Apartment standards: $145K extra and it's not about the size

If all of the apartment standards being considered are brought to Melbourne, apartments will cost approximately $115,000 to $145,000 more. Perhaps the most misunderstood aspect of this, is that the proposed increase in apartment sizes means an additional $15,000. Where then does the extra $100,000 come from and what is contributing to this spike in price?

Working with Rider Levett Bucknall, the global property and construction practice specialising in cost consultancy, project management and advisory services, I have calculated the very real cost associated with each of the proposed designed standards. Understanding that size accounts for just 10-12% of the overall cost, I think it’s time we realised size, whilst it has been the most publicised factor, doesn’t matter nor cost as much as these other standards.

In confirming that the apartment standards will be released in the same time frame as the C270 amendment, Planning Minister Richard Wynne has verified that we can expect these standards to come in to effect in September this year. The Minister has also said consultation was undertaken with industry bodies, yet no official apartment standards have been released to the public for their feedback, nor have indicative costings been disclosed.

The government seemingly refuses to tell the public what they are in for and what the true cost of these apartment standards will be. They simply plan to set into motion, planning legislation that will forever change our city and hurt housing affordability, without further notice.

You see in 2014, The Office of the Victorian Government Architect (OVGA) drafted their recommended apartment standards, which were subsequently leaked to the press that year – by whom exactly, we don’t know. What we do know is that these leaked standards are very similar to SEPP65 - the NSW apartment standards and appear to be based on this model.

And whilst it must be said that the public survey conducted by the Victorian government covered these same standards, it did so without conveying the price tag associated, thus making the results more or less redundant. After all, what is the point of asking if people want something if you don’t tell them how much it costs to have it? If you don’t communicate that these things come at an expense, you are implying they are free. It’s like asking if someone would like a nicer car, better clothes, longer holidays etc. of course they would, but ask them if they want to pay for such a privilege and many will turn it down.

To better understand the economic trade off I’m talking about here, I have created the following table (see below), which outlines the true cost of each of the standards detailed in the OVGA’s aforementioned documentation.

No one other than the Government knows what the standards being introduced in September will look like, which raises other concerns and begs the question why so much secrecy? What are they trying to hide? And why won’t they just tell us what we’re in for?

It doesn’t instill a lot of faith and quite frankly I’m not alone in my frustrations about the lack of transparency and democracy being exercised here, but those with the most to worry about are those looking to buy an affordable apartment – they stand to suffer the most. Mind you the affects don’t stop at the lower end of the market…

• Luxury apartments with a view to the south will be banned.
• A development on the northern side of the city won't be able to face the view, meaning Mirvac’s Eastbourne would cease to exist.
• Anything on the bay won’t face the water.
• And apartments, like my own home, which enjoy lovely roof top views to the south west will be banned.

Seems ludicrous right? That’s because it is.

If we take a step back though and consider what prompted this government intervention, we see that this came about at a time when the industry was producing predominantly small, one and two bedroom apartments. Why were we doing that? Because that's what buyers wanted and where the market was experiencing demand.

Today, it’s a very different scenario. Today, the market wants larger more luxurious apartments and so we adjust. The majority of Plus Architecture's work today, is premium two and three bedroom residences that are designed and developed specifically for the wealthy owner-occupiers that are flooding the market.

That is not to say that we won’t go back to the smaller models, because we will – the market is cyclical and eventually there will be demand for these once again. Whilst the market has moved on for the moment and done so naturally and without government imposed bans might I add, by the time this model returns to favour many will be in for quite the rude shock because the asking price will be $490,000+ as opposed to the $390,000 entry point we now enjoy.

Thus, the introduction of such standards can be seen to severely damage affordability and somewhat unnecessarily so. Last month alone, the Planning Minister approved $2 billion worth of development in inner Melbourne – a record amount set to generate thousands of jobs, more than 2,000 apartments and more than 300 serviced apartments. He did this without design standards.

Both Minister Wynne and his department have proved they are more than capable of assessing the viability and appropriateness of projects without these mandatory measures in place, so why then are we still having this conversation?

Why then are we still willing to risk housing affordability and destroy development opportunity for something that is already happening organically?

That’s what I’m still trying to work out.

Craig Yelland is a Director of Plus Architecture – a firm with vast experience in the multi-residential sector, Craig Yelland is an advocate of apartment living and innovative design.