Are Developers Greedy, Or Just Misunderstood?

Construction starts in Australia, like much of the English-speaking world, are falling across a spectrum from commercial to retail, industrial and housing. Construction industry jobs - one of the few sources for well compensated blue collar employment - are going with them. Yet developers, the very group who would create these jobs, continue to suffer a poor public image. Why, and can it ever be improved?

The Reserve Bank of Australia’s recent move to increase interest rates was not well received by the development and construction industry. Housing and non-residential approvals are in a general slide and a widely reported lack of new supply in housing is compounded by private sector commercial development at a virtual standstill, with development finance the most widely cited culprit. According to the UDIA, construction industry jobs are down by around 25,000 in just one Australian state, the formerly booming Queensland. That’s a lot of incomes not being spent in the economy.

Yet despite these problems, developers aren’t exactly being courted by policy makers or regulators. Quite the opposite – politicians still regularly throw the mud at the very industry which holds a key to improving housing supply and construction industry jobs. “I won’t stand by and let greedy developers get away with … blah blah blah.” You’ve all heard it before. Denial, pass the buck and shoot the messenger continue to be preferred defensive tactics of politicians responding to industry complaints of excessive regulation. Labeling all developers “greedy has about as much validity as suggesting all politicians are corrupt simply because a handful break the law, but the latter (politicians) continue to target the former (developers) - and get away with it.

It’s not just the politicians of course. Many regulators and planners, if you believe the horror stories, have taken an adversarial stance to development assessment whereby the developer is regarded with suspicion from the outset. The regulators don’t see themselves as facilitators of new activity but as ‘growth managers’ exercising every precautionary principle known in a bid to slow, curtail, check and re-check the consequences (real or imagined) of a proposal.

Then there’s community opinion, which puts developers and real estate agents and used car dealers into the same category. Development proposals that align with local or state planning schemes, and which may have already jumped through several hoops before a public airing, are often widely rejected via the pages of the local press. This isn’t just NIMBYism, because the target of hostile public complaint isn’t the planning scheme or the local or state politician who endorsed it, but the developer applicant who is simply complying with the scheme’s intent. Irrespective of how green, how sustainable, how rational or how much needed the proposal may be in community or economic terms, it’s the developer who gets the bad press.

Why is it that developers just can’t win?

I’ll venture a theory that many readers won’t like. Developers are too meek, too obsequious, too prepared to be thrashed with a wet lettuce and succumb. With rare exceptions (Stockland’s Matthew Quinn is one) developers rarely comment publicly about the problems imposed on the industry by excessive and growing regulatory burdens. The allegations of land banking, of profiteering, greed, opportunism, social irresponsibility and environmental vandalism are too infrequently challenged in the public domain.

Some blame no doubt lies in the politicization of development assessment: development is no longer an exercise in market and land economics, but a political game. Political intervention in planning schemes and the ability to kybosh proposals means that developers need to be acutely sensitive to political trends. Throwing back the facts and arguing the case publicly may not win political friends, and developers certainly don’t need any more political enemies. But what that means is that as more mud is thrown, more mud sticks.

It’s true that industry groups have their role to play in advocating development industry positions and promoting the benefits the industry brings, and by and large do a good job with the resources available. But is it also true that developers themselves tend to hide behind their industry groups in a sort of ‘good guy, bad guy’ act where industry group executives are left to do the sledging while developers do the schmoozing?

I recall a meeting with a Government Minister some years ago, dealing with a mounting problem in the Minister’s Department which threatened to cost the industry dearly. The meeting was civil but the issues weren’t danced around – “a full and frank discussion” might be its best description. The Minister was getting the message, loud and clear. But then, at the close of the meeting, the developer representative left the Minister with the comment that “Minister, thanks for your time and we want you to know you’re doing a great job.” Bang, pop – the pressure was instantly deflated. That Minister no doubt reported to their colleagues that the industry was pretty put off but didn’t present a political problem.

Perhaps asking individual developers to publicly challenge the opprobrium being thrown at them and defend themselves more aggressively is akin to asking them to paint a target on their forehead saying ‘shoot me’ But perhaps they can take a hint from Australian farmers. Farmers, thanks to aggressive environmental politics, were copping all the bad press from tree clearing and land erosion to fertilizer and herbicide runoff. Somehow the community was allowed to forget that without farmers we don’t eat, they responded. The ‘Every Family Needs a Farmer’ campaign was a defensive community education campaign, designed to build more empathy amongst urban consumers of the issues faced by farming communities. The campaign has run through several incarnations over several years, and was no knee-jerk, one-off exercise.

Now if Australian entrepreneur Dick Smith can fund a TV documentary and anti-growth campaign single handed, you’d think the entire development industry could manage something in its own interests, especially when those interests are closely aligned to the interests of the community. You wouldn’t call it ‘Every Family Needs a Developer’ but you could start with a few things that the community as a whole seems to have forgotten:

The homes we will need so that people aren’t sleeping on the streets won’t be provided by governments, or politicians, but by developers. The economy that we need to feed our families and support our aged and infirm, relies heavily on developers and the construction jobs that flow from them.

Many developers go broke trying, and in doing so they lose their own money, not public money. It’s a high risk venture where certainty is essential. It’s not an industry where the public sector has ever shown much of a track record – witness the billions squandered on public housing programs which produce very few roofs.

Developers have legitimate concerns about the cost of doing business. It means their costs to the consumer,in the form of houses young people can’t afford, or rents that businesses struggle to pay, are higher than they need to be. It’s not developers making this happen; it’s regulation.

At the end of the day, developers can sit back and wait for more mud to be thrown, or begin to defend their reputation, and to defend the need for growth.

Is there anything to be lost by trying?

Ross Elliott has more than 20 years experience in property and public policy. His past roles have included stints in urban economics, national and state roles with the Property Council, and in destination marketing. He has written extensively on a range of public policy issues centering around urban issues, and continues to maintain his recreational interest in public policy through ongoing contributions such as this or via his monthly blog The Pulse.

Photo by Scorpions and Centaurs