Sydney: Success and Equity in a Global City - The Next Stage

SYDNEY: SUCCESS AND EQUITY IN

A GLOBAL CITY - THE NEXT STAGE?

Dr Tim WilliamsChief Executive

Committee for Sydney

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Sydney Overview

• City with great momentum

• Effective government

• Budget surplus from growth

• Big infrastructure spend

• Big challenges remain

• Growth from 4 to 8m: up or out

• East –west /core periphery divides/Talent attraction

• Sprawl model v Public transport for all/walkable centres

• No metro governance or funding/state gov silos/too big/too small (41 councils):GSC?

• Can we grow our core sectors’ international market?

This is what economic success looks like : Sydney’s GDP growth: 4% in 2014: Overall Greater Sydney share of national wealth rose

to 23%: over 70% of NSW total.

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Partly driven by big construction / infrastructure investment: also Sydney’s high labour productivity of

FS/prof services

Sydney Financial Services = Mining in WA

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Income Generated by Fin & Insurance Services (AUD)

City Income $Billion AUDGlobal Financial

Centres Index Rank

Sydney $55.2 23

Hong Kong $54.7 3

Melbourne $34.0 24

Singapore $38.3 4

NSW & Singapore FS Exports

Aus economy correlates more with US when you include Sydney

Aus is part of shift to wealth in south and east shift….

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On faster growth path than most /12TH BIGGEST ..AND WITH LOWEST PUBLIC DEBT IN OECD/3rd pension fund

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Growth attracting population – to main cities: Aus is an urban economy and will increasingly be so

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Not surprising broader trends: Cities – where the world’s population and wealth going:

particularly in global south…

2010 metropolitan population:

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Size of the global metropolitan market 70% of world population of 9 billion by 205070 million people per year added to developing world

cities2 billion strong ‘consumer class’ in emerging market cities

by 2025

2050

And a diverse society – increasingly so

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At the edge: Vulnerable communities in a city

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Australian cities: low density sprawl, dispersed exurbia / under-crowding: will Sydney carry on with this model on way from 4 -

8m? Up/out? Evidence that shift underway to more dense cities…but politicians and media behind curve ?

So very urban society in an unusual way: small number /large cities/edge: 23 m in a space US has 300

Very different model….

Success is posing challenges /6% first time buyers/70% 35 year olds

Source: Demographia, 11th Annual International Housing Affordability Survey 2015

And…Vertical fiscal imbalance – cities underfunded

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Some big trends re-shaping the city KE value jobs (orange trend) v residential trend (sort of purple): massive trends

which our current governance and policy structure are not fit to respond to

And some sector imbalances: leading to spatial pressures: decline of manufacturing

is a geography too

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Also Business has rediscovered cities and is urbanising services: City Brands. But…

Sustainability / Eco-Cities

SiemensGE

ArupBombardier

The ‘City of the Future’

AudiDeutsche Bank

MicrosoftAtkins

GDF Suez

LiveabilityMercer

MonocleGrosvenor

Global CitiesJP Morgan

AecomAT Kearney

Smart Cities + Networks

CiscoEricsson

IBMCap GeminiBird + Bird

This is geography too: Business is re-urbanising to CBDs where knowledge workers are and want to be

Australia

• 42 major tenants moved from suburban locations to Melbourne CBD between 2008 and 2013 (JLL).

UK

• 8/10 of Britain’s largest cities have seen private sector jobs become more concentrated in city centres since 2008 (Centre for Cities).

• Cities with high proportions of Knowledge Intensive Business Services (KIBS) jobs have experienced particularly strong re-urbanisation.

• Larger cities tend to have higher proportions of KIBS jobs e.g. London – almost 50% jobs are KIBS.

• Examples

- Google, Amazon and LinkedIn: acquired major new premises in central London

- BUPA, Jacobs (engineering): Business parks of Cheshire to Manchester city centre

Distribution of Private Sector jobs in Milton

Keynes, 2011 (Centre for Cities)

In Asia too as well as Europe

China• In Beijing, core area office vacancy rate declined from 20.7% in 2009 to 4.2% in mid 2013 (Cushman

+ Wakefield).• Trend is for foreign multinationals entering China to locate HQs in central areas, with back-office

business (R&D, logistics and data management) in suburban areas (Cushman + Wakefield).

Philippines• Extraordinary office growth in central Manila and other cities fuelled by booming business process

outsourcing (BPO) sector. • BPO workers are buying apartments close to work to avoid long commutes in heavy traffic, new

work-shop-live complexes have emerged in central urban areas (Oxford Business Group 2012)

Japan• Tokyo CBD is expected to see the highest absorption of office spaces in the APAC region in 2014

(Cushman + Wakefield).

Major European Cities• In Brussels, Paris, Amsterdam, Madrid, Berlin, Frankfurt, Munich and London cheaper rents in CBD

locations during the Global Financial Crisis attracted more occupiers to central areas, pushing up average share of office take-up to 40% in 2010 compared to 33% in 2007 (Savills).

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Leading to GDP still concentrating east of Parramatta while population is growing west

With lack of public transport to meet Sydney’s structural challenge

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At the same time this has been going on…

A demographic perfect storm: biggest demographic event since the baby boom

• Meanwhile, the generation raised on Friends is not the only major cohort looking for new places to live. There’s a larger one: the millennials’ parents, the front-end boomers. They are citizens that every city wants—significant personal savings, no schoolkids. And empty nesters want walkability:

•With the leading edge of the boomers now approaching sixty-five years old, the group is finding that their suburban houses are too big. Their child-rearing days are ending, and all those empty rooms have to be heated, cooled, and cleaned, and the unused backyard maintained. Suburban houses can be socially isolating, especially as aging eyes and slower reflexes make driving everywhere less comfortable. Freedom for many in this generation means living in walkable, accessible communities with convenient transit linkages and good public services like libraries, cultural activities, and health care.6

• For them, that increased walkability means all the difference between an essentially housebound existence and what we all hope will be several decades of continued independence.

• In combination with their independent children, these retiring boomers will numerically overwhelm those families of child-rearing age who typically prefer the suburbs. This upcoming convergence represents “the biggest demographic event since the baby boom itself.”

Prefer Inner West model….But all cannot live in Inner West….Take it to them?

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• We are witnessing a virtuous cycle of worker preference

and firm demand: embracing cityness: complexity; density;

diversity; messy intersection of activities, the layering of

the old and new, an integration rather than segregation of

uses: profound shift

• ‘The current generation of tech workers doesn’t want to toil

in soulless Office Space complexes surrounded by moats

of parking or in dispersed factories(if still around)’..

• The trend as Business Week says: ‘is to nurture living,

breathing communities rather than sterile remote

compounds or research silos’

• Combined =Walkable/public transport precincts hot now

everywhere

Also changing worker/firm preferences

-another earning/some big trends globally /gentrification is successJust as affluent young professionals seem to be staying in the inner-city longer, turning places such as Dalston(in Hackney) and Peckham (in Southwark) into hipster enclaves, so too are the outer suburbs getting poorer, as people who cannot afford inner-London rents are pushed further out. By contrast, the places that have gone downmarket are in Metroland—the 1920s and 1930s railway suburbs stretching west of Acton and Willesden or around Ilford. These are the middle-class suburbs where commuters move when they have children. But of late, house prices in those parts of suburban London have stagnated, even as inner-London ones have soared ahead.

LONDON is turning inside out: so is Inner West

It’s happening in Chicago and here..

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All leading to spatial divides in outcomes: short term or increasingly permanent ?

Other spatial trends follow…

Obesity in the suburbs

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With problems for social mobility from the default model of sprawl and residential segregation/unmixed

communities

• ‘ We found significant correlations between intergenerational mobility and income inequality, economic and racial residential segregation. In particular, areas with a smaller middle class had lower rates of upward mobility. In contrast, a high concentration of income in the top 1% was not highly correlated with mobility patterns. Areas in which low income individuals were residentially segregated from middle income individuals were also particularly likely to have low rates of upward mobility’.

• Harvard Study

To Make Your Community Healthier and wealthier, Make It Denser

• The contemporary affinity for higher-density, mixed-use, walkable places in cities and suburbs alike arguably represents the single most significant contribution to public health

• — for those who can afford them — since World War II.\• low-density, typically suburban environments whose physical layout encourage auto trips at the

expense of walking, lead to increased rates of obesity, diabetes, and auto fatalities. • Today, the health benefits of urban densities are compelling. The incidence of chronic health

problems in walkable urban neighborhoods is generally lower than in typical suburban and exurban neighborhoods.

• A 2008 report by University of Utah researchers found that men who lived in walkable neighborhoods weighed 6 kilos less than men in low-density neighborhoods,

• a recent Journal of Transport and Health article links cities with more compact street networks to lower levels of obesity, diabetes, high bloop pressure and heart disease.

• per-capita auto fatalities rise roughly 400 percent along a continuum of density from typical urban to typical suburban.

• The payback from density extends beyond physical health. Walkable neighborhoods promote economic health by attracting knowledge workers and investment and promote environmental health by creating an inviting alternative to sprawl.

• Planning is coming around to a new generation of higher-density, mixed-use, walkable downtowns.• But….

Equitable density/affordable housing near transport

• The benefits of density generate an “amenity paradox” that threatens to translate America’s already egregious wealth gap into a widening health gap between rich and poor.

• Life-filled, walkable, transit-served neighborhoods have delivered the goods in ways that Jane Jacobs prophesized 50 years ago — with the glaring exception of diversity.

• Ten percent of Aus households control almost 75% of all wealth. They, along with their slightly less affluent peers, are consuming walkable neighborhoods at a voracious rate.

• This demand is bidding up housing costs and forcing poorer residents into less healthy, car-dependent environments. For the first time in Australia’s history more poor people live in suburbs than cities.

• Clustered increasingly at the fringes of car-centric suburbs, yet often unable to afford a reliable car, they are isolated from access to health care — and jobs, education, and support networks.

• Nor is this a passing trend.. As we employ density to create healthy neighborhoods, we also need to employ it to create equity. The challenge is not market acceptance.

• Where possible, we need to tap the rising value of amenity-rich urban neighborhoods to fund the mixed-income housing that makes the concept of diversity real. Density bonuses in return for increased affordability, inclusionary zoning and public benefit agreements represent potential strategies. More are needed.

• We need to expand access — for everyone — to environments that support healthier lifestyles.

Two Sydneys?

• Dickens wrote his novel, A Tale of Two Cities, about London and Paris. A writer with similar ambitions today could easily stay in one city and write a tale of two Sydneys.

• In one Sydney, people live within 10 kilometres of the city centre, where there is almost one job for every resident, and public transport is close by and comes fairly frequently.

• The inner suburbs, which from 2006 have soaked up more than half the city’s overall employment growth, stand in stark contrast to the Sydney more than 20 kilometres from the city centre.

• There are three jobs for every 10 western Sydney residents, compared to eight in 10 for people in suburbs within 10 kilometres of the centre. Outer suburban jobs also pay much less: across the nation, an average of $56,000 a year compared to $77,000 for those near the centre.

• Yet today more than half of Sydney’s population lives more than 20 kilometres from the city centre. And it is this outer Sydney where most population growth is occurring. The increasing separation between jobs and people in our large cities is Australia’s great new divide.

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How do we get from here?

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We need greater Metro self government to meet externality challenges of agglomeration: the price of

success

• High costs: housing, labour, goods, living

• Infrastructure investment demand

• Social cohesion and integration

• Two-tier labour market

• Sprawl

• Traffic congestion

• Pollution

• Opposition to growth model

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Comparing the options

Metropolis off• Sectoral policies lead

• Autonomous bodies

• Hierarchical system

• Spatial disparities and variation

• Low co-ordination equilibrium

• Tax and transfer payments

Metropolis on• Integrated planning• Cross cutting objectives• Networked governance• Spatial strategy and

cohesion• Cross cutting/catalytic

projects• High co-ordination

equilibrium• Financial innovation

and leverage

Metro self-governance gets you: integration and strategic boldness: as CfS points out

Lack of devolution to Australian cities impairs city management and productivity

• We know from cities around the world that devolution and more integrated approaches to investment will secure better infrastructure, unlock growth and create new, locally determined funding opportunities

• With very little control over services, funding, or borrowing, constraining their ability to give a clear focus across policies at the local level to promote sources of competitive advantage in the interests of local and national productivity.

• Australia’s system means city funding comes down a complex set of pipes, with no connections or integration at the city level.

Governance reform Greater Manchester City Deal: components GVA potential/ ability to secure social

/carbon benefits

• The City Deal for Greater Manchester announced by government Tuesday 20 March has been hailed as a major step in empowering the region to make decisions to maximise its economic growth. the deal document sets out a range of bespoke agreements between the government and Greater Manchester Combined Authority based on the needs and opportunities of the region’s economy. They are geared towards accelerating growth, boosting skills and encouraging local decision-making and increased self-sufficiency. Earnback ModelA radical Earnback model where the government has agreed in principle that up to £1.2 billion invested up front in infrastructure improvements by Greater Manchester will be ‘paid back’ to the combined authority as real economic growth is seen. This is the first tax increment finance-style scheme in England outside London. Investment frameworkA major shift towards local decision-making by endorsing the Investment Framework which Greater Manchester will use to align funding and assets to prioritise economic growth in the region and cut red tape. This approach, already used in the Greater Manchester Transport Fund, prioritises projects for investment based on their economic impact. By bringing together different funding streams into one pot and increasing the ability to make local decisions on priorities, funding can be invested with much greater flexibility.

There are also plans to establish a Greater Manchester Housing Investment Board to use national funding, local investment and public land assets to boost housing development.

• GREATER SYDNEY COMMISSION COMING…WILL IT BE A STRATEGIC GAME CHNAGER FOR OUR CITY?

More polycentric economy and amenity at key town centres: linked by public transport

Better understanding of city KPIs: To drive economy, Minneapolis-St. Paul looks to dashboard: not usual suspects…

• There are the usual suspects, such as gross regional product per capita and share of workers with a bachelor’s degree.

• But there are more novel indicators too, such as “percent of population employed in advanced industries,” which signals a commitment to global competitiveness, and “percent of jobs that are family sustaining” to measure job quality.

• There are also clear values around environmental stewardship (“per capita water usage”), healthy quality of life (“percent of population that is obese”), job access, and shared prosperity (“poverty rate”).

• Throughout there is an eye toward equity, ensuring the region is boosting fortunes for people of colour.

• I add Effective Job Density :labour market access.