Posts Tagged ‘Hong Kong’

Parramatta Road, the 20km link between Sydney’s 2 CBDs, is considered the worst road in Sydney: high levels of congestion result in long travel times and an unattractive place for people to live, eat and shop in. In my experience, congestion on weekends can be as bad or worse than during weekday peak hour. This has led to multiple proposals for improving the long strip (herehere, and here).

The most recent of these proposals comes from The Urban Taskforce, a lobby group for property developers. It calls for 100,000 new apartments and 100,000 new jobs along Parramatta Road. Such a change would be contingent on 2 things: (1) the construction of the M4 East to take surface traffic away from Parramatta Road, and (2) the creation of a new authority to oversee Parramatta Road, which is currently under the jurisdiction of 9 separate local councils. The changes would see 6 storey buildings on either side of the road, with 12-20 storeys further back and the occasional 25 storey tower to punctuate the streetscape. A metro or light rail would improve transport along the Parramatta Road corridor. A video by the Herald outlining the proposal is worth watching.

Another proposal was made by the NRMA last year, in which it suggested that Parramatta Road would be narrowed from 6 lanes to 2 lanes, allowing for trams to run in their own exclusive right of way as well as bike paths and a widened footpath.

Parramatta Road light rail

Before and after of light rail for Parramatta Road. (Source: Sydney Morning Herald)

In both cases, self interest is clear: developers want to be the ones to build those 100,000 apartments being proposed and the NRMA wants the M4 East completed that would be a requirement for this to happen. That said, self interest doesn’t automatically make this a bad idea. In fact, in this case it’s actually quite a good proposal.

First, a bit of background on Sydney’s population. According to the 2011 Metropolitan Strategy for housing, Sydney’s population will increase by 1.7 million people by 2036 and will need an additional 770,000 homes. This represents an increase in population of about a third, and an increase in housing of about a half. The disconnect between the two is due to a fall in the average household size, with single person households in particular expected to rise from 23% to 30% of all households.

Only 30% of new homes (230,000) will be new areas in greenfield sites, and the majority of these (180,000) will be in the Southwest and Northwest Growth Centres. The other 70% will be infill developments in existing urban areas of Sydney, the most prominent of which is Green Square, which will provide 20,000 new homes. Greenfield housing is more likely to be low density houses with larger average household sizes (3-4 people per house), while infill housing is more likely to be higher density apartments with smaller average household sizes (1-2 people).

The Urban Taskforce proposal to build 100,000 new homes therefore represents almost 20% of the infill housing stock required for the next 25 years. But the question remains: if Parramatta Road is so bad, why is it a good idea to make it worse with so much development along it?

This is where the  NRMA proposal comes in. One of the things that it argues for it that the increased government revenue (stamp duties, land tax, parking levies, etc) from development along Parramatta Road should be sufficient to pay for the cost of building the M4 East and a light rail line along Parramatta Road. This would take traffic off Parramatta Road and provide a frequent and rapid mode of transport as an alternative to a private car.

The reality of urban and transport improvements is that they do increase the value of private properties in the area, yet this increase in value is generally to the exclusive benefit of the property owners while the cost of building the infrastructure is borne by the taxpayers. So what this proposal is trying to do is use this increase in private value to pay for public infrastructure.

Such a technique is used frequently in Hong Kong, where the government takes control of land at a cost equal to the undeveloped value and then sells it to developers at a premium once transport improvements are made. This is easier to do in Hong Kong where the government owns all the land and only ever issues long term leases, rather than selling the land, which gives a similar form of certainty as actual ownership. Therefore, another way must be found to realise the private gains made from public spending on infrastructure so that those who benefit from the improvements also contribute to its costs. This won’t be easy, and there will be challenges from local residents who will feel they are made worse off by it:

“It seems putting most higher density redevelopment eggs in the activity centres basket isn’t paying off. The politics of dealing with existing residents is simply too hard for all levels of government, whatever their colour. That’s not surprising given residents generally feel redevelopment makes them worse off and the planning system emphasises the interests of local residents.”Alan Davies, The Urbanist (7 November 2011)

Another innovative way of paying for new transport infrastructure can be seen across the Pacific in the traditionally car dominated city of Los Angeles. Its mayor, Mayor Antonio Villaraigosa, has been making a big push to improve public transport there, including new transport infrastructure that will take 30 years to fund via a sales tax increment. However, he wants to build it in 10 years by borrowing from the federal government and then paying them back over 30 years from that same revenue, a strategy dubbed the 30/10 proposal. It’s attractive to the federal government because its a form of financing rather than spending (i.e. they get their money back) while also attractive to LA residents as they get access to cheap loans (since the US government gets lower interest rates than a city government) and receive the benefits sooner rather than later. This is actually not disimlar to how freeway construction is funded, by borrowing money to construct it and then paying it back over many decades through tolling.

In the context of the Parramatta Road proposal, bringing forward projected tax revenues from future developments in order to fund the infrastructure improvements required to make those developments viable could be just the solution that the Parramatta Road problem needs.