Old lands, new life: is this the solution to our housing crisis?

13 September 20226 min

There's something about extreme home makeovers that is therapeutic. Perhaps it is the entire process of assessing how bad the situation is, to the drama of decluttering, fixing, organising and building – until everything comes together with beautiful interior design, new furniture, landscaped gardens and a lot of energy. What once was an eyesore is now a cosy, relaxing sanctuary we all envy.

Unfortunately, however, not everything gets a makeover. Contaminated lands, for example, are rarely given one. The social and natural capital value of these lands are undervalued.

In Australia alone, it is believed there are more than 150 000 contaminated sites – or areas of land that have been polluted and ruined by toxic chemicals from past industrial or residential use. In Europe and the US, there are millions. Less than 1 per cent of these have been reported or undergone remediation.

How much potential land, water and space have we missed or undervalued?

A change in risk appetite towards contaminated land would create more opportunites for a variety of usage beyond commercial ventures. Properties that could be productive often remain vacant or underused for lengthy periods, largely due to a lack of adequate information about their contamination status or the nature of potential risks, which prevents sale and/or reuse. These lands are regarded as complex and mysterious. And where there is mystery, there is margin! Unpacking the mystery and distributing these benefits can be a challenge.

Over 1.6 billion people have inadequate housing conditions globally and as the world's population continues to rapidly increase, this statistic will only rise in years to come.

We all strive to live in beautiful places, but we cannot all be accommodated on pristine, greenfield land – or could we? Is land remediation the answer to our housing crisis? How could our communities and cities change if we give these abandoned and polluted lands a second chance? Can we afford not to?

Untouchable land

It might be more accurate to refer to contaminated sites as 'complex lands that people don't value'. Markets for contaminated properties can fail to clear for many reasons. In addition to poor or irregular information about potential contamination, 'mothballing': where property owners hold on to potentially contaminated properties to avoid facing clean-up costs; or liabilities being revealed during or after redevelopment, is very common. Urban land is valued for location, and land quality or capability is an externality.

And even if owners do wish to sell, potential buyers can be unwilling to conduct or consider a property transaction despite assessments suggesting that the benefits of cleaning up and reusing outweigh expected costs. The land faces a stigma where perceived risks are found to be greater than technical risks, or where benefits versus costs are not the deciding factor.

Research suggests that risk perception rises with risk characteristics such as uncontrollability, effect on future generations, and delay in manifestation. Contaminated land and water often exhibit such traits. This is why sites may remain stigmatised even after clean-up efforts are complete, resulting in persistent undervaluing and so many missed opportunities. If sites are only cleaned up to an extent that is practical in terms of regulation, broader social value is generally not enhanced by regulatory remediation activity.

So, with millions of hectares of contaminated lands across the world, what will it take for governments, organisations and property owners to invest in them?

Beyond doing 'less harm'

The full benefits of land clean-up involve going beyond the effects of removing or remediating contaminated ground to examine what happens once properties are deemed "suitable for the proposed use". It's not solely about doing 'less harm' but rather 'doing more' for society.

Increased land productivity and site reuse can contribute substantial social benefits by increasing the production of goods and services that people value. Enhanced land capability (or natural capital) can improve soil fertility, urban biodiversity, green space for urban cooling, waterway health and public health benefits. Framing programs of asset transformation with these social and natural benefits can create new life for urban precincts, and circulate ageing assets for new generations.

The Wapping Wharf in Bristol, United Kingdom, which was once a jail, as well as a timber and coal yard, has gone a long way and has now become a mixed-use development with apartments, shops, restaurants, and other businesses flourishing in the area.

In urban contexts, redevelopment can boost output at the community level through economies of agglomeration, or can improve community welfare through peer group effects, in which neighbours influence each other's behaviour. An old gold pen factory in Shanghai, China has been well-preserved and rehabilitated to be used as a cultural display such as a museum.

Redevelopment of urban contaminated sites based on Smart Growth principles can lead to improved amenities for local communities and reduced pressure to develop open spaces or 'greenfields' far from city centres, leading to indirect ecological benefits.

In Sydney, significant redevelopment of the Barangaroo site was made possible only by private investment. In the absence of incentives for clean-up, the land had laid dormant for over a decade in the city centre. And yet the investment has been a significant benefit to the economy and living quality of the nearby Darling Harbour area.

Across Australia, there are many developments which have been progressed following government stimulus either through policy change or direct capital investment to make them happen ‒ Port Adelaide Waterfront in South Australia, Docklands in Victoria and East Perth Gasworks in WA.

Perhaps an incentivised streamlined approach is required for social and affordable housing outcomes.

In some countries, incentive programs have been developed to encourage development of contaminated land. For example, the US Federal Brownfields Program (which has a legal mandate to facilitate site reuse in addition to clean-up), the US Environmental Protection Agency's Land Revitalization Initiative, and other program-specific efforts such as the Resource Conservation and Recovery Act (RCRA) Brownfields Initiative.

Increasing economic viability

How do we progress and financially incentivise the redevelopment of our contaminated sites for housing? Environmental gentrification provides another twist. Because remediation regulations are punitive, redevelopment only becomes feasible when remediation costs are insignificant compared to redevelopment value. Consequently, remediated sites are generally developed for higher-end premium land use and more expensive housing. Social housing is rarely provided as a goal of remediation.

Sustainable cities will need to stop wasting the land use in urban centres and encourage the redevelopment of contaminated sites – not only for the environment but also for social impact.

In addition to remediation of sites generating commercial opportunity to develop high value land in desirable locations, it can also provide much needed social housing if we can tap the landbank of currently (rightly or wrongly) stigmatised sites.

There is a win-win to be had here: clean-up sites, provide healthier urban environments and provide homes for people. This will require both regulation and incentivisation and to boost land value, taxes for municipalities and benefits distributed to a wide section of communities. The toolkit to open these opportunities will include sustainable procurement, social enterprise structures, impact investment channels and regulations to enable benefit and co-benefit realisation.

The evolution of the social infrastructure that facilitates contaminated land management will require advocacy, programmatic assessment of social value from brownfield lands, incentivised funding mechanisms and long-term business case analysis (total value of ownership – not merely the capital cost, but the longer-term sustaining capital and social benefit).

With an anticipated $50 Trillion infrastructure spend over the next 20 years globally, there is opportunity to frame urban asset transformation as a mechanism for better distributed social capital. It's a lot of hard work but if that's the price we have to pay to give our cities and environment a well-deserved makeover, it will definitely be worth it.

This blog was authored by: Colm Molloy