By Tina Perinotto
12 September 2012 – Landcom chairman John Brogden last Friday laid out an ambitious roadmap for the NSW state government land agency, soon to transition to UrbanGrowth NSW.
The former NSW Liberal leader made it clear that the development industry was crucial to the state and the agency would do all it could to facilitate faster urban growth.
“It is development and infrastructure that are the undoubted and unparalleled drivers of economic growth in NSW,” Mr Brogden said.
Speaking before more than 500 people at a Property Council of Australia lunch Mr Brogden said UrbanGrowth NSW would recognise this in a restructure that would see the agency become more a facilitator of residential development in NSW rather than a player.
Key would be major site amalgamations and smoothing the way for development for the private sector.
It would also help co-ordinate infrastructure delivery.
“We will play an expanded role in the provision of infrastructure for housing,” Mr Brogden said.
“I envisage this role will see the provision of minor capital works for our sites and, in a significant new approach, sites in which we have no interest. For example, if the upfront provision of a $2 million connection to a sewer main makes a development area viable we could play a role by cash flowing the connection.”
Part of the new package deal for Landcom will mean greater powers for compulsory acquisition, in a presumed reference to recalcitrant landowners in the north-west and south-west development lands who refuse to sell.
But the crucial part of Mr Brogden’s speech was the promise to be speedy. Not necessarily sustainable, or affordable.
Take note of the name of the Housing Supply Sub Committee of Cabinet, he said. It was called “not housing sustainability, not housing affordability – but housing supply”.
And the agency would transition out of retailing land, so that it would cease to be a competitor to the private sector.
But if retailing of land, which was a major revenue earner, was to be wound back, the agency would need to recoup its investment.
Landcom was “not a charity”, he said. No government in the world would hand it a $1billion cheque.
A panel discussion that followed included facilitator Glenn Byers, who is executive director of the PCA NSW Division, Lend Lease managing director development Australia Denis Hickey and chief executive officer development for Mirvac Brett Draffen.
Following is an edited version of John Brogden’s speech at the Westin Hotel.
Thank you for the invitation to speak here today and the opportunity to use this forum to outline the vision for UrbanGrowth NSW.
I want to start by acknowledging the critical and significant policy role played by the PCA and the Urban Development Institute of Australia. The contribution of the industry in the development of policy to increase Sydney’s housing supply has been critical.
In 1999 when I was appointed the Shadow Minister for what was then Urban Affairs and Planning, this industry taught me one essential lesson – that whilst the NSW Government has flexibility in taxing power on business to create economic growth, it is development and infrastructure that are the undoubted and unparalleled drivers of economic growth in NSW.
Hence, the government’s decision to create a new and pragmatic agency with the power and skills to deliver. In the current economic environment the supply of housing is at tipping point.
When Barry O’Farrell and Brad Hazzard approached me in December last year to chair Landcom, I reminded them that the first public statement I made about Landcom when I was NSW Liberal Leader a decade earlier was that it had no role in the market and should be sold. I asked them if I was the right person for the role.
So when they outlined the plan to take Landcom from what it is today and create UrbanGrowth NSW, I agreed.
It is a privilege to be engaged in public policy in NSW, and exciting to do so in an area that is a great passion for me – making Sydney the most liveable, functional and desirable city in the world.
Current housing market
The housing development story in Sydney is all too familiar. Over the last 10 years underlying housing demand has sat consistently at 25 000 homes per year.
The incremental strangulation of housing supply was cemented with the ridiculous statement by the then Premier Bob Carr in 2001 that “Sydney is full”. This pronouncement, coupled with the decision to overweight urban consolidation and reduce supply in greater Sydney delivered a perfect storm for housing in just five short years.
The number of lots produced in metropolitan Sydney fell from 5380 in 2001-02 to 1723 in 2007-08, a decline of 68 per cent. At the same time lot prices increased from $168,000 to $265,000 – a 58 per cent increase.
Over the same period Sydney’s population grew by 240,000 or 6 per cent.
During these five years every mainland capital in every year produced more lots for houses than Sydney. And the cumulative impact is startling. Between 2001-02 and 2007-08, the total number of lots produced were:
- Perth – 98,000
- Melbourne – 92,000
- Brisbane – 63,000
- Adelaide – 58,000
- Sydney – just 22,000
And NSW has not just lagged in the detached housing market. Fewer homes – that is detached houses and apartments – have been built in each year in NSW than in Victoria and Queensland the past five years.
In 2010-11, there were 51,000 houses and apartments built in Victoria, and only 31,000 in NSW, a difference of 20,000.
Since its establishment as the Land Commission of NSW in 1976, Landcom’s role has morphed many times.
Its original objective – broadly speaking to provide affordable housing and land on the fringes of Sydney – disappeared many years ago. Its role became more complex in response to confused government policy in the mid 1990s. It made its own way as a leader of design and sustainability – areas where it is highly awarded.
Landcom’s reputation for creating quality homes and communities lies very much in the dedication and leadership of Sean O’Toole, Landcom’s well known and highly respected managing director.
I am joined on the Board by talented directors Robyn Clubb and Bonnie Boozeman, and the “grand man” of property and development in Sydney, Mirvac’s founder Bob Hamilton. Bob’s unparalleled experience in this industry is invaluable to Landcom and will be to UrbanGrowth NSW.
Whilst we all bring skills to the board, discussing a project in the presence of Bob Hamilton is an extraordinary experience. Not only can he net present value anything that’s not moving – and some things that are – I am convinced he has walked over every piece of developable land in the state.
In coming months the government will add further directors to both complement our existing skills and provide additional skills in urban renewal, property finance and development.
Today Landcom is involved in over $5 billion worth of projects across Sydney and beyond.
These range from major urban renewal with the creation of modern inner city community at Green Square, in partnership with Mirvac and Leighton, to the retailing of housing lots at the Ponds in Blacktown.
But to marry together the state of the housing market and the role of Landcom, for the last six years Landcom projects have represented 33 per cent of supply in Sydney’s North West and South West.
In contrast, in ‘normal’ markets we represent 15 per cent of supply. We have only slightly increased our production in the face of a massive reduction in private sector activity due to the ongoing global financial uncertainty.
There can be few more stark reasons for the creation of UrbanGrowth NSW with a charter and powers to increase the supply of housing.
Government priority to stimulate housing supply
The government’s second budget in June clearly outlined its determination to prioritise increased supply and stimulate the market through a series of revenue and expenditure measures and the creation of UrbanGrowth NSW.
The government has designed an exciting, pragmatic and critical role for UrbanGrowth NSW. Our objective is to create the conditions that enable industry to deliver an increased and efficient supply of housing in NSW.
UrbanGrowth NSW is not a rebadged Landcom. It is a new organisation with a new purpose.
At this point, I want to state that we are still a work in progress. We expect legislation enacting the merger of Landcom with the Sydney Metropolitan Development Authority and the provision of new powers to pass the Parliament this year with an effective start date of 1 January 2013.
Before you criticise the process and timing, take heed of this salutary lesson. Just after the announcement of UrbanGrowth NSW, I shared a stage at a forum in Campbelltown with the former Planning Minister Craig Knowles – a former opponent and modern day friend. Craig
congratulated me on my appointment as Chairman of Landcom and noted that while announced, the details of UrbanGrowth NSW had yet to be finalised.
He paused and then said – ‘Don’t worry, if you wait until it’s all sorted out nothing will ever happen in NSW!’
Now let me outline the framework under which UrbanGrowth NSW will operate:
- Supply of housing. Our primary role is to increase the supply of housing in NSW – directly and indirectly. To this end we will be directed by the Housing Supply Sub Committee of Cabinet, established last year by the Government. Take note of the name – not housing sustainability, not housing affordability – but housing supply.
Its focus is clear and not hindered by the debilitating distractions of confused policy on affordability and sustainability. If we’ve learnt anything from the last 15 years it is that the layers and layers of policy and cost have made homes in NSW much more expensive and less available. Chaired by Brad Hazzard, the members of the Housing Supply Sub Committee are the stakeholder Ministers in the provision of the essential elements for housing supply in the state – Treasury, Roads, Utilities, Local Government and Environment. In addition, the Premier attends the committee as needed.
- Retailing land. In a serious signal to the market about our role and functions, I can announce today that except in areas of market failure, UrbanGrowth will withdraw from retailing land in competition with the property industry. In short, if you can do it, we will not. UrbanGrowth’s role is not to compete with a market that can function and deliver housing. This move alone demonstrates the shift in emphasis and the Government’s determination to use UrbanGrowth to unlock more sites for housing in very different ways from the traditional Landcom model
- Compulsory acquisition. As Brad Hazzard announced with the budget, the Government is committed to ensuring that UrbanGrowth has the powers necessary to drive good urban development outcomes. Amongst a suite of powers, there will be steps taken to maintain the power of compulsory acquisition that the previous Labor Government vested in the Sydney Metropolitan Development Authority through the Growth Centres Act. It is critical that such a power be available, but it is equally critical that the community has a clear sense that it will only be used where absolutely necessary to achieve a substantial benefit for the state. Government has been explicit in granting this power and in its expectation that it will be used appropriately. It is similar to the longstanding resumption powers that exist for hospitals, roads, schools and so on. The power will only be used in exceptional cases where there is demonstrable public benefit, with proper safeguards, and a fully transparent process for landowners. Further, we will not be able to use this power in competition with the private sector.
- Land consolidation. We will consolidate fragmented land. We will use our patient capital to assemble a site and present it to the market for housing. This brings us into line with our counterparts Places Victoria and LandCorp WA.
- Adding value. Once consolidated we will add value by – as needed – rezoning, master-planning and super lotting – wholesaling land into the market de-risked and ready for housing. To this end we will echo Places Victoria’s recently revised primary activity to deliver “precinct structure planning with a view to enabling the early release of development ready land parcels”. Our objective here is to reduce risk and increase the speed by which housing can be delivered by better meeting the market. However at any time through this process we will be open to approaches from the industry to sell sites to you to deliver housing. But let me be clear – our expectation is that these sites will be delivered. We are not interested in wholesaling land that remains idle for years. We are creating a true partnership with you for a single objective and a clear expectation of delivery.
- More opportunities for developers. In doing so we will open greater opportunities to second and third tier developers and builders to facilitate a more rapid increase in supply. In addition to accelerating supply this will stimulate economic growth in a market with which we have not traditionally engaged.
- Surplus government land. We will seek access to surplus government lands for the provision of housing. We await the report of the Government’s Property Asset Utilisation Task Force, chaired by Geoff Levy, which is due soon. This might mean, for example, relocating an existing police station to another appropriate site in the same suburb or district in order to release the original site for housing where it is has a higher use.
- Infrastructure for housing. We will play an expanded role in the provision of infrastructure for housing. I envisage this role will see the provision of minor capital works for our sites and, in a significant new approach, sites in which we have no interest. For example, if the upfront provision of a $2 million connection to a sewer main makes a development area viable we could play a role by cash flowing the connection. This is another significant departure from Landcom’s traditional role. Here we are talking about facilitating the release of land for housing that we don’t and will never own.
- Housing supply. We will play a more significant role in boosting housing supply in areas of strategic importance for the government. For example, ensuring that housing around the new stations on the North West rail line is appropriate for transport hubs and seeking the best utilisation of public housing.
- Regulatory barriers. We will work with the industry to identify regulatory barriers to the efficient supply of housing. As the Government’s development agency we share your pain in the lengthy, complicated and costly approval processes required from government agencies, in particular utilities. So we are uniquely placed to work with these agencies and through the Housing Supply Sub Committee of Cabinet to reduce the complexity and cost to benefit the entire industry. This work has already started with the establishment of a CEO Group – which has engaged many of you in this room – to directly advise us.
- Regional. Whilst much of the focus to this point has been on Sydney, we will play a role in regional NSW where there is market failure. Our recent investment in GPT’s Hunter Street site in Newcastle shows our commitment to engage with the industry to address both market failure and the need for urban revitalisation outside Sydney.
UrbanGrowth NSW is a massive new undertaking for Government. The significance of the task is equalled by its urgency. In order to achieve our objectives we will assume a new role to lead and co-ordinate other government agencies to:
- Provide infrastructure
- Obtain rezoning and development approvals
- Implement approved plans
We will not only have a seat at the table, but as and where necessary we will drive the process.
This is critical to achieve better development and urban renewal outcomes in areas where there may be fragmentation of public sector landowners with uncoordinated plans for future use, or in government designated Urban Activation Precincts where we have been tasked with implementing approved plans.
Urban Activation Precincts
The government recently agreed to the establishment of Urban Activation Precincts to declare areas that have wider social, economic or environmental significance for the community, or that have significant housing potential.
UrbanGrowth will play an advisory role in investigating and determining potential precincts, along with relevant agencies. Once a precinct has been declared by government they may task us with driving development and/or infrastructure delivery within that precinct.
We will also maintain our status as a state-owned corporation with our balance sheet and access to debt. This will ensure we have the resources and flexibility we need to respond in a timely and pragmatic way to opportunities as they arise.
In addition UrbanGrowth will continue to deliver the four year/10,000 home site target in Western Sydney set for Landcom in 2011.
In doing so we will run down our stock of land which we are currently retailing as we concurrently move to new areas of delivery.
Transport and the Metropolitan Strategy
Today I have deliberately omitted discussion on where and when we will engage in new projects. Whilst I appreciate there is much expectation about the role we might play, for instance, along Parramatta Road, we await the final release of the Transport Master Plan, Infrastructure NSW’s report and the updated Metropolitan Strategy from Planning – and the government’s reply to them. These priorities of government need to be settled to allow us to determine the priorities for housing and urban renewal that will flow.
And we are an interested party in the progress of Brad Hazzard’s “A new planning system for NSW” Green Paper. The fundamental principles outlined in this report will facilitate streamlined planning processes to assist us in delivering our objectives.
Our development at Green Square provides an insight into both what we will do more of and the importance of our new powers and responsibilities.
It is a complex urban infill project in partnership with the private sector. Landcom has consolidated about half of the town centre site, 5.1 hectares under our control, and pulled together a variety of government landowners including NSW Police and Roads and Maritime Services.
Our core sites will accommodate about 3500 residents and 4500 workers, with a total of 8600 workers expected across the entire town centre. The entire 14-hectare town centre will become the commercial, retail and cultural heart for the Inner South of Sydney, developed along transit oriented development principles.
We have worked with the City of Sydney to develop the planning controls which apply to the town centre and have signed up joint venture partners Mirvac and Leighton Properties to deliver our part of the town centre, de-risking the wider area for other private sector developers to follow.
But we are 10 years into the project with 10 years to go and we haven’t built a single dwelling. Whilst we expect to do so within six months, this project has taken too long and cost too much despite the patient effort of Landcom and our partners.
Green Square is an example of what we will do as UrbanGrowth but not how we will do it. UrbanGrowth NSW and other government initiatives should be able halve this time in terms of projects and delivery to market.
Our vision and purpose is unashamedly pro-housing. No one can debate that the availability of housing is at a tipping point. This initiative will drive increased housing supply for Sydney and NSW and in partnership with the community and the industry.