The latest instalment of a monthly digest of interesting articles, research reports, policy announcements and other material relevant to housing stress/affordability and homelessness – with links to the relevant source.
Improving outcomes for apartment residents and neighbourhoods [AHURI final report, 28 May] Focused on Sydney and Melbourne, this report summarises recent research into Australia’s increasing prevalence of apartment dwellers, including the demographic and socio-economic makeup of this group. Lower-income households are over-represented amongst those living in apartments, and they tend to be dominated by international students and millennial renters, migrant families in public housing, older homeowners and public housing tenants – though concentrations of each vary between Sydney and Melbourne. The report identifies shortcomings with how well apartment developments provide for the wellbeing, community and affordability needs of lower-income groups, and considers how these issues can most effectively be addressed in high-density developments – at both a building and precinct scale.
Would build-to-rent improve or worsen rental affordability? [AFR, 1 June] Not everyone is in favour of the emerging build-to-rent (BTR) sector in Australia. One such critic is apartment developer, Tim Gurner, who considers BTR “economically stupid”. He believes the investment returns of BTR are inadequate for institutional investors and worries that “big boy” (ie. institutional) investors will wipe out “mum-and-dad” investors, the latter whom he thinks make good landlords. Many would question that last proposition, for a few reasons. First, mum and dad landlords are typically unable or unwilling to offer their tenants more than a year’s security of tenure. Second, they tend to carry very high levels of debt and are vulnerable to economic and employment swings, not to mention changes in investment sentiment. Melbourne Lord Mayor, Sally Capp, is one who avows a “love” for BTR as a new asset class, and what it can do for us.
Money for social housing, not home-buyer grants, is the key to construction stimulus [The Conversation, 1 June] On the eve of the Federal Government’s recent announcement of its HomeBuilder stimulus package, the Grattan Institute’s Brendan Coates makes a strong case for the stimulus to be directed towards more social housing, rather than what it turned out to be. Coates argues that grants of the type which the government ultimately came up with provide little economic gain to the economy (because the relevant spending, such as home renovations, is already underway and doesn’t need to be stimulated) and tend not to make housing more affordable (as they are typically passed through into higher prices for those availing of them). Coates applauds initiatives such as the GFC-era Social Housing Initiative, under which 19,500 social housing units were built and another 80,000 refurbished, over 2 years, at a cost of A$5.2 billion, and which produced a quick and significant spike in construction activity, as was intended. Coates points to the need to tackle the growing scourge of homelessness. Building more social housing would most directly help address that problem for those amongst our most needy. See also: HomeBuilder: a missed opportunity to fix social housing [Macrobusiness, 5 June], HomeBuilder might be the most complex least equitable construction jobs program ever devised [The Conversation, 5 June], Building more social housing will save almost 20,000 jobs a year: SGS Economics [The New Daily, 3 June] and Coronavirus: Pundits divided on home-owner grants [The Canberra Times, 3 June]
Why the COVID Commission must back social housing stimulus [Pearls and Irritations, 3 June] UNSW Professor, Hal Pawson, calls for the Nev Power led National Covid Coordination Commission (NCCC) to advocate for a social housing stimulus investment program. He bemoans what he and others perceive to be the NCCC’s excessive focus on the promotion of a “fossil-fuelled medium-term industrial strategy tailored to mining interests”. One recent program that Pawson instances is the Social Housing Acceleration and Renovation Program (SHARP), a 3-year initiative to construct 30,000 social rental units across Australia, which he says would begin to address the 25 years of disinvestment in Australia’s stock of public and community housing. Restarting social housing investment can, according to Pawson, be easily justified as a social priority in a country where homelessness rose by 30% in the decade to 2016, and where private rentals are increasingly unaffordable. Importantly, he notes that there is a good economic (ie. not just social) case for government to invest in social housing. For example, “The typical annual impost on health, justice and other budgets linked to a chronic rough sleeper exceeds the unit cost of providing that same person with supportive social housing.” See also Australia can, and must, build the post-pandemic recovery with more social housing [Pearls and Irritations, 22 May], which provides more detailed information about SHARP.
The housing boom propelled inequality, but a coronavirus housing bust will skyrocket it [The Conversation, 9 June] The authors note how Australia’s housing boom that lasted from the mid-1980s (with only minor interruptions) has driven rising inequality, and cross-reference their previous article in The Conversation on the subject, in September 2018. They point to the particular risks for those who bought their first home at the peak of the boom, taking on board high levels of mortgage debt and profiting from historically low interest rates. Rapidly rising rates of unemployment (and underemployment), turbo-charged by the recent Covid-19 related lockdown, have put very many homeowners – including highly geared “mum and dad” residential property investors – at risk of defaulting on their mortgages and/or of finding themselves “underwater” from an economic perspective (ie. the value of their properties falling below their related mortgage debt). Those who hope that a Covid-19 induced housing bust (either a significant fall in house prices or increased rental vacancies) will make things more affordable in any sustainable sense are probably deceiving themselves. First, those most at risk simply usually don’t have the equity or borrowing capacity to take advantage of a house price bust. As the authors note “In the US from 2007 to 2009, despite declining house prices, rental affordability stress has only increased.” And a slowdown in housing construction will in the long run create supply shortages, leaving rental vacancies low and rents high.
On Social Housing [Architecture&Design, 9, 16 and 23 June] This 3-part series by UNSW Adjunct Professor and President of the Australian Architecture Association, Tone Wheeler, explores a range of key perspectives around social housing. Part 1 traces the nature and history of social housing in Australia, which in the last 75 years in Australia has declined from near 20% to a mere 4% of all housing. Part 2 examines the economics of residential property development, including the changing makeup of development costs (land, construction costs and development profit), particularly with rising land and construction costs in central areas of our major cities. Wheeler’s deconstruction of the costs of developing residential rental property demonstrates just how hard it is to develop suitable and affordable rental accommodation for those on lower incomes, particularly those in the lowest 2 quintiles of the income distribution. His conclusion is that the only solution for those on lower incomes is government subsidised rental accommodation (what in the main we call “social housing”), and he makes a strong plea that “We must end privatisation of housing.” Part 3 focuses on different social housing typologies, ranging from high-rise to “low and close”, and at a range of densities.
AustralianSuper takes 25% stake in build-to-rent platform [AFR, 11 June] AustralianSuper has taken a 25% stake in affordable housing developer Assemble Communities, currently focused on the Melbourne market but with plans to expand in other parts of Australia. Assemble’s build-to-rent-to sell model enables rental occupants to rent their property for five years and then buy at a price fixed at the time of commencement of the rental. Properties are targeted at households in low-to-moderate income bands. See also: AustralianSuper invests in affordable build-to-rent developer [The New Daily, 12 June]
Supporting families effectively through the homelessness services system [AHURI final report, 18 June] This research examines the capacity of existing measurement systems to identify what is working well, what could be expanded to improve housing and wellbeing outcomes, and the case for system redesign. The inquiry focuses on how the homelessness service system is working for different groups across their life course, recognising that homelessness is driven by both structural and individual factors and that homelessness systems are fragmented and jurisdictional rather than holistic and national. Key findings include that homelessness at a family (as opposed to individual) level has seen a disproportionate increase in recent years, led by rising domestic and family violence, poverty and a lack of affordable and suitable accommodation. Women and children are amongst the highest users of homelessness services. It is noted that the homelessness estimate derived from the Census does not report on homelessness by household composition, though some national data on homelessness by household type is available from the Specialist Homelessness Services program. Another key finding is that the homelessness system is not generally defined to include those sectors that could address structural factors such as the supply (including shortage) of long-term housing.
Homes for Homes NFP trials collaborative approach to fundraising for social housing [Australian Broker, 19 June] Homes for Homes (HfH) is an innovative not-for-profit that raises funds for affordable housing through donors who agree to include a removable caveat on their property title which enables the vendor of such property from time to time to make a tax deductible donation of 0.1% of the sale price to be given to HfH (unless of course the vendor or a predecessor has removed the relevant caveat, which they are freely able to do). HfH has recently partnered with real estate group Base Developments to raise funds for social housing in the ACT, including by getting a major landowner (Capital Airport Group) to register its entire Denman Prospect suburb with HfH. The arrangement has already yielded a donation of over $34,000 to HfH following the sale of 79 properties in Denman Prospect by Base Developments. Once sufficient funds are raised, HfH will allocate them to housing providers to create social and affordable housing.
“Confusing and not delivering enough”: developers and councils want new affordable housing rules [The Conversation, 22 June] The researchers behind this article conclude that voluntary arrangements between developers and local planning authorities for the provision of affordable housing don’t work effectively, for a range of reasons. These include the lack of capacity to enforce negotiated contributions and the lack of incentives for developers to justify their requirements, as well as general distrust between developers and planning authorities. Interestingly, the researchers have found (through a survey in Victoria) an almost universal preference from each class of stakeholder (developers and financiers, local government and non-profit providers) for consistent mandatory affordable housing requirements to be applied to all developments. Mandatory requirements of this nature are often termed “inclusionary zoning” and apply in many other parts of the world and to a limited extent in Australia. Although normally set at lower percentages, they can require up to 50% of the dwellings in a new development to be sold or rented at below-market rates. One of the main reasons these requirements work is that affordable housing expectations are established in the developer’s initial feasibility analysis and applied consistently across all sites in the relevant area from the outset. Mandatory inclusionary zoning represents a type of value sharing that recognises that development potential is a public good whose benefits should at least in part be allocated across the whole community, including those in need of social or affordable housing.
Super funds to press for affordable housing subsidy [Brisbane Times, 22 June] Industry super funds are lobbying state and federal governments to release cheap land and offer tax incentives so that the funds can invest in affordable housing during Australia’s recovery from the Covid-19 pandemic. Other groups involved in such lobbying efforts include the Community Housing Industry Association (CHIA) and The Constellation Project, which in turn includes PwC, the Centre for Social Impact, The Red Cross and Mission Australia. Key to making this sort of initiative work is achieving significant scale and securing adequate new government subsidy (either financial or in kind). For a different perspective, see: Superannuation funds demand housing subsidies [Macrobusiness, 22 June]