Inside Story

Dealing cities in

Malcolm Turnbull’s efforts to bring the federal government back into urban policy will be put to the test in Western Sydney

Peter Mares 3 July 2017 2190 words

City limits: assistant cities minister Angus Taylor (right) with treasurer Scott Morrison during a visit to Macarthur Railway Station in Western Sydney in May. Dean Lewins/AAP Image

Lindy Deitz wants to make life better for “squinters,” those residents of Western Sydney who face the rising sun as they drive east to work in central Sydney every morning, and then squint into the setting sun on their long commute home. Deitz is general manager of Campbelltown City Council, one of eight local authorities that have teamed up to negotiate a City Deal for Western Sydney with the federal and state governments. She hopes the agreement, centred on the development of Sydney’s second airport, will create jobs, generate more affordable housing and reduce chronic congestion. “Western Sydney can’t even get to Western Sydney anymore,” she joked at an Australian Housing and Urban Research Institute conference in Melbourne last week.

Western Sydney is Australia’s third-largest economy. With its population set to grow by one million people over the next twenty years, a City Deal for this region will be a big deal. The two other City Deals struck so far – in Townsville and Launceston – have been more modest in scope, which makes Western Sydney the first substantial test of the Coalition’s “smart cities” approach to urban development. When he announced the policy in April last year, prime minister Malcolm Turnbull said that smart cities would deliver all the things that Lindy Deitz wants for her squinters and more: “Jobs closer to homes, more affordable housing, better transport connections and healthy environments.”

Smart cities are also designed to drive “the innovation economy,” and City Deals are at their heart. Angus Taylor, Turnbull’s assistant cities and digital transformation minister, told the Melbourne conference that “we have to reshape the way our cities work” because they are becoming “a brake on productivity.” It’s not just the time lost to traffic jams and long commutes, it’s also inefficient land use and poor matching of jobs and skills. Deitz gives the example of major hospitals in Western Sydney struggling to find staff because key workers like nurses are priced out of nearby housing.

The very things that make cities economically productive – the benefits that flow from bringing people, ideas and capital closer together – also undermine that productivity by creating congestion and pushing up rents and property prices. Existing landowners make windfall gains but the poor and the young are forced either to pay excessively for housing or to move away from the places that offer the most jobs and the best career prospects. We are “actually asking young Australians to buy a high-paid job… by buying an expensive house or renting an expensive house,” says Taylor.

Improving Australia’s cities is “not a minor issue about productivity, but a central question of economic policy,” international urban development expert Duncan Maclellan told the conference. With current policies reinforcing inequality and frustrating sustainable development, it is also a matter of fairness and environmental impact. And the fact that Angus Taylor’s cities portfolio is located within the prime minister’s department suggests that Turnbull – unusually for a Liberal leader – recognises these realities.

In his famous “It’s time” policy speech during the 1972 election campaign, Labor’s Gough Whitlam told supporters in Blacktown that almost every major national problem related to cities. “A national government which cuts itself off from responsibility for the nation’s cities is cutting itself off from the nation's real life,” he said. “A national government which has nothing to say about cities has nothing relevant or enduring to say about the nation or the nation’s future.”

In office, Whitlam set up a Department of Urban and Regional Development and involved the Commonwealth in everything from inner-city renewal and heritage protection to public transport and sewerage projects. Since then, the engagement of national governments with cities has tended to rise under Labor and fall under the Coalition. During the Hawke–Keating years, Labor minister Brian Howe initiated the Building Better Cities program, which shares some characteristics including collaboration between different levels of government – with City Deals. The Rudd and Gillard governments not only developed a national urban policy to improve “the productivity, sustainability and liveability of major urban centres,” but also set up the National Affordable Housing Agreement and the National Rental Affordability Scheme, created Infrastructure Australia, and tracked progress in annual State of Australian Cities reports.

By contrast, the Fraser, Howard and Abbott governments tended to “stick to their knitting,” treating cities, urban policy and public transport as the realm of state governments. Turnbull is bucking this trend. The idea is to bring together all three tiers of government – national, state and local – to forge agreement on urban development goals and the measures needed to achieve them. Angus Taylor says the deals will be transparent and the lines of responsibility will be clear: “No more finger pointing, no more saying, look, housing’s the state, or local or the federal government’s fault. We put the finger-pointing aside and we say, you know, we’re actually going to solve this problem. We’re going to publicise who’s accountable for what and we’re going to hold ourselves to account.”

Taylor’s bold words are an attempt to deal with the fact that no single level of government has clear carriage of urban issues in Australia. Tim Williams, CEO of the Committee for Sydney, describes cities as “orphans of public policy.” In Melbourne, Duncan Maclennan asked rhetorically, “Who deals with the issue that we had a 20 per cent rise in property prices in Sydney last year?” His answer: “No one.” Three layers of government, he says, “is precisely the problem.”

City Deals have their origins in the longstanding French contrat de ville system, but they have come to Australia via more recent developments in Britain. Both Maclennan and Williams have direct experience of the way the deals have operated there since 2012, Maclennan as “knowledge leader” on City Deals for Britain's Economic and Social Research Council from 2014 to 2017 and Williams as a former senior adviser in the UK Department of Communities and Local Government.

Although he was initially sceptical about a private-sector-led scheme supposedly based on innovative finance models, Maclellan believes that City Deals have been “fundamentally positive” and “changed the game.” The poster child is Manchester: its agreement, the biggest and most established in Britain, has produced a revolving infrastructure fund (with the city earning back some of the tax revenue arising from the boost to economic growth), a metropolitan investment strategy, a housing investment fund, and hubs to promote apprenticeships, business growth and low-carbon initiatives.

The Manchester deal only involved two levels of government – national and local. Perhaps more relevant to Australia is Britain’s second-largest City Deal, in Glasgow, which also involved the Scottish government. The deal activates more than £1 billion (A$1.7 billion) in infrastructure investment for urban renewal and transport projects, establishes a life sciences research centre and provides targeted assistance for young unemployed Glaswegians and other vulnerable residents.

One of the most important things to come out of both the Manchester and Glasgow deals is not new money or new construction projects but innovation in the way those cities are governed. The Greater Manchester Combined Authority brings together ten separate local authorities and the Glasgow and Clyde deal brings together eight. The idea is that an overarching body can more effectively address issues that cross council boundaries, including transport planning, urban regeneration and investment strategies.

The Western Sydney City deal is also aiming for this type of horizontal integration. In bringing together eight local governments (Camden, Campbelltown, Fairfield, Hawkesbury, Liverpool, Penrith, the Blue Mountains and Wollondilly), it seeks to overcome another perennial problem of urban planning in all of Australia’s capital cities except Brisbane – the lack of an overarching authority that can coordinate policies across a greater metropolitan area. “Sydney does not exist as an entity,” says Tim Williams. “It doesn’t act as an entity; it has things done to it.”

One of the advantages of City Deals, says Williams, is that they are shaped from the bottom up, based on what local governments determine they need rather than on what central governments want to give them. And since local governments must invest some of their own money up front, they also have skin in the game. Both these factors move City Deals away from the Australian norm of top-down federal grants that are so vulnerable to pork barrelling (although it didn’t pass notice at the Melbourne conference that Australia’s first three City Deals are all in electorally sensitive regions).

One of the potential pitfalls of City Deals is the amount of effort needed to set up and implement them. Necessarily bespoke by nature, they can’t simply be rolled out across the nation. Townsville’s deal includes investment in port and rail facilities, as well as a new NRL stadium and a cooperative research centre for the development of Northern Australia. The Launceston deal includes money to move the University of Tasmania campus into the heart of the city, to redevelop the historic Paterson Barracks and support local schools to extend classes to Years 11 and 12. (Many Tasmanian high schools only go to Year 10.) Both deals are integrated to some degree with defence projects.

In Western Sydney, the deal is likely to include public transport investments, local employment initiatives and a housing package. In return for its investment, the Commonwealth will expect significant planning and zoning reforms at state and local government level to reduce restrictions on residential development and speed up building approvals. This is in line with the federal government’s dubious argument that red tape and a lack of new construction are almost entirely to blame for Sydney’s runaway house prices.

In reality, two distinct issues to be dealt with: “housing affordability” and “affordable housing.” The first relates to the general rise in house prices, which puts pressure on new home-buyers and raises overall levels of mortgage debt, with associated risks to the economy and the financial system. The second relates to the provision of dwellings for low-income households that simply can’t afford to buy or rent in the current market. While an increase in supply may help with housing affordability, it will do little to generate more affordable housing stock.

Many participants at the Melbourne conference argued that City Deals will only improve housing options for low-income households if they involve previously taboo initiatives such as inclusionary zoning. Widely used in other countries, inclusionary zoning requires developers to set aside a proportion of new dwellings in any project for sales or rentals at below market rates.

David Waldren, head of planning, design and development for the construction company Grocon, told the conference that his firm is absolutely certain that inclusionary zoning will be part of the future (though he acknowledged that rival firms strongly oppose the idea). The “notion of a fair go” is still embedded in Australian society, he argues, and would find expression in a demand to provide affordable housing options close to city centres. City Deals were an opportunity to make inclusionary zoning a reality.

One way to introduce inclusionary zoning would be to make it a condition of developers’ bids for government land like the former defence site at Maribyrnong, in Melbourne’s west. With developers incorporating the cost into their modelling, governments may earn less from the sale, but the benefit will be an increased supply of well-located affordable housing. Inclusionary zoning could also be combined with an investment strategy for not-for-profit housing providers. Duncan Maclellan says the funds unlocked through City Deals can help buy off the ideological opposition of some local governments to new social and community housing.

Whether Western Sydney’s City Deal will make much difference to either housing affordability or affordable housing will depend on the nature of the final deal struck. Given that the most urgent and necessary housing reforms lie in the realm of tax policy, and are being dodged, City Deals may be the only available option right now. They aren’t perfect, but at least they have the potential to generate coherent, region-wide land use strategies that better align housing, transport and jobs. And if they result in increased coordination and cooperation between Australia’s three tiers of government, and across fragmented local councils, then the process of striking the deals may be just as important as their content. •