If the development industry isn’t careful it might do itself out of a job. It wants government to pay for all the infrastructure, schools, parks, urban cooling, transport connections and be insurer of last resort when it builds on flood plains, in fact all the externalities. And now it wants the government to underwrite the financial viability of apartments and to pick up the pieces where it fails. What’s left?
The thing about David Chandler leaving as Building Commissioner in August, is who will replace him. And whether the state government has the guts to make sure his work continues. Because as you can imagine improvement in the building and construction industry is not a product, it’s a process that needs to be constantly reaffirmed and reinforced.
When Chandler jumped aboard five years ago, defects in construction averaged 39 per cent, with around 80 per cent of those centring on waterproofing. It was often referred to as the Wild West by those who fell foul of it.
At our event on Tuesday week 23 July we’ll be prodding Chandler for data on what he’s achieved, but according to our sources it’s been “extraordinary” and “overwhelmingly positive”.
The problem is that the changes he’s made are a restriction on profit, our sources shrewdly observe and so there will be pushback.
The people we spoke to this week ahead of our retrospective with the man himself, were as one in their concern that already there are calls to wind back what they see as restrictions on their ability to operate.
Lobby groups are already agitating for less “red tape”, (code for quality) and that usually comes with calls for less “green tape” (code for annoying environmental concerns that lead to lower, long term costs and healthier outcomes for housing occupants the whole of society if a systems approach is used).
One group put out a report this week slamming developer contributions and other statutory development charges, claiming they are a major barrier to housing delivery.
If the state and local governments heed the call it means We the Taxpayer pick up the costs of what developers want to leave out of the business case for new housing.
It means We the Taxpayer pick up the cost of the infrastructure such as schools, parks, libraries, transport, community facilities, urban cooling or any other externality that their projects might give rise to.
There’s also a resistance among developers about building in the admittedly expensive resilience we will now need to protect our community from the violent weather already destroying homes and lives. The opposition from certain quarters to raising energy efficiency standards in housing is now legendary and shameful. The alternative is 24/7 air conditioning and enormous energy bills for uninformed or desperate consumers.
Now let’s pause for a moment. What does it actually mean if governments comply and let developers off the hook for all these items around quality and externalities?
But first, let’s recall that only a few weeks ago, the New South Wales government suggested it might underwrite deposits for off the plan sales, no doubt in response to the big powerful lobby groups from housing that have the ear of government.
The angle is it would give confidence to developers to proceed with apartment projects when finance is leery.
Pull these two notions together – government (We the Taxpayer) pays for the physical infrastructure of greenfield or infill housing and then provides financial backing for development. There’s actually not a lot left for the developer to do.
The reality is that most development costs are passed onto end buyers: fees for the architect, urban planner, all the consultants involved and for the builder.
Developers tend to want a nice margin, both for the bank to give it security should projections fail and to compensate for all the angst created by the often big gambles developers take on.
Taking the developer out of the equation could mean a big overall saving on the cost of housing.
It’s not a unique idea; it’s what the Nightingale Housing concept is built on and what we learnt from that model so many years ago. The model is based on cutting out the middle person and making the end owners the developers. Consultants are paid market fees and all the costs are made transparent.
That Nightingale has managed to acquire only a tiny foothold in Sydney is because of the very high land costs.
Now the NSW state government in Sydney has a lot of power to fix that and provide low cost land as part of the housing infrastructure needed to keep a global city going.
But despite this and its pre-election promise to mandate 30 per cent affordable and social housing on the sites that it owns, the state government just recently sold a large site in Camperdown to the open market, no strings attached.
State gov, you’re missing a massive opportunity here!
This might sound like rampant socialism.
Newsflash: federal Opposition Leader Peter Dutton is on board. He’s proposed a socialist solution with nuclear energy (We the Taxpayer again); we’ve already got socialist subsidies for the fossil fuel industry; (we know the banks are protected and now the governments will increasingly be our insurers of last resort) and now he wants to break up the monopoly of the supermarkets.
We’re already halfway there.
The problem is that while federal pollies are in thrall to the big fossil fuel and nuclear lobby groups, state governments around the country are in thrall to the development lobby which makes up a big chunk of the state’s domestic product.
Developer lobbies are enormously wealthy, they can hire premium consultants and analysts to prove their case and say whatever is needed. And there’s very little voice from the other side – the disorganised badly represented consumers who end up carrying the can. (If this reminds you of the coal and gas industries it’s no surprise).
But stand back and take a close look at the development industry. It might start to shimmer like a hologram – all hot lobby air, no substance.
If developers want to hand all the risk to We the Taxpayer let’s give them what they want and encourage them to go further and dissolve themselves.
We the People would have no problem paying for our own quality building, infrastructure, externalities or resilience, because all the red tape and green tape would be to our long term benefit.
There’s always a desperate heart felt call to keep market driven solutions for all that we do. Markets in fact have vast benefits but they must be real markets, composed of the unique local qualities of the means of production that can be used to create what we need and want.
But what we have in so many sectors are oligopolies that distort the true market nature of what they deal with and instead apply enormous pressure on governments to favour their industry and way too often deliver the lowest possible value and quality to consumers.
Of course we have some excellent developers that have earned trust and provided value but there are too many that take advantage of the loopholes and the systemic issues that have produced low skill levels and a sense that anyone at all can become a developer.
The many gaps and failures though are why the building and construction industry that David Chandler started working in five years ago, was often called the Wild West. And it’s why his job has been so important and why its gains must be preserved and iterated out to all the other jurisdictions around this nation.
– Tina Perinotto