to do is present the statistical evidence on the suburban nature of employment in our metropolitan regions, and make some observations about the public policy and future development implications. No one can predict the future but it can be fun just thinking about what might happen. Your guess is as good as mine.

Thanks for the statistical evidence relied on in this series must go to Urban Economics – a great little consultancy whose name says it all. If this series has raised questions in your mind that you want answered, I suggest you get in touch with them. Please contact Kerriane Bonwick via kerrianne@urbaneconomics.com.au or phone them on (07) 3839 1400 if that’s the case.

The demography of employment part 4: the commute.

Parts one to three of this series looked at the spatial distribution of work in our major metropolitan centres, and the income profiles of employment based on geography. The findings, simply put, are that between 8 and 9 out of ten of all metropolitan region jobs are in suburban locations (not CBDs). This tends to be widely dispersed at densities up to around 500 jobs per square kilometre, rising to over 2,000 and 3,000 per square kilometre and more in some areas. While the suburbs represent the overwhelming majority of jobs, they also tend to be lower paid than the jobs found in CBDs and inner city areas which can earn on average between 50% and 100% more than suburban jobs. So while the CBDs and inner cities are minority employers, they are employment locations of relative financial privilege, concentrated in small geographic areas.

This instalment looks at how the demography of employment influences the commute. I am again indebted to Urban Economics for their research assistance in pulling these figures together. There aren’t too many questions this company can’t answer, so if these articles raise any particular questions in your mind, please contact Kerriane Bonwick on kerrianne@urbaneconomics.com.au or phone them on (07) 3839 1400.

The top 10 locations Australia wide for public transport commutes to work are all CBD and inner city locations. Topping the list is the Sydney CBD, Haymarket and the Rocks, with 67.7% of workers there using public transport. Next are workers in the Melbourne CBD, with 57.8% using public transport, followed by workers in Brisbane CBD, with 56.1% of workers there using public transport.

Reading on through the top 10 reads like a list of some of the more privileged or rapidly gentrifying workplace locations in the country: North Sydney/Lavendar Bay (52.6%), Surry Hills (49.2%), Docklands Melbourne (47.9%), East Melbourne (41.3%), Pyrmont-Ultimo (40.6%), Perth City (39.6%) and Redfern-Chippendale (37.2%).

The top 25 employment locations for public transport use paint a similar picture (click on the table to enlarge):

By and large, these are all mainly inner city locations. While the proportions making use of public transport to work in these areas is high, the same areas represent only a minority of 10% to 15% of metropolitan wide jobs. Plus, these are jobs which earn, on average, a great deal more than suburban employment. In short, the highest rates of public transport use are found amongst the minority of workers who earn the most money.

The converse is also true. Suburban employment centres, where the vast majority of jobs are located, are reliant on private vehicle. Here’s a selection: North Parramatta – 10% by public transport, 74% by private vehicle; Carindale (Brisbane) – 9.6% by public transport, 60.4% by private vehicle; Maribyrnong (Melbourne) – 8.5% by public transport, 68% by private vehicle. These are typically locations where public transport options are limited: it’s simply too expensive to contemplate servicing lower density suburban employment this way. Workers with jobs in these locations are not choosing the private car, they are relying on it. It’s not a ‘love affair’ but a necessity.

Visually, the picture is stark. The illustration below (taken from a site called ‘Charting Transport’ which is full of useful analysis – this particular illustration is from this article) shows clearly that public transport is typically a mode of choice for CBD and inner city workers and almost of no use to workers in middle or outer suburbs.

It’s the same pattern repeated across other metropolitan regions. The parts in red or orange are where the majority of workers are, the parts in green where a minority of higher paid workers are.

This point doesn’t need labouring but the implications take some explaining. Public transport systems are heavily subsidised by taxpayers. Yet the highest patronage is amongst the minority of workers who earn the most money. Private transport receives no such subsidy and, as motoring bodies point out, it raises more money through registration fees and fuel taxes than is spent on it. Private transport –namely the car – is the only practical mode of choice for the majority of workers in suburban economies, where they tend to earn less. The reality is that suburban workers on lower incomes with limited access to public transport as an option are subsidising the public transport systems used by inner city workers on higher incomes.

The irony is that governments are under almost relentless pressure to spend more taxpayer dollars on improvements to public transport for the benefit of a higher income minority, and also to keep fares low (and hence maintain or even increase the level of subsidies). The level of policy support for taxpayer funded improvements to metropolitan road networks hasn’t been as generous, with extensions and improvements to metropolitan road systems largely approved on the basis of PPPs where investors believe they can mount a business case (with mixed results).  This is despite the reality that the majority of employment is in suburban locations and that arguably private transport users already pay more in taxes than the road network receives in spending.

Australia is not unique in this regard. Many western economies adopt similar subsidy arrangements. (Many eastern economies have such vastly different levels of population and population density that comparisons aren’t really meaningful). But what is missing in Australia seems to be an awareness of how this subsidy plays out. Public transport users with high paying jobs in inner cities are often the first to complain about incremental increases in fare costs. Private car users with lower paying jobs in suburban locations where public transport is simply not an option, are asked to shoulder rising fuel prices, fuel taxes, registration fees – and even, lately, parking costs in some suburban shopping centres – without much public policy sympathy.

None of this should be taken as a pejorative attack on public transport. This is simply the reality of how people across our metropolitan areas commute to work, and the costs – taxpayer and private funded – involved in making this happen. No one, me included, is seriously proposing a divestment in public transport systems in favour of private. The public transport network is an essential element of our transport system. Without it, our urban workforce mobility collapses. Witness any number of occasions when train or bus networks fail, for whatever reason. Plus, public transport has an important social function by providing low cost transport for work and non-work trips for financially disadvantaged members of society who don’t have access to a private care, elements of our aged population, and for students.

But given the way employment is distributed through our metropolitan areas, is it sensible to suggest that spending even more taxpayer money on public transport is capable of making much difference, without also dealing with the realities of where the jobs are? This will tell us more about the realities of how much of the work related commute can be provided for by public versus private transport. We need to understand the economic and geographic realities better, and hope that the media, the community at large and transport policy groups base their arguments closer to the existing and future patterns of employment distribution.

For example, proposals to increase public transport patronage by imposing congestion charging regimes to punish suburban car commuters are, based on the evidence, entirely doomed to fail. Only a minority of the metropolitan workforce can realistically make use of public transport (mainly those with jobs in CBDs or inner city areas). For the majority of commuters with suburban employment, public transport isn’t an option (and making it one would be even more prohibitive that the costs of the present system). Penalising suburban car commuters thus imposes tax penalties on those least able to afford it for no policy gain. Then there are the proponents of ‘free’ public transport, who might need to explain how providing this service to the highest paid workers in our economy, at the expense of the lowest, stands the test of social equity.

The reality of where jobs are located throughout our metropolitan economies, and the nature of those jobs, should be a starting point for discussions about how to more efficiently manage our transport networks. Unleashing further economic potential in our cities won’t be achieved if the policy discussion is removed from the realities of workplace geography.

This series began with the suggestion that public policy and urban planning has become preoccupied with where we live, and with types of housing choice and form. Little discussion seems to take place about where we work. But where we work, and the nature of those jobs and the demands they make of our urban infrastructure arguably have a larger bearing on urban economic efficiency than housing. I hope these articles have made a few observations about the demography of employment that will promote further thought and discussion – based on realities rather than myth or presumption.

Next and final: the future of employment and how this could re-shape cities.

The demography of employment part 3: heading for a new class divide?

This third instalment of ‘The Demography of Employment’ looks at the different income profiles of city centre and suburban workers in Brisbane, Sydney and Melbourne. The results show some marked disparities based on geography, with the average CBD worker earning a quarter to a third more their average suburban counterpart. The top ten income areas city wide are nearly all inner city areas, and these workers earn more than double the average of the bottom 10 areas. Given that for every inner city worker there are around 7 or 8 suburban workers, the income divide between suburban worker and city worker becomes more stark.

The data referred to in this article has been extracted from Census data and prepared by the team at Urban Economics – an urban research company based in Brisbane. There are plenty of spread sheets to back up the statistics that follow so if you have further interest in this subject, I suggest you give them a call on (07) 3839 1400 or email Kerriane at kbonwick@urbaneconomics.com.au

In each of the three largest capital cities in Australia, the top ten income earning areas are mainly centred around the CBDs. Workers in central business districts areas earn on average between $80,000 and $90,000 each per annum. For working couples where both have city jobs, that’s a healthy household income of around $160,000 to $180,000 per annum.

Their suburban counterparts don’t fare so well. Average non CBD incomes are around $50,000 per annum. A working couple, on average, might bring home $100,000 per annum, a substantial $60,000 or even $80,000 less than their CBD worker counterpart. (These are just averages of course and good for order of magnitude comparisons only. It’s like the story of the economist who, with his feet in a bucket of ice and his head in a hot oven proclaimed ‘on average, I feel fine!’).

There are good reasons for this. CBD workers are likely to have higher standards of education and more saleable skills, working for businesses which pay a premium for talent in white collar industries such as finance, property and investment. Suburban employment typically leans more to retail and wholesale trades, and more blue collar industries where higher incomes are harder to earn. For areas in the suburban economy which are highly reliant on retail employment, for example, average incomes fall to around the mid to high $30,000s. Across all of our major metropolitan areas, there are many more people and families on these lower income levels than there are families where income earners enjoy inner city jobs and the pay packets that come with them.

Brisbane.

Highest average incomes in Brisbane are for jobs in the CBD, at $81,500 per annum. Second is inner city Newstead-Bowen Hills ($77,330) and third, Spring Hill ($75,880). But where the CBD and Spring Hill jobs are white collar knowledge workers and public servants (75%), there are only 35% of these types of workers in Bowen Hills, where 43% of jobs are blue collar. Adding to evidence that all high incomes aren’t always white collar are the Brisbane-Port Lytton area and the Brisbane Airport area, which are the 6^th and 8^th highest income areas in Brisbane with 74% and 62% of jobs classed as blue collar. But these are exceptions to the rule, with all other top ten income places taken by inner city areas.

Conversely, the bottom ten are nearly all outer suburban, led by Greenbank, then Caboolture, Taigum-Fitzgibbon, Robertson, Keperra, Victoria Point, North Ipswich, Carindale, Browns Plans and Shailer Park (incomes ranging from $33,710 to $37,770). The types of jobs are weighted more heavily to retail and wholesale trade, food and accommodation (roughly half of all jobs in these areas). Of interest is that even Taigum-Fitzgibbon and Keperra show a high percentage of white collar jobs for suburban areas (43%) but are still in the bottom ten. A white collar job it seems is in itself no guarantee of a good income.

Across the city, the average suburban job brings home $47,994 per annum while the average inner city job brings home 25% more at just over $60,000.

Sydney

North Sydney comes first for incomes across the Sydney region, at $93,410 per annum average. North and East Ryde are next ($89,570), followed by the CBD and Rocks ($89,210). At fourth and fifth place are the suburban employment centres Macquarie Park and West Pennant Hills. The latter has 80% of jobs in white collar positions but Macquarie Park is more evenly split between retail, wholesale and hospitality (29%) and white collar (54%) jobs. Further intensive development planned in this area will soon change these ratios.

Port and airport areas also feature in the top 10, with Port Botany ($75,560pa) and Banksmeadow ($75,210pa) showing that having 65% and 66% of jobs in blue collar roles is no barrier to a top 10 average income.

Sydney’s lowest income areas are around Bateau Bay, Roselands, Gorokan, Budgewoi, Casula, Cambridge Park, Umina, St Albans, Wyoming and Cabrammatta West, where average incomes range from $37,050 to $39,820 per annum. Here there are higher proportions of jobs in retail and wholesale trade (typically around 40% to 50%) but there are also reasonably high proportions of white collar jobs (mid-30%s to mid-40%s). Once again the evidence seems to say that a white collar job is no guarantee of a high income.

Across the Sydney metropolitan area, the average income of inner city workers was around $66,929 per annum and for their suburban counterparts, substantially less at $51,715 per annum.

Melbourne

Melbourne’s top ten income areas were almost all exclusively inner city, led by the Docklands ($87,300) a good way ahead of the CBD ($81,640). Then follow South Yarra, Southbank, Albert Park, East Melbourne, South Melbourne, West Melbourne and Abbotsford (the latter on an average of $70,250). Glen Iris – East is the only non-inner city area to make Melbourne’s top 10, coming in at number six ($76,300). All are largely white collar locations, with the exception on West Melbourne where 64% of jobs are blue collar and only 6% classified as white collar.

The lowest income areas across Melbourne are all outer areas, led by Taylors Lakes ($34,230) then Hoppers Crossing, Maribyrnong, Chirnside Park, Altona, Melton, Mill Park, Frankston, Meadow Heights and Mount Dandenong ($38,290). Altona Meadows and Frankston North show relatively high proportions of white collar jobs (46% each) which again is evidence that this is no guarantee of an area reporting higher average incomes.

Across the Melbourne metropolitan area, the average suburban worker earns $48,188 per annum, while their inner city counterpart brings home 24% more on $59,758 per annum.

Implications.

Earlier in this series we showed that suburban jobs outnumber city and inner city jobs by around 7 or 8 to one. We also know from the census results that inner city workers aren’t just in the minority by nature of location, but they are also in the minority by way of income. In both cases, it’s a case of being in a privileged minority: inner city workers earn on average a good deal more than their numerically superior suburban counterparts.

These averages aren’t always due simply to the nature of employment. Some suburban areas with relatively high levels of white collar employment are still featuring at the lower end of the income scale. Conversely, some areas with high proportions of blue collar employment also appear at the higher end of the income scale. (Mining, a non-urban industry is beyond the scope of this study but for the curious, the top 10 Australia wide areas for income are all mining regions, with incomes above $100,000 per annum).  So there are some grounds to suggest that location, as much as the nature of industry, has a significant bearing on income.

The evidence clearly shows that inner city areas have higher incomes. In many cases, considerably higher than suburban or outer suburban jobs. Our inner city areas are places of privilege in terms of the jobs they provide but also in terms of the riches of social infrastructure funded by the taxpayer. Heavily subsidised public transport networks are mainly designed to get inner city workers to and from their higher paying jobs. Taxpayer funded cultural, recreational and social infrastructure is concentrated in inner city areas, arguably where it is of more benefit (it is certainly more accessible) to inner city workers than residents of middle or outer suburban areas with suburban employment.

With so much intense discussion about urban growth and development typically focussed on what happens within a 5 kilometre radius of the CBD, it is fair to ask if this intense focus has diverted attention away from the needs of the majority of lower income (suburban) workers, to the benefit of the numerically smaller but considerably richer, inner city workers. The latter, based on the evidence, have a greater capacity to pay for the infrastructure they enjoy than the suburban worker and taxpayer.

This poses a challenge for policy makers and opinion leaders, many of whom are not only CBD or inner city workers themselves, but also residents of the inner city or near city areas. Living, working, shopping and pursuing high-end leisure pursuits in this privileged environment could lead to distorted views of the broader metropolitan economy. The CBDs and near city areas are seats of government and the headquarters of major companies. They are also typically where decision makers and opinion leaders in corporate life, public policy, the media, and industry groups live and circulate. It is easy to suspect that a good proportion of them don’t move much beyond these geographic confines.

I was reminded of this a couple of months ago when Prime Minister Julia Gillard decided to descend on the people of Rooty Hill, in Sydney’s west, hunting for votes. Following her went the Sunrise Show, the Today Show, and much of the press gallery. The footage I saw of them traipsing around Rooty Hill looking for ‘the real people’ reminded me of travellers in a strange land, encountering cultures and people quite alien to them. The people of Rooty Hill and western Sydney may well have breathed a sigh of relief when the circus left town a few days later. (Ironically, and in a classic display of how sad public policy making has become, the Prime Minister made some grand promises about an additional $1bn funding for a major highway upgrade to better connect the west to the CBD. This was despite the evidence which shows - though mustn’t have been consulted - that only a very small proportion of the people living there actually work in the Sydney CBD or its surrounds. The presumption seemed to be that Rooty Hill’s salvation lay in a better connection to the CBD. Asking the people of Sydney’s west what they really want may have revealed something else altogether).

The point here is that the income divide between city centre and suburban economies poses a challenge for policy makers. High income elites who work, live and circulate largely within a defined radius of the CBD could, unchecked, tend to dictate urban policy for the entire city, based on their limited perspective. We’ve seen elements of this surface in the disdain with which suburban ‘McMansions’ have been derided, or how the supposed ‘love affair’ suburban workers have with the private vehicle has been attacked.

It’s a fair question to ask whether the significant investments in inner city social infrastructure through urban renewal schemes, cycle ways, river and harbour side pedestrian walks, bicycle schemes, parks and gardens, cultural facilities and the rest have been balanced with equal emphasis on similar amenities for suburban employment centres.  

These inner city investments have largely relied on public policy support and taxpayer funds, but they have also leveraged private capital which has had the confidence to further invest in this environment. If a similar partnership could attract more private capital investment into suburban employment  areas, it could lead us in the direction of more significant economic benefit city wide, as opposed to concentrated benefit in the CBDs and inner city areas.

Next: transport and employment.

The demography of employment part 2: where we work.

In part one of the Demography of Employment, we looked at the largely suburban nature of employment in Australia’s larger capital cities (Brisbane, Sydney and Melbourne). Typically, the CBDs and the adjoining inner city commercial areas account for only around 13% to 19% of all jobs across the metropolitan regions. Plus, this proportion hasn’t changed in the last decade, and in some cases suburban employment growth has outstripped the inner city. At least four out of five jobs, if not more, are in suburban locations – a fact that receives little attention in discussions about urban growth and planning.

This series tries to bring some more focus to the suburban heartlands of our economy. In this second part, we look at where these conglomerations of jobs are, and what this might say about some of the issues canvassed regularly in the media or in professional forums debating the growth of our cities.

In assembling this information, I am indebted to the team at Urban Economics – an urban research company based in Brisbane – who have methodically ploughed through the official statistics to help paint a picture of our suburban economy. If any of the material that follows leaves you wanting to know more, I suggest you give them a call on (07) 3839 1400 or email Kerriane at kbonwick@urbaneconomics.com.au

Brisbane.

The combined CBD and inner city areas of the Brisbane metro region accounts for around 170,000 jobs, or less than one in five of the region’s 925,000 jobs. The rest of the region’s jobs are dispersed throughout the metropolitan area. Some of this is a ‘salt and pepper’ scattering of jobs in largely dormitory areas, but there are also notable concentrations which, although they don’t in their own right challenge the CBD for its density of employment, constitute in themselves some very large concentrations of economic activity.

One of the largest of these is what we might loosely call the ‘Logan and freeway south’ area, which covers a large expanse of commercial activity to the city’s south and provides a combined 54,806 jobs. Put into perspective, that’s around a third of the CBD and inner city combined. The number of workers per square kilometre averages around 550 in this region, but rises to over 1,300 workers per square kilometre in Underwood.

Also to the south of the city lies a region we might call the south west and industrial – comprising areas like Pallara, Willawong, Carole Park, Wacol, Inala, Darra, Oxley, Jindalee and Seventeen Mile Rocks. This area is home to some 46,000 jobs, at an average of 460 jobs per square kilometre, rising to 1,200 jobs per square kilometre in Carole Park and with Wacol containing over 9,000 jobs alone. This area is roughly equivalent to just over a quarter of the employment in the CBD and inner city.

Other south side concentrations include the Mt Gravatt region with almost 36,000 jobs at an average of 809 jobs per square kilometre and rising to over 2,000 jobs per square kilometre in Upper Mt Gravatt (no doubt a reflection of the intense retail concentration here).

Plus there is a broad region around Beaudesert Rd (Yeronga, Moorooka, Rocklea, Acacia Ridge, Coopers Plains etc) with over 42,000 jobs at an average of just under 700 jobs per square kilometre and with more than 1000 per square kilometre in Rocklea-Acacia Ridge, and more than 1500 per sq.klm in Coopers Plains.

If you combined these four south side aggregations, and didn’t include the ‘salt and pepper’ scattering of jobs located in other areas on the Southside, you have over 179,000 jobs – which alone is more than the CBD and city fringe.

North of Brisbane there is a large area around Chermside which provides nearly 35,000 jobs. Chermside itself has over 3,500 jobs per square kilometre (most probably explained by its retail concentration) and the area itself over 1,400 jobs per sq.klm.

In addition, there are the northern arterial areas of Strathpine, Brendale, Albany Creek, Lawnton and the Hills District, which contain 21,697 jobs, and further north again are the Moreton Bay areas of Burpengary to Redcliffe which are home to just over 30,000 jobs.

These three north side areas combined account for some 86,000 jobs, or the equivalent of half of the CBD and inner city employment market.

Other aggregations throughout the metro region include the Redlands area (20,426 jobs) and the Trade Coast south area (38,000 jobs) and Trade Coast north area (33,346, including the airport).  Combined, there are 71,436 jobs in the Tradecoast area north and south of the river mouth.

Sydney

Sydney’s CBD is the base for 13.4% of jobs across metro Sydney. If we include Pyrmont, Ultimo, Potts Point and Woolloomooloo, this rises to just 15.6%.

Beyond the Sydney CBD and inner city lie some very large concentrations of employment – Parramatta perhaps being the most notable. The Parramatta Road area is the daily commute for some 118,182 workers. Not only is this a big number of jobs, but they are closely packed: overall worker density is 2,656 per sq.klm rising to over 5,000 per sq.klm in Parramatta-Rosehill itself.

To the south west of this area lies the western industrial employment region around Wetherill Park. This is home to a further 40,440 jobs.  And then to the north west of Parramatta lies the Blacktown and Hills district with a further 61,880 jobs.

Combined, these three western Sydney employment areas account for some 220,000 jobs. To help with context, this is roughly the same as the 250,000 jobs found in the Sydney CBD, Haymarket and Rocks area. And none of these figures include the ‘salt and pepper’ distribution of jobs found in nearby and adjoining pockets of land which are more residential in nature but which still include a significant number of jobs. For the sake of argument, it is fair to say more people call this large western area of Sydney a workplace than all the people who work in the CBD.

The Sydney north shore is an obviously large concentration of employment. North Sydney and Lavendar Bay have 43,000 jobs alone, at a workforce density of over 22,000 per square kilometre. So densely packed is this 1.9 square kilometre patch of land that it is in effect an extension of the CBD. Nearby are the other lower north shore areas which are home to a further 96,245 jobs. Not surprisingly they are also densely packed, with Macquarie Park at over 3600 per sq.klm, Chatswood at over 4,300 per sq.klm, and St Leonards at 9,364 jobs per sq.klm.

Other areas of metro Sydney which account for some significant numbers include the airport region (52,000 jobs), and the south west (including Bankstown) which is home to over 57,000 jobs.

But in Sydney’s case, nothing quite compares to the western suburbs employment lands for employment scale in terms of rivalling the CBD, albeit over a much larger area.

Melbourne.

The Melbourne CBD is home to only 10.6% of all jobs throughout the metro region. Include the inner city locations of Dockland and Southbank sees this rise to just 14.3% of the metro region’s jobs.

Melbourne’s economy beyond the CBD is perhaps more evenly dispersed than Sydney or Brisbane although there are clear concentrations in certain regions. Close to the city centre, Box Hill is home to over 17,000 workers and a workforce density of nearly 2,500 per square kilometre. Likewise, Footscray and Preston, also close the city centre, are home to over 12,000 and 16,000 workers respectively (at densities of nearly 2,500 and 1,500 workers per klm).  

Further out, the airport is home to over 40,000 jobs. The northern region (around Broadmeadows) houses 41,500 jobs, the western industrial region is home to just under 50,000, the Moorabin area is home to just under 30,000, the Bayswater area (including Ringwood and Croydon) is home to almost 45,000 and the north west outer areas of Bacchus Marsh, Melton, Sunbury south and Gisborne, home to over 16,500 jobs.

The bigger suburban employment districts though are both to the south east of the city.  Clayton (including Oakleigh-Huntingdale, Mulgrave, Mount Waverly and Springvale) is home to 77,761 workers at an average worker density of 1552 per sq.klm. In Clayton itself there are over 3000 workers per sq.klm. Also to the south east is Dandenong, including Hallam and Narre Warren, which is home to 71,684 workers, at a lower density of 853 per sq.klm. Put these two regions together and the number is a considerable 150,000 jobs. That is getting close to scale to the Melbourne CBD itself (186,000 jobs).

Implications?

These are big agglomerations of employment, spread over larger areas than the density found in the inner city, but undeniably large in their own right. Suggestions that outer suburban ‘sprawl’ will generate uncontrolled congestion as people try get to jobs in the inner city is simply not supported by the facts – because the scale and location of these suburban employment areas are generating more work commutes – at a factor of five to one – than the inner city.

Indeed, it may mean that further housing growth is needed on the outskirts to provide additional housing choice for people working in these areas. Increased housing density in inner city areas will find a market; but as a wholesale solution to housing across the metro regions of our capitals, it fails to provide choice in areas close to places where most people actually work.

It is also possible that a market for more diverse housing within and surrounding these employment areas is largely untapped, or even discouraged through planning schemes. Lower cost medium and higher density housing, along with detached housing, located in areas reasonably accessible to these employment areas, could be something for future planning schemes to consider.

A further implication is the need to consider increasing the allowable density of the employment lands. With many areas showing under 1,000 jobs per square kilometre, the efficiency of public infrastructure investment can tend to diminish. The very nature of many of the industries in these areas might prohibit higher density (eg warehousing and storage) but planning schemes which declare entire areas unsuitable for anything but light industrial or warehouse/storage might be denying a more efficient use of employment land and increased capital and social returns.

This also works on another level. It could make sense to allow more employment lands in largely dormitory residential areas. If the objective is to allow more choice and the opportunity for people to have shorter commutes, this notion of clear demarcation of housing and employment lands may need consideration. The entire western suburbs region of Brisbane, for example, has almost no employment, and workers have no choice but to clog the limited arterials out of their leafy dormitories in the daily trek to work.

Then there is the issue of transport: these suburban employment areas are not well served by public transport, nor can they be (we simply can’t afford it at present population levels). They are typically all in areas where private vehicle is the only practical choice for getting to and from work. Proponents of congestion charging, for example, may want to answer how their proposals could possibly impact on city wide congestion, other than to penalise the majority of a region’s workers (those with jobs in the suburbs) whose jobs are typically not flexible in choice of work hours and for whom a congestion charge would simply add to their cost of living without making any difference to their mode of transport.

Finally, is it valid to ask whether our planning schemes and infrastructure priorities have become distorted by an exaggerated focus on the needs of the CBDs and inner city regions? These are the seats of government and the headquarters of many large corporations, and also a cultural and social focus of our communities, so their primacy in many respects in justified. But equally, suburban employment regions which provide metropolitan and even state wide economic benefits at least equal to the CBD seem to receive comparatively little attention. To what extent, it seems fair to wonder, would our overall economic performance improve if the hard and soft infrastructure needs of these areas received equal emphasis by city planners?

Next: the types of jobs which keep most of us employed and the economy moving. 

The demography of employment part one: a suburban economy

Introduction.


Much of our debate about planning and urban growth in Australia is focussed on population, housing form and location. Small changes in household types and demographic trends at the margin preoccupy the minds of planners, the media, developers and policy makers. But the demographics of employment – a fundamental driver of demand – are by comparison little understood. Where are the jobs located? What types of employment trends in particular locations are having an impact on everything from housing demand to transport use? What sort of opportunities does this create and what are the challenges for public policy? Are some of our presumptions about the geographic distribution of employment wildly inaccurate?

This series of research articles has been prepared to shed some light on what I’d like to coin ‘the demography of employment.’ Much of the data is based on analysis of various ABS Census’ and I am indebted to the professional team at Urban Economics for providing this and for interrogating the Census findings so diligently. Other sources are noted where relevant. However the conclusions and observations are my own so if you want to obtain research related to your particular interests, please contact Kerrianne Bonwick at Urban Economics directly on 07 3839 1400.

I am also grateful to senior development and planning industry colleagues for their review of the draft and for their constructive comments.

Ross Elliott. February 2013.

Part 1: a suburban economy

A widespread impression exists in the mind of many from the general community through to the media, urban planners and even some senior policy makers that the city centres (‘central business districts’) of our capital cities are the biggest employers in our economy. Nightly news bulletins feature CBD skylines as backdrops. They are typically the headquarters of major companies and the seats of government. They are at the confluence of road and rail networks and feature a high concentration of infrastructure from recreation to cultural to social.

The reality, however, is that despite their profile, our CBDs account for a very small proportion of jobs in the economy. Census data for employment has its limitations but even with these limitations in mind, the evidence is emphatic: employment in our cities is overwhelmingly located in suburban locations.

Based on analysis of the ABS Census, in Sydney in 2011, the CBD accounted for only 8.3% of all jobs in New South Wales, and for only 13.4% of all jobs in wider metropolitan Sydney. Including the surrounding areas of Pyrmont, Ultimo, Potts Point, and Woolloomooloo raises this share to just 9.7% of all jobs in the state and 15.6% of jobs in metropolitan Sydney.

In Melbourne, the CBD is home to just 7.6% of the state’s total employment, and to just 10.6% of all jobs in greater Melbourne. Including the ‘fringe’ locations of Docklands and Southbank sees this share rise to only 10.3% of the state and 14.3% of greater Melbourne.

In Brisbane, the CBD share is just 5.8% of the state and 12.5% of the Brisbane region. Including South Brisbane, Fortitude Valley and Spring Hill raises this share to 8.8% of the state’s jobs and 18.8% of jobs across the Brisbane region.

Looking at it another way, in these major centres at least 9 out of 10 jobs state-wide are located outside the CBD/frame, and even across the metro region, about 5 out of 6 jobs are located in suburban locations as opposed to the centre.

This isn’t to say that the CBDs and their fringe commercial areas aren’t numerically large in terms of employment (they are). It simply means that their geographic dominance of our metropolitan wide employment distribution isn’t what many may have otherwise presumed. In other words, their share of the city wide jobs cake is a minority one.

If this is surprising, what will also come as a surprise is that in the past decade, suburban jobs have been growing as fast or faster than in the inner city, meaning that CBDs are only holding their share, or losing their share, to suburban employment. This has come about despite what has arguably been a decade or two of intensive debate and policy investment into our inner city locations.

For example, in 2001 the Brisbane CBD’s share of metro wide employment was 14.3%. Over the ten year period from 2001 to 2011, this share actually fell to 12.5%. Including the city fringe areas saw the ratio slip marginally from 19% to 18.8% over the same period, suggesting a leakage of sorts from the CBD to city fringe areas. CBD employment actually grew in that period by 18,793 jobs but what the data reveals is that suburban employment in the Brisbane metro grew faster and by much more – an increase of nearly a quarter of a million jobs across the Brisbane metro region compared with the 18,793 increase for the CBD.

In Sydney, the CBD and inner city areas accounted for 15.1% of jobs in greater Sydney in 2001. By 2011, this proportion had changed little to 15.6%. (Boundary changes by the ABS over the period make CBD-only comparisons difficult). An increase of more than 40,000 jobs in the city area over that time was dwarfed by the increase of more than 200,000 jobs across greater Sydney in the same period. Hence the ratio remained unchanged.

In Melbourne, the CBD share of metro wide employment was only 10.2% in 2001. Ten years later, it too had changed little, reaching only 10.6% (although a slightly larger boundary in 2011 would account for this increase). The inclusion of the Docklands and Southbank precincts over this period sees the ratios move from 12.1% of greater metro Melbourne jobs in 2001 to 14.3% by 2011 – a significant increase of sorts, which points to the impact of these new precincts on spatial employment patterns in Melbourne. But still, the combined areas of the Melbourne CBD, Docklands and Southbank account only for one in every seven jobs across the metropolitan region. Hardly a dominant position.

Finally the trend is not explained by the much promised transition to ‘telecommuting’ or ‘work from home’ occupations. Like many predicted widespread social changes, the reality doesn’t live up to the promise. ‘Work from home’ employment accounts for less than 5% of all jobs and this proportion has actually decreased since 1991.

Implications

For starters, if you think your bus or train to the CBD is more crowded, you’d be right. There are more jobs in the city centres now than 10 years ago - significantly more. But you’d likewise be correct if you were a suburban worker, grumbling that your suburban roads were now more congested. There are many times more jobs spread across suburban locations than there are in the city centre, and these jobs have increased numerically by much larger numbers (albeit spread over larger areas). And of course, if your commute to your suburban workplace takes you through an inner city road or transit node, you have a double whammy effect.

There are a number of quite significant public policy implications that suggest themselves based on this evidence. Public transport policy is just one. Our public transport systems are mostly based on a hub and spoke system (particularly for fixed routes as with rail) where the hub is the CBD and the spokes spread out. This system serves a highly centralised employment model but is notoriously inefficient (and prohibitively costly) when it comes to decentralised employment.

If typically our CBDs contain only 10% to 13% of broader metropolitan area jobs, even with unlimited budgets, the capacity to ever reach high proportions of overall public transit use are virtually non-existent simply because the networks will struggle to take people where their jobs are (overwhelmingly in the suburbs). This reality of employment distribution is something which receives very little prominence in public policy discussions about public transport investment; perhaps it should receive more? If only 10% to 14% of all jobs in the metro region are in the inner city areas, how can we ever expect to set targets much above that for public transit use? It’s a logical and mathematical improbability.

It also means that the billions of dollars needed to upgrade public transit systems will only ever be able to serve the minority of the working population whose jobs are in locations capable of being served by public transport, based on current distribution of employment and the nature of transport networks. And it means that the majority who use private transport to reach their suburban workplaces would be unrealistic to expect the scale of infrastructure investment needed to de-congest the suburban road network. Fixing this conundrum means either a massive re-centralisation of employment around the CBD or achieving rates of population density across urban areas of Australia that are more likely to be found in Asian centres. Neither of which will happen soon.

The other large, daily population movement around our cities, that of students, is obviously also very decentralised and thus not efficiently serviced by a CBD-centric transportation system. Plus, community wide changes of attitude about child safety have had a noticeable impact on the proportion of students who catch public transport, walk or cycle to school. by students.

There is no easy answer in this but setting unrealistic public policy targets for public transport systems in cities where employment is overwhelmingly suburban and not easily serviced, is setting ourselves up for public policy failure and community disappointment.

Another implication that flows from this spatial distribution of employment involves TODs (transit oriented development). The premise on which much TOD thinking is based is that creating housing options around transit nodes such as suburban train stations will allow people more convenient commutes to the inner city and hence relieve road congestion by lifting public transit patronage, among other promised benefits. There will no doubt be a proportion of the population for whom this is very appealing but given the low proportion of jobs actually located in CBDs compared with suburban locations, this level of demand is finite. Indeed, it may be that as well as creating higher density housing opportunities around suburban train stations in order for residents to commute into the city, we could equally consider creating higher density employment opportunities around suburban train stations, so that inner city residents could commute to suburban workplaces. Is it fair to suggest that to date, the emphasis on TOD planning has been largely on TODs as dormitory residential opportunities for inner city workers, and that this doesn’t align very neatly with the realities of the demography of employment? The evidence points to a broader land use mix for TODs than many have envisaged.

Another public policy implication is both planning and market based. Our CBDs are expensive places for businesses to operate from, but this higher cost base is offset against a number of locational and marketing conveniences along with amenity factors that CBDs have in their favour. However, steeply rising rents, combined with costly car parking may be pushing more employers out of these locations and into city fringe or suburban locations. The evidence is there to support this.

A number of our CBD offices command rents in excess of $800 per square metre per annum – more than the cost of quality office in downtown Manhattan, New York. Our CBD car parking costs have risen rapidly, partly due to punitive taxes designed to discourage city parking (as found in Sydney), partly due to planning limits on parking spaces in new developments, and also partly due to the balance of supply and demand. A study by Colliers International (Colliers International Global CBD Parking Rate Survey, 2011) shows that the daily cost of parking in Sydney and Melbourne are the 3rd and 4th most expensive of a series of world cities: more expensive than midtown Manhattan and more than London or Tokyo. Brisbane parking costs came in at number 14, ahead of midtown Manhattan or Paris. Suburban employment locations in our cities offer considerably lower accommodation costs and parking costs are negligible by comparison.

This high cost structure may be encouraging a decentralisation of employment away from CBDs. If this is true, this would mean that costs are pushing jobs into locations that are less well served by public transport. Suburban employment is efficiently served by the private vehicle while centralised jobs in high density CBDs are well served by public transit. Further public policy attempts to raise the cost of business in CBDs (such as cordon tolling - a vehicle tax on the inner city) may only have the effect of further decentralising employment and working against the very claims of its proponents (to encourage more public transport use).

Opportunities

There are possibly also opportunities in understanding the spatial distribution of employment in our major cities. If people want to live closer to their workplaces for example, is it not sensible to try to identify additional housing supply options near major suburban employment nodes? Inner city and CBD housing markets offer premium pricing and possibly concentrated demand but there is potential to oversupply demand in these. This is possibly what is happening in Melbourne now, and what has happened in other capitals in different parts of the cycle.

Planning regulations which typically favour housing density in inner city areas may need to be more flexible in the future if creating housing closer to places of employment is to be a reality.

It’s equally possible that the potential for employment land uses in suburban locations has been inadequately considered by policy makers. It is a complaint of many developers that access to suitably zoned employment land in suburban locations is constrained. Perhaps allowing more opportunities for this to happen would mean creating opportunities to take workplaces closer to peoples’ homes? The same could be said for major transit nodes. As noted earlier in this article, while these have traditionally been thought of as high density dormitory opportunities for inner city workers, the evidence suggests they may equally offer opportunities as high density employment locations for residents living along the network.

Conclusion.

We have collectively developed a fixation on our CBDs and inner city areas as economic drivers of employment. While they are very significant in size, they are not dominant relative to the spatial distribution of jobs throughout metropolitan areas. If the evidence is clearly pointing to cities with employment overwhelmingly located in suburban locations, and points to this trend continuing, it is possible that a variety of public policy settings could need resetting given the realities of our urban environment. It is equally possible that opportunities for growth and development to meet market demand for employment lands in suburban locations haven’t yet been fully captured.

 
Next: The nature of suburban employment