Passenger Rail, Research & Development, Safety, Standards & Regulation

Fix the housing market one good transport project at a time

Household affordability. Photo: Vivendi

AECOM technical director Joe Langley says cleverly funded, strategically robust transport projects will be crucial to solving the housing crisis hitting Sydney and Melbourne.

A recent Moody’s study said mortgage repayments consume 35.1% of income in the average Sydney household with two income earners. In Melbourne, that figure is 28.2%.

While the situation has been worsened by excess demand from local and foreign investors, Langley says the “fundamental problem” is a lack of supply.

Without a sustained increase in construction, Sydney’s 20-year housing deficit will reach nearly 200,000 homes by 2024, he wrote in his submission to a parliamentary inquiry on home ownership.

“The constraints on the Sydney metropolitan region’s capacity to increase housing production – geographic, political, economic, physical and cultural – cannot be overcome by simply building more houses on the urban fringe,” Langley wrote.

Instead, public transport projects have a major role to play in fixing this issue, he said. But reform is needed, and that reform is twofold.

 
1. Improved governance arrangements

Langley identified a tendency for large transport infrastructure projects to adopt a “siloed” approach in the selection of leadership and technical teams within the delivery authority.

“Representation from other state and local agencies and the private sector with complementary skills in urban planning, urban renewal, local government and property development has tended to be limited to secondary and advisory roles, often to the disadvantage of the project and wider public interests,” he observed.

“Governance arrangements for major transport programs overseas are placing a much greater emphasis on drawing delivery agency leadership and technical teams from other complementary disciplines.”

In one example, board membership for the redevelopment of Denver’s historic Union Station included:

  • voting representatives from federal, state and local transport agencies
  • voting representatives from the regional public transport agency
  • voting and non-voting representatives from the local city council, and
  • voting representative from the public redevelopment agency

In addition, a private sector partner was selected through a public tender, bringing private commercial and residential development expertise and equity to the project.

As an additional suggestion, Langley wrote: “Long term transport plans in Denver and other US cities are also frequently linked [to] 20-year funding arrangements that are subject to voter approval via a public referendum. As a result, major transport projects … have enjoyed a high degree of public and political support, thereby avoiding the cancellation and financial failure of major transport projects as witnessed in the recent past in Queensland, Victoria and NSW.”

 
2. Value capture funding models

“The days of governments being able to fund major infrastructure projects from traditional general revenue sources have long passed,” Langley wrote.

“The scale, complexity, cost and equity considerations of major public transport projects in particular require government to move towards user charges and value capture funding models.”

Langley believes the current funding arrangements for transport projects “represent the most significant opportunity for reform,” but opined that “Australia has been slow to adopt these funding methods”.

He pointed to one example – London’s Crossrail project – which is getting 26% of its $29.6 billion in funding from a 25-30 year fund which comes from a 2% Business Rate Supplement taxed to non-residential properties benefiting from the extension to the commuter rail network.

“Transport projects in Australia provide opportunities for the state governments and transport agencies to generate and capture significant levels of revenue to help fund capital works.”

He said Sydney’s planned Metro CBD and Southwest project, and Melbourne’s Metro Rail Project, are prime examples providing this opportunity.

“Well-conceived, integrated transport and land use programs around these metro stations, combined with proven value capture funding methods, could improve housing affordability and choice, enhance commuters’ travel experiences, increase ridership and generate new revenue to help fund the projects,” Langley wrote.

Langley’s suggested revenue sources include:

  • redevelopment and sale or long-term lease of former works site sand surplus government land
  • special rates on properties within a clearly-defined transport improvement precinct around each station
  • sale of additional development rights made possible by increase transit capacity, and
  • sale or lease of government air rights

“Value capture methods such as these would allow state governments to fairly and equitably capture a portion of the unearned uplift in property values and other benefits created by the project, sometimes referred to as ‘unearned project externalities’,” he concluded.

2 Comments

  1. There is no doubt that the landscape for transport infrastructure has changed irreversibly. However federal and state policies display inertia in making the necessary transition in creating funding models that can deliver the transport infrastructure necessary to secure our future well being.
    We need to develop a wide range of options which include not only private finance and value uplift but also deliver funding models that will simultaneously deliver social benefit. Such models must now cater for the full period of investment and not be dominated by the costs of first build, that is to say efficient models for funding which recognize that the businesses and services created in infrastructure transport have to be efficient and capable of returning benefit to the investors, both government and private across the entire usage period of the infrastructure.

  2. Sydney could use this model to help fund faster rail connections to ‘satellite’ cities Central Coast, Richmond/ Windsor, Blue Mountains, Southern Highlands and Wollongong. Quicker transit times to these centres would promote commuters to move there.