HOUSING/DENSITY TARGETS AND OTHER POLICY TOOLS - BACKGROUND RESEARCH

FINAL REPORT Prepared for JULY 2019 Infrastructure Victoria

© SGS Economics and Planning Pty Ltd 2019 This report has been prepared for Infrastructure Victoria. SGS Economics and Planning has taken all due care in the preparation of this report. However, SGS and its associated consultants are not liable to any person or entity for any damage or loss that has occurred, or may occur, in relation to that person or entity taking or not taking action in respect of any representation, statement, opinion or advice referred to herein. SGS Economics and Planning Pty Ltd ACN 007 437 729 www.sgsep.com.au Offices in Canberra, Hobart, Melbourne, Sydney

190257 Housing Targets review Final report 20190720

TABLE OF CONTENTS

EXECUTIVE SUMMARY III

1. INTRODUCTION 1

1.1 Study context 1 1.2 Project purpose 1 1.3 Method and approach 2

2. HOUSING PLANNING CONTEXT 3

2.1 Metropolitan policy evolution 3 2.2 Current Local Government approaches to planning for housing 8 2.3 Regional Victoria 12

3. CASE STUDIES - TARGETS IN OTHER JURISDICTIONS 13

3.1 Sydney 13 3.2 New York 17 3.3 Toronto 18 3.4 London 20 3.5 Summary and implications 20

4. CONCEPTUAL EVALUATION 22

4.1 Risks and advantages 22 4.2 Evaluation 23

5. OPTIONS FOR HOUSING TARGETS 24

5.1 Introduction 24 5.2 Scope of targets 25 5.3 Summary 31

6. OTHER OPTIONS 33

6.1 Targets for specific sites 33 6.2 Capacity building 33 6.3 Incentivising development via financial structures 34 6.4 Changing Planning controls 34 6.5 Development contributions to fund local infrastructure 34

7. SUMMARY AND CONCLUSIONS 37

7.1 Key conclusions 37 7.2 Further research 38

APPENDIX – LIVEABLE YARRA CASE STUDY 40

Housing/Density Targets and other policy tools - background research i

LIST OF FIGURES

FIGURE 1: MARIBYRNONG HOUSING FRAMEWORK 9 FIGURE 2. COMPONENTS OF VIF POPULATION GROWTH (VICTORIA) 12 FIGURE 3: SYDNEY HOUSING TARGETS 2016–2036 15 FIGURE 4: GREATER SYDNEY HISTORIC AND FUTURE HOUSING SUPPLY 16 FIGURE 5 NEW HOUSING MARKETPLACE PLAN FISCAL YEAR STARTS 2004-2013 18 FIGURE 6: SUMMARY OF HOUSING TARGET DEVELOPMENT PROCESS 31 FIGURE 7: TYPES OF DEVELOPMENT CONTRIBUTION 35

LIST OF TABLES

TABLE 1: POTENTIAL ADVANTAGES AND RISKS OF HOUSING TARGETS 22 TABLE 2: EVALUATION OF HOUSING CAPACITY AND TARGETS 23 TABLE 3. EVOLUTION OF POPULATION PROJECTIONS FOR MELBOURNE 24 TABLE 4: HOUSING TARGET ELEMENTS 26 TABLE 5: ASSESSMENT OF APPROACH OPTIONS 29

Housing/Density Targets and other policy tools - background research ii

EXECUTIVE SUMMARY

Ensuring supply of the right type of housing, in the right locations across a city provides housing choice. It can also support efficient use of land and infrastructure, by encouraging development in areas with underused infrastructure capacity. In Melbourne, the issues planning seeks to address have changed as the city has grown, and society’s expectations have evolved. This has seen increasing consideration given to the environmental and economic outcomes of the city’s structure, resulting in an increased emphasis on planning for housing growth in the established parts of the city (particularly in locations with good access to jobs and services) to limit the outward expansion of the city’s footprint. The planning and delivery of housing in existing areas is inherently more complex and contested. The views and aspirations of the existing community need to be considered, and in many cases, there is resistance to accommodating additional growth. State Government has limited levers to influence how, where and when housing development happens. Metropolitan strategic planning is an important tool. Other tools such as major infrastructure investment, the Urban Growth Boundary and statutory planning instruments also influence housing outcomes. Councils’ influence on how and where housing development occurs, is primarily through undertaking strategic planning and developing local policy directions. These inform the application of planning controls and decision making regarding the use and development of land. Local planning for housing is generally based on policy neutral projections of demand (eg Victoria in Future population projections). Some strategies and planning frameworks provide a clear approach to accommodating anticipated demand, underpinned by robust analysis of capacity and feasibility. Others have general principles which don’t provide clarity on preferred outcomes for particular areas. Across metropolitan Melbourne there is significant variation in Council approaches to strategic planning for housing, and there is no mechanism to ensure that, at an aggregate level, planning will provide sufficient housing supply across the city. In terms of housing supply, there are locations in Melbourne with good infrastructure which are not KEY DEFINITIONS accommodating significant housing growth. This Population and housing projections: suggests alternative approaches are required to the aggregate level of growth that is planning for housing, and engaging with the anticipated and, in most cases, a community, if the objectives established in Plan spatial distribution of where this Melbourne are to be achieved. growth is anticipated to occur. The challenges of planning for, and delivering, Housing targets: the quantum of housing in established parts of the city are not dwellings which need to be unique to Melbourne, many other cities have faced similar challenges in the past few decades. Several accommodated in a particular area* cities have implemented targets to provide clearer Housing capacity: the quantum of expectations of growth. No robust evaluations of dwellings which an area can these approaches were carried out as part of the accommodate research to inform this paper. The continued *Noting that in Section 5.2 the use of capacity as a refinement of the targets approach in NSW target is also identified suggests that stakeholders see value in the approach. Overall, the experience in NSW suggests

Housing/Density Targets and other policy tools - background research iii

there are benefits in setting housing targets, but they need to be supported by analysis and planning to be effective. The case studies also indicate there are a range of approaches to negotiating and setting targets. Sydney, Toronto and London have all set housing targets for local government areas and have a similar approach in setting targets. A New York case study provides an alternative approach to housing targets; government leading the financing and construction of significant amounts of housing. There are a range of considerations for the format, content and approach for setting targets. If targets are evidence based, and negotiated with council and the community, they could deliver a range of benefits:

▪ Ensure a consistent approach to planning for housing ▪ Support optimal or improved urban outcomes across a range of indicators by ensuring housing is being delivered in the right locations ▪ Ensure the aggregate level of housing demand is being planned for, contributing to improved housing supply and choice ▪ Housing affordability ▪ Better more efficient housing market Most Councils prepare local housing strategies to provide clarity regarding how an area will accommodate its anticipated growth. Although variable in scope and approach, if prepared using a robust evidence-based approach, with appropriate community engagement, these strategies can deliver a range of benefits, including

▪ Providing certainty to the development sector regarding expectations in specific areas ▪ Potentially resulting in less conflict through the planning system, as it is clear where growth can be accommodated ▪ Providing the community with an understanding of the factors affecting growth, awareness of the trade-offs involved in planning for anticipated growth as well as input into planning for additional infrastructure. While these are important benefits, there is currently no mechanism to ensure that local housing strategies, collectively, will provide the scale of growth that is projected for the metropolitan area, or, that the distribution of growth that is being planned for will deliver optimal outcomes. Setting local housing targets, which consider these two elements (overall scale of growth, and optimal urban structure/ distribution of growth) would provide additional benefits to local and state government, as well as local communities. This would allow more coordinated planning for infrastructure, and potentially a more effective metropolitan housing market, in addition to the benefits of preparing a local housing strategy. In the UK, local authorities in London are encouraged to plan for housing through incentives with negative consequences if they don’t comply. The State government role in facilitating this outcome includes:

▪ Provide the vision and policy regarding urban structure/ settlement patterns, and policy principles regarding appropriate locations for housing ▪ Overseeing the development of a clear and consistent evidence base, to inform targets, and subsequent local planning ▪ Coordinating planning for urban renewal, including Growth Compact approaches ▪ Coordinating regional collaborations in planning for housing ▪ Providing advice, guidance and support for preparing housing strategies in a consistent manner across the city ▪ Delivering and coordinating infrastructure provision that supports and responds to housing and population growth.

Housing/Density Targets and other policy tools - background research iv

It should be noted that while this scope of work is significant at both a state and local government level, resources are already being deployed to undertake many of these tasks albeit without a consistent approach or framework. Targets which are set by using a trend or projection can also deliver some benefits:

▪ Enable and facilitate coordination of planning for infrastructure and services (particularly by the state government) by providing clear and agreed levels of demand in a particular area ▪ Focus State and local government thinking and planning efforts into identifying capacity for additional housing and barriers to unlocking that supply (e.g. infrastructure bottlenecks or commercial feasibility issues). Planning for housing growth also needs to consider planning for infrastructure. This should occur in a coordinated way, between state and local government, with community input. Planning for infrastructure in established areas is complex. In addition to the scale of future demand based on demographic projections it should consider:

▪ Capacity for existing facilities to deliver additional services (eg through improved scheduling of the use of sports grounds, or the co-location of community health and care facilities) ▪ The potential to deliver services in new and innovative ways (eg libraries can potentially deliver a wider range of services online without the need for significant additional floorspace) ▪ If additional infrastructure is required, the capital and operational costs and economic benefits of various scenarios should be assessed. Scenarios could encompass upgrading existing facilities, building new facilities, relocating existing services. In areas where there is little or no infrastructure (eg growth areas yet to be developed), planning for infrastructure may be more straightforward and can be informed by ratios or provision rates as a first step. Along with the provision of infrastructure, planning for housing with robust evidence and deploying housing targets, other options to help encourage additional housing growth and ways to try and direct development in locations where there is infrastructure capacity, include:

▪ Developing targets for specific sites ▪ Supporting skill and capacity development in local planning of housing ▪ Incentivising development ▪ Changes to planning controls ▪ The use of development contributions to fund infrastructure. A key barrier to housing growth, and an element of community resistance to increased growth is lack of local infrastructure.

Housing/Density Targets and other policy tools - background research v

1. INTRODUCTION

1.1 Study context Strategic land use planning plays an important role in the development of equitable, liveable and efficient cities. Planning for the delivery of housing, in the right locations, provides housing choice and affordability and ensures efficient use of infrastructure. The factors which affect planning for housing have changed as the city has grown, and society’s expectations have evolved. This has seen increasing consideration given to the environmental and economic outcomes the city’s structure, resulting in increased emphasis on housing growth in the established parts of the city, (particularly in locations with good access to jobs and services), and limiting the outward expansion of the footprint of the city. Various mechanisms have been used to encourage this in Melbourne, including:

▪ Articulation of desired outcomes in metropolitan strategic plans ▪ State government support for regional housing planning ▪ State government led assessments of housing capacity ▪ Local government settlement and housing planning Despite these efforts, there are locations in Melbourne with good infrastructure which are not accommodating significant growth (refer SGS 2019: Metropolitan Spatial Profiles for Infrastructure Victoria). Setting housing targets was an option raised in the Plan Melbourne refresh discussion paper. The discussion paper stated that targets can assist with guiding investment in infrastructure and services, as well as facilitating the distribution of new housing in locations close to jobs and services. Housing targets were identified as a way to ensure housing growth is directed to the most suitable locations in Melbourne, densifying locations with good infrastructure provision.

1.2 Project purpose In response to this, Infrastructure Victoria (IV) is examining whether housing/density targets for Melbourne could support more development, especially in areas where there is infrastructure capacity, and what other policy tools could be effective. A key objective of this work is to understand what tools and levers state government can use to incentivise local government to implement a policy of densification in appropriate locations. This research report was developed to:

▪ Identify the historic and current process for planning for housing in Melbourne ▪ Provide an overview of how housing targets are used in other cities ▪ Evaluate the benefits and challenges of targets to Victorian ▪ Outline parameters to maximise the effectiveness of housing targets ▪ Outline other state government policy tools (excluding governance reforms) which could incentivise local government to support more development in areas where there is infrastructure capacity, including evidence of the effectiveness, benefits and challenges of these policy tools and applicability to Melbourne and Victorian cities.

Housing/Density Targets and other policy tools - background research 1

1.3 Method and approach This preliminary paper on housing targets has been informed by:

▪ A review of various ways Melbourne and other cities have approached planning to meet for demand for housing and infrastructure ▪ The roles of local and state government in the development of local housing strategies ▪ Case studies of other jurisdictions where various types of housing targets have been developed ▪ A review of alternative ways to influence the delivery of housing The structure of the paper, as follows, comprises:

▪ Tracing the history of planning for housing in Melbourne, and in particular how the changing nature of the city’s urban structure and planning objectives have influenced planning for housing ▪ The current approach to planning for housing at the local level ▪ Australian and international housing target case studies ▪ The key choices and opportunities associated with setting housing targets, including potential risks, and an overall evaluation of targets ▪ Other ways the State government could encourage preferred housing outcomes ▪ Key questions for further research which have emerged from this initial research paper.

Housing/Density Targets and other policy tools - background research 2

2. HOUSING PLANNING CONTEXT

This section provides an overview of metropolitan strategic planning in Melbourne; a key tool for the State Government to influence the location of housing development. The variation in approach and principles of settlement planning, including the role of infrastructure, are outlined. Planning for housing also occurs at a local government level, and a more detailed overview of how this is generally approached is also provided.

2.1 Metropolitan policy evolution Strategic land use planning plays an important role in the development of equitable, liveable and efficient cities. Planning for the delivery of housing, in the right locations, provides housing choice and affordability and ensures efficient use of infrastructure. The government’s role does not, by and large, directly include the delivery of housing. Instead the government’s role in housing supply is to provide clear direction regarding the preferred locations and (potentially) form of housing. This acknowledges that, in the absence of government policy and intervention (via the planning system) sub optimal housing and liveability outcomes would prevail. The way this has been approached in Melbourne has evolved over time as the city has developed. In the past, the process was relatively straight forward: land on the fringe of the city was identified for development, housing densities (lot sizes) were determined, and construction of new dwellings commenced. The scale of development was informed by city wide projections of total population growth. As the city expanded its physical footprint, increasing consideration was given to the environmental, social and economic impacts of this approach. A more consolidated urban form was considered to deliver a range of benefits, including

▪ encouraging the more efficient use of land and infrastructure ▪ encouraging redevelopment in areas with underused infrastructure capacity ▪ providing greater housing choice Since the 1990s, planning policy has encouraged increased housing development in the established parts of the city, through urban renewal and increased densification in existing suburbs. This section provides an overview of the policy evolution of planning for settlement and housing in Melbourne, and the tools used to influence the location of development.

Plan for General Development (1929) The 1929 Plan for General Development forecast that the population of Melbourne would double over a twenty-year period, increasing from around one million people in 1930 to around 2 million by 1950. The plan largely focused on the regulation of development, introducing zoning and calling for tighter design guidelines around road and other service provision, particularly in growth areas. The key approach to informing settlement planning was working with local government and developers to set out subdivision patterns in suburbs like Blackburn, Mitcham, Box Hill, Brunswick, Camberwell, Oakleigh and Port Melbourne. Due to the Great Depression and

Housing/Density Targets and other policy tools - background research 3

World War II, the population of Melbourne only reached around 1.4 million in 1950, meaning many of the suburb plans were not fully realised. While targets were not specifically set, the plan set out how projected growth would be accommodated, in a reasonably detailed manner. This was possible given the scale of growth and the factors affecting planning for housing (ensuring sufficient infrastructure and outlining locations with proposed densities for development).

Melbourne Metropolitan Planning Scheme (1954) The 1954 plan, and the associated Melbourne Metropolitan Planning Scheme established the planning framework within which Melbourne largely operates in today. The 1954 Scheme projected a future population of 2.5 million people, and planned to accommodate this largely via outward expansion, in an urban area of about 686 square kilometres over a 25-30 year period. The plan set a limit on the outward expansion of the urban area and put in place mechanisms to ensure the timely provision of infrastructure with new development. Housing growth estimates for each region were provided in the plan, along with preferred densities for delivery. While not explicitly labelled as targets, the 1954 Scheme communicated clear expectations about the location and form of housing development. Melbourne’s growth occurred faster than was projected, reaching a population of around 3.0 million during that period.

Planning Policies for Metropolitan Melbourne (1971) The 1970s saw an increased consideration of the values of the physical environment in metropolitan planning, and the 1971 Planning Policies for Metropolitan Melbourne promoted urban corridors separated by protected green spaces. At the time it was acknowledged that a corridor orientated growth plan would require significant improvements in accessibility in outer regions. The 1971 plan sought to accommodate a population of around 4.6 million people by the year 2000. Melbourne’s actual population in the year 2000 was 3.5 million. As with the 1954 plan, a clear articulation of anticipated growth was provided, without explicitly being labelled as targets.

Metropolitan Strategy Implementation (1981) Following the end of the ‘long boom’ in the mid to late 1970s, the 1981 Metropolitan Strategy Implementation Plan took on a number of new objectives. In pursuit of a ‘more diverse, more interesting, more dynamic’ Melbourne, the 1981 plan called for:

▪ a vigorous Central Melbourne ▪ continued but slower growth in the outer urban areas ▪ greater activity at identified district centres along existing transport routes. The 1981 plan emphasised an incremental development approach, taking full advantage of the public and private investment that already existed in the metropolitan region, including transport, recreational and cultural facilities and social service networks.

Housing/Density Targets and other policy tools - background research 4

Revitalising the central city was supported by significant planned investment (a million dollars per year for the prompt delivery of required new services was planned) and parts of the central city were rezoned to facilitate commercial development and encourage intensified housing. This was supported by the City of Melbourne’s ‘Postcode 3000’ policy which, released in 1992, encouraged residential apartment construction and uptake in the central city, reversing the long term flight of population from the inner urban areas. The 1980s also saw the introduction of the Planning and Environment Act (1987), the legal framework for the preparation and administration of local planning schemes which inform decisions about granting of development rights via planning permits. Disputes over the issuing or otherwise of planning permits are heard by the Victorian Civil and Administrative Tribunal (VCAT). The economic conditions of this period meant that the focus for strategic planning was stimulating growth to support economic activity, and there was limited impetus for targets and the need to manage and direct housing growth.

Living Suburbs (1995) During the 1990s, several reforms to the planning system were made, primarily linked to economic prosperity and job creation. The 1995 plan, Living Suburbs, expected Melbourne’s population to reach 3.6 million people by 2011 (compared to an actual outcome of 4.2 million). Housing capacity for an additional 1.2 million people was identified in the plan, with 15 per cent of this in established suburbs. This period also saw both the amalgamation of local councils and an increase in State Planning Minister ministerial powers, resulting in more concentrated planning power at the state level. Planning began to focus more heavily on housing and population growth in established areas including major inner city development on former industrial areas in Southbank and Docklands.

Melbourne 2030 (2002) and Melbourne @ 5 Million (2008) Melbourne 2030 was released in 2002 and was developed based on projections which indicated Melbourne would reach a population of 5 million by 2030. Melbourne 2030 aimed for a more compact city through prioritising infill rather than greenfield development. The plan sought to reduce urban sprawl, build up neighbourhood centres and protect the green wedges of Melbourne. To encourage this development pattern the Urban Growth Boundary was established, and numerous activity centres of various significance nominated as a focus for housing and other development. Out of centre growth was restricted with the intention of protecting the amenity of established urban areas and directing development to areas with better infrastructure provision. Housing was also directed to strategic redevelopment sites that offered good access to services and transport. The Government aimed to improve the use of existing infrastructure by:

▪ Working with local government and the private sector to identify inner urban sites for residential redevelopment

Housing/Density Targets and other policy tools - background research 5

▪ Assisting councils to prepare planning strategies with special emphasis on integrating development with existing infrastructure - for example, by encouraging higher density development along tram routes and near railway stations ▪ Enhancing public transport services - through integration of services across all modes. Melbourne 2030 did not articulate housing targets, however Regional Housing Statements, and the Housing Growth Requirements Project were initiatives linked to Melbourne 2030, to support the plan’s aspirations for housing growth (refer below)) For various reasons, the projections used to inform Melbourne 2030 significantly underestimated future growth, and Melbourne reached the 2030 population 14 years earlier than expected. Early indications of this trend informed the preparation of Melbourne @ 5 million, which extended the Urban Growth Boundary and reinforced the urban structure, including centres and corridors, in Melbourne 2030.

Regional Housing Statements Regional Housing Working Groups were established as a key initiative of Melbourne 2030 and comprised local councillors, council officers and State Government representatives. The developed Regional Housing Statements (RHS) to provide a regional strategic framework to plan for the housing needs of the region’s predicted population and household growth to 2031. They were intended to provide guidance and direction for local councils in the development and review of strategic planning work, and to assist State and local government in coordinating future infrastructure and services with population growth. The Statements provided capacity estimates for regional strategic redevelopment sites, dispersed residential locations and greenfield locations, although it was explicit these were not targets. The extent to which these resulted in infrastructure investment appears limited and has not been formally evaluated.

Housing Growth Requirements and Housing Capacity Assessments The Housing Capacity Assessments (HCA) project was identified by State Government in Planning for all of Melbourne (a response to the recommendations of the Audit of Melbourne 2030) to ensure adequate supply, choice and affordability of housing in the face of population growth. It was part of a broader Housing Growth Requirements program, which aimed to facilitate a whole of government effort to plan for housing needs including setting clear requirements on the amount and diversity of housing need in each LGA. A central objective of the HCA project was to better understand the amount and location of opportunities for new housing to inform short and long-term planning and investment decisions by State and local governments, the community and private sector. A common method was applied to all existing urban areas across metropolitan Melbourne municipalities, to estimate the capacity for additional housing and likely distribution of projected housing development to 2026 based on existing policies and recent development trends. The HCA findings provided a basis for better understanding opportunities for additional housing across Metropolitan Melbourne. The method was robust, based on clear assumptions, consistent across LGAs and based on reliable evidence. The three key stages of analysis were:

▪ Estimating the potential number and distribution of new dwelling opportunities in existing urban areas ▪ Projecting the likely number and distribution of new dwelling opportunities taken up by 2026 in five yearly intervals ▪ Identifying a range of options to increase dwelling capacity and take-up and estimate the resulting change. Comprehensive consultation with councils and State Government was recognised as key to the project’s success.

Housing/Density Targets and other policy tools - background research 6

The capacity assessments were intended to inform Housing Growth Requirements (HGR). However, changes in the political context (including change of government) meant the project stalled. Importantly, the project led to a detailed and consistent understanding of capacity in established areas and that there was a significant quantum of capacity for additional development.

Plan Melbourne (2017) Plan Melbourne, finalised in 2017, focuses on the economic drivers of development and change in Melbourne, and identifies an urban form which reflects these influences. It acknowledges the important economic, social and cultural role of the central city, identifies seven suburban clusters for employment and innovation (NEICs) and 11 metropolitan activity centres to accommodate jobs, activities and housing. Plan Melbourne’s approach to planning for housing is underpinned by the 20 minute neighbourhood concept, which seeks to create ‘accessible, safe and attractive local areas where people can access most of their everyday needs within a 20-minute walk, cycle or local public transport trip1’ The Plan notes that since 2014 around 70 per cent of all new housing has been built in established areas, and that Melbourne must build on this current trend to ultimately accommodate 70 per cent of all dwellings in established areas. It sets out population projections the six metropolitan subregions in terms of additional dwellings in established and greenfield locations (65% in established areas, 35% in greenfield), and an aspirational scenario where the balance is shifted towards a 70:30 outcome for total housing. The Plan outlines a number of strategies and approaches to achieve this, including regional planning and principles relating to the location of housing development. It also addresses housing diversity, and affordable housing. The preparation of Land Use Framework Plans (currently underway) will identify locations for medium and higher density housing, while planning for major infrastructure projects will also identify opportunities for additional development in established parts of the city.

Summary and implications Metropolitan strategic planning policy has consistently sought to articulate the scale of population and housing growth that is projected to occur, and to provide clear direction as to where it should be accommodated. The principles and values which underpin this planning have evolved, reflecting the broader societal context and trends. This has resulted in a shift in emphasis from planning for housing by expanding the urban footprint, opening up greenfield areas and providing infrastructure in response, to supporting housing in established parts of the city and leverage existing infrastructure capacity. This approach is more complex, requiring additional implementation and delivery approaches including coordination with local government and specific initiatives to develop a consistent evidence base. The RHS and HGR programs represented an increased focus on planning for housing from State government, in collaboration with local government. They were important initiatives, the first major steps towards understanding capacity across the city, and facilitating regional scale discussions about how the city’s growth should be accommodated, and local government’s role in this.

1 The preparation of the Regional Land Use Framework Plans notes that the 20 minute neighbourhood concept has been refined to encompass a 20 minute pedestrian round trip.

Housing/Density Targets and other policy tools - background research 7

2.2 Current Local Government approaches to planning for housing Detailed planning for accommodating housing growth generally occurs at a municipal level. From a demand side, it largely draws on the official government projections Victoria in Future (ViF) and considers the regional projections outlined in Plan Melbourne. These projections provide important information about the anticipated scale of growth and context for local area planning, including for infrastructure. ViF provides projections of estimated resident population, as well as the number of households and dwellings. It does not break this down to dwelling types.

Housing Strategies Planning for housing by local government often occurs via the preparation of a housing strategy. This can include:

▪ A spatial approach to accommodating projected housing growth (areas of change, locations were medium and higher density development is preferred, as well as areas where there will be more incremental or limited change, refer Figure 1) ▪ Objectives regarding housing design including expectations of built form in various areas of change, as well as adaptability and environmentally sustainable design ▪ Strategies to address dwelling diversity, including specific needs (eg student, aged care, disability) as well as different housing types (townhouse, detached, unit/ apartments) ▪ Mechanisms to address housing affordability ▪ Implementation including Scheme changes, updates to policy and advocacy work.

The various areas of change are generally identified based on a range of factors, including the character and built form of an area, as well as estimates of capacity to accommodate additional housing. The current land use in an area and its designation as an activity centre can also inform the classification of areas. Identifying sufficient opportunities for growth in preferred locations is an important strategy for limiting growth in other areas and can be an important discussion to have with the community. The concept of trade offs about locations for growth and subsequent infrastructure investment is important for building community support and understanding of the need for growth in established areas.

Housing/Density Targets and other policy tools - background research 8

FIGURE 1: MARIBYRNONG HOUSING FRAMEWORK

Source: City of Maribyrnong, 2018 and SGS Economics and Planning, 2018 Strategies can also be underpinned by an overall estimate of housing demand, drawing on ViF projections as well as Census data patterns in demographics and housing types, recent trends in housing development as well as household type and structure, age profiles. In some cases, councils commission independent demand projections. However, they will generally be similar to ViF. There is significant variation in how housing strategies are prepared, including:

▪ How demand is assessed, including whether recent growth trends are incorporated, whether there has been consideration of regional and local trends ▪ The way capacity is identified, including whether feasibility and site constraints are considered, how capacity of major urban renewal sites are identified

Housing/Density Targets and other policy tools - background research 9

The robustness of strategies is variable – some are aspirational while others are more realistic. This influences the level of detail, and guidance provided. For example, some strategies indicate support for high levels of density in urban renewal and activity centres, without a clear sense of which centres might be able to accommodate growth in the short, medium or long term, expected built form outcomes in various locations, or the scale and nature of infrastructure required to support growth. In the absence of a clear housing strategy there are no clear expectations about housing growth in a particular location. This makes developing an understanding of the role of a particular location or precinct in delivering the municipality’s overall housing growth unclear. Without clear policy, there is a risk that sites are under-developed, and opportunities to deliver housing close to jobs, transport and services are lost. In other instances, local government planning has set clear expectations for particular locations. For example, in Doncaster Hill, Council had a clear agenda for accommodating high density built form. The articulation of this in policy meant that:

▪ Other parts of the municipality accommodated more incremental growth ▪ The development sector had clear guidance of appropriate building forms for the precinct. Housing strategies which don’t provide an evidence base for accommodating sufficient housing risk having their strategies regularly contested through the development approvals process. For example, if a proponent can demonstrate that Council’s policy to accommodate the majority of housing in a few selected activity centres or urban renewal sites is unlikely to be realistic, development in alternative locations may be more likely to be supported by independent entities such as VCAT. Overall, this means there is an inconsistent approach to planning for housing across the metropolitan area. A further implication is that there is no mechanism to ensure that, at an aggregate level, sufficient housing is planned for.

Planning for strategic urban renewal areas Planning for local urban renewal areas (for example Northland Urban Renewal Precinct) will generally consider the site capacity and constraints as well as the local and regional demand for different dwelling types, and development on the site will be included as part of the strategy to accommodate the projected dwellings in the municipality. For major urban renewal areas (for example Fishermans Bend), planning will also consider site capacity and constraints, but it is assumed that demand for housing will exist over and above LGA wide projections.

Issues discussion The method used to prepare ViF is summarised overleaf, noting there is limited consideration of the capacity to accommodate future growth in terms of infrastructure, services and economic growth. The use of projections as a proxy for demand limits the likelihood that Councils will plan to accommodate additional growth beyond what is projected. Given ViF is policy neutral and does not explicitly consider optimal urban form outcomes, this may represent a suboptimal outcome. Projections are, however, an important part of the planning process and provide a useful indication of the magnitude of expected change.

Housing/Density Targets and other policy tools - background research 10

Summary and conclusions Despite these approaches, further efforts to deliver housing in established parts of the city are required. Evidence based housing strategies can provide confidence about where and how housing growth will occur. There is inconsistency in the scope and approach used to prepare these across the city and no mechanism to ensure that collectively, they will ensure that the city’s necessary housing growth will be accommodated. There is also no incentive or mechanism for certain LGAs to support more housing, even if they are the best location for it. These factors have the potential to cause adverse outcomes for the city, including inefficiencies in the metropolitan housing market and a lack of coordinated planning for infrastructure. In particular, there is potential for:

▪ Continuation of the trend which has seen parts of Melbourne not accommodating significant growth despite being infrastructure rich, while growth occurs in other areas where there is limited infrastructure, requiring more infrastructure to service communities while existing infrastructure is underutilised ▪ Poor economic and social outcomes, such as limited access to jobs and services ▪ Friction throughout the planning process, including at VCAT, leading to increased costs of development ▪ Community frustration at uncertainty and unpredictability of the development process, and lack of infrastructure to support growth ▪ Discussion and interactions between state and local government may not be informed by consistent and robust evidence regarding anticipated growth Setting local housing targets at an LGA level which consider overall scale of growth, and optimal urban structure/ distribution of growth across the city would address these adverse outcomes. These targets should set the overall context for local housing strategies, which should articulate how the growth will be accommodated.

Housing/Density Targets and other policy tools - background research 11

VICTORIA IN FUTURE – METHODOLOGY OVERVIEW The cohort component model is used to determine the size and age structure of the Victorian population, and to apportion this population across smaller areas. At the state and regional level, modelling is purely demographic. This model takes a population by single year of age and sex, and ‘ages’ that population in given increments. This is done by taking into account the likelihood of any individual to give birth, to die, or to migrate in or out of the area. At the State level the inputs for the cohort-component method are:

▪ Base year population (by single year of age and sex) ▪ Mortality rates (by single year of age and sex) ▪ Overseas migration arrivals (by single year of age and sex) ▪ Overseas migration departures (by single year of age and sex) ▪ Interstate migration arrivals (by single year of age and sex) ▪ Interstate migration departures (by single year of age and sex) ▪ Fertility rates (by single year of age from 15 to 49 years), and ▪ Sex ratio for births. The different components of population change affect the projected future population to different degrees. VIF2015 makes assumptions of the future changes in the components based on trend analysis and expert advice. Figure 2 presents a summary of the key component of population growth between 2011 and 2051.

FIGURE 2. COMPONENTS OF VIF POPULATION GROWTH (VICTORIA)

2.3 Regional Victoria Some regional locations are experiencing growth at a rate that strategic planning for where and how housing growth should be focussed is necessary. This is mainly occurring in larger regional cities such as Geelong, Ballarat, Bendigo and Shepparton, as well as some peri-urban areas. In these locations, planning for housing should follow a similar process to metropolitan Melbourne – identifying demand, capacity and, considering local market dynamics, identifying a preferred distribution of housing growth.

Housing/Density Targets and other policy tools - background research 12

3. CASE STUDIES - TARGETS IN OTHER JURISDICTIONS

Given the current approach to planning for housing has its limitations in terms of delivering housing in the right locations, alternative approaches are required. This section provides an outline of the current approaches in Sydney, New York Toronto and London, including the use of housing targets.

3.1 Sydney

Metropolitan Strategy – City of Cities The 2005 strategy provided a vision for Metropolitan Sydney to 2031 to continue to be the economic driver for the state and the nation. It identified that 725,000 additional homes would be needed by 2036, and by 2056, significant further housing supply would be required in response to continued strong population growth. The plan identified desirable housing and employment locations along with some major transport initiatives. The Strategy defined capacity targets for residential and employment growth. Further detailed planning at the District level provided a vision for the future role of the subregion, clarity on the future roles of centres in the District, staging and prioritisation of renewal, a framework for prioritisation of state infrastructure within the subregion and targets for housing and employment capacity. Specific policy in the strategy included: that over three–quarters of new housing will be located in strategic centres, smaller centres and corridors within walking distance of shops, jobs and other services concentrated around public transport nodes. State government required local government to prepare Residential Development Strategies (RDSs) in 1995, to allow additional dwellings of a suitable type to be developed within the existing urban area with the objective of minimising sprawl. These had to identify local housing opportunities and to zone land to allow for increased residential development and were translated into land use zones in Local Environmental Plans (NSW Planning Schemes). In the 2005 strategy, it was noted that ‘These RDSs have been successful by both providing a sufficient amount and appropriate location of supply. In the past five years, 43 per cent of new dwellings in existing areas have been in locations with easy access to public transport.’ The strategy included an action to ‘plan for increased housing capacity targets in existing areas’ and to ‘set subregional housing capacity targets, based on discussions with local government representatives’. These targets were for housing to be delivered by 2031. To translate these regional targets to local government areas, government proposed subregional planning exercises. A further action was to ‘undertake dwelling potential assessments to better understand supply.’ This assessment of housing potential was to determine more precisely the levels and locations of zoned capacity and would include monitoring housing supply in the pipeline and land that is currently being developed. Councils were also required to identify new housing opportunities and sources of supply to match the housing requirements outlined in the Metropolitan Strategy.

Housing/Density Targets and other policy tools - background research 13

Metropolitan Plan for Sydney 2036 This plan, released in 2010, remained relatively similar to the 2005 strategy and included actions to:

▪ ‘Locate at least 70 per cent of new housing within existing urban areas and up to 30 per cent of new housing in new release areas ▪ Reflect new subregional housing targets in Subregional Strategies and Local Environmental Plans, and monitor their achievement’ This Plan updated subregional housing targets by moving the timeframe to 2036 with consideration given to updated Local Government Area targets. The targets represented a shift towards more homes in established areas compared with the 2005 Strategy. Councils had to incorporate the Plan’s targets and strategic directions into their LEPs at the first opportunity, and it was acknowledged that the targets were a minimum and councils were encouraged to plan for higher capacity. The plan also included an action to market test the feasibility of development controls. Councils had to annually upload their long–term housing strategies and estimates into the METRIX Subregional Planning Tool (an internet-based electronic model which examined the feasibility of locating these additional dwellings in centres as opposed to areas outside them2). Housing targets were calculated after considering household and dwelling projections, demographic and economic trends, land capacity, infrastructure and feasibility. A key guiding factor for distributing new housing targets was the subregional jobs to population ratio.

A Metropolis of Three Cities The Greater Sydney Commission’s (GSC) strategy sets out objectives to deliver housing supply and affordability, including 20 year district level housing targets. The District Plans prepared by the GSC include housing targets at a district level. The targets are based on dwelling demand and known opportunities to deliver supply under current planning controls. They are minimum targets, largely reflecting what is expected to occur in the short term in the municipality. Councils are then required to develop targets for 6-10 years, as part of a broader housing strategy. The strategy format and required considerations are outlined by State Government and need to demonstrate capacity for steady housing supply into the medium term. State government also play an assurance role on the local strategic planning statements for councils (including local housing strategies) in the metropolitan area as well as a role in negotiating targets and monitoring housing delivery. The housing supply targets are informed by:

▪ Dwelling projections (NSW Department of Planning and Environment) ▪ Housing supply forecasts (NSW Department of Planning and Environment) ▪ The NSW Intergenerational Report ▪ Housing Market Demand Areas ▪ Housing market preferences ▪ Existing local infrastructure capacity. Councils are to investigate opportunities for supply and a diversity of housing particularly around centres to create more walkable neighbourhoods. For councils, the main tool for understanding the need and planning for housing and infrastructure delivery is housing strategies which need to address the 0–5 year and 6–10 year local (when agreed) or district housing targets as well as 20-year strategic district targets outlined in district plans.

2 Bunker 2015 The changing political economy of the compact city and higher density urban renewal in Sydney

Housing/Density Targets and other policy tools - background research 14

Councils detailed consideration of capacity of the current planning framework needs to consider feasibility as part of capacity, as well as potential yields from state priority planning precincts. Councils are working with the GSC and State agencies to establish agreed 6–10 year housing targets, building on the 0-5 year targets, as they develop their housing strategies and identify the right locations for additional housing. How much councils can deliver is based on demand and capacity considerations under planning controls and development constraints such as local character. In addition, councils are to identify specific attributes that make local areas suitable for housing supply beyond 10 years. These attributes include proximity to transport interchanges and strategic and local centres (especially those with a supermarket) that can support walkable neighbourhoods with access to jobs, schools and open space and opportunities to optimise existing infrastructure. Planning for housing supply beyond 2026 is more strategic to allow for a range of changing circumstances and industry responses to market changes. The 20-year strategic housing targets are at the district level to provide the longer-term context for housing strategies. Where housing market areas cross local government boundaries and where infrastructure to support growth is of city shaping significance, a district level housing strategy may be appropriate. Joint activity is being considered for the western Sydney Parkland City through the western Sydney planning partnership comprising Councils, DPE and the GSC. The development industry plays an important role in supporting housing outcomes by continually provide new housing and translating development capacity created by the planning system into approvals and supply.

FIGURE 3: SYDNEY HOUSING TARGETS 2016–2036

0–5 year housing supply target: 20-year strategic housing target: District 2016–2021 2016–2036

Central City 53,500 207,500 Eastern City 46,550 157,500 North 25,950 92,000 South 23,250 83,500

Western City 39,850 184,500

Greater Sydney 189,100 725,000

Source: https://www.greater.sydney/metropolis-of-three-cities/liveability/housing-city/greater-housing-supply

Housing/Density Targets and other policy tools - background research 15

FIGURE 4: GREATER SYDNEY HISTORIC AND FUTURE HOUSING SUPPLY

Source: https://www.greater.sydney/metropolis-of-three-cities/liveability/housing-city/greater-housing-supply

Evolution of housing targets in Sydney The initial establishment of housing targets by the State Government in Sydney provided some benefits for planning purposes:

▪ There was clarity regarding the number of dwellings that needed to be planned for, enabling coordination of state agencies, and local planning ▪ Local Government were supported in their discussions with local communities about the need to accommodate housing growth. The 20 year targets were not based on local housing need, and did not reflect the changing dynamics of the housing market. This meant that as the city grew faster than anticipated, the housing targets quickly became out of date. The recent approach of articulating the short term housing supply pipeline (0-5 year supply) builds on previous experience, and provides clarity to stakeholders regarding anticipated growth. The commitment to articulating 6-10 year targets will further support these, as well as local and regional infrastructure planning.

Housing/Density Targets and other policy tools - background research 16

Many local governments are also developing local housing strategies, reflecting the various local dynamics and increasing complexity and diversity in local housing markets. The advent of new technologies, such as AirBNB and other accommodation sharing platforms, combined with increasingly diverse household structures, also means that planning for housing is becoming more complex. Setting housing targets in this context may require a local and more nuanced approach. Overall, the experience in NSW suggests there are benefits in setting housing targets, but they need to be supported by other analysis and planning to be effective.

3.2 New York In 2002, Mayor Bloomberg launched the New Housing Marketplace Plan (NHMP), marking the start of the largest public investment in the City’s housing stock. It set targets for the supply of affordable housing and by 2014, 165,000 housing units (including new and preserved) had been delivered by the NHMP. This represents around two thirds of all new additional dwellings in New York. The delivery of housing via the public sector acknowledged that government investment in housing operates in the context of the larger housing market and must therefore be responsive and adaptive to commercial feasibilities. On an agency level, housing targets have served as a device around which to organise work, plan budgets, and motivate staff. While the housing target served an important purpose, some argue that the emphasis on numbers came at the expense of a more strategic focus on diversification of income targets or comprehensive neighbourhood planning and development. The NHMP was followed by the Housing New York: A Five-Borough, Ten-Year Plan which aims to ensure supply of 200,000 high-quality, affordable homes.

Housing/Density Targets and other policy tools - background research 17

FIGURE 5 NEW HOUSING MARKETPLACE PLAN FISCAL YEAR STARTS 2004-2013

Source: The New Housing Marketplace Plan

3.3 Toronto To manage the expansion of Toronto and its surrounding areas, the Ontario provincial government led the development of the Growth Plan for the Greater Golden Horseshoe in 2006 and updated the Growth Plan in 2017. The Growth Plan establishes an intensification first approach to development and community building, one which requires municipalities to first demonstrate that they are optimizing existing urban land, infrastructure and public service facilities, before the urban area can be expanded to accommodate population and employment growth The aim of the Growth Plan was to confine at least 50 percent of growth to already built-up areas until 2031, and 60 percent from 2031 onwards. Greenfield areas should have a minimum of 80 residents and jobs combined per hectare. The plan also sets minimum housing densities for transport corridors (e.g. 200 residents and jobs combined per hectare for those that are served by subways).

Housing/Density Targets and other policy tools - background research 18

The Growth Plan stated that all municipalities must develop strategies to achieve minimum targets, including identifying strategic growth areas, updating zoning and prioritising infrastructure investment. Municipal housing strategies must promote a mix of housing options and densities and establish targets for affordable housing; accommodate the plan’s forecasted growth and density targets; and maintain land with servicing capacity for a three-year supply of housing. The municipal housing strategies:

▪ Encourage intensification generally to achieve the desired urban structure ▪ Identify the appropriate type and scale of development and transition of built form to adjacent areas ▪ Identify strategic growth areas to support achievement of the intensification target and recognise them as a key focus for development ▪ Ensure lands are zoned and development is designed in a manner that supports the achievement of complete communities ▪ Prioritise planning and investment in infrastructure and public service facilities that will support intensification ▪ Be implemented through official plan policies and designations, updated zoning and other supporting documents. Municipalities are required to provide data and information to the Planning Minister to demonstrate progress made towards the implementation of the Growth Plan. Municipalities may request an alternative to the target established via a comprehensive review where it is able to demonstrate that this target cannot be achieved and that the alternative target will: ▪ Maintain or improve on the minimum intensification target in the official plan that is approved and in effect ▪ Account for existing infrastructure, public service facilities, and capital planning ▪ Account for existing planning approvals and other related planning studies ▪ Consider the actual rate of intensification being achieved annually ▪ Account for lands where development is prohibited or severely restricted. Within the Growth Plan new or expanded infrastructure will occur in an integrated manner, including evaluations of long-range scenario-based land use planning. There is a focus on leveraging infrastructure investment to direct growth and development in accordance with the policies the plan. This includes the achievement of the minimum intensification and density targets in this Plan and providing sufficient infrastructure capacity in strategic growth areas.

Housing/Density Targets and other policy tools - background research 19

3.4 London London sets ten-year targets3 for net housing completions which each local planning authority then plans for. Boroughs (local government areas) must include these targets in delivery-focused Development Plans. These plans allocate an appropriate range and number of sites that are suitable for residential and mixed-use development and intensification. These plans consider sites with existing or planned public transport access levels based on clear metrics4. Mixed-use redevelopment of car parks and low-density retail parks and housing intensification on other appropriate low-density sites in commercial, leisure and infrastructure uses are also a focus. The redevelopment of surplus utilities and public sector owned sites are also considered. Housing development on industrial sites is investigated, but there are also requirements for the retention of industrial sites to support London’s economic function. In additional to the identified capacity, boroughs will try to encourage development on other appropriate windfall sites not identified in Development Plans through the Plan period. Boroughs are required publish and annually update housing trajectories based on the targets. As at 2019, 139 local authorities look set to meet their housing supply requirements. 164 local authorities are likely to miss their targets5. The National Audit Office noted that ‘councils are struggling to negotiate successfully with developers’. Between 2005-6 and 2017-18, an average of 177,000 dwellings were built each year with an aim of over 300,000 per annum6. The central government is using a combination of rewards and penalties to get councils to more effectively plan for housing delivery and identify future capacity7. There are bonuses for those that meet targets and the threat of losing planning powers for those who fail to meet targets. A National Audit Office report8 noted that ‘there is little evidence that the Bonus had made significant changes to local authorities’ behaviour towards increasing housing supply’ but also noted it may be too early to conclusively state whether it is a useful or successful approach.

3.5 Summary and implications Planning for housing in other jurisdictions, particularly where infill and established area growth is a key objective, is also challenging. Cities have taken various approaches, including:

▪ Allocating growth to sub regions within the metropolitan area ▪ Setting short, medium or longer term targets at a local government scale ▪ Tasking local government with developing medium term targets, in the context of district level targets ▪ Setting out approaches/ rationales for varying targets ▪ Directly investing in housing to deliver additional stock ▪ Setting density requirements in particular areas where higher intensity growth is favoured ▪ Requiring local governments to develop housing strategies, and setting the framework or approach for what these strategies should consider

3 Historically, a Strategic Housing Land Availability Assessment (SHLAA) is undertaken by LGA to ascertain the amount of developable land, while A separate demand assessment is undertaken based on national housing projections. 4 Public Transport Access Levels (Index categories 3-6) or which are located within 800m of a Tube station, rail station or town centre boundary 5 https://www.savills.co.uk/research_articles/229130/282264-0 6 https://www.theguardian.com/society/2019/feb/08/half-councils-expected-miss-housebuilding-targets-england 7 Wilson, W. (2019) Stimulating housing supply - Government initiatives (England) House of Commons Briefing Paper 06416 8 National Audit Office (2013) The New Homes Bonus

Housing/Density Targets and other policy tools - background research 20

▪ Incentivising exceeding targets, and penalising, including losing planning powers, for areas that fail to meet targets No robust evaluations of the overall approach to setting housing targets were identified as part of the research to inform this paper. The continued refinement of the targets process in NSW suggests that stakeholders see value in the approach. Overall, it appears that there are benefits to this method, and targets are one potential way of supporting growth in particular parts of Melbourne. It also appears though that targets are increasingly being deployed as part of metropolitan planning, to support the delivery of housing in appropriate locations. There is limited experience in how these types of measures have been implemented. In the United Kingdom case study, it is unclear how much of an impact on achieving local targets this has had. Setting targets for a municipality at a level below capacity will to allow the market to function effectively, and setting targets at five-year increments will give a sense of immediacy and allow for effective monitoring and refinement/ adjustment. This is particularly important as population projections are regularly updated and broader forces can influence population growth and distribution.

Housing/Density Targets and other policy tools - background research 21

4. CONCEPTUAL EVALUATION

Having established in Section 2 that the current approach of planning for housing isn’t delivering desired outcomes, followed by a review of various mechanisms by which other jurisdictions negotiate and set housing targets in Section 3, this section summarises the risks and advantages as well as an overall evaluation, of housing targets as a conceptual approach.

4.1 Risks and advantages Overall, the establishment of housing targets would come with a range of advantages and risks. These would be dependent on the specific scope and approach, but in general the following should be considered.

TABLE 1: POTENTIAL ADVANTAGES AND RISKS OF HOUSING TARGETS

Agency Advantages Risks State ▪ Basis for more sophisticated, evidence based state-local ▪ Political risk, particularly in areas which may government dialogue be resistant to accommodating additional ▪ Would provide a quantitative local/subregional/regional growth and change expression of Plan Melbourne and Land Use Framework ▪ Political and planning risk if targets are not Plans, enabling monitoring of plan delivery and achieved and process of setting targets is strengthening the policy impact of these plans seen as a policy failure ▪ Enables a transparent basis for sharing the infrastructure obligation between local and state government ▪ Basis for common assumption planning by state agencies enabling a coordinated and efficient response to infrastructure planning and delivery timing and staging ▪ Enables an informed, place based approach ▪ Agreed basis for targeted value capture schemes to fund infrastructure (eg based on bonus floorspace to achieve targets)

Local ▪ Requires a discipline and rigour in strategic planning: ▪ Planning to targets might be too narrow – ▪ a clear evidence base required to demonstrate housing planning could be reduced to a quantitative strategy is achievable exercise with quality of outcomes neglected ▪ local level strategic planning moves beyond broad ▪ Could entrench disadvantage or low growth planning objectives for an area which needs growth – if targets are based on trend or current amenity and ▪ be realistic in identifying areas for change, consistent liveability with strategic planning principles and considering market realities ▪ Adds a political risk – focus of community input to planning is about the targets not the ▪ Provides State endorsed basis for a conversation with the outcomes community about future needs, tradeoffs, changes to neighbourhood character and infrastructure ▪ Straightjackets the market – good proposals might be outside the achievement of targets ▪ Provides the basis for a more coordinated approach to and not get a favourable hearing local infrastructure planning – infrastructure will be focused on achieving targets ▪ Projections of housing demand, population growth and other variables rarely represent ▪ Providing greater certainty will support more transparent on the ground outcomes. More flexibility may and efficient discussions with development sector, be required, including a range or scenarios. ultimately providing benefits to Statutory Planning teams

Private Sector ▪ Provides clarity regarding appropriate locations for ▪ If not feasible for development to occur in different forms of growth (although this may also be areas designated for growth, may push delivered via a robust and clear housing strategy) growth elsewhere (as currently may occur ▪ clear signalling of where growth is desirable through VCAT)

Housing/Density Targets and other policy tools - background research 22

4.2 Evaluation The implementation of housing capacity and targets, as outlined above, requires careful consideration.

TABLE 2: EVALUATION OF HOUSING CAPACITY AND TARGETS

Criteria Evaluation Precedent ▪ Housing targets have been implemented in other jurisdictions. In the UK there is a clear and agreed approach for identifying housing need and this forms the basis for targets. ▪ In Sydney, targets have been a longstanding component of regional and metropolitan planning, although they are based on projections rather than capacity and infrastructure based. There are also employment targets which are broadly accepted by local government. ▪ Melbourne has not previously had explicit housing targets.

Practicality ▪ Articulation of targets can be done using existing tools (eg metropolitan and regional strategic planning). ▪ The reality of development feasibility should also be incorporated to the development of targets – this will help ensure targets are feasible and broadly accepted by the development sector; they key deliverers of housing growth.

Stakeholder ▪ Community, and local government could resist if seen as top down enforcing response growth, needs to be part of broader conversation. ▪ Could also respond positively, if it’s clear the rationale (growth should go in appropriate and well served locations, provide information about that variation in infrastructure provision such as the IV Metropolitan Spatial Profiles) and that infrastructure will support growth. ▪ Development sector likely to support, as can provide certainty, but only if targets are feasible, and provide sufficient flexibility.

Certainty of ▪ The process of understanding capacity and then developing targets will increase outcome the likelihood that housing growth will occur in appropriate locations, as planning scheme changes and other policy signals will be robust and based on evidence. ▪ Unintended outcomes.

Longevity of tool ▪ Capacity, and targets would need to be regularly updated, to reflect housing market fluctuations and the impact of broader changes (eg evolving housing preferences, impact of major infrastructure). ▪ Major changes to housing market (eg major urban renewal site identified, major government infrastructure project announced/) could also trigger updating of capacity and targets.

Time and/or cost ▪ Capacity assessments are a major undertaking, but provide a consistent evidence required to base. Many local governments are doing similar work, so would involve a re- direction of existing resources. implement ▪ Consultation and engagement with community on topics such as this are time and resource intensive ▪ If the city is to develop in a sustainable and efficient way, it is essential that housing is provided in the right locations. At present, the process of each individual LGA undertaking housing research and strategy development requires significant resources, and there could be efficiencies in this occurring at a regional or metropolitan level.

Housing/Density Targets and other policy tools - background research 23

5. OPTIONS FOR HOUSING TARGETS

The previous section confirms that housing targets are an appropriate mechanism to consider in terms of supporting housing growth in appropriate locations. This section outlines choices, options and risks associated with various approaches to housing targets.

5.1 Introduction

Targets and projections A key objective of planning for housing is to ensure sufficient supply of housing within a city or location. State governments generally produce projections of population and housing to inform a range of infrastructure and service planning. These projections provide a sense of the scale and location of anticipated population and housing growth (refer Executive Summary). The use of housing targets as a tool to help facilitate the supply of housing therefore needs to relate to projected demand. The total demand for additional housing in a city is determined by an estimate of population growth. If the overall population projection is too conservative, then local housing targets set on this basis will also be too conservative. As shown in Table 3, the ViF population projections have, historically, consistently underestimated growth. Recent improvements to the data and method of preparing ViF means that it is now informed by robust demographic methods, which align with international and national best practice. It is also considered appropriate that ViF provides an input to housing targets, and, if this occurs, the regular updates and revisions of ViF should also inform updates to any housing targets.

TABLE 3. EVOLUTION OF POPULATION PROJECTIONS FOR MELBOURNE9

VIF 2011 Population 2031 2031 Revision 2031 Revision 2031 Revision 2031 Revision Vintage Estimates / Population Compared with Compared with Compared Compared Projections Projection 2004 2008 with 2012 with 2014 VIF 2016 4,170,00 6,056,000 1,520,000 780,000 644,00 100,000 VIF 2015 4,170,000 5,980,000 1,440,000 700,000 564,000 20,000 VIF 2014 4,170,000 5,960,000 1,420,000 680,000 540,000 VIF 2012 4,140,000 5,410,000 870,000 130,000 - VIF 2008 4,080,000 5,280,000 740,000 - - VIF 2004 3,880,000 4,540,000 - - - Source: Victoria In Future

While projections are an important input in terms of aggregate demand for additional housing, it should be noted that projections are generally policy neutral. That is, they reflect what is likely to occur, rather than aspirations outlined in metropolitan or regional spatial planning. The variation in this is noted, to some degree, in Plan Melbourne (refer page 7). The 2016 ViF review noted that, based on consultation undertaken with various users of ViF:

9Note: Numbers have been rounded to the nearest 10,000

Housing/Density Targets and other policy tools - background research 24

There was consensus that a scenario based around a policy platform (such as Plan Melbourne) would assist users to understand the spatial implications of state policy. It was also noted that such a scenario should, in many cases, inform demand analysis for infrastructure and services. In this context, the geographic scope is a key issue that should be considered in developing any approach to housing targets: what is the optimal urban form, given projected growth in a particular location. Plan Melbourne sets out aspirational regional10 population and housing growth targets, however it is not clear the role of each LGA in accommodating these to deliver optimal outcomes. It is also not clear how or if variations to these distributions may deliver more beneficial outcomes.

5.2 Scope of targets The following provides an overview of the potential scope and approach for housing targets, including:

▪ The elements of housing targets ▪ Options for developing targets ▪ Implementation options ▪ Monitoring approaches These have been evaluated based on the objective of ensuring a sufficient supply of housing and housing choices in metropolitan Melbourne.

Elements of targets

Number The starting point for housing targets is the number of additional dwellings that need to be delivered in a particular location. This could comprise projected demand, where the target would reflect the anticipated number of additional households that will be accommodated. This would ensure realistic inputs to infrastructure and service delivery planning for state and local government agencies. Alternatively, targets could be set which require an area to identify a particular quantum of future housing capacity. This would require a clear and robust set of assumptions and approach, so an assessment of whether an area has met their target appropriately can be undertaken. Targets could also include a number of other elements; the risks and benefits associated with each are outlined below.

Geographies - housing submarkets 13 housing submarkets, based on likeness of the following five key attributes, have been identified for Melbourne11

▪ Dwelling structure ▪ Median house price ▪ Tenure type ▪ Household composition ▪ Country of birth of persons living in households In terms of developing targets, housing submarkets have a propensity to accommodate households with similar preferences. In this sense, they represent the range of geographies within which households may consider locating and could therefore be appropriate for various distributions of housing growth.

10 Plan Melbourne regions comprise between 3 and 8 local government areas 11 SGS 2018, for DELWP

Housing/Density Targets and other policy tools - background research 25

Densities/ preferred locations Appropriate densities in various locations could encompass:

▪ For greenfield areas - eg a minimum of 30 dwellings per hectare; ▪ For new developments within 800 metres of a train station eg a minimum of 200 dwellings per hectare. ▪ For areas in and around activity centres and on key strategic redevelopment sites - higher density residential development ▪ For areas where there is well developed infrastructure networks and good access to jobs - higher densities The following table sets out the risks, benefits and recommended approach for each element.

TABLE 4: HOUSING TARGET ELEMENTS

Elements of housing Benefits Risks Recommendation target Number: ▪ Projected demand: ▪ Projected demand: government has Further research is required on ▪ Projected Provides clarity for limited levers available to deliver how capacity could be used as a demand infrastructure and housing. service planning target. ▪ Capacity ▪ Capacity: not clear what ratio of (Refer next ▪ Capacity: More closely demand to capacity is required for section) aligned to levers efficient functioning of housing available to government. market. Would need clear, robust and Provides flexibility in agreed approach for assessing delivery of additional capacity. dwelling.

Geographic areas: ▪ Regional: allows for ▪ Regional: Opportunities for overall Given: ▪ Regional consideration of optimal metropolitan urban structure ▪ Plan Melbourne has been urban structure at improvements may be missed (eg is ▪ Housing adopted and reflects current regional scale growth in Melbourne’s west government aspirations submarket preferable to north or south east?) ▪ Housing submarket: ▪ Current iteration of Regional ▪ LGA considers transferability Some governance (although DELWP have established Economy and Land Use Framework Plans ▪ Major urban of housing preferences have not considered most renewal areas Planning working groups based on ▪ LGA: clear governance these subregions) appropriate distribution of and existing approaches housing within region ▪ Housing submarkets: no formal to planning for housing ▪ Local government targets growth governance to plan and deliver housing are, in the current context, ▪ Major urban renewal likely to deliver most areas: would provide ▪ LGA: misses out on opportunities to pragmatic outcome. clear expectations consider broader urban form outcomes or to transfer dwelling In future: regarding outcomes in ▪ Regional approach to particular areas delivery between LGAs. Current approach not delivering required establishing appropriate outcomes distribution to LGA level, with consideration given to ▪ Major urban renewal: needs to occur housing submarkets within LGA or broader context, to ensure aggregate demand met. ▪ Clear targets for urban renewal sites within this context should also be established.

Dwelling types (eg ▪ Could contribute to ▪ Demographics of an area can change ▪ Dwelling types not part of detached dwellings, delivery of more diverse over time; targets base on dwelling targets, but considered in housing type may not respond appropriately local government planning, semi detached, to changing demand reflecting local needs. townhouse, flat/ ▪ Could be overly prescriptive; unit/ apartment) particularly given government is not directly involved in delivery of housing

Time horizons ▪ Articulating short term ▪ Short term delivery could be affected ▪ Planning should consider 20- (eg within 5, 10 and (eg 0-5 years) target by property market fluctuations 30 year horizon, with targets would give some sense broken in to 5 year 20 years) ▪ Timeframes required to plan and of immediacy and reflect deliver new supply may be greater increments. existing pipeline than 5 years (eg strategic planning to ▪ Regular reviews and updates ▪ Long term targets would identify additional capacity, rezoning, should be built in to reflect make monitoring and development assessment and changing conditions. adjustment in the short delivery unlikely to occur in 5 years) term difficult

Housing/Density Targets and other policy tools - background research 26

Densities / Opportunity to ensure ▪ General principles may not be ▪ State government should preferred locations appropriate leverage of appropriate in all locations (eg due to articulate principles in advice heritage, neighbourhood character, about housing strategies. government investment in environmental constraints) infrastructure ▪ Local government develop ▪ More appropriate to consider specific housing strategies which housing densities through local respond to these government planning

Development of targets: process and approach The process of developing targets is considered crucial to their success in affecting the delivery of housing. The following approaches or inputs have been reviewed. The elements below outline some of the key inputs that would inform discussions and negotiations of housing targets. As well as these technical inputs, it is considered crucial that a collaborative approach between state and local government should underpin decision making about the scope (see previous section) as well as the content of targets. This would ensure:

▪ There is a shared understanding of the challenge of planning for housing ▪ State government departments and agencies are aware of local conditions which affect potential delivery of targets ▪ There is support and buy in for the overall process by local government, as the main deliverers of planning for housing at the local level ▪ Relevant state policies and objectives are appropriately translated to local strategies ▪ There is a consistent approach to planning for housing ▪ In aggregate, there are plans to accommodate metropolitan demand for housing.

Community Engagement Community engagement can support the development of knowledge and understanding about trends affecting metropolitan growth, alternative urban form/ settlement structures as well as locations to accommodate growth and change and the associated infrastructure required to support this growth. Discussions about how to accommodate growth overall are important for building understanding about:

▪ Levers available to government to influence housing and population change (ie ‘no growth’ is not an option) ▪ Tradeoffs associated with various urban forms (eg accommodating growth in established areas vs further urban footprint expansion)

Growth Compact Community resistance to growth is often driven by a perception that there isn’t sufficient infrastructure to support the additional population. A particular approach to community engagement, to help address this, is an Urban Renewal Community Compact. This would have a focus on a specific site or precinct within the established parts of the city and would involve:

▪ Declaring an Urban Renewal Community Compact Area where significant change is anticipated (for example, areas expected to grow at well above average rates, say at two to five percent per annum, and anticipating a population of say 8,000 to 10,000 or above at build out) ▪ Establishing a formal governance arrangement including relevant state agencies, local government and genuine community representation in declared renewal areas (some suggestions for governance roles are discussed later) ▪ Developing outcomes and indicators for liveability in precincts slated for major renewal ▪ Undertaking baseline measurements for each of the indicators

Housing/Density Targets and other policy tools - background research 27

▪ Making a commitment to the community, for example in the form of a Memorandum of Understanding, that through more effective integrated planning and intra-agency cooperation outcomes against these indicators post development will be measurably maintained or enhanced ▪ Developing a robust funding and implementation framework. For this Urban Renewal Community Compact ‘liveability’ represents a short hand for triple bottom line outcomes across multiple dimensions – economic, social and environmental - as implied by the following definition: Liveability can be broadly defined as the well-being of a community and represents the characteristics that make a place where people want to live now and in the future. It is the sum of the aspects that add up to the quality of life of a place, including its economy, amenity, accessibility, environmental sustainability, health and wellbeing, equity, education and learning, and leadership. For any specific precinct the actual indicators and measurable outcomes are likely to vary depending on the baseline provision, but a Compact might ultimately include commitments such as:

▪ Increasing the area/quality/accessibility of active open space assets ▪ Increasing the ratio of accessible community/cultural facilities with capacity ▪ Increasing the length of dedicated bike paths and safe and ‘off-road’ pedestrian paths ▪ Increasing the ratio of accessible public education places to primary school age children ▪ Appropriate housing diversity to respond to the changing composition of households ▪ Increasing the share of social and affordable dwellings ▪ Increasing the share of accessible metropolitan jobs through local transport infrastructure improvements linked to metropolitan networks ▪ Reducing car dependence ▪ Improving the environmental performance of the precinct. These outcomes and infrastructure investment would occur in the context of agreed population and housing growth and change, effectively representing triggers for investment.

Scenario testing Various settlement structures will have different outcomes in terms of liveability, and other indicators (refer Growth Compact). For example, distributing housing growth to growth areas vs established parts of a region will produce different results in terms of various indicators such as:

▪ Access to employment (eg effective job density, or proportion of metropolitan jobs which can be accessed by households) ▪ Greenhouse emissions from travel ▪ Human capital Specific indicators should be based on metropolitan strategic planning objectives. Identifying an optimal or preferred distribution of growth across the metropolitan area or region would support the setting of targets which are likely to deliver improved outcomes.

Capacity assessments The capacity of an area to accommodate growth and change should inform the negotiation of housing targets. In developing housing capacity assessments, common assumptions used across the metropolitan area are critical. For example, assumptions regarding identifying available land associated with various planning zones, a consistent approach to estimating yield associated with various locations. Understanding the capacity of existing infrastructure to support additional housing and population growth would be an important input. Indexes such as the Public Transport

Housing/Density Targets and other policy tools - background research 28

Accessibility Level would also be an important consideration along with development feasibility. Capacity assessments would identify more housing than projections or demand. For example, if 10,000 additional dwellings are required for a local area in 20 years, the capacity assessment should identify the potential for more12 dwellings to ensure flexibility in terms of delivery. As the housing market matures and evolves, it is also likely that new housing forms will become viable in an area, and areas will have increased capacity. Capacity estimates should be regularly updated.

Assessment of approach options

TABLE 5: ASSESSMENT OF APPROACH OPTIONS

Approach Benefits Risks Recommendation ▪ Community ▪ Engages community in ▪ Resource intensive Should be considered as part of engagement discussion about future setting targets; specific approach including housing choices and Growth tradeoffs would need further research. Compact

▪ Scenario ▪ Would provide ▪ Resource intensive Should be considered as part of testing indication of improved ▪ Requires significant assumptions setting targets; specific approach or optimal settlement structure would need further research.

▪ Capacity ▪ Provides robust and ▪ Resource intensive Should be considered as part of assessments transparent input in to setting targets; specific approach targets would need further research.

These options are not necessarily mutually exclusive; elements of each could be undertaken as part of an overall process.

Implementation The implementation, or articulation of targets, should:

▪ Be articulated in metropolitan and regional land use plans and inform local government planning policy. ▪ Inform infrastructure and other planning by state government agencies; ▪ Be the starting point for local government planning, which should be required to demonstrate how their planning will accommodate targets via a housing strategy development including feasibility considerations. If a housing strategy is considered feasible but not developed within an appropriate time frame, then this could be grounds for increased State government involvement in local planning.

Local housing strategies Once a local target has been set, there is a requirement to prepare a delivery-focused (including commercial feasibility considerations) local housing strategy that identifies an appropriate range and number of sites suitable for residential intensification. This will produce an overall housing capacity assessment for the local area. Local planning should be developed to identify capacity and help deliver housing over a five year period. This will identify where and when the housing will appear within the municipality. This will help to provide certainty for development community.

12 Noting the exact ratio is not clear, and that setting targets for capacity is also an option.

Housing/Density Targets and other policy tools - background research 29

The development of housing strategies by local government should demonstrate how the housing targets will be met, by addressing the following:

▪ Outline how projected demand will be accommodated, prioritising future housing need to medium- to high-density locations and growth corridor areas, and considering where heritage, environmental, landscape or other conservation values might constrain future development ▪ Ensure development capacity to accommodate 15 years housing supply and identify notional 0-5, 6-10 and 11-15 year staging based on the capacity and provision of local and state infrastructure, community engagement findings and viability analysis ▪ Meet housing need, ensuring supply meets the changing requirements of households in terms of size, configuration, tenures and price points of different housing submarkets based on demographic and housing market analysis ▪ Provide housing type and quality, ensuring new housing is available and with appropriate standards and features for downsizing seniors ▪ Consider the role of activity centres, urban renewal sites, and other areas in accommodating projected housing ▪ Establish principles for housing locations – eg focus for medium and higher density growth within 800m of Public transport and activity centres ▪ Genuinely engage the community about how to accommodate growth, preferred locations, density and housing typologies and place qualities ▪ Identify local implications and implementation mechanisms of the regional approach to the provision of affordable housing ▪ Identify an open space and community infrastructure provision plan reflecting the notional development staging ▪ Deliver sustainable housing choices and liveability consistent with Plan Melbourne, supported by performance measures for each place where change is anticipated, based on community engagement, and covering, for example, housing type and mix, transport mode share, the provision of open space or community facilities. The process of identifying strategies to accommodate housing growth is also likely to lead to a more nuanced understanding of the local area.

Monitoring Annual reporting on housing supply and identification of housing capacity are an important part of monitoring housing targets. This will help to identify local areas where capacity is absorbed more rapidly and areas where capacity is absorbed more slowly. Over a five year period, an evaluation can be made of how the municipalities are performing in relation to their targets. Evaluation can be the amount of housing delivered (which can be impact by the ups and downs of the housing markets) and the amount of housing capacity identified within the local area. Evaluation should include an assessment of council planning decisions and the implications they may have on housing supply and capacity. Within the framework for setting targets, municipalities should be able to request an alternative to the established target via a comprehensive review where it is able to demonstrate that this target cannot be achieved and that an alternative target will be.

▪ Housing development can be tracked using Housing Development Data, which is available on an annual basis (but released every second year) ▪ Evaluation should include council planning decisions and consideration of housing market dynamics (eg property market downturn) ▪ 5 yearly reviews and updates to targets To ensure that targets are met there can be bonuses (in terms of funding for additional services and infrastructure) for municipalities that meet targets and the prospect of losing funding or planning powers for those that do not.

Housing/Density Targets and other policy tools - background research 30

5.3 Summary Figure 6 presents a summary of housing target development process. It should be noted that housing targets are almost always developed during a broader strategic planning process. A strategic planning process considers not just housing, but also transport requirements, job location and future urban structure of a city / state.

FIGURE 6: SUMMARY OF HOUSING TARGET DEVELOPMENT PROCESS

Many of the tasks listed in Figure 6 are already undertaken in Victoria. Implementing housing targets would be building on existing efforts of state and local government. A short summary is listed below.

▪ City Wide Population Projections – produced as part of Victorian In Future ▪ Policy principles for housing at certain locations – to a degree are within Plan Melbourne ▪ Testing of subregional distribution – not currently undertaken ▪ High level capacity assessment – established areas of Melbourne housing capacity assessment was undertaken in 2010. Some local government areas have continued to update this work ▪ Housing Target / Local Community Engagement – many local government produce housing strategies which have targets (by location, by time etc) ▪ Monitoring and Evaluation – The Housing Development Data published by DWELP provides a way to track the supply of new housing across Melbourne. In summary, key conclusions regarding the approach to negotiating targets include:

▪ Targets should consider and respond to the aggregate level of demand, noting that projections are regularly updated, and that currently, ViF is policy neutral and does not necessarily represent the optimal urban structure outcome ▪ There are a range of choices regarding the scope and development of targets, including:

▪ Whether the target is a number of dwellings to be delivered, or capacity to be identified (requires further research of potential implications)

Housing/Density Targets and other policy tools - background research 31

▪ The spatial area that a target would cover (recommended that local government, with consideration given to regional distribution including scenario testing of alternative settlement patterns to inform targets ▪ Whether targets should include dwelling types (recommended this is considered as part of local housing strategies rather than targets) ▪ The time horizons for targets (recommended that planning should consider 20- 30 year horizon, with targets broken in to 5 year increments).

▪ Community engagement is crucial in developing targets and housing strategies, as are capacity assessments with a consistent approach ▪ Local government should prepare housing strategies which demonstrate how targets will be accommodated, and respond to State government policies regarding locations for growth ▪ Housing delivery should be monitored on an annual basis, to help inform updates to targets and housing strategies ▪ A collaborative approach between state and local government on this aspect is particularly important; ultimately the process of identifying capacity and targets (rather than the target itself) will generate the knowledge and value to inform planning for housing in a sustainable and productive way ▪ Having a clear, agreed number of the housing that is to be planned for is helpful in supporting a coordinated approach between state and local government, and associated agencies.

Housing/Density Targets and other policy tools - background research 32

6. OTHER OPTIONS

There are a range of other options available to support housing growth, including through funding local infrastructure. Collecting development contributions is a key mechanism available to local government to enable this.

6.1 Targets for specific sites13 Specific locations have targets for the development of housing. For example, the vision for Fishermans Bend is to create vibrant neighbourhoods that is a world-leading example of urban renewal. There is a residential target of 80,000 people. This is based on an average residential density of 323 people per hectare, which is comparable to the projected population densities of other inner city locations such as the Hoddle grid (297 people per hectare) and Southbank (308 people per hectare). These residential densities reflect the diverse built form across suburbs from low to high-rise, as well as the varying mix of residential and commercial uses. The Arden Structure Plan is planning for a residential population of 15,000 people in 2051. This is based around likely yields which could be expected on inner city residential land close to a train station.

6.2 Capacity building A lack of capacity in local government to undertake the detailed planning required to create a supply of housing is often cited as an issue holding back development. Programs like the previous Victorian Government Expert Assistance Program (EAP) aimed to address this. The program was established during in 2007-08 and provided specialist expert advice to assist councils to develop and implement structure plans for activity centres. Two streams of funding were available:

▪ Proactive: Support is provided to 6 activity centres that are ‘development ready’ and EAP funds aim to facilitate development on the ground in the short term ▪ Responsive: Support is provided to resolve short term issues or gaps in structure plan completion and implementation. More specifically, the EAP aimed to support metropolitan Councils to progress or implement structure planning in activity centres, and assist Councils to produce real and effective change that is visible in the physical fabric of the activity centres. The EAP also worked with councils to identify blockages or gaps hindering the completion or implementation of activity centre structure plans. There appears to be a degree of success with several sites (e.g. Highpoint, Sunshine, Preston) planned with the EAP have seen strong housing growth over the past decade. The EAP may have helped to increase the supply of housing in these suitable locations.

13 Refer also the Growth Compact outlined in Section 3.1.

Housing/Density Targets and other policy tools - background research 33

6.3 Incentivising development via financial structures Encouraging build-to-rent is a way to increase housing development. Build-to-rent refers to a residential development in which all the units are retained by the developer and leased out, rather than sold off. This is quite different to the typical residential property arrangement in Australia, known as build-to-buy. This is way for large scale investors to gain access to the rental market. There is also the National Rental Affordability Scheme (NRAS) which is aimed at producing more housing for low and moderate income earners. NRAS are a partnership between the Australian and state governments to invest in affordable rental housing for low and moderate income earners. These types of incentives do not have explicit spatial consideration, and hence the additional housing may be located in places which could produce adverse economic, social and transport outcomes. For these types of incentives to help facilitating the distribution of new housing in locations close to jobs, services and public transport, there would have to be additional requirements put into place.

6.4 Changing Planning controls A wide range of land use planning tools are used to achieve the aims of state, regional and local policy. Zones, overlays and policies specify land uses, the form of development and control subdivision. These are developed through consideration of a range of factors, including appropriate built form and local character of an area and preferred location for growth. Changes to planning controls would have an impact on the form, and, in some cases, the subsequent quantum of development that could occur on a site. Any changes to planning controls need to consider a range of impacts, including whether poor transport and social and economic outcomes may occur.

6.5 Development contributions to fund local infrastructure Lack of local infrastructure can often be a barrier to development, as well as frustration of an existing community that is accommodating significant additional growth. Councils can require a contribution from developers as part of the development process for housing, retail, commercial, industrial land use to help fund infrastructure. Inserted to relevant parts of the Scheme, development contribution rates and mechanisms are a clear and transparent way of helping fund local infrastructure. There are four development contribution types, as summarised in the following chart (Figure 7). Each type has a separate justification and carries its own principles. To fund infrastructure, the inclusionary requirements and the value sharing approaches are appropriate to consider (assuming DCPs are already in operation).

Housing/Density Targets and other policy tools - background research 34

FIGURE 7: TYPES OF DEVELOPMENT CONTRIBUTION

USER PAYS CONTRIBUTIONS FOR OFF- INCLUSIONARY REQUIREMENTS / IMPACT MITIGATION VALUE SHARING SITE INFRASTRUCTURE DEVELOPMENT STANDARDS

APPORTIONMENT PRINCIPLE APPORTIONMENT PRINCIPLE APPORTIONMENT PRINCIPLE APPORTIONMENT PRINCIPLE Proponents are responsible for 100% Proponents are required to share part Proponents must meet certain Proponents pay according to share of of the cost of making good of the uplift in land value occasioned development standards on site or pay usage of planned infrastructure unanticipated off-site effects, by re-zoning or granting of a for these to be satisfied off-site including infrastructure impacts development approval

EXAMPLES EXAMPLES EXAMPLES Development Contribution Plans EXAMPLES Parking requirements and cash in lieu AmC270 Melbourne Planning Scheme (DCPs) and Infrastucture Charges Plans 'Make good' conditions in planning schemes The Growth Area Infrastructure (ICPs) for local infrastructure including permits, determined on a case by case Open space requirements and cash in Charge (GAIC) roads, open space, recreation facilities basis lieu schemes Rezoning conditions and community facilities Affordable housing contributions

Source: SGS Economics & Planning Pty Ltd

Development contribution type 1 - User pays charges This category of development contribution is applied in Victoria via the ‘DCP’ and ‘ICP’ provisions of the Planning and Environment Act, premised on the ‘user pays’ principle. It requires proponents to contribute cash or in-kind towards infrastructure, with the contributions linked to the proportion of usage of the infrastructure items in question. A nexus between the development and an infrastructure item is established when residents, workers or visitors of the development make use of the planned facility, and fair cost apportionment is established by aligning share of cost with share of usage. Funds collected must be used for the delivery of the planned infrastructure or they must be returned to the current owners of the land which generated the user pays revenues. This category of development contribution could be applied to infrastructure in established areas however, the apportionment of cost according to share of projected usage is likely to mean that only a relatively small part of infrastructure costs would be recovered.

Development contribution type 2 - Impact mitigation payments It is unlikely this category of development contribution is relevant to infrastructure in established areas. Proponents of development may be required to make compensatory payments or off-setting contributions to mitigate the unanticipated adverse effects of their projects. For example, if a development incorporates significantly more site coverage and would therefore result in stormwater runoff that exceeds the parameters which had been built into an area wide contribution scheme (Development Contribution Plan) for drainage, that particular proponent may reasonably be requested to meet 100 per cent of the cost of, say, an off-site retarding basin or tank to manage the additional flows. This requirement is premised on the ‘exacerbator pays’ principle where the party responsible for the damage must meet the full cost of making it good (even though others may subsequently benefit from the off-site retention facility). As impact mitigation payments are applied to deal with unanticipated adverse effects of development, they cannot be pre-

Housing/Density Targets and other policy tools - background research 35

notified in Planning Schemes. Instead, they are applied on a case by case basis via conditions on development consents.

Development contributions type 3 - Value sharing requirements Value sharing requirements are premised on a separate and distinct principle relating to the efficient regulation of community sanctioned development rights. Regulation of land use and development through planning schemes in Victoria represents a form of restriction on market access, necessitated by the objective of economic efficiency. The State deliberately and systematically rations access to ‘development rights’ via planning regulations. Governments apply this rationing because it is expected to generate a net community benefit (that is, an efficiency or welfare gain) compared to allowing urban development to proceed on a ‘laissez faire’ basis. The value of regulated development rights is capitalized into the price of land. For example, other things being equal, a piece of land which is enabled for use as a major shopping centre will be more valuable than land without this privileged access to retail centre development rights. Similarly, land enabled for a multi-storey apartment building will be worth more than otherwise equivalent land designated for a single household dwelling, and so on. Land zoned for mixed use residential will be more valuable than land designated for industrial uses. As occurs with other regulated markets, for example, commercial fisheries, mineral exploitation and broadcasting bandwidth, it is appropriate to charge a licence fee for access to these regulated development rights14. Potentially, a de-facto ‘licence fee’ for the granting of additional development rights in established parts of a municipality, through some form of floor area uplift scheme such as that operated under the Melbourne Planning Scheme for the Central City (and now mooted for Fishermans Bend) could occur. This approach could legitimately be applied in established areas where additional development rights on a particular site is being considered. For example by allowing additional development intensity on some parts of a major urban renewal site. This can also occur through the rezoning process; as value is ‘created’ through changes to the scale and nature of activity which is enabled via zoning provisions.

Development contributions type 4 - Inclusionary provisions Inclusionary provisions are based on minimum acceptable standards of development. The acceptable standard (whether it be open space or car parking) may be provided off site through a cash or in-kind contribution. Cash-in-lieu schemes have been operated for the fulfilment of car parking requirements for decades and are now formalised in the Victoria Planning Provisions. Cash payments in lieu of provision of 5 per cent (or more) of land for public open space upon approval of subdivision is another example of the ‘inclusionary standards’ premise for requiring cash or in-kind contributions from a development proponent. This premise is quite different to the other rationales for requiring cash or in-kind contributions (user pays, impact mitigation and value sharing) and could reasonably be applied in addition to any of the other measures. This is the approach being implemented as part of the overall Open Space strategy for Darebin, which proposes a 10 per cent contribution rate for all development in Darebin, as well as noting that an additional contribution is considered appropriate in the case of Northland Urban Renewal Precinct and the Preston Market site. Kingston, Frankston and Manningham have all implemented inclusionary provisions for open space; Kingston has a minimum 8 per cent for strategic redevelopment sites and Monash is seeking to implement the 10 per cent across the municipality (currently on exhibition).

14 See Spiller, M., Spencer, A. and Fensham, P. (2017) Value capture through development licence fees, Occasional Paper published by SGS Economics & Planning Pty Ltd, February 2017.

Housing/Density Targets and other policy tools - background research 36

7. SUMMARY AND CONCLUSIONS

This paper has identified some preliminary benefits, issues and challenges associated with Housing Targets. Overall it concludes that while there is limited robust analysis of the effectiveness of housing targets to support growth in appropriate locations, some jurisdictions have been using targets as part of broader housing planning. Victoria can learn from these approaches, as well as the benefits and challenges associated with current approaches in Melbourne, to improve planning and delivery of housing in appropriate locations across the city.

7.1 Key conclusions The process of developing and agreeing targets represents an opportunity for government and the community to engage in significant questions about appropriate levels of infrastructure, alternative urban forms and how to best accommodate growth across the city. Arbitrary targets, or those based on extrapolation of trends, can play a role in terms of establishing some agreed parameters for more nuanced discussions between levels of government, and across state government. Targets based on infrastructure and other capacity are more likely to be accepted and provide a sound basis for realistic infrastructure planning. In summary

▪ There is very limited literature on clear mechanisms for ensuring housing targets are met. The United Kingdom offer bonuses for those municipal hitting targets and the prospect of losing planning powers for those that don’t, although it is unclear if these incentives are delivering results ▪ Targets should be developed in context of broader metropolitan planning considerations regarding the optimal location of housing growth and change ▪ Housing targets can help make better use of existing and planned infrastructure ▪ The process of setting targets is important as it focuses State and local government thinking and planning efforts into identifying capacity for housing and barriers to unlocking that supply (e.g. infrastructure bottlenecks or commercial feasibility issues) ▪ Community involvement and understanding of housing targets is important and can increase community buy-in ▪ Historically, local targets have been based on a forecast / projection of the whole city. These have tended to underestimate the future projections of the city and in hindsight there has not been enough housing capacity identified ▪ Housing targets should be set by the State Government with the municipality and the community in a transparent manner, with consideration given to capacity across the metropolitan area. There are some benefits of State government leading this process, including:

▪ Opportunity to consider whole of metropolitan or regional distribution ▪ Ability for councils to then engage with the community on local scale issues with clear parameters about what is negotiable (ie the overall scale of growth is already set, and the focus for community discussions is the distribution and form of growth)

▪ A consistent approach to understanding capacity across the metropolitan area is an important input to setting targets as well as local housing strategy development; it

Housing/Density Targets and other policy tools - background research 37

can provide an evidence base for a discussion with the community about tradeoffs of housing growth in different locations. ▪ Local planning should use housing targets, and identify how and where housing will be accommodated. This will help to provide certainty for development community as well as local residential community. The provision of infrastructure required to support growth can also be part of this process. ▪ Local housing planning should also incorporate metropolitan and state objectives regarding providing a mix of housing types, higher density residential development in and around activity centres and on key strategic redevelopment sites ▪ A balance between consistency of approach and format, and reflection of local dynamics and growth is important developing local housing strategies (eg areas experiencing incremental or infill development will have different objectives compared to major greenfield areas) ▪ The 0-5 year target is likely to be a reflection of the existing housing pipeline, and a more strategic approach for growth beyond 5 years is appropriate. ▪ A similar approach to housing planning incorporating targets in faster growing regional cities and peri urban areas is appropriate ▪ Apart from housing targets there are other options to generate an increase in supply of housing (e.g. planning controls, price signals from development contributions, building planning capabilities within local government), although these are not considered as effective as collaborative planning, setting targets and delivering infrastructure. It is considered crucial that a collaborative approach between state and local government should underpin decision making about the scope as well as the content of targets. There are a range of benefits to this approach, including:

▪ Supporting a shared understanding of the challenge of planning for housing ▪ State government departments and agencies are aware of local conditions which affect potential delivery of targets particularly in the short term ▪ There is support and buy in for the overall process by local government, as the main deliverers of planning for housing at the local level ▪ Relevant state policies and objectives are appropriately translated to local strategies ▪ There is a consistent approach to planning for housing ▪ In aggregate, there are plans to accommodate metropolitan demand for housing.

7.2 Further research The following further research would help progress how housing targets could be developed in the Victorian context:

▪ The risks, benefits and approaches of targets should be further investigated and tested with local government and other stakeholders, particularly in NSW and London. In particular, understanding mechanisms and approaches through focussed and targeted consultation would be beneficial as well as identifying potential ways to improve on existing approaches ▪ Further detailed research (or synthesis of existing research) to understand what drives community resistance to housing growth, and whether a more collaborative approach to planning and infrastructure gaps could address this ▪ Consultation approach on a broad scale – potential ways to have LGA and Melbourne wide discussions about urban form and structure, appropriate infrastructure and local growth targets ▪ Whether a ratio of capacity to required supply is necessary, and if so, what it should be15

15 Various SGS projects working with local government on housing strategies have identified twice as much capacity as demand would suggest is required.

Housing/Density Targets and other policy tools - background research 38

▪ Review of council housing planning to understand in more detail the variations in approaches, challenges and barriers to undertaking robust housing strategies and help inform best practice housing strategies, particularly across the different urban contexts in Melbourne In terms of targets and housing strategy research, the following areas require further investigation:

▪ Updating the Public Transport Accessibility Levels index, to inform capacity assessments ▪ How housing diversity (including affordable housing provision) could be incorporated in to targets ▪ Further learnings from Housing Capacity Assessment and Housing Growth Requirements Project, particularly in terms of process of engagement and relationships between state and local government ▪ Engagement with councils regarding views on targets and approach ▪ Reviews of VCAT cases to understand if arguments about lack of feasibility in designated growth locations is considered an appropriate rationale for supporting growth in alternative locations.

Housing/Density Targets and other policy tools - background research 39

APPENDIX – LIVEABLE YARRA CASE STUDY

Council puts in place policies and projects to support this evolution and decision making on these issues usually involves some sort of tradeoff. For example, building separated bike lanes can mean reduction of on street car parks; limiting development in some locations means it will occur in others. There is not always widespread community understanding of the challenges Council faces in making such decisions, the complexity and inter related nature of the issues, or the breadth of policies and projects that are in place. Parts of Yarra’s community are particularly articulate, and not afraid to make their views known. Although consultation and engagement is regularly undertaken by Council, in practice the voice of some sectors in the community often goes unheard. A traditional ‘town hall meeting’ approach does not enable community members to hear each other, and to appreciate the diversity of views that exists in their community. A Review of the Planning Scheme in 2014 identified major challenges with Yarra’s current scheme. A range of policy areas were identified as needing review and update. Recognising the likely scale and complexity of the task ahead, as well as the challenges of hearing from a wide range of perspectives, Council resolved to use deliberative engagement principles to help inform a Rewrite of the Planning Scheme. While a deliberative approach has been utilised in other local government projects, the use of such a framework has not, to our knowledge, been used to contribute to a Scheme Rewrite process before. What follows is an overview of some of the key lessons learnt from the planning and delivery of the Liveable Yarra project. Planning stage Initial discussions had to steer away from questions of logistics and mechanics (eg how many workshops, who should participate, what should they discuss) and instead focus on what the project needed to achieve to be considered successful. It was established that the project needed to both gather information to help inform policy development, and also to encourage wider understanding of the complexity of planning issues and decision making. Following endorsement of the project fundamentals, a consultant team with expertise in deliberation and engagement was procured to work with Council to plan and deliver the project. The project team, comprising Council staff, Capire and Max Hardy locked in dates, times, recruitment and logistics. Four workshops, of four hours each, were scheduled for Saturday mornings in August and September as well as a suite of supporting engagement, including targeted workshops and meetings with Council’s Advisory Committees. The procurement of suitable experts to partner with Council in delivering the project was crucial – in particular having the right facilitator, workshop planning and on-the-day support as well as broader engagement expertise. The capacity of the project team to work together to tailor an approach suitable for the Yarra context, using deliberative principles, underpinned the success of the project.

Housing/Density Targets and other policy tools - background research 40

Getting the mix of Panel participants right Enabling a diverse cross section of Yarra’s community involved in the Panel process was identified as project success factor, and was instrumental in delivering useful and pragmatic outcomes. An expression of interest process for the Panel was promoted through a range of channels, including a randomised mail out to households, and nominations taken over a 4 week period. Our 60 ‘People’s Panel’ participants were selected from this pool. Panel members were selected to represent the diversity of Yarra’s age, sex, ethnicity, English proficiency, location, tenure and housing type profile. Those who had not recently engaged with Council directly were given preference. This phase was undertaken by the consultant team, ensuring independence from Council. Promoting the role and purpose of process effectively was also crucial; being clear the Council’s Advisory Committees would be consulted separately as well as various targeted consultation with hard to reach groups. Small incentives for participation in the Panel were offered and assistance with travel and child care where provided. Central Question Our central question for the Panel was broad: What advice would you give Council on rewriting the Planning Scheme? The Scheme Review had identified 4 areas that policy development needed to focus on: People and housing, Business and employment, Access and movement, and Built form. Council prepared and sent out background papers outlining recent trends, issues and opportunities for each of these topics, prior to the workshops. A principle of the workshops was sharing the dilemma that Councilors often face when making decisions. Participants were tasked with coming up with actions or solutions to Council challenges, rather than commenting on draft plans or policies. This approach enabled participants to appreciate more deeply the complexity and challenging nature of many planning issues and created a strong sense of ownership by Panel participants of the ultimate advice and outcomes. Workshop format & planning Having 4 sessions, of 4 hours each, with the same participants to discuss key planning issues presented a unique opportunity. Given the significant time commitment, it was important to use time effectively and to generate useful content from the participants. The need to balance delivery of key information to participants with opportunities for discussion amongst participants was a challenging component of workshop planning. While participants were interested and engaged in the future of Yarra, they didn’t have specific expertise in the topics. To help the Panel provide useful advice, additional information from Council was sometimes required (eg ways Council currently undertakes transport planning, Council’s current ESD policy). We provided this information in a range of formats, including via email between the forums, and presentations at the forums. Balancing the desire to further interrogate complex issues with the need to get through the required tasks was also challenging at times. The complexity of the issues meant that participants sometimes felt rushed through discussions, but to ensure we gathered sufficient data at each workshop, we had to move quickly through topics. An approach to mitigating the frustration associated with this is to provide material in a variety of formats, and to make some material available prior to workshops.

Housing/Density Targets and other policy tools - background research 41

Workshop content In each workshop, we built on content generated in the previous forum/s. This required a clear idea at the start of the process of the objectives of each forum, and what sort of outcomes we wanted from each forum. It also required flexibility and time between each form to reflect, digest and, synthesize the volumes of data generated in each forum, and to then plan the activities for the next forum. In most cases, we provided additional information to the participants between the forums – following up questions, links to documents and information as well as analysis of previous forum outputs. This helped crystallize, for the participants, the progress they had made and the ideas that were forming. Participants also received advice from Council’s 11 Advisory Committees and a series of targeted workshops held as part of the project. The approach fostered a deeper understanding of planning issues to be developed by the participants, and ultimately more nuanced and sophisticated advice. It was, however, resource intensive. Resourcing & timing The project required a significant commitment from Council in terms of resourcing. Council staff worked extensively with the consultant team to co-design the process; this was important so that the content generated was useful for Council. It was important to respect the significant time given up by participants to attend the forums. This meant spending time answering questions, developing information for next forum and working to design the next forum. It also required co-ordination and co-operation across Council – business units across the organisation were advised well in advance that there may be questions and requests sent their way. This approach worked well. Having a range of Council staff present at each of the forums meant that participants could ask experts the question directly, and in some cases ask follow up questions for clarification. This two way conversation was beneficial in creating a deeper understanding of the issues for the participants. There was 2 weeks between each of the first three forums, and 3 weeks between 3 and 4. This meant there was (just) enough time to prepare for the next workshop and for the participants to reflect on the issues. Outcomes & project benefits What we found is that when you ask a diverse group of people, give them the time, space and information to consider these challenging issues, they, on the whole, come up with sensible conclusions. The community are generally thoughtful, constructive, interested, and want to help. They are grateful to be involved and appreciate the complexity of the issues.

Housing/Density Targets and other policy tools - background research 42

Contact us

CANBERRA HOBART MELBOURNE SYDNEY Level 2, 28-36 Ainslie Place PO Box 123 Level 14, 222 Exhibition St 209/50 Holt St Canberra ACT 2601 Franklin TAS 7113 Melbourne VIC 3000 Surry Hills NSW 2010 +61 2 6257 4525 +61 421 372 940 +61 3 8616 0331 +61 2 8307 0121 [email protected] [email protected] [email protected] [email protected]