Productivity Commission recommends major zoning, planning law reform

Business compliance costs could be reduced and more land would become available for construction quicker under new recommendations for zoning and town planning outlined in a new Productivity Commission report.

The report has recommended a number of changes to town planning laws, including a transformation of zoning regulations that would focus more on larger regions and less on squabbles over individual businesses.

Aaron Gadiel, chief of Urban Taskforce Australia, says if the laws are taken up by the Council of Australian Governments later this year then prices for both construction and ongoing retail businesses could drop.

“If these recommendations on levies and infrastructure are followed, then prices could drop. These fees are very often excessive and can be quite substantial for businesses.”

“The other issue is that government authorities have been using zoning fees and so on as a form of backdoor taxation, and the Productivity Commission recognises fairly set principles about these.”

The report follows years of complaints from builders and developers over complex zoning and planning laws – experts say the complexity of such arrangements mean the building industry isn’t as reactive as it could be, leading to what some believe is a chronic housing shortage.

But current laws also restrict competition in the retail market, favouring larger shopping centres over SMEs – a trend the report recognises quite clearly.

“They arise from excessive and complex zoning, through taking inappropriate account of impacts on established businesses when considering new competitor proposals, and by enabling incumbent objectors to delay the operations of new developments,” it says.

Several of the recommendations are designed to both cut red tape for small business and developers, including a recommendation to keep a sharp eye on timeframes for building approvals. Resolutions over land use and coordination, to ensure approvals are finalised as quickly as possible, have also been recommended.

One of the major recommendations would see zoning laws focus more on larger areas, rather than squabbling over whether individual businesses are in or out of each zone’s border. Gadiel says this is a welcome recommendation.

“Zoning laws are quite restrictive, and they are regulated down to the most minute details of what businesses can sell. The argument of whether you’re allowed to sell cheese alongside fruit and vegetables is one that shouldn’t be happening, but it does.”

“The recommendations seem to spell out what most people think the businesses should do, and broadly set out the kinds of buildings that are allowed to go in an area rather than focus on micro-regulation.”

The report points out that approval timeframes are a “major concern” for developers, with recommendations to finalise applications quickly.

“The main compliance costs associated with seeking planning scheme amendments (rezoning) or development approval include: requirements to prepare, submit and provide supporting material; meeting specified development controls; paying fees and charges; and holding costs associated with the time taken to obtain planning approval. “

“On the ground, these costs, individually and in combination, manifest in significant variations in the regulatory compliance burden placed on businesses operating within and across different jurisdiction.”

Other recommendations include engaging communities early to determine any objections, and “rational” allocation rules for infrastructure to save businesses and residents from paying higher prices.

Gadiel says this is the first report on town planning laws which has been conducted by a relatively objective body, and says the recommendations should be considered for their economic benefits as well.

“If these recommendations are adopted, we could see a significant boost to money flowing in. Some cities have had parts of them be stale for far too long, and haven’t had the growth that’s been required.”