Red tape stifling affordability

Reform of the approvals process is cited as the biggest challenge for Perth’s residential development sector. 

Influential property developer Nigel Satterley has identified the approvals system as the biggest barrier to solving Perth’s housing affordability riddle, considered by many to be a major impediment to economic growth.

Mr Satterley last week told a Business News Success and Leadership breakfast the system had become so cumbersome over his 32 years in the business that an additional $50,000 in taxes and levies had been added to developers’ costs per lot compared with the 1980s and 1990s.

The GST adds about $22,000 to the cost of a lot, local authority schemes and levies $18,000, environmental costs between $4,000 and $5,000, while a further $3,000 to $4,000 is added simply because of the time it takes to navigate through the approvals process, according to Mr Satterley.

In the same period, block sizes had halved, he said.

“It is easier to get a major mining site up than it is a major residential site,” Mr Satterley said.

“When we really started doing land in 1982, we could get the approvals usually in 90 days.

“As things have grown and gotten a lot more complex, it’s taken longer to get subdivision approval.”

Research from the Urban Development Institute of Australia shows the minimum time frame from identification of a suitable tract of land for residential development through the 10-stage approvals process required to start construction is around five years.

But that’s the best-case scenario.

In a worst-case scenario, according to UDIA WA chief executive Debra Goostrey, that timeline could stretch out for years, which is becoming typical at some stages of the approvals process.

The longest delays, as indicated in the timeline above, occur in rezoning and structure planning processes, which include federal and state environmental approvals.

Rezoning the land through an amendment of the metropolitan regional scheme can take anywhere from 18 months to 36 months, preparing a district structure plan can last anywhere between one and three years, while local structure planning can take from six months to two years to complete.

“In generic terms, a delay over 12 months is going to add around 13 per cent to the cost of a lot,” Ms Goostrey told Business News.

“But there are also bigger things, such as we’ve had an issue around capital contributions to Western Power, which were going to make a difference of $1,500 per lot.

“There are also developer contribution schemes, which have gone up 40 per cent in one year, and that’s thousands of dollars per lot.

“People in various government agencies at local and state level think it doesn’t really matter, it’s just the developer they are loading extra costs onto; but all of those costs get passed through to the purchaser.” 

The delays were particularly concerning because vacant land has been in short supply for quite some time, Ms Goostrey said.

Data released recently by the Housing Industry Forecasting Group indicates Western Australia will need 21,000 residential lots in 2013-14, while UDIA research showed there were 10,692 lots currently under construction in Perth that were likely to be released to the market within 12 months.

Total building approvals for WA in the eight months to February were 20,180, the HIFG said, up 26 per cent on the same period in 2012-13.

Housing Industry Association WA executive director John Gelavis said the availability of affordable titled land was a real concern, especially considering the price of land per square metre in the Perth metropolitan area had risen to $600 – the highest in the country.

The industry has responded to the supply squeeze by delivering smaller lots, driving up the value/sqm, but it hasn’t necessarily aided affordability.

“There is a train of thought that the lots are smaller therefore affordability will be improved,” Mr Gelavis said.

“But if you talk to builders building on small lots, where you have got local government planning requirements, in a lot of cases it actually becomes more expensive to build on smaller lots.

“Builders are becoming quite frustrated in the fact that it’s much more difficult to build now than what it was 25 years ago.”

Mr Gelavis said the state government was aware of the issues and was taking steps to overcome them.

An independent review of the approvals had been completed and was being analysed by the Department of Planning.

However that review has also been problematic because of the number of ministers and government departments involved.

Mr Gelavis said the HIA had been engaging with Housing Minister Bill Marmion, Commerce Minister Michael Mischin, Planning Minister John Day as well as Finance Minister Mike Nahan.

“It’s good that the state government has set up the regulatory gatekeeping unit to look at all of these things,” he said.

“But certainly we now call on them to take action on it.”