Melbourne's future plan has admirable goals but new strategies are needed to achieve them: Catherine Cashmore

This week I read with interest Melbourne’s newly released discussion paper, produced by the City of Melbourne, entitled ‘Future Living.’  

Once past the holiday brochure-inspired pictures designed to give the impression that a diverse range of attractive multicultural individuals are happily enjoying life in their rather ‘grand’ looking inner city studio apartments, the 'vision' is set forth.  

Lord Mayor Robert Doyle opens with a commendable statement:  

“As Melbourne continues to evolve and attract more residents, good quality homes will be crucial.”  

The phrase ‘good quality’ deserves to be emphasised – as does ‘homes’ – as these are two areas of importance which have arguably been ignored in recent years.  

He goes on:  

“Our aspiration is for an inner city where housing is affordable, well-designed and meets the diverse needs of our residents. New housing must also be well planned and developed in ways that create safe and welcoming neighbourhoods, close to where people work.”  

You’d be hard pushed to argue with the noble intentions stated above.  Despite my many criticisms of Melbourne’s development projects, we remain an enviable ‘walkable’ city in the eyes of those who visit either locally or overseas.  

However, it has been clear for some time that Melbourne is undergoing a growth spurt which threatens exceed what both housing and services are able to comfortably deliver. And in response to an ageing population’s needs, the city is under pressure to provide a broad range of additional services to shelter a forecasted increase in the municipality’s population, from a current 100,000 to an estimated 180,000 by 2031.  

The paper invites discussion and should be applauded for the detail contained within its chapters.  It addresses issues such as minimum sizes for apartments, needed storage space for an average couple or individual (a big issue for apartment dwellers), parking facilities for a resident populous unwilling or unable to give up their vehicles. It also makes mention of critical points I have directed at current high-rise projects in previous columns, principally the difference between designing for investors/student renters, and home buyers.  

In my opinion, this is an important requirement.  For too long, the ‘squeeze as many on the block as possible’ mantra has dominated our skylines.  I doubt Melbourne's Lord Mayor has the time or opportunity to visit many of the completed high-rise blocks created to address the much spruiked housing shortage in which quality is often lacking. For want of a better term, much of it is ‘overpriced rubbish.’  

I've walked through many of the new developments, and from an owner-occupier perspective, unless the purchase is for one of the “luxury” units designed with the professional city worker in mind, the relatively small one and two bedroom apartments featured as “affordable” tend to fall into the investment sector of the market not just because of tight lending restrictions banks impose on first-home buyers for this type of accommodation - rather high owners’ corporation fees set aside to service the lifts and other security features, a lack of natural light, poorly thought out floor plans, and low quality appliances, place the units currently being updated by the rookie renovators on The Block, a far more desirable proposition.

Therefore it's no surprise to find many are sold off plan to overseas buyers who are never required to set foot on the premises.

And as the paper points out, it's likely we're going to see ‘more of the same,’ as the new growth will be predominantly apartments, which have already accounted for 93% of the builds in the municipality over the past six years.

With any city plan, it's important to get the ingredients right, because one of the reasons vacancy rates are so high in many of the already established buildings in the Docklands or Southbank (as an example,) is due to a significant number of buyers who find the current standard of accommodation, neither desirable, nor affordable. Put simply, our consumer market doesn’t want to buy it – or rent it, and therefore the exercise so far, has failed to fulfil its purpose.  

Design and raising the standards of our inner city developments to ensure they last decades not years – employing good natural light, adequate private outdoor space, quality assured safety standards (something I have addressed previously,) and the ability to live side by side without fear of waking in the middle of the night to hear the next door neighbour’s television ‘insomniac’ watching activities, is very important.  

Various social studies have shown, even without a change in financial status, an upgrade in living standards provided primarily through wise and well thought-out development which in principal, shouldn’t increase the capital cost, is enough to improve the health and wellbeing of residents, lowering the propensity for depression and other related illnesses.

And it’s fair to suggest, we’ll be seeing a greater proportion of renters opting for apartment living not only represented by a falling share of first-home buyers who have been termed ‘generation rent,’ but also home owners who are finding work related activities require periods of tenancy as excessive stamp duty charges deter any feasibility of a quick ‘profitable’ move. In other words, we also have a growing demographic of ‘generation invest’ - those who own, whilst renting their principle place of residence.  

However, at present, no matter how many apartments are built, there is no getting away from the fact, that home owners prefer low density – it’s been shown the elderly overwhelmingly downsize into medium density accommodation thereby avoiding high density developments – in fact latest figures show the proportion of elderly residents living in high density housing is on the decline.  Currently 5.6 per cent of our population reside in high density accommodation, however, only a meagre 4.1 per cent of those aged over 65, and there’s nothing to show a change is underway – if anything, the reverse is the case.  

Younger generations in their 20s and 30s have a better propensity towards high density housing and the proportion is increasing; however figures still only peak at around 14% at the age of 27 and the trend across all age groups is marginal, with only 1 in 20 choosing this form of accommodation nationwide (as of 2011.)  

This issue isn’t just a symptom of inner city development.  I’ve written previously about the need to establish quality housing for a larger proportion of buyers who will accept townhouse living, but reject high density developments and it is possible to accommodate an equal number of residents in medium density dwellings without building to the skies as movements such as Create Streets in the UK, and Robert Dalziel - the London-based architect for Rational House, who visited nine cities around the world, including Mexico City, Shanghai and Berlin, to examine how to make high-density living agreeable for a broad demographic of home buyers, has shown in his book – commissioned and published the Royal Institute of British Architects: entitled A House in the City — Home Truths in Urban Architecture.

I’d suggest the construction industry would improve two-fold if we placed the same level of intelligence and innovation in Australia’s future design. However, at present, there’s little hope because it’s far more ‘profitable’ to build apartment blocks or multi-story dwellings, aimed at investors and housed by student renters, than it is to increase the supply of new accommodation for our home-buying demographic. And herein lays the problem.  

Architectural design is something that is often missed in the race to develop.  Too often it’s been claimed that planning departments sit in the pockets of developers who are under pressure to cut all possible corners in an effort to maximise profit.  

It also needs to be understood that whilst a push to increase underling supply is top of mind for city planners, developers are currently having tremendous difficulty financing proposed projects – there has been plenty of suggestion that banks won’t lend for a site, unless there is 100% debt cover – and in certain cases even more.  

In light of this, developers are pressured to pay vastly inflated commissions to achieve the pre-sale targets set out by the banking system – which as we’re all aware, lacks competition and is limited to just four major avenues.  

And therefore, even with a fancy research paper such as Melbourne’s ‘Future Living,’ investigating a ‘wish list’ of ‘wants,’ as far as a developer is concerned, if requirements become inflexible, producing an increase in the capital cost thereby resulting in a stagnation of sales for which they are unable to profit, it will have a roll on effect to supply.  

There are ways to solve the conundrum – but once again, it means thinking outside the square, attacking the system on a number of fronts (easier access to funding being one area of importance), and perhaps taking a clue from international markets which are centuries down the line in terms of inner city innovation.  

For example, as well as the ‘low density’ frameworks I cited above, there is method employed in Argentina in which architects construct apartment buildings funded directly from the ‘clients’ which rather than being a single developer, are a consortium of home buyers/investors who often end up being the eventual occupiers.  The method employs a “Fideicomiso” legal trust and works well in medium density projects on sites in which larger developers often overlook as being unprofitable – allowing smaller architects a leading edge in this field.  

One person at the forefront of the research is Elias Redstone – editor-in-chief and co founder of the ‘London Architecture Diary,’ – therefore there is plenty of information already available on the popular ‘self build’ model which can potentially help to increase ‘quality’ supply where there is already an existing problem of in-completed projects.  

I said above, in Sydney, where standards are arguably better, the market is under-supplied due to increased capital cost and a stricter enforcement of regulations. In Melbourne, the CBD is over-supplied with an arguable abundance of low grade ‘rubbish’ – therefore planning successfully for a larger population (fulfilling the wish list of future residents) and thereby ensuring developments are sold and remain fully occupied, is not going to happen under the current model of thinking. We need to explore other avenues.

Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.