The End of Local Infrastructure Growth Scheme

By Chris Avis, Infrastructure & Development Consulting

On 30 June 2020 the Local Infrastructure Growth Scheme (LIGS) will cease to exist. According to the NSW Department of Planning Industry and Environment website, the LIGS initiative “supports councils in the delivery of essential local infrastructure in high growth areas. The scheme funds the gap between the maximum contribution councils can collect from developers and the reasonable costs of delivering required local infrastructure”.

In simple terms, LIGS sees the State Government “cap” the amount a developer pays under section 7.11 levies (formerly section 94) and pays the gap to Council as a co-contribution to essential local infrastructure. Originally, the capped amount was $30,000 per dwelling in greenfield areas in metro Sydney, with $5,000 incremental rises up to $45,000 through to 30 June 2020 and uncapped from 1 July 2020.

Importantly, LIGS funding only applies to contributions plans which have been reviewed by the NSW Independent Pricing and Regulatory Tribunal (IPART), while plans that have not been reviewed are still subject to a $30,000 cap with no gap funding available.

Many s 7.11 levies in Sydney’s growth areas sit between $50,000 and $60,000 per dwelling, but others, particularly in the North West growth area are over $100,000. To see the effect of this change on a common development scenario in Sydney’s growth areas, take a 5-acre (2 hectare) lot with a density of 15 dwellings per hectare (i.e. 30 lots). The table overpage shows the total s7.11 contributions amounts for a few sample Precincts in the growth areas.

The hypothetical site in Austral is subject to the Austral and Leppington contributions plan which is currently in the early stages of being exhibited by Council prior to a review by IPART . It is therefore limited to $30,000 per dwelling until the review is complete.

It is clear that the upcoming changes will have varying effects on each precinct, but how it will affect supply and prices is unknown.

■ How long will it take vendors land value expectations to adjust downward?

■ Will the vendors be happy to remain in place and not transact given the relative cost to relocate to a similar lifestyle in surrounding peri-urban areas?

■ How much land under option will no longer be feasible to develop?

■ How drastic will this impact on land supply and the development pipeline?

It is likely that the effects of this will be felt more in fragmented precincts. Areas like Austral, Leppington, Riverstone, Box Hill, etc. are typically more reliant on Council to deliver green infrastructure (i.e. open space, drainage basins, creeks, etc.). If development stalls in these areas, insufficient levies will be available for Council to provide the infrastructure required to create liveable places for the communities that have started to grow. This means that the numerous temporary detention basins will remain in place, residents won’t have access to open space and kids won’t be able to ride their bikes to school on safe bicycle lanes or footpaths. This would be an absolutely awful outcome for everyone.

They say problem spotters are a dime a dozen so here are a couple of measures that can be implemented to help solve the issue.

Extend the $5,000 per annum Cap Raises

Safeguard against the risk of severe supply shortfalls by extending the $5,000 per annum increases until all Section 7.11 Plan amounts have been reached. This would allow land transactions to continue and avoid the major shock of some Plans doubling overnight.

Review Stormwater Management policies

The biggest difference in Contributions Plans across the various Local Government Areas is undoubtedly Stormwater Management and the biggest component of this is land acquisition. Here are a few measures that can help reduce the amount of land required for drainage purposes.

■ Extend the permissibility of online basins to 3rd and 4th order streams. Currently, online basins (basins that are situated “on” the creek line) are only permitted on 1st and 2nd order streams. These online basins are far more efficient and have a reduced land take requirement than offline ones.

■ Permit detention basins on sports fields. Not allowing detention basins on sports fields means that land must be acquired for open space and then again for basins, rather than a dual use sports field/detention basin.

■ Permit Water Quality Basins below the 1 in 100-year flood level. Again, this would reduce the amount of developable land lost to drainage and reduce the land acquisition rate per square metre by using flood affected land.

Anything we can do to reduce the land acquisition rates per square metre and the amount of land lost for drainage purposes means that the costs can be reduced and spread out over more lots, reducing the levies per dwelling

As we begin to see the green shoots of growth out of this last housing slump the continued development of the growth centres is imperative to ensure that the development industry and Government can work together to create great places, not just housing. We just can’t afford to lose this momentum that is slowly appearing.