Melbourne 2030 - is it working?

Any plan to put more people onto public transport has two complementary prongs to bring the two closer together. These are as follows:

* Bring good transport to more people. This may require line or route extensions, longer-running and more frequent services, and bus route reform with key corridors served by Adelaide-style Go-zones. The general aim here is a convenient network of frequent services extensive enough to be within walking distance of most homes and jobs. These matters are within the province of the various transport plans, such as 'Meeting our Transport Challenges' and the 'Victorian Transport Plan'.

* Bring more people to good transport. Amongst other things this requires clustering denser housing, jobs and shops around railway stations, discouraging large-scale developments remote from transit and requiring that all neighbourhoods have walkable, crossable and bus-friendly local streets. These topics, but particularly the activity centres and an urban growth boundary are part of the 'Melbourne 2030' plan.

The two are not independent; achieving the former is easier and cheaper if the latter is done as less route mileage is required to achieve equivalent coverage and resources can be put to better span and frequency instead.

It is important for the long-term relevance of public transport for a plan something like 'Melbourne 2030' to exist and be implemented. Those who think otherwise take Melbourne's rail-based mid-sized suburban centres too much for granted and haven't lived in Perth where the newer stations, mostly located mid-freeway, scarcely have even a milk bar nearby. Hence public transport there is effective for CBD trips to work, but more complex trips (eg shopping after work) will probably requires extra bus trips instead of a simple dash across the road, so are less attractive.

So this brings us to the question - is Melbourne 2030 working?

Bob Birrell's mob at Monash Uni doesn't think so.

His team found that new housing simply wasn't being built around activity centres. Instead it was all happening away from railway lines and transport hubs, contrary to the Melbourne 2030 aims.

To be fair, I should mention that Birrell has always been a critic of denser living, urban growth boundaries and transit-oriented development. Hence the report is a polite 'I told you so'. In this they are like Wendell Cox/Demographia. But unlike developer-funded Wendell, Monash do have academic standing, independence and rigour so they are worth taking notice of.

Even better though is to make one's own observations, and these are documented below.

Exhibit A is Carnegie. This is a Melbourne 2030 major activity centre between two major university campuses, not far from Chadstone Shopping Centre and only a few stations along from affluent suburbs like Toorak and Malvern.

This 5-part video shot last year, shows the suburb's retail and residential building boom. The shopping centre pictured as being under construction is now open. A major new library opened in 2007. Transit improvements that year included extended hours for local bus routes 623 and 627 and the new Route 900 SmartBus along Dandenong Road. There's both development and transit, so count this as a success for Melbourne 2030.

Exhibit B is Frankston, a principal activity centre. Under major redevelopment, this centre is still in transition with many empty shops. Unlike Carnegie it has lost major stores and its retail diversity has declined. For example, Dimmeys, vacated its large premises and is now a small shop in an arcade. And Spotlight has abandoned Frankston CBD altogether, joining a major new auto-based shopping area near Bunnings on Moorooduc Highway. Buses though have gained, with the new 901 SmartBus and longer hours on most local routes.

If 2030 works, Frankston might be a better place to watch a movie or grab a coffee, but as a diverse retail centre it has lost ground. We are not seeking much new residential above CBD shops, and the station's pedshed is poor as there is no exit onto Beach Road from the northern end of the platform.

If we apply Monash's test of whether there is more development further from the station than nearer to it, the shift of activity to the bulky-goods, auto and hardware precinct on the highway do not demonstrate success.

Exhibit C is the Hoppers Crossing area, particularly the shopping area around Hoppers Crossing Station and the Point Cook Town Centre.

The Hoppers Crossing station and retail precinct is pedestrian-hostile and has not thrived. Though designated as a Melbourne 2030 centre, there have been no attempts at denser development, despite its potential, given the station, shops, hospital and nearby university campus. Buses though have benefited; two Hoppers Crossing routes were upgraded to 'minimum standards' (ie 9pm finish time 7 days a week) in 2007.

Point Cook and its shops have grown rapidly in the last couple of years as a heavily car-based development. Its gridlike street patterns are relatively pedestrian and bus friendly. Bus services though limited; after upgrades elsewhere Point Cook is probably the largest remaining area in Melbourne without Sunday buses.

Just like Central Plaza (Altona Meadows) took over from the shops around Laverton Station (now largely abandoned), there is a risk that Point Cook and an ever-expanding Werribee Plaza could take over from the shops around Hoppers Crossing Station. The risk is particularly high due to Hopper's poor walkability and lack of surrounding housing within a 10 minute walk. Much more than Frankston, the Hoppers Crossing station area can be considered to be a missed opportunity at best and a failure at worst.

These examples demonstrate a great deal of truth in the Monash study; despite its intentions, Melbourne 2030 has not materially changed the basic direction of suburban development of new centres. Transit centres that have successfully developed appear to be in high-value inner areas in which housing demand is (by definition) already highest.

Otherwise the economics of higher housing densities (as advocated in 2030) are poor, both from a homebuyer and developer point of view. The further out you go the worse it gets, which explains why the Mitcham Towers development did not proceeed.

From a buyer point of view, one can buy a basic 3 bedroom house on a full sized block in Werribee for as little as $200 000; even less if you look around. This is below replacement cost so represents good buying, especially if you find somewhere so cheap it's only slightly dearer than the land alone. The cheapest established unit in the area (which may or may not be near the station) would sell for (say) $180 000. Hence houses are much better value than units.

To build a new new version of same, the land would cost around $100 000 and construction cost of around $150 000 per unit. A development comprising two units on the block would cost $200 000 per unit. The economics get better when you're building three or more units per block, but even so it will still not be possible to sell a new unit for less than the cost of an established house on a full block, so purchaser value will still be poor. And for the private investor, buying two established $200k houses is likely to return more with less hassle than buying only one house, demolishing then building two units.

To profit from developing you need either high sale prices or low costs/cheap land. Cheap can mean nasty so often new units will be in inconvenient and inaccessible areas such as Tarneit (instead of central Werribee or Hoppers Crossing). While some buyers are willing to sacrifice backyard space for closeness to facilities, in somewhere like Tarneit they get the worst of both worlds. Nevertheless enough people like the sniff of new carpet and paint so these denser places on cheap land still get built, making a net negative contribution to Melbourne 2030 aims.

The classic retiree downsizer will find that selling their $300 000 house and moving into a $250 000 unit will not boost their nest egg after sale costs and stamp duty are deducted. Besides the house would be better for grandchildren to stay and likely appreciate faster in value. So provided they can still look after the house they're better off staying put.

For first homebuyers, outer area houses are hardly dearer than units, so there is no financial imperative to buy the latter. Also from the developers point of view, the low prices on established houses puts a ceiling on what can be charged for new units (it can be a bit more but not $100 000 more). This imposes a tight lid on costs so development is only profitable if land costs are low and big sites are available.

Hence for both buyers and developers the economics of denser housing in outer areas is quite poor, and it's only likely to work in unserved, cheap land areas away from transport. The problem then is that people pay in other ways, through increased car dependence and the atrophy of shopping centres near railway stations. Plus of course the high cost of providing extra kilometres of infrequent, indirect and poorly patronised bus routes.

That is not to say that the principles of Melbourne 2030 activity centres are not worthy, even in outer areas. Hoppers Crossing Station is surrounded by poorly used land that could become improved housing and retail, though probably at the cost of significant land resumption. Bus stop and station pedsheds could be extended through better pedestrian facilities and resuming land to open up culs-de-sacs for better bus routes. And Melbourne 2030 needs to say something about designing bulky goods and industrial areas to be suitable for efficient public transport.

Unfortunately 2030 overlooks these major retail and employment landuses, so betrays its bias towards the cafe-sitting inner-suburban unmanual white collar type (who may guiltily drive to the Nordic IKEA more often than the out-of-mind Bunnings or Spotlight).

The situation is much brighter in the high amenity inner suburbs. A basic 1-bedroom unit might sell for $200 000 to 250 000, while houses might be $500 000 to $800 000 or more. People on average incomes can't generally afford the latter but the area is super-handy so they'll put up with a unit. And it doesn't hurt that many residents are students or professionals who don't care for gardening much either.

Building costs for units are pretty much the same everywhere, innner or outer suburbs. Anything with more than one level (eg 2-storey townhouses with garaging underneath) will cost more. But a new unit or townhouse for $500 000 doesn't look so bad in value to buyers if the house next to it is worth $700 000 (as it could be) rather than $300 000, as in an outer suburb.

And, though the land value is higher, the resale value for the developer is higher still, permitting a better profit to be made. Plus new townhouses will often have garaging, open-plan and two bathrooms that the Edwardian next door won't. Whereas in the outer suburbs most new houses are the now-standard 4 x 2, despite shrinking household sizes. This again means that new units and townhouses in outer suburbs are less advantageous in term of features or better value relative to full-sized houses.

But the situation is more favourable in inner suburbs, and this is why these are redeveloping as someone has identified sufficient buyer appeal to make a profit and hence worth doing.

To summarise, the relative prices of homes and the economics of developing are not helpful to Melbourne 2030 succeeding around outer suburban nodes, which in many cases are only a few kilometres from cheap greenfields land accessible by freeway. In such areas individuals are no better off buying a unit as they're hardly cheaper than houses and are probably not even near the train.

Turning this around may require an unfashionable level of housing-commission style government intervention to resume and develop sites near stations. A problem here is that developers can sometimes be wary of bureaucracy or getting involved in such projects. Plus governments can change or projects can be shelved, so relying too much on them presents a risk bad for business.

Melbourne 2030 also failed because it was not associated with a major capital works program of walking and cycling projects in established suburbs. The only thing it is associated in the public mind is increased density at little direct benefit to existing residents.

Some apparently simple and cheap transport projects like opening culs-de-sacs can cause huge controversy, yet may be essential for efficient buses. Nevertheless this should not be a reason for inaction; bottom-up community consultation clearly supports better urban design and better transit access, and there are many allies in seniors, disability, school and local government that could implement pedestrian amenity projects and assure community support.

Disability access is particularly useful for pedestrians since two birds can be killed with one stone. It will be increasingly realised that although the bus buying program is ensuring that all new buses will be low floor, stops will remain inaccessible. This is because increasing road traffic and a fetish for roundabouts is causing more roads to be uncrossable on foot, let alone wheelchair.

Then there are market-based pricing or tax mechanisms based in incentives rather than direct interventions. I regard vacant land and buildings, particularly near stations, as an opportunity use, crying out for a higher and better use. Sitting on it is not in the public interest; there could even be an argument for vacant land near stations to be taxed more highly than developed land. This could encourage owners to 'develop or sell' rather than hold for speculative purposes.

Density and distribution of jobs is another factor, with a worry being offices in light industrial or bulky goods areas. Offices don't even need the sort of heavy truck access that industrial areas need, and low-density 'business parks' are unnecessary. The high costs of 'free parking', and the opportunity cost this presents (from public transport access to being able to walk somewhere for lunch) needs to be realised.

Clustering around transport nodes is desirable; from a public transport perspective it's easier to move people from many suburbs to one centre than to move from many to many. And with the daily commute the largest distance travel most people often make, it makes sense to aim to increase efficiencies here by worrying as much if not more about 'job densities' than 'housing densities'.