Urban growth management in New South Wales (NSW) has had a patchy history. Deficiencies have existed at the State level for example, in the policies and mechanisms for the management of the impact of development on natural resource values and environmental quality. Included in this scenario are various market-based instruments, the utilisation of which have been part of the Australian policy and regulatory landscape for more than two decades. Investigation, advocacy and, in some specific instances adoption, of a hybrid approach of regulatory, and statutory and policy-based economic, instruments has been evident over this time in the areas of urban planning, environmental protection and resource management (Williams, 2004). Yet despite this earlier promise and enthusiasm, the reality is that the extent and successful application of market-based tools in the Australian planning systems has been somewhat underwhelming. One reason for this poor record is the long-standing reliance on traditional ‘command and control’ approach using mechanisms such as land use zoning, development standards and other regulatory tools. Further, as market-based mechanisms constitute a more recent public policy approach, they are possibly a less understood planning tool that has been perceived to challenge the traditional regulatory framework.

As a consequence there has been some reluctance on the part sections of government and other stakeholders to fully embrace this option to complement other planning other tools such as regulation. This paper considers the potential benefits of market-based instruments, particularly from a property rights perspective. The paper examines two types of market-based instruments – transferable development rights (TDR) and tradeable offsets – that have been utilised in NSW. Several past and current TDR and tradeable offsets schemes are identified, ranging from schemes designed to conserve heritage buildings, agricultural land, scenic landscapes and biodiversity, and protect water quality. Review of the application of these TDR and tradeable offsets seeks to identify both problems experienced and benefits achieved. Identification of the difficulties faced and successful elements of these schemes permits the distillation of the necessary ingredients or conditions if market-based instruments are to be more fully implemented as part of the range of policy options or tools available to achieve planning and natural resource objectives.

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The State of Australian Cities (SOAC) national conferences have been held biennially since 2003 to support interdisciplinary policy-related urban research.
This paper was presented at SOAC 5held in Melbourne from 29 November – 2 December 2011.

SOAC 5 was hosted by the University of Melbourne, RMIT University, Monash University, Swinburne University of Technology and Latrobe University as well as the Australian Housing and Urban Research Institute and the Grattan Institute, the Victorian State Government and the City of Melbourne.