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The case for developer charges: fair water infrastructure contributions promote better development outcomes and reduce infrastructure costs to the community

Developer groups have opposed Sydney Water and Hunter Water’s planned reintroduction of infrastructure contributions (or ‘developer charges’). These charges to developers help recover the area-specific, development-contingent costs of providing or upgrading the water, wastewater and stormwater drainage networks to serve new development.

However, such contributions have never been more important to the community. These charges signal to developers the costs of providing infrastructure in different areas, and thus promote socially optimal development decisions – i.e., development in locations where the benefits to the community exceed the costs. They also minimise price increases to customers’ water bills (helping to reduce cost of living pressures), and they allow some of the land value uplift generated by rezoning to fund much needed infrastructure.

Cost-reflective infrastructure contributions can also be an efficient and fair funding source for infrastructure provided by local councils to serve new developments, including much needed public open space, transport (eg, local roads) and local stormwater infrastructure.

The reintroduction of water and wastewater developer charges

The term ‘rent-seeking’ was first used to describe the wasting of resources by entrepreneurs to fight for artificially created wealth transfers. This is an apt description for the time spent in recent years by developers seeking to convince the NSW Government to resist the reintroduction of cost-reflective water, wastewater and stormwater infrastructure contributions (or ‘developer charges’) in Sydney and the Hunter.

Following a review by the NSW Productivity Commission in 2020, the NSW Government committed to reform the infrastructure contributions system, with a key element being the phased reintroduction of developer charges for Sydney Water and Hunter Water’s water, wastewater and stormwater services. This follows over a decade of these charges being set to zero (set by Ministerial direction in 2008). The consequence has been that Sydney Water and Hunter Water’s additional costs to provide water infrastructure to service new developments has not been recovered from developers, but from all water, wastewater and stormwater customers via their quarterly bills.

Under the methodology set by the NSW Independent Pricing and Regulatory Tribunal (IPART), these infrastructure contributions would recover Sydney Water and Hunter Water’s costs of providing water, wastewater and stormwater services to new development areas that are above and beyond the retail price revenue the water utilities will receive from servicing customers in the new development areas over time.[1]

Developers have long opposed paying these infrastructure contributions, arguing these costs should be borne by the wider community. They have suggested a broader revenue base (i.e., anyone but them) for infrastructure funding is needed, and that there is limited public benefit to infrastructure contributions.

Given concerns about housing affordability, the community is naturally interested in the key supply-side and demand-side drivers of house prices. Seeing an opportunity, developer groups have sought to re-prosecute their case opposing the developer charges as they claim they increase development costs and house prices.[2]

However, given the incentives at play, this requires closer scrutiny. Do these charges really increase development costs and house prices? What are the implications to the broader community and water customers if these infrastructure contributions are not reintroduced?

A cost to whom?

Infrastructure contributions may be a new cost to developers, but not to society. That is, infrastructure contributions do not create costs, they just represent a way of recovering them.

Since 2008, the costs of providing development-contingent water infrastructure have been paid by all water, wastewater and stormwater customers across Sydney Water and Hunter Water’s areas of operation through their regulated prices. IPART, with responsibility for setting maximum charges levied by Sydney Water and Hunter Water, explicitly accounts for these when setting the charges that are levied on customers via their quarterly bills. This decade old subsidy from water customers (including households) to developers has added billions of dollars to water bills of households and businesses, directly impacting the affordability of these essential services.

In 2019, IPART estimated that by 2029, Sydney Water’s average customer would be paying an additional $140 per year for their water, wastewater and stormwater services if infrastructure contributions were to continue to be set to zero.[3]

Despite the overwhelming current media focus on the cost of living, this impact on the affordability of water is one of the few areas that has escaped public scrutiny.

Re-introducing cost-reflective infrastructure contributions would simply reallocate these costs back to developers, who are creating the need to incur them and benefitting from them. This is in line with the “impactor pays” principle, enshrined in the Council of Australian Government’s National Water Initiative Pricing Principles, which were designed to increase the efficiency of Australia's water resources and infrastructure assets. This principle also underpins funding for a range of other critical services.

The reintroduction of infrastructure contributions would provide bill relief to all water customers, which will be increasingly important as major metropolitan centres in Greater Sydney and the Hunter continue to grow, and households face cost of living pressures.

Supporting planning objectives and efficient development

Cost-reflective infrastructure contributions also support planning objectives, by signalling to developers the costs of providing water infrastructure to different areas in Sydney and the Hunter – with some areas being higher cost and others lower cost to service, and these variations being ideally reflected in infrastructure contributions.

This price signal would encourage efficient development decisions. Currently, without such cost-reflective infrastructure contributions, developers do not need to consider the different cost of providing water infrastructure to different areas in Sydney. This means there is a risk they develop in areas where the costs to the community of providing such infrastructure exceeds the benefits of the development.

Smearing development-contingent costs across all water customers risks diluting one of the key signals related to the cost of development between locations, which in turn can contribute to inefficient investment in relatively high-cost areas.

As the NSW Premier and Productivity Commission have recently said, we need to improve how we plan and develop Sydney to minimise stretching of infrastructure services, including building more housing in infrastructure corridors to enhance amenity, lower infrastructure costs and improve housing affordability.[4]

Water infrastructure contributions and house prices

Provided developers have sufficient line of sight of infrastructure contributions (i.e., they are aware of these contributions before they purchase developable land), the economics of housing supply tells us that these costs are not necessarily passed through to homeowners through higher house prices.

As observed through numerous studies across multiple jurisdictions and the NSW Productivity Commission (see Box 1 in PDF Bulletin), they are likely to be factored into the prices developers pay for developable land – resulting in a lower than otherwise price to the landowner, who may still receive significant windfall gains by virtue of their land being rezoned or deemed developable.

That is, infrastructure contributions can allow some of the land value uplift generated by rezoning to fund much needed infrastructure.

If there are occasions where this means the landowner is not willing to sell to the developer, this would indicate that the benefits of the potential development in that location (as measured by what the developer is willing to pay for the land) does not exceed its costs to the community. However, this is unlikely to be common, as in an environment of increasing population, the value of developable land in and surrounding cities often exceeds its opportunity cost in alternative uses (e.g., for industrial use or agricultural production).

This key conclusion – that housing affordability is not exacerbated by infrastructure contributions, provided developers are aware of these contributions before they purchase developable land – is also backed up by empirical literature. Abelson (1999)[5], Ruming, Gurran and Randolph (2011)[6], Davidoff and Leigh (2013)[7] and Murray (2018)[8] all found that the incidence of development contributions likely falls on developers or landowners rather than home buyers.

The most reliable Australian evidence is consistent with this view; with little credible evidence to the contrary.[9]

The NSW Productivity Commission has observed that, as a policy to increase housing supply, setting Sydney Water and Hunter Water’s infrastructure contributions to zero has been ineffective and costly, predominantly resulting in a transfer of wealth from water customers to owners of developable land, “including those that would have developed land regardless”.[10]

Where to from here?

Cost-reflective infrastructure contributions can help to fund infrastructure more fairly, reduce pressure on water bills to residential and non-residential customers, and support better planning and development outcomes.

The focus should not be on whether these contributions should be reintroduced, but rather how to:

Resources spent on doing these well, rather than “rent-seeking”, will deliver value to the whole community, including developers.

Importantly, for the same reasons as outlined above, cost reflective infrastructure contributions can be an efficient and equitable funding source for infrastructure provided by local councils to serve new development – including public open space, transport (such as local roads) and stormwater infrastructure.

[1]  Retail prices to customers reflect network-wide average costs (i.e., all customers face the same prices, regardless of their location within the utility’s network). Infrastructure contributions therefore recover the difference between the costs of servicing a specific development area and network-wide average costs.

[2] Daily Telegraph, Water torture for new housing, May 12, 2023.

[3] IPART, Prices for Sydney Water from 1 July 2020, Issues Paper, September 2019, p 29.

[4] NSW Premier Chris Minns puts Sydney NIMBYs on notice, 15 May 2023; Sydney Morning Herald, Sydney’s richest suburbs need to be higher, denser to solve housing crisis, 31 May 2023.

[5] Abelson, P, 1999, ‘The real incidence of imposts on residential land development and building’, Economic Papers, vol. 8, no. 3.

[6] Ruming, K, Gurran, N, & Randolph, B, 2011, ‘Housing Affordability and Development Contributions: New Perspectives from Industry and Local Government in New South Wales, Victoria and Queensland’, Urban Policy and Research, vol. 29, no. 3, pp. 257–274.

[7] Davidoff, I & Leigh, A, 2013, ‘How do Stamp Duties Affect the Housing Market’, Economic Record, vol. 89, no.286.

[8] Murray, CK, 2018, ‘Developers pay developer charges’, Cities, vol. 74, pp. 1–6.

[9] Bryant (2017) finds a substantial impact on house prices however there are a number of concerns with the empirical approach taken. UQ Economist Cameron Murray’s paper, in response to the work of Bryant, is more convincing, having applied a clear empirical strategy exploiting unanticipated changes to the developer charge regime to identify the impact of these developer charges, finding no impact on house prices and therefore house buyers. Even more illustrative is the replication of the results of Bryant (2017) when ignoring the mechanical relationship between house characteristics and developer charges.

[10] NSW Productivity Commission, Review of Infrastructure Contributions in New South Wales, Final Report, November 2020, p 101.DOWNLOAD FULL PUBLICATION

Integrated planning, economics and quantifying the value of urban cooling

The costs of excessive urban heat are significant and lead to negative consequences for the health of our communities, environments and infrastructure. Increasingly, integrated planning of our natural and built environment covering blue, green and grey infrastructure is recognised as a force to reduce urban heat. This bulletin describes how mainstream evaluation practice can incorporate economic tools to identify, quantify and integrate urban cooling into decision-making frameworks in order to quantify benefits and support better decisions.

Excessive urban heat is a growing economic problem for our cities

Australia is particularly exposed to the physical risks of climate change, including heatwaves. In 2019 and 2020, Australia experienced the two hottest summers on record, with major metropolitan areas, as well as regional towns, experiencing catastrophic bushfires.

Across the coming decades, global temperatures are expected to rise more than 2.4⁰C above pre-industrial levels, the consequences of which are likely to disproportionally fall on our urban spaces.

Cities are more vulnerable to temperature rises because vegetation, open space and tree canopy is often replaced with concrete, roads and other heat-absorbing materials that radiate the heat they absorb during the day and through the night.

Our cities are already paying the price of excessive urban heat. These costs include increased pressure on our water and energy infrastructure as the infrastructure manages the consequences of increasing average and maximum urban temperatures. These also include increased likelihood of heat-related illness which put pressure on our healthcare sectors. Of all natural hazards, heatwaves currently represent the biggest cause of death in Australia.

However excessive urban heat can create longer-term costs associated with inactivity and mental health related illness as a result of reduced opportunities for passive and active outdoor recreation. Many of these costs accrue slowly over time.

At the same time, mainstream approaches to the provision of infrastructure and services are often blind to these costs, or struggle to rigorously recognise and incorporate them into decision making.

The good news is we have the tools to address urban heat: integrated planning of our natural and built environment covering blue, green, and grey infrastructure. This includes integrating the provision of:

Blue, green and grey infrastructure provides the potential to use existing and any new infrastructure more efficiently and create cool, liveable communities and environments. In many respects, these investments can have public good related characteristics with benefits accruing to a range of beneficiaries, some beyond the local environment.

Blue, green and grey infrastructure provide proven urban cooling benefits, but are not always well integrated into decision-making

It is increasingly recognised that blue, green and grey infrastructure plays an integral role in the provision of cool, green, liveable cities. Despite this, historically the benefits of reduced urban heat have not been well integrated into infrastructure investment decisions.

In our experience, this is because the site-specific, dispersed nature of urban heat means for integrated blue, green and grey infrastructure investments (compared to more traditional investments), it can be more difficult to:

Economics is the key to integrating the value of urban cooling into decision-making

Too often these barriers have led to sub-optimal consideration of the benefits of reducing urban heat and risks inefficient allocation of scarce community resources and funding. This is especially pressing given that the current scale of urban development across Australia presents time-limited window of opportunity to avoid locking in our historical urban development paradigm for the long-run. Our decisions made today cannot be easily reversed.

The question then is, how do we embed active consideration of these urban cooling benefits into our decision-making process?

While government policy could mandate investment in blue and green infrastructure, prescribing a one-size-fits-all approach does not guarantee smart investments. In some circumstances, the expense of setting up and maintaining blue, green and grey infrastructure will be more than outweighed by its benefits.

Economic evaluation frameworks such as cost benefit analysis (CBA) provide the means to identify value-enhancing urban-cooling investments through incorporating and monetising these broader costs and benefits. This requires 3 steps:

  1. Identifying the causal link between the blue, green or grey investment and urban-cooling related outcomes (such as reduced energy demand, reduced heat related illness or increased inactivity related disease).
  2. Quantifying the incremental change (ΔQ), which can be challenging and often requires site-specific scientific or engineering analysis. For example, properly assessing the urban cooling mitigation impact of an urban heat mitigation option might require establishing the change in urban temperature attributable to water investments alone.
  3. Monetising this change in outcomes. (ΔQ x P), which can require undertaking primary research or the application of economic techniques such as benefit transfer.

While these steps are not always easy and can require collaboration across sectors and disciplines, they provide a robust and defensible framework for identifying where and when blue and green investments can cost-effectively manage urban heat.

We know this approach works: The $6.5 billion opportunity in Sydney’s Western Parkland City

The Western Parkland City is a priority growth area located in one of the hottest and driest parts of Greater Sydney. To draw people and businesses to the area, the City will need to offer a ‘cool and green’ environment. This means creating attractive urban communities and appealing places to live, work and play.

However, this urbanisation will place major pressure on the health of Wianamatta South Creek, its tributaries and the local environment and pose significant challenges in meeting a much higher community demand for water-related services. Water will also be needed to increase the urban tree canopy, maintain shaded, open and green space and support water features

Infrastructure NSW and Frontier Economics’ strategic options business case for the Western Parkland City (South Creek Catchment) found that, in the face of these challenges, integrated land use and water cycle management in the City can deliver significant economic, social and environment benefits.

The framework developed to monetise these economic, social and environmental impacts, found that integrated land use and water cycle management can deliver around $6.5 billion in benefits to the local, Greater Sydney and broader NSW communities.[1]

A key driver of these benefits was related to urban cooling related investments, which could lead to a reduction of up to 2.2°C in forecast maximum summer daily temperatures across the Western Parkland City. This reduction in urban temperature, in turn, was found to lead to associated reductions in energy consumption, peak demand, and heat-related deaths and healthcare costs.

Our analysis showed that quantifying these values in dollar figures enables effective policy, regulatory and investment decision-making, and ultimately leads to more attractive, liveable and productive places.

Further, as a result of our work with INSW, Infrastructure Australia designated blue-green infrastructure in the Western Parkland City as a national priority initiative.[1] It is a rare example of a non-traditional infrastructure project on the list.

Where to from here?

There is often only one chance to get urban spaces truly right, and now is the time to integrate the benefits of urban cooling into our urban infrastructure choices. It becomes harder and more costly to rectify the outcomes of poor past decisions.

Failure to address the resilience of cities to urban heat − including the role of blue, green and grey infrastructure − as a part of decision-making exposes the community to growing risks, which if were to crystalise would impose significant and broad economic, social and environmental costs.

Decision-makers should approach and incorporate economic, planning, design and development decisions.

Basing infrastructure decisions on good economics that draws on scientific, ecological, planning and engineering expertise and properly factors in economic, social and environmental outcomes into the ultimate investment decision is critical to delivering cool, green, liveable and resilient cities today and for decades to come.

This will require collaboration between economists, scientists, planners across the public and private sector to better identify, quantify, value and incorporate these benefits into decision-making.

[1]   See NSW Government, Greater Sydney Water Strategy – Draft,2021, p80:



Infrastructure Australia today released the 2021 Australian Infrastructure Plan, which provides Australia’s green, grey and blue infrastructure sector with a 15 year roadmap to drive economic growth, maintain and enhance our standard of living and improve the resilience and sustainability of Australia’s essential infrastructure.

The 2021 Plan provides Infrastructure Australia’s reform pathway to respond to the 180 infrastructure challenges and opportunities identified in the 2019 Australian Infrastructure Audit. There are a number of key themes in the plan. We highlight and discuss several of these below.

The inclusion of waste and social infrastructure (such as green and blue infrastructure) for the first time, alongside energy, transport, telecommunications and water.

The need for place-based decision-making, including the need to holistically plan blue, green and grey infrastructure.

Recognition of the need for a consistent approach to valuing the economic, social and environmental benefits of blue, green and grey infrastructure (which has also been recognised by NSW’s Department of Planning Industry and Environment). Frontier Economics has discussed this in two recent bulletins: Greening our cities: from vision to value and Greening our cities: from vision to reality.

The need to embed sustainability and resilience into infrastructure decision-making, including the importance of a consistent all-hazards, systems approach to resilience planning and quantification of the costs, impacts and benefits of resilience investment.

Recognition of the need for clear management and governance of the water cycle, including stormwater and waterways.

The need to remove targets, mandates and subsidies for certain types of water, including recycled water. (For a look at how to encourage uptake of recycled water initiatives, and barriers, Frontier Economics undertook a review for Infrastructure NSW.)

It is a comprehensive plan addressing all aspects of infrastructure. It puts forth a compelling vision of Australia in 2036, that includes liveable, attractive and resilient communities with social infrastructure supporting a strong, healthy and prosperous nation.

The urban economics team at Frontier Economics advises across these areas. For more information or to discuss a project, please contact us.

Specifying required outcomes is key to unlocking green infrastructure funding

A clear view of the outcomes we want in our urban landscape is key to unlocking funding for green infrastructure. COVID-19 has highlighted, more than ever, the importance of green infrastructure and open space – as for many of us these features of our urban environment have been an important source of refuge during the challenges we’ve faced over the last year. Green infrastructure (or blue-green infrastructure) refers to the tree canopy, parks, waterways, vegetation, wetlands and lakes in our cities. It delivers enormous benefits to our community, and it is much more than just pleasant ‘greening’. Green infrastructure can make our cities cooler, healthier, more ecologically sustainable and attractive places to live and work.

Given the rate of development in our cities, the pressures on our urban environments and the adjacent natural environments, and the importance of integrating green infrastructure with other forms of infrastructure early in the development process, there is an urgency to improve the provision of green infrastructure. This requires a step-up in funding.

In a previous bulletin, Greening our cities: from vision to value, we observed that we need to actively embed consideration of green infrastructure into our planning and decision-making processes, and that a key element of this is identifying and accurately valuing the costs and benefits of green infrastructure.

This bulletin explores why greater clarity about the specific green outcomes (or standards) we need as a community is a key step in securing efficient and sustainable sources of funding for green infrastructure. As much as possible, policy and funding certainty for green infrastructure needs to be in place ahead of the growth and development that is occurring across major metropolitan areas.

There’s value in green

In high-level strategic plans for cities and urban areas, governments are now recognising urban nature as genuine infrastructure that delivers valuable services to the community and which merits policy and planning priority. They recognise that the natural green (and blue) assets of a city can deliver real public benefits, including mitigating the urban heat island effect, protecting and restoring ecological health, promoting active lifestyles, and providing beautiful places to live, work and play.

A clear government policy vision for green infrastructure is a good (and necessary) start. To transfer this vision into reality, however, requires:

The clock is ticking. With climate change, higher levels of population and development, and increasing urban encroachment on the natural environment, there is an urgent need to improve the supply of green infrastructure in many cities. In particular, it needs to be planned, delivered and truly integrated with development and other forms of infrastructure, rather than being supplied as an afterthought (as often seems to be the case).

Western Sydney, for example, is continuing to undergo significant development via the Western Parkland City initiative. Green infrastructure is critical to ensuring this new region is productive, liveable and sustainable. Failure to adequately plan, integrate, fund and deliver green infrastructure would consign future generations of people living and working in the Western Parkland City to missing out on the substantial benefits that flow from green infrastructure.

Below we outline some important steps for turning the vision for green, highly liveable urban areas into reality.

Providing certainty that there are enduring and sustainable funding frameworks ahead of investment occurring is crucial

A range of stakeholders including developers, utilities and various levels of government will be involved in planning, funding and delivering critical green investments in our cities.

Providing certainty to these stakeholders ahead of investment and development occurring that there are sustainable frameworks for funding green infrastructure is crucial for ensuring this infrastructure is delivered effectively and efficiently.

Clear and certain funding frameworks can ensure that:

We need to be more specific in defining required green outcomes

Government policies and city plans often set out general or high-level objectives or targets for amenity and improved environmental outcomes. However, greater clarity is often required about the specific environmental, amenity and other green outcomes we want and need as a community.

Such green outcomes (or standards) should be set after robust analysis of their economic, social and environmental costs and benefits, and the costs and benefits of alternative outcomes.

The Australian Productivity Commission’s 2020 Research Paper on Integrated Water Management – why a good idea seems hard to implement

The Commission noted that City Plans recognise the importance of green open spaces for community health, well-being and urban cooling, but they often only include high-level ‘motherhood statements’.

It cited a lack of clear and precise objectives (and subsequent allocation of responsibility and accountability) for urban amenity and enhanced environmental outcomes as a key impediment to investment in integrated water cycle management.

It stated that until high-level aspirations are turned into more precise objectives, there is not a strong basis for normal project (and hence funding) assessment processes. These processes typically begin by identifying a specific problem that needs to be solved or objective that needs to be achieved, and then involve identifying and evaluating options to solve this problem or achieve the required objective at least net cost or greatest net benefit.

The NSW Productivity Commission’s 2020 Review of Infrastructure Contributions in NSW

The NSW PC found that, in terms of local infrastructure for new development areas, roads and drainage often take precedence over amenity and open space when funding is short. This is because the former are often considered ‘essential’ to unlock development. The implication being the latter is often considered discretionary.

The NSW PC also found that current open space standards for new development are outdated.

In Australia, both the NSW and Australian Productivity Commissions have recently recognised that a lack of clarity around required green outcomes can act as a significant impediment to adequate funding of green infrastructure and hence achievement of green outcomes.

Greater clarity around required green outcomes would focus attention on how we as a community achieve these outcomes, including the specific governance, regulatory and funding arrangements that are required. In particular:

Integrate specific green outcomes into planning and regulatory instruments

Once required green outcomes have been determined, they should be integrated into relevant policy documents, planning instruments and, where applicable, other legislative and regulatory requirements.

This should assist in putting green infrastructure on an equal footing with traditional or ‘grey’ infrastructure and help to ensure that green infrastructure is considered upfront and integrated with development and other forms of infrastructure rather than provided as an afterthought.

This upfront consideration of required green outcomes, and hence integration of green infrastructure with other forms of essential infrastructure (e.g., transport, water) can be particularly important for efficiently achieving amenity and environmental outcomes.

The Australian Productivity Commission has noted that water infrastructure, for instance, can offer opportunities for enhancing urban amenity and environments (in addition to the traditional water and wastewater services that it provides). For example:

Similarly, the NSW Productivity Commission has observed that more efficient delivery of open space “will be achieved by shifting to performance-based benchmarks and a requirement to consider efficient land needs during the strategic planning process. This could, for example, include the dual use of land around creeks for both drainage and passive open space.”

Establishing sustainable funding sources for green infrastructure

There are strong economic efficiency and equity reasons for allocating the costs required to achieve green outcomes to those in the community that create the need to incur the expenditure (i.e., ‘impactors’) and/or those that benefit from this expenditure (‘beneficiaries’). In some instances, however, it may not be possible or practical to recover costs from specific groups of impactors or beneficiaries, in which case the broader community (taxpayers or ratepayers) may have to pay.

Clarity about required green outcomes is an important step in determining who is creating the need to achieve, or benefiting from, these outcomes, and therefore in establishing secure and sustainable sources of funding for green infrastructure.

If, for example, specific green outcomes are required to service or accommodate a new development (e.g., in relation to open space, waterways management, etc), which would not be required in the absence of that development, the local council should have a mandate to require developers to fund the capital costs of supplying green infrastructure for the development to achieve these outcomes– along with other essential infrastructure routinely funded or provided by developers for new development.

Similarly, if a water utility whose prices are regulated was required by its operating licence or similar regulatory instrument to meet specific green outcomes (e.g., in terms of stormwater and waterways management), then it should have assurance that it would be able to recover its costs, via its prices to its customers or charges to developers, of delivering servicing solutions that efficiently achieve these green outcomes. Notably, it would not likely have the same level of assurance, and hence funding certainty, if its statutory green objectives/requirements were less well defined.

Where it is appropriate for government to fund green infrastructure (on behalf of the broader community), greater clarity about required green outcomes can:

Greater clarity about required green outcomes can also enable us to better assess the adequacy of existing funding mechanisms in meeting the scale and pace of development and investment required.

Where to from here?

Providing greater clarity about required green outcomes (or standards) can be challenging. However, it is important for improving governance, regulatory and funding arrangements for green infrastructure, and necessary if these green outcomes are to be achieved.

Along with best-practice regulatory design principles, valuation of the full costs and benefits to society of the environment and amenity outcomes related to green infrastructure can play an important role in both setting these outcomes and in assessing the range of options available to achieve them. As we discussed in a previous bulletin, there are a range of techniques that can be employed to undertake such valuation.


Achieving a cool and green Western Parkland City (WPC) in the South Creek corridor that is able to catalyse the significant investment being made in the Western Sydney Airport and compete successfully with the more established Eastern Harbour City (centred around Sydney Harbour), and Central River City (centred around Parramatta River) will require ‘city shaping’ investment in blue-green infrastructure in the Western Parkland City. This involves conserving, investing in and actively maintaining ‘green’ infrastructure (such as urban canopy, open space) as well as blue infrastructure (water-related infrastructure such as waterways and stormwater management) to support and promote amenity, recreation, urban cooling and environmental outcomes.

Against this backdrop, Frontier Economics is assisting Infrastructure NSW with the South Creek Sector Review to develop regulatory certainty for integrated water and land-use planning.

The path chosen for the development of the WPC will affect national productivity, the quality of life for people living and working in Western Sydney and the value that can be created from existing and new infrastructure. Developing and sustaining a competitive, liveable and resilient city presents a complex set of land use and water management challenges, and there are significant economic, environmental and liveability-related challenges to achieving the WPC vision.

Recognising the national significance of delivering the WPC, the catalytic nature of blue-green infrastructure and this unique opportunity to shape the future of Western Sydney,  Infrastructure Australia today announced that blue-green infrastructure in the Western Parkland City will be added as an initiative on the Infrastructure Priority List (a prioritised list of nationally significant investments). This is one of the first blue-green infrastructure investments to be listed on the Priority List, which has traditionally focused on grey infrastructure investments.

A map of Sydney's western flank showing the outline of the South Creek catchment area.


Frontier Economics assisted Infrastructure NSW in developing the submission to Infrastructure Australia’s Infrastructure Priority List and is advising a range of clients on economic issues and challenges in urban growth and development.

Image Credit: Infrastructure Australia: 'Infrastructure Priority List 2020'.

The Water Services Association of Australia (WSAA) has published a report prepared by Frontier Economics, Health Benefits from Water-Centric Liveable Communities. This landmark report looks at understanding and quantifying the liveability-associated health benefits of water industry investments to better inform investment decisions.

The challenges posed by urban development are complex, and as we shift away from traditional development patterns, decisions about water are critical. Good decisions can transform urban areas into cooler, greener and liveable spaces.  Bad decisions are costly, far-reaching, and locked in for generations.

Addressing these challenges requires critical decisions to be made about how we use land and other resources, including decisions around housing, infrastructure corridors, environment and our waterways; and evaluate and value potential investments in grey, green and blue infrastructure. Appropriate policy enables community resilience to pressures such as population change, climate and drought.

This project aimed to understand, quantify, and crucially, monetise, the contribution of water investments within real world project evaluations. Our work shows that investing appropriately in water infrastructure has benefits for the community. Water investments can improve health to create more liveable cities through four pathways:

The Urban Economics team at Frontier Economics has been advising clients on a range of projects at policy and implementation level addressing challenges particular to our urban environment.

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Over the next 40 years, NSW will face strong population growth, particularly in Western Sydney around the South Creek corridor. This rapid urbanisation will place increasing pressure on water-related infrastructure and services as well as on the health of the key waterways and local environments.

Water recycling has the potential to provide significant benefits to both end-customers and the broader community in meeting the demand for water and wastewater services from a growing population, while at the same time protecting sensitive environments and promoting more productive, liveable and resilient urban communities. This requires the right policy and regulatory settings to be in place to promote investment in and use of cost-effective water recycling. Getting these settings right could deliver significant customer, community and environmental benefits to contribute to the Greater Sydney Commission’s vision for a Western Parkland City.

There have been significant changes in the NSW urban water market since the mid-2000s, but despite these changes the uptake of water recycling in metropolitan NSW has plateaued in recent years. This has generated concerns that existing regulatory, policy and institutional arrangements are impeding the potential for investment in and use of recycled water. Aspects of the regulatory framework covering or influencing water recycling in NSW have not been reviewed or updated for over ten years.

Frontier Economics was engaged by Infrastructure NSW to provide independent advice on the optimum regulatory framework for the uptake of cost-effective recycled water initiatives, with a focus on the economic regulatory framework governing the urban water sector.

Our review has found that while many elements of the economic regulatory framework are promoting cost-effective water recycling and remain ‘fit for purpose’, a number of aspects are likely to act as barriers to cost-effective water recycling. These aspects include:

Our report makes 32 recommendations aimed at addressing current and potential barriers to cost-effective water recycling. They seek to encourage greater consideration of the broader costs and benefits of water recycling, provide consistent incentives and signals for investment in and use of water recycling, and promote the entry of efficient private sector providers of recycled water. They require action to be taken by the NSW Government, the public water utilities and the Independent Pricing and Regulatory Tribunal (IPART), with an emphasis on acting sooner rather than later.

Not all of the actions recommended in this report are straightforward. But decisions need to be made now to keep ahead of the intense pressure that population growth will place on essential water, wastewater and stormwater infrastructure over the next decade and to avoid the potentially significant adverse impacts of this pressure on the NSW economy, natural environment and communities across the State.

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