Australia’s affordable housing shortfall is vast, but new research shows the situation is particularly dire in New South Wales, where an extra 12,000 social and affordable homes a year are needed from now to 2026 to meet projected needs.
The research by Dr Barbara Yates was undertaken for the Community Housing Industry Association (CHIA), the peak body for social and affordable housing providers. Its release coincided with this week’s Everybody’s Home Affordable Housing Conference in Sydney.
The conference addressed a range of topics relevant to the sector including financing models, the need for a national strategy, the potential of innovations such as build-to-rent and offsite construction, and the role of sustainability in reducing operational costs.
Speakers and panels also explored issues around provision of affordable housing in regional areas, housing for Aboriginal people and communities, housing for people with disabilities and the role of support services in assisting tenants with complex needs.
Why we need a national strategy
Chief executive of the UK’s National Housing Federation, David Orr, was one of the keynote speakers, presenting on the need for a national strategy.
Speaking to The Fifth Estate from the conference, Mr Orr said there was “real frustration” at the absence of a strategic policy approach at the federal and state levels.
Politics at both levels was demonstrating a “long-term failure to engage with long-term thinking”, he said.
Meanwhile, the number of people suffering from the lack of long-term thinking and appropriate policy is growing.
NSW currently has more than 55,000 households on waitlist for social housing, and the state’s homelessness rate is growing three times faster than the national average.
Homelessness NSW chief executive Katherine McKernan said a chronic lack of housing was the biggest cause of homelessness.
“Homelessness in NSW increased by 37 per cent between 2011 and 2016; this was driven by scarcity of social housing and a lack of affordable rentals,” Ms McKernan said.
“The additional funding of $61 million provided in the NSW budget for homelessness is welcome, however, it isn’t focused in the right area – we need significant investment in social housing and housing first to really fix homelessness in NSW.”
Dr Yates’ analysis, based on 2015 ABS data on household incomes, homelessness and the latest figures on rental stress, showed that NSW needs 5000 new social housing homes a year and 7500 affordable homes at below market rent for people
experiencing rental stress.
CHIA NSW chief executive Wendy Hayhurst said this amount of additional social housing would return the proportion of social housing to six per cent of all NSW housing –the same levels as 20 years ago. The new build rate would also see 2.5 per cent of rental properties in the state comprising affordable housing.
“To put that into perspective, England expects 40 per cent of its new housing will be affordable housing and New York is working towards 30 per cent of all new housing being affordable housing by 2026,” Ms Hayhurst said.
The UK also has a massive shortfall in terms of social and affordable housing. Mr Orr said the shortfall of around four million homes had been “building up for years”.
There is also a shortfall in housing stock overall. He said to keep up with its growing population the UK should have been building around 250,000 new homes a year for the past 40 years.
The shortage of properties and the trend for properties in high-value markets purchased by investors looking for the best possible return from rents completes the perfect storm of affordability supply challenges.
It won’t be solved without building new homes, Mr Orr said, and the UK government needs to be spending money on the problem.
Getting in institutional investors
He said his sector was looking at institutional investors to help address the shortfall.
However, this will be “much easier to do at scale” if the government has a long-term strategy in place and undertakes some long-term planning – which currently it isn’t.
Everyone in the sector, including Australia, needs to be asking the question, “What contribution can the states and federal government make?”
One area where the UK sector has been finding some success is through leveraging its asset base.
“In the UK one of the advantages is community housing providers own their own stock; they have an asset they can use to secure long-term borrowing,” Mr Orr said.
Currently, the sector represents£90 billion (AU$160b) of long-term debt accrued over the past 40 years, and has demonstrated it can more than double any public money invested in social and affordable housing.
“We have been able to stretch the public pound.
“If the government invests one pound, it gets seven pounds worth of value because of what the sector can borrow.”
Because the sector has a degree of scale – Mr Orr’s organisation manages a combined total of 2.5 million properties, for example – it can also leverage the bond market.
For smaller organisations, they can join forces through an intermediary organisation, the Housing Finance Corporation, to access the bond market sector of the investment market.
Mr Orr said the thinking around how to bring in long-term institutional investors is underpinned by the housing providers’ goal of trying to “change the dynamics of the private rental market”.
Currently, the UK has more than 800,000 small landlords – those who own 1-2 properties and seek maximum rental returns.
There are very few large scale institutional providers. But this is changing, he said.
The build-to-rent proposition is starting to attract some interest, as where the housing associations are involved in managing the properties, they are higher quality properties and offer a better form of tenancy agreement.
Value capture
Another way the sector is achieving more properties is through a planning instrument, Section 106.
This “planning gain” policy means that when a developer gets development consent – and as a result the value of the land goes up – the housing associations capture some of that value through a mandated proportion of affordable housing as part of the development.
So if a developer builds 100 homes, the housing association may buy 25 of them at an affordable price and maintain them as affordable rentals.
Planning conditions require that the properties remain affordable in perpetuity, Mr Orr said. Even if they are sold on as private title, the properties must be maintained as either public or affordable housing.
More than 40 per cent of new properties in the affordable and social housing estate are coming from the planning value capture route.
However it is not a system without its difficulties. Mr Orr said developers generally try and negotiate down the affordable proportion, or propose to substitute them for properties in other developments, or offer the least attractive dwellings, sometimes built to a lower quality standard.
At the end of the day, developers are just “after the money so they can move on and build elsewhere”, he said.
“It’s always a bit of a battle.”
Housing providers get into the development game
Many of the housing associations are flipping this on its head, however, by becoming developers themselves. Their projects look to maximise the affordable housing component, while subsidising it with the market-priced properties.
This also has a quality and sustainability dividend.
“When housing associations build themselves the quality is generally better,” Mr Orr said.
That is because while developers are building simply to sell and move on to the next project, the associations are building to a standard that will be cost-effective for them to hold onto and maintain for 40, 50 or 100 years.
The end result is much more energy-efficient homes.
“Our models are about holding onto properties and then reinvesting and doing it again,” Mr Orr said.
“If you are building homes for people on low incomes, reducing the outgoings means people are more [economically] secure so they can pay the rent. It makes good business sense.”
As a result of this understanding, the sector is also seeing some leadership examples in terms of testing low-energy and no-energy homes.
Mr Orr said that, overall, while there are “some big challenges out there” for the social and affordable housing sector, it has a size and scale that gives it some power.
“We have huge opportunities.”
The commercial approach to delivering a social purpose is also a strength, and means the sector can do “good and useful things even without government support”.
While the Australian sector is smaller and does not have all the same opportunities, Mr Orr said his message to people here was that “it is possible to envisage a future where more can be done”.
The peak bodies around housing and homelessness coming together is a positive sign, as it is generating a more strategic approach and the force of combined energies.
“It’s a challenge everywhere – but what we are seeing is the ability of civil society to have a reach and a voice and be heard.”