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

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Why western Sydney is a magnet for investors

Posted by on February 19th, 2020 · Demographics, Finance, Housing, Private rental, Sydney, Tenancy
Western Sydney is popular with investors but most of these investors do not live there. Photo: Brendan Esposito

By Hal Pawson and Chris Martin, City Futures Research Centre. Originally published at Domain.

With the latest ABS statistics indicating a fourth straight quarter of rental investor housing finance growth, it appears that Australia’s private landlords are rediscovering a taste for house buying.

While relatively modest compared with the investor surge of a few years ago, this is a trend which will likely help push the Sydney and Melbourne housing markets towards new highs during 2020.

Because of their house price implications, the ups and downs of housing finance always attract attention in the Australian media. However, the bigger and longer-term story of Australia’s investor landlord phenomenon and its housing market impact is rarely told.

Our newly published research shows how landlord investors in Australia’s recent rental housing boom have preferred certain types of locations and certain forms of housing. These preferences matter, because they contribute to local housing market and neighbourhood change that is remaking the social geographies of our major cities.

Socio-economically disadvantaged areas of metropolitan Australia – typically middle and outer suburbs with below-average property values – have a special attraction for investors, most of whom live elsewhere.

In an age of increasingly savvy landlords empowered by online searching and informed by a burgeoning property investment advice industry, the traditional pattern of amateur landlords favouring property purchase in familiar local neighbourhoods may be breaking down.

Who buys rental properties in western Sydney?

Our research looked closely at nine disadvantaged western Sydney suburbs recording unusually large numbers of rental property acquisitions over the boom period of 2011-15. In our sample of 244 recent investors, only one in seven lived locally, while almost one in five lived at least 40 kilometres away.

Most of the purchasers were experienced landlords. Nearly two-thirds involved landlords who already owned rental property, with one in six homes acquired by owners already owning at least five investment properties.

Denham Court.
Only one in seven investors who buy in western Sydney actually live there. Most live outside of the area. Photo: Janie Barrett

We also saw evidence of portfolio-building among the first-time investors too: more than one-third of them had bought a second property in the time between their first investment and our research survey.

Most of the investors we surveyed owned their own homes, but a remarkably large minority did not. One in 10 in our survey lived in rental housing themselves; another one in seven were living with parents or others. Strikingly, among first-time investors, more than a third rented their own home, lived with parents or shared with others.

The reasons they buy in western Sydney

Unsurprisingly, the most important factor attracting investors to buy in western Sydney was the perceived potential for capital gain – more than 80 per cent in our survey nominated this as highly or extremely important in influencing their property and area choices:

“I’m always looking at properties, looking at areas of growth, looking for why places would grow in value, how to improve the value so if I renovate this property here what [sale price] can I expect to achieve … ” [Financial planner, owner-occupier 29 kilometres away, fourth investment property]

First-time investors, however, were more likely to nominate “affordability”: more than two-thirds of this group choose to buy in western Sydney substantially on the basis that this is simply the cheapest part of the city:

“My preference would have been closer to [home suburb] Parramatta [but] … too expensive”  [Personal assistant, owner-occupier 26 kilometres away, first investment property]

We also saw evidence of a secondary dwelling or “granny flat factor” drawing investors to the large suburban blocks of western Sydney.

Private open space can make a granny flat more desirable as a rental.
Western Sydney investors frequently look out for properties they can add a granny flat to, increasing their rental yield.

Strikingly, a quarter of the homes acquired for rent in the study areas between 2011-15 included a secondary dwelling. Since the proportion of all houses in these areas with granny flats will be far lower than this, it suggests a purposeful strategy to seek out such properties.

Moreover, many landlords quickly added such buildings to newly acquired dwellings. The scope for site intensification of this kind was clearly important for many:

“We wanted something that allowed for the granny flat build, and also a land size that met current council regulations for dual occupancy to allow for future development [to add resale value probably involving sale with Development Approval]”  [Teacher aged 45-54, owner-occupier, interstate resident, ninth investment property]

“The block was big enough [to add a secondary dwelling] – another reason we bought it”  [Professional asset manager, aged 55-64, owner-occupier, eight kilometres away, 10th investment property]

The addition of secondary dwellings by investors meant that within five years, the proportion of acquired houses with granny flats had risen from 26 per cent to 39 per cent, expanding total dwellings by approximately 10 per cent.

This strategy is especially popular among experienced investors –  practiced landlords who are willing to take on more debt to increase rental yields.

On the other hand, there is little declared support for “flipping” as an investment strategy: less than one in 10 of our respondents said they intended to sell their recently acquired property in the next five years.

On the contrary, just over half intended to hold the property for at least another 10 years. Just over half, too, intended to buy further properties in the short-to-medium term.

What does this all mean?

First, it seems likely that lower value urban housing markets such as western Sydney will increasingly feature rental (not owner-occupied) homes held by remotely located landlords with multiple agent-managed properties.

Since private rental is the prime source of housing for low-income households, this is likely to compound the 30-year trend of pushing the working and non-working poor towards the metropolitan margins.

Second, to the extent that the “cottage industry” status of landlords justified weak legal protections for tenants, a “business savvy” profile of recent investors justifies a stronger approach.

Suburban roof tops - Generic Sydney suburbs aerial view
Sydney’s western suburbs are likely to become more tenant-heavy in the years to come. Photo: iStock

Investors’ typical lack of a personal connection to the properties means current provisions that readily allow tenancies to be terminated could be tightened, with greater security for tenants.

Third, if properties are remaining in the rental sector longer, or permanently, without a spell in occupation by an owner who makes repairs and improvements for their own comfort, there is an argument that minimum property standards should be more clearly prescribed and actively regulated.

In other parts of Sydney, it is clear that investors have been recently dominating off-the-plan purchases too, generating twin growth poles in the city’s private rental market: high density units primarily in inner city urban renewal locations and low density houses in lower value middle and outer suburbs.

But with high-rise apartment starts now in steep decline, it is likely to be western Sydney that forms the main epicentre of sector growth over the next five to 10 years.

Australia’s housing system needs a big shake-up: here’s how we can crack this

Posted by on February 17th, 2020 · Affordability, Affordable housing, Economy, Finance, Government, Guest appearance, Housing, Housing supply, Social housing, Tax, Tenancy

By Hal Pawson, UNSW; Judith Yates, University of Sydney, and Vivienne Milligan, UNSW. This article is republished from The Conversation under a Creative Commons license. Read the original article.

Despite two years of housing market cooling in Sydney and Melbourne, Australia stayed near the top of the global unaffordability league in 2019. And with prices rebounding in our two largest cities, that status is likely to be reinforced in 2020. Australia’s 30-year housing affordability decline has been among the worst in the developed world.

This problem is fundamentally structural – not cyclical – in nature. Yes, periodic turbulence affects prices and rents. And yes, market conditions vary greatly from place to place. Australia-wide, though, there is an underlying dynamic that – over the medium to long term – is driving housing affordability and rental stress in one general direction only: for the worse.

Certain key factors in Australian housing woes are, of course, far from unique. As we argue in our new book, neoliberal policy dominance and the financialisation of housing have damaged housing system performance in many other countries as well. Similarly, cheap debt has supercharged house prices globally, not just here. And ours is not the only comparable nation where coping with rapid population growth is part of the policy challenge.

But, as we show in our book, over the past 30 years across 18 OECD countries, our market has had the third-biggest fall in house price affordability – and the largest of any major OECD nation.

In Australia, the focus of concern is often on the challenges aspiring first-home buyers face. Although important, this shouldn’t distract policymakers from the bigger policy problem: affordability stress affecting lower-income renters.

Being pushed into poverty by high rents is a serious issue. It affects well over a million Australians. That’s many more than the marginal first-home-buyer cohort.

Source: Private renters are doing it tough in outer suburbs of Sydney and Melbourne/The Conversation

Systemic problems have very broad impacts

Financial regulators and policymakers are starting to realise housing system under-performance doesn’t just damage the welfare of key population groups. It also raises concerns about economic productivity and systemic financial risk.

Even from a narrow “cost to government” perspective, the Australian government should treat current housing system trends as a serious budgetary concern because of impacts on future public spending.

For example, declining home ownership among younger and middle age groups will filter through to older age groups over time. Increasing numbers of older, lower-income, private renters will generate political pressure to boost Rent Assistance and the Age Pension. And pensioner numbers will be inflated if rising numbers of home owners who reach retirement age with mortgages draw on superannuation savings to pay off their debt.

The number of private renters has grown as the proportions of owner occupiers and public housing tenants have fallen.
Vulnerable Private Renters: Evidence and Options, Productivity Commission, CC BY

Why do we need system-wide change?

As we argue in our book, housing policy needs to be much more broadly conceived. It’s about much more than “housing programs”. Indeed, housing outcomes in Australia over the past 25 years have been driven far more by policy on tax, finance and regulation – activities rarely controlled by any department with housing in its title – than by explicit spending on housing or subsidies.

Because housing is a system, any serious attempt to improve housing outcomes must recognise the need for system-wide analysis and transformation.

Micro-measures have been the preferred approach of most Australian governments over the past 25 years. But these often generate minimal net benefit or are even counterproductive.

A national housing strategy is long overdue. And only the Commonwealth can lead this. The Commonwealth and its agencies – not the states – control key instruments driving housing outcomes, especially tax and social security settings, as well as financial regulation.

As national governments recognised in the early 1990s and from 2007-10 – and indeed exemplified by the Turnbull government’s 2018 National Housing Finance and Investment Corporation – the constitutional designation of state and territory responsibility for housing and planning is no bar to this.

What are the priorities for a national strategy?

A key goal must be to discourage speculation in land and housing. This would include a phased restructure of tax settings that incentivise unproductive housing over investment. For example, most housing economists agree investor landlord tax concessions should be wound back and a broad-based land tax should gradually replace stamp duty on housing sales.

The strategy must also aim to increase diversity in the housing market. Expanding the scale of government and non-profit housing provider activity can boost the capacity to better house disadvantaged groups. It will also reduce vulnerability to damaging market volatility arising from the overwhelming reliance on for-profit developers building for individual buyers.

To repair the hollowing-out of housing policy-making capability within governments, the plan should include institutional reform and capacity-building. Both levels of government should have a dedicated cabinet-level housing minister to champion the housing cause across departments. We also need an enduring national agency like the US Department of Housing and Urban Development or the former UK Housing Corporation.

Start small and build up to far-reaching action

Our insistence on system-wide analysis and reform might seem utopian, especially given the current state of Australian politics. There are parallels here to the challenges of climate change: many might ask how much worse things have to get before active policy action becomes irresistible as a bipartisan commitment.

In the absence of immediate system-wide action on housing, we can also point to initial reforms that Australian governments could easily adopt with minimal direct budgetary impact.

State and territory governments could, for example, follow many comparable countries in adopting planning system rules that set minimum levels of affordable housing that must be built within market housing developments.

In the realm of tenants’ rights, other states could follow Victoria in rebalancing residential tenancy laws away from their typically in-built landlord advantage. “No grounds evictions” should be outlawed.

The Commonwealth could restore the pre-1996 rules of its longstanding National Housing Agreement with the states and territories which largely ringfenced federal funding to supply and improve social housing. All governments could commit to delivering a substantial proportion of affordable housing within residential developments on ex-government land. Many industry stakeholders advocate a 30% target.

We see scope for a phased approach: first-step measures could be implemented while building the political consensus needed for more far-reaching actions. To improve affordability and moderate the rising inequities within and between generations, Australia’s housing system must be fundamentally reformed. There is no responsible “business as usual” option.

Housing Policy in Australia: A case for system reform by Hal Pawson, Vivienne Milligan and Judith Yates was published by Palgrave Macmillan this month.The Conversation

 

‘I wouldn’t want to buy even if I had the money.’ The rise of renters by choice

Posted by on February 10th, 2020 · Affordability, Guest appearance, Housing, Tenancy
Image: fizkes/Shutterstock

By Alan Morris, University of Technology Sydney; Hal Pawson, UNSW, and Kath Hulse, Swinburne University of Technology. This article is republished from The Conversation under a Creative Commons license. Read the original article.

The private rental sector has expanded at more than twice the rate of the increase in Australian households in the last two decades. This increasingly diverse form of tenure now houses about one in four of us.

Australia’s lightly regulated private rental sector means the insecurity of tenants is a key factor in why most Australians aspire to own their home. However, despite this insecurity, our research suggests an increase in people choosing to rent for a long time – ten years or more – accounts for a small part of the growth in private renters.

Much of this growth is attributable to middle- and high-income tenants. Especially in Melbourne and Sydney, high housing prices mean saving for a deposit takes much longer than in the 1990s. In the meantime these households are renting for a long time.

‘Who stays put, loses’

In our survey of 600 private renters in different areas of Sydney and Melbourne, we asked: “Many people are renting privately for longer periods (10+ years). Do you think this is a positive trend?”

About a third responded in mainly positive terms. Their main reasons were:

  • renting is more affordable than owning
  • there are fewer worries and liabilities
  • renting is more flexible than owning.

Some questioned the norm of home ownership in Australia.

For a more in-depth understanding, we interviewed 60 long-term private renters in low, medium and high-rent areas in Melbourne and Sydney. Almost all who chose to rent mentioned flexibility as a key advantage.

“Choosers” highly valued the freedom to move or travel at will. Zygmunt Bauman’s concept of liquid modernity highlights the increasing desire for transience. As he explains:

Transience has replaced durability at the top of the value table. What is valued today (by choice as much as by unchosen necessity) is the ability to be on the move, to travel light and at short notice. Power is measured by the speed with which responsibilities can be escaped. Who accelerates, wins; who stays put, loses.

Renters in their own words

Patricia*, who lives in a high-rent part of Melbourne, has always rented.

Well since I came to Australia in 1977, I rented. I didn’t want to buy. Got close [to buying] a couple of times, but changed my mind.

I just travel anywhere and everywhere. I thought […] if you’ve got a house you’re stuck there, and I thought, no. I work hard for my money, so that money that I work hard for is for me, not to have a [permanent] roof over my head. […] Renting has been good for me because I can still do what I want.

Myra lives in a studio apartment in a high-rent area in Sydney and has no desire to own a home. She is single, in her mid- to late 30s, and earns well. The possibility of being asked to vacate did not bother her.

Maybe I’ve been lucky, but every situation has always sorted itself out. You know a lot of people would have freaked out if they had to move out […] It didn’t concern me in the slightest, yeah. I mean not at all. There’s always somewhere to stay. So it suits my lifestyle. I wouldn’t want to buy [a property], even if I had the money.

Leanne inherited a third of a house. Rather than using the proceeds to buy a property, she decided to move to Melbourne’s inner city (a high-rent area) and continue renting.

So I thought rather than put money into a house […] I would invest it and I could travel and go to concerts and live the life I wanted to lead, so that’s basically what I did and I’m still renting.

Pam was renting in a low-rent area in outer Sydney. She felt her situation required the flexibility of renting:

The relationship was rocky and you can’t predict the future, but I knew it wasn’t going to end up in marriage and kids and all that kind of crap […] We were both working, both earning good money and we could have afforded to buy a house between us […] But for me it was like, no. I don’t know where this [her relationship] is going, so no way, I’m not going to put myself in that predicament [having a joint mortgage] and then have to go through court to go, “This is mine, this is yours”, all that crap. But so it was my choice to rent and to stick to it […] I’m not going to rely on anybody else for anything, no way.

Her renter status allowed Pam to make a rapid, clean break.

I just got up one day and walked cos I knew he was going to ask me to marry him the next day, so I said: “I’m just going to go to the shops to get a packet of cigarettes.” I left everything behind. I went for a walk, never went home.

For the families with children who choose to rent long-term, the key reason is it allows them to live in highly desirable areas where they cannot afford to buy. Gabrielle and her partner earn well and live in a high-rent area in Sydney:

Sure it [home ownership] provides you with security and you don’t have that stress of […] having to move. I get that, but at the same time, you know for us, for example, if we wanted to buy we’d be paying four times what we pay at the moment in a mortgage […] It doesn’t really make financial sense to go and do that […] You’d have to live somewhere. So I choose to live in a nice area where my children are [at school].

They also did not want the burden of a large mortgage:

[…] I have no desire to put myself in a position where I have a $2 million mortgage and have to work for the rest of my short life to pay for it […]

Although probably only a small proportion of people choose to rent long-term, this option may be gaining ground. Young, well-paid professionals in particular see the flexibility of private renting as attractive.

Location also seems to be a critical factor. Most of the choosers rented in desirable inner suburbs of Sydney and Melbourne, which would otherwise be inaccessible. An estimated one-in-eight private renters are “rentvestors” who rent where they want to live and buy elsewhere to get a foothold in the housing market.

*All names used are pseudonyms.The Conversation

 

Why adequate and affordable housing matters to productivity

Posted by on January 21st, 2020 · Affordable housing, Cities, Economy, Government, Guest appearance, Housing, Productivity, Social housing

By Wendy Hayhurst, CEO Community Housing Industry Association. Originally published on John Menadue’s Pearls and Irritations.

A growing body of research is demonstrating the adverse productivity impacts of inadequate or unaffordable housing in Australia (and elsewhere).

These include impacts on human capital through the mismatch between the availability of suitable housing and employment, and the distorting impact that high house prices and high rents can have on consumption, savings and investment. Governments at both Federal and State level continue to ignore these impacts to the disadvantage of our economy.

With this year’s bushfire calamity threatening to push Australia’s economy into recession, Treasurer Josh Frydenberg is facing renewed calls for immediate economic stimulus measures. But underlying this situation, as the Treasurer knows, the nation faces a more fundamental challenge in boosting economic productivity, crucial to longer-term wage growth and overall prosperity. As yet, however, officialdom has failed to grasp the reality that fixing our under-performing housing system needs to form part of Australia’s economic productivity solution.

The wider productivity problem is, of course, well recognised both by government and financial regulators. Indeed, in a recent speech the Treasurer noted that ‘Our productivity growth over the last decade has slowed and we cannot simply rely on high commodity prices to boost national income’. He went on to identify labour productivity growth rates as the main culprit – averaging only 1.1% in the last five years (and even lower recently). But although recognising that, in Frydenberg’s words, ‘a key enabler of higher productivity is publicly provided infrastructure’, government continues to adopt a one-eyed perspective on what constitutes ‘infrastructure’ for these purposes – failing to recognise that it is not only roads and ports that should be in the frame here, but also housing.

It was therefore heartening to learn, in 2018, that the NSW Productivity Commission set up at that time understood its focus as including ‘tackling some of the state’s most pressing challenges including the recent deterioration in housing affordability and cost-of-living pressures’. It was heartening because while affordable housing advocates have long argued that inadequate or over-expensive housing is a serious welfare concern, we are now accumulating evidence that housing system dysfunction is also imposing mounting economic costs on Australia.

A growing body of research demonstrates the links between housing and the economy. Concerned about worsening housing affordability in Sydney and its economic productivity impacts across the metropolitan area, a multi sector partnership has commissioned a series of studies on the issue over the past two years.

The first such study ‘Making Better Economic Cases for Housing Policies’ (March 2018) argued that housing’s weighty economic role is largely ignored in Australia, just as in most of our comparator countries. It identified that housing has two types of productivity impact.

The first affects human capital through the mismatch between housing and employment which limits access to jobs and constrains job mobility, thereby damaging labour force participation. This mismatch also imposes health costs which impact on economic performance, with low income renters increasingly concentrated in specific neighbourhoods thus compounding disadvantage.

The second feature is the impact of high house prices and rents on consumption, savings and investment. The housing boom has locked up capital in residential property that adds little to growth and productivity. It has also increased economic instability, as rising housing wealth has tended to lead to more consumption in economic upturns – so-called procyclical spending – amplifying metropolitan economic cycles. This will increase instability and reduce productivity. Beyond this, when rising housing costs capture a disproportionate share of disposable household income there is likely to be a significant hit to broader household consumption.

The second such study ‘Strengthening Economic Cases for Housing Policies’ (Feb 2019) modelled how housing outcomes impact economic growth and productivity, with a particular focus on Sydney. This revealed strong, positive productivity effects from investing in a notional portfolio of 100,000 rental housing units affordable to low income workers and located close to transport, services and jobs.

Over a 40-year timescale, by comparison with a ‘business as usual’ scenario where low-income workers occupy expensive housing distant from employment centres, the cost to government was easily out-weighed by broader productivity gains. Thus, an investment in housing capital subsidy of $7.27 billion NPV would over that period generate $17.57 billion NPV in human capital uplift. Returns of this order would be comparable to most standard infrastructure investments, including transport investments.

There remains much scope to deepen insights on housing system impacts on productivity. Not least the economic consequences of high housing cost burdens experienced by many renters, and newer owners. Further work to quantify these impacts is planned by a partnership of organisations across the housing sector.

So what of the NSW Productivity Commission and its October 2019 discussion paper ‘Kickstarting the Productivity Conversation’ releasedto inform the productivity reform agenda? While acknowledging that urban growth can undermine productivity (e.g. through ‘road congestion, more crowded public transport, more intense use of public land [and] increased pollution’), it was largely silent about housing unaffordability and its impact on productivity. Regrettably, the 2018 announcement suggesting that these issues could be central to the Commission’s agenda has so far proven unfulfilled.

If the Commonwealth and NSW Governments are serious in their shared pledge to restore productivity growth, they cannot afford to ignore evidence of housing system dysfunction and impaired economic performance. A clearer appreciation of the links between housing and productivity would do three things:

· Articulate the urban economic productivity benefits that will inure from well-located housing made available at a price affordable to middle and low-income workers;

· Lead to a broader consideration of the action Government could take to alleviate housing unaffordability (acknowledging that the solutions are linked to household incomes and the feasibility of a market response); and

· Enable a conversation about the relative merits of investing in housing compared to other forms of infrastructure.

It is to be hoped that, in its forthcoming productivity Green Paper, the NSW Productivity Commission broadens its agenda to recognise the importance of housing in this sphere. Such recognition would, if taken to its logical conclusion, result in housing being accorded a far greater priority in government deliberations at both state/territory and federal levels.

Household infrastructure spending: new dashboard launched

Posted by on December 19th, 2019 · Cities, Data, Infrastructure

By Ori Gudes, City Futures Research Centre, and Kim Johnstone, Astrolabe Group.

What do Australian households spend on infrastructure – water and sewerage, energy, transport and telecommunications? And what do they think about infrastructure quality, accessibility and affordability?

A new dashboard launched by researchers at City Futures Research Centre and Astrolabe Group allows users to explore data about infrastructure costs and perceptions in Australian states and capital cities. Available via City Futures’ CityViz page, the Household Infrastructure Spending Dashboard uses the data analytics platforms ArcGIS Online, Map Story and Tableau to present in a new way the analysis reported by the research partners to the Australian Infrastructure Audit 2019.

As well as showing differences between states and cities in average costs and perceived quality, accessibility and affordability, the dashboard allows quick comparisons of different data sets. A number of tools were used together to show infrastructure data in ways that are much easier to access and understand for people who don’t use data on a day to day basis. The dashboard has also allowed us to look at data that couldn’t be included in the project’s original report, in particular differences between capital cities, and dynamically shows trend changes over time.

The dashboard provides information about the following topics:

  • Household Expenditure Survey (HES);
  • Household, Income and Labour Dynamics in Australia (HILDA);
  • Perceptions of the quality, accessibility and affordability of various infrastructure services; and
  • Household Weekly Expense on Water and Sewerage.

The dashboard was a collaborative project between university and private sector researchers, leveraging a diverse range of skills to deliver robust analysis, key insights and new approaches to data visualisation. Seeing information usually presented in long reports in this dynamic format can bring a lot of value to end-users. The collaboration allowed the university to bring its technical expertise to projects that have real life implications, a way of working that we hope to see more of in coming years.

UNSW team members: Dr Vivien Shi, Dr Ori Gudes, Prof Chris Pettit, Associate Prof Hoon Han, and Dr Simone Zarpelon Leao. ASTROLABE GROUP team members: Dr Kim Johnstone, Matthew Ting, and Vanessa Leung.

 

Australian cities pay the price for blocking council input to projects that shape them

Posted by on December 17th, 2019 · Government, Guest appearance, Planning, Productivity, Sydney

By Mike Harris, Lecturer in Landscape Architecture and Urban Design, Faculty of Built Environment, UNSW. This article is republished from The Conversation under a Creative Commons license. Read the original article.

National, state and city governments aspire to increase prosperity through globally competitive and more liveable cities. Through “world class” infrastructure, buildings and public spaces they aim to increase a city’s competitive advantage in attracting investment and talent. Research shows city governments, not states, nearly always deliver these projects overseas. The controversies in the Australian examples are largely the result of excluding local government.

Globally, mixed-use megaprojects have increasingly been seen as vehicles to make cities competitive as well as responding to local transport and housing issues. My research for a forthcoming book, Mixed-Use Megaprojects and the Competition for Capital, examines such projects on government land in Sydney, Melbourne, New York and Copenhagen.

What do Australian cities do differently?

The research examined projects in terms of governance, narrative, urban form, connectivity and public benefit. The findings underscore the argument that state governments lack the structural capacity or nimbleness to manage the subtle interplay of various place-based programs necessary to coordinate enablers of modern competitiveness.

Compared to developments overseas, the Australian examples have several things in common:

  • more property industry influence
  • less strategic coordination with other land assets and transport projects
  • less public benefit outcomes
  • less commitment to legislated planning frameworks
  • less engagement with local knowledge.

The Barangaroo development in Sydney is perhaps the archetype of these patterns.

Despite much controversy over Barangaroo, one thing can be agreed. The poor relationship between the city and state governments has contributed to a loss of trust in planning.

Excluding the city is not good policy

Firstly, this is a skills mistake. The city council has sophisticated capabilities and consistent place-based planning, design and approvals processes. These have been developed over decades.

The city also has established consultation processes and deep experience dealing with a range of stakeholders involved in inner-city development.

When the state intervenes to deliver a project and excludes the city, these processes and their advantages disappear.

Secondly, this is a political mistake. A sophisticated enemy is created that has working relationships with local stakeholders and constituents. With decades of planning work and expert knowledge disregarded, city governments are compelled to scrutinise the process and criticise the state from the sideline.

The City of Sydney appears to be winning the political, if not material, battle of Barangaroo. The lord mayor has outlasted seven state premiers in the project’s lifetime along with numerous measures intended to reduce lord mayoral efficacy.

But the battle is the problem and it’s sure to continue under current patterns of (non)rules. Consider the following examples.

The minister for planning is free to make major changes to the plan without reference to any process. This includes approving the hotel-in-the-harbour proposal even though it contravened state planning policy.

This ministerial power makes projects highly sensitive to political fluctuations. Longer-term planning objectives can be destabilised as a result.

The unsolicited proposal process has been another trust-breaker. Traditionally, government established the need for infrastructure within a metropolitan plan. It would call for tenders from the private sector, then evaluated those tenders in a competitive process. Now private sector participants are encouraged to approach government with development “ideas”.

A prime example involves the Crown Casino complex at Barangaroo. This proposal required major changes to the approved plan. It more than doubled the allowable floor space of the previous hotel-in-the-harbour proposal it had been encouraged to replace to restore trust in planning.

What might city involvement look like?

The Copenhagen City & Port Development Corporation is an arm’s length delivery authority, owned 95% by Copenhagen municipality and 5% by the state. It is responsible for delivering a number of mixed-use megaprojects.

As with all city areas, Copenhagen municipality develops the “Lokalplan” for precincts under standard processes and approves individual buildings and public spaces. North Harbour has been delivered as adopted in 2009.

In New York, a private developer has delivered the Hudson Yards project above state railyards under the city’s standard planning process (ULURP). The state’s involvement is limited to the air rights lease.

This did not protect the Hudson Yards project from criticism. Nevertheless, it went through the lengthy standard consultative process and has been delivered according to the rezoning since 2005.

As an aside, the city governments of both European and US cases have adopted mandatory affordable housing laws. They are now delivering 25% in their megaprojects.

As an indulgence, let’s say we were in Copenhagen or New York. The casino complex, hotel-in-the-harbour, or doubling of the site’s floorspace would require revisiting the city’s Lokalplan or ULURP. This process would include public review and approvals by multiple city government agencies. In Sydney, one person, the state minister, decides on major changes to the plan.

This research shows the approaches needed to improve city competitiveness and fairness tend to be done better by city governments than by state governments. Yet in Australia the state has absolute control of these complex, city-based projects. Whether as part of a new metropolitan sphere of governance or not, it is time to empower local city governments in the transformation of our cities.

 

The Conversation

Your Airbnb guest could be a tenant. Until the law is cleared up, hosts are in limbo

Posted by on December 16th, 2019 · Guest appearance, Housing, Law, Marginal rental, Sharing, Tenancy
Image credit: Daniel Krason/Shutterstock

By Bill Swannie (Victoria University) and Chris Martin (City Futures Research Centre). This article is republished from The Conversation under a Creative Commons license. Read the original article.

With summer holidays around the corner, many Victorians may be thinking about offering their homes through a home-share platform, such as Airbnb, while they get away themselves. Airbnb’s terms of service describe home-share arrangements as a “licence”. Legally, a licence can be terminated at any time and a guest who does not leave is a trespasser.

However, in 2016 the Victorian Supreme Court decided home-share arrangements may constitute a lease. This decision indicates residential tenancy law may apply to all home-share arrangements where the host is away from the premises.

This would impose significant legal obligations on hosts, who would be regarded as landlords. Guests, if considered tenants, would have all the associated legal protections.

For example, if a guest refuses to leave the premises, the host/landlord would have to follow the eviction process required by tenancy law. This has happened in California. Australian courts will eventually have to decide this issue.

How did the court arrive at its decision?

The court’s decision involved a tenant who offered the premises to guests on Airbnb. The court decided the tenant had breached the terms of the lease by subletting the premises. The tenant was evicted, as tenants cannot sublet without the landlord’s consent under tenancy law.

The court focused on the relationship between the tenant and the guest and determined that the host had given “exclusive possession” of the premises to guests. In Victorian tenancy law, exclusive possession is required to create a lease.

The court said it did not matter that each guest’s stay was only a few days, or that the Airbnb terms described the arrangement as a “licence” rather than a lease.

Although the court’s decision applied to tenants in this case, logically the decision applies to all whole-of-premises home-share arrangements, including where the host owns the premises. This is because the legal test for creating a lease is the same as that for creating a sublease.

The decision is controversial because home sharing on Airbnb is similar to boarding arrangements (where the host provides accommodation and services such as cleaning), hotel rooms and serviced apartments. These arrangements are usually regarded as a licence, not a lease. This is because the host has access to the property during the guest’s stay (for example, to do cleaning), so exclusive possession is not given to the guest.

In fact, Airbnb arrangements are unlike typical tenancy agreements. They specify check-in and check-out times, furniture, linen and towels are usually provided, and “house rules” (for example, on noise levels and smoking) may restrict the guest’s use of the premises.

In addition, Victorian residential tenancy laws do not apply to premises ordinarily used for holidays. Potentially, this could exclude premises used for home sharing.

The situation may be different in other Australian states and territories, which, unlike Victoria, exclude from residential tenancies legislation agreements for the purpose of a holiday. However, not all home sharing is done for holiday purposes. For example, it’s also used for travel for business.

Legal uncertainty remains

The court’s decision means tenants who provide rented premises on Airbnb without the landlord’s consent may breach their own tenancy agreement and be evicted. However, the court stated that the particular circumstances of each case must be examined.

For example, hosts who provide only part of the premises (such as a bedroom and shared used of a kitchen) but who continue to reside in the premises will not be subletting. This is because they have not provided exclusive use of the premises.

However, if the host is away from the premises, then residential tenancy law may regulate home-share arrangements. This would give guests (now considered a tenant) stronger legal protections, including protection from eviction. The decision shows a court can ignore the description of the arrangement in an agreement if it determines exclusive possession has been provided.

Airbnb provides support to hosts and guests in the case of a dispute over a stay. It also provides compensation to hosts (akin to insurance) if guests damage the property or cause the host financial loss. However, if a host is found to have obligations under residential tenancy law, these obligations belong to the host/landlord, not to Airbnb.

The contentious aspect of the Supreme Court’s decision is its treatment of short-term hotel-like accommodation as a lease. However, it strongly suggests that residential tenancy law may regulate whole-of-premises home-share arrangements. That’s likely to come as a shock to Airbnb hosts – owners and renters alike.The Conversation

 

As simple as finding a job? Getting people out of social housing is much more complex than that

Posted by on December 12th, 2019 · Affordability, Government, Guest appearance, Housing, Social housing, Tenancy

By Chris Hartley, Center for Social Impact, UNSW and Kathleen Flanagan, University of Tasmania. This article is republished from The Conversation under a Creative Commons license. Read the original article.

A private member’s bill, moved by Labor MP Josh Burns, recently called on the Australian government “to help build more affordable homes” in response to the growing homelessness crisis. A premise of the bill is that a lack of social housing is a major cause of homelessness and increasing the supply is a key element of solving the problem. The government’s response was that one solution is to encourage social housing tenants to find paid work, so they can move into private rental housing.

The problem with this argument is it overlooks the major barriers to entering the private rental market for low-income households. It also does not excuse the failure to invest adequately in building more social housing.

There is certainly a shortage of social housing. About 140,600 applicants were on the waiting list for public housing and 8,800 households were wait-listed for state-owned-and-managed Indigenous housing as at June 30 2018. Another 38,300 applicants were waiting for mainstream community housing as at June 30 2017 (the most recent publicly available data). Together, these tenure types comprise most of Australia’s social housing.

These figures exclude people temporarily suspended from waiting lists (e.g. social housing applicants in New South Wales who take up Rent Choice private rental assistance), who need social housing but are ineligible and others not on waiting lists but still in need, such as rough sleepers and very low-income households in housing stress.

Tenure in social housing was once effectively unlimited provided tenants paid their rent and maintained their property. But waiting list pressures have led to a new approach. In his response to the private member’s bill, the assistant minister for community housing, homelessness and community services, Luke Howarth, argued:

There needs to be more responsibility […] from state governments to help people who are able to get back into the workplace to then move on from social housing so that it will provide a flow-through effect for people currently on the waiting list.

Market realities

Howarth’s argument is consistent with much state and territory policy. For example, the NSW Future Directions policy explicitly commits to “upskilling” tenants to enable them to live in private rental housing.

Tacitly overlooked in such “pathways” policies are the barriers to entering private rental. Across Australia less than 26% of private rental properties are affordable for households on a minimum wage. Less than 4% are affordable and appropriate for households on income support.

Prejudice and discrimination against tenants perceived to pose a greater risk to landlords’ investments make access even more difficult.

Low-income households in the private rental market also face insecure tenure. “No-grounds terminations” are permitted in all states and territories except Tasmania and, from July 1 2020, Victoria (except at the end of the first fixed term).

Under “no grounds” termination, landlords can evict tenants for no stated reason at the end of a fixed-term lease and at any time on a periodic lease. Fear of retaliatory eviction makes it less likely tenants will assert their legal rights.

Employment as a pathway

Even if private rental access and affordability were certain, many social housing tenants are not in a position to undertake employment. In 2017–18, about 398,900 households were in social housing in Australia. Many of them relied on the disability support pension (21%) or the age pension (19%) as their main source of income.

Long-standing targeting of social housing to greatest need means tenants are disproportionately likely to have low educational qualifications and limited marketable skills. They face considerable employment challenges, not the least of which is stigmatisation.

It is also worth considering what “employment” realistically looks like for social housing tenants seeking to enter or re-enter the workforce. It’s likely to be as casualised labour in the gig economy.

As social policy researchers Greg Marston and Catherine McDonald have argued, we cannot assume exiting welfare for the labour market leads automatically to social and economic security. Precarious, intermittent, low-wage employment does not offer a sound basis for sustaining a private tenancy.

Of course, social housing tenants should be supported to find work and to move out of social housing if they want to. But the evidence would suggest tenant choice is not the motivation here. Rather than creating “pathways” as a way of managing social housing waiting lists, governments would have greater impact on the housing crisis if they invested much more in social housing.

Between 2011 and 2016, government spending on social housing decreased 7%, from A$1.42 billion to A$1.32 billion. This has contributed to a backlog of 433,000 dwellings in Australia’s social housing supply. That’s predicted to grow to a shortage of 727,000 dwellings by 2036.

In addition to providing more social and affordable housing, governments must act on the systemic problems in the private rental market. This includes developing nationally consistent tenancy legislation to provide more protection for tenants, including against no-grounds evictions, and providing the resources to properly enforce such laws.

The Conversation

 

 

Lack of information on apartment defects leaves whole market on shaky footings

Posted by on November 21st, 2019 · Construction, Data, Government, Guest appearance, Housing, Housing conditions

By Martin Loosemore (University of Technology Sydney); Bill Randolph, Caitlin Buckle, Hazel Easthope, and Laura Crommelin (City Futures Research Centre, UNSW Sydney). This article is republished from The Conversation under a Creative Commons license. Read the original article.

 

The litany of defects, poor building standards and regulatory failures has serious implications for apartment owners, occupiers and buyers alike. Fears of a loss of confidence in the sector have unfortunately come true. Our research suggests a lack of reliable information about building defects is a critical factor in the crisis.

About a year ago, we started a research project with six industry partners in New South Wales entitled Cracks in the Compact City: Tackling Defects in Multi-Unit Strata Housing. The context is compact city planning policies and a rapid shift towards apartment living in Australian cities.

The urban development strategies of NSW and other states rely on higher-density cities with many more multi-unit strata title dwellings. The human and economic impacts of the building defects crisis could undermine these strategies.

Even with our resources, obtaining data on the extent and nature of defects in NSW apartment buildings has been a challenge. Individual buyers and owners must face even greater obstacles.

This lack of access to information poses a clear challenge to the principle of “buyer beware” that underpins property sales. The imbalance it creates between buyers and sellers is a prime example of what economists call “information asymmetry”.

 

Why does this matter for the whole apartment market?

Nobel laureate George Akerlof explained how the price and quality of goods traded in a market affected by information asymmetries tend to gradually reduce to the point where only lowest-cost “lemons” remain. When buyers can’t tell the difference between products of good and bad quality, they typically prefer the cheapest available. This forces higher-quality products out of the market.

Sellers can also exploit this situation to hide poor-quality products from consumers. They might even charge the same as competitors selling higher-quality products.

While some unscrupulous sellers might profit in the short term, overall profits fall for everyone as confidence and links between price and quality are undermined. Ultimately, the entire market can collapse.

The risks are highest in markets with these two features:

  • sellers are not rewarded for delivering information to buyers or cannot disclose it effectively
  • buyers cannot discriminate between the quality of different products, as is often the case in apartment developments.

These problems are more likely when buyers cannot easily inspect products at the time of sale – as with apartment units bought off the plan.

When a vendor sells a product to multiple buyers, again typical in apartment developments, that can multiply the impact of information asymmetries.

The buyer of a standalone house might be able to make the sale conditional on an independent inspection of the entire building. But such clauses are very difficult to negotiate in off-the-plan sales for apartments in multi-unit buildings.

It would also be too costly for each buyer to commission such an inspection. Buyers are unable to organise a joint inspection of the building until after they have settled, which greatly increases their risk. While NSW’s new defects bond scheme does require an inspection, it happens after ownership is transferred.

The negative impacts for buyers have spill-over effects as information asymmetries mean risks are perceived to increase across the entire apartment housing sector. Negative publicity, such as the flammable cladding and defects scandals, can cause values to fall market-wide, regardless of the quality of individual developments. At the same time, finance and insurance costs increase.

The issue persists for subsequent buyers too. Information about defects is often unavailable due to poor record-keeping or confidentiality agreements. Ironically, this adds to the information asymmetries that contributed to the problem in the first place.

 

What can we do about the problem?

To reduce information asymmetries, sellers and buyers tend to engage in two main types of behaviour: signalling and screening.

Signalling involves sellers flagging the higher quality of their products to buyers indirectly. For example, a reputable developer may use warranties and brands or quality marks, certificates and awards as a sign of their high-quality work. Buyers may well be prepared to pay more for higher-quality products that won’t cost more in the longer term.

Crucially, signalling only works if the signal is credible. At present, there are no construction-specific quality certifications and warranties, only generic standards such as the international ISO 9001: 2015. And the administrative burden and costs of independent third-party certification make it unviable for many small companies. So instruments like ISO 9001 are likely of very limited value for effective signalling in the apartment sector.

The NSW Building Commissioner is supporting an industry rating system that will enable better signalling. Data mining will be used to identify risky players and phoenix operators. It should take effect in the apartment sector by 2021.

Screening involves buyers investing time and resources to uncover the likelihood of defects. This includes examining available records and the behaviours of sellers and their representatives. But this adds to buyers’ costs, which disadvantages them in the marketplace.

Stakeholders in the building development process should be compelled to release this information. NSW’s new law on off-the-plan contract sales will increase sellers’ disclosure obligations and provide stronger protections for buyers. Importantly, sellers will have to identify material changes made during the development process at least 21 days before settlement.

A similar requirement involving an independent expert building inspection would help buyers better understand the risk of defects before they finalise their purchase.

Another positive move is the requirement in the new Design and Building Practitioners Bill for declared designs and as-built drawings to be lodged with the government. The Building Commissioner has said these will be made available on an easy-to-access platform.

This would enable buyers to check information as the development progresses, before the crucial building handover. It’s a step towards creating a “digital twin” for everyone licensed to perform construction work, making it easier for the public to check their record.

While the devil is likely to be in the detail, the NSW government is on the right track in tackling the information asymmetry problem. However, the various information gatekeepers will still have to be persuaded – or required – to release information they have long withheld in their own interests.The Conversation

 

 

 

 

Greening for a resilient 21st century

Posted by on November 19th, 2019 · Cities, Government, Planning, Sustainability, Wellbeing

By Susan Thompson, City Futures Research Centre. Originally published in New Planner, the journal of the New South Wales planning profession, published by the Planning Institute of Australia.

The great green city of the future is ecologically and economically resilient; it’s made up of healthy, livable neighborhoods where the benefits of nature are available to all people (Mittermaier, 2018)

The importance of natural green places in our ever expanding and densifying cities cannot be overstated. Green is a foundation of planning policies and practices for a resilient 21st Century.

 Having worked at the interface of urban planning and public health since the early 2000s, I have witnessed a growing focus on greening environments for wellbeing – both for human health and that of the planet. And while it’s not the entire picture, green plays a central role in resilience – it cools a warming globe and offers opportunities for individuals to reduce their risks for chronic disease. Green environments support physical activity, fresh and nutritious food access, as well as social connectivity. These activities underpin personal resilience and community strength – key pillars of the Resilient Sydney Strategy. Green is a powerful tool for planners assisting communities responding to, and preparing for the environmental and socio-cultural challenges encountered daily, as well as those that lie ahead.

Defining green

So, what is ‘green’ in the context of resilience? Multiple and wide-ranging definitions exist. From ‘vegetated urban spaces’, such as street trees and grassy roadsides, to parks (big and small), children’s playgrounds and inter-connected green corridors. And then there’s ‘green infrastructure’ which typically implies purposeful planning and ongoing maintenance of initiatives such as green roof tops and walls, forested urban precincts, community gardens and wetland regeneration.

Planners can convincingly argue the case for the preservation of existing green spaces and advocate for extra green infrastructure by pointing out the broad and well documented benefits. The evidence is compelling. Just being in a green space can be calming and restorative, providing health benefits from reduced blood pressure and stress, to improving physical activity participation rates and facilitating faster recovery from illness. Benefits are available across the life course and enhance the natural and built environments, as well as bolstering the local economy. These multiple outcomes of greening, or co-benefits, provide additional weight for a strong planning case. A raft of resources are available to assist, including the NSW Government Architect’s draft Greener Places Policy, Active Living’s Urban Cooling with Green Infrastructure and AECOM’s Green Infrastructure.

But of course, there are complexities. Attention to equity is one. Ironically, if we make places green and lush to improve health conditions and build resilience in areas of low socio-economic status, this can price the community being targeted for assistance out of those localities (Wolch, et al, 2014). And why should a local council allocate funding to improve health if the resulting economic gains subsequently flow to another level of government? Responsiveness to differing cultural and social needs are also challenging. But this is where planners shine with their local knowledge and appreciation of the myriad qualities and characteristics of the people for whom they plan.

Personal resilience

Green places also play a vital role in our own personal lives. Not only do they nurture the resilience we need to adjust to a rapidly changing world, immersion in a range of green experiences brings a deeper appreciation of their importance – for ourselves and others. We will reap benefits for our physical and mental health through being active and participating in urban agriculture. Quiet gardens and forest bathing offer opportunities for psychological restoration and peaceful reflection in nature. So, take some time to lie on the grass and look up at the sky – feel the textures, breathe the smells and hear the sounds around you. Be IN green and remember, a green environment is the foundation for a resilient and healthy planet. As we were recently and starkly reminded in the Intergovernmental Science-Policy Platform for Biodiversity and Ecosystem Services,  our very existence depends on it.