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Why poor areas will miss out on urban renewal

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Owners of units in crumbling apartment blocks in poorer areas of Sydney may be stuck with them indefinitely, according to a new report, while their better-off counterparts in in more salubrious suburbs upsell their apartments for luxury low-rise or lucrative high-rise developments.

The UNSW report, launched today (Wednesday 25th),  says some areas of Sydney most in need of urban renewal will miss out on the benefits of new strata laws that will allow a majority of owners to force the others to sell their apartment to developers.

The report identifies a corridor of “multiple disadvantage,” basically following the rail line from (but not including) Parramatta to Cambelltown, taking in Cabramatta and Liverpool, as being most in need of urban renewal, but least likely to enjoy it under the new collective or forced sales laws.

It warns there is little incentive for developers to renew apartment blocks past their use-by dates in areas where house prices are low, while silvertail suburbs will see most of the urban renewal promised by the laws slated to come into force next year. Either way, it’s a blow to low-income families seeking affordable housing.

“It’s all very well getting excited about re-building bijou apartments overlooking the beach at Clovelly for sale at $2m a pop,” said Professor Bill Randolph, Director of City Futures at UNSW.  “The big problem will be redeveloping old and decaying blocks in areas that are already high density but where, even if it was economically viable to renew strata schemes, lower income families may well no longer be able to afford to buy or rent them.”

The report claims that 25 percent of apartment blocks in greater Sydney are over 35 years old. Strata owners have a legal obligation to maintain and repair their buildings, often leading to crippling levies as building age.

Currently the laws demand 100 percent agreement before strata schemes can be sold off but the controversial collective sales laws, passed by parliament last month, will allow 75 percent of owners in apartment blocks to force the other 25 percent to sell or agree to a scheme in which they get a new apartment in a redeveloped block.

Collective sales have been promoted as a way of renewing the building stock in established suburbs while freeing apartment owners from the burden of having to maintain unit blocks that were well past their use-by dates.

A preliminary report issued last year by UNSW’s City Futures Research Centre in the Built Environment department reckoned 8,500 apartment blocks, predominantly in the Eastern Suburbs and around the harbor, were potentially economically viable redevelopments under existing or tweaked planning regulations.

But owners of run-down apartment blocks in some areas will miss out because it’s cheaper to build a new block than go through the process and expense of renewal.

“It costs the same to build in Cabramatta as it does in Coogee,” a developer who preferred not to be named told Fairfax Media. “In areas where prices are low you would just start from scratch on a greenfield or brownfield site, so you don’t have the additional expense of buying out the existing owners then demolishing the building.

“In area where the land price is higher, and building sites are in short supply, that’s when you start looking at existing buildings where you could put more units – or more expensive apartments – on the same site and still make a decent profit.”

The report, Renewing the Compact City: Economically viable and socially sustainable approaches to urban redevelopment, identifies three major strands of potential strata renewal that it calls Gentrification, Densification and Residualisation.

Gentrification means the replacement of three-storey schemes with new similarly low‐rise blocks built to higher quality specifications.  This would occur more in high property‐value locations in the Eastern suburbs, North Shore and near the ocean and harbor.

Densification, the replacement of low‐rise schemes with new higher‐rise (up to 10 storey) buildings, would be concentrated in middle‐ring suburbs. However, residualisation refers to areas, largely in the Western suburbs already experiencing multiple disadvantage, where the replacement of existing strata schemes with new blocks is not economically feasible.

Adding to the problem is that previous densification of these areas, mostly with small, walk-up apartment blocks, locked up land now identified for greater housing density to accommodate the projected population growth, says the UNSW report.

“Many of these blocks, although sturdily constructed, may be coming to the end of their physical life. Especially where repairs and maintenance have been neglected, these older blocks will be in need of wholesale refurbishment or replacement.”

The report, largely written before the recent law changes were passed, also calls for a better appreciation of older building stock’s contribution to affordable housing and says government should encourage not-for-profit organisations to undertake urban renewal projects where commercial developers don’t consider them viable.

Among other recommendations, the report suggests stamp duty should be waived for owners who purchase a new unit in a block built on the site of their previous homes.  It also calls for secret ballots on collective sales, suggests owners should have to disclose if they own more than 20 percent of the units, and says tenants should be informed about proposals and their key dates.

It calls on NSW Department of Planning and Environment to review the Affordable Rental Housing State Environmental Planning Policy to include the loss of affordable rental accommodation in terminated strata schemes.

And it asks the government to “strengthen oversight of residential building and certification processes to foster greater public confidence in the quality of new multi‐unit residential buildings.”

The UNSW Built Environment report was written by Laurence Troy, Bill Randolph, Laura Crommelin, Hazel Easthope and Simon Pinnegar and is available online at www.cityfutures.net.au.

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