Submission to House Standing Committee into the Federal Government's Role in the Development of Cities

Submission to House Standing Committee into the Federal Government's Role in the Development of Cities

When in Brisbane recently I made a joint presentation with Dr Andrea Sharam from RMIT University to the Committee on Infrastructure, Transport and Cities inquiry into the Australian Government’s role in the development of cities. Chaired by John Alexander, the inquiry has a dual focus on:

  • Increasing the environmental sustainability and liveability of our cities; and
  • Preparing our cities and regional centres to accommodate much larger populations.

We were asked to participate in a discussion with the Committee on unconventional methods of delivering housing and the potential for more affordable housing.

I made the following key points in response to the Inquiry’s terms of reference:

How to generate a high quality natural and built environment?

We should be making it easier for citizens to participate in community instigated projects. People should be empowered to co-create the cities they want to live in rather than have it taken out of their control by profit focused developers. We believe that the more people we can involve in a participatory architecture process, the better cities we will co-create. This is because it is future residents that are most concerned with the long term liveability of their streets, neighbourhoods and cities.

What models and alternate funding options would be required to improve liveability and resilience?

We currently work within the confines of the credit criteria of the major banks. At the moment our primary relationships are with BOQ and NAB. In the past ANZ have funded our projects and we have had positive discussions with Bank of Melbourne and Westpac.

We believe for lenders this is a safer model. Lenders have full visibility on participants in our projects right from the start. So they can work out serviceability and take guarantees which reduces their risk. However to date they haven’t necessarily reflected this reduced risk in the deals they offer us. Therefore the collectives contribute around 25-30% of development costs. To date we have managed to fund past projects at 80% LCR and 75% LCR. We are now looking at 60% LVR/70% LCR as lenders tighten lending to developers generally.

We are trying to find a lender truly understands this model and that will partner with us through the whole development lifecycle and recognise the reduced risk with higher lending amounts and lower rates. The biggest barrier to participation being not necessarily the total cost of dwellings but the amount of capital required to contribute.

Finding a lender that we can partner with and trust means we can confidently put more accessible propositions into the market that will allow more people to participate.

What regulations and barriers exist and how to cut red tape?

Our model has been born of pragmatism working within the existing constraints of the planning system and funding markets.

I see three main barriers to more people participating in these types of projects:

  1. Cost – Funding
  2. Time – Planning
  3. Land – Suitable sites

Funding
To make this model more accessible we need to make it more affordable and less capital intensive for to home owners with more constrained budgets. This could be done by:

  • partnering with a lender, group of lenders or social impact funds who have more holistic outlooks and are willing to adjust their terms based on the reduced risk these projects present, or
  • working with local, state and/or federal government agencies to sell land to us on favourable terms (long settlement terms triggered by construction funding approval)

Planning
Across Melbourne there are no allowances or concessions I am aware of in state or local planning policies to support community instigated or citizen led developments.  Anything that reduces the time and risk through the planning process would assist. Simple things could make a big difference. For instance,

  • a fast track process for owner led developments
  • senior planning management support from project inception

These are simple things that could be done without even looking at planning code constraints that would assist these projects like car-parking requirement and site coverage concessions.

Suitable sites
We are competing on the open market against for profit developers. Any advantage we can gain from lenders (higher gearing or lower funding costs) or planning policies will provide us with the advantage we need.

Similarly we are aware of some state land corporations and local councils which are selling land to developers on favourable terms. Making public land available for citizen-led projects will drive down the total cost of housing and the capital required to participate.

Click here to download a copy of the full transcript. Andrea and my submission is from p.37 onwards.