• VCAT

February 2, 2020

Monash Council release justification for subdivision contribution fee hike

Following the footsteps of Frankston City Council, who successfully increased their public open space contribution rates, Monash Council proposed amendment C148, an amendment that is much heavier handed and is one of the highest of any council.

Amendment C148 proposes to increase the public open space contribution requirement for subdivisions of 3 lots or more to 10% cash, 10% land, or a mix of both. Currently, Council requires a public open space contribution of between 2% and 5% depending on the number of lots created. A contribution rate of 10% has been determined by council as necessary to deliver a reasonable standard of open space provision across the whole of Monash for a growing population. Council believes this contribution rate reflects the need to ensure that all future residents will have contributed to providing an appropriate level of public open space services and recognises a need of 30 square metres per person as determined by Monash Council.

Recently, an independent Planning Panel has been appointed by the Minister for Planning to consider the Amendment and all submissions that Council received about the Amendment. The Planning Panel Hearing for the Amendment C148 will commence on Monday 17 February 2020 and will go for 4 days. With the hearing commencing shortly, Evidence statement prepared by Dr Marcus Spiller, instructed by Maddocks on behalf of the City of Monash, been released on the council’s website for public to inspect and review.

Dr Marcus Spiller is a Principal and Partner of SGS Economics & Planning Pty Ltd (SGS), with academic qualifications of PhD in Global Studies, Social Science and Planning, Master of Commerce (Economics) and Bachelor of Town and Regional Planning. Dr Spiller specialises in metropolitan strategic planning, housing policy, urban infrastructure funding and the links between urban structure and national economic performance. Dr Spiller also has experience in providing advice to all tiers of government and the private sector related to the dynamics of housing, transport, employment, infrastructure and the general economy in cities.

Why Council adopt 30 square metres of Open Space per person

In the evidence statement, Dr Spiller first explains the rationale behind the need of 30 square metres of public open space services per person as determined by Monash Council.

In the table above, provided by Dr Spiller, Melbourne based local governments illustrate a range of open space rate between 24 and 30.3 square metres per capita, while other average open space rates under a range of other authorities are slightly higher than 30 square metres per capita. Therefore 30 square metres of open space per capita is considered a reasonable benchmark to apply in Monash. Despite this rate is towards the higher end of the range of possibilities, the adoption in Monash is justified in the context of climate change and community expectations of greater infrastructure investment to support urban consolidation.

Dr Spiller further adds, as at 2016, open space provision across the whole of Monash stood at less than 27 m2 per capita, which is already 10% below the standard adopted above. With no further addition to open space stocks, the open space rate will fall to less than 25 m2 per capita over the next decade. Therefore Substantial investment in the quantity and quality of open space provision in Monash is required to arrest this trend decline and build towards a reasonable standard of sufficiency.

Why council propose flat rate of 10%

To arrive at the uniform 10% contribution rate for Monash, the open space standard has been applied to all developable land in the City; that is, including land already developedas well as land that is likely to be developed or redeveloped over the planning period. Conceptually, his calculation method contemplates Monash as a blank slate and poses the question ‘how much open space would be required in the City by 2028 to fulfill an aggregate provision standard of 30 m2 per capita?’ This quantum is then divided by all developable land to give a ratio. 

Dr Spiller argues that a 10% contribution rate is not unprecedented. In his opinion, historic practices in open space contributions in metropolitan Melbourne are no longer appropriate in the context of climate change and community expectations for additional investment in infrastructure to support urban consolidation. Contribution rates under the open space Particular Provisions in Planning Schemes have been increasing in recent years, with a number now featuring flat rates of around 8% covering large areas of municipalities. He regard this as a reflection of growing awareness that “business as usual” in open space contributions will no longer do and that substantially increased investment in the quantity and quality of open space is a pre-requisite for urban consolidation and a climate resilient city.

Impact on development in Monash

Dr Spiller believes the cost of the increased open space contribution will most likely be passed back in the form of lower bid prices for development sites rather than compression of developer profit margins or increases in dwelling prices. In many circumstances, the reduction in bid prices for development sites will still leave a substantial premium for land sellers so that they will remain motivated to sell to bona fide developers. There is a large pool of potential development sites in Monash. Only a small proportion of these sites needs to be released for development to achieve projected housing demand.He believes developers who have already acquired land for development but have not yet subdivided will be impacted by the introduction of a higher open space contribution rate as it will not have been incorporated in initial development costs assessment. Am C148 will affect development feasibility to the extent that it influences the profile of costs that need to be built into the RLV calculation, in particular the public open space requirement.

Impact on housing affordability

It is his opinion that the Gross Realised Value (GRV) of developments in Monash will not be affected by the introduction of Am C148 as Developers operate in competitive markets and are unable to apply a cost plus formula to dictate unit sale prices. They are price takers rather than price makers.

Therefore, he disagrees with those who claim that increase in the open space contribution rate will lead to dwelling prices increases. These prices will be determined in the wider market independently from the open space provision requirements in the Planning Scheme. The increased open space contribution will impact on the price developers are willing to pay for a development site, not on the price that development units are sold for, nor on the construction costs.

Dr Marcus Spiller’s Conclusion

Am C148 is critical to ensuring there is adequate open space in the future. The proposed amendment to require all subdivisions of 3 lots or more to provide a public open space contribution of 10 per cent will enable an adequate funding stream for City of Monash to ensure there is a sufficient standard of open space provision.

He believes AM C148 will not impact on housing prices in new developments. It may have a short term impact on landowners’ willingness to sell due to a change in the profile of development costs which sees residual land value becoming a smaller proportion of the gross realised value. But it cannot be assumed that this will forestall development.

Panel Hearing and other Evidence Statements

The independent planning panel will commence on Monday 17 February 2020 and will go for 4 days. City of Monash will present on day 1 and other parties to present on day 2 to day 4.

More information about the amendment, including the amendment documents and other evidence statements are available on the City of Monash website.