Developer contributions: A (not so) radical idea
Updated: May 11, 2022
Many jurisdictions use developer contributions as a valuable revenue stream to help support improved public infrastructure as the community grows. Currently, Hobart City does not require any contribution to the city as part of any development. The developers apply through the usual channels for their development, and if it sits within the planning scheme and is approved by Council, then they start construction, sell the property and make an absolute killing.
At first glance you might think "whats wrong with that? its a free market". But you must consider that increasing the density of population through development places a burden on The City's public infrastructure. Whether its increased road use and parking requirements, upgrades to power, sewerage and water infrastructure, or the densification of population in open space, every development puts more and more pressure on existing infrastructure and public space. Not only that, but developers often benefit from significant value uplift as a result in rezoning from light industrial or commercial to residential. For example, the site on which the apartments pictured are being built was a disused petrol station. I'm sure the developers have increased the value of this site by several magnitudes.
National conversations about developer contributions highlight that developer contributions underpin "our quality of life, supporting our economy and enabling individuals to contribute to our collective prosperity". I strongly support implementing developer contributions as a priority and Hobart City Council is looking into models of developer contributions. They are:
User charges: Payments required of developers to help fund planned shared infrastructure which will be used by the development in question. A key principle is that the developer should contribute in proportion to their expected share of the use of the infrastructure items in question.
Impact fees: Impact fees apply when a development creates unanticipated demands on local infrastructure because of its design or timing. The underlying principle for cost appointment is the ‘polluter or exacerbator pays’ principle, that is, those who cause the cost impact are full responsible for the costs of abatement or rectification.
Value sharing: This mechanism captures part of the uplift in the unimproved land value that follows from an infrastructure investment, site rezoning or development approval which allows for a higher value or more intensive land use. The justification for this type of contribution is that land use regulations and planning decisions create windfall land value increases for particular landowners. This additional land value has been ‘created’ by government decisions rather than landowner effort or investment and therefore, in principle, the community is entitled to share in the uplift that exceeds the normal profit from development activity. The proportion of land value uplift that should be shared is a key area of debate. In Australian practice, a 50% to 75% share of value being shared with the community is common.
Inclusionary requirements: Inclusionary requirements are about ensuring that successive developments meet community expectations in relation to liveability, efficiency, and sustainability. In general, inclusionary requirements are satisfied through on-site provision of infrastructure (e.g., open space or off-street parking) or by satisfaction of specific design requirements (e.g., building setbacks, plot ratio, water, or energy efficiency measures, etc.).
To be very clear, these models of developer contributions are in place in jurisdictions all over the country. This is not a new, ground breaking idea and nor will it stymie future developments in Hobart. With the rapidly rising value of realestate, property developers are making an absolute motza on the property boom and Hobart City is struggling to keep up. Although I tend to favor user pays of value sharing arrangement, legislating some form of developer contribution needs to happen as a high priority. For every month delay, Hobart City Council is losing revenue that could be spent on improving public facilities and infrastructure for the benefit of the whole community.
I know many Hobartians struggle with the growing pains of our city, unsure of what the future holds. So, as more apartment complexes get approved and construction commences, let's at least make the property moguls contribute to improving the city for all.
Read The Hobart City Council discussion paper HERE