Not in my backyard

In 2002, the Victorian Labor Government launched Melbourne 2030 – a strategic planning policy framework for greater Melbourne aimed at reducing urban sprawl and car dependence by shifting new housing development away from Melbourne’s fringe (“greenfield development”) towards pre-existing urban areas (‘brownfield development’), where public transport is already established.

Central to Melbourne 2030 was: the establishment of an urban growth boundary (UGB) that drew a boundary around Melbourne and banned urban developments outside of it; specific targets for infill (brownfield) development (currently set at 53%); as well as levying up-front charges on developers in order to recover infrastructure costs. These measures were deemed necessary in order to “protect Melbourne’s highly valued farming, conservation and recreation areas”, which is a fancy way to describe the cruddy shrubs and listless paddocks stretching endlessly to Melbourne’s north and west [believe me, it ain’t exactly prime farm land].

The Melbourne 2030 plan has since changed names (it became [email protected] million in 2008) and the UGB has been expanded, but the central tenet remains the same: urban sprawl bad, infill good.

The impact of these policies on vacant land within Melbourne’s UGB were instantaneous, with prices simultaneously increasing and lot sizes shrinking (see below UDIA chart) .

With the supply of land reduced, developers were incentivised to compete vigorously for the available land within the UGB. Meanwhile, lucky pre-existing land owners were effectively granted ‘monopoly rights’: with competition and contestability within the land market reduced, they could now demand higher prices. And because the price of pre-existing housing is set, to some extent, by the cost of new housing (which now comprised significantly higher land costs), the policies contained in Melbourne 2030 contributed to Melbourne’s rapid house price inflation experienced over the past decade.

In 2006, Justin Madden was made the Planning Minister for Victoria, and the man tasked with delivering the urban consolidation envisioned in Melbourne 2030. Throughout his term, which ran from 2006 until 2010, Mr Madden continually espoused the merits of higher density living and intervened to force through large infill developments, often against community wishes (e.g. the Camberwell Railway Station redevelopment and the 25-storey Windsor Hotel redevelopment). Mr Madden even went as far as to lambast outer-suburban households for their large ‘McMansions’, despite the fact the he lives in large two-storey heritage-protected home in the inner suburbs.

How times change. Following Mr Madden’s move to Opposition after Labor’s defeat at the polls last year, it appears that he no longer supports the ideals of Melbourne 2030. Now Mr Madden is leading a resident’s action group – “Save Moonee Ponds” – opposing a housing development at Moonee Valley Racecourse, which just happens to be near his home in Essendon. From Fairfax:

JUSTIN Madden is no stranger to public outcry over new developments.

As planning minister he presided over the Windsor Hotel scandal, where a staffer’s leaked email suggesting a sham public consultation led to a parliamentary inquiry and ombudsman’s investigation.

His government’s planning decisions raised the ire of residents’ groups across the state…

But now it’s Mr Madden who is kicking up a stink about a new development.

The Essendon resident and local MP has joined residents who are angry about a massive $1.4 billion redevelopment of the Moonee Valley racecourse, saying it will stretch infrastructure beyond breaking point.

This month the racing club held a public consultation into its plans to build 2000 apartments and townhouses – including high-rise towers of up to 25 storeys – that will house 6000 people.

But local residents, who have formed a Save Moonee Ponds group, say the club’s master plan is a ”severe case of overdevelopment”…

Mr Madden said he was reflecting the sentiment of the local community: ”They think the extent of the proposal is just quite extraordinary, to shoehorn several thousand residents into that area”…

All of Melbourne’s major racecourses are planning residential developments as the value of inner-city land soars.

So according to Mr Madden, urban sprawl is to be discouraged in favour of higher density development in pre-existing suburbs… Provided this development takes place in someone else’s backyard.

There’s nothing like a dose of hypocrisy from our political elites.

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Unconventional Economist
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    • …ugh….

      I just realised…it’s entirely possible that they DO realise this is inflationary policy…

      But it’s possible they don’t really care, in net effect, as they have a preferred/more valuable to them social/geographical agenda.

      I’m inclined to think that is closer to the truth – though i’m sure they don’t think it’s bubble-icious policy…maybe a bit of inflation is “acceptable collateral damage”??

  1. ”stretch infrastructure beyond breaking point.”
    Of course neither side of either State nor Federal politics ever considered the effect of mass immgration on our cities infrastructure, untill of course it spikes them in the arse. To date its all been about divi-ing up the spoils of engineered high property prices and aplauding the population expansion no matter what the cost to the rest of us. I for one do hope this project goes ahead. If only to punish those who have orchastrated crap for the rest of us, and of course to add more properties to the pool of existing houses/flats for sale.
    As for Brown field building, what is the point of buying a flat in a 25 story building with service costs crippling you for the rest of your life. Terrace houses with back gardens would be the go that most of us could live with, or at least, large European style flat that families could actualy live in.

  2. When you discount out the land price, the cost of an apartment is almost the same as the cost of a house. A realistic ‘high density housing’ plan should produce much cheaper apartments. The target is $200K for a brand new, 2 bedroom apartment located within walking distance to the CBD. (50 floors, 50 square meter with no balcony) The chance of any government planners allowing this to be built is ZERO as it will drive down prices.

    • innocent bystander

      Gotti says apartment building is much more expensive than house building because of the large union involvement

      • Yeah, Gotti like units built with below minimum wage labourers from Korea – each with their own ABN number, expressly designed to circumvent the minimum wage rules.

    • LandDeveloper

      Try selling a 50sqm apartment to Gen Y. Gen Y want 2 parking spaces, super-sized fridge space, separate laundry, 18sqm balcony for their BBQ, etc etc. (Please note I say this in jest and am very much generalising). The point is, that a 50sqm apartment might be a good idea on paper, but it can be hard to execute well (yes, I realise it CAN be executed, but the trick is to do it well without simply producing a low-grade investor product).

  3. What else would you expect from the same crowd that bought you Myki, smart meters and the world’s biggest (read most expensive) desalination plant. Justin Madden was typical of the standard of minister we got under Labor; look at the brilliance of Kosky, Bachelor et al. Brumby himself was totally oblivious to how hated they were on election night – he couldn’t understand why they had just been kicked in the arse. They had no idea how expensive and congested some parts of Melbourne were becoming.

    Case in point is the many lost seats they had in SE Melbourne where they took away lots of express trains to try and make the system more reliable; just try getting on a Frankston or Pakenham train in peak hour and you’ll understand why people passionately hated them for tinkering around the edges without real service improvements.

    On the topic of planning you only have to look at places like South Morang where the sprawl was allowed to overtake the railway line by many kilometers; Labor had no idea nor did they care that they were creating two or three car dependent households with bugger all services on the fringe.

    • Yes Yes and Yes. As a resident of Melbourne’s SE suburbs (and on the long suffering Frankston Line) I totally agree with all of the above comments.

      Frankly I think many of the previous Brumby/Bracks government (I will use a small ‘g’ intentionally) should be in prison or at least facing criminal charges. Greedy, arrogant and self serving.

      Koksy, Madden & Bachelor would have been first onto the block if the revolution came….

      • There’s no need to chop their heads off DarklyDrawl, just cut their extremely generous pensions off and they’ll be squealing. Look at Bachelor (for example), signed both the Dumb Meter and Myki Mouse contracts and he still got out on a six figure pension most of us can only dream of. Look at Brumby – he’s already got some plush union superannuation jobs because of his connections ON TOP OF his non-means tested pension and an office in the city (imagine the average pensioner trying to get THAT past Centrelink!). We have a system that rewards poor performances like that while the rest of us get punished with skyrocketing water/power bills and filthy/late/unreliable public transport.

        The trouble with Labor is (and I hate to agree with Tony Abbott here) they stand for nothing but power for the sake of power, dishing out patronage and contracts to whoever will give them a cushy job after politics. Whatever happened to the worker’s party started in the shearer’s strike of the 1890’s?

  4. “…I for one do hope this project goes ahead. If only to punish those who have orchastrated crap for the rest of us…”

    That seems a bit rough on the people of Moonee Ponds, most of whom will have never orchestrated so much as a kitchen renovation, let alone a 2,000 apartment redevelopment.

    These disputes show how hard and how expensive it is to retro-fit a whole city with higher-density housing. For mine, I would probably do away with the UGB, while ensuring that greenfields developments offered a wide variety of local housing densities and that first class transport systems were built-in.

  5. It’s happening in my street with the result in the morning and evenings that it’s hard to enter/exit the street, and quite dangerous at school times.

    The other effect I notice is how congested the area is now, and services just aren’t there for the new boost in population. I spoke to my council planning about the congestion, and they referred me to Madden’s department to complain, but the guy said nothing would be done.

    One further thing with my street is that the storm water just can’t cope now and we flood often, and in my case water into the garage five time this year.

    A not on Brumby/Madden and this plan, I meet one of Madden’s planning contractors while cycling, and he said the plan was to develop Melbourne as you’ve stated here, but there was no plan to fund any regional development or decentralise services to benefit those areas at all. Geelong/Seymour were considered to be part of Melbounre and would get funding, but that was it.

  6. As a resident of Moonee Ponds, I’m in favour of the development – provided council and the racecourse fund the required infastructure…what are the odds of that, d’ya think???!!!

    Better still…get rid of the racecourse altogether and re-develop a mix of medium and high density residential…

    The hypocrisy of Madden is most definitely cringe worthy…but not surprising in the least. Onwards and upwards for NIMBY, and abysmal political leadership in this country.

  7. This is where the commonsense of the German planning regime in rewarding local government for efficency and GDP growth makes a lot of sense, increase your high density housing, improve your infrastructure more people more efficent more funds.

  8. Here are the details of the development at Caulfield Racecourse:
    These racecouses are some of the last tracts of uncontaminated land located in valuable middle-suburban areas (the Caulfield land was used for car parking).
    This kind of development only stacks up financially in well-serviced locations – developers can charge the neccessary premium in the sale prices due to the location.
    Prestige apartment developments in Melbourne at Tooronga Village and Camberwell Junction (middle rather than inner suburbs) were pitched at a higher end of the market and have sold well.
    Of course Madden is a hypocrite but a selective one – all the old car yards on Keilor Road (probably in his electorate) are being redeveloped into apartments. Now that we have a Liberal Govt. in Victoria, wait and see how many projects in their heartland get canned by the Planning Minister!
    Two other recent interesting articles about house prices and growth in Melbourne:

    • Kelior road is a great example of in-fill planning done well.

      The car yards need not be located on the tram line, near schools, shops and other services.

      The lot sizes were appropriate for the development and they put in underground parking to alleviate the strain on surrounding residents. Ground floor shop fronts and a mix of 2 and 3 BR apartments is entirely appropriate.

      I would be happy to see more of this development (ie: along tram routes) rather than dual-occupancy subdivision and demolition of moderately sized family homes in the back streets.

      • I agree. Similar mixed-use development has also occurred in Bridge Road, Richmond and Burwood Road, Hawthorn.
        Unfortunately, some of the Hawthorn developments have included (or been largely composed) of student accomodation – you should see the haircuts people have been taking on those in recent times (compared to when they bought off the plan in 2009 or 2010). (Very sad, actually…)
        I hope the Caulfield Racecouse development is not a trojan horse for more student accomodation in that area – there is some very low quality stuff already around Monash Caulfield, especially along Dandenong Road.
        Another piece of trivia – the apartments built above “The Well” shopping centre in Burke Road, Hawthorn East were being flipped (at a good profit) by some of the off-the-plan buyers at settlement. But this is a very rare instance of that happening!

    • I ride my bike past the Tooronga development twice each day. Judging by the amount of lights on they appear only around 10% occupied at present. Given they were only completed a few months back, it will be interesting to see how quickly they fill up. It’s a nice development though and far better than the cruddy shoping centre there previously. But the apartments are very expensive and out of reach for most people.

      • All brownfill developments in the inner suburbs nowadays are very expensive and out of reach for most people. Except overseas investors. Foreign investment is the only thing holding the market up in Melbourne and Sydney. Remember, there is no longer any requirement for developers to hold 50% of new apartments for those with Australian citizenship. This rule and many other long standing FIRB regulations (that limited or restricted the sale of residential real estate to foreigners) were scrapped by Rudd in 2008. They have not been reinstated despite popular opinion to the contrary. Interesting article from Gottleibsen in yesterdays Business Spectator…”Yesterday, I was yarning to Harry Triguboff, the largest apartment owner and developer in Sydney and a major player in Brisbane and the Gold Coast. He tells me that more than 80% of the apartments he is selling in Sydney are bought by mainland Chinese buyers. There will be a similar pattern in Melbourne.(There certainly is.) The Sydney apartment market is down about 10% but, without the Chinese buying, apartment prices would fall sharply leading to a significant decline in eastern states dwelling prices.”

  9. LandDeveloper

    Ah yes, gotta love the hypocritical NIMBY’s – a daily fact of life in land development. Last week I received a call from a guy (on his mobile phone) complaining about plans for a phone tower to be located on a slightly elevated knoll in State Forest about 3km from his new house…how dare he catch a glimpse of this “monstrosity” from his new lounge room…especially when talking on his mobile. Go figure.

    • That is crazy but an all too common fact of life unfortunately.

      Just out of interest, how much does genuine NIMBYism (appeals, planning delays, etc) add to the cost of development and housing costs?

      • LandDeveloper

        Local NIMBYism doesn’t cost much – we can usually find a solution. But government planning delays, appeals etc, can be very expensive. I won’t go into the lengthy details, but the biggest problem we find is that the local authority can impose any kind of condition no matter how ludicrous, but the burden of proof in an appeal situation rests with us to show the condition is invalid, rather than with the authority showing that the condition is reasonable. So what happens is that cash-strapped local governments “try-it-on” for minimal cost and see if they can get free infrastructure. If they lose, well no harm done (to them), but if they win, well they get free infrastructure. At one of our current appeals, the local authority doesn’t even turn up because there is no burden on them to prove the reasonableness of the condition (they want us to build $16m worth of infrastructure that’s not even on our land or near our project). We’ve spent $200k on reports, lawyers, consultants, and lost 18 months. Even the judge can’t understand the condition, but we have to go thorugh the process nevertheless.
        That’s my whinge for the day…

        • LandDeveloper

          Oh, did I mention that our legal costs are usually unrecoverable even if we win (only in exceptionally vexatious circumstances can you get some money back, but in 16 years and numerous “wins” I’ve never got a dime back). So as you can see there’s no disincentive for local authorities to stop this practice…

        • How different is this contribution to what you would have expected when you bought the site, and when you lodged the DA?

          And how much longer in the approval likely to take compared to what you initially expected, or what is typical for that type of project?

          • LandDeveloper

            We’re 15 years into an 18-20 year master-planned project, so the $16m contribution was never ever (and still isn’t) considered, relevant, or budget-able. It’s a pure money-grab in a spurious attempt to get some free infrastructure.

          • To use your development as a case study, has this type of ‘constraining’/delaying/costly behaviour by council actually resulted in you being unable to offer any lots for sale at any point in time?

            Because if not, then that is pretty strong support for the argument that such delays do not create typically create market impacts, since they occur ‘in the background’ so to speak – the supply to market at any point in time remains unaffected.

            But, if you have had times when these types of delays meant that you had nothing to sell, then that is evidence of a transmission mechanism from approval processes/delays to the market where buyers and sellers actually meet.

          • Cameron. Take a close look at these charts (here and here). Now explain to me why there was not a construction boom following the 2000s house price explosion? Unresponsive supply maybe?

            Now explain to me why NSW and QLD produced far more homes, when adjusted for population size, in the 1990s than the 2000s? And why construction in the other capitals has been broadly flat, despite the faster population growth and house price surge?

            Surely if the supply-side was not being constrained, we would have seen a significant supply response as prices surged throughout the 2000s. Instead, we face a situation where fringe land values have exploded at the same time as plots have reduced in size. How does any of this add up in your view of the world?

          • Cameron,
            Two words “sampling bias”. You are asking whether a successful developer was able to sell blocks. Of course the answer is yes.
            You need to sample a group that includes all developers – successful, potential and failed.
            Only this way could you determine how council rules and delays affect supply.

          • Just remember this discussion and hadn’t read Land Developers reply. Thanks for that.

            To The Claw, there is no sample bias problem is asking if Land Developer had a period with no block for sale. The reason is the the unsuccessful developer has very few choices – sell the blocks at the market price, sell the development site to another developer. In both scenarios the blocks get developed.

        • I work for an organisation that has been dealt this card – with a $7.5m infrastructure charge being tried on by the state government after the initial agreements have been signed. It’s not uncommon.

    • Alex Heyworth

      NIMBYism I can at least understand. It’s the BANANAs (Build Absolutely Nothing Anywhere Near Anybody) that get me riled.

    • I’m a mobile phone software developer by profession, and have a look at some of the cell towers that are now going in due to environmental concerns. I worked for Qualcomm in San Diego, and we had one in our main campus.

      They have been used in the UK for years. Drive down the M4 and see if you can spot them. They are everywhere.

  10. There is no hard and fast rule that says that “infrastructure costs” per capita for a city get higher as the city grows in footprint. Fringe infrastructure CAN be cheaper than increasing the capacity of infrastructure in built areas.

    The exception is public transport infrastructure. This DOES get more and more expensive. So the public needs to decide whether they want public transport to be the tail that wags the “urban economy” dog, prevents affordable housing being provided, and obstructs social mobility.

    It is a bitter irony that “public transport subsidies” are justified in terms of “providing mobility for the poor” when the greatest benefit by far is captured by people in suburbs close to the CBD where public transport routes converge and service is hence extremely frequent. And, of course, those suburbs are far too expensive for the poor.

    The best thing we COULD do for the poor, is bring the price of houses down and perhaps subsidise their purchase of a small, economical hatchback car. This would actually be far cheaper than attempting to run high frequency public transport routes to where they currently can afford to live.

  11. The_Mainlander

    Sorry to Correct you UE but you said:

    “There’s nothing like a dose of hypocrisy from our political elites.”

    But don’t you mean?

    “There’s nothing like a dose of elite hypocrisy from our political ordinaries.



  12. LandDeveloper

    To answer Cameron Murray at July 13 5:36pm. Answer = No.
    But we specialise in long-term projects (10 years plus), so we plan our lot production well in advance. So whilst I actually see some benefit in UGB’s (a whole other post), I do side with UE that it is very difficult to quickly bring on supply unless you are very well prepared (1.5 – 2 years in advance). The problem that brings is that I am preparing a product mix today for what will be needed in 2 years time. So that invariably means we redesign our subdivision layouts 2 and 3 times to meet market shifts – and that adds cost.

    • LandDeveloper

      Sorry, that above post isn’t all that clear. What I mean is that yes we can bring on lots very rapidly (a matter of months), but that is only because we have planned them 1 to 2 years in advance (and provided the market hasn’t shifted requiring our 2 year old designs to be redesigned and reapproved).