Call for resident-free city zones

By Shane Scanlan

A suggestion has been made to ban residential development from parts of the CBD to protect commercial property owners from unintended extra costs.

Property Council of Victoria deputy executive director Asher Judah says the Postcode 3000 experiment has been so successful, it risked undermining the CBD as a commercial centre.

Mr Judah said, because valuations were based on “best use” of land, commercial buildings were being taxed as if they were higher-yielding residential towers.

He said this was flowing through in extra rates, land tax and fire services levies.

“The risk is that we are going to erode the competitiveness of the CBD as a commercial centre,” Mr Judah said.  “The impacts are already starting to be felt.”

He said residential development was most welcome in the CBD but it was important to guard against unintended consequences.

He said the Property Council did not have a formal position on the issue but he wanted to start a broad discussion.

He said New York deliberately cordoned off its financial centre from residential development to protect the level and value of economic activity it generated.

He said, while no specific residential-free locations had been identified, the Bourke and Collins street spines could be considered.

Mr Judah said planning overlays were already in place to protect from inappropriate development and protection of commercial viability could be similarly considered.

City of Melbourne finance chair Cr Stephen Mayne said Mr Judah had raised a legitimate issue, worthy of further investigation.

“We can’t have our prime commercial precincts being damaged by residential development. There is certainly merit in looking at protected zones.”

CBRE commercial real estate agent Josh Rutman also sees merit in investigating the concept but says the market should determine the outcome free of restriction.

“Developers, particularly those from Asia, have been very attracted to the flexible zoning provisions for the CBD, so we need to be careful about any changes that may cloud their confidence to buy here and keep creating jobs and driving economic growth,” Mr Rutman said.

“Based on our experience post-GFC, I am inclined to lean towards allowing the open market to determine the highest and best use of a site, especially given the somewhat lack-lustre office pre-commitment market which would prevent an office development being delivered regardless of land use provisions or taxing changes.”

Mr Rutman’s faith in market forces is not shared by Savills’ national research head Tony Crabb, who says such an approach is “short-sighted”.

“The market, left to its own devices, would get it wrong,” he said. “You need some idea of preservation to maintain an appropriate balance.”

“We have to realise that we are stewards of the city for tomorrow and the generations to come.”

He said if commercial activity was driven out of the CBD, the whole rationale and purpose of the residential boom would be lost.

“Proximity to jobs is the sole driver of the increasing land values,” he said. “If they end up destroying the jobs, then they will have under-mined the very reason for their existence.”

Mr Crabb does not necessarily support resident-free zoning, but he said an appropriate mix needed to be identified and codified.

He sees the greatest danger to the future as unfettered strata-titled towers, which will become almost impossible to remove, even when they are no longer useful.

Residents 3000 president John Dall’Amico also sees merit in such a discussion and supports the need for a master plan for the CBD.

“However, the immediate question is not where the residential towers are built but what some see as ineffective residential planning,” he said.  “This could be seen as having the biggest impact on the economy of the CBD, not necessarily where residential buildings should or should not be built.”

He said it must be remembered that the City of Melbourne and the State Government implemented the Post Code 3000 policy and invited residents into the city.

“They must now take responsibility for the wellbeing and amenity of its residents,” he said. “It must be remembered that the residential movement reduced commercial vacancy rates dramatically in its hour of need.”

“This must be kept in mind when considering the restriction of residential areas,” he said.

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