When the fringe is the future: Land development for housing in Melbourne s growth areas

Transcription

1 When the fringe is the future: Land development for housing in Melbourne s growth areas Tony Dalton Anitra Nelson Australasian Housing Researchers Conference University of Tasmania February 2015

2 Introduction Problems with growth area development Nature of critique and debate on growth areas Rethinking the paradigm growth areas and institutions Elements of the analysis: Developers and other actors Changes in actor relationships Developers: scale, structure and strategy Creating and reproducing growth area retail markets Resilience of mode of production in growth areas Implications for policy and future research. RMIT University 2015 Centre for Urban Research 2

3 Acknowledged problems Affordability Most house land packages remain unaffordable to low income households Accessibility Reinforces sprawling car dependent low density suburbs Sustainability Aust n ecofootprint three times global average and city shape contributes Adaptability Development uniformity, future land use changes and building design. RMIT University 2015 Centre for Urban Research 3

4 Growth areas policy directions Resulting policy directions: Expand the UGB to expand supply Improve housing affordability by diversity in lot size and housing type Reduce time taken to plan, develop and build Assist home purchasers with grants to improve affordability and stimulate supply RMIT University 2015 Centre for Urban Research 4

5 Rethinking the paradigm Current analysis tends to focus on: Economic variables of land and housing supply, demand, transactions, investments and price Planning policy based on assumed efficacy of planning schemes and structure plans Economic and social infrastructure provision based on a-spatial functional needs analysis and planning Debate lacks institutional understanding of: Types of private actors making economic transactions, investments and prices State regulations that can preference some private players Structures that enable and constrain actor strategies and action Culture of markets through which investment strategies are developed and enacted Local to global geographic frames within which actors develop and enact strategies. RMIT University 2015 Centre for Urban Research 5

6 Developers in the industry Melbourne land development companies, quintiles (total=100) (Vacant Residential Allotment Turnover, 2009/10) Melbourne top 20 land development companies (Vacant Residential Allotment Turnover, 2009/10) Data source: Spatial Economics through DTPLI Vic RMIT University 2015 Centre for Urban Research 6

7 Developers and other actors RMIT University 2015 Centre for Urban Research 7

8 Developer company characteristics Wholly-owned private companies Private companies with internal trust funds and forming estate-specific syndicates Publicly listed companies (shares) Growth area only land developers Companies with diverse scope: Growth area land, and Land and buildings in existing urban areas (infill) Growth area land and housing Geographical scope: Melbourne, regional, national, global Joint ventures: development companies and equity finance Public authority Places Victoria Distinct types: [Y] has internal revenue and institutional investment it s own investment management business with access to superannuation funds and doesn t need to borrow finance [Z] is the development business with a separate legal entity to the construction business, itself split up by projects into companies Distinct accountability obligations: because we are a large company we have to record on the National Greenhouse Emissions NGER, which you know Metricon s not, Henley s not, but we are, so we ve got these extra requirements that we ve got to report on so, you know, we have to start requiring this sort of information from the subcontractors about how much fuel or diesel they re using on the site Time frames: the level of risk for us is less than it is for smaller [developer] players and we can wait longer for a return on our investment RMIT University 2015 Centre for Urban Research 8

9 Change 1: Land owners & developers Two major landowner developer relations: Larger land acquisitions through Project Development Agreements (PDAs) Changes in financing Growth Area Infrastructure Contribution (GAIC) One-off purchase of smaller land parcels by developers Features of PDAs We will take on all construction risk all of the master planning and the planning roles and the functions of the site. We ll develop it, but you remain the land owner then, on the day we sell, you get X percent of the revenue There are tax advantages: a raft of those sorts of advantages The landowner s only risk is in fact selling, the selling risk [delays] Landowner benefits: they stay in for the long haul and they basically benefit from the uplift in value For developer: Holding costs on the land is negligible that s clearly our preferred model RMIT University 2015 Centre for Urban Research 9

10 Change 2: Developers and builders Rise of master planned communities (MPCs) from the 1990s Display villages with selected builders Rise of volume builders, such as Metricon Henley Burbank Porter Davis Simmonds The display village is a window into the community they know that they can feed off you as well as you feed off them But it is a big cash outlay builders preparedness to become involved is cyclical, opportunistic and strategic RMIT University 2015 Centre for Urban Research 10

11 Land and building businesses are distinct It s less about managing cash flows on a weekly basis like builders have to do. Land development goes on over a longer term and a bigger scale. For those reasons, the two don t necessarily sit together as one company. It s quite a different operation, different drivers, different skill sets required, different risk profile we are basically risk managers builders have huge overheads from sales offices to the person laying the bricks. It s very labour intensive and usually low margin. RMIT University 2015 Centre for Urban Research 11

12 Change 3: Developers, consultants and contractors Developers consist of a small core team of professional managers Growth in consultants for design and commercial services Contractors for site preparation and construction Consultants and contracts working across metro area Developers have a slender managerial groups that supports project design and flexible strategy in a volatile market: they re small teams in the centre a lot of the small to medium developers are really small. They might have one project manager who s managing three or four small projects. And they re really just overseeing a whole heap of consultancies and just keeping an eye on the numbers and the contracts Successful developer teams have created: a long-term view of what they could do with a project and they invested in developing concepts RMIT University 2015 Centre for Urban Research 12

13 Growth area retail markets Diversity of house types and lots in display villages Constant adjustment of product to satisfy market segments Adjustments to changing policy, environments, such as first homeowners and levies Typical steps in purchaser process: Corridor Estate/community House plan Lot purchase RMIT University 2015 Centre for Urban Research 13

14 MPCs: Planning for differentiation Distinctive precincts, landscapes and streetscapes offer more variety and much more differentiation to make the places more interesting to live in. We have gold, silver and bronze guidelines Gold is the premium down the main thoroughfare [Mid 2012] people seem to want affordability and value for money, and they don't value those extras as much [as in early 2011]. They are all negotiating with builders and developers to get a no frills product, cheapest house and cheapest land so that they can afford it We're starting to see a level of environmental consciousness younger purchasers, that has changed the way we think so house design has responded RMIT University 2015 Centre for Urban Research 14

15 Differentiated product in segmented market as place creators the idea is that mums and dads will look after a property about 60% of sales in an ideal world. 20% would be builders every third release may be a builderonly release.. we might have some house and land packages that will mostly be bought by mums and dads anyway, or investors 15 % of straight investment might be part of that mix. we've been working closely with builders and our land product to make sure that we've tailored products to meet that first homebuyer market... and still give variety for other buyers upgrading. we've got different price points to suit different household budgets we re basically seeing a situation now where lots are getting smaller and smaller and smaller mainly to keep land at the fringe affordable for first home buyers RMIT University 2015 Centre for Urban Research 15

16 Growth area model and resilience Model of growth area development based on: Embedded support for, and culture of, detached houses for suburban living Financial institutions investing in residential land and housing Industry capacity to withstand fluctuations in demand for new land and housing through loose coupling and flexibility land development is not that hard if you have good relationships with the authorities, a good team, and a good relationship with the builders. We catch up with the top seven builders one every week we rotate them through that enables us to get a look at what s going to be happening in the future, lessons learnt, what not to repeat or what we did well. The biggest challenge in the growth areas is the provision of infrastructure, it s really tough. RMIT University 2015 Centre for Urban Research 16

17 Future policy and research The growth areas represent a special case for actors and policy makers While affordability and accessibility are market pressures that developers have embraced or grappled with, sustainability and adaptability have been incorporated mainly only under state pressure or activity through regulation and planning. We concur with Rowley et al. that for policy making: A deeper institutional understanding of types of developers distinct modes of operation is crucial The key lever is to reduce the risks and increase the stability of the contextual parameters within which policy-relevant developer types act and transform. Rowley S, Costello G, Higgins D and Phibbs P (2014) The financing of residential development in Australia, AHURI Final Report No Australian Housing and Urban Research Institute, Melbourne RMIT University 2015 Centre for Urban Research 17