Opinion, 21 March 2020

Written by Steve Mann, Chief Executive, Urban Development Institute of Australia NSW

We most often think about infrastructure as the big, splashy projects: the Sydney Metro, the new stadiums or the WestConnex tunnel. But there is a type of infrastructure that desperately needs to be built in our cities and suburbs. It’s the infrastructure that keeps our roads safe by installing lighting, footpaths and bike paths. It’s the infrastructure in our local parks that gives the kids local sporting fields to play on. These projects are funded by local communities, local home-owners and firstly through property developers, to be delivered by Councils. Unfortunately, Councils are not delivering them on time, and our communities are missing out on amenities they have paid for.

UDIA NSW data released today, shows that Councils are sitting on $2.6 billion in unspent local infrastructure contributions across the Sydney megaregion. In this area, which stretches to Newcastle in the north, Wollongong in the South and the Aerotropolis in Western Sydney, Councils have collectively spent only 63% of their funds collected in the past three years. What makes this infrastructure different to big projects is that many of the projects could start tomorrow providing jobs and infrastructure during the COVID-19 crisis. There is $2.6 billion that we have paid for, now sitting idle.

The new home buyer is the one who hurts most in this system. Not only do the infrastructure contributions add to the cost of their new home, but they also must live without the promised infrastructure projects. In the Liverpool Local Government Area, there are temporary drainage basins in Austral which are scattered throughout the suburb and are dangerous to live next to. In the Maitland LGA, 500 new homes would benefit from a new lighted sports field, clubhouse and playground if the section 7.11 funds could be unlocked. But because of the way the system is structured, the infrastructure can’t be delivered anytime soon.

Developers pay these infrastructure contributions up front, under section 7.11 of the Environmental Planning and Assessment Act 1979. Since 2010, the NSW Government has capped these infrastructure contributions, so that any requests for additional funds from developers need to be assessed by IPART, and if found to be essential to the area, the Government will supplement the missing cost. At the time this policy began it provided a big boost to productivity and supply for housing the next generation of Australians.

But on 1 July 2020 in 80 days, the local infrastructure contributions are set to be uncapped. If this happens, the section 7.11 levy in Western Sydney can be up to $90,000 per home, but they are currently capped at $45,000 in greenfield areas in Sydney. This means higher infrastructure contributions will be required in an already broken system and it will reduce supply and make housing even less affordable and putting much needed jobs at risk. This is a critical opportunity to get shovel-ready projects on the ground and create essential employment opportunities.

The system is broken and there has to be a better way. Some councils are working hard to deliver infrastructure, but are blocked by a convoluted planning system that can slow delivery. Councils often find they are better off banking this money, leading to some sitting on pots of gold, while others are forced to come up with complicated planning measures to deliver infrastructure on the ground.

While the Government has promised to fix the broken system, they need to maintain the s7.11 cap in Western Sydney and regional markets to keep housing affordable. In the interim, there is up to $2.6 billion in economic stimulus that could be unlocked with state support either through coordination, prioritisation, or additional loans to unlock larger projects within an LGA. This stimulus would provide jobs now, faster recovery, and new infrastructure after the crisis.

-ENDS-

Media contact:
Mia Kwok – 0435 361 697
Email: media@udiansw.com.au

Download the Infrastructure Funding Performance Monitor here.