Social infrastructure: the policy conundrum of growing cities

Australia’s cities are growing fast. Of all the OECD nations, only Israel grew faster than Australia over the past decade. By 2061, Perth and Brisbane are likely to double in size, while Melbourne and Sydney are likely to be cities of up to 9 million people. The Australian Bureau of Statistics projects, over the same period, Australia’s capital cities will need to accommodate between 11 million and 19.3 million additional people.

Despite a recent trend towards urban consolidation, much of this growth will be accommodated in greenfields developments on the urban fringe. In these areas, hundreds of new suburbs are being planned and constructed.

A key ingredient to the long-term success of new communities is the provision of “social infrastructure” such as schools, libraries, sporting facilities and community centres. How well governments go about doing this a critical issue for public policy.

The provision of social infrastructure is complex. Responsibility is shared between local government, many state government portfolio agencies, developers and other private providers, as well as not-for-profit organisations. Each of these groups has its own mechanism for funding and delivering social infrastructure, and they do not always fit together coherently or easily.

Planning for new suburbs is generally done well

Despite the challenges, Australian governments have developed significant expertise in planning new suburbs. Australia’s largest cities have city-wide strategic plans, and these are generally articulated further in a series of regional or corridor plans that provide the settlement framework that effectively shapes where social infrastructure is planned. New suburbs on the edge of Australia’s cities are routinely master-planned using precinct structure plans.

Funding is challenging and mechanisms are contested

Most jurisdictions have developer contribution schemes in place to ensure that private developers — and, by implication, homebuyers — contribute to the cost of infrastructure, although these schemes vary in their comprehensiveness. In Melbourne and Perth, developers are required to contribute to the cost of some social infrastructure. In south-east Queensland, developers contribute to the land cost only.

Other infrastructure is funded from council rate revenue or from ad hoc grant revenue provided by state or Commonwealth governments (although it is far from clear what shape a Commonwealth cities policy may take). Although Victoria and Queensland have (limited) developer contribution schemes for state infrastructure, the main source of funds for state infrastructure is budget appropriations.

With tight fiscal conditions, state governments are understandably attracted to the idea of funding infrastructure from developer charges, although this has an impact on housing affordability. The Productivity Commission argues social infrastructure should generally be funded from general revenue because infrastructure is used by the broader community and accurate cost allocation is difficult.

Trading off appropriate infrastructure provision in return for cheaper house prices is not likely to be a sensible option over the longer term. Therefore, social infrastructure will have to be paid for one way or another, whether through developer charges or general revenue.

Delivery is complex

Social infrastructure is often delivered in a fragmented fashion, with only minimum co-ordination between funding organisations.

State government departments find it difficult to discuss potential delivery priorities or timeframes with councils or other providers in instances where budget funding is not yet approved. For local government, this makes effective co-ordination with state government quite difficult, and it means that opportunities for innovation and efficiency are sometimes forgone. For example, developing a sporting facility or library shared by a school and the broader community is usually a win-win outcome, but is only possible when councils and state government collaborate early.

In an effort to better co-ordinate the planning and delivery of social infrastructure, the Victorian government has built upon an earlier successful pilot by entering into partnership with five growth area councils. Jointly funded “brokers” build and mediate relationships, co-ordinate activity and assist with planning and problem solving. Evaluations have shown this approach to be effective.

Social infrastructure points to broader lessons

Outer suburban social infrastructure provision reminds us that getting things done in government often requires navigation across a complex array of governments, organisations, interests and policy settings. It shows us that optimising outcomes in this sort of environment requires an openness from government and a preparedness to share information. For those directly involved, it involves working with a diverse array of people, and the ability to work collaboratively in partnership with others is absolutely essential.

Australia’s capital cities will be transformed over the coming decades, with hundreds of thousands of new houses being built in new communities on the city fringes. If our intention is to build socially cohesive neighbourhoods, then provision of social infrastructure is essential. How well we do this is a truly important matter for public policy.

This is an edited extract of a longer article — Planning, Funding and Delivering Social Infrastructure in Australia’s Outer Suburban Growth Areas — published recently in Urban Policy and Research