Comparison of selected elements; current practice vs proposed minimum standards (source: Urban Melbourne)
Comparison of the cost of selected elements; current practice vs proposed minimum standards. Click through for full list (source: Urban Melbourne)

The Victorian government has failed to tell the public what impact its proposed draft minimum amenity standards will have on apartment prices and rents. So architect Craig Yelland has done the job for it.

As I outlined recently the changes include mandating balconies, setting a maximum room depth, banning “borrowed” light in liveable rooms, requiring provision of general storage space, and much more (see Will these standards really make apartment residents better off?).

Mr Yelland estimates the standards will add $62,500 to the cost of constructing a two bedroom apartment. He’s a Director of Plus Architecture, a firm with extensive experience in the multi-unit residential sector. He says:

None of the standards are for free. They all come at a cost. The yield of each site will also decrease by 20% to 40% as a result, with the impact on potential development sites, profound.

He appears to have taken a conservative approach. For example, while balconies aren’t mandatory at present, he’s assumed an existing two bedroom apartment has an 8 sq metre balcony that under the proposed standards must be 10 sq metres i.e. an increase of 2 sq metres.

It’s unlikely the standards will have much impact in the short term because the glacial pace at which they’ve been prepared – the process started in 2014 under the former Napthine government – has given developers ample time to get projects approved under current rules.

The impact will likely be felt in the medium term, well after the Andrews government takes the immediate kudos for addressing the purported problem of “dogbox” apartments. The downsides might well become apparent just when it’s no longer around to take responsibility for its actions.

A significant increase in the cost of construction like that identified by Mr Yelland necessarily means developers will pay less for suitable sites in the future. The owners of those sites have other uses for the land – almost all inner suburban sites have existing income-earning buildings on them – and some owners won’t find the (lower) price offered by developers offers sufficient incentive to sell.

The upshot is the supply of sites will decrease, the number of apartments coming to market will fall and, unless demand moderates for some reason, prices and rents will rise.

One of the great mysteries of the public debate is how the same commentators who insist eliminating mandatory parking requirements will significantly reduce the price of apartments, can simultaneously argue that higher apartment amenity standards will have no effect on prices. It smacks of motivated reasoning.

Many of the changes proposed by the government reduce the scope for owners and renters to decide for themselves what trade-offs they want to make between amenity and price. Not all of them are doubtful though; for example, there’s a good case to regulate separation distances between buildings because it’s something  that can’t be readily foreseen by prospective residents.

But whether good or bad, the government must inform itself – and home seekers – what the proposed changes are likely to do to prices and rents. It can’t leave this key task to others. As the instigator of the changes, the onus is on the government to provide this very basic information. Without it, the government’s public consultation continues to be a sham.