31st May 2024

In this Edition...

1. NSW Government responds to Urban Taskforce call for better infrastructure coordination

2. Housing Targets – another piece of the housing supply puzzle

3. Once again DPHI decides to walk back on planning reforms – this time low to mid rise reforms

...and much, much more.

4. ABS data shows problems with housing supply on three fronts

5. Streamlined assessments for social and affordable housing great – but why not for large market housing proposals as well?

6. Federal Treasury analysis on nation’s housing performance

7. Approvals not leading to commencements – the price of planning complexity and skyrocketing development costs

8. Quote of the week

9. $200 million in latest round of the Accelerated Infrastructure Fund

10. Urban Taskforce in the news

11. Members in the news

1. NSW Government responds to Urban Taskforce call for better infrastructure coordination

Better coordination means better outcomes on the ground

It was pleasing to see the Premier’s commitment this week, that a NSW Cabinet sub-committee on infrastructure would be established.

On Monday CEO Tom Forrest iterated the need for a whole of government approach to infrastructure delivery – driven and monitored from the very top.

Our call elicited an almost immediate response, with the Premier announcing that Planning Minister Paul Scully would chair a new subcommittee of cabinet responsible for overcoming delays on DA’s.

The Premier acknowledged what Urban Taskforce has been saying for some time, that Planning too often carries the can for laggards like TfNSW and Sydney Water:

We couldn’t agree more.

The significance of establishing of a strong, Cabinet-based forum to co-ordinate the clearing of critical infrastructure bottle necks preventing housing supply and jobs cannot be underestimated. 

The Cabinet sub-committee needs to cut through impasses where Planning struggles to gain traction from key infrastructure agencies like TfNSW and Sydney Water to overcome crippling delays and bureaucratic dithering. 

Achieving housing supply targets requires a collective effort. This effort needs to be led from the top with the power to co-ordinate, monitor and enforce infrastructure delivery that underpins housing and jobs in NSW.

The Premier is listening to our concerns and responding. The establishment of a Cabinet sub-committee and resolving blockages to housing supply at the highest levels of Government is a very good start.

2. Housing Targets – another piece of the housing supply puzzle

This week Premier Chris Minns announced long awaited housing targets that would be imposed on the 43 Councils in Greater Sydney, the Hunter, the Illawarra and Central Coast.

In announcing the targets – the Premier looked at the state of NSW and concluded that underpinning much of its social and economic challenges was the lack of housing – full stop.

The announcement fleshes out the commitment of the Minns Government made from Opposition that it would aim to not only deliver more housing but ensure a fairer distribution of housing across Sydney.

The targets are matched by a $200 million infrastructure fund to incentivise Councils to achieve their targets.

While a good start and will accompany the Federal Government $1 billion national infrastructure fund announced in their recent Budget, one can be fairly sure the fund will be oversubscribed.

The following table shows the new targets, the increase/decrease and the percentage change for Sydney Councils over the new 5-year period, ranked according to the percentage increase from the old GCC targets. 

Under the new targets, 41% will need to be delivered in the eastern city, 37% in the central city, and 22% in Sydney’s west.

Councils in Greater Sydney will be expected to deliver 263,400 new dwellings over the next 5 years – representing almost 70% of the housing supply needed in NSW under the National Housing Accord.

The question remains of how the Government will deal with recalcitrant Councils, or even those struggling to meet targets. Direct assistance from the DPHI may be required in the case of the latter, but for Councils thumbing their noses at the Government’s targets, there must be the courage and resolve to strip such councils of their planning powers.

The Government has announced the carrots but have been elusive thus far on the sticks. 

Another critical question is monitoring of performance. Monitoring can be and needs to be undertaken as regularly as possible. The ABS already reports monthly on building approvals - a monthly public available report on various housing metrics in NSW is required.

Acting CEO of Urban Taskforce, Stephen Fenn said the NSW Government’s housing targets need to be closely monitored and enforced.

Acting CEO of the Urban Taskforce, Stephen Fenn, also spoke with ABC News on the task ahead. Targets are only as good as they are enforced. The main task is to convert higher approvals into completions. There’s still a lot more to be done to solve the housing supply crisis, including the ongoing impact of government fees, taxes and charges.

These costs, along with high construction costs, labour supply and interest rates, work against converting housing approvals into commencements and completions.

*Please note, the below link may be paywall protected

To read the Urban Taskforce press release welcoming the targets but calling on a plan to deal with Councils who want to continue to be part of the problem rather than the solution, click the button below.

The Minister for Planning, Paul Scully, wrote an Opinion Piece “More Housing should be music to our ears” published in the Daily Telegraph on Thursday. It repeats the fine-sounding rhetoric of the State Government when it comes to housing, but the proof is in the performance!

It’s all well and good in the rehearsals – but the Government needs to hit every note from now on.

3. Once again DPHI decides to walk back on planning reforms – this time low to mid-rise reforms

The 9 "refinements" are:

This response is disappointing to say the least. The reading down that occurred with the Tier 2 TOD reforms is now happening with the low and mid-rise reforms.

It is another cave in where the slightest hint of council displeasure sees Planning bend over backwards to scale back and limit reforms.

In a housing supply crisis, one would have thought the potential of reforms (along with the social licence now behind the need for more housing) would have been maximised. Not so according to this paper – which seems to want to appease Councils at every opportunity.

Reducing floor space ratio from 3:1 to 2.2:1 (a measure of density) is even more dramatic than the backtracking on Tier 2 reforms, which was reduced FSR from 3:1 to 2.5:1.

The refinements also show Planning ruling a line through all R1 “general residential zoning” – used by a handful of councils but most significantly City of Sydney and Inner West.

Why weren’t the apparent “issues” detected prior to release of the EIE? There is industry concern that DPHI is largely making up planning reforms as they go.

The entire process is sloppy, secretive and will ultimately work against housing supply.  Reform needs to be thought through thoroughly prior to release and executed with minimal change.

CEO of Urban Taskforce, Tom Forrest, said the emerging trend within Planning was undermining the messaging and intent of the Premier Chris Minns and his Planning Minister Paul Scully:

These backdowns from Planning over low and midrise housing will only give further encouragement to the NIMBY naysayers in the community that they can have their way on housing supply.

The NSW Opposition has highlighted these weaknesses – particularly where Inner West and City of Sydney Councils are given favourable treatment on the R1 zoning change, despite having some of the most well-located suburbs in Sydney with an embarrassment of riches when it comes to infrastructure an amenity. 

To read the release from the NSW Opposition Leader, Mark Speakman and the Shadow Planning Minister, Scott Farlow, click below:

The Minns Government mantra to date has been about a fair share of housing across Sydney. Rewriting planning reforms to benefit a small number of councils cuts across that message and intent.

One thing is for sure – the need for the TOD precincts and greenfield development to do most of the heavy lifting in terms of housing supply is all the more critical after this turnabout.

Changes like this undermine housing targets and the confidence of industry. If it is not feasible to build, the building of new homes will simply not happen. Every wind back on policy threatens the feasibility and viability of housing.

Time for some mettle.

*Please note, the below link may be paywall protected

4. ABS data shows problems with housing supply on three fronts

Three key data indicators released by the ABS this week – housing approvals, value of construction undertaken and the monthly CPI.

Firstly, the ABS data on construction work done for the March 2024 quarter showed the value of work done falling, with total construction work down 2.9% to $64 billion in seasonally adjusted terms – the decrease driven by building work which fell 3.7% in the March quarter.

The same day the ABS released the monthly CPI indicator for April, which rose to 3.6%. An ongoing problem for the CPI is the significant price rises in housing - up 4.9%, with rents remaining a consistent inflationary pressure, increasing 7.5% over the 12 months to April 2024.

The affordability and rental crisis needs the apartment pipeline fully operational. This will take much of the pressure of rents and house prices. As CBA economist Harry Ottler said this week:

The banks can see it, the development industry can see it, but does Government get it? Time will tell.

The penny must surely be dropping with the political class that until the housing supply crisis is dealt with, ongoing price pressure in housing, particularly rents, will work against any hope for interest rate relief.

On Thursday the monthly pulse check of building approvals data was released by the ABS. It showed yet again that approvals continue to fall promoting the question from Urban Taskforce – when will housing approvals start to pick up again?

Monthly approvals figures were down 5% to a woeful 3,467 approvals for April 2024.

Annualised data was equally bad – showing approvals for the 12 months to April 2024 at a decade low of 44,934.

To put in in the context of the National Housing Accord, to reach 76,00 annual completions, something in the order of 90,000 approvals will be needed - right now NSW is tracking half of where it needs to be.

Rather than consulting councils and reading down reforms, DPHI need to start turning the housing supply pipeline around!

5. Streamlined assessments for social and affordable housing great – but why not for large market housing proposals as well?

And it will be the big developments, those worth more than $50 million in construction value (excluding land), that will have to do most of the heavy lifting.

The measure could even have a time limit of 5 years coinciding with the duration of the Accord. We are in a housing supply crisis, and a business-as-usual approach won’t suffice.

The Housing Minister Rose Jackson says, “all options are on the table to address the housing crisis”. Extending these reforms to large market housing developments needs to be looked at.

Expanding the state led assessment would also take pressure off under resourced councils who could focus on smaller housing proposals.

State assessment would also enable the DPHI to more effectively and swiftly deal with complex high yield developments that often have State Government delays associated with them such as Sydney Water, TfNSW and Environment.

The Government’s announcement today contains positive principles – this should extend to the private sector which will have to deliver the lion’s share of housing.

6. Federal Treasury analysis on nation’s housing performance

Included within the myriad of Federal Budget Papers was an analysis undertaken by Treasury regarding issues around housing supply and delivery in Australia. 

The good news – the number of dwellings built per 1000 people in 2022 exceeded that of Costa Rica, Columbia and Chile!

Hardly gold star stuff!

But significantly Australia lags behind most of the developed nations and the OECD average.

And sentiment in industry is that things will get worse before they get better.

The analysis draws conclusion that will come as no shock to readers of the Urban Taskforce newsletter – the finger of the Federal Treasury points at the State’s planning systems:

a.      The lack of responsiveness of supply to demand driven by a slow and     unresponsive planning system

b.      Faster planning and zoning approvals processes to unlock supply

c.       Planning and zoning processes to encourage housing supply where it is needed

In terms of demand stimulus measures like help to buy schemes or using super to purchase homes, the Treasury document refers to Federal Productivity Commission research that concluded:

To read the Federal Treasury assessment of the state of housing, Statement 4 of Budget Paper 1, and the impacts of a failing supply pipeline in NSW, click the button below: 

Election battlelines are now being drawn around the housing issue. Expect even more focus on housing supply in the coming months.

To read an excellent analysis of the centrality of housing in the next Federal election by Adrian Harrington, former chair of what is now Housing Australia, click the button below: 

*Please note, the below link may be paywall protected

7. Approvals not leading to commencements – the price of planning complexity and skyrocketing development costs

Concerns embedded in Federal Treasury documents were reflected in a report prepared by KPMG this week on the growing gap between housing approvals and commencements.

Historically not all approvals lead to commencements. This is borne out in ABS data stretching back decades.

The KPMG analysis notes a growing lag time between approvals and commencements, with a large part of the problem being the impact of developers’ gaining finance for projects. The banks need to see a profit before shelling out finance – right now, that path is increasingly murky.

The KPMG analysis revealed there were more than 11,000 dwelling approvals in Sydney alone that had not commenced by the end of 2023.

This is not news to those in industry, but it is pleasing to see the media starting the dig more deeply into the barriers to housing supply. CEO Tom Forrest was interviewed by ABC Radio’s Sarah Macdonald on the KPMG analysis:

8. Quote of the week

9. $200 million in latest round of the Accelerated Infrastructure Fund 

Good news for regional communities in NSW with the announcement of $137 million to fast-track infrastructure in 5 high growth regional communities under the Accelerated Infrastructure program. A further $64.7 million will be provided through co-commitments from 5 regional councils.

9 projects in all will be funded through tranche 3 of round 3. Good news comes in threes!

Infrastructure funding is the key to unlocking housing supply, and this funding is welcome and will make a difference to these communities struggling to deliver the housing to meet demand.

10. Urban Taskforce in the news 

CEO of the Urban Taskforce, Tom Forrest, welcomed the long-awaited targets as giving more context to the challenge that lay before most Councils. 

Tom said the NSW Government must have a plan of action for those Council that can’t or won’t meet their targets:

11. Members in the News

*Please note, the links used below may be paywall protected.
 

“…The towers form buildings three and four of the massive four building residential and commercial complex by Greenfield Developers, located only 200m away from Oran Park Podium shopping centre and 500m from the future Oran Park railway station…" read more...

The Daily Telegraph, May 28

“…It’s Goodman Group first, daylight second, when it comes to Australia’s big listed property groups..." read more...

AFR, May 28

“…Paramount on Parkes, ALAND’s latest $357 million development in the Parramatta CBD, celebrated a key construction milestone with a traditional ‘Topping Out’ ceremony. The event symbolised the successful completion of the 46-storey mixed-use development's construction phase…" read more…

Apartments and Developments, May 28

“… Developer Deicorp has won planning approval for its 32-storey tower in the heart of Sydney’s inner-west… read more…”

Urban Developer, May 30