City Futures Blog

News and research in housing and urban policy, from Australia’s leading urban policy research centre.

City Futures Blog random header image

What if autonomous vehicles actually make us more dependent on cars?

Posted by on February 19th, 2019 · Cities, Guest appearance, International, Smart cities, Sustainability, Transport
File 20180618 85840 119d7mc.jpg?ixlib=rb 1.1

By Mark Kleinman, Professor of Public Policy, King’s College London and Charlene Rohr, Senior Research Fellow, King’s College London. This article is republished from The Conversation under a Creative Commons license. Read the original article. Mark Kleinman is visiting City Futures Research Centre as part of the PLuS Alliance.

Cities across Europe are taking steps to become increasingly car free. London Mayor Sadiq Khan is aiming for 80% of all trips to be made on foot, by cycle or using public transport by 2041, while Copenhagen authorities are aiming for three quarters of all trips to be made in these ways by 2025. Policymakers in Paris want to halve the number of private cars in the city centre, and Madrid will ban all non-resident vehicles except zero-emission delivery vehicles, taxis and public transport from its city centre in November 2018. In Helsinki, the aim is to phase out the use of private cars by 2050, by providing on-demand, affordable public transport.

Alongside reducing congestion and improving urban mobility, city leaders are expected to promote sustainable economic growth, improve air quality and respond to concerns from residents – all within tight budgets. In a world where talent and investment are increasingly mobile, city leaders know they must compete in terms of economic dynamism and quality of life – and transport planning is one way to do that.

Boon or burden?

But car makers and tech giants are looking to a very different type of future, where private car ownership, human control and petrol and diesel engines are replaced by shared, electric and autonomous – or self-driving – vehicles. Many of these changes could be positive for society, compared to current transport systems. It is likely that autonomous vehicles will eventually be better drivers than humans, which would reduce the number of road accidents and fatalities. They may also provide much needed accessibility to elderly and disabled people, which would be beneficial not only to them, but the economy at large.

Without the need to drive, people will be able to be more productive while travelling. If people are able to call up a car at the touch of a smart phone, car ownership will drop, which will free up the substantial tracts of urban land that are currently used to park vehicles. And, with the right incentives, travellers could be encouraged to use the most efficient vehicle for each journey taken, with substantial reductions in emissions and pollution. There would also be benefits for freight deliveries, which may be able to be undertaken at night, when there is more available road capacity.

Paris: quieter by night.
Luc Mercelis, CC BY-NC-ND

But some changes may be negative. Self-driving cars are likely to increase – rather than decrease – car travel, as people succumb to the allure of convenience and switch from public transport, or make more journeys. Autonomous vehicles may be able to park themselves away from urban centres, but they still need to be parked – and make return journeys to collect passengers, adding empty cars to the roads and contributing to congestion and air pollution.

And there are lots of unanswered questions about how urban systems will work with the introduction of self-driving vehicles. For example, it’s not clear how self-driving vehicles will co-exist with pedestrians and cyclists. If they are programmed to stop whenever a pedestrian or cyclist gets in their way, there will be pressure to further separate vehicles, pedestrians and cyclists. The vision of future cities in the 2050s may then start to look more and more like the vision of the 1950s, with futuristic new models dominating the foreground, while human activities such as walking and cycling are relegated to concrete overpasses and gloomy subways.

Back to the future

History shows that decisions made by policy makers have long-lasting effects. For example, when automobiles first arrived in cities, policymakers in different countries took different approaches to the issue of mixing of vehicles and pedestrians. In the United States, policymakers invented the concept of “jaywalking” and introduced stringent laws to separate vehicles and pedestrians, in order to “protect pedestrian safety”. The UK, on the other hand, took a more relaxed approach, introducing no such laws.

At the other extreme, policymakers in The Netherlands have taken the view that shared spaces – where streets are designed specifically to allow interaction between vehicles, pedestrians and cyclists – improve safety for all, as well as the liveability of cities more generally. These decisions have had long-lasting impacts on how cities in these countries look and feel today.

The way we think think about the future for autonomous vehicles seems divorced from the wider issues of city transport strategy and economic and social sustainability. It is time to put this right. Mayors, supported by their officials and planners, should start leading a debate now about how self-driving vehicles can best serve the needs of residents and visitors, and help deliver wider goals for their cities. They must develop the policies needed to deliver these benefits – well before self-driving vehicles arrive on the streets.

The Conversation


Stay cool with revised house construction codes

Posted by on February 15th, 2019 · Climate change, Construction, Government, Guest appearance, Housing, Housing conditions, Sustainability, Sydney, Wellbeing

By Professor Mat Santamouris, Built Environment, UNSW Sydney. This article was first published by the Sydney Morning Herald.

For many Australian households, summer’s debilitating heatwaves will be felt well into autumn as the steep costs of airconditioning show up on household power bills. We shouldn’t have to live like this.

Much of the punitive cost of cooling is not down to power prices but to cheap and thoughtless construction and design. What’s most exasperating is we already have the materials, knowledge and skills we need to better protect ourselves from climatic extremes, without boosting electricity demand and costs.

Take, for example, ‘Josh’s House’ in Perth, a zero-carbon home of ABC TV’s Gardening Australia fame. In late January the outdoor temperature was hovering around 40 degrees, inside it was a comfortable 24 degrees. This 10-star energy efficient ‘living laboratory’ was not using airconditioning, so no additional energy was needed. Its excellent thermal performance was simply down to good passive solar design.

By contrast, on hot days in Sydney’s west, electricity demand for cooling doubles and the health, comfort and wellbeing of residents is at risk. Our recent research across this large expanse of Sydney suburbs that lies beyond the reach of moderating coastal breezes, found indoor temperatures of up to 35 degrees in poorly constructed homes.

To put this in context, consider the ‘thermal comfort zone’. That is, the narrow temperature range in which humans can operate productively without being distracted, overwhelmed or suffering physical ill effects. Commercial buildings in Australia, for example, usually stipulate indoor comfort be maintained at between 21 and 24 degrees. So, it is not surprising so many Australians have reported sleeping poorly for months, due to the recent intense heat.

We know Australian houses get too hot for relatively simple reasons. Yet we continue to use black or dark roofs, even though the excess heat this traps is well understood. We skimp on insulation in our walls, roofs and windows and pay the price in discomfort or higher energy bills. We continue to pave the surrounding roads with black asphalt that, likewise, acts as a heat sink, And, in many locations, we forego the cooling benefits of trees, parks and open green space to maximise the numbers of dwellings we can squeeze onto a site.

Working in Parramatta with Sydney Water, we recently assessed the potential of cool, reflective materials, planting trees and vegetation and the use of recycled water in features like spray mists and fountains. We found outdoor temperatures could be reduced by 2.5 degrees and, with further work, by up to 4 degrees. Even a 2.5-degree cut would reduce cooling energy costs by 35 per cent and reduce peak electricity demand by 5 per cent, the equivalent of taking 200,000 cars off the road. These are important and encouraging results.

But there is a limit to what can be done to turn the temperature down outside. We must also urgently modify the codes and regulations that dictate the performance of Australian buildings.

A recent study, Built to Perform, found even modest changes in building regulations could reduce Australian household power bills by $900 a year. Some could come at no additional cost, like choosing a light coloured roof over black. Others – including improved insulation, double-glazed windows, better air tightness, outdoor shading and wider eaves, ceiling fans and more efficient airconditioning, lighting and hot water systems -would cost between about $6800 for an apartment to $14,000 for a free standing house. These upfront costs would be more than offset by savings on power bills, the study, funded by the CRC for Low Carbon Living, found.

The COAG Energy Council this month acknowledged our National Construction Code was ‘not set at an optimal level’ and announced a new ‘trajectory’ towards tighter standards. This is a step in the right direction. But we need to move now. Business as usual presents many risks, particularly the opening of a social divide as temperate extremes intensify – between the haves (aircon) and have-nots.

As the federal election approaches, there will be plenty of political finger-pointing over power prices. But we need a more sophisticated debate. Our buildings use 20 per cent of our energy and rapid growth in airconditioning as temperatures rise is a major contributor to peak power demand. We have a major opportunity in better buildings. We need politicians and industries to seize it now.

Is social housing essential infrastructure? How we think about it does matter

Posted by on February 6th, 2019 · Finance, Government, Guest appearance, Housing, Productivity, Social housing

By Kathleen Flanagan, University of Tasmania; Chris Martin, UNSW Sydney; Julie Lawson, RMIT University, and Keith Jacobs, University of Tasmania. This article is republished from The Conversation under a Creative Commons license. Read the original article.

We know that safe, adequate, affordable and appropriate housing is essential for our health, well-being and social and economic security. However, even as house prices subside from recent record highs, many Australians struggle to obtain the housing they need to be as healthy, well and secure as they could be. An unacceptable number of Australians have no home at all.

How Australian governments meet such housing challenges has changed over time. Decades ago, direct investment in publicly owned housing was the core of their response. In the 1950s, state housing authorities built more than 100,000 dwellings — one in eight of all new homes at the time.

Over time, however, social housing has been recast as a welfare service. Political support has dwindled. Social housing is starved of funds, stigmatised and residualised.

Could changing how we think about social housing serve as a starting point for a renaissance? Policy advocates like the Australian Council of Social Service (ACOSS) argue that social housing is actually a form of essential infrastructure. This is because it supports economic productivity and a range of other non-shelter outcomes.

Our research has examined whether changing how we think about social housing to see it as infrastructure might provide a pathway to increased investment.

What’s the evidence for this approach?

Conceptually, we found a link between social housing and infrastructure: both operate as forms of spatially fixed, durable capital that enable economies and societies to work better. Governments need to be involved in providing infrastructure to realise its full benefits — because of the scale of investment needed and because effects are spread across the community. In the same way, realising all the benefits of social housing requires government involvement.

When we look at history, there is compelling evidence for this. For example, during Australia’s post-war public housing construction boom, governments recognised their investment as necessary to enhance economic productivity, improve public health, and support families to thrive.

Across [Europe], especially in Finland, Austria and Scotland, we see social housing investment today undertaken in support of energy sustainability, economic stability, and social cohesion.

However, if social housing is to be considered as infrastructure, then proponents need to be more conversant with the practices and policies that sustain infrastructure investment. This includes developing credible, costed arguments to demonstrate the benefits of social housing relative to its cost. This isn’t easy — much that is relevant to the purpose of social housing and the people who live in it cannot be quantified or monetised.

Public infrastructure and private finance

An even more fundamental challenge arises from prevailing ideas about how infrastructure should be financed and funded.

In infrastructure-speak, “financing” is the provision of money to build and maintain an infrastructure asset, and “funding” is the means of paying the costs of finance. Even as governments pay more attention to infrastructure policy, the prevailing view is that it should be privately financed by institutional investors like banks or super funds. The role of governments, according to this view, should be limited to funding investments where user charges won’t deliver enough return to the investor.

This prevailing view comes from a deep-seated belief within Australian governments and the wider community that governments are always fiscally constrained and that the mark of a “good” government is a budget surplus.

These are not just surface beliefs — the norms and practices associated with them are embedded in the way bureaucracies and governments prepare and manage their budgets.

When there is not enough government money to go around, even with a rigorous, costed business case establishing beyond doubt the value of investment in social housing, it might not be recognised as high enough priority for any meaningful level of funding to result.

To change this belief, we need to do more than make a case for social housing as infrastructure. We need to make the case for social housing.

A vision for social housing

To make the case, we must confront the politics of housing. The prevailing narratives have benefited powerful interest groups and produced mounting debt and inequality.

But we can draw on the historical precedents of policies that created public wealth through public investment in rental housing and expanded opportunities for ownership. We need to make the case for government to take a stronger, more direct role in infrastructure investment by embracing its role as a patient investor and a deliberate co-creator and shaper of markets for specified public purposes.

Direct public investment is also the cheapest, most effective way to generate affordable housing supply that meets community needs and delivers vital economic and social benefits.

Engaging with this vision, and what it implies about the role of government in Australia today, offers us the chance to think differently enough about social housing to make not properly investing in it unthinkable.

AHURI is presenting the inaugural Discussion Series event, “Is social housing infrastructure?”, at the State Library Victoria, Melbourne, on Monday, February 11 2019. A second event examining the same research topic will be held in Brisbane in March. More details are available here.

The Conversation


The big lesson from Opal Tower is that badly built apartments aren’t only an issue for residents

Posted by on January 17th, 2019 · Cities, Construction, Government, Guest appearance, Housing, Housing conditions, Strata, Sydney

By Laura Crommelin, Bill Randolph and Hazel Easthope (City Futures Research Centre), and Martin Loosemore (Built Environment, UNSW Sydney). Originally published on The Conversation.

The saga of Opal Tower, the 36-storey Sydney apartment building evacuated on Christmas Eve after frightening cracking, has helped to expose the deep cracks in Australia’s approach to building apartments.

An interim engineering assessment released yesterday indicates concrete panels cracked due to their manufacture and assembly deviating from the original design. Though the building is structurally sound and in no danger of collapse, repairing the faults will be costly, slow and disruptive to residents.

The tower’s size, age (it is less than six months old) and the timing of its cracks might have made it particularly newsworthy, but badly built apartment blocks are far from unusual. Right now across Australia’s cities many buildings have significant leaks, cracks and fire safety failings.

So we can’t just address faults in individual developments. We need to identify the systemic flaws in how “compact city” policies have been planned and implemented.

Cracks in the compact city

The consequences of these flaws increasingly affect us all.

As the population of Australia’s capital cities grows, more of us are living in apartments. Governments have been promoting greater housing density as an alternative to sprawl for decades. But they haven’t always ensured this density has been done well, including in terms of building quality.

In the aftermath of the Opal Tower saga, experts have pointed to many reasons why building defects can occur.

These include the fact that developers owe buyers few legal obligations once the apartments are sold, which limits their risk if they get things wrong. There are also significant market pressures, particularly in boom times, to build quickly and cheaply. And there are gaps in how the construction process is overseen, meaning errors go unnoticed.

These are not new observations, but getting regulations in place to address them has proven challenging. A case in point is NSW’s new defects bond, requiring developers to put aside 2% of the building value to fix defects down the track. The bond’s introduction was delayed for years, and it will be a few more years yet before we know if it works.

Scoping the problem

So just how severe is the situation? Right now, we don’t know for sure.

In 2012 a City Futures Research Centre project surveyed apartment owners in NSW. Out of more than 1,000 respondents, 72% knew of defects in their strata-title complex. Among those whose apartments had been built since 2000, the percentage was 85%.

That project only looked at building defects as one of a number of issues facing apartment owners, however, so it didn’t document the issue in detail.

Our new research project will examine just how prevalent building defects are, the reasons they occur, and how strata-titled housing can be improved.

While the research will focus on Sydney, we hope it is a step towards changing planning and development policies to ensure better quality apartment buildings nation-wide.

Increasing inequality

A system allowing defective apartment buildings not only creates huge financial and emotional stress for residents but much wider economic and social risks.

Poor building practices undermine confidence in the multibillion-dollar construction industry, the strata management industry and in the planning system.

They also contribute to inequality. This is because apartment residents are more likely to be younger, renting, on lower incomes, and from non-English speaking backgrounds.

Amid growing concerns about the widening gap between housing “haves” and “have nots”, there is renewed political interest in housing policy. Certainly this is a crucial issue for governments to tackle, but it goes beyond a focus on housing supply and prices. Addressing quality must also be a priority.

At the same time, we also need to step back and reconsider how we do compact-city planning more broadly – including the roles governments and the private market play. With two-thirds of us now calling our biggest cities home, we need to have a serious public conversation about what we want our cities to be and how we can best achieve those goals.

We can’t afford to ignore the growing evidence that our cities are cracking under the strain. Because like the Opal Tower owners, we’re all going to bear the cost when things go wrong, and we’ll all have to live amid the wreckage.The Conversation

There are lessons to be drawn from the cracks that appeared in Sydney’s Opal Tower, but they extend beyond building certification

Posted by on January 11th, 2019 · Construction, Government, Guest appearance, Housing conditions, Sydney

By Geoff Hanmer, Adjunct Lecturer in Architecture, Univeristy of NSW, Sydney. This article is republished from The Conversation under a Creative Commons license. Read the original article.

The reasons for the cracked concrete that triggered the evacuation – twice – of residents from Sydney’s Opal Tower over Christmas and the New Year are unknown and will take time to properly establish. Many commentators are jumping to the conclusion (yes that includes you, Senator Carr) that the problem is the result of the privatisation of building certification. Instead of being done by government or council inspectors, certification is now done by private contractors engaged by the developer.

It might well be a contributing factor, but what went wrong at Opal Tower is is much more complex than that. Making certification a government responsibility again won’t solve it.

Opal is unusual. Very few residential buildings in Australia have ever been evacuated due to construction defects, and fewer still because of structural cracking. The vast majority of construction defects in multi-unit residential buildings are waterproofing failures. Rather than creating short-term alarm, they create long-term misery. Because misery does not generate headlines, the problem of quality in multi-unit housing continues to be ignored by governments.

Most strata buildings are defective

Strata title allows each resident to own the space in which they live as well as a share of the common property including pipes and walls. It’s the way apartments are usually sold after they are developed.

We don’t have definitive, current data on the extent of defects in strata title buildings. Researchers from UNSW’s City Futures Research Centre have begun collecting the information for Sydney. But there are clear indications that defects are significant and widespread.

A 2012 study by City Futures surveyed 1,020 strata owners across NSW, and found 72% of all respondents (85% in buildings built since 2000) knew of at least one significant defect in their complex.

In 2017 a City of Sydney survey identified defects and maintenance as the top concern of owner occupiers of apartments, along with short-term letting through organisations such as Airbnb.

Unfortunately for those keen to leap to conclusions about certification, studies showed the same thing back in the early 1990s when certification was largely in the hands of local governments. In fact, studies have found the same thing ever since speculative housing became common in Australia, from the end of World War One.

In fact, ever since speculative housing development and investment has become common (after World War I in Australia), residential construction defects have been a concern both here and overseas.

The market for residential buildings is extremely competitive, and controlling the cost of construction is one of the key factors in making a profit. Sometimes, the urge to maximise profit dominates to the extent that both short and long-term construction failures are inevitable.

It’s the consequence of cost control

There are, of course, reputable developers and builders, but reputation usually finishes last, undercut by less-reputable players who produce buildings that are slightly cheaper.

Defects in single-storey speculative houses with pitched roofs are probably just as common as defects in multi-unit dwellings with flat roofs, but they are much easier to fix because the houses are close to the ground and no strata committee is involved.

They are also much easier to find; a competent building inspection initiated by a purchaser is normally enough to protect the buyer. On the other hand, a building inspection of a single unit in a multi-unit development is highly unlikely to find defects which are located elsewhere in the common property of a building.

There are 653 apartments in the Meriton-developed Regis Towers, for example, which was the subject of a long-running legal action for defects.

Intervening at certification is too late

The only practical way to make multi-unit dwellings a good investment for the residents and a decent place to live is for government to take a pro-active role in driving quality throughout the design and construction process, not just at the end when the building is certified for occupation, or at the beginning when it gets a development approval.

It is a simple reality that no other actor in the construction process has the capacity to take this role. It is also simpler and cheaper to build in quality than to rectify defects.

Often, a $1 detail realised for fifty cents will cause endless grief and cost thousands of dollars to fix.

Reducing the amount of rectification required will improve sustainability outcomes by containing the amount of embodied carbon incorporated in the building.

If the building performs well, it will have a longer life and that will reduce the need to eventually replace it with a new building; again saving materials and improving the outcome for embodied carbon. It is worth remembering that 20 million tonnes of construction and demolition waste are produced in Australia each year.

Governments have been reluctant to intervene early

Governments have as good as ignored the problem of defects in multi-unit residential construction even though they have been aware of it for years.

This is particularly concerning because the state governments in NSW and Victoria have been busy spruiking this type of accommodation as the solution to the pressures of rising populations in Sydney and Melbourne. Given this, the protections for apartment owners under existing legislation are ludicrously slight.

Unfortunately, compliance with the National Construction Code (NCC) in its current form is no guarantee. There are so many ambiguities and grey areas in the NCC and in the way that it is applied that it is a guarantee of almost nothing, particularly when it comes to waterproofing.

A simple example is the construction of balconies with flat slabs, which is perfectly acceptable under the NCC. The floor slab is constructed as a single plane from the interior to the exterior of the building with the waterproof barrier at the balcony being provided by a masonry wall or a concrete ridge on top of the slab.

This design almost always leaks within a few years. The reliable solution is to cast the slab with a step, but this is more expensive and as a consequence is rare. Cut-price membranes under tiled terraces are also common, causing leaks, mould and misery, despite arguably complying with the provisions of the NCC.

Fortunately, there is plenty that government could do to improve quality of multi-unit construction without affecting prices much.

Five stars. Information could drive standards

One clear way forward is to make the construction quality of a building more transparent to buyers.

This could be achieved by introducing a similar sort of quality assurance scheme to the one government runs to improve safety in cars; a five-star rating.

People are free to buy a two-star car, but for obvious reasons, not many do, even if they are cheap. Similarly, it is unlikely that many people would buy a two-star unit.

It would be perfectly possible to star rate multi-unit housing for construction quality using an independent assessment body against a transparent set of criteria.

It’s been tried before

Such a quality assurance scheme was introduced by the now defunct Building and Construction Council (BACC) in NSW during the 1990s, but unfortunately foundered due to a lack of funding and will from Bob Carr’s government. This was a pity, as the scheme was designed to drive quality through the whole of the building process, from design to completion.

It still provides a perfectly valid model for a policy that would actually do something to improve multi-unit construction quality at a cost which is minimal in relation to the value of the benefits produced. If a building is built correctly in the first place, then owners will not need to rely on shonky fly-by-night builders and developers for rectification works nor need to claim against complex insurance policies.

If the NSW and Victorian governments are serious about having a greater proportion of people live in multi-unit developments, they have a responsibility to do something about their quality before we are left with a overhang of misery, leaks and failures. Just ask the residents and owners of Opal Tower.The Conversation

Labor’s housing pledge is welcome, but direct investment in social housing would improve it

Posted by on December 19th, 2018 · Affordability, Affordable housing, Finance, Government, Guest appearance, Housing, Housing supply

By Julie Lawson, RMIT University and Laurence Troy, UNSW. This article is republished from The Conversation under a Creative Commons license. Read the original article.

Despite recent falls in the housing market, housing costs and indebtedness bite deeply into household budgets, especially at Christmas time. Just over 433,000 households confront housing stress and homelessness every day across Australia. They represent the current shortfall of social housing.

If Christmas offers a moment for reflection, ask yourself what should our resolutions be for the housing market? What should we expect our governments to do about it?

In this article, we look at this week’s major statement on housing policy from a key contender to lead Australia’s next government – made by Bill Shorten at the ALP national conference.

We applaud the principle of fairness and the ambition of the ALP policy. We are less supportive of the reliance on for-profit investors, market rent mechanisms and land grabs. Our research shows direct government investment in social housing is ultimately far more efficient and effective than subsidising investors in the long term.

So what is Labor’s policy?

Shorten’s announcement also pledges reform of tax concessions that are driving inequality between households and investors. However, Labor recognises that this might not be enough to tilt the balance in favour of low-income households, and directing the savings from these changes into housing programs is a welcome move.

Labor proposes to subsidise investors in affordable rental housing, much like the Rudd government’s National Rental Affordability Scheme (NRAS). Labor would offer an $8,500-a-year subsidy over 15 years to investors who build new homes for low-income and middle-income households to rent at an “affordable” rate – 20% below market rent.

Starting modestly, the program aims to produce 20,000 affordable units over three years, building to a much larger target of 250,000 dwellings over ten years.

State governments would also be required to get on board through partnership agreements, as they have done in the past, providing land and other forms of co-investment. Hefty stamp duty revenues in recent years should make this easier for the states.

While Labor’s targets appear high by recent standards, Commonwealth and state governments directly funded the building of 9,000 public housing dwellings each year for the better half of the 20th century – until 1996. Annual production is now down to 3,000 dwellings. That’s not even enough to maintain the existing public share of housing.

Since the mid-1990s, a preference for outsourcing social responsibility through private rental providers and indirect rental support payments has dominated public policy. The ALP’s subsidy-based policy continues this trend.

The proposal centres on maintaining returns to investors at levels that encourage investment. As our previous research has shown, over the longer term this increases cost per dwelling. The question remains, as it did under the NRAS: who are we trying to subsidise here, the investors or the tenants, and is it really equitable and effective?

What are the alternatives?

Previous work has shown that NRAS-type schemes offer most benefit to new affordable housing developments when the funds are directed to not for profit organisations, rather than “leaking” out to the for-profit private sector. The advantages of this approach include:

  • subsidies are retained within the affordable housing system
  • benefits are directed to regulated not-for-profit developers with a social purpose
  • the benefit is stretched out over a longer time, meaning government investment does not expire after a set time.

In the UK, a lack of direct conditional investment and weak definitions of affordability led to an 80% decline in social housing production. Without public equity, recurrent operating subsidies have no influence on design quality or ongoing impact after the expiry of providers’ obligations – or their cancellation. Yes, they can be switched on and off like a tap – as happened in 2014 with the NRAS.

With good design, a new scheme could overcome some of these deficiencies. Labor promises to provide lower annual subsidies than NRAS but for longer – 15 rather than 10 years – adding up to at least $127,500 from the Commonwealth for a tenancy to be offered at below market rents. It’s a substantial commitment.

Yet if this level of support was invested up front to build dwellings, rather than provided as an annual operating subsidy, it would make a substantial and enduring contribution to Australia’s housing needs. This is not only socially responsible, it can drive green innovation and is also more financially responsible too.

The only thing that stands in the way is the narrow public accounting doctrine that privileges day-to-day expenditure over long-term investments. This is something that, in the UK, even the Treasury and the National Audit Office are learning to overcome after the painful experience of the Private Finance Initiative.

How much more cost-effective is direct investment?

If equity and fairness are to be the yardsticks of policy, age pensioners, people with disabilities and low-paid workers should be the focus of our deepest support. Our AHURI research has established the level, type and location of investment required to meet the needs of 433,000 low-income households in housing stress or homeless across Australia. The current market offers no affordable or secure options for them.

Our research also compared the cost of subsidising investors versus direct investment by government. Our modelling of costs and review of international experience provide evidence that direct investment is far more efficient and effective in the medium and long term.

Capital funding model.
Lawson et al, 2018, Author provided
Operating subsidy funding model.
Lawson et al, 2018, Author provided

Thus, we argue for more direct investment in social housing, strategic use of efficient mission-driven financing and retained investment via public equity and public land leases.

Recognition of the need for national leadership and policy reform is growing. After backpedalling, the Coalition government moved forward in 2018 to establish, with cross-party support, the National Housing Finance Corporation. This mission focused public corporation will soon channel lower-cost financing towards regulated not-for-profit housing. Of course, financing is debt and not quite the same as funding.

The Australian Greens have yet to announce their policy but an outline suggests a commitment to invest in social housing and establish a federal housing trust.

The ALP’s proposals are framed in line with the laudable principle of fairness and are a work in progress – rather than mission accomplished. Overcoming the shortfall of affordable and secure housing will require purposeful Commonwealth and state government funding, mission driven financing as well as land policies to make housing markets fairer for all.The Conversation

Julie Lawson, Honorary Associate Professor, Centre for Urban Research, RMIT University and Laurence Troy, Research Fellow, City Futures Research Centre, UNSW


Shorten places housing at the centre of the 2019 election

Posted by on December 18th, 2018 · Affordability, Affordable housing, Government, Housing, Housing supply

With his weekend announcement of a $6.6 billion affordable rental construction program, Bill Shorten has dramatically reinforced Labor’s emphasis on housing as central to the party’s 2019 election policy pitch. The initiative, Labor’s first significant housing investment pledge in four federal elections, aims to help qualifying low-to-moderate income earners increasingly squeezed out of urban housing markets. It builds on Chris Bowen’s vow, ahead of the last federal contest, to restrict landlord investor negative gearing tax handouts to those helping to expand supply through newly-built housing acquisition.

Now, Labor is re-committing to its 2016 investor landlord tax reform plan and to a rental supply program partly financed by the resulting tax savings. In combination, these moves start to redirect what is effectively a form of housing subsidy (negative gearing and Capital Gains Tax discount) towards a targeted and highly justifiable end: expanding the supply of good quality rental properties reserved for essential service workers and other similarly eligible applicants.

Importantly too, Shorten’s new housing program is far removed from the small-scale gimmick initiatives that have become so familiar in this policy area. His claim that this would be the largest national housing program since World War 2 is no exaggeration. Since public housing construction flatlined following 1997 Howard Government cuts the only measure at scale has been Kevin Rudd’s 2008 National Rental Affordability Scheme (NRAS). But, with its initial target of 50,000 units, NRAS was small beer compared with Shorten’s 250,000-in-a-decade pledge.

The need to crank such an operation into gear means it will necessarily start fairly small, generating a targeted 20,000 construction starts in the next parliamentary term. But this needs to be seen within the current context where annual public housebuilding (often involving the replacement of obsolete homes) equates to only around 3,000 dwellings.

With the aim of generating 250,000 homes over ten years the Shorten program will need to be delivering close to 30,000 annually by the time it really hits its stride in the mid-2020s. Justifying his rhetoric, this would far exceed the output achieved in the mid-twentieth century heyday of public housebuilding. Equally, though, in modern Australia it would represent only around 10-15% of total residential construction – proportionately similar to public housing in the early post-war period and well below the present-day subsidised rental output of some European countries (including the UK, Finland, France and Austria).

So, yes, this is a big program – but how far would it actually address need? In our recent research we estimated a current shortfall of over 400,000 homes affordable to very low-income Australians – people who are actually homeless or are low earners paying rents so expensive that they are forced to forgo basic necessities. Even with steadfast political will and commitment to the necessary social housing investment, resolution of this situation would take decades to achieve. The required program, must therefore also account for the newly arising need projected to emerge over such a period. On this basis we estimated that – without other major changes in market conditions or policy settings – this would call for a 20-year program to deliver over 700,000 social rental properties (over 350,000 in a decade).

While somewhat lower than our needs estimate, Shorten’s number is arguably getting close to the same ball park. The bigger question is exactly how ‘affordable’ the Labor program homes would be. On this, Shorten’s speech was explicit, designated federal funding will enable rents to be set at a 20% discount on market levels – or, as he put it, a saving for a family paying an average private sector rent of ‘up to $92 per week, every week of the year’. That will help in reducing rental stress (facing an unaffordable rent) that now affects 44% of low-income tenants (over 50% in NSW). But the new homes generated under the program will be affordable to very low-income earners only if construction and land costs are underpinned by additional subsidy beyond what would be federally supported.

This is where the states and territories must be incentivised and cajoled to come to the party. By matching Commonwealth support through discounted public land, through cash subsidies and through obligatory developer contributions (via the planning system), state and territory governments can enable Shorten program homes to be rented out at levels affordable to those reliant on minimum wage employment or welfare benefits. Indeed, these kinds of investment contribution are envisaged in the Labor statement. But unless they happen, to a much greater extent than achieved under the Rudd NRAS initiative, the program will be of only indirect assistance in tackling Australia’s growing homelessness problem and in cutting the huge queue of social housing applicants.

Referencing the current government’s – albeit modest – input in this space, Labor envisages its new initiative as complementing the low-cost financing recently enabled through the National Housing Finance and Investment Corporation (NHFIC). This facility, established under Scott Morrison in his Treasurer role, should channel private investment to not-for-profit housing providers otherwise reliant on higher cost bank finance. Unless complemented by government subsidy, however, the NHFIC is likely to be something of a white elephant. With Shorten’s speech, Labor has now upped the ante here. The challenge for Prime Minister Morrison is to respond with an election pitch of his own that includes an affordable rental funding commitment. Otherwise, his contribution to this policy area as Treasurer will have been futile.

Australia needs to triple its social housing by 2036. This is the best way to do it

Posted by on November 15th, 2018 · Affordable housing, Demographics, Finance, Government, Guest appearance, Housing, Housing supply, Social housing

By Julie Lawson, RMIT University; Hal Pawson, UNSW; Laurence Troy, UNSW, and Ryan van den Nouwelant, Western Sydney University. This article is republished from The Conversation under a Creative Commons license. Read the original article.

Australia needs to triple its small stock of social housing over the next 20 years to cover both the existing backlog and newly emerging need.

That is the central finding of our new research report on the housing infrastructure needs of low-income earners, published by the Australian Housing and Urban Research Institute (AHURI). By our reckoning, 25 years of inadequate investment has left Australia facing a shortfall of 433,000 social housing dwellings. The current construction rate – little more than 3,000 dwellings a year – does not even keep pace with rising need, let alone make inroads into today’s backlog.

The report also shows that Australia needs to avoid overly complex private financing “innovations”. These have proven ineffective elsewhere and were recently abolished by the UK Treasury.

Our modelling of household need and procurement costs shows that direct public investment, coupled with more efficient financing through the National Housing Finance Investment Corporation, is the best way to tackle this policy challenge. Compared with subsidising the operating income of a commercially financed program, the lifetime cost of the first year of house building is A$1.6 billion less. That’s a 24% saving to the public purse.

Lack of investment takes its toll

From 1945, state and territory governments, financially supported by Canberra, maintained public programs that built 8,000-14,000 dwellings a year for half a century.

From 1996, however, social housing largely slipped from the Australian government agenda. Dedicated ongoing funding to states and territories was at “starvation levels”. Public house building plunged to today’s residual output, except for a short-lived GFC-stimulus-funded recovery from 2008-11.

How do we estimate the level of need?

Our analysis quantifies both Australia’s housing need “backlog” and the “newly emerging” need from population growth over the next 20 years. It conservatively calculates backlog need as comprising two elements.

First, it considers those who are homeless now. The 2016 census counted 116,000 homeless people across Australia. Recognising that some would choose not to live alone, we estimate that our homeless population implies a need for about 47,000 extra dwellings.

Second, our analysis considers the group whose housing needs are not being met by the market. These households are on very low incomes (excluding student households), in private rental housing, and in rental stress – where rent is more than 30% of their earnings. If you are on a very low income, housing costs of this order mean going without other essentials.


Collectively, these components imply a current backlog of 433,000 social housing dwellings.

Newly emerging need will expand the shortfall to 727,000 dwellings by 2036. This factors in expected population growth and the current share of social housing. It assumes no improvement in private rental housing affordability.

How achievable is a building program of this scale?

Fixing this problem – both the backlog and newly emerging need – calls for a major program of social housing construction. This is needed to expand the national social housing stock to nearly three times its 2016 size by 2036.

Simply preventing the existing problem from getting worse calls for nearly 15,000 extra dwellings a year to be built. That’s a little over 290,000 homes over the next 20 years.

To eliminate the backlog as well would require an annual program averaging 36,000 units. This would need to begin gradually to build capacity and avoid inflating costs.

This would represent around a tenfold increase in current social housing construction rates. The output would be similar to the 14% public housing share of Australia’s total house building in the decade to 1955.

For comparison, housing providers with a social purpose today account for 20-31% of all house building in the UK, Finland, France and Austria, and much more in some Asian countries such as Singapore. England’s not-for-profit housing associations, for example, completed some 42,000 homes in 2017-18, out of 161,000 homes built in total.

What will this cost the government?

What would be the price tag for such a program? And what’s the best way for government to provide the necessary support?

To answer the first question, we identified both the social housing need, described above, and the land and construction costs across 88 regions of Australia. Different regions have different land costs and building forms, such as detached, medium and high-rise dwellings. Not surprisingly, the modelled unit procurement costs vary substantially, from A$146,000 in remote South Australia to A$614,000 in parts of Sydney. We then calculated the price tag across the country.

To work out the cost to government, and answer the second question, a couple of important assumptions are made.

The first is that social housing need should be met in (or near) the places where it arises. While skewing the building program towards less well-located places could accommodate the need more cheaply, it is in our view essential to avoid such a “ghettoisation” model.

Second, while tenants can help cover the costs through their rent, to be affordable that rent will service only a modest amount of debt. As the federal Treasurer’s own advisory committee acknowledges, therefore, the public purse must bear most of the development cost.

No amount of “innovative” procurement or financing will yield a government “free lunch” as the UK’s National Audit Office evaluation of private infrastructure financing experiments demonstrates.

The five investment scenarios

We examined five contrasting “investment pathways” for delivering a program that builds social housing on the required scale. The basic choice is between a capital grant model (subsidy paid up front) and a revenue subsidy model (annual payments underpin debt repayments and operating costs).

We calculate that the cost of the first year of the program would total A$5 billion under a capital grant approach. A private debt-financed approach, with government support through revenue subsidies, would cost A$6.6 billion. This is after discounting costs incurred in later years.

Thus, direct investment would save Australian governments 24% on average.

So while governments tend to favour “financial innovation” options that push costs into the future, capital grant funding is the rational investment pathway.

Providing enough housing for low-income earners is a growing policy challenge. With rising homelessness and housing stress in recent years, this research quantifies the scale of that challenge and identifies the most cost-effective investment pathway to its resolution.

The Conversation


Who wins and who loses when platforms like Airbnb disrupt housing? And how do you regulate it?

Posted by on November 8th, 2018 · Affordability, Airbnb, Cities, Government, Housing, Housing supply, International, Law, Marginal rental, Private rental, Sharing, Sydney

By Laura Crommelin, Chris Martin and Laurence Troy (City Futures Research Centre, UNSW Sydney) and Sharon Parkinson (Swinburne University of Technology). This article is republished from The Conversation under a Creative Commons license. Read the original article.

Short-term letting platforms like Airbnb are changing property owners’ and investors’ views and behaviour in the Sydney and Melbourne rental markets. These changes are directly affecting housing availability in localised areas, especially the inner city.

Our research for AHURI is the first major study to combine analyses of the geography of Airbnb in Australia’s two largest cities. This included detailed empirical research into Airbnb hosts’ motivations, and the regulation of short-term letting in Melbourne, Sydney and cities overseas.

Our findings suggest current owners are likely to benefit from the impacts of short-term letting platforms. Prospective owners and tenants may be disadvantaged.

Who feels the impacts of Airbnb?

Short-term letting is not a new economic activity. Hosts sharing their primary place of residence – such as taking in lodgers, offering bed and breakfast, and so on – have long been a feature of urban housing markets.

However, short-term letting platforms have fundamentally changed the scale of this activity. These platforms have made it more efficient and less risky, and greatly reduced the search costs.

Airbnb listings for Sydney and Melbourne (Aug 2015–Feb 2018)
Authors’ analysis based on data

Existing research on these platforms and the “sharing economy” suggests the growth in short-term letting affects different housing market participants in very different ways.

Our research shows that existing owners will likely benefit over time from the rise of these platforms. That’s because these sites offer a flexible means of monetising housing wealth to allow further consumption.

For prospective home owners, however, entering the market may become more difficult, as short-term letting earnings may be capitalised into higher purchase prices.

For tenants, there are few benefits. The rise in short-term letting is likely to cause greater uncertainty for prospective tenants seeking long-term rentals. There are risks and restrictions that limit the ability of current tenants to use the platforms to sublet.

Where does Airbnb have the most impact?

Despite some growth in more suburban areas, the spatial impact of Airbnb in both Sydney and Melbourne remains concentrated in high-demand inner-city areas. In these areas, two factors – decreasing bond lodgement rates and increasing property vacancies – point to the likelihood that short-term letting is removing properties from the long-term rental market. This in turn is contributing to increasing unaffordability.

The impact of Airbnb listings on rental housing markets has been very localised in Sydney and Melbourne.

In Sydney, Darlinghurst, Manly and the eastern beach suburbs of Bondi, Tamarama and Bronte have been the focus of Airbnb activity. In these areas, Airbnb listings account for between 11.2% and 14.8% of rental housing stock.

Listings as a proportion of rental dwellings (ABS 2016) in Sydney.
AHURI, Author provided

In Melbourne, central Melbourne, Docklands, Southbank, Fitzroy and St Kilda have been the focus of Airbnb listings, accounting for between 8.6% and 15.3% of rental housing stock.

Listings as a proportion of rental dwellings in Melbourne.
AHURI, Author provided

However, the impacts of Airbnb on rental supply have been offset by:

  • substantial growth in dwelling numbers in key areas of Melbourne
  • large numbers of dwellings that are otherwise outside of long-term housing supply, including many unoccupied dwellings.

What motivates Airbnb hosts?

This research offers a new Australian perspective on Airbnb host motivations and decision-making, drawing on some of the most extensive empirical work to date.

Financial motivations were bolstered by the fact that hosting brings additional intrinsic benefits. These include the opportunity to connect with diverse people, and a sense of pride associated with being a good host. For many hosts, the flexibility to use the property occasionally, while also using it to earn money, was a significant advantage of short-term letting over long-term rental.The main motivation for hosting on Airbnb is to earn extra money from housing assets, in a way that is perceived to minimise risk. In some cases this income is tied to an immediate need for a buffer against housing insecurity. But this is not the case for many hosts.

Some hosts have converted long-term rental properties into permanent Airbnb listings. However, some of these will likely return over time due to a perception of declining profitability, a greater workload associated with short-term letting, and the professionalisation of Airbnb. On the other hand, some hosts are motivated to expand their Airbnb portfolios with new acquisitions.

For other hosts, flexibility is key. Without Airbnb they would prefer to keep dwellings vacant rather than rent out long term. This points to other motivations for owning investment property than achieving maximum rental income.

Approaches to regulation

We reviewed regulation in Melbourne, Sydney and nine cities overseas in which short-term letting is a significant issue. Our review found three broad approaches to regulation:

  • a permissive approach – short-term letting is mostly allowed without prior permission or notification
  • a notificatory approach – short-term letting is mostly allowed, provided the host first notifies an authority (that is, there is no specific decision by the authority).
  • a restrictive approach – short-term letting is mostly banned, or allowed only where an authority gives specific permission.

Melbourne and Sydney have both recently adopted a permissive approach, with some limitations. However, we believe the notificatory approach is best adapted to managing new aspects of short-term letting in the Airbnb era.

Policy implications

The research findings suggest four ways to strengthen policy responses to short-term letting:

  • a registration system for listings, to help with enforcement
  • additional localised strategies to limit short-term letting and ensure adequate affordable rental supply in areas of intense activity
  • the integration of measures to limit commercial-style short-term letting within a broad-ranging housing policy, which reflects the changing nature of housing markets and the complex drivers behind these shifts
  • an ongoing research agenda into short-term letting across our cities and regional areas and its impact on housing and urban planning outcomes, supported by access to detailed, up-to-date data.

This article has been updated to include additional graphics from the AHURI report.The Conversation

Laura Crommelin, Research Lecturer, City Futures Research Centre, UNSW; Chris Martin, Research Fellow, City Housing, UNSW; Laurence Troy, Research Fellow, City Futures Research Centre, UNSW, and Sharon Parkinson, Senior Research Fellow, Centre for Urban Transitions, Swinburne University of Technology


What we need for a national settlement strategy that works

Posted by on October 19th, 2018 · Cities, Demographics, Migration, Planning, Regions

There is a growing cacophony of calls for a national settlement strategy. What does that mean? Are we all over the exhaustion of daily congestion? Are we fed up with promises of infrastructure that fails to catch up with the growth of our cities? Is it about migrants and the number of those apparently crowding our cities? Or is it about a regional economic growth plan that guides new investment to places in Australia that want and need it?

This week the Planning Institute of Australia launched its most recent report, Through the lens – the tipping point at Parliament House. It joins a recent report by the Standing Committee on Infrastructure, Transport and Cities, Building Up and Moving Out, to advocate for a national settlement strategy. Both reports argue that it is time to look differently at how Australia will accommodate future population growth.  

Continuing as we have been doing, and allowing unmanaged growth to settle in our big cities is already diminishing our valued way of life. The debate may turn ugly if we don’t address these issues soon.

For some commentators, the only response to untrammelled growth is to stop it. The debate in Australia has frequently fallen back to that solution. Bob Carr, when premier,  famously announced that Sydney was full and closed for new migrants.  Even current premier Gladys Berejeklian has said “we need to take a breath” on such high numbers of migrants. 

Migrants critical to tax base to pay for health care and pensions

What we don’t talk about is how critical the taxation paid by new migrants is to government revenue needed to support an ageing population with health care and pensions. So the conversation should not be “no more migrants” but should be where can our population and new jobs be located in order to retain the liveability of our big cities? 

Recent political discussion has raised the option of “forcing” migrants to settle in small centres away from the big cities. 

Last year 140,000 new settlers arrived in Sydney. Even if half of them were encouraged to settle elsewhere, that still leaves a large number adding to the growth of Sydney.  

And 70,000 new settlers are unlikely to find employment in small inland centres without a significant program of employment development in those centres. 

And there’s the challenge, a vicious circle: settlers won’t happily go elsewhere without prospective jobs and jobs won’t go elsewhere without the potential of skilled employees.  

There’s another challenge with settling small towns. Work recently completed in the Orana region (Dubbo and surrounds) found that basic facilities were needed to make that centre settler ready. Priority issues were telecommunication connectivity, adequate hospital facilities, water for industry, road upgrades to get produce to market, and connectivity with Sydney. 

And the business case for supporting funding of those facilities is unable to compete with big city priorities due to the small number of businesses and residents benefiting. The very model built by Treasury is stacked against the small out of big city centres development.

If we all agree that the settlement of small towns and centres must be supported in order to relieve the population growth pressures in our major cities, then we need to shift priorities and help make those towns settler ready.  

It’s not about where but how

The Standing Committee’s report and the PIA report released this week call for a sensible discussion around a national settlement strategy. Both the Prime Minister and the Opposition Leader have flagged their partial support for such an idea. But, given the issues highlighted above, it’s not about where, it’s about how. 

To make small towns settler ready significant investment in all kinds of infrastructure is needed and a program of incentives to encourage businesses and industry to relocate and to grow must be undertaken. 

This can be matched with settlers from our migrant intake and our existing residents who wish more affordable housing, and a great community lifestyle. But to tie all that together, we need to create much better access between those centres and the big city. Nothing will transform that access better than a fast train service for both freight and passengers. 

Forcing any of our population to head away from the big city is doomed to failure. We must add quite a big carrot to the stick. It must have bi-partisan support to give business the long term confidence to locate and to create more jobs. 

And it must be supported with essential services and a fast train link back to the markets and ports in the big cities and to families and entertainment back in the city.

The sense of community and affordable lifestyles in smaller towns are often significantly better than in the big cities. But they must be supported by essential services, jobs and fast links back to the big smoke. 

We need a national settlement strategy, but we need that strategy to focus on “how” not “where”.  And we need it as soon as possible before the debate focuses on all the wrong issues.