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Last year’s affordable housing green shoots have withered

Posted by on May 22nd, 2018 · Affordability, Affordable housing, Economy, Finance, Government, Housing, Social housing

By Chris Martin and Hal Pawson. This article was originally published on John Menadue’s Pearls and Irritations.

Budget 2018 fails the 1.5 million Australian households living in unaffordable rental housing or officially homeless, despite the urgent need for Commonwealth leadership on affordable housing policy.

On Budget night 2017 Treasurer Morrison announced a ‘comprehensive plan to address housing affordability’. In last week’s budget he said next to nothing. The 2018 package does nothing to build on last year’s small but positive steps, and fails the 1.5 million Australian households living in unaffordable rental housing or officially homeless.

The case for Commonwealth leadership on affordable housing policy is no less urgent. Last month Anglicare’s Rental Affordability Snapshot showed that a person on Newstart could afford just three properties (not three per cent – just three properties) advertised to let across the whole of Australia. Now so low that even John Howard would raise it, Newstart, along with similarly inadequately indexed Rent Assistance, barely keeps recipients in the low end of the rental market, where properties have become scarcer and less cheap for moderate income working households too.

Moreover, in our Australian Homelessness Monitor report published this week by Launch Housing we reveal the scale of recently rising homelessness in our capital cities. As shown in our analysis of ABS data, the sharpest increases have been in Sydney (up 48% 2011-2016), in Darwin (up 36%) and in Brisbane (up 32%). This pattern underscores that it is the intensifying shortage of affordable housing in pressured urban housing markets that is the main driver of the rising homelessness numbers seen nationally since 2011.

In his Budget speech, the Treasurer uttered the word ‘housing’ once only – in relation to funding for remote Indigenous housing in the Northern Territory (failing to mention that such funding would not be extended in Queensland, South Australia and Western Australia).

The Commonwealth’s contribution to the States’ and Territories’ social housing sectors will continue under the National Housing and Homeless Agreement (NHHA) only at present levels, which do not account for the continued growth in need for affordable housing arising simply from our expanding population, nor for past decades of under-provision.

This level of funding is a starvation ration. For the public housing authorities, it does not even fill the gap between the rental income received from low-income tenants and the reasonable cost of operations – far less does it provide any support for vitally needed portfolio expansion. For the non-government community housing sector, where rental revenues are modestly boosted by Rent Assistance payments, current arrangements appear sufficient to generate small operating surpluses and capacity for limited growth, but still leave community housing providers (CHPs) in a position where long term financial sustainability remains a constant challenge.

So what’s become of the 2017 initiatives, one year on?

The National Housing and Homelessness Agreement

Last year’s budget indicated that this refreshed framework for federal-state funding of social housing and homelessness services would also set a broader agenda of affordable housing reforms. It held out the prospect of effective Commonwealth pressure being exerted on the states and territories to up their game in this arena, including through the purposeful use of land-use planning powers (sometimes termed ‘inclusionary zoning’ but in practice generally value capture), through public housing renewal, and through further public housing transfers to CHPs, potentially making a modest contribution to supplythrough leveraging revenues and asset values.

As an overarching discipline, states and territories would be expected to commit to targets for social and affordable housing expansion within the context of broader aggregate supply objectives.

A year on, however, there is concern in the social housing sector that Commonwealth commitment to these reforms has waned, and that the NHHA agreements – still under negotiation between the two levels of government – may fall far short of what was apparently envisaged in May 2017.

The National Housing Finance and Investment Corporation (NHFIC)

In line with a Budget 2017 pledge, a new statutory agency is being set up to facilitate enhanced access to private finance for affordable housing development. This entity, the NHFIC, will incorporate a bond aggregator facility, enabling CHPs to secure debt at cheaper rates and on better terms than can be obtained for bank finance.

Welcomed by the affordable housing industry, NHFIC-channelled finance would not, however, overcome the problem of weak rental revenues (partly due to inadequacy of Newstart and Rent Assistance) and the insufficiency of ongoing subsidies under the NHHA. Unless this remaining ‘funding gap’ is addressed, NHFIC may provide little more than a one-off benefit, allowing existing debts to be refinanced but unable to fulfil its potential to help facilitate portfolio growth through new construction.

Due to commence 1 July 2018, the NHFIC’s establishing legislation is currently before the Senate. Considering its bi-partisan support it is to be hoped that – while Treasurer Morrison has so far failed to commit resources to fill the funding gap – Labor will step up to the plate should they form government after the next election.

Private investment in affordable housing

Aside from NHFIC bonds, Budget 2017 also sought to advance equity investment in affordable housing by offering an additional 10% discount on capital gains tax for properties let at affordable rents through a CHP. The government especially sought to engage institutional investors, and to that end proposed legislation allowing Managed Investment Trusts (MITs) to invest in affordable rental properties (of particular relevance to overseas investors, since disbursements through MITs attract a lower rate of withholding tax than other payments).

However, the legislation would have effectively restricted MITs from investing in non-‘affordable’ residential rental – which, according to the government, merely reflects the current law. This is challenged by proponents of Australia’s nascent ‘Build to Rent’ sector, who have been looking to MITs as an investment vehicle and are alarmed at the door being legislatively shut. For the moment, the government has not proceeded with the MIT amendments, but maintains that the current law precludes MIT residential investment, to the frustration of Build to Rent advocates.

Meanwhile, the associated Capital Gains Tax discount legislation is before the Senate, although a capital gains-based incentive (enhancing the discount from 50% to 60% for affordable rental housing) appears to sit uneasily with the CHP business model, and may not be useful to them.

Is this any kind of strategy?

There are a few positive, if relatively minor, housing measures in the Budget. These include a move against land banking, by denying tax deductions for land holding costs. There are also funds for the ABS to improve housing data collection, for AHURI to continue housing research, and for a review of the national regulatory scheme for community housing.

But, as demonstrated by the 2018 Budget beyond all doubt, the Commonwealth still lacks anything remotely resembling a coherent, comprehensive strategy to address the increasingly stressed condition of Australia’s housing system. Regrettably, the past 12 months has seen regression rather than progress.

Homelessness: Australia’s shameful story of policy complacency and failure continues

Posted by on May 15th, 2018 · Affordability, Cities, Data, Government, Guest appearance, Housing, Social housing, Sydney

By Hal Pawson, UNSW and Cameron Parsell, The University of Queensland. This article was originally published on The Conversation. Read the original article.

Exactly a decade ago in 2008, the Australian government committed to an ambitious strategy to halve national homelessness by 2020. Through stepped-up early intervention, better homelessness services and an expanded supply of affordable housing, the problem would be tackled with conviction. Instead, as succeeding governments regrettably abandoned the 2008 strategy, homelessness in Australia has been on the rise.

Last week’s federal budget offered no response to this concern. And the problem is fast getting worse, as highlighted in our new Australian Homelessness Monitor, prepared for independent community organisation Launch Housing. Emulating a respected UK annual monitoring project, this report is a comprehensive national analysis of the state of homelessness in Australia together with the potential policy, economic and social drivers of the trends across the country.

Recently published 2016 Census statistics showed a 14% increase in overall homelessness in Australia since 2011. That’s well ahead of the nation’s population growth rate.

Our major cities have seen much larger rises in homelessness. Recent increases have been especially big in Sydney (up 48% since 2011), Darwin (up 36%) and Brisbane (up 32%).

Concerningly, the numbers of people sleeping rough have been growing particularly fast. This, the most visible and extreme form of homelessness, grew nationally by 20% over the 2011-2016 period.

Although offset by periodic rehousing initiatives for long-term street homeless, five-year increases in the municipalities of Sydney, Melbourne and Adelaide have exceeded the national trend. This was especially true in Melbourne. The 2016 City of Melbourne count showed numbers jumped by more than 200% over this period.

Why are the numbers soaring?

As our report this year highlights, many policies, or policy failures, are implicated in these trends. These include:

Such developments are critical in a housing market where, by international standards, subsidised social housing provision is minimal. This means the vast majority of Australia’s lower-income population must depend on an increasingly stressed private rental sector in which the stock of low-cost homes is dwindling.

Partly as a result, ABS statistics cited in our report show the proportion of low-income tenants in rental stress has risen from 35% to 44% over the past decade nationally. In New South Wales, it has risen from 43% to 51%. In Victoria, the figure rose from 32% to 47% over the decade.

The geographical pattern of recent homeless changes shows the housing market is driving these changes. Our report finds increases in homelessness have generally been much more rapid in capital cities. Non-metropolitan areas have recorded much lower growth rates, or even reductions.

In another pointer to housing market impacts, increases in homelessness have tended to be higher in the large eastern states. These are the states where economies and property markets have been relatively strong over the past few years. In South Australia, Tasmania and Western Australia, where these factors have been less evident, the rate of homeless growth has been lower.

So, overall numbers were up by 53% in inner Sydney (2011-2016), but rose by a more modest 21% in Hobart. In contrast, homeless numbers fell by over 30% in remote South Australia and Western Australia.

Governments have let this happen

Despite these stark trends, recent Australian governments, while footing the bill for homelessness services rising well ahead of inflation, have presided over cuts in social and affordable housing.

In its 2014 budget, the Abbott government cancelled the National Rental Affordability Scheme. This was Australia’s last national affordable housing construction program.

An increasingly underfunded social and affordable housing system leads to a burgeoning homelessness support system. The cost of emergency services for those lacking homes has risen by 29% in real terms over the past four years. On its current path, the cost is set to exceed A$1 billion by 2020.

 

Meanwhile, in the face of deteriorating public housing stock and intensifying shortage, social housing investment by state and territory governments has actually fallen by 7% since 2012-13.

Five years ago, prior to the 2013 federal election, then opposition spokeswoman on housing Marise Payne said “the Coalition’s homelessness plan” was “to abolish the carbon tax, pay down Labor’s debt, generate one million jobs in the next five years and increase our collective wealth so all of us – individuals and charities – have the capacity to help the homeless and those most in need in areas where government is not always the answer”.

While placing faith in philanthropy, such sentiment is underpinned by a stubborn belief that we can rely on market forces to provide suitable and affordable housing for disadvantaged Australians – just as much as for all other citizens. It is clear from the latest statistics that the official approach moulded by this thinking has failed.

What needs to be done?

Looking to the future, the ongoing restructuring of private rental markets seems likely to keep pushing up the numbers of people subject to housing insecurity. The availability of affordable low-rent housing continues to contract.

For any realistic chance of progress, the Australian government needs to reconfirm recognition of homelessness as a social ill that must not be ignored. It needs to re-engage with the problem, starting with a coherent strategic vision to reduce the scale of homelessness by a measurable amount within a defined period. And it needs to recommit to a level of government support that ensures enough social and affordable housing is provided to keep pace with growing need, at the very least.

The ConversationDisappointingly, the federal budget provided no indication that such developments are in prospect. Yet squarely tackling Australia’s growing homelessness problem demands recognition that excluding people from safe, secure and affordable housing is effectively a denial of citizenship.

 

Zoning: impost, or necessary urban management?

Posted by on May 14th, 2018 · Affordability, Cities, Data, Economy, Housing, Planning

By Greg Paine, City Futures Research Centre.

City Futures Research Centre and the Henry Halloran Trust recently hosted a seminar to review a Reserve Bank Australia discussion paper on zoning and house prices (see the video, and the CityBlog summary).  It was well-attended (the issue strikes a chord), and conducted in the best traditions of scientific rigour – strong, even feisty, critique by peers, but also polite (the participants were happy to sit next to each other rather than be separated, as in debates!) – in an effort to get to “what’s what”.  But on wandering home, a question lingered:  have we actually got any closer to an answer and, given it didn’t seem like it, would more of the same help?  Just what is going on here in this duelling of ideas and numbers and graphs?

 

An answer started to formulate when remembering the idea of the “wicked problem”, those issues that are so tangled up and recursive that usual limited-dimension problem-solving just doesn’t work anymore.  The concept is now much talked about, though often forgetting that it was first described by two urban planners, back in the 1970s.  City problems are inherently wicked.

And so maybe this RBA report, and the event itself, with its four economists (only, plus one urban planner) was itself inherently limited in its ability to reveal.  Like the laboratory technician picking from a petri dish a strand only of the thing being investigated and putting it under the microscope.  You get to learn a lot about that lonely strand, but little if anything at all about its wider operating context, how it influences that wider world, how in turn it is influenced, and whatever else there is out there we need to know.  Too often, to make complexity manageable, we simply leave things out.  The problem becomes “desiccated and dulled”, and isn’t the actual problem anymore.  We also know, from neuroscientists’ ability to now map brain activity, that decision-makers (which is all of us) are not persuaded by facts and number alone.  Sometimes not even a little bit, as explored in exquisite detail by the Utopia television show.  As its author, Rob Sitch, explains, he is interested in that part of decision-making where the business case is actually not of interest (“runs out” as he puts it) to those involved.  It is the resultant need for a more expansive connected view that the recent approach of “network science” for example seeks to address.

There were lots of graphs presented.  One was key.  It shows the cost of actually building a dwelling structure, plus the cost of land, with overall sale prices.  The “gap” (or “wedge” as the RBA, perhaps provocatively, called it) was where the real debate took place.  The RBA called it the “zoning effect” and considered it more or less as an impost.  There was much discussion as to whether it comprised the “narrow” planning view of zoning as simply land use control (as in colours-on-the-planning map) or a more omnibus version including lot size, allowable density, and so on – ie. market interventions, or “planning”, overall.

Source: RBA.

There was less (though some) canvassing of what else this diagram could indicate.  And how, looking at this space in a more networked way, there might be a whole lot more going on than revealed by a mere economic analysis of the three price criteria alone.  Like how it might actually, and more accurately, represent the whole raft – and complexity – of personal and household lifestyle factors that are part of any decision (choice) about where and how to live?  And, if factored in to any study, might yield far richer outcomes (as an example, see that co-authored by one of the event participants).

Why, for instance (and as canvassed in some earlier discussion), some households are willing (if they can, and perhaps through reductions in costs such as transport fares or second cars) to pay for walkability or proximity to particular schools or churches or to extended family and/or work.  Meaning, for example, that retaining planning controls to achieve a “30 minute city” (as in the current Sydney plan) might be as important than loosening controls to simply increase house supply anywhere.  And why, as shown in another revealing graph from one of the panel, neither “planning” nor the “market” are supplying the dwellings surveys suggest we want (with a preponderance on detached houses and density apartments, rather than the desired semi-detached dwellings).

And how, even if we can somehow reduce house prices by expanding city land boundaries, as suggested by some, there are always potential personal costs, as we now know only too well, if the result is simply more sedentary lifestyle commuter suburbs – costs relating to transport, time, health and wellbeing; and by extension also the public costs of delivering transport and services, from reductions in land available for food growing and environmental services, and from dealing with burgeoning chronic diseases.  Considering these means the “sale price” line (re-conceptualised as a “whole-of-household” living expense) is going to be entirely different.  Indeed, can that line ever be simply “structure cost” + “land cost”?  Some of that cost is what we – individually and as a community – choose to pay for quality of life, and achieved through “zoning” (however defined).

“Zoning” is after all just some tools (amongst others) used to meet this larger city-living equation.  As in any human endeavour they are applied with varying success.  Research can assist.  It also means planning instruments are constantly in flux, responding to changing wants and needs (the RBA study seems to portray them as more static, and indeed traditional research is more comfortable with particular points in time and space).  And here again wickedness creeps in.  This very fluidity, indeed willingness, to change planning “controls” facilitates another feature: speculation, the “hope factor”, particularly now in Australia where dwellings may no longer be just that but wealth-creation vehicles.  And then of course there are contributory taxation regimes, and choices by developers themselves to “drip-feed” supply to maintain investment returns, and, and ……

The diagram is a useful picture.  Sure, we need to “manage” the space in the middle to ensure the resultant price line is achievable (“affordable”).  Detailed petri dish examinations are worthwhile.  But it is also worth remembering the make-up of that space, and resultant policy, needs to be a lot more “multi” than a study like this can, alone, reveal.  The Australian Public Service Commission in a report on how to deal with wicked problems in public decision-making suggests this need is an evolving art, but one which requires, at least:

  • holistic, not partial thinking
  • innovative and flexible approaches
  • work across agency and discipline boundaries
  • a tolerance of uncertainties, and
  • an understanding of individual and social behaviour.

 

NSW is overselling its social housing commitment

Posted by on May 8th, 2018 · Construction, Government, Housing, Housing supply, Social housing, Sydney
Photo: Zachary staines

According to figures published this week the NSW government has over the past few years managed to build more public housing units than it has sold to raise revenue.

As revealed by the figures, the NSW Land and Housing Corporation (LAHC) constructed 1647 homes between 2014-15 and 2016-17 in place of 795 sold on the open market during this period – a net gain of 852.

Considering the intensifying shortage of affordable rental housing in the state, and the financially unsustainable condition of the public housing system, that sounds like good news.

As yet, however, this is not translating into actual portfolio expansion: the state’s public housing stockremained virtually static during this period – 110,214 in 2015 versus 110,221 in 2017. The apparent inconsistency here might be accounted for by public housing demolitions. In any event, it would seem that LAHC has been building a sufficient number of homes only to offset sales and demolitions – not sufficient to increase the stock at all.

And, although the data are not publicly available, it can be surmised that the homes sold will be disproportionately in the inner city (with Millers Point accounting for a distinct component), whereas those added to the stock will be largely in the middle and outer suburbs. This just compounds the effect of the private housing market – pushing lower income people more and more towards the remote urban margins.

The bigger story here is about the longer term inadequacy of social housing construction in terms of keeping up with growing need. Looking at housing stock figures for the period since 2008 – the total number in NSW increased by some 10,000. This was mainly as a result of the one-off gain of some 6000 dwellings under the federal government’s 2009-2012 Nation Building Economic Stimulus Package to stave off the Global Financial Crisis.

Despite this fortuitous circumstance, the gain over this period only amounted to seven per cent, whereas population grew by around 13 per cent. Keeping up with population growth alone would have called for an increase of 18,000 homes – not 10,000.

Looking to the future, the NSW government has two programs slated to generate additional housing to the tune of some 9900 dwellings over the next decade:

  • 6500 through the Communities Plus estate renewal program (23,000 new social homes minus 17,000 to be demolished; plus 500 new “affordable homes”)
  • 3400 under the Social and Affordable Housing Fund– of which 25 per cent will be “affordable” not social)

Meanwhile, over a similar 10-year timeframe, keeping pace with recent rates of population growth would call for not 9900 but 21,000 additional (not including replacement) dwellings.

So the stock addition projected under current NSW government plans amounts to less than half the number needed just to stand still – let alone to make any inroads into the existing backlog of need (exemplified by the 60,000 households on the waiting list). And even the assumption that the 9900 “committed” additional social and affordable homes can be unproblematically added to the existing portfolio numbers is likely to prove highly optimistic, bearing in mind the likelihood of ongoing open market sales and non-Communities Plus demolitions.

You also have to ask whether it is realistic to imagine that the Communities Plus program will in fact complete the demolition and replacement of 17,000 homes (and provision of 6500 more) by 2026 – as implicit in the program’s 2016 announcement. The first sod has recently been turned at Ivanhoe, but progress so far achieved in progressing the program’s other “major projects” such as Waterloo, Telopea and Riverwood Phase 2 raises a huge question mark here.

To be clear, though, this is not at all to suggest that renewing worn out estates under Communities Plus is a bad idea – if this can generate brand new public housing in equivalent or slightly increased numbers, that’s definitely all to the good. But the way that government oversells this program by implying that the “23,000 new social homes” are largely a net addition to the stock that amount to a major contribution to redressing the net shortage is highly misleading.

The limitation NSW imposes on itself here is that the cost of new government-supported social and affordable housing must be funded exclusively through “land value release” and not by general revenue.

Thanks to the property boom of the past few years government has enjoyed a massive revenue bonanza through stamp duty income. Factoring in the level of residential property stamp duty receipts received in 2011/12, the actual stamp duty income recorded in recent years has amounted to a windfall of no less than $18.25 billion in excess of that “counter factual” revenue. And yet none of this booty has been channelled into expanding social and affordable provision for the many lower income Sydneysiders whose stressed housing situation has been made yet more precarious by this turn of events.

Overarching all of this it also fair to say that not all of the blame for the inadequate provision of social and affordable housing should be attached to state and territory governments. It is the federal level of government that, in 2014, scrapped Australia’s most recent national affordable housing construction program, the National Rental Affordability Scheme. And, realistically, it is only when the national government re-enters this policy space that there is a serious prospect of progress. This week’s budget is unlikely to deliver such an outcome.

Can the cost of zoning in Sydney really be $489k per house?

Posted by on May 4th, 2018 · Affordability, Economy, Housing, Housing supply, Planning

By Laura Crommelin and Hal Pawson, City Futures Research Centre.

Can landuse planning restrictions be fairly blamed for Sydney’s unaffordable housing? Around 200 people attended a spirited yet erudite debate on this subject jointly staged by Sydney University’s Halloran Trust and UNSW City Futures last week. At issue was the striking claim made in a recent Reserve Bank of Australia discussion paper that the financial impact of ‘zoning’ in Sydney equates to $489,000 for a typical house and $399K for an apartment. Moreover, as the RBA paper argued, this ‘zoning effect’ had become more pronounced over recent years.

RBA report co-author, Dr Peter Tulip was on hand to explain his methodology. At the heart of the analysis was the estimation of ‘physical [residential] land’ price and the observation of an unexplained ‘residual’ when subtracting this from typical dwelling price, allowing for construction cost. This ‘residual’ amount, according to the RBA paper, is ‘the cost of zoning’.

The discussion paper’s approach was backed by the Grattan Institute’s Brendan Coates as in tune with the recent Grattan argument that overpriced capital city housing results substantially from undue planning restrictions on medium density redevelopment in middle suburban areas.

Contesting the RBA claim, meanwhile, were housing economists, Dr Cameron Murray (Australia Institute) and Prof Rachel Ong (Curtin University), as well as Sydney University Professor of Planning, Nicole Gurran. Professor Ong questioned the appropriateness of treating the entire ‘unexplained component’ of house prices as a ‘zoning effect’. As well as querying the treatment of land as a standard commodity akin to apples she noted that – even if accurate – claims about ‘the cost of zoning’ made in the absence of any attempt to quantify the benefits of planning problematically indicated a one-sided research agenda.

In a similar vein, Dr Murray argued that the RBA analysis paid insufficient regard to the special economic qualities of land  and that the method used to estimate the physical land value component of house prices was therefore inappropriate. To round out the presentations, Professor Gurran argued that the RBA paper had arrived at misleading conclusions due to its lack of engagement with the real world operation of planning systems, and its failure to explain the range of regulations it grouped under the ‘zoning’ label.

Last week’s event has already stimulated some lively press coverage. And going by the number of audience questions, it was clear that the panellists touched on some pressing and contentious issues, with the debates continuing over drinks long after the event’s conclusion. Our thanks to Sydney University for hosting the event, and to Dr Peter Tulip and the panellists for their thoughtful contributions to an important debate.

Grappling with housing disruption: how should planners respond to Airbnb?

Posted by on May 1st, 2018 · Affordability, Cities, Data, Economy, Government, Housing, Planning, Sydney

By Laura Crommelin. This article originally appeared in New Planner – the journal of the New South Wales planning profession – published by the Planning Institute of Australia. 

The explosive growth of digital short-term letting platform Airbnb poses plenty of challenges for planners, with the impact being felt across both urban and regional areas. But what exactly is the nature of the disruption caused by Airbnb, and how should NSW’s regulators respond?

Airbnb.com makes it easy to advertise a property for short-term rental—be it an entire home, or part of one (a private or shared room). It has fast become big business worldwide, and Sydney is among Airbnb’s top 10 markets globally. To date, however, the NSW Government has not followed global cities like Berlin and London in restricting Airbnb use. This may soon change, as the government reviews thousands of submissions on short-term letting, made in response to a recent Options Paper. The Options Paper itself followed a 2015 Parliamentary Inquiry, which heard input from industry, government and community stakeholders.

Numerous press reports have documented the diverse challenges Airbnb (and similar short-term letting platforms like Stayz) pose for regulators, from uncertainty under existing planning laws, to complaints about party houses and concerns about housing affordability impacts. At the same time, Airbnb provides a financial boost to tens of thousands of NSW residents, as well as the state’s economy more broadly—estimated at $115m in 2015. Airbnb also aligns with the NSW government’s collaborative economy strategy, which ‘forms a key component of the NSW innovation agenda. Regulatory responses must take all these considerations into account, as well as more pragmatic enforcement challenges (as efforts to regulate unauthorised music sharing sites have shown, restricting online activity is no easy task).

So how best to proceed? Our work studying Airbnb—including an ongoing research project for the Australian Housing and Urban Research Institute—points to two key tasks for regulators: first, establishing exactly the sort of disruptions caused by Airbnb (and other short-term letting sites), and second, gaining a clear understanding of the benefits these digital disruptions bring. In both cases, addressing these challenges requires information that is not easily accessible. This data access issue highlights a far broader challenge posed by the digital revolution, and one we must address if the benefits of the smart cities
transformation are to be shared equally.

Detailing the disruptions caused by Airbnb

A key challenge facing planning officials is the diverse range of problems Airbnb poses, including:

  • amenity issues for nearby residents when properties are used as ‘Airbnb
    hotels’ and ‘party houses’;
  • increased insurance and management costs for body corporates where Airbnb
    is used in strata-titled properties;
  • Airbnb rentals being used for illegal purposes, including unregistered brothels
    and informal boarding houses; and
  • impacts on the availability and affordability of housing in areas with significant Airbnb use, where many properties have become permanent short-term rentals.

Mapping of Airbnb use in Sydney has shown clustering of properties in three main areas: the CBD and surrounds; the eastern beaches; and the Manly peninsula. This means certain areas of Sydney bear the brunt of the Airbnb phenomenon. Furthermore, these are areas with large quantities of high density housing, meaning strata management issues and increased risk of neighbour disruptions.

Regulatory efforts need to recognise and address these localised impacts, rather than simply assessing Airbnb at the city-wide or state-wide scale. To help with this, our forthcoming research will provide detailed mapping of the housing opportunities in the areas most affected by Airbnb in Sydney and Melbourne, including affordability metrics and socio-economic indicators.

Unpacking the benefits of Airbnb

Another challenge with assessing Airbnb’s impact is that few of the benefits claimed by the site have been independently tested, making it hard to assess their reliability. Detailed data on how and why Airbnb is being used is harder to come by. For example, Airbnb regularly claims that its purpose is to facilitate ‘home sharing’, by allowing visitors to use excess housing capacity (a spare room, or a whole property while the owner is traveling). But it is clear that many users are running commercial operations, so their properties are ‘shared’ only with other visitors, not permanent residents. It is the latter category which raises housing affordability concerns, as these properties might otherwise be used as long-term rentals. Using data provided by the website AirDNA.com, we have calculated how many Airbnb listings in Sydney are likely shared  properties (either a partial property, or an entire property available for no more than 90 days a year), and how many are really full-time commercial enterprises (entire properties available for more than 90 days a year, or one of multiple properties owned by a single host). The results are:

Listings (% of total)
Traditional Holiday Let   5,084 (24%)
House Sharing                 15,960 (76%)
Total                                  21,044 (100%)

This analysis shows the majority of Airbnb use to be home sharing, but there is also significant commercial use of Airbnb. In our view, regulations should primarily focus on managing the latter.

Where to from here?

Our research goes some way towards unpacking the nature of Airbnb’s disruption, as does related work by researchers at the University of Sydney. In both cases, however, these analyses rely on incomplete datasets, as Airbnb has not made their data freely available for research or public use. Without it, as well as more extensive and independent engagement with Airbnb users, we’re left with a worryingly incomplete picture of Airbnb’s impact. This places researchers, regulators and the public at a disadvantage in trying to respond equitably and effectively to digital disruptions like Airbnb.

In the smart city, data is power, and anyone lacking access will find themselves at a disadvantage. As major corporations like Airbnb, Google and Uber play an increasingly significant role in shaping how our cities function, we need to ensure the government and the public are wellplaced to assess the impact of these digital disruptions and respond accordingly. Any smart city strategy that fails to ensure data access is arguably not smart at all, but likely to see growing inequality and reduced efficiency. In this regard, the Airbnb experience might be seen as a test case.

While tackling the housing disruptions raised here is an important part of the NSW government’s regulatory response, tackling the data access issue may well prove to be even more significant in the long run.

 

How does a city get to be ‘smart’? This is how Tel Aviv did it

Posted by on April 20th, 2018 · Data, Government, Guest appearance, Smart cities
File 20180419 164001 1ceu0v0.jpg?ixlib=rb 1.1
Image: Alexandra Lande/Shutterstock

By Christine Steinmetz, Senior Lecturer in Built Environment, UNSW. This article was originally published on The Conversation. Read the original article.

Smart cities, digital cities, virtual cities, connected cities. Are these just trendy buzzwords? Perhaps. But these types of cities are supported by infrastructure that is more than bricks and mortar.

These cities are smart (thoughtful, people-centric), digital (driven by data acquisition, measured, analysed and sometimes exchanged) and virtual (experiential). And, as a result, they are connected, creating more potential interactions between people and their place.

Tel Aviv is one of these cities. Undoubtedly the 2009 book Start-Up Nation: The Story of Israel’s Economic Miracle contributed to its reputation as a “non-stop city” with innovation clusters teeming with companies at the cutting edge of technology.

However, Tel Aviv’s standing is not only built on commercial success — it has an internationally recognised local government. Winning first place in the 2014 World Smart City Awards not only boosted its profile on the international stage, but Tel Avivians, well, they actually have positive things to say about their local government.

A city that decided to change

This was not always the case. Municipal leaders had to do something to change how the community perceived them.

In 2011, the municipality organised focus groups with residents, heard their complaints and listened to what they said they needed. The municipality realised it needed to change the way it engaged with citizens. A cultural shift was needed, an internal one, to deliver an intelligent and active municipality.

Tel Aviv, like Detroit, is an urban laboratory; a test-bed for city projects that combine public and private efforts, startups and university centres. As Israel’s leading business centre, its main priorities are supporting high-tech companies and startups. Located in a geopolitically contentious region, challenges faced by Tel Aviv residents over the years have also driven a new wave of urban administration — emphasising transparency, trust and local government led by residents.

A key smart city initiative is the DigiTel Residents Club. DigiTel card holders have access to a personalised web and mobile platform that provides residents with individually tailored, location-specific services delivered via email, text messages and personal resident accounts.

It’s the brainchild of Zohar Sharon, chief knowledge officer of Tel Aviv Municipality. In a recent interview, he told me: “As a result of what we learned from the focus groups and unique knowledge-management processes in the municipality, we now have over 200 municipality staff from different departments, called knowledge champions, who feed data into the DigiTel platform.”

DigiTel isn’t just one-way communication. Users tell the municipality what is happening in their area. They can feed back information about, for example, broken city signage or playground fixtures needing attention.Daily updates inform residents about: road closures in their area, registering for school, local events, development or heritage conservation proposals requiring feedback, community greening initiatives, recycling, and invitations to public surveys. The card also gives residents access to discounted rentals of beach equipment, theatre and movie tickets, car-share rentals, and a variety of other services.

The municipality sees the community members as having “wisdom”: they are the most informed about what is happening in their local area.

 

Since starting as a pilot in 2013 the DigiTel Residents Club has spread citywide. It has almost 200,000 registered users (who must be aged 13 or older) – over 60% of the eligible population.

Sharon says:

We must understand that when we are talking about ‘smart cities’ we must think first about the city’s residents and how we can use smart tools to improve their quality of life. The local municipality must adopt a citizens-centric approach and deliver by push-tailored information and services to citizens, implementing a holistic approach, breaking silos and thinking about citizens’ actual needs.

Today, because of our practice, we can see a tremendous change in the participation of residents in various community activities, greater involvement in city life and greater satisfaction from Tel Aviv municipal services.

The platform has expanded to include Digi-Dog for dog owners and Digi-Tuf (tuf meaning young children in Hebrew) for parents of children up to the age of three.

In India, Thane – one of the cities included in the Smart City Mission announced by Prime Minister Narendra Modi in 2015 – has launched DigiThane, with help from Sharon.

What can other cities learn from this?

To be a smart city is to know your people, know what they want, and know what they need. And you know what they need because they told you.

Many councils throughout Australia are under pressure to have a smart city strategy. Perhaps the way to become smart is to start small. This may not require reinventing the wheel, but really just sitting down and listening to what people need and figuring out how to deliver in the most economical and sustainable way.

As Sharon says:

We didn’t create the technology — it was already being used by the commercial sector — we just adapted the technology to make it work for the public sector.

Sydney needs more boarding houses

Posted by on April 9th, 2018 · Construction, Government, Guest appearance, Housing, Housing conditions, Housing supply, Marginal rental, Planning, Private rental, Sydney

By Matthew Benson, UNSW Built Environment Masters candidate and town planning consultant. Originally published in the Sydney Morning Herald.

I was a town planner at the former City of South Sydney in the mid-nineties when brothels became legal. Brothel operators could apply to legalise brothels that had been operating for decades. I remember someone objecting to a “proposed” brothel in East Sydney, saying it would be a disaster for her neighbourhood if that use was to commence a few doors along. She seemed surprised to learn that it had been operating for several decades. Boarding houses seem to share a similar stigma – they are associated with apparently socially undesirable types deemed by some to be wholly unwelcome in the Hills District or on the Northern Beaches.

It seems a pity to have to explain that the boarding houses built under state affordable housing policies are usually self-contained flatettes with regular folks living in them who happen to form a single person household, or sometimes a couple.

And as with brothels, this type of use has been occurring across Sydney for decades – only not with approval and normally not in a self-contained arrangement. They are known as share-houses. Typically regarded as a bohemian rite-of-passage for students, they proliferate across Sydney. They often involve rooms let out by a non-resident landlord with unauthorised internal modifications. As with illegal brothels, illegal boarding houses can be unhygienic fire traps.

In 2009, the NSW government introduced a state affordable housing policy that freed up restrictions around granny flats and boarding houses along with some other forms of affordable housing.  Under those rules, boarding houses are allowed in low density areas if within 400 metres of a bus stop with frequent services.

The O’Farrell administration introduced the “character test” into the boarding house rules, meaning that a proposed boarding house has to be compatible with the character of its locality. That has prevented boarding houses being grossly out of character with their suburban setting.
I assisted with a boarding house proposal in Cromer that attracted over 800 objections. Many of those objectors expressed horror at the location of the proposed boarding house where children walk past it to go to school. They thought residents would be ex-criminals or other perceived socially undesirable types.

However, the proposal was for a single storey boarding house comprising eight rooms with a generously landscaped front yard and clearly was compatible with the character of its locality.
That boarding house has now been constructed and is operating. The surrounding residents are wondering what they were so worried about. You would hardly know it was there.

It is unfortunate that proper boarding houses are so maligned. Approved boarding houses provide a dignified option for people who don’t want to share their fridge and bathroom with strangers. It provides an option for people that might be in the wrong demographic for the typical share house situation and who suffer repeated rejections.  Approved boarding houses provide compliance with fire regulations and provide rooms for people with a disability. They also operate under a plan of management that helps keep potential disturbance to a minimum.

The NSW Minister for Planning, Anthony Roberts, has now announced an intention to increase parking rates for approved boarding houses to 0.5 parking spaces per boarding room. The current rate per room in an accessible area is 0.2 spaces per boarding room.

The proposed parking rates will effectively prohibit small-scale boarding houses in suburban areas. The only viable proposals will be on large, more isolated sites and will be large scale proposals. All that this will achieve will be to encourage illegal operators.

Sydney needs more single person accommodation that is properly built, including access for people with a disability and fire safety measures. It should be located in areas within a short walk of frequently operating public transport. Let’s hope the minister rethinks this matter.

Wealthy landlords and more sharehousing: how the rental sector is changing

Posted by on April 5th, 2018 · Demographics, Finance, Government, Housing, Housing conditions, Marginal rental, Private rental, Tenancy, Uncategorized

By Chris Martin. This article was originally published on The Conversation. Read the original article.

More people are becoming heavily indebted by buying rental properties and shared accommodation is flourishing, as third party tech platforms help people find a place without a real estate agent.

A new report from the Australian Housing and Urban Research Institute explains how the private rental market is changing over time for both landlords and tenants. The report analyses data from the 2016 Census, the 2013-14 Survey of Income and Housing and the 2014 Household, Income and Labour Dynamics in Australia (HILDA) Survey. It also draws on interviews conducted with 42 people involved in all aspects of the private rental sector: financing, provision, access and management.

Over the 10 years to 2016, the number of renters grew 38% – twice the rate of household growth. More renters now are couples, or couples with children, so it seems the sector is shaking its image of unstable housing or perhaps these people are left with few other options.

PRS households by type, 2006 and 2016

Rental property ownership also grew. We found the number of households with an interest in a rental property grew and the number that own multiple properties grew slightly as well.

But the typical landlord is still the conventional “mum and dad” investor. Two-thirds of rental investor households have two incomes, and 39% have children.

However they are also mostly high-income and high-wealth households: 60% are in both the highest income and highest wealth bracket. Interestingly, about one in eight landlords is themselves a private renter.

The biggest change in ownership is in finances: owners of rental properties are relying more heavily on debt.

Housing finance ($A), 2000 – 2016

 

Financing rental properties

The people we interviewed highlighted the Australian Prudential Regulation Authorities’ (APRA) guidance to lenders on loan serviceability calculations as having the greatest impact on overall investment levels and investor decisions.

Adding to the complexity is the proliferation of intermediaries, such as mortgage brokers and wealth advisers. These advisers are telling borrowers what lenders and loan products to use to maximise their borrowing power and negotiate lender and regulator requirements.

Houses are the most commonly rented in Australia, but everywhere rental markets are moving away from this and towards dwellings like apartments.

There’s now more diversity in rental properties too. For example the building of high-rise student accommodation, “new generation boarding houses” and granny flats.

These allow landlords to house more people in the one building, increasing revenue and making management more efficient.

The informal sector of shared accommodation appears to be flourishing, like improvising shared rooms and lodging-style accommodation in apartments and houses.

Finding a rental

People have moved from finding rentals in real estate agents’ high street offices and onto online platforms. New third-parties like apps and other digital platforms offer non-cash alternative bond products, schedule property inspections, collect rents, and organise repairs.

Even though these technological innovations avoid agents, they have in fact increased their share of private rental sector management. Agents themselves are use these platforms to change their businesses, and the structure of their industry.

Our research found that revenue from an agency’s property management business (its “rent roll”) has become increasingly important. Some players in the industry are consolidating their businesses around it, to make higher profits from tech-enabled efficiencies.

However, the real estate business still depends on building personal relationships, particularly in high-end markets.

The new tech platforms of the private rental sector raise issues for tenants too, particularly in terms of the personal information they collect. For example, one of the online platform operators told us they looked forward to using applicants’ information to score or rank applicants. Another one of the new alternative bond providers uses automatic “trust scoring” of personal information to price its product.

These innovations may be convenient to use, and may give some tenants an advantage in accessing housing – but at the expense of others who are already disadvantaged.

Rental properties meeting demand?

If the private rental sector is going to meet the demand for settled housing, governments will have to intervene. This can’t be left to technological innovation, or higher income renters exercising their consumer power.

Federal or state governments could create public registers of landlords, or licensing requirements, to police landlords who are not “fit and proper” and exclude them from the sector.

There could also be stronger laws around tenancy conditions and protections for tenants against retaliatory action. The Poverty Inquiry in the 1970s set the basic model of our present laws and they haven’t changed much.

Tenants’ personal information also needs to be protected, to properly take account of the rise of the online application platforms; another is the informal sector, which is currently in a regulatory blindspot.

The ConversationThe popular emphasis on “mum and dad” investors diminishes expectations of landlords. Rental property investment should be regarded as a business that requires skill and effort. As for-profit providers of housing services, landlords should be held to standards that ensure the right to a dignified home life.

 

Housing: New Reapolitik Needs a New Real Economics

Posted by on March 22nd, 2018 · Affordability, Cities, Economy, Government, Housing, Planning, Productivity, Tax

Managing the pressured housing markets of cities such as Sydney and Melbourne poses a major challenge to governments at both state and Federal levels. As has become increasingly clear, such trajectories are wreaking serious damage for younger aspiring homebuyers and for broad swathes of the lower income population. As yet less well-recognised, however, is the wider hit to urban productivity that results from poorly functioning housing systems. Smarter policymaking is eminently possible in this area but will require that Ministers and their advisers resist the lure of simplistic ‘blame the planners’ analyses and adopt cleverer and better-informed approaches to the problem.

The Shaping Housing Futures Group, an international collaboration of academics and housing industry experts, has been reviewing experiences of pressured metropolitan housing markets in Australia, Canada and the UK. Our research on the problematic consequences that can result supports many of the arguments recently put by Ross Gittins about the need for a constructive rethink on entry to home-ownership. But it also argues for expanded affordable rental provision for lower income groups.

The present difficulties of the metropolitan areas covered in the SHFG study, in Australia and the other countries, largely stem from their success in creating and capturing the benefits of agglomeration – the economic gains that arise from co-location of firms and ‘thick’ labour markets. These growth dividends for major cities, and their un-linking from wider regional housing markets, raise two difficulties for housing and other infrastructure policies.

First, at the federal scale, the divergent house price patterns of pressured metropolitan versus other areas weakens the scope for use of monetary/ financial policy instruments in growth management. National governments have been quicker to respond to the financial stability aspects of house price changes than to their productivity consequences. It is worrying that Federal administrations have so little comprehension of how housing and land markets play out in these major chunks of space that provide more than half of national output.

The second concern is that, alongside its benefits, growth also generates congestion costs and shortages. Prolonged scarcity within housing markets arises not just because supply systems are inelastic but because rising prices often tend to boost market demand rather than to suppress it. Housing is, for many, most effectively allocated by market mechanisms. But, rather than resorting to economics 101 explanations, policymakers need a housing economics that identifies where sluggish housing markets fail; a housing economics that can guide a fix for such problems. The key policy failure across the cities and countries involved in SHFG, from Sydney to Vancouver though London and back to Melbourne starts by failing to see housing as essential economic infrastructure within an inherently sticky supply system.

The metropolitan housing markets examined by SHFG (Brisbane, Melbourne, Sydney, Vancouver, Toronto, Halifax, London, Manchester, Edinburgh) appear to have had three common phases to their post-2000 dynamics. Metropolitan economies prospered in the long boom after the mid-1990s. Rising incomes boosted housing demand, not least preferred home-ownership, as Gittins observes. Tax arrangements and political stances reinforced the demands for housing as an asset, not simply to accumulate by steady saving but to shape nations of speculators.  The rising housing wealth gains of the baby boomers, allied to favourable rental investment taxation, then drove increases in rental investor acquisition as a retirement provision, shaping a rental sector that was inefficiently financed and managed. It also sustained the upward drive in metropolitan housing prices. That exacerbated the home ownership exclusion of the 25-40 somethings and, increasingly attracted overseas investors to these ‘safe’ metropolitan places.

The sustained upward shift in prices, as Gittins notes, was shaped by policies and largely nationally driven demand pressures. Overseas investment is a small froth on an increasingly bitter-made brew. Recent research on the London housing market shows overseas investors paying similar prices and purchase behaviours to London locals and Toronto evidence reveals Chinese investor contribution to property market inflation in that city to have been very localised and small in scale. Meanwhile, in Vancouver, two years after restricting overseas demand upward pressures have resumed. It is time for the great cities to focus on policies that will facilitate the economic infrastructure that will forestall rising congestion costs. These costs may now be driving firms and skilled labour away from their most productive long-term locations.

The consequences of housing pressures go well beyond the displacement of younger Australians into rental homes (with the problem of deposit formation masking the persistence of a historically low cost of capital for housing owners). The same pressures have exacerbated homelessness and have imposed acutely high rental payment burdens on lower income households (as the stocks of non-market rental housing have failed to keep pace with population growth).

The increasing concentration of lower income households and a shift of low income housing to the outer suburbs are shaping more difficult housing futures for Australia and Canada. Economic policy interest has been focused on financial stability. Yet the research evidence for Australia and elsewhere is that a range of housing outcomes are hampering productivity growth and attracting the concern not just of poverty lobbyists but business leaders. Small, poor-quality housing and unstable housing tenancies with frequent moves for kids impairs their educational performance. In adulthood, many outer metro workers face long commutes from the ‘affordable edge’. These damage productivity, wellbeing and environmental quality. Chains of connection between poor housing outcomes and reduced human capital capacity can be matched with similar logic chains of how housing outcomes shape small firm formation and growth. More obviously, the restricted consumption that results higher housing payments has a damaging effect on Australian output and productivity (through scale economy effects). Housing outcomes have driven, in Australia, not just the major shifts in wealth and income (after housing costs) highlighted by Thomas Piketty, but they now threaten the Glaeser agglomeration gains.

Gittins is right that policy failure, as much as market failure, is at the heart of these growing difficulties. Policy choices have failed to manage housing change for the Australian economy. Creating the framework for a more flexible and fair housing system for Australia requires some fundamental shifts. Part of the problem is the major vertical fiscal imbalance at the heart of Australian metropolitan growth. Productivity growth is primarily metropolitan, but the tax revenues flowing from that growth and the autonomies to use them lie elsewhere, as metropolitan governance is weak. Australian governance arrangements match neither the geographies of potentials nor problems. Too often the multi-level structure of government is used as an excuse not to fix the problem.

Viewed from outside Australia, the recent Commonwealth government attempt to encourage better quality and strategic state housing strategies was a sensible measure but it has been frustrated as states cried ‘compromised control’.  Perhaps Australia should move housing support to a ‘housing deals’ format that aligns the strategic and resource interests of different levels of government. State governments need to identify the housing and infrastructure packages (otherwise known as places) that will be home to rising numbers of Australians. Housing infrastructure and transport need to be jointly planned and financed. Within state governments there is a serious need for a major injection of applied housing economic capacities (economics 101 is even more dangerous in the corridors of power than in the press), and some serious evidence building and modelling.

This latter point is well illustrated in the emergent policy debate. Ross Gittins is right, wheels are squeaking, and so are the pips. Housing affordability is looming as a major political issue across the OECD. One line of response from those who take a naively optimistic (and theoretically or ideologically driven) view about the functioning of housing markets is that the essential problem is one of supply and that problem arises from regulation/planning.  We can all agree that the dominant problem is about supply (although demand-side boost from first-owner grants and tax advantages matter too). We do however need a more informed view about what causes supply inelasticity. Inelastic supply can reflect planning decisions and processes but infrastructure shortages may deter developers from using zoned, available land. In Sydney, for instance, there is a substantial stock of land with permissions that remains undeveloped. The development industry, where it owns stocks of land in inflating markets, may have firm management incentives that do not involve maximising the short-term flow of new housing. An efficient Australian housing market cannot be assumed into existence but needs to be shaped by evidence-informed policies.

Other key policy ideas need to be trialled that would make for change. From a productivity standpoint inclusionary zoning is an effective housing policy for producing affordable housing as it produces homes from the ‘scarcity rents’ of already wealthy landowners. It does not reduce productive output. Tax financed grants and subsidies to produce the same housing would, somewhere in the Australian economy, reduce productivity and growth. Naturally a settled policy regime is essential. Involving non-profits in owning houses built (as in London and Vancouver) retains the uplift gains for lower income households into the longer term.

For almost two decades some Australian states have dilly-dallied in the social housing space. Most have resolutely failed to invest in new public housing and they have fashioned non-profit sectors that they have then simply failed to support and grow. There is an almost delusional quality to debate within state governments on this issue. UK experience has shown how such organisations can be client oriented, careful investors with patient capital. They have provided low income rental housing, dealt with special needs, brought together different sectors of interest required to renew communities and they have, with effective regulation and acquired scale, made strong, safe connections to national capital markets. Now they are dealing with market failures and helping create new routes into home ownership and exit from it in later life stages. Some major states have preferred to sit unmoved on their public housing assets leaving a major housing equity unlevered and strategically unused. Transfers could be transformative.

Australia has the ideas and the opportunities to shape a new, better housing system. It need not cost governments more but it will require them to think how housing markets really work and how these outcomes can be improved by strategic policy decisions. Australia needs to move beyond blaming planners and relying on separated chunks of short term policies for homeless and first home buyers to shape efficient market and governance systems for cities, states and the nation.

 

Shaping Housing Futures has been a knowledge co-production project led by the University of Glasgow and involving UNSW and the University of Toronto working with 21 cities, government departments, non-profits and others to think through better housing futures for Australia, Canada and the UK.