The notion time is money is a daily reality for the development industry amidst the balancing act of prudent planning, infrastructure provision, and budget management by government. Despite a sustained increase in housing approvals in Sydney, uncertainty and delays still plague the planning system, particularly in infrastructure contributions.
Greenfield developers will start to feel the pinch following the State Government’s removal of the cap on contributions for growth infrastructure, with rates in Sydney set to rise from $30,000 per lot to around $70,000, and state contributions another $15,000 to $20,000 on top. But it is the delays in the planning system which can translate into an even bigger impost on business.
In 2013, the Centre for International Economics (CIE) estimated the unnecessary delays and bottlenecks in the NSW planning system cost business and the community $260 to $305 million a year. The Government has introduced various incremental reforms since then, and its policy focus on housing affordability has attempted to cut through land release delays. But it’s important that the implementation of housing supply policy is not compromised by an overly complex and multi-layered contributions system, where costs in time unnecessarily burden the sector.
So how can time be saved in the system?
First, all the developer contributions for a new urban development area need to be known sooner. Although, there’s good arguments for developers to fund their fair share of growth infrastructure, the beauty of the contributions cap was that it provided certainty to developers. In the new policy environment, the pendulum of who should pay for the infrastructure has now shifted back from the taxpayer towards developers. In most areas, the question remains, how much?
At the state level, developers of greenfield sites pay Special Infrastructure Contributions (SICs) for regional infrastructure such as schools, regional roads, bus networks and emergency and health services. The catch is that the SIC rate needs to be first determined by State Government or alternative steps such as opaque ‘satisfactory arrangements’ in Local Environmental Plans (LEPs) are used.
The recent announcement of the Hunter and Rhodes East SIC amounts is promising, but the Illawarra SIC has been in draft form for five years and there’s more than 20 other SICs for Sydney’s identified growth areas that are yet to see light. The Government needs to confirm these contributions with the market quickly so that the amounts can be factored into site feasibilities.
Even better, a standard, regional development levy would remove uncertainty and save time.
At the local level, councils won’t usually issue DA consents without a contributions (section 94) plan in place for infrastructure such as drainage, collector roads and parks. The plans determine the contribution rates.
Unfortunately, contributions plans have taken up to two years or more to be approved after IPART and the Government have reviewed them. Many developers are bypassing these delays by negotiating a Voluntary Planning Agreement (VPA) with the council but this relies on goodwill and successful negotiations between the parties. Developers in fragmented ownership areas don’t have the same opportunities.
IPART offers an independent umpire to call out unreasonable infrastructure costs in plans but there needs to be strict time protocols in the process. It is also usually a later step, and it can instigate further delays if councils then need to make fundamental changes to rectify earlier infrastructure decisions made at the rezoning stage.
Instead, there needs to be earlier planning for infrastructure funding and contributions which is integrated into the rezoning process. Ideally, via a comprehensive infrastructure funding and delivery plan for each planning precinct, developed from the outset, and tested with independent scrutiny. The plan should be underpinned by an agreed funding mix which has local and state contribution rates, and any other value sharing, special rates, grants, or other charges to fill the funding gaps.
Also, standard levies which reflect the efficient cost of providing infrastructure would help to remove much of the guesswork. In Victoria, standard levies are pre-set for development settings and land uses, and NSW would benefit from a similar approach.
The NSW Government is currently consulting with industry about the steps and timing in the s94 process and the essential works list in contributions plans. There are real opportunities here to make changes in the system that can reduce delays.
Lastly, more streamlined contributions plan-making needs to be matched by effective plan implementation. Navigating the contributions pay and collection process for councils and developers is challenging. Timely infrastructure delivery and coordination is another largely unresolved issue that also delays development. Monitoring delivery is essential. This is where a smart tool that allows stakeholders to know what contributions are liable, collected and spent on in a systemised fashion could come in.
With more certainty about contributions earlier and information to better inform infrastructure delivery and development needs in real time – imagine the savings that could be achieved throughout the system.