‘Sydney sprawl’: Costly issue facing major Australian city revealed

Millions of Aussies could soon find themselves in a “very costly” situation due to a major issue unfolding in one of our key cities.

First-home buyers are often told they need to move further away from the city if they want to afford a house – but it turns out the increasing spread of one of Australia’s top cities is likely to have major ramifications.

By 2041, at least 550,000 new homes will be needed across Sydney but it has been revealed that building those homes in the city’s outer-suburbs could lead to higher taxes and a poorer quality of living for millions of Aussies.

A major report from the NSW Productivity Commission released on Monday warned the “Sydney sprawl” was costing residents big time, with the cost of development up to $75,000 extra when building in Sydney’s outer suburbs compared to the CBD and inner suburbs.

The report, titled Building more homes where infrastructure costs less, suggests Sydney needs to completely rethink the way the city is growing, revealing the places where people want to live, such as near the CBD, are largely areas that also have the lowest infrastructure costs.

A report has found that building more housing closer to the CBD will result in lower infrastructure costs. Picture: NCA NewsWire/ Gaye Gerard

Peter Achterstraat, NSW Productivity Commissioner, said it was more important than ever to make sure new housing was build in the right areas and that exciting infrastructures were used in the most economical way possible.

“This paper investigates the costs of building across Greater Sydney and finds that the economic costs of growth, varies from $40,000 to $114,000 per home, with the lowest cost in areas near the CBD and increasing significantly moving north, south, and west,” he said.

“Building up in existing areas is cheaper because much of the necessary infrastructure, such as roads, public transport, schools, utilities, and open space, is already in place. More homes close to jobs also means shorter travel times.”

The Commission’s previous paper, Building more homes where people want to live, found that the inner city, Inner West, North Shore and Eastern Suburbs had the greatest unmet demand when it came to where people wanted to live.

Mr Achterstraat said the latest research suggested that these areas also had the most existing capacity and were the most cost-effective areas to build in.

“Put simply, more housing in the right places, where people want to live, will improve affordability, reduce infrastructure costs, and limit the burden on taxpayers,” he said.

The research found that the CBD and Inner West suburbs have lower infrastructure costs due to shorter commutes to the city, more active public transport options, more water and wastewater infrastructure capacity and greater access to schools.

This is compared to northern, western and southern suburbs that have higher costs due to long commutes, high car usage, overcrowded trains and a lack of wastewater and school capacity in some areas.

This map shows the total infrastructure costs per dwelling for different areas of Sydney. Picture: NSW Productivity Commission

A comparison of overall infrastructure costs across different areas in Sydney found inner suburbs such as Redfern, Ultimo and Surry Hills had the lowest additional cost when creating new housing, with $39,500 per dwelling.

The most costly areas were in the northwest, with Baulkham Hills and Pennant Hills costing an extra $114,400 and $112,300 per dwelling.

The paper found that continuing to disperse growth further out of the CBD “will require ever-increasing capital expenditure” to support infrastructure in these areas that already exists in inner Sydney.

Building homes in already established areas where infrastructure costs less – so building up instead of out – will ultimately have a positive impact on taxpayers because their money is being used more efficiently.

“By using taxpayers’ infrastructure dollars more efficiently, we will have more government money to maintain and improve government services and to keep taxes lower,” the paper found.

“We can reduce the burden on taxpayers substantially by prioritising growth in high-quality locations that are already well-serviced by infrastructure, without necessarily abandoning growth in other areas.”

The paper argues that more focus needs to be on building up housing in city-centric areas, rather than encouraging spreading out further. Picture: NCA NewsWire / Damian Shaw

Mr Achterstraat said the spread of Sydney was one of the biggest challenges facing the city, noting our current planning system had encouraged homes to be built away from, rather than near, the CBD where demand for housing was the highest.

“Growing through sprawl has also been very costly. If we continue that way, then ultimately existing and future residents will have to pick up the bill through higher taxes or public debt,” he said.

“With effective planning and urban design we can overcome this challenge. This paper exposes the significant variation in infrastructure costs between different parts of Sydney.

“Building more homes where infrastructure costs less provides policymakers with insights to reorient Sydney’s planning system, and to help that system deliver better value for all of us as NSW residents.”

Mr Achterstraat said the growing cost of living pressures and being faced by Australians means it was time for Sydney to “do things differently”.

“We need to build homes in the right places to ensure Sydney remains Australia’s best city,” he said.

Originally published as ‘Sydney sprawl’: Costly issue facing major Australian city revealed