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Sydney must heed lessons of London affordable housing fiasco

Posted by on July 20th, 2017 · Affordable housing, Government, Housing supply, Planning, Social housing, Sydney, urban renewal

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

A recent Sydney Morning Herald feature on urban renewal in London shone an interesting and quite revealing spotlight on a high profile project with a major Australian connection. Crucially, though this rather uncritical account completely missed the aspect of the story with the greatest direct relevance to Sydney.

The SMH piece focused on the renewal of Southwark’s Heygate Estate and the central involvement of Australian developer Lendlease – a project already lauded by Federal Treasurer Scott Morrison as ‘…[something] I’d love to see … lived out on the streets of Australia’. Quite rightly, the SMH noted that “Lendlease sits at the heart of the debate about the best way to build and renew social housing in London”. Having done that, however, it entirely failed to explain the main reason why the company “sits at the heart” of this argument. In fact, through its profitable exploitation of planning system loopholes on affordable housing obligations, Lendlease has achieved notoriety within UK affordable housing advocacy circles. And just how this came about is a tale with direct implications for Sydney.

The SMH story played up the inclusion of 25% ‘affordable housing’ within the rebuilt 3,000 (sometimes reported as 2,500) unit Heygate. On the face of it, a pretty hefty project component. But it’s a completely different matter when one also considers that the new scheme is replacing a large demolished council estate and that the number of directly equivalent homes included in the rebuild is in fact derisory. According to a 2015 Guardian report, just 74 of these homes will be low rent “social housing” affordable by very low income earners. That’s 74 in place of around 1,000 council homes (and 200 leasehold ex-Right to Buy properties) flattened to make way for the project. Some might call this “social cleansing”.

Lendlease’s ‘social housing offer’ also compares with the 432 such homes that, for a project of this scale, Southwark’s policy would normally require incorporated in any private housing development on privately owned land (i.e. involving no social housing clearance). As one affordable housing advocate therefore commented, “Southwark has lost 358 social-rented homes in the deal, while Lendlease stands to make whacking profits – on land they bought from the council for a pittance.”

All of this came about through the company’s skilful utilisation of a planning system weakness introduced by the Cameron Government in 2012 allowing developers to deflect or dilute affordable housing obligations. Crucially, under the new ‘NPPF’ framework enhanced weight was accorded to project “viability assessment”. As described by one UK planning expert, the mechanics of the test within this changed context have “driven a coach and horses through the planning system”.

The direct relevance of this story to Australian readers is the connection with the generally progressive proposal for affordable housing targets in our own city, as laid out by the Greater Sydney Commission in 2016. Critically, the GSC’s ‘inclusionary zoning’ draft policy also allows that private developer affordable housing contributions (5-10% of additional floorspace in upzoned developments on greenfield sites or in urban renewal precincts) will be “subject to viability”.

While the GSC outline formula appears influenced by the UK framework it pays no regard to the inclusionary zoning affordable housing policies widely operated across North America. Here the idea of a viability test is seen as fundamentally conflicting with the basis for such policies – i.e. that the land market will adjust to the designation of affordable housing obligations, as developers offer less for the land to maintain project viability. For example, in the inclusionary zoning framework recently enacted by the Canadian province of Ontario (applicable to Toronto – a city with many similarities to Sydney), viability assessment does not feature.

As argued in greater detail in the City Futures Research Centre consultation submission on the GSC’s District Plans, when the precise rules for the GSC viability assessment are worked out it’s essential that these are not unfairly weighted in favour of developers as in London. For example, in contrast to the eye watering levels of developer profit factored into some London viability tests, reasonable and defensible profit assumptions must be used.

More broadly – and in sharp contrast to the secrecy attaching to such calculations in the UK – any such process in Sydney or elsewhere in Australia must be fully transparent. And it must be founded on clearly stated developer obligations enshrined in planning law and guidance which do not provide a free pass to companies who have recklessly overpaid for sites. Only if constructed on this kind of basis is the GSC’s system going to realise its ultimate objective – the suppression of land values consistent with designated developer obligations on affordable housing and other infrastructure.

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