ARTICLE
16 September 2024

Will TOD Make It On Its Own?

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Vincent Young

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The Transported Oriented Development (TOD) Program and the Low and Mid-Rise Housing (LMR) Program (Programs) and the concept of a focus on accelerated precincts...
Australia Real Estate and Construction

Introduction

The Transported Oriented Development (TOD) Program and the Low and Mid-Rise Housing (LMR) Program (Programs) and the concept of a focus on accelerated precincts arose from a consideration of not just trying to increase housing, but an endeavour to increase housing where opportunities exist and where they don't exist then to create opportunity, close to rail transport hubs and town centres. The aim is to facilitate the State and Federal targets to increase overall housing supply, affordable housing supply and address the current housing crisis.

Those programs were intended as reasonably short term and then varied longer term benefits to enable developers to carry out more residential development. Our previous articles describe the Programs in more detail.

The difficulty is that development has not dramatically increased. The reasons are various and some are discussed below. Giving effect to the Programs was and remains impaired because the Programs were dropped into an environment of high and rising site acquisition prices, rising interest rates for purchase and construction funding, building insolvencies, construction price increases (materials and labour), opposition from some Councils and a legacy of logjammed development and authority approvals.

Affordable housing component

A problem with this situation is not just that housing overall will not meet the State and Federal targets, but affordable housing is not being advanced at the rate projected. Even in those areas designated for increased housing development under the Programs, the percentage of the developments to be affordable housing has angered the affordable housing community. To this extent, the NSW government recognises that high percentages of required affordable housing would make most developments not feasible, so the banks won't lend and the development doesn't proceed.

The other issue with the Programs' requirements for affordable housing is that the small percentage potentially required to be built makes that percentage insufficient to be managed by a community housing provider.

Site acquisition

One of the problems with residential development over the last couple of years for many potential projects is the cost of acquiring development sites in a continually rising real estate market. This has impacted project feasibilities even with the promise of the Program benefits.

To some extent this was worsened by the implementation of the Programs as many landowners saw the Programs as increasing the value of their properties as development sites in a market which already was rising on a regular basis.

This has particularly impacted the small to medium developers who are dependent on site acquisition and consolidation to commence new projects. The larger developers have had the advantage in some cases of commencing a reduced number of projects by concentrating on properties that were land banked.

Construction

The construction industry is a factor in lower project proposals. The cost of construction has increased dramatically and not just materials, but primarily in the cost and shortage of skilled labour. The instability of builders also affects projects negatively. Sometimes this is felt once projects have commenced and the developer is required to either find a new builder where their builder is in financial distress or to support their financially fading builder to achieve project completion, effectively passing most risk to the developer.

Again, this risk seems to be reduced for those large developers with their own in-house building teams.

Shortage of skilled labour

There is considerable discussion of this problem, particularly the shortage of skilled labour and pressure on the Federal Government to allow increased immigration focused on skilled labour as growing the numbers internally is not working fast enough.

In respect of the shortage in construction trades such as painters, roof tilers, and bricklayers, the NSW Productivity Commission (Commission) noted that in terms of immigration, they are not on the priority list, but rather on a draft list awaiting further review, whilst seemingly less critical roles such as yoga instructors and dog handlers appear on the core list. It is understood that approximately a further 30,000 skilled tradespersons will be required to achieve the housing targets.

Delayed approvals and condition inconsistencies

Although there has been a reduction in new applications for development, there remains a backlog of development approvals in many local government areas. The Planning Minister Mr Scully acknowledges that there remain delayed approvals and delayed and conflicting approval conditions from various authorities, probably the worst of those authorities (other than Council) being Sydney Water.

Mr Scully has stated he is not done with planning reform, noting that applications still take on average 100 days to be approved in Sydney (we believe an optimistic figure and not likely focused on major housing developments), and with that timing excluding the time it takes to deal with Sydney Water, Transport for NSW and other agencies.

One of the considerations should perhaps be to draw the approvals requirements from these authorities into a central authority to provide a prompt and un-conflicting set of requirements and conditions, or to provide an effective government service which developers can access to assist in dealing with delayed approvals and conflicting or unrealistic conditions of approval.

Other suggested changes to the Programs

Increase the 400 metres radius

The Programs have changed planning controls to allow six-storey developments within 400 metres of 37 train stations.

The Commission has recommended that radius be doubled to 800 metres.

"800 metres is a walkable distance to a train station," the report said

"Doubling the radius of a TOD area to 800 metres quadruples the uplift."

Increase in height limits

The maximum height limit of buildings under the Programs is approximately 6 storeys.

The Commission also recommends the Government "significantly lift TOD height limits in areas where feasibility is high".

Increase targeted areas

The Programs already aim to boost housing supply by zoning for more high-rise apartments around train stations at Bankstown, Bays West, Bella Vista, Crows Nest, Homebush, Hornsby, Kellyville and Macquarie Park.

The Commission has suggested that similar zoning rules be applied more widely in "highly profitable" areas like Waverley in Sydney's eastern suburbs and Ku-ring-gai on the upper north shore and also noted Artarmon, Wollstonecraft and Waverton stations on the lower north shore as being suitable for further development.

The writer expects that to implement these suggestions to widen the Programs base will meet with further objection from those members of the community who currently object to the Programs.

Conclusion

The Programs have laid a practical and sensible platform to enable higher density development in and around railway and town centres including the accelerated precincts, but there is still further work to do for them to have significant effect and an improvement in those factors over which the State government has no control such as rising real estate prices, rising interest rates for financing and lack of skilled labour.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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