So, you want to build a TOD

Let's say you're consulting with industry about creating a new TOD SEPP. You hear it's great for housing affordability, it unlocks growth, it gets the industry off its knees. Tick, tick, tick. So, what are the risks and downsides you aren't hearing, and how might you mitigate them? Here are five things to consider:

1. Minimise displacement of essential non-residential land uses by excluding the heart of the TOD from residential development, say within 100m from 'busy roads and rail corridors'
2. Ensure there isn't already sufficient development capacity, through an audit of unrealised floorspace around well-served stations, before upzoning further and risking sterilising the land
3. Control for density and form not just height and FSR, to make sure you get what you're after
4. Provide a checklist of what good looks like - beyond access to stations, the local walkable amenities like primary schools and supermarkets
5. Value capture major uplift by understanding viability and sharing any dividends that your planning largesse may have bestowed

Then consult on the SEPP using the 'Gunning Principles' - before a decision has been made, with a willingness to amend, and a commitment to re-exhibition.

Risk is generally considered plotted against impact and likelihood, with the high impact, highly likely risks the ones requiring proactive management to avoid. For example:

• the risk of the TOD SEPP resulting in a catastrophic drop in housing prices in NSW, destroying people's nest eggs etc is extremely low, although the impact would be high. At best, the SEPP will deliver enough housing to meet demand and satisfy recent undersupply - this is a tall order in itself.
• the risk of the TOD SEPP not realising enough growth is conversely moderately likely, but also only moderate impact - the growth can still happen elsewhere with different triggers, the biggest impact is sterilising those lots by having over-inflated the value of land, and the continued impact of rising unaffordability to the NSW economy, voter confidence in government etc.
• the risk of the TOD SEPP negatively impacting on non-residential land uses might be quite high, given the relative profitability of residential development. Poorly drafted (for example, without safeguards for those other uses), the likelihood would also be high due to market forces plus the incentives (or removal of barriers) provided by the SEPP. A mitigation is required.

So, what are some moderately likely and impactful risks?

Displacement of essential non-residential land uses

This is a top priority issue, as discussed above. It's not unique to NSW or Australia. Residential not only can overtake towns by being the highest-and-best use, it can sterilise land for 24 hour economy uses due to noise complaints, and make the delivery of land-rich land uses like schools and parks prohibitive. Community facilities and urban services can also be sacrificed, to the detriment of the future community. A good model policy targeted at this issue is the "sequential test" in the UK's National Planning Policy Framework. Under the heading "Ensuring the vitality of town centres", it is described in 87-88 as:

Local planning authorities should apply a sequential test to planning applications for main town centre uses which are neither in an existing centre nor in accordance with an up-to-date plan. Main town centre uses should be located in town centres, then in edge of centre locations; and only if suitable sites are not available (or expected to become available within a reasonable period) should out of centre sites be considered.

When considering edge of centre and out of centre proposals, preference should be given to accessible sites which are well connected to the town centre.?...

So, how might that work in NSW? First, the inverse test could be applied for the TOD SEPP - is there enough room in town centres for these main town centre uses, like schools and community facilities? If not, is there room in nearby accessible sites? If not, then first preference should be given to retaining or rezoning enough land to ensure that essential town centre uses can be provided, before rezoning any of this land to residential.

A simpler version would be to merely exclude land within a given radius of a station, at least 100m (about 1 block in each direction). This would reserve at least some land for the town centre uses, and avoid inflating the value of land so as to make those uses unviable. It would also assist in realising other benefits of TODs like incidental walking to public transport, and efficient trip chains. Of course, this would only reserve 3-4ha of land, barely enough room for a school (1.5ha), small oval (1.7ha), community centre (0.1ha) and supermarket (0.3ha).

Another approach would be to exclude or modify sites that in themselves are going to be difficult to achieve SEPP65 amenity outcomes due to the proximity to busy roads and rail. The venerable Interim Guideline for Development near Rail Corridors and Busy Roads (2008) has sliding scales, but generally 60-80m from rail and 100m from a busy road would require special treatment. As a minimum, enforce the recommendation of the guideline to 'sleeve' sensitive uses including residential with non-residential uses for the full height of the frontage to the busy road / railway, to create a sound wall ('barrier block' in the guideline) - thus providing the space for non-residential uses - although this risks other uses being squeezed into inappropriately slender forms.

Ensure there isn't already sufficient development capacity

We assume the issue with volume of applications is a function of the availability of land, without undertaking an audit of whether there already may be significant unrealised development potential. What may be holding back some areas is not lack of zoned land for growth, but some other factor, like a difficult-to-reach station with poor secondary connections.

A housing study often starts with a search for land which does not have the incentives in place for uplift (ie. land that is not already R3 or R4, where the FSR is less than 2:1, in government ownership etc). We rarely check the converse - are there large-enough blocks (or potentially amalgamated blocks), already R3 or R4, with the right FSR, which have unspent capacity. One reason for this is that small amounts of unrealised potential may not be practical to turn over - a three storey building with 20 units will be quite hard to convert to a four storey building with 25 units - the uplift usually does not justify the cost and hassle of buying out all the owners, demolishing and rebuilding. There are exceptions - the waterfront flats in Elizabeth Bay and Kirribilli that squeeze out an extra unit or two - but they are rare and land value must be sky-high.

However, this is not necessarily the case, and there are a number of examples where unrealised height and FSR are substantial. Take Gosford, for example. The CBD has too much height and FSR for the market to soak up the supply. Land value has risen in reflection of the large potential of city blocks, but without a supply squeeze, the 'skyscraper economics' required to justify such large buildings does not stack up. The city remains uplifted and under-developed. Government can catalyse growth, but the interventions required are difference, such as bus rapid transit (BRT) to make more of the CBD accessible from the station, and create 3 precincts along its spine, as the Gosford UDF explains.

So, an audit may help in two ways:

1. Where is there already plenty of untapped potential, it may identify other infrastructure that could catalyse growth (like affordable housing, increased frequency of trains, or improved secondary transit services)
2. it may also identify how much floorspace could the local economy absorb year-on-year so that it did not become overwhelmed with supply. After all, an 800m radius from a station is about 200ha of land, which at a gross density of 60 dwellings per hectare, even allowing for roads and parks could yield a whopping 4,500+ additional houses, per station. If a given local market only absorbs 100 or 200 houses a year, then zoning more than 5ha at a time in that area is likely to lead to land banking, as a rational developer will avoid flooding the market and reducing their own profits. The TOD SEPP may need to address this say by identifying eligible land for uplift on application to the Department, subject to meeting other tests (see below), rather than conferring uplift as of right, all at once.
3. The Department may also wish to avail itself of more control over timing, such as by only permitting an certain volume (say 5ha) to be uplifted at a time, and which must be under construction before the next tranche in that area can be released - again to avoid land banking and large volumes of unrealised DAs.

Control for density and form

Now if the object of the SEPP is to deliver compact neighbourhoods around stations then one step that policy could take is to directly require a density to be realised, rather than relying on the proxy metrics of height and FSR. If 200 houses are sought and 5 hectares available for residential, then setting a density target of at least 35 dwellings per hectare on those 5 residential hectares will help that target to be met. 35 dw/ha is also useful because it tends to describe a type of outcome - suburbs of terraces and semis typically are this density.

The SEPP could (and should) go further and describe the form - if terraces and semis are sought, then describing that form, guided by a typical height in storeys (in lieu of absolute height in metres) will better guide the market to this outcome.

Conversely, FSR and height in metres are metrics the general planning system has relied on for the last 60 years, and generally insists on. Now FSR poorly controls for development outcome (Bob Meyer wrote an excellent article on this in New Planner years ago) - basically because allows for an easy trade-off between building forms (at the cost of community expectations being met).

It is noteworthy that North Sydney Council, which controls the 2nd largest CBD in NSW and historic and high-rise suburbs does not use FSR as a control.

Height in metres is also an odd control - rather than describing the outcome (e.g. a three storey building), it seeks to proxy for it with absolute height, on the basis that this will mitigate the impacts on the surrounds that a taller shadow may not. Given upzoning high-rise buildings is already very impactful on low rise areas, it is unclear why a metre or two beyond that is considered beyond the pale. Conversely, for lower rise buildings, the converse is usually true - squatter buildings are often more impactful because they are ugly, and provide the user with less volumetric space. Compare houses built pre-war vs post-war (and the imposition of heights under the post-war planning acts) to see how our "8.5m"-type controls, designed to prevent a three-storey form by stealth, have diminished detached housing.

Since a proxy metric does not directly control the outcome, when we do allow for good built form outcomes like lofty ceilings, say by allowing 3.1m floor to floor heights, then we can perversely incentivise the opposite - a 3m floor-to-floor skyscraper so that it can interleave 1 storey for every 30. New York's pencil towers demonstrate that an elegant tall form can be less impactful on the urban landscape while providing more generous internal spaces than one that is controlled for absolute height.

To explain the 'volumetric' aspect, although we typically focus on dimensions in plan in our planning system, we perceive space three dimensionally, and lofty space can compensate, to a degree, for smaller spaces both visually and in actual space, such as storage. Thus a Paris apartment of 40sqm can achieve the sense of space, and storage space, that is superior to our 50sqm 1brs.

Lastly, describing the form sought, like "three storey townhouses", or "35 dw/ha" gives assessment a touchstone for what kind of outcome is sought. A building that presents six storeys to the street, but which achieves a recessed 7th storey (that is not visible) both delivers more housing and with less impact than one that achieves in 22 storeys at the same FSR as the six by pushing that density into a single impactful tower. Yet assessing a 1m non-compliance in an (arbitrary) 12m or 22m height, or conversely assessing a planning proposal for 35m instead of 26m based on similar shadows on a given area, becomes detached from the built form outcome - and can result in fierce opposition to modest transgressions on the one hand, while allowing radical changes to form on the other.

Provide a checklist of what good looks like

One might assume that a TOD provides for all needs - it is close to transport. However, more will need to be done to ensure that the density is 'done well'.

First, the station might not have good connectivity to the places people want to go. The TOD SEPP should only uplift stations that are known to be well connected - St Leonards over St Marys. A good place to start would be the minimum frequency and train travel time to a major employment hub. In fact, the concept of a TOD itself might need broadening (thus allowing for gentler density, likely to be more acceptable to communities), by recognising the capacity for medium density around frequent bus corridors (a BOD?), or within walking distance of CBDs (PODs).

Secondly, although a TOD has excellent connectivity, we might still try and plan for uplift using the same tools we use for all development - the same parking rates, the same traffic generation, the same expectations of road widening and congestion. In this, we make a rod for our own back. Not only do we destroy the town centre we are trying to build up, but we reduce the land footprint at the very time we are seeking to increase the development of land. We cannot plan for uplift around transport without also supporting a transit-first approach for users, and minimising car parking and use in the TODs.

Now, not all amenities are reached by not just access to stations, and it would be a travesty if cars were retained because of the 'other' demands which the TOD cannot serve. Key to housing are the local walkable amenities like primary schools and supermarkets. Without these, close to home, we risk a TOD in name only. Again, reserving land for these uses is essential (see #1), but equally, this means that not all TODs will be suitable for uplift, not if in doing so we create car and congestion nightmares of the streets.

This brings us to 'everything else'. Walkable neighbourhoods - places where people want to live - are more than just the synthesis of their daily needs. Things to see and do, tree canopy, clean air, community facilities, a night time economy - a good place is likely to require all of these things. Some might even be paid for by the development - but they all will need to be planned before uplift, to ensure that enough space is allowed for those other activities to grow and flourish. As a minimum, the government can provide a checklist of 20-30 things that places must have, as a proxy (or we can provide it for them).

Value capture

Lastly, as with any uplift by fiat, the government needs to get smarter about sharing the dividends of its generosity. It will cost money to upgrade infrastructure, provide services, build schools. The risk here is that government will be out of pocket more for supporting the uplift than it will reap in contributions and taxes. This risk, as with the others, is both likely and high impact.

Now value capture, properly done, is not about making development unviable but the opposite - when profits are realised, to the extent that these profits are in excess of what would have been realised on the land, capture at least some of this new value, and share the increase on profits with the developer to pay for the things government will need to pay for. Run your own feasibility studies on applications if you must (this is what they did in the UK where their 30% social housing requirement was briefly negotiable based on viability), and set your expectation of profit share on that basis. Or retain the leasehold on government land being opened up. The methods are myriad, the principle the same. Value capture may also have the tidy side-benefit of reducing that other source of chronic housing (and development) unaffordability - rampant land speculation.

Then, having adopted these five principles, be prepared to consult honestly with communities and their representatives, without having made a decision, listen to feedback and refine the policy, and re-consult on the amended policy before enacting the final SEPP (the 'Gunning Principles' as they call them in the UK).