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A Fresh Lens on Housing Unaffordability – Fixing the Problem

Posted by on June 18th, 2015 · Affordability, Housing

‘A Fresh Lens on Housing’ – Paper presented at the Urban Conversations event 10 May 2015 hosted by the Australian Graduate School of Urbanism at UNSW Built Environment, Cox Richardson Architects and Planners and the NSW Architects Registration Board.

By: Prof Bill Randolph, City Futures Research Centre, UNSW Built Environment

Part 2 – Housing Unaffordability in modern Australia: Fixing the Problem

Bill mugshot

So, as argued in my last post, we have a housing market currently dominated by an investment boom which is, if anything, exacerbating rather than easing housing unaffordability. What might be a way forward? The number of stakeholders in this complex puzzle is substantial, but the role of government in terms of leadership to steer a path out of the present conundrum is clear. The market won’t do it, unfortunately. Where might we start?

At Federal level, the urgent need for housing taxation and subsidy reform is now all too apparent. With only short lived exceptions, we’ve lacked a coherent national housing policy for over 20 years. We need one now desperately. But this is unlikely in the short term

Nevertheless, over time, negative gearing in its current form has to go, as does the unnecessary capital gains tax concession for investors. These distort housing demand? far too much. In their place there needs to be a focused system to divert the subsidies currently supporting speculative housing investment into supporting investment into a new and invigorated affordable housing sector which could draw on both the informal “mum and dad” landlords and large scale institutional investment funds. This would form the basis of a long term new-build affordable rental sector using non-profit community housing providers to take long term charge of the asset and provide a guaranteed low risk if lower yielding ‘blue chip’ return to investors. The models are already out there.

For housing provision at well below market rents, a reformed Commonwealth Rent Assistance scheme, linked perhaps to a reformed and much invigorated NRAS-type product would help – but this needs to be at scale and over a long term, as in other countries.

And Federal investment in major transport infrastructure to make new homes accessible to sub-regional job centres and other facilities that would spread housing development across our cities, rather than the misjudged approach that piles expensive new apartments into already pressured urban cores, could also be part of the Federal response to the needs of our growing cities.

But clearly, all that’s for the future. What of the present?

It is clear that some State governments are now in a position and of a frame of mind to act. By all means continue to review the planning system to see if efficiencies can be made in facilitating housing supply. But not at the expense of reasonable local input and influence. Improve the transparency of the development approval system – few in the wider community trust it to do the right thing – and let local communities begin to engage in their own higher density futures. You might be surprised what would happen. There are new planning tools and much new data that would allow greater use of participatory planning activities – especially once the low hanging fruit of underutilised public land becomes exhausted and renewal of aging housing and infrastructure is needed.

A key issue will be to provide places where downsizing older households can access more suitable but nevertheless affordable housing options in their communities. Smaller blocks of apartments spread across our suburbs might be a real option to allow older people to downsize – with greater provision of higher care housing again in situ. Thinking that the needs of older people will be solved by only offering them flats over railway lines or town centres is not going to deliver viable housing for them. Think beyond the Activation Precinct framework and plan for them. Using the smaller clusters of low density public housing to translate into mixed tenure housing options for local older people could be part of this process.

But what of the wider need for affordable housing supply? If the market is never going to deliver this – then governments must take a lead. In the absence of a Federal lead, State governments, if they want to do something about housing affordability, need to take action. What options are there?

  1. Firstly, better understand the nature of local housing needs in our cities – who is it that we need to provide affordable housing for, at what price and where – and then set policies that encourage these needs to be effectively met. At the same time, affordable housing must be seen as an essential social infrastructure investment to support a balanced and productive city economy.
  2. We need a new framework for the production of affordable housing investment. Here there are options on the table, but it will take government money, at least to pump prime. In NSW up to $1bn has recently been promised for affordable housing. We don’t yet know what this might be. But we need to ensure some of this is put into a major investment fund to support the development of new forms of affordable housing across the city. Add to that the receipts from public housing sales and there would be enough to act as a stimulant to develop new delivery models at scale with delivery through not-for-profit providers.
  3. Making possible large scale institutional investment, in well located mixed income affordable housing rental development, is the next big step that needs to be made to match any public investment. State governments have the opportunity to do this – the institutions are actively looking for opportunities to invest in long term rental housing that would give a secure return. With stock developed and managed by not-for-profit housing providers, this would offer a major new sector that over time would grow into a significant provider of housing for the lower paid workforce.
  4. A government guarantee to underwrite the debt taken out by not-for-profit housing providers to undertake development could be an effective nil-cost initiative to support this investment. This has worked extremely well in the UK, where it has never been called upon to make good a default by a community housing provider, but has facilitated borrowing at rates not even government could match.
  5. To further assist in bringing institutional funding into the equation, there is no reason why State government should not institute its own version of NRAS, tied into institutional lending and perhaps on a revolving fund basis, to make the investment stack up. Public land also offers a source of implied subsidisation and there are several estate renewal initiatives that offer models here. The government who cracks this will have major political advantage.
  6. Make sure affordable housing is linked to where good job opportunities are being created. That means locating a proportion of new affordable housing supply in places close to or accessible to job rich urban centres. Improved mass transit links into major employment hubs is a key issue, with the proposed Parramatta light rail in Sydney a case in point. All this means connecting infrastructure, housing and planning strategies at city and local scales through integrated state and local planning policies. Again, there are signs that his is now appreciated and initiatives such as schemes being developed by UrbanGrowth NSW are attempting to do this. Integrated policy approaches that involve the reform of planning and housing policy together with infrastructure investment charged in part with addressing housing affordability issues, coordinated across the levels of government, should work together to create affordable housing opportunities across our cities. But this needs to become a ‘business-as-usual’ model for all city-wide development activities, not the select few.
  7. Consider a policy of ‘dispersed density’ as an alternative model than the tight concentration of high density in limited locations.   There is no need to cram every site. While accessibility is important, it is clearly leading to poor urban design and amenity outcomes around many of the cramped town centres in which it is now being rolled out. And there is little sign that transport capacity is being significantly improved in these places to cope with the expected higher use. Land costs here are also high. Rather, a more generalised, well designed density on appropriate sites, locally planned for, offers a more general densification of the city that will raise demand for local services, including public transport, and provide a mix of accommodation types across the city. The example of the 2009-2011 Nation Building Stimulus Package in delivering a range of moderate density across Sydney is a clear example of how good quality outcomes can be achieved with little ongoing negative reaction and is a model that should not be forgotten.
  8. Finally, there is also no reason why a mandatory inclusionary zoning provision for affordable housing could not be introduced for all larger development approvals where rezoning leads to greater density. Working with the new institutional investment model would pay for the delivery of affordable housing at scale across the city which developers could factor into their land purchase and development assessments. If set in place over the long term, the development industry would be provided with the certainty it requires and a source of long term affordable homes could be created.

So in summary, we now have a series of governmental reports on affordable housing, both at State and Federal levels, to draw on. There is no end of research which has reviewed options. Models are out there and, if not actually shovel ready, certainly offer clear options for action. All it needs is the political intent and determination to put these different perspectives together to make a difference.

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