Pearls and Irritations

This is the latest monthly digest of articles, research reports, policy announcements and other material about housing stress/affordability and homelessness.

New NSW planning policy looks good for people but developers are furious The Fifth Estate’s Tina Perinotto reports on reactions to the NSW government’s release of its new draft State Environmental Planning Policy (SEPP), which NSW’s Planning Minister, Rob Stokes, describes as one that emphasises placemaking, allows and incentivises more tailored and affordable housing choice, promotes healthier communities, walkability and sustainability, and puts people first. The draft has been cautiously welcomed by some environmental groups but criticised by the development industry for failing to address some of their concerns. Amongst the initiatives introduced by the draft SEPP are two new housing types to meet changing needs: “Co-living housing” and “Independent living units”.

Submission to the UN on the decriminalisation of homelessness This submission to the United Nations, which has been prepared by Justice Connect Homeless Law (a specialist homelessness legal service operating in Victoria), aims to highlight the ongoing risks of criminalisation of homelessness and the policing of public space. Although Victoria’s laws and regulations are the focus of the submission, similar provisions exist across every Australian state and territory. The submission recognises that people experiencing homelessness are, due to their public visibility, more likely to confront law enforcement and be moved-on, searched and/or fined or charged for low-level offences related to homelessness and poverty. “Public space offences” of the type for which homeless people are sometimes charged include begging, public drunkenness, and certain types of conduct on public transport.

States’ social housing boom no substitute for federal funding commitment In this Fifth Estate article, UNSW Professor of Housing Research and Policy, Hal Pawson, highlights ongoing extreme shortages of public and community housing across Australia, despite patchy efforts by some states (notably Victoria, Queensland, Tasmania and Western Australia) to fund a boost in their own supply of such housing. Those efforts will add over 23,000 new public or community housing units, but this number must be seen against the backdrop of 155,000 households registered on social housing waiting lists across the country and more than 400,000 households in need of low-cost rental tenancies. Pawson estimates that the prospective net gain in social housing dwellings over the next three years, after allowing for government plans to demolish or sell existing public housing stock, will be only 400 in NSW, 8300 in Victoria and 4400 in Queensland. He points to the tightening rental squeeze that started in mid-2020, with rents accelerating at more than 8 per cent Australia-wide — the fastest pace since 2008, and far ahead of wage growth of under 2 per cent. Such rent escalation is not confined to the cities, it is also prevalent in regional areas, particularly in NSW, Victoria and Queensland. The situation is exacerbated by the progressive expiry of rental subsidies under the now discontinued “National Rental Affordability Scheme” (NRAS). Pawson refers to recent ACOSS-UNSW research that documents Covid pandemic induced efforts by certain states (eg. NSW and Victoria) to facilitate safe, secure and supported accommodation pathways for former rough sleepers, but notes more could have been done, particularly considering the scale of the problem and the need to redress what he describes as “the huge shortfall in rental housing affordable to low income Australians that has accumulated since the effective end of a routine national social housing construction program in 1996”. He concludes by stressing the pivotal role that the federal government can and must play in restoring satisfactory and sustainable levels of social housing.

IMF pressures Frydenberg on housing, tax reform AFR Economics Editor, John Kehoe, writes about the recent pressure imposed by the International Monetary Fund (IMF) on Australia to pursue serious tax reform. Amongst other reforms advocated by the IMF are a cut in Australia’s corporate tax rate and an increase and broadening of our GST, in the latter case accompanied by appropriate compensation to low-income households. More relevant here, however, is pressure to improve housing affordability, a field in which the IMF says tax reforms to “discourage leveraged housing investment by households could help dampen investor demand in residential real estate”. Kehoe notes that this is an “implicit endorsement of Labor’s 2019 election policies to curtail the capital gains discount and negative gearing, which Labor has since dumped”. The IMF also advocates a move away from stamp duty on housing transfers (a tax widely seen as productivity negative and market liquidity negative) towards to an annual land tax (seen as productivity neutral and market liquidity positive , a reform that NSW Premier Dominic Perrottet has for some time favoured, including during his previous role as NSW treasurer.

Four out of five first home buyers locked out of most of Sydney and Melbourne SMH Social Affairs reporter, Caitlin Fitzsimmons, examines aspects of a recent report by the National Housing Finance and Investment Corporation (NHFIC), which analysed home purchase affordability for Australia’s first-home buyers, and at home rental affordability nationwide. The analysis looks at affordability by income segment (ie. each 20 per cent segment or “quintile” of the income distribution, across relevant population groups, and in different parts of the country) rather than average or median income. Although Sydney and Melbourne were slightly more affordable for renters than a year ago (due to Covid), they are still very expensive. Sydneysiders in the bottom 40 per cent of the income distribution can afford only up to 10 per cent of rental properties, against the corresponding figure of 30 per cent of rental properties for those from Melbourne. Amongst first-home buyers, 60 per cent of those in Sydney can afford fewer than 10 per cent of Sydney properties, compared to 20 per cent of Melbourne properties. Accumulating the cash to pay a deposit is, as always, a major obstacle, except for those able to rely on the “bank of mum and dad”. Amongst Australia’s capital cities, Perth and Adelaide were rated most affordable, and Hobart least affordable. Rental and purchase affordability in regional areas was found to vary widely across the country, with regional NSW and regional Victoria faring worst. See also First home buyers left with housing scraps

Productivity Commission to review National Housing and Homelessness Agreement Federal Treasurer, Josh Frydenberg, has recently confirmed that the Productivity Commission will conduct its scheduled review of the National Housing and Homelessness Agreement (NHHA) and that the review’s final report is expected to be released by 30 June 2022.  NHHA enables the provision of around $1.6 billion per annum in Commonwealth funding to support states and territories to deliver housing and homelessness services and programmes. This is in addition to federal funding of around $5.3 billion in 2021-22 via the Commonwealth Rent Assistance (CRA) program to support individuals in the private rental market and community housing to pay their rent.

Canada: Housing is both a human right and a profitable asset, and that’s the problem Brian Doucet, Canada Research Chair in Urban Change and Social Inclusion at Canada’s University of Waterloo, explores the problem inherent in housing being both a basic human right and a commodity from which to extract wealth. Writing in The Conversation, he argues that most housing debates ignore this contradiction and miss key questions about: housing for whom; against whom; who profits; and who is excluded. For Doucet, the answers to the housing problem require a deeper understanding of what type of supply gets built, what does not and what is lost as cities grow and develop. On the demand side of the equation, he says “Reducing demand from speculators is key”. In Ontario, apparently a quarter of all home buyers are investors. Doucet cites the Canada Mortgage and Housing Corporation as linking skyrocketing housing costs to speculative investment. Speculators, he argues, both increase demand for housing, and shape the supply that gets built (ie. supply which meets demand from speculative investors, but not necessarily those most in need). Doucet notes the adverse affordability consequences of so-called “gentrification” within cheaper neighbourhoods, and uses the terms “demovictions” and “renovictions” to describe the effective pricing out of low-income residents from a neighbourhood through demolition or renovation of existing (cheaper) housing. He favours boosting the supply of “new social housing and other forms of ownership such as co-ops and rent-controlled apartments that are off limits to speculators” and opposes a system where housing supply is essentially market driven. In his view, that inevitably leads to an investor driven “commodification” of (and speculation in) something he considers a basic human right. He advocates a more targeted approach to supply, one that preferences affordability, owner-occupiers (as well as those offering purpose-built affordable rentals) and some form of rent control in relation to housing designated as “affordable”.

NZ: report card 2021 reveals negative trends in housing affordability Alexander Gillespie, Professor of Law at New Zealand’s University of Waikato, writing in The Conversation, provides his own report card on how well – or poorly – New Zealand has done in 2021. I have restricted the following comments about Gillespie’s findings to what is relevant for this housing affordability and homelessness digest. According to Gillespie: “Undeniably, the most negative trends involved housing and poverty” – though he also mentions New Zealand’s stubbornly high wealth inequality. Rampant house price growth (25.9 per cent in 2021) may have been, as Gillespie notes, “Good for some, maybe many, but terrible for the young and others locked out of the housing market by extreme prices”. For a small country whose population of around 4.8 million is some 0.5 million less than that of Greater Sydney, the following 2021 statistics which Gillespie quotes about New Zealand are sobering: 102,000 people are now living in severe housing deprivation, including 3,624 without shelter, 7,929 in temporary accommodation, 31,171 in severely crowded dwellings and 60,000 in sub-standard housing (lacking one of six basic amenities such as tap water or a toilet).

Government response to NHFIC statutory review The federal government has published its response to the statutory Review of the operation of the National Housing Finance and Investment Corporation (NHFIC), a response which supports 21 of the Review recommendations in full or in principle. One encouraging response is that the government will reposition NHFIC to leverage greater private sector involvement in the delivery of new social and affordable housing.

Trust, political integrity and affordable housing Mike Brown, writing in The Fifth Estate, challenges conventional thinking around the role of supply and demand for housing, in the context of the housing affordability debate. He rejects the binary view that the problem is either solely supply-side or solely demand-side, arguing that elements of both must be considered, and that more regard should be had to the economic costs of ballooning house prices, including the lack of any concomitant improvement to national productivity. He views rampant house prices as amounting to an unproductive transfer of wealth, and land itself as, by its nature, monopolistic. Presumably, he is referring to a kind of localised monopoly, due to land’s finite supply and limited fungibility. Brown rejects arguments that planning controls are the cause of housing unaffordability, and notes that planning regulations are “the favourite whipping boy of conservative commentators”. He laments the unwillingness of the development industry to embrace inclusionary zoning as a means of creating more affordable housing, and believes our current lack of affordable housing represents “market failure” – more particularly a failure by the market to deliver an adequate supply of affordable housing. That said, he acknowledges that other factors also play a role, not least the current “cheapness” of money. Brown argues that affordable housing should be “removed from circuits of wealth creation, restoring the primacy of its shelter function”, that it should be delivered through a variety of systems that are genuinely competitive (in order to lower prices) and that it should not be accompanied by any regulatory changes that diminish existing spatial standards.

Follow the Kiwi model to fix the house price nightmare Grattan Institute economic policy program director, Brendan Coates, writing in the AFR, looks “across the ditch” to New Zealand, which has recently legislated to force local councils of major cities such as Auckland, Wellington and Christchurch to allow townhouses up to three storeys tall “as of right” in city suburbs, without requiring approval from the local council. Builders are still obliged to satisfy basic rules and to meet minimum green space requirements and setbacks. The new rules, which follow an earlier move to allow six-storey “as of right” residential development within walking distance of city centres and major transport networks, should facilitate and speed up increased density residential development in New Zealand’s major urban centres – where easy access to existing infrastructure, services and jobs makes it attractive for people to live – and should also lower carbon emissions and enable better transport links.  The new rules will go a long way to overcoming the impediment of NIMBYism (ie. incumbent residents saying “Not In My Back Yard” to more density). Modelling by accounting firm PwC suggests the new rules could result in 48,000 to 105,000 new homes being built in the next five to eight years. Coates notes that New Zealand is also removing tax deductibility on loans for residential property investments and imposing capital gains tax on investors who sell an investment property within 10 years of purchase (previously 5 years). New homes are exempt from such changes. He calls on Australia’s federal government to follow the New Zealand lead, and to use analogous reform measures to tackle Australia’s housing crisis. The federal government could, for instance, financially incentivise Australia’s states to reform land-use planning laws in ways that will boost housing supply. He remains of the view that Australian tax concessions such as negative gearing and the 50 per cent capital gains tax discount should be removed.

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