Are infrastructure costs a lot higher in the outer suburbs?

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.