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Flying into uncertainty: Western Sydney’s ‘aerotropolis’ poses more questions than answers

Posted by on March 23rd, 2017 · Cities, Government, Guest appearance, Planning, Sydney, Transport
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The uncertainties about the new Badgerys Creek airport in Western Sydney are raising many questions that only good governance can resolve.

By Robert Freestone, UNSW

While Melburnians sombrely reflect on the risks of intensive commercial development near airport runways, Sydneysiders are enthusiastically scoping the development spin-offs that will come with their new airport in the city’s west. The Conversation

Critical uncertainties still cloud this prospect. Will Sydney Airport Group take up its extraordinary “first right of refusal” option? The enticing early prospect of securing a virtual monopoly on Sydney’s airspace is now clouded by the reality of huge upfront development costs before any planes land or take off for the first time in the mid-2020s.

If Sydney Airport Group pulls out, what happens next? Will the opportunity be opened up to other development companies? Or will the government commit more public money to doing the job itself and then on-selling the airport to the private sector?

The federal government presents its case for the Western Sydney airport development.

Will there be rail access from day one, as seems utterly critical to its early success? If so, which option will be preferred – a very fast train or an ambling suburban service? This is the subject of a major transport study with a further dilemma looming: who will build and pay for it?

What type of airport will it be? Current thinking is to have it quickly assume the scale of the current Gold Coast or Adelaide airports with 6-7 million passengers per year.

But who will fly here? Will it be a hub airport for a major airline/s? Will it have direct international services? Will it specialise in freight services?

A great many considerations affect the “business case” for the new airport.

A bustling ‘third city’?

Even larger questions relate to co-ordinated land use development around the airport. This is recognised as important, with the New South Wales government delineating an extensive “priority growth area”. The Greater Sydney Commission chaired by Lucy Turnbull envisages a whole new western urban complex around the airport – the so-called “third city” after Eastern Sydney and Parramatta.

The organising device for making sense of this so far is the “aerotropolis”. This is a model for orderly airport-centric large-scale metropolitan development. It’s exemplified by Dallas Fort Worth, Singapore and Hong Kong. The core is a bustling airport city at the epicentre of road and rail networks knitting together a bustling job-rich region.

The case for the ‘aerotropolis’, from the aviation industry’s perspective.

Through other lenses, this aviation-dependent urban form is variously a greenhouse horror story and noise machine. The concentration of critical infrastructure is seen as creating a possible security nightmare. There is now a well-organised global anti-aerotropolis network highlighting the environmental and ecological downsides of aviation mega-projects.

The guileless boosterism attached to many schemes makes them a sitting duck for devastating critiques by the likes of British critic Will Self. He has taken apart their conventional first world premises as “slumbering on the redeye flight to apocalypse”.

The naysayers and the true believers

All such heretical thoughts were scripted out of a recent industry summit on the Western Sydney Aerotropolis. The registration cost could have paid for a few days’ comparative fieldwork at Dubai Aviation City or Incheon/Songdo in South Korea.

Chairman David Borger, of the Western Sydney Business Chamber, smoothly chaired two days’ worth of proceedings that were generally dismissive of naysayers finding different and ineffectual ways of saying no – no airport, no curfew, no jobs.

This was a room of largely true believers, starting with the federal infrastructure minister, Paul Fletcher, and NSW’s minister for Western Sydney, Stewart Ayers. All were upbeat spruikers for the cause.

Yet despite the palpable goodwill – and there’s no doubt Sydney has the chance to pull off something world-leading – many questions again surfaced about how this area might best be planned and governed.

Something for everyone

How massive a jobs generator will the airport be? How vulnerable is a sustainable economic strategy for Western Sydney based around an airport that will have to go head-to-head with the established and profitable Kingsford-Smith Airport?

On a trip to Sydney in 2015, Professor John Kasarda, who has almost trademarked the “aerotropolis” label, made the disruptive suggestion that Kingsford-Smith might best be closed. The old airport could then be transformed into a lucrative urban renewal site to ensure the success of the new airport.

Exploring the multimodal infrastructure, commercial, and residential aspects of Dr John Kasarda’s Aerotropolis model.

Sub-regional governance is the major concern: how best to orchestrate infrastructure, timing, type and location of development within special stakeholder-friendly administrative arrangements.

An “aerotropolis delivery authority” was mooted. But in what form isn’t clear. Local governments and a chafing-at-the-bit development sector respectively need sensibilities assuaged and aspirations equitably managed.

Dealing with developers large and small, private and institutional, looms as a major challenge. The aerotropolis promotes land dreams because it offers something for everyone – business parks, retail centres, residential estates, innovation districts, medical complexes and university campuses. Advanced planning for a science park at Luddenham is the bellwether.

A thoughtful approach

The aerotropolis notion works best as a reminder of the need for integrated regional planning. What is lacking is a human-scaled approach that values liveability alongside productivity.

These issues surfaced at the summit and require more attention. How do we promote a healthful metropolis on the back of an airport? The rival paradigm of “airport urbanism” has some utility in stressing small-scale community gains.

So, there are many questions about how this will pan out. Spatial planning needs to be advanced to develop a clearer vision for the airport. That now should be linked to an implementation model for the wider region that co-ordinates all the public and private players jockeying for a piece of the action.

As Borger stressed at the summit’s end: so many issues keep coming back to the importance of getting the governance right. Constructing the airport alone will be a demanding engineering project. But the real challenge will be choreographing the mix of old and new city that will surround it.

Robert Freestone, Professor of Planning, Faculty of Built Environment, UNSW

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

By far and away the biggest (housing) tax reform prize on offer?

Posted by on March 20th, 2017 · Affordability, Government, Housing, Social housing, Tax

By Hal Pawson, Associate Director, City Futures Research Centre.

Weekend reports suggest that an exchange of land tax for stamp duty might be, at last, under genuine government consideration. The potential significance of such a change – one we’ve previously backed – is hard to overstate. Cited in the Sydney Morning Herald, Grattan Institute economics guru John Daley describes it as ‘far and away the biggest [tax reform] prize on offer’.

The pitch is far from new. Perhaps the last time it got a serious airing was in Ken Henry’s 2010 tax review. At the time it was remarked that such a package already commanded wide support across economics advice agencies (i.e. Treasury and the Productivity Commission), as well backing from radical experts. But this Henry proposal fared no better than most of his other recommendations – famously disowned by Kevin Rudd and Wayne Swan before the report’s ink was even dry.

Now, apparently thanks to the active encouragement of Scott Morrison and the interest of the NSW and Victorian governments, it’s claimed that the package is back in contention. It’s being put forward mainly as an aid to housing affordability through re-profiling home buyers’ property tax obligations. Instead of raising revenue by charging what some see as an upfront home ownership entry fee, governments would generate the same quantum of income by charging an annual levy based on property value. Existing homeowners whose property purchase had already incurred stamp duty would be given a credit against the new tax or an exemption for a period of time.

As we’ve previously noted, the notion that just axing stamp duty will, by itself, improve housing affordability is highly dubious. Economic theory suggests that while the legal obligation to pay stamp is on the purchaser, the economic incidence falls on the vendor, who receives less of the purchase price they would otherwise receive. Furthermore, the research evidence indicates that higher rates of stamp duty result in lower prices generally.  However, stamp duties do impose costs on households in other ways, namely by discouraging owner-occupiers from moving house when it would make sense for them to do so (for example, for a new job, or because of changing household circumstances).

The advantage of a broad-based land tax is that by imposing a cost on holding property, it encourages owners make best use of it. While land tax is already paid by investor landlords, expanding it to other landowners (including owner occupiers, who comprise about 60 per cent of the tax base) would deter speculative holding generally, and instead bring under-utilised land and housing to the market. In this way, land tax helps drive the housing supply response that governments are so keen to trumpet as their main unaffordability solution. Greater use of land tax may also mean less need for the potentially cumbersome and difficult to police arrangements now being contemplated – e.g. in Victoria – for empty property taxes.

A broad-based land tax would also have significant benefits well beyond the realm of housing affordability. Importantly, these include the creation of a simple value capture mechanism to enable the whole community to benefit from asset values boosted by public investment. The most obvious case in point is new transport infrastructure. However, the argument also applies to publicly-funded upgrading of facilities such as social housing estates – a form of outlay which AHURI research has shown to enrich surrounding private home owners and from which, therefore, the wider community should reap a share to offset government expenditure.

Other AHURI research which modelled the spatial and distributional impacts of exchanging stamp duty for land tax also showed that this would be likely to shift the incidence of property tax towards better-off localities. More broadly, as something akin to a wealth levy, land tax has significant redistributive qualities. In a world where there is strong popular support for a Buffet rule mandating specified tax rates for the well-off, that could evoke wider public backing for the proposed reform.

Contested spaces: living next door to Alice (and Anh and Abdullah)

Posted by on March 14th, 2017 · Cities, Demographics, Guest appearance, Housing, Wellbeing
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How is apartment living changing the way we get to know our increasingly diverse neighbourhoods?

Edgar Liu, UNSW; Christina Ho, University of Technology Sydney, and Hazel Easthope, UNSW. Originally published on The Conversation.

Ethnic conflict is on the rise in Australia, with regular reports of racist abuse in public spaces, including transport, streets and shopping centres. But what about our more immediate domestic environments such as apartment buildings?

Our research shows that ethnic tensions can also play out within these buildings, where growing numbers of city dwellers now live.

As increasing diversity and density come to characterise our cities, how can we build harmonious communities within apartment complexes? Community relations programs have traditionally focused on neighbourhoods, local associations, sport and recreation activities, or schools. But as more and more of us move into apartments, we need to pay more attention to these super-local residential interactions.

Apartment complexes are microcosms of society, but living so close to strangers can increase the likelihood of tension. The flashpoints range from complaints about noise and garbage to disputes about levies and budgets. Cultural and language differences can exacerbate these conflicts.

What can we do with our closest neighbours to combat growing cultural tensions in society and improve community harmony? Here, drawing on our research, we reveal some top tips on how to build an inclusive and harmonious community in your apartment building.

Know thy neighbours

Social commentary on the loss of community abounds. As we become busier and more mobile, we are less and less likely to know our neighbours and our local community. However, a recent book highlighted the benefits of talking to strangers. This includes cementing relationships in the places where you live, work and play.

In our increasingly isolated societies, these local relationships are important. The same goes for our most immediate neighbours.

In addition to getting to know them face to face, you could ask your strata committee to do a quick survey of residents to get a better picture of the diversity among your neighbours. If many families of particular cultural groups live in your building, this knowledge can help you plan communication and events accordingly.

It may be that you have important notices translated, or arrange for neighbours to act as translators at meetings and relay information to others who may not speak English well. Or you can plan communal activities around festivities such as Christmas, Chinese New Year, Diwali or Eid.

Be a social butterfly

Doing things together is by far the most effective way to getting to know people. Invite your neighbours over for a cup of tea or, if all of you prefer, a glass of wine. But, remember, while sharing food can help you get to know one another, be considerate of people’s food choices, whether it’s for religious, ethical or other reasons; a barbecue of just pork sausages many not win many friends.

Invite neighbours to form working bees to do up the garden or decorate the hallways. But be culturally sensitive in your approach to building aesthetics. Don’t just put up decorations for Christmas or Easter; include other cultural events your neighbours celebrate. Or, if your building has a “no decorations” rule, make sure this applies universally and not just to Chinese New Year or Diwali ornaments.

Some apartment residents have successfully used social media such as Facebook groups or WhatsApp group chat to encourage communication in their buildings. This may be an easier method of communication for those with poor spoken English. Your residents survey may reveal other preferred forms of communication.

Singling out is never the right thing to do

While translating important documents will help your neighbours who may not have a good command of English, singling out specific language and cultural groups as potential wrongdoers (such as by translating “Do not do this” signage into one language only) may not only cause offence, but may be pointing the finger at the wrong party.

And leaving notes like the one below without first trying to find the culprit and speak with them about it may also damage relationships with your neighbours.

These are just some tips on how to start making your apartment building more harmonious and inclusive. Our project webpage has a longer list of these tips.

Help is also often at hand from other sources. The City of Sydney, for example, regularly holds workshops on how to live well in apartments for all parties. Likewise, peak bodies such as Strata Community Australia (NSW) produce fact sheets that not only update you on changes in regulations but also on ways to make your meetings run more smoothly.

Apartment living provides many opportunities to foster intercultural understanding, as residents increasingly share a domestic environment and work together to maintain their buildings. However, such close proximity can also amplify intercultural tension and hostility.

Fostering harmonious relations within high-density living is becoming increasingly important in creating socially cohesive, multicultural cities. We need to pay more attention to ideas and strategies for achieving this goal.

You can find other pieces published in the series here.

Edgar Liu, Research Fellow at City Futures Research Centre, UNSW; Christina Ho, Senior Lecturer & Discipline Coordinator, Social & Political Sciences, University of Technology Sydney, and Hazel Easthope, Senior Research Fellow, City Futures Research Centre, UNSW

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

Value sharing for affordable housing

Posted by on March 7th, 2017 · Affordability, Affordable housing, Cities, Government, Housing supply, Planning, Sydney

By Bill Randolph, Director, City Futures Research Centre. Originally published in New Planner.

The recent inclusion of Inclusionary Zoning (IZ) in the draft District Pans for Metropolitan Sydney marks a turning point in the debates – and hopefully the policies – on the possibility of accessing some of the value generated by property development to generate new affordable housing in New South Wales.

Already several Sydney councils have or are actively considering adopting firm IZ targets for affordable housing in their new local planning arrangements.  The Inner West Council’s draft Affordable Housing Policy, released in early December 2016, includes a well-argued 15 – 30% IZ target for new residential development[i].  This beats the draft District Plans proposed 5 – 10% IZ target range by some margin.

IZ is, in reality, just another form of value capture – or ‘value sharing’, as the more sanitised version of the process is now being termed.  The requirement for a developer to factor in a proportion of a new development as affordable housing (i.e. priced at below market) is simply another way of saying that part of the value gain achieved through rezoning should be used to support lower cost housing outcomes.

Developers have been fully attuned to the process of value uplift for decades, of course.  The stroke of a pen from a publically accountable planning authority can result in an immediate substantial private gain by any land owner able to effect the change though a spot rezoning or simply by being in the right place at the right time.  As a result, a remorseless process of up-zoning is reconfiguring our urban space and, in the process, creating substantial value.  In addition, major new pubic investment in infrastructure can also generate substantial financial benefit for land owners through better accessibility and amenity.

The question obviously arises is a simple one: given that this value is created by the decision of a publically accountable planning authority or from public investment, then shouldn’t some of that value accrue to the public purse?  Of course, value sharing in one form or another has been around for many years – land taxes and rates, Section 149 contributions, special development levies and voluntary planning agreements are all forms of value sharing.

However, the emergence of IZ for affordable housing as a further possible value sharing component raises additional issues.  Not surprisingly, development industry lobby groups have rapidly hit back claiming that IZ will impact on housing costs and supply.  But they are willing to negotiate.  ‘We’ll sign up for IZ, but only if you give us additional density to compensate’ is their response.  In other words, if you want affordable housing, you are going to have to provide more value uplift to pay for it.

The key issues are therefore how much value is created, how much should be fairly shared between public and private stakeholders, and whether affordable housing should be included in the calculation.

Taking the last issue first, in fact, there’s a very good and longstanding case for affordable housing to be seen as a key economic infrastructure.  As such, it should be treated in the same way as the other infrastructure that benefit from value sharing mechanisms.  The housing market, however well it might work for the majority, does not work at all well for those on lower incomes who struggle to get into either affordable or appropriate housing.   The 60-odd thousand on the NSW public housing waiting lists are just a small part of this demand.  The growing sector of the working poor – the ‘precariat’ – on low, insecure, part-time and essentially limited incomes, are now a structural feature of the workforce.  They also need decent homes in the right places at an affordable price.  Yet our housing industry completely ignores these people, being more inclined to target investors.  But the private rental market imposes unacceptably unaffordable rents for low income workers regardless of where they live in the city.

Displacing the working poor to the outer suburbs to the cheapest housing simply leads to sub-optimum labour market outcomes and indeed may create areas of low productivity that act as a drag on overall growth.  Affordable housing should be considered as essential infrastructure for a modern, well-functioning and productive city.  Value sharing should play its role in helping to pay for this much needed infrastructure.

Sydney is not the only place where these kinds of issues have come to the fore.  London provides a more advanced example of how this has played out in practice – and in policy.  Faced with a similar investor fuelled ‘dash to density’ across that city, and spurred on by a growing community backlash against the practices of developers to effectively get out of providing the affordable housing required under the London Plan, the new London Mayor, Sadiq Khan, has drawn up an Affordable Homes Program.  This proposes that all new developments need to show how they achieve 35% “genuinely affordable” homes without subsidy – i.e. derived entirely through a value sharing arrangement.  If they do, they get a speedy decision.  If not, then a team of valuation experts will tease over the developers’ feasibility assessments to see if they really can’t afford to provide the required amount of affordable homes.  The chances are if they can’t, the proposal will be rejected.

This approach goes to the heart of the value sharing argument.  The debate should be about the price developers’ pay for the land they want to build on and how much of the resulting uplift is deemed ‘reasonable’ profit, not about demanding more density.  Once enacted, IZ will act to force land prices down to provide the feasibility leeway needed for the affordable homes.  Moreover, developers should be required to expose their feasibilities to public scrutiny if they want to obtain planning approval to ensure there is a transparent understanding of just how much value is being delivered through the permission to develop.  This would inform any ensuing negotiation as to what proportion should reasonably be shared for affordable housing.  Such an approach needs to be incorporated in the revised District Plans to allow a fair proportion of the value generated through the granting of development approval to be retained for essential public infrastructure provision, of which affordable housing is a key component.

Capturing some of the value created through mandatory IZ provisions for affordable housing is therefore both justifiable and feasible.  While we can all agree that value sharing is not a “magic pudding”, it is nevertheless a rich pudding that needs more equitable distribution.


Metropolitan plans and metaphors: potential problems with Greater Sydney’s ‘three cities’

Posted by on February 28th, 2017 · Government, Planning, Wellbeing

By Dr Greg Paine, City Futures Research Centre.

The Greater Sydney Commission is currently exhibiting its proposed district (ie. sub-regional) plans. Concurrently, though with less publicity, it is exhibiting its vision for the metropolitan area itself: Towards Our Greater Sydney 2056, a set of proposed amendments to the current metropolitan strategy A Plan for Growing Sydney (2014).

Sydney has never been short of metropolitan planning documents. It has, though, always had a problem taking on the metro view when it comes to actually delivering for its population. In the documents currently on exhibition we can now judge to some extent the promise of the Commission as a much-needed fresh perspective on planning for Sydney – as a whole not just as a set of geographical and sectorial parts that has long hindered the oft-cited aspiration of a liveable city. Key is the Commission’s conceptualisation of Sydney as three cities: an ‘eastern’ city based on the current Sydney-North Sydney CBD, a ‘central’ city based on Parramatta as eventually an equivalent CBD in itself, and a ‘western’ city based on the expansion of various existing centres and an ‘aerotropolis’ around the new second city airport (which will yet again gobble up, seemingly without any regrets, precious food-growing land, here more fertile and moist than most).

The three cities approach initially sounds good. Sydney has for too-long suffered from its western sector being a blind-spot amongst planning authorities and service providers (and planners themselves) with jobs, transport and services playing perpetual catch-up with its massive population increases. Equally deficient has been a de-valuing of the cultural and intellectual resources that population possesses.

But is the ‘three cities’ conceptualisation the right one? A few years ago the Urban Research Centre at the Western Sydney University, reporting for the Penrith Business Alliance, pointed out the ‘power’ of such ‘spatial metaphors’ – and consequent limitations if your part of the city happens to not be included in its vision. In that case the concern was with the ‘global arc’, a key platform of recent metro plans and stretching from the Norwest Business Park and Macquarie University, through Epping and Chatswood and the North Sydney-Sydney CBDs to the new start-up ‘creative’ precincts of Surry Hills, Alexandria and Zetland and Sydney airport. And where, it was calculated, Sydney’s future globally-connected economy would be based. Its current iteration in A Plan for Growing Sydney includes ‘extensions’ to Parramatta and Port Botany. But what about us?, Penrith asked. And the rest of southern and western Sydney that seemed to be excluded from this overriding vision of where the principal drivers of Sydney’s future lay.

The concerns expressed then seem all too real now with the recent publicity by the Greater Sydney Commission’s Economic Commissioner of yet another metaphor – the ‘latte line’ roughly dissecting the metro area from north-west to south-east and signally a disturbing disparity in jobs, income and opportunities between those to the north of the ‘line’ (holding the ‘good life’) and those to the south (who do not). Instructively, the ‘latte line’ has a remarkable parity with the alignment of the global arc.

Should the ‘three cities’ conceptualisation be reviewed in the light of such experience? On one level it suggests a lingering difficulty with seeing Sydney as a whole.  More critically, one could ask whether ‘three cities’ has a similar potential, as with the global arc, for exclusion. Resulting in a Sydney characterised yet again by a separateness and distain for the other (of which, in Sydney, we know only too well) rather than a necessary joining-together? The risk seems all too real.

Not that such conceptualisations are inherently bad. We now know that what best captures our minds, influences our thinking and generates the necessary enthusiasm for action are feelings and seductive images, not hard data and abstract reports. Metaphors are important catalysts. But we need to choose wisely and adopt only those which are inherently comprehensive and promote connection and inclusion. So what might take the place of ‘three cities’? Fortunately we already have a home-grown example in the ‘city of cities’ model from recent metro strategies and continued also (as ‘an equitable and polycentric city’) as one of nine ‘metropolitan priorities’ proposed in Towards Our Greater Sydney 2056.

It holds the dual promise of Sydney as a single cohesive entity and at the same time polycentric; with those centres existing at different scales and, although hierarchical, closely connected and supportive in function. Each offering its own attractive nucleus surrounded by a rich variety of residential and employment land uses. Each familiar and identifiable as ‘theirs’ by those who live and work there. And collectively resulting in a metropolitan structure conducive to a ’30 minute’ accessible city (another current ‘metropolitan priority’). In a word, Sydney as networked.

It is rather like how Londoners see their huge metropolis as a series of neighbourhoods having their own character and all connected by an intricate public transport system, roughly equivalent in their case to the various villages and townships progressively subsumed in Greater London’s growth. And with the ‘Le Cinq Paris’ project from the 1990s which looked to the establishment of five interactive centres acting as growth points but with a concurrent parallel project, ‘La Mission Banlieues ‘89’ – a process of suburban renewal aimed at diffusing the long-standing and increasingly damaging privilege of central Paris. The ‘Mission’ included small-scale catalyst projects able to achieve composite goals in key localities. It was informed by detailed cognitive and functional mapping aimed at identifying those localities that were key to local identity and wellbeing – and which warrant support and if necessary ‘repair’.  Critical was the underlying conceptualisation: the need for a ‘qualitative urbanism’ to replace the quantitative analyses and zoning principles that characterise usual practice, and an understanding of the city as actually lived – as a continuous interactive spectrum of scale from the metropolis to the street corner tabac kiosk.

It is also consistent, here in Sydney, with some of the proposals arising from Joanne Jakovich’s SOUP (‘Strategic Open Urbanism Platform’) ‘innovation lab’ commissioned a few years ago by UrbanGrowth NSW to ascertain and tap into the aspirations and advices of Sydney’s younger citizens on housing in what will be (and is) after all their city. Active, interesting neighbourhoods around transit points comprising centres in their own right throughout the metropolitan area and providing affordable spaces was a key theme, possibly at odds with our current predilection for massive, centralised ‘growth corridors’.

We now know that a city that is not inclusive cannot maximise its prosperity, and liveability. In generating these goals the efficacy of the ‘three cities’ conceptualisation relative to a renewed primacy to the ‘city of cities’ approach, networked and polycentric, would seem to be worth rigorous consideration as part of the finalisation of the current draft metropolitan strategies.

The 10-point Plan to Tackle the Housing Crisis Rides Again

Posted by on February 21st, 2017 · Affordability, Affordable housing, Cities, Government, Housing, Housing supply, Planning, Tax

By Hal Pawson, Associate Director, City Futures Research Centre.

With anxieties about Australia’s increasingly unaffordable housing close to fever pitch, increasingly zany policy ideas are being touted to fix the problem. Not long ago we heard the Urban Task Force advocating for a plan fundamentally undermining NSW planning system integrity. Last week the ABC’s Michael Janda described as ‘a recipe for financial disaster’, Nationals MP Andrew Broad’s call for deposit-free housing loans. And proposals to allow super to be used for home purchase, previously panned as ‘hare-brained’ and a ‘thoroughly bad idea’, have been revived by the NSW Planning Minister.

Recognising the need to re-inject some sanity into the debate, The Conversation last weekend re-posted our 10-point plan for fixing housing unaffordabilility, as originally published in June 2015. These evidence-based proposals by seven Sydney-based housing academics were couched in moderate and non-partisan language. And, as noted at the time, most were then – and remain – widely supported by policymakers, academics and advocacy communities, as well as throughout the affordable housing industry.

Far from being a ‘simple matter’ of boosting housing supply, addressing Australia’s housing affordability challenge is in fact complex. It calls for a set of concerted and coordinated actions by national, state and territory governments. Crucially, therefore, our plan advocated a comprehensive strategy calling for action involving all levels of government.

Encouragingly, on a number of our recommendations the past two years have seen at least tentative signs of progress either nationally or at state level. Here in NSW, the Greater Sydney Commission has proposed affordable rental housing targets for incorporation within the planning system. And none less than the Federal Treasurer, Scott Morrison has apparently been progressing plans for a bond aggregator to facilitate low-cost private finance for affordable housing development. He recently even hinted that a new tax credit scheme to channel effective subsidy into rental housing could be on the cards.

The single most important outstanding item from the plan is reform of tax settings that encourage speculation in housing. Federal Labor has made a positive commitment on negative gearing and capital gains tax, and the ACT Government has taken positive action to broaden land tax. Supporting the courageous stand of prominent Federal Liberal MP, John Alexander, NSW Coalition Ministers Rob Stokes and Dominic Perrottet have recently shown interest in constructive reforms. And the fact that the Treasury had been investigating options around the CGT discount for landlord investors is promising – despite the Prime Minister’s reflex knock-back for the idea last week. Housing-related tax reform is no longer the third rail of Australian politics – it’s time the Prime Minister grasped it too.

Australia needs to reboot affordable housing funding, not scrap it

Posted by on February 20th, 2017 · Affordable housing, Finance, Government, Social housing

By Chris Martin, UNSW and Hal Pawson, UNSW. Originally published on The Conversation.

Federal government ministers have cast a cloud over funding for social housing and homelessness services, leading to speculation that the National Affordable Housing Agreement (NAHA) may not survive the 2017 budget.

Treasurer Scott Morrison and Assistant Treasurer Michael Sukkar point to the recent Report on Government Services, which shows the number of public housing properties has fallen, as evidence of the NAHA’s “abject failure”. Sukkar said:

We believe it’s crucial that every dollar of spending on affordable housing programs increases the number and availability of public and social housing stock. Clearly, this objective has not been met.

It should be no surprise that Australia’s social housing has been largely static for 20 years. Everything we know about the system tells us it is not funded to even cover the costs of its ongoing operation, let alone growth to meet the needs of an expanding population. Aside from a one-off boost under the 2009 federal economic stimulus plan, social housing has been on a starvation ration for decades.

The whole system system is effectively being run at a loss. So, from the perspective of state governments, building a new public housing dwelling is just one more way of losing money.

The federal government has also long lamented the lack of transparency about how states and territories spend their NAHA funds – about AS$1.5 billion a year. And there are glaring gaps in the evidence about the operations and performance of public housing authorities.

In failing to act on a 2009 commitment to modernise and enhance the Report on Government Services metrics, the states and territories have placed themselves in a weak position to rebut claims of ineffective financial management.

That said, everyone who has any contact with the public housing system knows it to be grossly underfunded. One-off studies occasionally illuminate the scale of the issue. For example, a 2013 New South Wales Audit Office report found a $600 million annual operating deficit for that state’s public housing. But no-one can easily quantify the extent of the problem using routinely published data.

A snapshot of social housing in Australia

Around 320,000 of Australia’s approximately 428,000 social housing dwellings remain under public housing authority control. This stock was amassed through a long series of funding agreements between federal and state and territory governments. These were known as the Commonwealth-State Housing Agreements until their 2009 NAHA rebranding.

Australia has had federal-state housing agreements since the Labor government of Ben Chifley initiated the first one in 1945.

From the first Commonwealth-State Housing Agreement in 1945, the basic arrangement was that the federal government would lend funds to state housing authorities to build houses. The states would cover the ongoing costs from the rents paid by working-class tenants.

And, at least to begin with, the housing authorities did build. They made a significant contribution to housing supply, amounting to roughly one in six houses built between 1945 and 1965.

From the early 1970s, the housing authorities were directed, justifiably, to provide more housing to low-income households unable to pay full “market” rents. However, their capital funding also went into a long decline. With the exception of a brief period in the mid-1980s, housing authorities never again built at their earlier rate.

A number of interlocking problems set in. Social housing’s declining share of the housing stock became more tightly rationed to the lowest-income households. This eroded the system’s rent base. At the same time, its ageing buildings and households with greater support needs increased its costs.

Two landmark studies by Jon Hall and Mike Berry charted the implications of these developments for the finances. At the end of the 1980s, all but one of the housing authorities ran an operating surplus. By 2004, all but one ran an operating deficit.

Various attempts to improve the situation have been made. The 1989 Commonwealth-State Housing Agreement switched federal funding from loans to grants; the 1996 agreement allowed federal funds to be spent on recurrent expenses. In the early 2000s, rebates on social housing rents were reduced, slightly increasing revenue.

Modest amounts of public housing have also been transferred into the hands of not-for-profit community housing providers. Partly, this is to take advantage of the eligibility of community housing tenants for Commonwealth Rent Assistance. But although this often enables these providers to run a small operational surplus, it isn’t enough to fund stock replacement or any significant expansion.

Meanwhile, the overall stock has been eaten away, through market sales of public housing, and run down, through skimping on repairs and maintenance. Both are unsustainable strategies.

Running a system without good data

If the broad outlines of the problem are clear, there are major deficiencies in the data as to the details. The Hall and Berry analysis is now dated. There is no current evidence base that shows transparently and consistently what the social housing system in each state and territory costs, and how these costs are met.

For example, the Report on Government Services purports to show the “net recurrent cost per dwelling” for each state and territory. But this does not differentiate between distinct expenditure components such as management and maintenance.

Our 2015 research found that this metric was a “black box”, subject to implausibly large variations across jurisdictions. These reflected the vagaries of departmental restructures, rather than a sound accounting of social housing operations.

There is little doubt that all public housing authorities are now in deficit. However, the Report on Government Services provides no data on the relative scale of these funding shortfalls. Nor do governments routinely reveal the scale of system costs still met by tenants’ rents, nor through stock sales.

What should a rebooted NAHA do?

Although the NAHA does it inadequately, an enduring program of federal funding for operational expenses is essential to sustain the social housing system. Such funding cannot be “replaced”, as Morrison has suggested, by a government-backed aggregated bond financing model.

The bond aggregator model depends on social housing providers having a durable subsidy from government that pays the difference between their ongoing costs and the revenue from rent that low-income tenants can afford.

Instead, NAHA should be rebooted to deliver three things:

  • capital funding for new social housing stock, distributed according to an assessment of current and projected needs in each state and territory;
  • recurrent funding, distributed according to the number of social housing dwellings in each state and territory and an assessment of reasonable net recurrent costs; and
  • clear accounting by social housing providers for costs of provision and the contributions of tenants, government funding and other sources of income towards meeting these costs.

Many in the social housing world would agree the NAHA framework is far from transparent and that there is no certainty that NAHA money is optimally spent. But a ministerial focus on these issues while ignoring the system’s chronic underfunding smacks of re-arranging deckchairs.

Rather than scrapping the NAHA, the system should be rebooted, to properly fund both the growth and ongoing operations of social housing. This must be done on the basis of clear targets for the level of need to be met and the reasonable costs of providing the service.

The Conversation

Chris Martin, Research Fellow, Housing Policy and Practice, UNSW and Hal Pawson, Associate Director – City Futures – Urban Policy and Strategy, City Futures Research Centre, Housing Policy and Practice, UNSW

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

Rental insecurity: why fixed long-term leases aren’t the answer

Posted by on February 16th, 2017 · Law, Tenancy

By Chris Martin, UNSW. Originally published on The Conversation.

The insecurity of rental housing and unsatisfactory condition of many properties are receiving much-deserved media attention following the release of a national survey of tenants.

However, the stock response to the insecurity this revealed – longer fixed-term agreements – is not the answer. The solution to the failure of existing legal protections must take into account the structural features of the rental market, including the mobility of tenants.

The survey, commissioned by Choice, National Shelter and the National Association of Tenant Organisations, presents evidence of a widespread sense of worry, dissatisfaction and injustice on the part of tenants. According to respondents:

  • 75% feel that competition for rental properties is “fierce”;
  • 50% are concerned about being “blacklisted” on a tenancy database;
  • 50% have experienced some form of discrimination;
  • 30% live in properties requiring non-urgent repairs, and 8% require urgent repairs;
  • 11% experienced a rent increase; and
  • 10% reported an angry response after requesting repairs.

Residential tenancy laws cover many of these problems. That tenants are not successfully exercising their legal rights indicates a deeper problem of insecurity in renting. This problem is both structural and legal.

Small landlords and mobile tenants

Small landlords dominate the Australian rental sector: 72% own a single property each. Most (62%) make a net rental loss, so it is important to them that they can switch out of the sector when it suits them.

Research for the Australian Housing and Urban Research Institute (AHURI) indicates that 21% of landlords exit the sector within their first 12 months. By five years, 59% will have exited.

When landlords exit, they might sell to another landlord or an owner-occupier. Older research indicates that the transfer of rental housing into owner-occupation is a significant feature of the Australian market.

These dynamics cause structural insecurity for tenants. They also mean many landlords do not willingly tie up their sole asset in a long fixed term.

Despite the legal and structural insecurity of the sector, most moves by tenants are for their own reasons.

The ABS Housing Mobility and Conditions survey shows that tenants generally are very mobile: 81% have been in their current premises for less than five years. About half of moves between rental premises were for “personal reasons” (including family and employment reasons); 20% were to get more suitably sized housing; and 15% because of a termination notice from the landlord.

This degree of mobility suggests it is not in most tenants’ interest to enter into long fixed terms and the rental liability it entails. That’s not to mention the risk of being tied to a small landlord who is an unknown quantity and has no business reputation to protect.

Residential tenancies law in Australia

Each state and territory in Australia has its own Residential Tenancies Act. These differ in the details but are broadly similar in outline. All provide standard terms for tenancy agreements, processes for rent increases and terminations, and relatively accessible dispute resolution and eviction procedures.

Most do a decent job, on paper at least, when it comes to repairs and maintenance. Generally speaking, landlords are obliged to ensure rented premises are provided fit for habitation and maintained in a reasonable state of repair.

This means tenants are entitled to repairs even if the premises were in bad condition to begin with, and even if they pay relatively low rent. Tasmania is an exception: there, landlords are obliged to maintain premises in the condition in which they were first provided.

Similarly, each state and territory prohibits landlords from interfering in tenants’ quiet enjoyment of their premises. Most expand this right to protect tenants’ “reasonable peace, comfort and privacy”.

These are important protections, even though there may be scope to improve them – for example, by adding specific standards for safety devices and fixing particular legal defects like Tasmania’s. The great problem is that the ability of landlords to give notices of termination without grounds undermines the existing protections in every state and territory.

Without-grounds termination notices give cover to terminations by landlords for bad reasons, such as retaliation and discrimination. This means the prospect of receiving such a notice hangs over tenants when repairs and other issues arise.

What’s the solution, then, to high insecurity?

The legal insecurity of tenants might be improved in several ways.

Under the current laws of each state and territory, a fixed term prevents the landlord from terminating without grounds, and on other grounds such as sale or change of use of the premises, for the duration of the fixed term. It also prevents the tenant from lawfully terminating without grounds.

The idea of long fixed-term tenancy agreements is occasionally raised in the media and has caught the attention of the New South Wales and Victorian governments in their reviews of residential tenancies laws. Both those governments are considering how to facilitate long (five-year) fixed terms, including by altering other aspects of their laws – such as the protections about repairs.

But this approach presents problems of its own. Long fixed terms are unwieldy for landlords and tenants. Trying to make them more useful also threatens other valuable legal protections.

The present structures of the Australian rental sector call for different reforms.

We can reconcile the mobility of tenants with their sense of insecurity if we think of “security” as more than just the legal right to occupy. AHURI researchers have conceived of “secure occupancy” to encompass a person’s ability to make a home of premises and exercise housing autonomy. This includes the ability to confidently get repairs done in one’s premises, or keep a pet – and to freely decide to make a new home elsewhere.

This conception points towards a stronger reform agenda for improving security. Instead of long fixed terms, we should abolish without-grounds termination by landlords.

The law should instead provide a comprehensive set of reasonable grounds for termination, with notice periods and exclusion periods appropriate to each ground. This accommodates our present lot of small landlords, and can be done immediately.

Over a longer term, we should set our housing tax and finance policies to get a more stable sort of landlord. That would be one who operates at greater scale, has a reputation to protect and is less interested in switching out of the sector than in receiving a steady trickle of rents from secure tenants.

The Conversation

Chris Martin, Research Fellow, Housing Policy and Practice, UNSW

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

How Australia can spread the benefits of our bulging infrastructure pipeline

Posted by on February 8th, 2017 · Construction, Government, Guest appearance, Social enterprise

By Martin Loosemore, UNSW. Originally published on The Conversation.

Good infrastructure can transform the social fabric of local communities, regional economies and national prosperity. The 2012 Olympics’ impact on London’s East End and the Guggenheim Museum’s role in revitalising Bilbao in northern Spain are examples of how infrastructure projects can regenerate disadvantaged communities by creating a new sense of identity and pride.

But what about the project design and construction phases? This has been largely neglected in the debate about equitable and sustainable cities.

With one of the world’s largest infrastructure pipelines Australian governments have an unprecedented opportunity to leverage their procurement spending power. For instance, the second airport for Sydney at Badgerys Creek in the city’s west offers a great opportunity.

Projects like this can be used to tackle growing disadvantage and inequity in the communities where they are built. This can kick-start change over the life of major infrastructure projects.

Europe’s largest construction project, Crossrail in the UK, is an exemplar of how the project construction phase can enhance and rejuvenate communities. During its design and construction, Crossrail will create more than 55,000 full-time-equivalent jobs and 600 apprenticeships.

Its social procurement programs generate direct and indirect employment opportunities with an emphasis on UK contractors and consultants, small and medium enterprises, local jobs and long-term skills development.

How does social procurement work?

Social procurement is one of many policy instruments that governments and some construction companies are beginning to use to promote social equity and justice.

Rather than regulating the market, handing out state aid or making philanthropic donations to these ends, social procurement involves governments and firms participating in the social economy by leveraging their spending power.

In effect, this creates a quasi-market for social benefit organisations to participate in the project planning, design, construction and facilities management.

These organisations operate a hybrid business model which blends social and economic goals. They can include social enterprises, Indigenous businesses, disability enterprises, minority-owned enterprises, enterprising not-for-profits, charities, social businesses, co-operatives, charities and local businesses.

Social procurement takes many forms. Some initiatives involve the direct purchasing of products and services from social benefit organisations that specialise in employing disadvantaged groups such as Indigenous, disabled, ex-offenders, ethnic minorities, youth or the long-term unemployed.

Other approaches rely on indirect means. There may be contractual clauses to require existing supply-chain partners to provide training and employment for such people. They may also be required to contribute in other ways to the communities in which they work, such as by employing local businesses.

This in turn translates to measurable longer-term benefits in the wider community. These include increased wealth, better health and reduced crime.

What can industry do?

The built environment industry can do more than most to help overcome Australia’s growing level of disadvantage. It employs about 9% of the labour force. It is also the largest youth employer in the country.

The industry is often the first port of call for migrants. This is due to its preponderance of low-skilled jobs and its highly culturally diverse workforce. Research shows that about 57% of construction workers speak a language other than English at home and 54% were born in another country.

A unique feature of the industry is that for historical reasons different nationalities tend to congregate into certain trades (Italian concreters, Maori scaffolders, Croatian form workers, Korean and Afghani tilers, Chinese and Vietnamese gyprockers). Unlike most industries, it also operates in the most remote and disadvantaged communities.

It is estimated, however, that less than 2% of Australian social benefit organisations operate in the sector. Those that do tend to be micro-businesses. These work at the bottom of the supply chain, in low-margin, high-risk trades such as cleaning, gardening and landscaping and grounds maintenance.

The built environment industry employs around 1 million people, of whom 43% are 15-to-23 years old. This means that a mere 1% increase in work could provide 43,000 new employment opportunities for social benefit enterprises in the supply chain that specialise in disengaged youth.

Given the industry’s 3:1 multiplier effect in the wider economy, that could create as many as 172,000 jobs in total.

Pulling the policy levers

The industry responds to market drivers and regulation better than anything else, and is unlikely to change voluntarily. Knowing this, various levels of Australian government are developing social procurement regulations and policies.

Governments can use a range of soft and hard policy levers. For instance, they can require firms tendering for work on government projects to employ a certain proportion of disadvantaged people, social benefit organisations, minority businesses and local businesses in their workforces and supply chains. The federal government’s Indigenous Procurement Policy (2015), NSW government’s Aboriginal Participation in Construction Policy (2015) and the Queensland government’s Building and Construction Training Policy (2015) and Charter for Local Content are examples of this.

For the Victorian government’s A$25 billion major infrastructure works program, its recent Major Project Skills Guarantee mandates that 10% of project hours be allocated to apprentices and trainees and 2.5% to Indigenous employment. There are also requirements to employ disadvantaged people from local communities through direct employment and supply chains.

The Melbourne Metro Rail Project is a prime example of the Victorian government’s social procurement policies in action.

Encouragingly, the NSW Department of Premier and Cabinet has set up a steering committee to explore social procurement opportunities for the new western Sydney airport.

Forward-thinking city councils such as Gold Coast, Brisbane, Parramatta, Wyong, Wollongong and Ballarat have also developed social procurement policies.

A few leading construction companies are innovating in social procurement. For example, Multiplex is experimenting with creative models that bring multiple stakeholders together to provide new training and job opportunities in the construction supply chain on large projects in socially disadvantaged areas.

However, too many companies remain disconnected from the communities in which they build. They seem ignorant of their industry’s potentially enormous role in building a more equitable and sustainable society.

The growing numbers of social benefit organisations set up to help the disadvantaged face many barriers to entry. Too many built environment companies see the community as a risk, rather than an asset and an opportunity to give something back to the society in which they operate.

Equity of opportunity and wealth distribution are the basis of a stable and prosperous society. Recent world events have vividly demonstrated this.

We need to start thinking about the whole of the planning, design, construction and facilities management process – not just the end products – as a way to build more equitable and socially sustainable cities. And it’s about time the built environment industry met its full responsibilities to society.

The Conversation

Martin Loosemore, Professor, Construction Management Program, Built Environment, UNSW

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

New housing ministers – new housing policies?

Posted by on January 30th, 2017 · Affordability, Affordable housing, Government, Housing, Social housing

Congratulations to Anthony Roberts, the Minister for Housing, and Pru Goward, the Minister for Social Housing, on their appointments to NSW Premier Gladys Berejiklian’s new Cabinet. Congratulations too to Matt Kean, Minister for Fair Trading, whose housing-related portfolio includes residential tenancies.

This is the first time New South Wales has had two housing ministers.  From the Second World War, ‘housing’ was a discrete ministry in New South Wales for almost 70 years, until the State Coalition, upon coming to office in 2011, dropped it, and later replaced it with a ‘social housing’ ministry. Arguably the new arrangement reflects the prominence given by the Premier to housing affordability policy; it may also be a way of avoiding the curse of previous housing ministers who, after promising to prosecute policies for the whole of the housing system, inevitably became caught up in the administrative apparatus of social housing. (The two-minister arrangement is also unusual, but not unique, amongst other Australian jurisdictions: South Australia currently has separate ministries for ‘social housing’, and ‘housing and urban development’. The Federal Government still does not have either.)

Minister Roberts takes on the new portfolio in the absence of an existing formal State Government policy for housing affordability. The Government’s Affordable Housing Taskforce, established 2011, did not produce a final report, and other policy actions flagged by the taskforce did not eventuate. Recent initiatives such as the establishment of the Social and Affordable Housing Fund  and the Greater Sydney Commission’s adoption of inclusionary zoning are promising, but lack a clear overarching strategy that sets out the housing outcomes to be achieved and how different instruments of government will be coordinated to achieve them. As City Futures’ Hal Pawson wrote last week, setting this strategy must be a priority for the State Government – and the new Minister.

For Minister Goward, the social housing portfolio is not quite as ‘greenfield’, with the State Government’s ‘Future Directions for Social Housing‘ agenda published one year ago, and a review of social housing rent models by the Independent Pricing and Regulatory Tribunal (IPART) currently underway. Both these developments, however, show how much more needs to be done to place social housing on a sustainable footing.

As City Futures observed when it was published, ‘Future Directions’ commits to new social housing construction, but is vague as to how all the resources for developing and maintaining this stock will be put together. It also doubles down on tightly rationing social housing, out of which tenants can be made to ‘transition’ as their circumstances improve – despite 10 years of this approach making work disincentives and poverty traps worse, and doing nothing for applicants on the waiting list. What’s needed is a more detailed strategy that proceeds from an rigorous assessment of the extent of housing need that should be served by non-market housing, and makes firm commitments of resources – cash subsidies for ongoing operations, land for development, government backing for bond financing – to social landlords to meet that need.

This also goes beyond what’s being considered in IPART’s review of rent models. As we said in the City Futures submission to IPART (now published by IPART), the question of how rents are set in social housing is important in terms of equity of assistance between households, affordability outcomes, work disincentives and simplicity and ease of administration; however, no changes to rent settings on the present stock of social housing, with its present clientele, can generate revenues that are sufficient to sustainably grow and maintain the stock to meet future needs.

To address the question of the sufficiency of social housing system revenues, the Commonwealth Government will have to be joined in any reforms, to overcome the present problem of States being discouraged from bringing on much-needed additional stock, because of the ‘loss’ each new dwelling represents, and to ensure that changes to welfare payments do not undermine social landlords’ revenue base.

And in order to properly address the objectives of improved equity of assistance, reduced work disincentives and ease of administration, the review should challenge the idea from ‘Future Directions’ that tenants must be categorised into ‘safety net’ and ‘opportunity’ classes (with the latter expected to ‘transition’ out of social housing), and the associated idea that social housing equals ‘dependence’ while private market housing means ‘independence’. This demeans social housing tenants and ignores the subsidies – greater, in dollar terms – delivered through our tax and transfer settings to owner-occupiers. It also ignores how the present system of income-related rents in social housing actually allows households whose incomes improve to ‘transition’ out of deep housing subsidy into lighter subsidy – or even into being a net provider of subsidy to others – without having to move out of their homes.

The real challenge for the IPART review will be to identify where the present system of income-related rents, which is strong on affordability and targeting assistance to need, can be adjusted to achieve greater equity between tenants in dwellings and locations of different amenity, and a greater degree of choice, such that tenants can respond to any trade-offs between amenity and subsidy. The challenge for both new Ministers goes further than that.