SUSAN RYAN. Affordable housing and inclusionary zoning.

Nov 12, 2016


There are recent signs that governments are belatedly starting to move on the urgent problems created by the lack of affordable housing. A variety of data sources shows that increasing numbers of people, especially older women, face homelessness. Based on 2011 census figures, among poorer single older women alone, we are looking at something like half a million who do not own a home and once they have left the workforce cannot afford private rentals.

This problem does not only affect poor older Australians who have ended their working lives. Younger people, especially in our cities are locked out of home purchase. House prices rise continually, fuelled by extravagant tax concessions to private investors. Those excluded from home purchase must rent, adding pressure on the rental market. Without major changes in housing policy these renters will also face homelessness later in life. Homelessness in Australia is likely to reach unmanageable levels.

The Federal Treasurer Scott Morrison recently pointed to the need for state governments to address the problem by releasing more land. This could at best provide only part of the answer. It is not a simple matter of supply and demand. Market forces have failed and will continue to fail to provide affordability. More land for more developments marketed under current rules would not improve the supply of affordable housing. The extra new dwellings would be snapped up at inflated prices by investors chasing negative gearing, asset value growth and capital gains tax concessions, just as current housing is. Reports of increasing numbers of houses and apartments left vacant indicate that the capital gains concessions and asset value growth offer enough attraction to investors even without rental earnings. If it only provides more tax breaks for the well off, increased supply of itself is not the answer. The challenge is not just to get more dwellings on the market, but to get more dwellings that middle and low income people can afford to buy or rent.

An effective and proven strategy to deal with these problems is what is called “inclusionary zoning”. This approach requires state governments to mandate that a percentage of new development be offered as affordable housing. Were this to happen in NSW for example, the numerous, large and continually expanding new residential developments around the periphery of Sydney would provide housing options for the low income as well as the affluent. This has not happened to date.

It now seems that the planned Parramatta Road development may offer some possibilities. As advised by the Greater Sydney Commission, the plan to redevelop the major road linking the City of Sydney to Parramatta will provide at least 27000 new residential dwellings. The plan states that at least 5% of these dwellings should be zoned affordable, which could deliver 1350 new homes for poorer people. This is welcome, but the target of 5% is too low.

When the 5 % target was announced, developers immediately opposed it, on profitability grounds. Policy makers must judge these responses by what is already happening in high density, expensive cites overseas. Inclusionary zoning for affordability is successful and profitable in London, New York and other parts of Europe.

In South Australia, it is working. The South Australian Housing plan in 2013 set a requirement of 15% affordable dwellings. This delivered 1223 such homes in 2013 with commitment to a further 2793.

The NSW government should be more ambitions.

The St Vincent de Paul Society in NSW has rolled out a campaign to get the NSW government to mandate 15% affordability in new developments. If this petition based community campaign persuades the legislators, the Parramatta Road development could deliver many more that the 1350 likely to result from the 5% target.

The Commonwealth needs to do more. The National Rental Affordability Scheme, NRAS, set up under the Rudd government, was to attract institutional investment into low cost housing by subsidising the provision of below market rentals to poorer tenants.

The scheme ran into difficulties and underperformed. It was suspended by the Turnbull government. Since a recent audit problems are being tackled and the scheme may be extended. The Council on Federal Financial Relations, the forum for commonwealth and state treasurers, has established a working group on affordable housing. The issues paper it published in January this year set out a picture of current supply of social housing, including public housing and community housing operated by ngos. The supply is seriously inadequate but the required new investment, public or private is not forthcoming under current tax and investment policies.

A big gap in the domestic investment market is the absence of investment vehicles to attract large scale investors such as superfunds into housing. Australian superfunds over the years have invested billions of their trillions in real estate, in Australian and overseas vehicles, Real Estate Investment Trusts. These REITs have all been commercial investment trusts. The challenge is to structure a real estate investment trust that funds residential developments. The treasurers’ working party called for new approaches to large scale institutional investment. It referred to the US Housing Partnership Equity Trust, a social purpose Real Estate Investment Trust that works in partnership with not for profits as well as government. It has a successful track record. There is on the face of it no insurmountable obstacle to developing such a vehicle in Australia.

Capital is available. Superfunds are constantly looking for relatively secure long term investment opportunities. Several Australian ngos have relevant experience and capacity. Common Equity Housing Ltd in Victoria is a housing cooperative currently managing 2200 properties, and there are other important examples.

For commonwealth and state governments acting together in partnership with developers, investors and ngos there are good precedents to follow. The financial costs of failing to provide decent secure housing for all citizens are huge, growing and inescapable. The human costs are higher. Without effective initiatives, the threat of homelessness will overtake more and more of our vulnerable citizens.

Susan Ryan AO has recently completed a five-year term as Age Discrimination Commissioner at the Human Rights Commission. She also served as Disability Discrimination Commissioner. She has led several superannuation bodies, was Senator for the ACT 1975-1988 and a minister in the Hawke cabinet 1975-1988


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