City Futures Blog

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

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Can the market provide affordable housing?

Posted by on July 9th, 2018 · Affordability, Government, Housing, Housing supply, Marginal rental, Private rental, Sydney
A new-generation boarding house in Randwick built under AHSEPP, with units that were advertised for $500 a week.

By Laurence Troy, Ryan van den Nouwelant and Bill Randolph, City Futures Research Centre. Originally published by The Fifth Estate. 

There is an ongoing debate about the best role for the planning system in addressing the shortage of affordable housing in Australia’s cities. At one end of the spectrum is the argument that its role in setting land value can be parlayed into mandating the inclusion of targeted affordable housing. At the other end is the argument that there is a need to simply remove planning constraints on supply, particularly on lower-cost housing options.

A good example of the latter has been the NSW State Environmental Planning Policy for affordable rental housing, or “the AHSEPP”. Introduced in 2009, the AHSEPP sought to remove barriers to, and even provide incentives to stimulate, the market delivery of housing options affordable for low-income households. The policy’s purpose as described in explanatory material highlights its role in addressing long waiting lists for social housing, among other worthy goals. Although broad in scope, the policy essentially relies on market delivery of secondary dwellings (granny flats) and boarding houses (called rooming houses in other jurisdictions).

But after nearly a decade of operation, there’s been no official position on what the policy is expected to deliver, or a review of its effectiveness. Given the importance the NSW government placed on affordable housing when it came into office in 2011, this might be considered surprising.

While some have sought to unpack the outcomes indirectly, Southern Sydney Regional Organisation of Councils (SSROC) has worked with us to undertake the most comprehensive analysis of the AHSEPP to date, using primary planning data from its 11 member local council areas across central and southern Sydney.

More housing, but not more affordable

At one level, the AHSEPP appears to have delivered some significant results: over 8000 secondary dwellings and over 9000 boarding rooms have been approved since 2009 in this part of Sydney alone. This is a significant amount of development – as new dwellings, this would equate to about one in six of the total dwelling growth in this region between the 2006-2016 intercensal period.

But we found both secondary dwellings and boarding rooms were not markedly more affordable than what is already on the market in southern Sydney. This means that, if the private rental sector has not previously met the needs of some cohorts – as evidenced by the waiting lists for social housing – then the injection of supply through the AHSEPP does not appear to offer a remedy for this market failure. As such, and despite the extent to which the incentives were taken up by developers, it is difficult to claim success in its core objective of stimulating housing affordable for low-income households.

Equally concerning, we found evidence that very few of secondary dwellings were reaching the “formal” rental market, with only one quarter matched to rental tenancies. It appears that the provisions were taken up largely to accommodate informal expansion of the main household – actually fulfilling the true definition of “granny flat”! Similarly, the vast majority of boarding rooms were not rental housing available to everyone. It was clear from the geography, project description and proponent that these provisions were largely being taken up for student housing. A formal student housing option is a better outcome than the more informal ways demand has previously been met. However these new dwellings are hardly “affordable”, with rooms renting for over $400 a week.

So it seems that neither set of provisions were meeting the intentions of the policy: to deliver affordable rental dwellings and take the pressure off social housing wait lists. This highlights how difficult it is for planning incentives and regulatory dismantling to overcome this kind of market failure – that is, to make housing for people on low incomes profitable enough for private investors to deliver it.

Unplanned and uncounted

More broadly, the case of the AHSEPP raises other issues about how effectively the strategic planning accounts for this type of housing supply. Our analysis shows secondary dwellings are overwhelmingly delivered in established suburbs. Yet these areas have been conspicuously ignored as places for new housing by recent strategic planning policies.

This raises questions about the extent to which the population growth here is accompanied by a reciprocal growth in services and infrastructure. The absence of strategic planning for growth in existing suburbs has also established community expectations for little change here, meaning new developments (however merited) are met with strong opposition.

The injection of boarding rooms into areas already over-represented by both smaller dwellings and rental dwellings is also problematic. It suggests the policy is undercutting the objective of other government regulations attempting to deliver diversity in urban renewal contexts, where the challenge is supplying family-friendly housing options to build long-term community stability, not just student dorms.

So what use is planning deregulation?

The most specific conclusion that can be drawn is that this laissez faire approach to planning regulation, in the hope of overcoming previous market failures, has not been successful under the AHSEPP. More broadly, though, it shows how this approach to planning deregulation undermines many of the fundamental benefits of good urban planning – ensuring that the location of future growth is appropriately directed; that diverse and growing populations are effectively provided for; and that local context is considered and communities provided some certainty around anticipated change.

Inclusionary Zoning in Ontario

Posted by on June 25th, 2018 · Construction, Government, Guest appearance, Housing, Housing supply, International

Image result for ontario affordable housing

By Richard Drdla, Richard Drdla Associates, Toronto, Canada. Earlier this year Richard, an expert on planning for affordable housing in North America, wrote us a guest blog post about the Greater Sydney Commission’s affordable rental housing targets. This post discusses the latest developments regarding inclusionary zoning in Ontario, Canada. Richard is a guest speaker at the 2018 Affordable Housing Conference held this week in Sydney. 

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Ontario’s legislation authorizing the use of inclusionary zoning (IZ), the Promoting Affordable Housing Act, 2016, was passed in December 2016.  The implementation of this legislation was subject to regulations from the Minister of Housing.  The first draft of those regulations was released for public review on December 2017.  The final regulations were released in April 2018, at which time they and the legislation came into effect.

Ontario’s regulatory framework represents a singular achievement.  It is the first time that a province or state has authorized  the use of IZ, while also prescribing how IZ might be used by its constituent municipalities.  There is no precedent for this in the US.  IZ programs there have been developed and operated by municipalities without sanction and direction coming from the states.  (The only exception to this is New Jersey, where the state supreme court – and not the state itself – set out the fundamental rules for the use of IZ.)

In developing this regulatory framework, as will be seen, the province struggled principally with how to reconcile two fundamental concerns:  enabling the municipalities to establish productive programs, while also maintaining the continued health of the development industry.  It is too early to know if it has succeeded.

Legislation

In general, the legislation takes a permissive approach.  It enables municipalities to adopt IZ programs, while not requiring them to do so nor limiting how they can do it.

Despite generally taking this approach, the legislation does contain one notable restriction.  It prohibits  the use of cash-in-lieu payments that would have allowed the developers to buy-out their affordable housing obligation.  While there are legitimate concerns about the use of cash-in-lieu, these could have been addressed through appropriate regulations without making an outright legislative prohibition.

Draft Regulations

In contrast with the legislation, the draft regulations were highly prescriptive, setting out province-wide rules that left little latitude for the municipalities to experiment and respond to local conditions.

The regulations included a number of restrictions that when taken together would have stifled the production of affordable housing.  First of all,  IZ could not be applied to developments of less than 20 units, nor to any rental developments.  Also, the maximum set-aside was limited to 5%, except in “high-density transit-station” areas where the limit was 10%.  All of these regulations are more restrictive than the well-tested best practices being used widely in the US.

On top of these, the regulations introduced another unprecedented and particularly crippling provision.  The municipalities would have been required to provide financial “contributions” (that is, compensation to the developers) amounting to 40% of the price reduction for the affordable units. (This figure changed over time.  For some time before the regulations were released, the developers had been seeking a 50% municipal contribution.  After the release of these regulations and the ensuing backlash, a 20% obligation was briefly floated by the government.)

This municipal contribution had to be made through waivers to parking requirements and to certain fees (planning application fees, parkland fees and development  charges) already being collected from the developers.  The use of density increases was ruled out by the regulations.  Direct financial subsidies were not required or expected, but remained moot.

The problem with this approach was that the prescribed municipal contributions effectively set the price reduction that could have been achieved, and that price reduction (even with just the 20% contribution) would not have been sufficient to provide affordable housing in the more upmarket developments.  Furthermore, achieving even this insufficient price reduction would have depended upon the municipalities fully reallocating monies already being collected for other municipal services and infrastructure improvements.

The regulations did allow the municipalities escape from this obligation when they used the  “community planning permit” system.  This is a form of comprehensive pre-zoning that allows the municipalities after planning, financial testing and public consultations to set affordable housing requirements, density limits and other conditions in specific areas.  But this process is more appropriate for use in small areas rather than across an entire jurisdiction.  As such, it is better used as a supplement to a full IZ program rather than as a substitute for it.

Before adopting IZ, the municipalities would have been required to prepare a “municipal assessment report”  analysing their housing needs and supply, and overall housing affordability.  The intent was to establish a factual foundation and justification for the programs.  It was not meant as a means of testing the viability of the regulations nor assessing their impact on development.

Pushback

What stands out most in the draft regulations is that they would have been so protective of the development industry. The government had clearly taken note of the developer’s argument that they needed provincial safeguards against the potentially unreasonable demands of the municipalities. This is seen in the restrictive regulations as well as the compensation requirements.

The government had spoken often about finding a “balance” between providing affordable housing and ensuring that development continued, but these regulations manifestly were not that.

The regulations prompted a strong pushback from the affordable housing advocates and the municipalities including particularly the City of Toronto. The Minister was caught flat-footed by the pushback, and had to scramble to re-think the regulations ahead of an impending provincial election.  This led to a remarkable turnaround in a very short period of time.

The pushback was founded principally on three arguments.  The first was that these regulations would have led to the production of very little affordable housing.  The second was that the municipalities were not capable of providing significant compensation, and in any case the need for that compensation was questionable.   Finally, the government should not attempt to impose one-size-fits-all rules across a province that has widely diverse housing conditions.

All of these concerns were addressed to some extent in the final regulations, but it is probably the last that led to the most significant changes.

Final Regulations

In sharp contrast to the earlier regulations, the final regulations give the municipalities an almost free hand in setting the rules and obligations in their IZ policies.  They contain only one notable limitation (and that one is less restrictive than the draft provision).  Under the final regulations, IZ cannot be applied to developments with fewer than 10 (previously 20) units.

But the final regulations also add a new and very significant condition:  before those policies are adopted, they must be analysed for their “potential impacts on the housing market and on the financial viability of development”.

What this analysis will entail remains unclear.  The government has offered no guidance, nor in the  pre-election scramble has it even given much thought to what might be required.   While the regulations do indicate that some form of financial testing will be needed, they notably do not establish what criteria must be used.  Most crucially, they do not say whether or not the  municipalities will be responsible for maintaining the profit margins of the developers or for providing compensation making them “whole” again.

Overview

The regulations were fundamentally changed between the draft and final versions.  They went from being very prescriptive to very permissive.  With regard to compensation, they also went from explicitly applying a province-wide standard formula to potentially using a locally-based viability test.

The final regulations longer refer directly to municipal compensation, but this contentious issue is still very much alive.  Whether or not compensation will be necessary, and if so how much, will be the most difficult matter to be addressed in the viability testing.

The new provisions can be seen as  a brilliant political maneuver.  They kicked this contentious issue down the road and past the upcoming election.  By leaving the issue unresolved, both sides – the developers on one and the housing advocates and municipalities on the other – for the moment have reason to be optimistic.

All in all, the final regulations represent a significant improvement and positive development in comparison with the draft regulations.   But there remains the concern that the viability tests will lead to unnecessary and impairing demands being placed upon the  municipalities, and this in turn could force the municipalities to trim their programs.

Does NSW really need to double its social housing output?

Posted by on June 23rd, 2018 · Uncategorized

By: Hal Pawson, Associate Director, CFRC

‘Homelessness: NSW government ‘must double public housing’ soberly declared the Daily Telegraph’s Saturday headline. This, above a story warning that ‘The NSW government needs to double the amount of social and affordable housing it aims to build to prevent a huge leap in homelessness’ according to ‘experts’. Further, ‘the $1.1 billion earmarked in the Budget need[s] to be bumped up to $3.6 billion to tackle the impending crisis’.

As one of the cited ‘experts’ I wanted to sate any reader’s curiosity about the basis for such lurid claims. Although the prospective ‘huge leap in homelessness’ is correctly not attributed to me, the assertion about the amount of extra taxpayer-funded cash needed to fund the minimum required amount of additional social housing was mine. While avowedly a ‘back of the envelope’ estimate assembled in response to a media query, it does have a logic – as summarised in the table at the bottom of this post. First, the commentary….

The NSW Government expects, at best, to fund the construction of 9,900 additional social and affordable rental homes over the next 10 years. But, just to keep pace with growing need implied by expected rates of population growth, 21,000 additional social and affordable rental homes would be needed.

If it was possible to add 21,000 to the NSW social and affordable rental housing stock over the next decade it would be expected that the current level of ‘unmet housing need’ (e.g. social housing waiting list circa 60,000 households; 38,000 people homeless on Census night, 2016) would remain steady. On current plans, however, with additional provision expected to be less than half the minimum increase in need, we must expect that the number of low income people lacking suitable housing in 10 years from now will be substantially higher than at the moment. A larger housing waiting list, higher numbers of homeless people.

Just keeping pace with growing need will call for the construction of at least 11,100 new social and affordable homes additional to those currently planned and budgeted for by the State Government. Given that the current Social and Affordable Housing Fund (SAHF) initiative is expected to generate 3,400 social and affordable homes over several years, there would be a need to create 3.3 additional initiatives of this size to underpin the construction of that 11,100-home cohort.

Given that the current SAHF is being funded from an endowment of $1.1 billion, this would require an additional investment of $3.6 billion. A large amount, but less than the current annual NSW State Government budget surplus ($3.9 billion) and far below the extra $18.5 billion that Government has reaped from additional stamp duty revenue over the past six years thanks to the property boom.

(a). Additional social housing needed over 10 years (to 2026) to match growing need (population increase) 21,000
(b). Expected additional social/affordable housing to be generated through Communities Plus public housing estate renewal program 6,500
(c) Expected additional social/affordable housing to be generated through Social and Affordable Housing Fund (SAHF) 3,400
(d) Shortfall – according to current plans (a – (b+c)) 11,100
(e) Additional SAHF initiatives needed to fill the gap 3.3
(f) Cost of required additional SAHF initiatives (@ $1.1 billion per fund) – $billion 3.6

For a further explanation of the ‘planned  housing supply’ and ‘projected housing needs’ statistics above see earlier post: NSW is overselling its social housing commitment

The Telegraph’s assertion of a new $1.1 billion social housebuilding pledge in last week’s State Budget was unfortunately a reference to the original 2015 SAHF announcement. In fact, despite the evident need, the Treasurer’s plans included no new funds for such investment.

So, in answer to the opening question, yes – even if the aspiration is only to keep the current high level of housing need from rising higher,  currently planned social housebuilding in NSW should be more than doubled. To be fair to the State Government, the Commonwealth should also be expected to contribute to the heavy lifting here. But, with Scott Morrison also forgoing his recent budget opportunity to do so, there is regrettably little immediate prospect of this.

Higher density and diversity: apartments are Australia at its most multicultural

Posted by on June 19th, 2018 · Demographics, Guest appearance, Housing, Migration, Strata, Sydney
File 20180607 137315 15akpbh.jpg?ixlib=rb 1.1
Image: Marcus Jaaske/Shutterstock

By Christina Ho, University of Technology Sydney; Edgar Liu, UNSW, and Hazel Easthope, UNSW. This article was originally published on The Conversation. Read the original article.

Increasing numbers of city dwellers live in apartments. This is particularly the case for migrants. And that makes apartment buildings important hubs of multiculturalism in our cities.

However, our recent research shows that researchers and policymakers have largely overlooked the implications of this combination of increasing cultural diversity and increasing housing density.

We live in an environment of increasing cultural diversity. But we also see increasing racism in Australian society, as well as a rise in racialised tension about Chinese property buyers.

These developments suggest we need to pay more attention to how to make apartment buildings work for residents from many different cultural backgrounds.

This is essential to support social cohesion, or the positive social relationships that bond members of society. When social cohesion is weakened, we see a lack of trust and reductions in people’s sense of belonging and their willingness to participate and help others. This, in turn, can damage people’s health and well-being, as well as fuelling broader political instability.

Increasing density

In 2015, we passed an important, but largely unrecognised, milestone in Australia. It was the first year in the country’s history that dwelling starts for attached properties overtook those for detached houses.

Author provided

This should perhaps come as no surprise. State governments have for many years been pushing for more apartments to be built.

Australia is not alone in this regard. Countries around the world have been promoting “compact city” policies that focus on building up rather than building out.

Around Australia, almost one in ten people now live in apartments. However, the proportions are much higher in our major cities.

Across the Greater Sydney metropolitan area, for example, 30% of residents live in apartments. In some inner-city suburbs, apartments are home to the vast majority of residents, including in Pyrmont, Zetland and Ultimo (see Table 1 below). Beachside locations such as Surfers Paradise, Queensland, and Glenelg, South Australia, also have high proportions of apartment residents.

Increasing diversity

Apartment residents are very diverse culturally. Across Australia, more than half of apartment residents – 56%, compared to 33% of all Australian residents – are migrants. Of these, the biggest group (26% of apartment residents) are migrants born in Asia.

Nationwide, only 7% of Australian-born people live in apartments. For those born in northeast Asia (including China), the figure is 31%. And for those born in southern and central Asia (including India), it’s 26%.

Looking again at Greater Sydney, housing density and cultural diversity are clearly correlated. The Sydney suburbs where more than 90% of residents live in apartments also have high concentrations of overseas-born migrants.

Challenges of apartment living

While apartment living is unfamiliar to many Australian-born residents, Australian apartment lifestyles and norms can be even further from what migrants are used to. Our research, based on interviews with Sydney-based strata managers, shows that social and cultural differences can contribute to tensions within apartment buildings. These might be about shoes left in common areas, or washing hung on balconies, or “offensive” cooking smells wafting beyond kitchen walls.

Tensions between residents with different lifestyles are not limited to residents from different ethnic or cultural backgrounds. Tensions also arise between residents of different ages, different household types and with different working schedules. Cultural difference is but one of many factors that can contribute to tensions in apartment buildings.

However, strata managers also commented that sometimes new arrivals’ lack of English and lack of familiarity with Australian regulations had prevented them from fully participating in their building by, for example, joining strata committees or attending or speaking at meetings. Sometimes new arrivals were not even aware of basics such as the need to pay strata levies. Quite possibly that’s a result of strata rules and regulations not having been adequately explained to them.

Australian strata regulations and bylaws reflect a particular understanding of what it means to own or live in an apartment. Obligations and opportunities here – for example, the right to vote on motions at meetings – may look very different in other countries.

Apartment residents, strata committees and strata managers are finding that they need to adapt to the reality of their culturally diverse communities. After all, multiculturalism is about acknowledging and respecting difference.

Fostering cohesion

As we have previously discussed, more inclusive practices – such as translating documents and meeting discussions, conducting audits and surveys of building residents, and providing a range of opportunities for participation – will benefit all residents and owners, regardless of their background.

While multicultural apartment blocks may pose challenges, they also offer opportunities for residents to enjoy the richness of a diverse and cosmopolitan environment. This is one of the enormous attractions of urban life. For many apartment residents, it’s available on an everyday level.

The ConversationWith growing numbers of urban residents living in apartment buildings that are also culturally diverse, more efforts to foster co-operation and understanding are vital for realising the potential of these urban spaces to become productive hubs of everyday multiculturalism in Australia.

 

Why is it so hard to engage communities in healthy city making?

Posted by on June 14th, 2018 · Cities, Wellbeing

By Susan Thompson, City Futures Research Centre. This article originally appeared in New Planner – the journal of the New South Wales planning profession – published by the Planning Institute of Australia. For more information, please visit: www.planning.org.au/news/new-planner-nsw.

Why is it hard to get people from all walks of life and across the age spectrum genuinely involved in planning?  Is there a crisis in community engagement?  Surely the issue of how cities can be supportive of health would be a motivating factor for getting involved?  The epidemic of chronic disease threatens to compromise both our physical abilities to enjoy our lives, as well as our mental capacity to be happy and well.  So why isn’t this a motivating factor?

Is there a problem?

Change is everywhere, particularly in our cities and urban centres.  So why should planners be surprised that this is unsettling for many communities?  The comforting familiarity of home, broadly defined as the dwelling, local street and surrounding neighbourhoods, is threatened by change, particularly when it is ongoing and significant.  This is often blamed for the ‘NIMBY’ response, nearly always judged negatively, when it can be a powerful way of understanding deep-seated fears of residents. Busy lives and the constant flow of information from multiple sources further challenge planners trying to engage communities in decision making.  But it seems surprising that concerns about health and wellbeing are not motivating communities to participate.  Perhaps the healthy built environment connection is not well understood and worries about chronic disease lie dormant until illness actually strikes.

What can be done?

There are examples of community involvement in planning – inspired, either wholly or in part, by concerns for health and wellbeing.  Community led protests can be a sign of care, as well as deep frustration with government decisions and actions.  In Sydney, a current example is the WestConnex motorway project which has enraged affected local groups.  RAW – Rozelle Against WestConnex – is arguing for alternative investments in public transport to encourage walkable and car free cities. Their stance is supported by healthy planning experts who spoke at the most recent Active Living’s FitNSW Forum.

Unexpected disaster can see communities coming together in unprecedented ways, lobbying for health supportive urban planning initiatives.  The earthquake in New Zealand’s Christchurch was the unfortunate catalyst for the creation of urban food gardens across the city, enhancing understandings of food security and resilience.  Community gardens, fruit and nut producing street trees and urban orchards are some of the projects being championed in the post-earthquake city.

Professional practitioner led projects can involve communities in positive, innovative and ongoing ways.  This can occur in placemaking as the recent awards by Place Leaders Asia Pacific attest. Large and small scale projects, as well as exemplary procedural approaches, demonstrate the key role of communities in every aspect of placemaking, including different aspects of health supportive environments.

Governments have a central role too and we are encouraged to see the recent release of the NSW State Infrastructure Strategy 2018-2038. This sets out the government’s infrastructure priorities for the next 20 years.  In the context of current, and increasing, high levels of expenditure on health, the Strategy notes that the built environment can improve health and wellbeing.  Recommendation 99 in the Strategy proposes ‘that the NSW Government increase investment in walking and cycling infrastructure and parks and open spaces as part of the ongoing integration of health into land use planning and transport strategies.’  This will enable communities and local councils to fund and promote healthy active living infrastructure, possibly via their Community Strategic Plans.  These Plans featured in the HBEs September 2016 column, which included information about healthy living and the Integrated Planning and Reporting Framework. The new State Strategy is a further opportunity to pursue funding to translate healthy planning related objectives into local community facilities.

Communities can also be involved in research to enhance urban health.  A particularly exciting and innovative project is UK based ‘Urban Mind’ – a collaboration of academics at King’s College London with landscape architects J&L Gibbons and art foundation Nomad Projects.  Engaging via smart phone technology, individuals utilise an app to record information about their lifestyle, mental wellbeing and experiences of city living. 8  Such projects are critical as cities densify and the public realm increases in importance.  Communities enthusiastically engage as this is part of their daily activities in space.  The opportunity to have a say (that’s easy and personally relevant) about how our environments make us healthy and well is really important to all of us!

 

Airbnb regulation needs to distinguish between sharing and plain old commercial letting

Posted by on June 6th, 2018 · Airbnb, Cities, Data, Housing, Housing supply, Law, Sharing, Sydney
File 20180605 175451 1delxiw.jpg?ixlib=rb 1.1
Image: paul/Flickr, CC BY

By Laura Crommelin, Chris Martin and Laurence Troy, City Futures Research Centre, UNSW. This article was originally published on The Conversation. Read the original article.

Airbnb and other short-term letting websites have been a hot topic of debate for some time. In New South Wales, it seems the state government is on the verge of announcing a new short-term letting policy. Our research suggests about a quarter of Airbnb properties in the city are essentially commercial short-term letting operations.

But as cities like Berlin and Barcelona have learned, regulating these platforms is not always easy.
Enforcing restrictions against individual hosts can be costly. Airbnb has also challenged regulations limiting short-term letting.

At the same time, there has been a lot of hype about platforms like Airbnb as leaders of a new “sharing economy”. This has made some governments wary of interfering with a potentially lucrative economic driver.

How do you tell if it’s sharing or business?

To ensure these new platforms are regulated effectively, it’s important that we understand exactly what they do, and the impacts they’ve having. Despite Airbnb’s efforts to promote itself as being all about sharing, there’s actually a mix of activities happening on its platform. In a new research paper, we examined these different activities, to better identify how Airbnb is being used and whether the platform should be viewed as a “sharing economy” superstar.

Overall, we found that in late 2016, about a quarter of Sydney’s Airbnb listings were best viewed as short-term letting businesses, rather than examples of the sharing economy in action. The figure was greater for other global cities we looked at – 26% in New York, 28% in London and Hong Kong, and a hefty 49% in Paris.

So how did we reach this conclusion? To start, we needed a definition of the “sharing economy”. We took this to mean economic activity involving the sharing of excess capacity in an asset or service, which is driven by a sharing attitude.

We then took a close look at listing data from the five cities and identified two categories of use:

  1. House sharing, which includes advertising part of a house (a private or shared room) or a whole house for a small portion of the year (up to 90 days). These uses suggest that the property is otherwise meeting someone’s permanent housing needs.
  2. Traditional short-term lets, meaning properties permanently offered for short-term rental, thus preventing their use as long-term housing. This includes properties available or booked for more than 90 days per year, and those where the host has multiple listings.

By categorising listings this way, we get a clearer sense of whether Airbnb is really being used to share spare housing capacity, or to run commercial rental accommodation.

Unfortunately, Airbnb keeps tight control over data about the use of its platform. This makes it challenging to quantify these uses.

To get around this, a few organisations have scraped and collated data from Airbnb’s website. While much existing research uses a dataset from Inside Airbnb, our research complements this work by using a dataset produced by the company AirDNA. While neither dataset is perfect, together they provide an increasingly clear picture of Airbnb’s impact.

What did our research find?

Our findings show a significant share of Airbnb hosts are using the platform to engage in economic activity that existed long before Airbnb did – that is, dwellings are used as serviced apartments, B&Bs or holiday rentals. This is commercial activity, not sharing. These properties aren’t just “excess” unused housing space and there’s no “sharing attitude” involved.

While commercial properties are not the majority of listings, other research suggests that this activity nonetheless generates a larger proportion of Airbnb’s income than home-share activity. In many cities this activity is also already subject to planning laws and land-use regulations about “tourist accommodation”. This means these Airbnb listings are potentially in breach of existing laws.

Furthermore, by mapping the Sydney listings we can see that while these traditional short-term lets were only about a quarter of listings, they were overwhelmingly concentrated in suburbs with very tight rental markets.

LOCATION OF TRADITIONAL SHORT-TERM LETTING

Author provided

LOCATION OF HOUSE SHARING

Author provided

Another factor is the rapid growth of Airbnb since late 2016. Australia now has 87% more listings than in late 2016. That’s a lot of properties in popular neighbourhoods that might otherwise be long-term rentals. So not only is this commercial activity not “sharing” at all, it’s also potentially pushing renters into shared living elsewhere, by reducing the amount of available rentals.

What does this mean for regulation?

So where does this leave our regulators? In our view, any policy decision needs to account for the different uses of these platforms, and be particularly focused on the impact of commercial short-term letting. While house sharing also raises concerns – particularly in apartment complexes – it at least fits the “sharing economy” model and arguably provides some of the shared financial, social and environmental benefits sharing economy supporters claim.

At the same time, regulators need to act on the lack of transparency in debates about platforms like Airbnb. Without good data, it will be tough for regulators to target their efforts at the most problematic aspects of new technologies. As we conclude in our research paper:

If Airbnb is genuinely committed to the ideal of ‘sharing’, as it regularly claims, it should share its data with regulators, even if it is not made publicly available. Airbnb’s unwillingness to do so (to date) indicates its sharing rhetoric is more of a sales pitch than a guiding philosophy.

 

Last year’s affordable housing green shoots have withered

Posted by on May 22nd, 2018 · Affordability, Economy, Finance, Government, Housing

By Chris Martin and Hal Pawson. This article was originally published on John Menadue’s Pearls and Irritations.

Budget 2018 fails the 1.5 million Australian households living in unaffordable rental housing or officially homeless, despite the urgent need for Commonwealth leadership on affordable housing policy.

On Budget night 2017 Treasurer Morrison announced a ‘comprehensive plan to address housing affordability’. In last week’s budget he said next to nothing. The 2018 package does nothing to build on last year’s small but positive steps, and fails the 1.5 million Australian households living in unaffordable rental housing or officially homeless.

The case for Commonwealth leadership on affordable housing policy is no less urgent. Last month Anglicare’s Rental Affordability Snapshot showed that a person on Newstart could afford just three properties (not three per cent – just three properties) advertised to let across the whole of Australia. Now so low that even John Howard would raise it, Newstart, along with similarly inadequately indexed Rent Assistance, barely keeps recipients in the low end of the rental market, where properties have become scarcer and less cheap for moderate income working households too.

Moreover, in our Australian Homelessness Monitor report published this week by Launch Housing we reveal the scale of recently rising homelessness in our capital cities. As shown in our analysis of ABS data, the sharpest increases have been in Sydney (up 48% 2011-2016), in Darwin (up 36%) and in Brisbane (up 32%). This pattern underscores that it is the intensifying shortage of affordable housing in pressured urban housing markets that is the main driver of the rising homelessness numbers seen nationally since 2011.

In his Budget speech, the Treasurer uttered the word ‘housing’ once only – in relation to funding for remote Indigenous housing in the Northern Territory (failing to mention that such funding would not be extended in Queensland, South Australia and Western Australia).

The Commonwealth’s contribution to the States’ and Territories’ social housing sectors will continue under the National Housing and Homeless Agreement (NHHA) only at present levels, which do not account for the continued growth in need for affordable housing arising simply from our expanding population, nor for past decades of under-provision.

This level of funding is a starvation ration. For the public housing authorities, it does not even fill the gap between the rental income received from low-income tenants and the reasonable cost of operations – far less does it provide any support for vitally needed portfolio expansion. For the non-government community housing sector, where rental revenues are modestly boosted by Rent Assistance payments, current arrangements appear sufficient to generate small operating surpluses and capacity for limited growth, but still leave community housing providers (CHPs) in a position where long term financial sustainability remains a constant challenge.

So what’s become of the 2017 initiatives, one year on?

The National Housing and Homelessness Agreement

Last year’s budget indicated that this refreshed framework for federal-state funding of social housing and homelessness services would also set a broader agenda of affordable housing reforms. It held out the prospect of effective Commonwealth pressure being exerted on the states and territories to up their game in this arena, including through the purposeful use of land-use planning powers (sometimes termed ‘inclusionary zoning’ but in practice generally value capture), through public housing renewal, and through further public housing transfers to CHPs, potentially making a modest contribution to supplythrough leveraging revenues and asset values.

As an overarching discipline, states and territories would be expected to commit to targets for social and affordable housing expansion within the context of broader aggregate supply objectives.

A year on, however, there is concern in the social housing sector that Commonwealth commitment to these reforms has waned, and that the NHHA agreements – still under negotiation between the two levels of government – may fall far short of what was apparently envisaged in May 2017.

The National Housing Finance and Investment Corporation (NHFIC)

In line with a Budget 2017 pledge, a new statutory agency is being set up to facilitate enhanced access to private finance for affordable housing development. This entity, the NHFIC, will incorporate a bond aggregator facility, enabling CHPs to secure debt at cheaper rates and on better terms than can be obtained for bank finance.

Welcomed by the affordable housing industry, NHFIC-channelled finance would not, however, overcome the problem of weak rental revenues (partly due to inadequacy of Newstart and Rent Assistance) and the insufficiency of ongoing subsidies under the NHHA. Unless this remaining ‘funding gap’ is addressed, NHFIC may provide little more than a one-off benefit, allowing existing debts to be refinanced but unable to fulfil its potential to help facilitate portfolio growth through new construction.

Due to commence 1 July 2018, the NHFIC’s establishing legislation is currently before the Senate. Considering its bi-partisan support it is to be hoped that – while Treasurer Morrison has so far failed to commit resources to fill the funding gap – Labor will step up to the plate should they form government after the next election.

Private investment in affordable housing

Aside from NHFIC bonds, Budget 2017 also sought to advance equity investment in affordable housing by offering an additional 10% discount on capital gains tax for properties let at affordable rents through a CHP. The government especially sought to engage institutional investors, and to that end proposed legislation allowing Managed Investment Trusts (MITs) to invest in affordable rental properties (of particular relevance to overseas investors, since disbursements through MITs attract a lower rate of withholding tax than other payments).

However, the legislation would have effectively restricted MITs from investing in non-‘affordable’ residential rental – which, according to the government, merely reflects the current law. This is challenged by proponents of Australia’s nascent ‘Build to Rent’ sector, who have been looking to MITs as an investment vehicle and are alarmed at the door being legislatively shut. For the moment, the government has not proceeded with the MIT amendments, but maintains that the current law precludes MIT residential investment, to the frustration of Build to Rent advocates.

Meanwhile, the associated Capital Gains Tax discount legislation is before the Senate, although a capital gains-based incentive (enhancing the discount from 50% to 60% for affordable rental housing) appears to sit uneasily with the CHP business model, and may not be useful to them.

Is this any kind of strategy?

There are a few positive, if relatively minor, housing measures in the Budget. These include a move against land banking, by denying tax deductions for land holding costs. There are also funds for the ABS to improve housing data collection, for AHURI to continue housing research, and for a review of the national regulatory scheme for community housing.

But, as demonstrated by the 2018 Budget beyond all doubt, the Commonwealth still lacks anything remotely resembling a coherent, comprehensive strategy to address the increasingly stressed condition of Australia’s housing system. Regrettably, the past 12 months has seen regression rather than progress.

Homelessness: Australia’s shameful story of policy complacency and failure continues

Posted by on May 15th, 2018 · Affordability, Cities, Data, Government, Guest appearance, Housing, Sydney

By Hal Pawson, UNSW and Cameron Parsell, The University of Queensland. This article was originally published on The Conversation. Read the original article.

Exactly a decade ago in 2008, the Australian government committed to an ambitious strategy to halve national homelessness by 2020. Through stepped-up early intervention, better homelessness services and an expanded supply of affordable housing, the problem would be tackled with conviction. Instead, as succeeding governments regrettably abandoned the 2008 strategy, homelessness in Australia has been on the rise.

Last week’s federal budget offered no response to this concern. And the problem is fast getting worse, as highlighted in our new Australian Homelessness Monitor, prepared for independent community organisation Launch Housing. Emulating a respected UK annual monitoring project, this report is a comprehensive national analysis of the state of homelessness in Australia together with the potential policy, economic and social drivers of the trends across the country.

Recently published 2016 Census statistics showed a 14% increase in overall homelessness in Australia since 2011. That’s well ahead of the nation’s population growth rate.

Our major cities have seen much larger rises in homelessness. Recent increases have been especially big in Sydney (up 48% since 2011), Darwin (up 36%) and Brisbane (up 32%).

Concerningly, the numbers of people sleeping rough have been growing particularly fast. This, the most visible and extreme form of homelessness, grew nationally by 20% over the 2011-2016 period.

Although offset by periodic rehousing initiatives for long-term street homeless, five-year increases in the municipalities of Sydney, Melbourne and Adelaide have exceeded the national trend. This was especially true in Melbourne. The 2016 City of Melbourne count showed numbers jumped by more than 200% over this period.

Why are the numbers soaring?

As our report this year highlights, many policies, or policy failures, are implicated in these trends. These include:

Such developments are critical in a housing market where, by international standards, subsidised social housing provision is minimal. This means the vast majority of Australia’s lower-income population must depend on an increasingly stressed private rental sector in which the stock of low-cost homes is dwindling.

Partly as a result, ABS statistics cited in our report show the proportion of low-income tenants in rental stress has risen from 35% to 44% over the past decade nationally. In New South Wales, it has risen from 43% to 51%. In Victoria, the figure rose from 32% to 47% over the decade.

The geographical pattern of recent homeless changes shows the housing market is driving these changes. Our report finds increases in homelessness have generally been much more rapid in capital cities. Non-metropolitan areas have recorded much lower growth rates, or even reductions.

In another pointer to housing market impacts, increases in homelessness have tended to be higher in the large eastern states. These are the states where economies and property markets have been relatively strong over the past few years. In South Australia, Tasmania and Western Australia, where these factors have been less evident, the rate of homeless growth has been lower.

So, overall numbers were up by 53% in inner Sydney (2011-2016), but rose by a more modest 21% in Hobart. In contrast, homeless numbers fell by over 30% in remote South Australia and Western Australia.

Governments have let this happen

Despite these stark trends, recent Australian governments, while footing the bill for homelessness services rising well ahead of inflation, have presided over cuts in social and affordable housing.

In its 2014 budget, the Abbott government cancelled the National Rental Affordability Scheme. This was Australia’s last national affordable housing construction program.

An increasingly underfunded social and affordable housing system leads to a burgeoning homelessness support system. The cost of emergency services for those lacking homes has risen by 29% in real terms over the past four years. On its current path, the cost is set to exceed A$1 billion by 2020.

 

Meanwhile, in the face of deteriorating public housing stock and intensifying shortage, social housing investment by state and territory governments has actually fallen by 7% since 2012-13.

Five years ago, prior to the 2013 federal election, then opposition spokeswoman on housing Marise Payne said “the Coalition’s homelessness plan” was “to abolish the carbon tax, pay down Labor’s debt, generate one million jobs in the next five years and increase our collective wealth so all of us – individuals and charities – have the capacity to help the homeless and those most in need in areas where government is not always the answer”.

While placing faith in philanthropy, such sentiment is underpinned by a stubborn belief that we can rely on market forces to provide suitable and affordable housing for disadvantaged Australians – just as much as for all other citizens. It is clear from the latest statistics that the official approach moulded by this thinking has failed.

What needs to be done?

Looking to the future, the ongoing restructuring of private rental markets seems likely to keep pushing up the numbers of people subject to housing insecurity. The availability of affordable low-rent housing continues to contract.

For any realistic chance of progress, the Australian government needs to reconfirm recognition of homelessness as a social ill that must not be ignored. It needs to re-engage with the problem, starting with a coherent strategic vision to reduce the scale of homelessness by a measurable amount within a defined period. And it needs to recommit to a level of government support that ensures enough social and affordable housing is provided to keep pace with growing need, at the very least.

The ConversationDisappointingly, the federal budget provided no indication that such developments are in prospect. Yet squarely tackling Australia’s growing homelessness problem demands recognition that excluding people from safe, secure and affordable housing is effectively a denial of citizenship.

 

Zoning: impost, or necessary urban management?

Posted by on May 14th, 2018 · Affordability, Cities, Data, Economy, Housing

By Greg Paine, City Futures Research Centre.

City Futures Research Centre and the Henry Halloran Trust recently hosted a seminar to review a Reserve Bank Australia discussion paper on zoning and house prices (see the video, and the CityBlog summary).  It was well-attended (the issue strikes a chord), and conducted in the best traditions of scientific rigour – strong, even feisty, critique by peers, but also polite (the participants were happy to sit next to each other rather than be separated, as in debates!) – in an effort to get to “what’s what”.  But on wandering home, a question lingered:  have we actually got any closer to an answer and, given it didn’t seem like it, would more of the same help?  Just what is going on here in this duelling of ideas and numbers and graphs?

 

An answer started to formulate when remembering the idea of the “wicked problem”, those issues that are so tangled up and recursive that usual limited-dimension problem-solving just doesn’t work anymore.  The concept is now much talked about, though often forgetting that it was first described by two urban planners, back in the 1970s.  City problems are inherently wicked.

And so maybe this RBA report, and the event itself, with its four economists (only, plus one urban planner) was itself inherently limited in its ability to reveal.  Like the laboratory technician picking from a petri dish a strand only of the thing being investigated and putting it under the microscope.  You get to learn a lot about that lonely strand, but little if anything at all about its wider operating context, how it influences that wider world, how in turn it is influenced, and whatever else there is out there we need to know.  Too often, to make complexity manageable, we simply leave things out.  The problem becomes “desiccated and dulled”, and isn’t the actual problem anymore.  We also know, from neuroscientists’ ability to now map brain activity, that decision-makers (which is all of us) are not persuaded by facts and number alone.  Sometimes not even a little bit, as explored in exquisite detail by the Utopia television show.  As its author, Rob Sitch, explains, he is interested in that part of decision-making where the business case is actually not of interest (“runs out” as he puts it) to those involved.  It is the resultant need for a more expansive connected view that the recent approach of “network science” for example seeks to address.

There were lots of graphs presented.  One was key.  It shows the cost of actually building a dwelling structure, plus the cost of land, with overall sale prices.  The “gap” (or “wedge” as the RBA, perhaps provocatively, called it) was where the real debate took place.  The RBA called it the “zoning effect” and considered it more or less as an impost.  There was much discussion as to whether it comprised the “narrow” planning view of zoning as simply land use control (as in colours-on-the-planning map) or a more omnibus version including lot size, allowable density, and so on – ie. market interventions, or “planning”, overall.

Source: RBA.

There was less (though some) canvassing of what else this diagram could indicate.  And how, looking at this space in a more networked way, there might be a whole lot more going on than revealed by a mere economic analysis of the three price criteria alone.  Like how it might actually, and more accurately, represent the whole raft – and complexity – of personal and household lifestyle factors that are part of any decision (choice) about where and how to live?  And, if factored in to any study, might yield far richer outcomes (as an example, see that co-authored by one of the event participants).

Why, for instance (and as canvassed in some earlier discussion), some households are willing (if they can, and perhaps through reductions in costs such as transport fares or second cars) to pay for walkability or proximity to particular schools or churches or to extended family and/or work.  Meaning, for example, that retaining planning controls to achieve a “30 minute city” (as in the current Sydney plan) might be as important than loosening controls to simply increase house supply anywhere.  And why, as shown in another revealing graph from one of the panel, neither “planning” nor the “market” are supplying the dwellings surveys suggest we want (with a preponderance on detached houses and density apartments, rather than the desired semi-detached dwellings).

And how, even if we can somehow reduce house prices by expanding city land boundaries, as suggested by some, there are always potential personal costs, as we now know only too well, if the result is simply more sedentary lifestyle commuter suburbs – costs relating to transport, time, health and wellbeing; and by extension also the public costs of delivering transport and services, from reductions in land available for food growing and environmental services, and from dealing with burgeoning chronic diseases.  Considering these means the “sale price” line (re-conceptualised as a “whole-of-household” living expense) is going to be entirely different.  Indeed, can that line ever be simply “structure cost” + “land cost”?  Some of that cost is what we – individually and as a community – choose to pay for quality of life, and achieved through “zoning” (however defined).

“Zoning” is after all just some tools (amongst others) used to meet this larger city-living equation.  As in any human endeavour they are applied with varying success.  Research can assist.  It also means planning instruments are constantly in flux, responding to changing wants and needs (the RBA study seems to portray them as more static, and indeed traditional research is more comfortable with particular points in time and space).  And here again wickedness creeps in.  This very fluidity, indeed willingness, to change planning “controls” facilitates another feature: speculation, the “hope factor”, particularly now in Australia where dwellings may no longer be just that but wealth-creation vehicles.  And then of course there are contributory taxation regimes, and choices by developers themselves to “drip-feed” supply to maintain investment returns, and, and ……

The diagram is a useful picture.  Sure, we need to “manage” the space in the middle to ensure the resultant price line is achievable (“affordable”).  Detailed petri dish examinations are worthwhile.  But it is also worth remembering the make-up of that space, and resultant policy, needs to be a lot more “multi” than a study like this can, alone, reveal.  The Australian Public Service Commission in a report on how to deal with wicked problems in public decision-making suggests this need is an evolving art, but one which requires, at least:

  • holistic, not partial thinking
  • innovative and flexible approaches
  • work across agency and discipline boundaries
  • a tolerance of uncertainties, and
  • an understanding of individual and social behaviour.

 

NSW is overselling its social housing commitment

Posted by on May 8th, 2018 · Construction, Government, Housing, Housing supply, Sydney
Photo: Zachary staines

By Hal Pawson, City Futures Research Centre. Originally published on The Fifth Estate. 

According to figures published this week the NSW government has over the past few years managed to build more public housing units than it has sold to raise revenue.

As revealed by the figures, the NSW Land and Housing Corporation (LAHC) constructed 1647 homes between 2014-15 and 2016-17 in place of 795 sold on the open market during this period – a net gain of 852.

Considering the intensifying shortage of affordable rental housing in the state, and the financially unsustainable condition of the public housing system, that sounds like good news.

As yet, however, this is not translating into actual portfolio expansion: the state’s public housing stockremained virtually static during this period – 110,214 in 2015 versus 110,221 in 2017. The apparent inconsistency here might be accounted for by public housing demolitions. In any event, it would seem that LAHC has been building a sufficient number of homes only to offset sales and demolitions – not sufficient to increase the stock at all.

And, although the data are not publicly available, it can be surmised that the homes sold will be disproportionately in the inner city (with Millers Point accounting for a distinct component), whereas those added to the stock will be largely in the middle and outer suburbs. This just compounds the effect of the private housing market – pushing lower income people more and more towards the remote urban margins.

The bigger story here is about the longer term inadequacy of social housing construction in terms of keeping up with growing need. Looking at housing stock figures for the period since 2008 – the total number in NSW increased by some 10,000. This was mainly as a result of the one-off gain of some 6000 dwellings under the federal government’s 2009-2012 Nation Building Economic Stimulus Package to stave off the Global Financial Crisis.

Despite this fortuitous circumstance, the gain over this period only amounted to seven per cent, whereas population grew by around 13 per cent. Keeping up with population growth alone would have called for an increase of 18,000 homes – not 10,000.

Looking to the future, the NSW government has two programs slated to generate additional housing to the tune of some 9900 dwellings over the next decade:

  • 6500 through the Communities Plus estate renewal program (23,000 new social homes minus 17,000 to be demolished; plus 500 new “affordable homes”)
  • 3400 under the Social and Affordable Housing Fund– of which 25 per cent will be “affordable” not social)

Meanwhile, over a similar 10-year timeframe, keeping pace with recent rates of population growth would call for not 9900 but 21,000 additional (not including replacement) dwellings.

So the stock addition projected under current NSW government plans amounts to less than half the number needed just to stand still – let alone to make any inroads into the existing backlog of need (exemplified by the 60,000 households on the waiting list). And even the assumption that the 9900 “committed” additional social and affordable homes can be unproblematically added to the existing portfolio numbers is likely to prove highly optimistic, bearing in mind the likelihood of ongoing open market sales and non-Communities Plus demolitions.

You also have to ask whether it is realistic to imagine that the Communities Plus program will in fact complete the demolition and replacement of 17,000 homes (and provision of 6500 more) by 2026 – as implicit in the program’s 2016 announcement. The first sod has recently been turned at Ivanhoe, but progress so far achieved in progressing the program’s other “major projects” such as Waterloo, Telopea and Riverwood Phase 2 raises a huge question mark here.

To be clear, though, this is not at all to suggest that renewing worn out estates under Communities Plus is a bad idea – if this can generate brand new public housing in equivalent or slightly increased numbers, that’s definitely all to the good. But the way that government oversells this program by implying that the “23,000 new social homes” are largely a net addition to the stock that amount to a major contribution to redressing the net shortage is highly misleading.

The limitation NSW imposes on itself here is that the cost of new government-supported social and affordable housing must be funded exclusively through “land value release” and not by general revenue.

Thanks to the property boom of the past few years government has enjoyed a massive revenue bonanza through stamp duty income. Factoring in the level of residential property stamp duty receipts received in 2011/12, the actual stamp duty income recorded in recent years has amounted to a windfall of no less than $18.25 billion in excess of that “counter factual” revenue. And yet none of this booty has been channelled into expanding social and affordable provision for the many lower income Sydneysiders whose stressed housing situation has been made yet more precarious by this turn of events.

Overarching all of this it also fair to say that not all of the blame for the inadequate provision of social and affordable housing should be attached to state and territory governments. It is the federal level of government that, in 2014, scrapped Australia’s most recent national affordable housing construction program, the National Rental Affordability Scheme. And, realistically, it is only when the national government re-enters this policy space that there is a serious prospect of progress. This week’s budget is unlikely to deliver such an outcome.