Insights

What's the price of sunshine? Proposed mandatory height controls in Melbourne

Posted August 03, 2021

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  • State government
SGS Economics and Planning the price of sunshine article marcus spiller

The City of Melbourne is proposing to introduce mandatory height controls to preserve sunshine penetration into its parks at the winter solstice. While the controls are yet to be adopted by the State Government, they received a largely positive report in the independent panel review process which applies in Victoria.

This planning move is noteworthy in two respects. It sheds light on the interpretation of ‘net community benefit’ in planning matters and it provides new evidence on how the value of sunlit parks might be assessed.

The cost of foregone development capacity

The proposed controls would trim the development envelopes of properties alongside relevant parks. While these property holders would suffer a financial loss, it was put to the Panel that this did not represent a loss in net terms for the community. This is because, for the foreseeable future, there is ample developable capacity in nearby sites to absorb the loss of development potential on park fringing land. One land owner’s loss would be fully offset by another land owner’s gain, meaning no net change at the community level.

This affirms the role of planning regulations in getting the best outcome for the community as a whole rather than protecting individual interests.

Nevertheless, the economic evidence put to the Panel took a conservative approach and allowed for the possibility that in the very long term, the trimming of building envelopes on sites flanking parks might leave the City with less reserve development capacity. That is, at some point in the future, the City of Melbourne would be less able to accommodate more housing and jobs than it otherwise might in the absence of the new controls.

The consequence of constraining future infill capacity, albeit in the long term future, would be to displace a future stream of development that would have occurred in the City of Melbourne to the urban fringe through a vacancy chain effect. This would represent a net cost to the wider community. It was monetised as the difference in residual land value for the quantum of development that would have occurred in the City versus the same quantum taking place on the urban fringe, with numbers discounted back to present values.

Willingness to pay for retained winter sunshine

Meanwhile, on the benefit side of the equation, the Panel heard evidence regarding the value which the community places on preserving winter sunshine in parks. In what may have been a world first, this was monetised via a willingness to pay (WTP) survey.

The survey methodology, designed by Prescience Research, employed two separate techniques for gauging WTP. One applied ‘Choice Modelling’. This avoids questioning respondents directly on their WTP. Rather, respondents are offered a range of choices featuring different mixes of benefits and prices (an annual Council levy). WTP for a particular feature (e.g., controls to prevent overshadowing of parks) is imputed by analysing variations across the survey group in terms of the price/feature trade-offs.

The second method simply asked respondents what their WTP for park overshadowing controls was.

Both methods are valid and widely used in WTP surveys. Choice modelling is sometimes claimed to be more reliable because respondents are less aware of direct spending scenarios and, therefore, may be less biased in their responses.

The Prescience Research Choice Model produced a household WTP of $18.48 per annum (average) for the following benefit:

Maintain sunlight in parks. Tall buildings near parks can increase shadows and reduce sunlight in parks and gardens. Councils are considering building planning controls to restrict the height of building developments that border with parks to ensure that existing levels of sunlight in parks is maintained.

This translated to $9.89 per head per year (including children in a household).

The direct question method produced an annual WTP of $41.30 per household (average) or $21.17 per head.

These estimates of WTP were applied to the pedestrian catchment populations of all the parks in question to arrive at an overall estimate of the community value generated by the proposed sunlight access controls.

The planning scheme changes were shown to deliver a benefit cost ratio of ratio of 1.8:1 or 4.4:1 depending on which WTP estimate is used, indicating a strong net community benefit.

If the findings of the WTP were to be applied to the entire metropolitan population, planning measures to protect winter sunshine in public spaces like parks would be expected to generate a benefit of between $50 million and $100 million per year.

This article was first published in The Sourceable.

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SGS Economics Planning Marcus Spiller
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