Building more homes where infrastructure costs less

About the paper

Sydney is growing quickly, both in its population and its footprint. With growth comes the challenge of providing housing and the infrastructure needed to support it.

The NSW Department of Planning and Environment projects Sydney’s population will grow by more than a million people by 2041, requiring at least 550,000 additional homes. As the city grows, new and existing households and businesses need access to infrastructure to be productive and have a good quality of life. When infrastructure provision is poorly coordinated with growth, new and existing residents suffer directly, and opposition to further growth rises.

This paper explores, for the first time, the infrastructure-related costs of increasing the density of different parts of Sydney, focusing on five types of public infrastructure: roads, rail, water, schools, and open space. We find these costs vary substantially across Sydney, with areas close to the Central Business District (CBD) costing $75,000 less per dwelling than the North West.

Our analysis shows there are opportunities to leverage existing infrastructure close to the CBD to manage the costs of delivering the new homes Sydney needs. This paper is the second in our series on housing; our first paper showed that inner areas are also typically the places where people most want to live.

In planning for Sydney’s future, prioritising density in high-demand locations with lower infrastructure costs would benefit both new residents and society more broadly, as vibrant dense communities bring higher productivity and amenity. Doing so will also allow the government to better provide infrastructure and services without increasing debt or taxes.

Key findings

  • The infrastructure costs of building new homes are lowest near Sydney’s CBD, increasing as development moves north, south, and west. The infrastructure-related costs of building further away can be up to $75,000 more per dwelling.

  • Most of the variation in infrastructure-related costs between areas relates to local traffic congestion and wastewater costs, followed by school infrastructure and green space costs. Building more homes in inner-ring suburbs, close to jobs and public transport, creates less than half the extra congestion cost of building in outer areas.

  • Providing water and wastewater infrastructure is more expensive away from the coast, particularly in hilly or environmentally-sensitive areas. Water and wastewater infrastructure costs around $13,000 per new dwelling in established areas, particularly south of Sydney Harbour, compared to $42,000 in outer areas like Hornsby.

  • Limited capacity in existing schools makes growth in the north-west and outer-south more costly. In the Pennant Hills-Epping, Manly, Pittwater, and Hornsby areas, the combined cost of extra primary and secondary school infrastructure is more than $20,000 per new dwelling, compared to less than $10 per new dwelling in the Fairfield area.

  • Open space is critical for the amenity of an area and the health of its residents. Most of the established suburbs in Sydney have good access to public open space, although there may be constraints on specific types of open space in places.