The release of the State Budget on Tuesday confirmed the Government’s successful economic stewardship through the COVID-19 pandemic with forecasts of the budget deficit coming in at only half that predicted seven months ago. However, the budget is almost silent on the BBQ stopper (or the elephant in the room – or both) subject of housing supply and new home affordability.

There was a lot of pre-budget talk about housing supply – but there is very little in the budget itself or in any of the media releases. Apartments deliver the vast majority of new dwellings – yet there was no mention of any boosts for apartment approvals.

In fact, the Government seems to have missed the key source of new housing altogether.  For 25 years, 70% of new homes in Greater Sydney have been in existing urban areas.  This will continue due to the high cost of infrastructure in the greenfield locations. If the Government is going to address the housing supply crisis, it must take urgent action to deliver more apartments and increase density in all areas of Sydney, not just Western Sydney.

The GSC needs to urgently reverse its “protect and manage” policy for dilapidated urban services land (old industrial areas which have been dormant for decades). That alone would be a giant step in the right direction in terms of housing supply.

The budget includes a miserly allocation of $20 million (over 4 years) to support the Department of Planning to continue the precinct planning process announced 14 months ago. But this represents a drop in the ocean in terms of delivering any significant boost to housing supply.

A decade of under-performance – and now a housing supply crisis – will not be fixed with a $20 million allocation over a four-year period for precinct planning.  The allocation (and urgency) must reflect the fact that we have a housing affordability crisis now.  State led re-zoning should be beefed up with an allocated of at least $20 million per year. It is time the Government got serious about this issue.

The Budget is largely silent on immigration, yet we know that the Commonwealth plan to urgently return to pre-COVID net immigration numbers of 160,000 per year and further expand that intake to 225,000 migrants per year. We know that this will boost our economy – but it will also put upward pressure on housing prices unless the Government addresses the supply crisis – and that means do more than rezone a few precincts in the South-West of Sydney that have been in the system for decades.  The Treasurer knows that a return to full immigration levels is critical to the budget – but they Government does not want to mention this because they know the planning system has failed to deliver sufficient housing.

Productivity Reform or a grab for cash?

The Treasurer has introduced a Bill to implement many of the NSW Productivity Commission White Paper recommendations. The “Environment Planning and Assessment Amendment (Infrastructure Contributions) Bill 2021” is a cognate Bill to the Budget.

Urban Taskforce has been working with the Government on the implementation of the Productivity Recommendations.  Urban Taskforce has strongly stated in all consultation forums that there must be a reduction in fees and charges for the development of large scale housing supply.

In Greater Sydney, the total cost of fees, charges and taxes (Local, State and Federal) is $300,000 for a $1 million apartment – significantly more than in Melbourne (circa $220,000) or Brisbane (circa $180,000).

The Government is quite rightly boasting a record infrastructure spend – but this must not be at the expense of young families who are already priced out of the suburban Sydney marketplace, Government needs to do more, not tax more.

The rhetoric from the Minister, in announcing the changes to infrastructure charges in the Budget, was all about new funding for additional infrastructure. Urban Taskforce is open to supporting the proposed Bill – but a solid commitment needs to be made from those in the planning system to deliver a significant increase in approvals in brownfield development areas right across Sydney.  To have an impact on housing affordability, these targets need to be significantly higher than those proposed by the GSC through the lamentable LSPS assurance process.
 

Urban Taskforce supports the postponement of the timing of payment of local infrastructure charges till the building is complete and ready for occupation (OC).  The Bill gives the Minister for Planning the power to issue a Direction to this effect and Urban Taskforce members look forward to him doing so.

However, senior Treasury and DPIE officials have advised that the intention is that the new Regional Infrastructure Charges (RIC) of $12,000 per new home RIC will be in lieu of any State Voluntary Planning Agreement (VPA). That is - there will be no VPAs in locations subject to a RIC. VPAs will only be allowed for the purpose of supporting the infrastructure needed to bring the release of greenfield development precincts forward (out of sequence) and even then, we are told, they will be limited to land contributions and must not have any value capture component.

Councils will also be limited in what they can include in S.7.12 or s.7.11 local infrastructure fees.

The Government has ignored the Productivity Commission’s finding that affordable housing levies should be banned as they do not fit with a “principled based approach to infrastructure contributions” (p.82, NSW Productivity Commission Final Report, November, 2020).
 

The changes to the contributions regime in NSW can only be supported if there is evidence of a substantial and immediate change in culture and practice across the planning system with a renewed focus on housing supply right across Sydney. Without immediate steps to increase the supply of housing across Sydney, the new fees and charges represent nothing more than new taxes on the housing supply.

The Bill has been referred to the Portfolio Committee No. 7 - Planning and Environment for inquiry and report prior to consideration by the Parliament. The Committee has until 10th August 2021 to finalise its report.

Analysis

It seems that the State Government has been the last to realise that there actually is a housing supply and affordability crisis. But it is not too late to act. The Urban Taskforce has called on the NSW Government to:

• Establish a State Significant Development planning pathway for high value high yield housing projects – thus removing those assessments from the hands of Councils and local community activists
• Reduce infrastructure fees and charges (which ultimately add to the cost of new homes)
• Spread the burden of additional housing right across Sydney so there is increased supply in all areas, not just the far West and South West of Sydney where infrastructure costs are high
• Accelerate and expand State-led precinct and corridor planning
• Hold State Government agencies and Councils accountable for the delivery of infrastructure to support housing supply.

We would also welcome a system of rewards for Councils that deliver higher than targeted new dwelling approvals.

In what has become a footnote, the much-heralded productivity boosting plans announced in last year’s Budget to abolish Stamp Duty and introduce a broad-based property tax appear to have hit a political roadblock with nothing in the budget Bill to progress this initiative.  This runs directly against the Government’s call for productivity improvements.

The issue of housing affordability is going to be with us right up to and beyond the next State election in 2023.  It will take years to make up for the decade of under supply of housing which has caused the current crisis.
 

Click here to see Urban Taskforce CEO Tom Forrest’s comments in the Channel 7 pre-budget coverage.

See below to listen to Urban Taskforce CEO Tom Forrest’s comments included across various radio syndicates:

• Housing affordability crisis calls.
• Pre Budget calls.
• Post Budget and Rising Housing Prices.

Click here to read the Premier’s media release on the NSW Budget.
 

Click here to read Minister Stokes’ release on the extension to the Accelerated Infrastructure Fund.
 

Click here to read Minister Stokes’ Media Release on the $20M to progress precinct planning.

Click here to read the Treasurer’s Environmental Planning and Assessment Amendment (Infrastructure Contributions) Bill 2021.

Click here to read the Treasurer’s and Minister Stokes’ Media Release on the Bill.
 

Contact Nicola Baume on 9238 3955 for further details.