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CAP 2014: SINGAPORE
International Forum on City Planning
Cities of Tomorrow – Smart Cities, Better Living
Tue 25 November 2014
9:00 to 6:00pm
Grand Copthorne Waterfront Hotel, Singapore
Organised by: Singapore Institute of Planners (SIP)
Supported by: Commonwealth Association of Planners (CAP)
Key Topic: Mega high rise living – reaching for greater heights
Paper Title: A compact city model for equity in housing and
opportunities to participate in agglomeration economies –
Melbourne context
by
Hon Seng Vincent LOH
(Urban Transport and Planning Consultant and
currently Project Consultant for SBS Transit)
email: vincentloh2012@yahoo.com

Hon Seng Vincent Loh 1
Abstract
Melbourne is the world’s “Most Liveable City” and it vies for economic prosperity
and human talent through agglomeration economies. Current issues connected to
equity in housing and opportunities for participation in agglomeration are urban
sprawl; polarization; housing affordability; lack of access to higher order
jobs/services etc. However connecting people, jobs and firms needs to be
addressed effectively.
Decentralization, polycentrism and compact city can shape a more sustainable
and desired urban morphology. Compact city and its challenges are investigated
like urban density, land value, community acceptance, transport and governance.
Practices from other cities are discussed. The economic and social benefits of a
more compact Melbourne are significant.
Key words:
1. compact city
2. agglomeration economies
3. transit oriented development (TOD)
4. housing affordability
5. land value capture

Introduction and Background
Pick up any real estate promotional flyer and more often than not, it extols the
location of the property on sale or rental. It may even be emblazoned with the
cliché ‘location, location, location’. Yet this is far from just marketing, there is a lot
of truth especially if one looks at it from the perspective of access to higher-order
knowledge jobs. This is where this paper begins its journey.
According to Kelly and colleagues (2012, p. 4), “Even with the large contribution of
mining and agriculture to national wealth, 80 per cent of economic activity takes
place in Australia’s major cities.” Australia is a highly urbanised nation of cities,
susceptible to outcomes of city functioning and urban governance (Gleeson et al,
2012, p. 117). The five largest of its capital cities make up two thirds of the
population (ibid). Hence the urban realm is where most Australians live and work.
The urban form of Melbourne is shown in Figure 1 below.
Figure 1: Urban form of Melbourne
Source: State of Victoria, 2014, Plan Melbourne, p. 4
With changing economic conditions particularly after World War 2, employment
and jobs fanned by land intensive manufacturing, logistics and warehousing
sectors, began to hollow out from the Central Business District (CBD) and inner
cities in favour of ever burgeoning suburbs fulfilling the Australian Dream of living
in a detached house with the space and greenery to match. The transportation
technology of more affordable automobiles facilitated this transformation. Cervero
and Landis (1997, p. 310) consider “urban form is largely a product of the
dominant transportation technology during a city’s prevailing period of growth.”
The car boosted productivity as labour markets became more flexible and workers
could acquire new skills due to the mobility offered by the car (Spiller, 2011, p. 81).

After the 1980s, economic circumstances varied with services increasingly
replacing manufacturing as the main source of new jobs and coupled with traffic
congestion and rising fuel prices, the CBD and inner cities re-emerged as
attractive places to live and work (Kelly et al, 2013, p. 4). This trend has become
more pronounced in recent years owing to globalisation and the unbundling of
value chains (Spiller, 2011, p. 82) and the rise of agglomeration economies where
its definition by Plan Melbourne (VIC, 2014, p. 197) suggests the nexus of
economic benefits and spatial form as follows:
“Agglomeration: the location of businesses in close proximity to each
other which allows them to get productivity and efficiency gains
through large customer bases, knowledge-sharing and access to
skilled workers.”
The agglomeration of knowledge-intensive activities predominates and in fact vital
to be in the CBD and environs with some small clustering in the inner east, inner
south and around Monash University (Kelley et al, 2012, p. 6; Spiller, 2011, p. 83;
Rawnsley et al, 2011, p. 3) (see Figure 2). The CBD environments are necessary
in fostering a critical mass for business development and industry innovation of the
knowledge-intensive services and activities (Spiller, 2011, p. 89). Knowledge-
intensive activities provide largely customised, problem solving services which
require application of significant intellectual effort or capital (Kelley et al, 2012, p.
6).
Figure 2: Economic activity centres in Melbourne today
Source: State of Victoria, 2014, Plan Melbourne, p. 8

The paper by Rawnsley et al (2011, p. 4) argues that critical mass synonymous to
a higher density of economic activity in an agglomeration improves labour
productivity that enhances human capital in the process. For the workers, this
means where people should live to be close to the best job opportunities. For the
policy-makers, this means ensuring “that transport and housing markets improve
access to the deep labour pools these firms need” (Kelley et al, 2012, p.43).
Having briefly introduced how economic forces and transportation technology
have shaped the urban morphology of Australian cities in the second half of the
20th
century and with the 21st
century economic challenges and benefits of
agglomeration economies on labour productivity, human capital etc, the paper will
next examine current issues over equity in housing and opportunities for
participation in agglomeration economies. Finally the paper will broadly identify
housing and urban strategies like compact city, decentralisation and polycentric
city in addressing these issues with more investigation particularly in the compact
city model.
Housing Issues
Most Liveable City
Melbourne is the world’s “Most Liveable City” in 2014 for the fourth year running,
according to Economist Intelligence Unit. Like all major urban settlements
worldwide, it too vies for economic prosperity and human talent via the global
trend of competitive cities through agglomeration economies. The vibrancy and
activities of its CBD and inner areas have contributed much to such acclaimed
recognition.
Housing Affordability and Urban Sprawl
However with a sprawling metropolitan footprint of about 100 kilometres from east
to west, suburban growth areas in Melbourne are increasingly excluded from the
higher order job opportunities arising from agglomeration economies centred in
the CBD and inner suburbs (Spiller, 2011, p.83). This is contributed by the slide in
housing affordability in Melbourne where homes in the inner and middle suburbs
have become out-of-reach for the average households and no longer provide the
“platform for opportunity” that growth area communities once enjoy as shown in
the analyses by Spiller (2011, p. 85) in Figure 3, Figure 4 and Figure 5. His charts
show that the average house price relative to the distance from Melbourne CBD
has rapidly exceeded the average income affordability threshold from 1994
through 2000 to 2009. Where in 1994 the best fit of the price gradient and income
threshold was about 10 km from the CBD, it shifted further out to about 24 km in
2000 and reached close to 40 km by 2009 (ibid). There were a number of
affordable suburbs within 15 km of the CBD in 1994 including Box Hill but this was
significantly reduced 6 years later (ibid). The narrow dispersion and gradual price
gradient in 1994 meant that high-end suburbs like Albert Park and Sandringham
were still relatively affordable and the average house price had small variations

whether closer to or further from the CBD (ibid). By 2009, hardly any suburbs
within 15 km could be accessed by the average income households (ibid). “Unless
households can gain access to equity from other sources, their purchase of
dwellings in growth areas is likely to confine them to these districts” (ibid).
Figure 3: House price gradients, 1994/1995
Source: Spiller, 2011, p. 86

Therefore the issue is one of better connecting people, jobs and firms (Kelley et al,
2012, p. 43). She further explained that if people and jobs are better matched,
further skills acquisition will follow thereby increasing the human capital of firms
and workers (ibid). “Well-connected firms, jobs and people speed the transfer of
knowledge and skills” with the desired outcomes of national prosperity and wealth
where global competitiveness and success leverage on talents, knowledge and
skills to stay ahead (ibid).
Potential options to address this issue include providing more linkages in and
increasing capacity of the road network; expanding and improving the public
transport infrastructures and intensifying the supply of housing in suburbs
especially those areas that are labour pools for the agglomerated firms. Aspects of
these will be discussed later in the paper.
Social Polarisation and Lack of Access to Jobs/Services
People living in suburbs further away from the CBD are having not only fewer
higher order job opportunities but also poorer access to services like education
and healthcare. Using data on major employment destinations for Pakenham,
some 35 kilometres from the Melbourne CBD, Spiller (2011, p. 83) reveals that
most workers there are employed in local jobs (trades that follow the population
movements e.g. medical clinics, food and beverage outlets and groceries) or in
and around nearby Dandenong with only a small number working in the inner
urban region despite the availability of commuter train services to central
Melbourne. He analyses that “accessible employment counts by location can be
taken as a proxy for access to services” (Spiller, 2011, p. 84). Hence if one has
convenient access to a large pool of education jobs, then the same would have
access to many options for education and training (ibid). This causes a divide in
opportunities for those in the outer suburbs as against those living closer to the
CBD and in the inner or middle areas. It can be argued that the location of a

person’s home could affect his job prospects, career and learning opportunities,
productivity and human capital, quality of life and community integration at large,
much beyond just the immediate issue of housing affordability, important no doubt.
The lack in all these would potentially create a negative cycle to polarise and
divide the society that could on one extreme lead to ugliness and frustrations that
have disordered nations elsewhere. Rawnsley and colleagues (2011, p. 12)
suggests that any policy failure in managing our future employment and
population growth will cause economic division in Australian cities with the “central
core of our cities successfully linked into the global economy and the fringe
dependant on industrial and population serving employment. The reduced access
to opportunities (employment, education, health, recreation etc) for Australians
living on the fringe of our cities could create a socially divided city of ‘haves’ and
‘have nots’ which threatens the liveability of the whole city.”
Planning Process and Community Acceptance
Higher density housing at transport nodes in suburbs that are suitably accessed to
higher order jobs encounter issues of planning approval process and community
acceptance. Soon after Victorian Planning Minister Matthew Guy took office from
December 2010, the Planning News (Guy, 2011, p. 10) reports the minister is
“conscious of the impact of an inefficient and slow planning system on a supply-
constrained market and housing affordability.” While land is released to meet the
needs of Melbourne’s outskirts, “housing demand also needs to be met by
facilitating development in Melbourne’s inner city areas close to major transport
hubs and other services” (ibid). Sites ripe for residential development in good
locations close to infrastructure and services have been embroiled in council,
developer and community ‘stand-offs’ over concerns about heights and density. A
case at hand is the redevelopment of 590 Orrong Road in Armadale, an inner
eastern suburb under Stonnington Council. The site is about 6 km from the CBD
and abuts a commuter train station. In September 2011, a major property
developer in Melbourne submitted a planning application for the use and
development of the said land parcel comprising mainly a disused large 1959 5-
storey office building with a smaller structure rising to 7 storeys and extensive
surface car parking (Stonnington Council, 2014; VCAT, 2012, p. 7). The proposed
redevelopment will provide 466 dwelling units contained in 19 buildings ranging
from 2 to 12 storeys and a convenience shop, café and maternal health centre as
well as facilities for residents (VCAT, 2012, pp. 8-9). Public accessible amenities
like bicycle parking and open green spaces are included in the proposal (ibid).
However many nearby residents had strongly opposed to the proposed
redevelopment owing to its scale and design (VCAT, 2012, p. 8). This position was
unanimously supported by the Council and it refused a permit to the applicant on
those grounds at a special meeting of the Council in January 2012 which was
attended by a good 200 people, reflecting the much interest and lobbying against
the proposal (Stonnington Council, 2014; VCAT, 2012, p. 8). However VCAT
(Victorian Civil and Administrative Tribunal) ruled in favour of the proposal with
conditions and set aside the Responsible Authority’s (the Council) decision. Not
satisfied with the outcome, the Council lodged an appeal with the Supreme Court

which was dismissed in September 2013, some 2 years since the planning
application was submitted. The saga continued with the residents’ group and the
Council seeking Minister Guy’s approval to a clause amendment in the Council’s
Planning Scheme to limit the building height and density of the site (Morton,
2013). The Minister retorted that it was too little too late since any planning
amendment could not in retrospect rescind an approval already given to an
application based on the conditions then (Mackay, 2013). This long drawn episode
shows how the current planning process could “stand in the way of densification”.
However things are changing as the next section on housing strategies will
illustrate.
Housing Strategies
Decentralisation, Compact City and Polycentrism
Potential urban strategies to address the issues above include decentralisation,
compact city and polycentric city model and principles. Arguably, these principles
and hence objectives and outcomes are often similar. The various metropolitan
strategic and concept plans as well as their follow-up and implementation plans
have used these urban strategies for the integrated land use and transport
planning. For instance in Melbourne 2030, it planned to decentralise activities to
other identified metropolitan centres to broaden the range of services available to
a spread of higher population catchment areas across Melbourne (DOI, 2002, pp.
1-2). In conjunction with this, the report advocated a more compact city approach
which included “locating a substantial proportion of new housing in or close to
activity centres and other strategic redevelopment sites that offer good access to
services and transport” (ibid). A decade later, the Department of Infrastructure and
Transport (2011, p. 63) reiterated the need to reduce travel demand by co-location
of jobs, people and facilities through a polycentric city structure. Plan Melbourne
(VIC, 2014, p. I) echoes the same concept of a polycentric city with an expanded
Central City, larger than the CBD, well connected to “other major centres of
business, recreational and community activity distributed across the city.”
Compact City – Focus and Definition
The paper will now investigate further the compact city model in response to
equity in housing and job opportunities discussed thus far. For a start, compact
city can be defined in general to mean “a relatively high density, mixed use city,
based on an efficient public transport system and dimensions that encourage
walking and cycling” (Burton, 2000, p. 1969). She adds that “the process of
achieving urban compactness is usually termed ‘intensification’, ‘consolidation’ or
‘densification’” (ibid). However having high density does not necessarily mean high
rise. While high rise will generally give rise to high density, two other perspectives
of high density are concentrating more dwelling units into a plot of land even if the
housing types are low rise like townhouses, single or two storey houses. The other
is having more units of smaller floor area even if there is height limitation to
development.

However Gordon and co-writer (1997, p. 95; p. 100) argue against the promotion
of compact city, saying that the advance of telecommunications and
telecommuting is “accelerating the growth and dispersion of both economic
activities and population”, to the point that locational choices of households and
firms have expanded and geographical distances no longer matter much. They
view major innovations in transportation and communications as making available
agglomeration benefits over larger areas thereby “allowing many of the costs of
congestion to be avoided” (1997, p. 100). It is noted that this argument was
propagated some 17 years ago and while technology and telecommunications
have truly progressed by leaps and bounds in unimaginable ways, the capture of
benefits of agglomerations within the central city and inner areas of Melbourne
remains relevant if not more so. After all, face-to-face human intereactions whither
casual or formal have not been replaced or diminished by telecommunications.
Hence the “need to connect, manage and grow the existing and emerging high
density, mixed use neighbourhoods within the central subregion (expanded central
city)” is a key initiative in Plan Melbourne (VIC, 2014, p. 41). This approach also
applies to the other agglomerations in Melbourne termed national employment
clusters including the current ones at Parkville (bioscience area with hospitals,
universities and research institutions), Monash (research based activities and
advanced manufacturing enterprises) and Dandenong South (business parks,
health and education institutions and advanced manufacturing firms) and more
being developed (see Figure 2) (VIC, 2014, p. 42).
The concentration of firms in similar or related business sectors/industries within
Melbourne’s expanded city centre and national employment clusters helps to
enhance the labour market pool available to the industry, flexibility in the use and
access of labour and talents as well as employment opportunities for the workers
(Beaudry et al, 2009, p. 319; Scott et al, 2003, p. 195). The movement of workers
from one firm to another and casual interaction of employees of similar or even
different industry sectors help in continuous and informal but significant knowledge
spillovers (ibid).
Compact City – Social Equity and Access to Facilities
As described, the arguments for compact city include more affordable housing and
better job accessibility (proximity of home and work). In Burton’s article (2000, p.
1973), supporters of compact city have claimed that “it has the potential to reduce
the separation between home and work and thus the time and money spent on
commuting” as well as promoting social equity.
In connection with social segregation, “it is widely argued that, in the compact city,
communities are likely to be more mixed and that low income groups are less
likely to suffer from the added disadvantages of being spatially segregated”
(Burton, 2000, p. 1975). Burton (ibid) clarifies that such an argument is not based
on investigation of high density city living but from evidence of apparently
increased segregation resulting from decentralisation. Colebatch (2011) reports on

findings from a housing research that revealed Melbourne’s housing scene fast
becoming class segregated as rising house prices between 1986 and 2006
particularly in the inner and middle suburbs have led to only well-off households
living there while poorer ones “forced” to outer suburbs. In 1986, the median
house prices showed little variations across most of Melbourne (ibid). The inner
suburbs were traditionally where migrants to Melbourne made their first homes
(ibid). However since 1986, gentrification and new housing development there had
changed the social make-up. By 2006, “only 28% of inner suburban households
were low or lower middle incomes while 58% were on upper or upper middle
incomes” (ibid). It is suggested that the supply of affordable rental housing in the
inner and middle suburbs be increased, potentially high rise apartment buildings
development by private developers and Places Victoria (a Victorian Government
land development agency) (ibid). Incentives like increasing the square footage of
developments can be offered to developers to mix a certain percentage of social
housing units in their buildings. However similar housing schemes and objectives
in cities like New York, London and Washington DC have in fact heightened social
divide and triggered debate on rising income gap and class discrimination (Sim,
2014, p. 36). Sim (ibid) writes on the ‘poor door’ phenomenon or having dual
entrances in a building with both luxury and low cost housing on the same plot of
land. An example is 40 Riverside Boulevard in Manhattan, New York, a 33-storey
tower where the well-heeled have units facing the Hudson River accessed from a
posh riverside entrance while the affordable housing tenants have no such views
and low end amenities with a separate access to a narrow street (ibid). Similarly in
East London, “the main lobby of 1 Commercial Street has a concierge, marble
floors, manicured plants and revolving glass doors. The ‘poor door’ has a grey
façade and opens on to a narrow alley with no sidewalks” that is dark and unsafe
and makes the low-income residents feel insulted and discriminated (ibid). The
upsides for them are better schools in the vicinity and amenities like supermarkets
and shops that are drawn by the presence of higher income households.
Nevertheless such social segregation could potentially rear its ugly head in
Melbourne too as house prices of the increasingly compacted central and inner
areas continue to head north.
Another argument for compact city is more households are closer to not only
health and education facilities as mentioned earlier which are located in the inner
areas and specialized clusters but also commercial and retail amenities that are
supportable by higher population density and minimum demand threshold to be
economically viable (Burton, 2000, p. 1972). This translates potentially to a greater
number of facilities and amenities per head of population in a compact city (ibid).
Such is a positive outcome for lower income households since car and public
transport affordability may be an issue for them (ibid).
Apparently a proponent for compact city model, the Victorian Government’s Plan
Melbourne (VIC, 2014, p. 63) aims to establish a more compact, higher density
and sustainable city for greater triple-bottom-line benefits. This plan aims to
provide clarity on which areas will be protected from higher density development
and locations for medium to higher density development to be near services, jobs

and public transport in order to support the objectives of housing choice and
affordability. It is conceivable from the above that affordable living (measured by
cost of sale/rental of dwelling, cost of transportation and cost of quality of life/well-
being) could be supported by the strategies of polycentric and compact
development.
The subsequent paragraphs in this section aim to illustrate the compact city model
and its challenges such as residents opposing high density development,
metropolitan governance, public transport centricity, private vehicle control and
land value capture. The challenges impacting Melbourne and the steps to manage
them will also be discussed with overseas examples to augment where relevant.
Compact City – Planning Process and Community Acceptance
Reiterating, higher density in compact city will enable people to live closer to jobs.
Currently inner urban and even middle suburbs living with their better access to
public transport and jobs are dominated by the wealthier households (Kelley,
2012, p. 38). The high property prices there have kept many households from
moving closer to the city centre even if they wanted to (ibid). There is a “mismatch
between people’s housing preferences, the housing stock, and the housing being
built. The shortage (relative to what people want) consists of non-detached
housing in inner and middle suburbs” (ibid). Existing residents have shown to want
to preserve the current neighbourhood character and form and are resistant to
change. While this is understandable in cases supported by justification of
potential loss of amenity, clear land use conflicts, general health compromises etc;
NIMBYism (not-in-my-backyard syndrome) can also be irrational driven by self-
interests. This can hinder or setback the strategies for land use and development.
In a Sydney-held seminar in May 2013, the now Federal Minister for
Communications Malcolm Turnbull was quoted as saying “NIMBYism is rampant
and it’s something people have to think about. If you mount a campaign to stop
greater density in your suburb, are you not just simply determining that your
children will never be able to afford to live there?” (Jewell, 2013) Public education,
consultation and buy-in would help mitigate or remove such hindrances. Land use
zoning under the Victoria Planning and Provisions (VPP) as contained in the
planning scheme could be reviewed and reformed to facilitate smooth
development.
An article in the Planning News (Guy, 2012, p. 6) highlights a recent planning
scheme amendment by the state as a reform towards cutting red tape and
complexity in the planning system which is a key policy lever to improve
productivity. Minister Guy appears to favour more flexible pro-business planning
provisions (Dowling, 2012) where MAC (2012, p. ix) suggests “moving away from
regulation as the primary means of achieving planning outcomes” whereby
innovative market initiatives could proceed “even if these projects are not
contemplated by current planning controls.” Two recent examples are
encouraging. One is reforming the residential zones for Victoria in July 2013
(DTPLI, 2014a). The improved mixed use zone enables new housing and jobs

growth in mixed use areas like renewal of local neighbourhood centres and
around train stations (DTPLI, 2014b). This is the only residential zone without
maximum building height specified (ibid). The three new zones of residential
growth zone, general residential zone and neighbourhood residential zone intends
to balance housing growth and diversity with preservation and respect for existing
urban character of a locality (ibid; VIC, 2014, p. 70). While there is height
restriction in all 3 new zones, ranging from 8m to 13.5m, flexibility can be
exercised for the growth and general zones, potentially more so for the former
which applies to areas near activity centres, train stations and other areas suitable
for increased housing activity (DTPLI, 2014b). It is apparent that the urban policy
identifies and segments specific areas across and within suburbs for development,
using land zones that will influence outcomes on the ground thereby providing
greater certainty and clarity to the planning process (VIC, 2014, p. 70). The
second example is the bending of hitherto ‘sacrosanct’ planning control that the
building height cannot overshadow the south bank of the Yarra River within the
CBD (Dow et al, 2014). In exchange for this, developer of the proposed 300m tall
building will provide a large 1,900 square metres of public open space worth
A$20m (ibid). Though Minister Guy has the final say on its height, the benefits
appear pro-business with a good community outcome. The current government
has declared that high density Hong Kong style apartment living for the inner city
is the way forward (Masanauskas, 2013). Minister Guy was quoted as saying “For
the long term sustainability of this city, this Government believes that
concentrating growth around activities areas, particularly around our central city
area, is going to be the most important way we can accommodate population
growth sustainably into the future.” (ibid) All these are consistent with the new Plan
Melbourne (VIC, 2014, p. 186) which aims to further streamline planning controls
that trigger the need for a planning permit, reform development contributions
including urban areas to rein in escalating costs to developers and remove
bureaucracy and prepare a new state planning policy framework to enhance
guidance to decision makers such as local governments and VCAT. Hopefully
more positive and speedier outcomes in housing development become the norm
which would address what Kelley and colleagues (2012, p. 44) consider as current
“disincentives developers face in building in established areas” and ‘locked down’
established suburbs by “restrictive zoning and planning rules.” Rawnsley et al
(2011, p. 12) adds that “dialogue with the Australian community on the various
costs and benefits of different policy interventions” shaping our cities is helpful
since a “well informed community will be more cooperative in embracing good
public policy when they are well aware of the alternatives.”
Compact City - Governance
The Metropolitan Planning Authority (MPA) first proposed in Plan Melbourne
appears to address the concerns from various quarters in the planning profession
of the current fragmentation of metropolitan planning and responsibilities resulting
in governance deficit with adverse urban structure (Gleeson et al, 2012, pp. 117-
118). The two aspects of governance deficit affecting Melbourne for the longest
time are planning deficit and democratic deficit, both giving rise to specific urban

fabric, institutional form and planning culture that contribute to diminished
affordability living and job opportunities (see Figure 6). For instance in the context
of NIMBYism discussed earlier, Gleeson and co-writers (2012, pp. 123-124) reveal
that it is common for state ministers to intervene routinely in development
assessment processes as it is not occasional that communities lobby through
demonstrations and advertising campaigns over their unhappiness with proposed
changes to their neighbourhoods. With opposition parties scoring political points
by challenging the government decisions, long-term city building policies are often
compromised by policy reversals and swings owing to short-term political cycle
(ibid). Therefore state ambitions for residential growth and compaction as per
compact city model, in metropolitan areas like Melbourne does not resonate well
with local government politics and outcomes are potentially adverse with local
communities becoming antagonistic, disenchanted and cynical over metropolitan
planning (ibid). The authors opined that a metropolitan planning layer of
governance could provide the mechanism for consultation, clarification and
leadership at the broad city level and facilitate such plans to be embraced also at
the local level (ibid). While it is early days yet, the Authority has already been
tasked to coordinate whole-of-government integrated land use in the metropolitan
area and to implement the initiatives outlined in Plan Melbourne (VIC, 2014, p. 17
& 184). From the Authority’s home page (viewed 19 Sep 14), it assumes a much
needed facilitative role to work with local councils, other government agencies and
the planning and development industry to help deliver greenfield and urban
renewal projects. MPA is arguably a step in the right direction particularly the
many deep challenges in the compact city cum housing market that looms larger
each passing day.
Figure 6: Governance deficit in Melbourne being addressed by MPA
Source: author’s analysis of Gleeson et al, 2012, pp. 117-125

Compact City – Public Transport and Transit Oriented Development (TOD)
The features characterising compact city at city scale are the same for transit
oriented development (TOD) at precinct scale. According to Gihring (2001, p.
307), “Transit oriented development, the creation of transit station communities,
or compact, mixed use activity areas, centred around stations, that by design
encourage residents, workers and shoppers to walk and to ride transit.” In Figure 7
below, surrounding the four key features of TOD namely mixed use and high
density development, public transport centric and walkability are its benefits like
exciting urban form, land value capture, lower commuting time, densification etc.
Higher level issues impinging TOD comprise varying market forces and economic
conditions, city sustainability and liveability, political agenda and implications and
managing population growth and expectations. Hence compact city and TOD are
symbiotically linked to support and enhance each other. In Plan Melbourne (VIC,
2014, p. 74), it intends to “deliver housing close to jobs and transport” including
the densification of areas around railway stations, public transport interchanges
and certain public transport corridors. Public transport investments in Melbourne
(e.g. Regional Rail Line under construction and the proposed Melbourne Metro)
will increase public transport accessibility, connectivity and capacity and create
TODs around proposed Melbourne Metro stations at Arden-Macaulay and E-Gate
(North Melbourne) thus providing new opportunities for investment in Victoria (VIC,
2013, p. 25). Such public transport investments will certainly help bring housing
and opportunities (jobs and services) closer together for more equitable
participation by all in agglomeration economies. However rail investments in
particular are large capital expenditure projects with long and complex
construction schedule to realise. Hence buses especially for corridors that require
a threshold critical mass to develop to justify rail investments, could play a bigger
role meanwhile owing to its flexibility and quicker implementation.
Figure 7: Features, benefits and issues of TOD
Source: author’s analysis

Compact City – Private Transport
While Kelly et al (2012, p. 40) understands that new roads and increasing road
capacity are needed still, road congestion adds significantly to business costs. It is
time to explore the challenges of road pricing and to use this revenue to expand
public transport especially buses given the longer gestation period of metro train
and tram systems (Kelly et al, 2012, p. 44).
Statistical tests by Cervero and Kockelman (1997, pp. 199-200; pp. 216-219) lend
some support to the argument that “compact, mixed use, pedestrian friendly
designs can degenerate vehicle trips, reduce vehicle miles travelled per capita,
and encourage non-motorised travel”. This is in line with the contention of new
urbanists and others that density, diversity and design, could positively shape
travel demand towards more non-motorised trips, reduced motorised travel
distances and increased transit mode share (Cervero et al, 1997, p. 199).
However, Cullinane (2003) purports that urban density alone is not enough to fully
realise an outcome of reduced car ownership and usage; using densely developed
Hong Kong as case study. Comparing densely settled Asian cities of Singapore,
Hong Kong and Tokyo with equally dense Bangkok and Jakarta, the former cities
are much less car dependent despite being wealthier than the latter (ibid). This
phenomenon does not support the density alone debate. Further undermining the
argument, she (2003, p. 28) adds that Hong Kong’s population density “increased
by around 10% in the period 1995-2000, yet car ownership and use increased
over this time.” Cullinane’s investigation (2003, p. 33) reveals that government
policies on controlled parking and high costs of motoring (i.e. new car registration
taxes, license fees, fuel duty, tunnel and bridge tolls etc) have been implemented
with the intention of suppressing demand for private transport.
Australian cities are generally car dependent where car ownership increased
rapidly since the 1950s as cars liberated travel from fixed route public transport
(Lowe, 1995, pp. 30-31). The expansion of suburbs enabled Australians to enjoy
an uncrowded urban form and lifestyle away from city apartment living thereby
fulfilling the Australian dream of a house and garden. The physical infrastructure
provision since the 1960s had been dominated by roads (ibid). Urban sprawl
increased travel distances by cars and reduced feasibility of public transport
services (ibid). As recent as the 1980s through to the mid-1990s, almost all of the
growth in travel demand in Melbourne came from private vehicles which grew its
mode share (PTV, 2012, p. 10). It was only from the mid-1990s till the early 2000s
that public transport grew at the same rate (albeit a small base) as private vehicles
(ibid). Around 2004, a different travel trend emerged where the growth in average
vehicle kilometres travelled for private vehicle slowed while public transport usage
increased at a faster rate (ibid). This pattern implies that public transport, cycling
and walking are accommodating a significant proportion of the growth in travel
demand under a period of unprecedented high population increase in Melbourne
(ibid). The actual and forecasts of metropolitan Melbourne’s daily trips by primary
travel modes are shown in Figure 8. The Plan Melbourne with its emphasis on
compact city development at specified locations however has not included any

bold measures to restraint car ownership and use particularly in the denser
downtown area. This can be a means of providing funds to further enhance and
expand the public transport systems for greater housing and job accessibility.
Figure 8: Metropolitan Melbourne daily trip forecasts by primary travel
Mode (reference case as at June 2011)
Source: PTV, 2012, p. 13
Compact City – Land Value Capture
Accessibility benefits of living and working near or at transit stations are
capitalised into property values (Cervero and Duncan, 2002, p. 8). Hence transit
increases land value and commercial/office rental and occupancy rates (Cervero,
1994, p. 89). Land value capture is a potential source to fund the infrastructure
costs of public transport investments. The late Nobel laureate economist William
Vickery (1977, p. 349) theorised that “use of land rents….for public purposes is
therefore not merely an ethical imperative….derived from private appropriation of
public created values, but is….a fundamental requirement for economic
efficiency.” At the same Sydney held event mentioned earlier, Malcolm Turnbull
advocated for a value uplift model (basically land value capture) for funding public
transport (Jewell, 2013). It was reported that Turnbull said “Because it does seem
to me that we’ve forgotten something that we once knew. If you look at the 19th
century railway companies, they were all basically real-estate players, and the
biggest property owners in Japan or North America are still railway companies.
Yet we seem to have lost that….” (ibid) Recouping urban transport costs from land
value is exemplified by Hong Kong and Japan transit systems. Miller and Hale
(2008, pp. 5-6) describe Hong Kong’s MRT model as “Rail + Property” and “joint
development is commonly employed to create new real estate clusters around the
stations.” Its model has achieved operating ratio of above 100% thereby ensuring
funds can be ploughed back for system expansion to meet anticipated growth
(ibid). Another model of integrated land use and transport development is the
Tama Garden City project by Tokyu Railway Company of Japan that transformed
a sparsely inhabited area into a community of some 3,000 hectares for a
population of 440,000 between 1959 and 1989, where a key feature was land

readjustment to assemble the land by organising and consolidating properties of
land owners (World Bank, 2001, p. 20). No direct government subsidy was
provided for the project and Tokyu through this scheme acquired land sites for
commercial and housing development to fund the rail investment and to increase
population and rail ridership in the process (ibid).
Compact City - Urban Density and Housing Affordability
Still on the discussion of land value, there are contrary claims about the effects of
compact city on housing affordability. Burton (2000, p. 1976) writes that “compact
city is sometimes advocated on affordability grounds particularly in Australia” with
the argument that higher density housing like flats and apartments, reduces the
land value component of a dwelling thus benefitting the consumer with lower
house price. However critics argue that compact city will rather reduce affordability
owing to land becoming more scarce thereby more expensive and “housing values
will be inflated by the extra costs involved in treating and reclaiming contaminated
or derelict land” (ibid). She quotes from another research that congestion and
property costs are expected to rise in the compact city (ibid). Her original research
suggests that “higher densities may not cause the increase in house prices” per se
but rather higher demand for housing in specific areas or cities that lead to higher
land values which in turn give rise to higher densities (2000, p. 1986).
Compact City – Application in Other Cities
Before concluding this section, we consider examples of cities that have benefited
from cogent strategic urban planning that transformed a clear forward-looking
vision into a conceptual plan of a future metropolis whereby high-capacity transit
investments produce desired urban form outcomes like Copenhagen’s ‘Finger
Plan’ and Singapore’s ‘Constellation Plan’ (Suzuki et al, 2013, pp. 3-5).
Specifically on Singapore, Suzuki (ibid) describes its concept of “radial corridors
that interconnect the central core with master planned new towns. Its spatial plan
has the appearance of a constellation of satellite ‘planets’ (new towns), which
surround the central core, interspersed by protective greenbelts and interlaced by
high-capacity, high-performance rail transit.” This plan stipulates a hierarchy of
commercial nodes with the major nodes located at the intersection of rail lines to
form regional centres and sub-regional centres. Smaller fringe centres and town
centres are also located at rail stations. The land use and development for
different functions are scaled accordingly e.g. more commercial and retail space in
regional centres than town centres. Cervero (1998, pp. 172-174) notes that while
the regional centres function as ‘concentrated decentralisation’ or mini-CBDs in
the form of “dense mixed use nodes to allow for efficient rail services”, the central
area remains the key commercial and financial hub. For its financial sector, offices
in the CBD offer a prestigious and ‘high contact’ environment that projects
Singapore’s image as a financial hub and vibrant global city (CLC, 2014, p. 80).
The planners in creating an active 24/7 downtown street life have zoned land for
high rise high density inner city housing (Cervero, 1998, p. 172). It follows that the
needs of Singapore’s economic structure limit somewhat the scope for

decentralisation (CLC, 2014, p. 80). Notwithstanding this, Singapore’s multi-
centred metropolis built upon compact transit-oriented communities has allowed
all strata of its residents to enjoy quality and equality of access to housing, jobs,
education and medical care (Cervero, 1998, p. 176). Hence Singapore exemplifies
decentralisation and compact city model going hand in hand.
Conclusion
It appears that agglomeration economies that depend on knowledge and skills
have been advocated as one key way forward for Australian cities but the
associated and large issues of better connecting people, jobs and firms have to be
addressed effectively through enlightened policy interventions to better integrate
land use and transportation and increase the housing supply and mix in existing
suburbs. This avoids creating dysfunctional and divided suburbs from participating
in the opportunities of agglomeration economics.
The paper aims to have demonstrated that the land use and urban strategies of
decentralisation, polycentrism and compact city all work towards a sustainable
urban morphology. The compact city model is investigated further in that section
with discussions in housing density, land value, transport and governance
amongst others. With both advocates and critics of compact city and the more
specific aspect of urban density still on-going in their research and analysis, the
model probably has to be fine-tuned to the conditions and politics of each city.
Notwithstanding this, “it is worth noting that achievement of a more compact, less
divided and more environmentally sustainable Melbourne is likely to deliver a
sizeable value-added dividend, which has been conservatively estimated at 3% of
GDP” or broadly speaking an annual A$2 billion potential increase in tax revenue
(Spiller, 2011, p. 93).
Now this is an economic return that even decision makers in government and
business and the progressive and pragmatic segments of the public would agree
that ‘location, location and location’ of where one lives does matter to the nation
and society.

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