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Infrastructure

Mar 1, 2016

Are infrastructure costs a lot higher in the outer suburbs?

It's a truism that development costs are much higher on the urban fringe than in inner areas. But there's little evidence the claim still holds and good reason to think it's no longer the case

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Trubka et al's version of the difference in development Infrastructure costs, inner vs outer (source: Trubka et al)
Is this right? Trubka et al’s version of the difference in residential development infrastructure costs, inner vs outer,2007$$ (source: Trubka et al)

The new Australian Infrastructure Plan has some good recommendations, but it isn’t notable for the sophistication and depth of its supporting analysis (see Is the Australian Infrastructure Plan on the money?).

One of the tropes repeated by Infrastructure Australia is the idea that residential development infrastructure costs on the urban fringe are much higher than those in the inner suburbs. It says:

The research finds that the average cost (in 2007 dollars) of providing energy, telecommunications, water and transport infrastructure services to a unit of housing in existing inner urban areas is $26,500, while for outer urban greenfield locations the cost is $69,500. This represents a difference of $43,000 per unit.

The research Infrastructure Australia relies on is a 2007 report, Assessing the costs of alternative development paths in Australian cities, written by three Curtin University academics, Roman Trubka, Peter Newman and Darren Bilsborough.

The authors compared the costs of providing infrastructure in the first 10 km from the CBD of a notional city with the costs in the outermost 10 km (they also looked at the economic costs of the two locations).

A number of other influential reports have also relied on their findings to support their conclusions and recommendations e.g. Transforming Australian CitiesResidential Intensification in Tramway Corridors; and Macro-Urban Form, Transport Energy Use and GHG Emissions: an Investigation for Melbourne.

I looked at the Curtin University report back in 2010 and 2011 and wasn’t impressed. I pointed out in this article, Are infrastructure costs higher on the fringe?, that the underlying data is out of date and the methodology isn’t transparent.

As I said then, Trubka et al didn’t calculate costs themselves. They sourced their estimates from a 2001 report, Future Perth, prepared by the WA Planning Commission to assess infrastructure costs in Perth.

Future Perth didn’t calculate its estimates from first principles either; rather, it surveyed 22 earlier studies, some dating from as far back as 1972 and some relating to costs in the USA and Canada.

Future Perth is a working paper and hasn’t been published – hence the rigour of its methodology and the quality of the 22 studies it drew from hasn’t been tested.

Unfortunately, this area of policy and research seems to be a black hole. The sort of reliable data on contemporary infrastructure costs that’s required to inform policy-making simply doesn’t exist. I don’t know if they ever were, but I think it’s unlikely the relativities estimated by Trubka et al are even close to the mark now.

The implicit assumption of urban consolidation is that there’s spare infrastructure capacity in inner areas. After all, the inner suburbs used to support larger populations forty or more years ago, the argument goes, when average household size was larger than it is today.

However the frequent stories in the media about traffic congestion, competition for on-street parking, and over-crowded schools suggest that assumption doesn’t hold any more.

While there are also city-specific factors, there are a number of likely reasons for that conclusion. As I’ve explained before (Is unused infrastructure capacity in the inner suburbs all used up?):

  • Most areas within 10 km of the CBD now have the same or higher population as they had three, four or five decades ago.
  • Households today consume more electricity, gas, water and road space than previous generations e.g. air conditioning systems, flat panel TVs, second cars.
  • The sorts of households that locate in the inner suburbs today tend to be much more affluent than their predecessors. As the Australian Conservation Foundation points out, prosperous residents use more resources per capita than average income residents.
  • Average household size is smaller now. The same number of people is spread across more dwellings, meaning economies of scale in infrastructure provision are lower e.g. it takes almost as much gas or electricity to centrally heat two people living in a dwelling as it does if four live in it.
  • Some inner suburban infrastructure has been converted to other uses e.g. primary schools converted to apartments.

There’s also another critical factor that bears on residential development costs; it’s difficult and expensive to retrofit infrastructure. Inner suburban areas are more intensively developed, values are higher, sites are smaller, access is harder, opposition from neighbouring land uses is more intense, and the cost of avoiding disruption of other activities is higher.

I favour policies to increase housing supply in inner suburbs and in established areas more generally because there’s evident demand and because it’s likely social costs are lower. It’s vital though to have reliable evidence; right now we don’t know the relative costs of providing development infrastructure in outer and inner areas (and there are city-specific influences too).

Infrastructure Australia and other policy-makers shouldn’t rely on shaky data. This is a basic and obvious gap; there’s a serious need for governments and universities to put resources into providing the necessary information to  guide policy on a city-by-city basis.

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5 comments

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5 thoughts on “Are infrastructure costs a lot higher in the outer suburbs?

  1. bushby jane

    infrastructure Australia seems to have been fiddled with lately, as in politically, is this correct?

  2. Socrates

    From past work I did on this topic some years ago I think outer suburban development does cost far more in infrastructure. However not for the reasons cited in th Ia report, which I agree is superficial.

    In the analysis I did the problem with outer suburban development was that it led to the need to upgrade both inner and outer suburban networks, to connect to trunk services that usually radiated from the centre. So they were more costly for outer areas simply bcause the lengths were longer. This was at least true for water and roads, which was what I costed. I cannot comment on the rest, but expect it would be a similar pattern.

    I think there is another rarely admitted reason why inner urban redevelopment is facing large costs – the need to repair broken old infrastructure. Decades of “efficiency” have often been code for deferring or shelving maintenance of assets which are now falling apart. There is no money to replace them, so inner redevelopment becomes a trojan horse to repair failed assets. Again, this cost would have to be faced whether the new development was inner or outer. Here in Adelaide there was a $2 billion “rail rvitalisation” program since 2008/09. I would say up to half the cost was glorified maintenance and repair of dillapidated track, that had not been properly maintained since the SA state bank collapsed in the early 90s. I doubt Sydney would be any better, and I know Melbourne heavy rail has huge deferred liabilities in replacing its rail overhead power supply. Perth and Brisbane are in better shape, because they still manage their assets properly.

  3. Jacob HSR

    How could they reserve land for the 8 hectare Birrarung Marr park in the city but not land for a school in Docklands!

    The government needs to buy the Ford factory land next to Upfield station for a school/university.

    There is no university in the north.

  4. Dylan Nicholson

    I’m not a fan of suburban sprawl, but this doesn’t pass the sniff test. Generally I would expect it to be far more expensive to build infrastructure in inner suburbs than outer suburbs for the obvious reason that you cause far more disruption, and there’s limited space to actually put all that infrastructure.
    However that’s only the short term (economic) *cost* – what I’d expect to see is that the benefits of building infrastructure in inner suburbs are much higher, because it can be used by far more people.
    I also personally feel there are other costs in building infrastructure in outer suburbs (and completely undeveloped greenfield sites) that are hard to put any sort of short-to-medium term (or indeed any) dollar value on, which is ultimately the main reason I’d much prefer to see a vision of compact/reasonably dense cities and towns separated by areas of undeveloped nature reserves and farmland than the idea of a huge spread-out city gradually absorbing everything around it.

  5. James Taylor

    As a long time Urban Planner I applaud your diplomatic and careful analysis of the situation.

    To put is bluntly, however, a large part of the foundation research for the Australian Infrastructure Plan is “rubbish” (as in “rubbish in rubbish out” and the level of analysis, euphemistically called in the report “high level” is really “superficial”.

    Research is based in many cases on anecdotal comments from local government officials subject to political influence and from companies with barrows to push. Ad hoc is probably a good description of large parts of the plan and that won’t change until there is serious funding for proper research on urban issues.

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