Regulating urban development
Laws regulating urban development are closely tied to government policies and revenue needs. The densification of urban areas has many attractive features, but it is difficult to achieve against vocal opposition. Urban spread into farmland on the urban periphery also comes at a cost, not the least to those who will live in those area.
Multiple regulatory controls
Urban development is subject to multiple regulatory controls. These are imposed under multiple Acts of Parliament, each of which has its own objectives.
Property for sale, “permit approved”
Melbourne, Australia 2024.
Not surprisingly, approval under one Act does not imply approval under another. A proposed development may be acceptable in terms of environmental impact, but unacceptable in terms of land use planning.
For a proposed development in an urban area laws dealing with planning and development are of critical importance. There is little point for a developer to obtain building and environmental approvals for a development which would be refused under planning laws.
Conversely, approval under planning laws provides a basis for other - subsequent - applications. A land owner may find benefit in obtaining planning approval for a site and then selling the site on a “permit approved” basis. A prospective purchaser would have confidence that the approved development has the key approval. Other approvals (such as a building permit or an environment discharge permit) could then be sought.
Urban planning, infrastructure and value capture
New infrastructure provides benefits - that’s why governments build it. But it is expensive!
Analysis of a proposed project should consider all of the costs and all of the benefits in assessing whether there will be net benefit. In principle the project should not proceed unless there is net benefit.
A value capture scheme is based on a detailed analysis of the benefits side of this equation, and particularly who will obtain the benefit. The concept of value capture is that owners of land who obtain special benefit from the new infrastructure should contribute to its cost. There are two key concepts:
special benefit: the land owners who obtain more benefit from the project than the public generally are said to obtain special benefit from it;
nexus: there should be a link - nexus - between the benefit which people obtain from a project and the amount which they should be required to contribute.
Transport infrastructure
If a project is established to fund transport infrastructure at a transport hub, a value capture scheme might be established to provide some of the required funding. The public generally will benefit from the project, with more transport options, less traffic congestion, safer roads and improved amenity. The owners of land near to a transport hub will obtain special benefit from the creation of the hub. A land owner might take the benefit by redeveloping the land by construction of a new building suitable for transport oriented uses, such as retail. This redevelopment would be facilitated by appropriate land zoning. If the land is not immediately redeveloped it has improved development potential.
Transport hub in an urban setting
Special benefit to owners of nearby land.
The benefit of the project is obtained by the owners of land near to the transport hub. In some circumstances a short term occupier of land will receive no benefit. For example, if a scheme causes land values to rise, the rent paid by the occupier may rise. If the occupier’s business is not oriented to transport infrastructure the occupier may be worse off, being required to pay higher rent but obtaining little benefit. However, the critical question is whether there is benefit to the land. The owner or a long-term lessee of land in that situation would obtain special benefit even if a short term business operator does not.