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Affordable housing – some small moves to fix a big problem

Melbourne apartment block
unsplash-logoLennon Cheng

OXYGEN FILES: Australia is in the midst of a housing crisis and although affordable housing is generally considered a state and federal concern, local governments are now stepping up to the plate.


It might be a novel idea in Australia but in the UK, council housing comprises around 10 per cent of the housing stock and is a vital provider of social and affordable housing.

Some Australian councils such as Liverpool City Council are now exploring affordable housing options, closing an Expressions of Interest affordable housing tender this week for a site at Lurnea with one of the options for council to lease the land to a developer, rather than selling it.

City of Darebin in Melbourne has gone a step further. It called for Expressions of Interest last year for a site in Preston and carried out a community-wide consultation on a proposal to lease it for affordable housing.

While there were several objections raised, including fears affordable housing might have a negative impact on the value of other properties in the area or lead to a rise in crime and anti-social behaviour, council found no evidence this happens when affordable housing is added to a neighbourhood.

It has now put out a closed tender to potential affordable housing developers to finalise a proponent for the project.

A second site, a disused carpark behind the former Preston Bowling Club, is already being leased for at-risk youth housing. Kids Under Cover has been granted a three-year lease of the site and is erecting tiny homes for youth at risk of homelessness.

“Council is strongly committed to taking action to increase the supply of affordable housing. House prices in Darebin have risen significantly over the past two decades, and we are seeing more and more people struggling to gain secure, affordable accommodation,” Darebin Council mayor Susan Rennie says.

In combination with a decline in funding for public housing, she says Darebin is facing a housing crisis.

“We are glad to be able to use our land to deliver affordable housing and are exploring more ways we can do this. Council sees the delivery of affordable housing as a responsibility of all levels of government, and we all need to do everything we can to solve this critical problem.”

One of the researchers involved in an ARC Linkage project examining local government housing, Professor Alan Morris from the Institute for Public Policy and Governance at UTS, says that while local government initiatives are useful, there is a limit to how much land is available for projects.

More broadly, measures such as inclusionary zoning, which sets a percentage of a development that must be affordable as part of development consent, are not happening at scale.

Morris told The Fifth Estate that City of Sydney has probably been the most proactive user of the inclusionary zoning tool, particularly around Pyrmont and Ultimo.

It has a target of 7.5 per cent affordable housing by 2030, and has identified a shortfall of around 11,000 affordable homes within the City of Sydney municipality.

But in the last decade, despite being “one of the most interventionist” councils in Australia on affordable housing, Morris says only 1000 affordable homes have been delivered.

Morris says there’s generally a lack of capacity within local government to intervene in any meaningful way to fix the housing crisis – and the property market has certainly failed to deliver affordability either.

A survey of local government found that for most councils, particularly metropolitan ones, affordable housing is seen as a state or federal government responsibility.

The scale of the problem is “tremendous,” Morris says.

What state and federal governments could be doing is looking at government-owned land and identifying what could be released at a subsidised rate specifically for affordable developments.

In general, state and federal budgets for affordable housing are “pathetic”, Morris says.

“There has been no serious endeavour [to fix the crisis].”

The situation is creating “massive inequalities”, with low income renters in the private rental market in “dire straits”.

Low income homeowners with mortgages are also in trouble.

Morris notes it’s also an intergenerational issue, as low income families generally cannot help their kids into the property market like many middle class families do.

The national economy’s dependence on house price growth is part of the problem. State government dependence on stamp duty revenue is another.

For households with incomes in the bottom 40 per cent, the whole situation “is a disaster”.

Morris says federal and state governments need to recognise that addressing the housing crisis is a way to kickstart the economy again – much like the 2009-2010 stimulus package that helped the economy better navigate the global financial crisis.

So, what are the feds doing?

There were two announcements from the federal government this week in relation to affordable housing.

Victorian community housing provider, Housing Home Safe, has been granted a $65 million loan from the National Housing Finance and Investment Corporation’s Affordable Housing Bond Aggregator.

The announcement says Haven will use the loan to refinance its existing debt and provide working capital towards the construction of 99 new social and affordable homes. It is expected the refinancing will save Haven $10 million in interest on its existing debts.

NHFIC has, to date, provided more than $600 million in loans to community housing providers, with the government estimating this will result in savings of more than $80 million and other costs for housing providers.

Overall, it expects NFIC will support the deliver of more than 800 new and 2700 existing social and affordable homes.

But within City of Sydney there’s a shortfall of 11,000 affordable dwellings. So, drops and buckets spring to mind.

Another announcement from NHIFC this week was its second bond issuance, which is already seeing strong interest from institutional investors and superfunds.

The $315 bond issue will raise funds to be loaned to community housing providers in Victoria, NSW, Queensland, Western Australia and South Australia, with more than 2000 dwellings expected to be added to the provider’s portfolios, including more than 360 new social and affordable dwellings.

“NHFIC is very pleased with the strong level of demand from both local superannuation funds and offshore investors for its bonds and to see CHPs from around Australia benefitting from NHFIC’s finance,” NHFIC chief executive, Nathan Dal Bon said.

“Superfunds have an increasing desire to invest in social and affordable housing in Australia and NHFIC’s bonds provide them with an opportunity to do this at scale.

“These bonds have also drawn commitments from significant international investors which is further evidence of community housing emerging as a new investment asset class in Australia.”

CBUS and UniSuper have both supported the two NHFC bond issuances.

Another recent move by the feds was establishing a housing supply research unit within NHFIC. This aims to provide the data lacking since the government scrapped the Housing Supply Council in 2013.

AHURI will be working in cooperation with the new unit, AHURI executive director, Dr Michael Fotheringham, told The Fifth Estate.

AHURI welcomes the generation of better data around supply, he says.

However, there are big picture things that urgently need to be addressed.

One is retirement incomes, Fotheringham says, as the national policy around pensions and superannuation is predicated on older people owning their homes.

Another urgent issue is the way taxation settings favour investment property ownership over owner-occupier ownership.

House prices are also a major part of the problem. Fotheringham says between 1985 and 2016 average house prices have tripled, but wages have only doubled.

Add to that the reality that employment incomes are less secure with the rise in contract, casual and gig economy employment and more people are coming into a state of housing stress.

He says the initiatives by local councils such as Liverpool and Darebin are valuable.

He points to the example of the UK where affordable, council-owned housing comprises around 10 per cent of housing stock and is a really important property class that we “just don’t have” at scale in Australia.

“Anything that means we have more supply is a good thing. There is no one way [to fix this].”

Creative and innovative approaches of many kinds are needed to try and “fix a broken system”.

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Comments

One Response to “Affordable housing – some small moves to fix a big problem”

  • Kevin Cobley says:

    Leasing land to build “affordable housing” is a really stupid idea.
    When the lease ends what happens?
    Like a trailer park you are told to relocate your trailer when the lessor wants to sell the land to a developer?
    Government aren’t yet interested in building social housing, it’s going to take a large number of voters to shift this attitude.
    When the boomers were a large voting block in the past they ensured social housing was built, university was free, now they are old they want big pensions, free medical care, nursing homes and investment concessions.

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