I was interviewed recently by the organisers of the Affordable Housing Australasia Conference where I will be speaking on inclusionary zoning practices and policy questions in November. Transcript of the interview below.
What are the best alternative funding options available for affordable housing developers?
Traditionally affordable housing organisations have had to rely on an ‘on/off’ tap of government grants coupled with access to standard bank finance arrangements as the primary funding model to deliver new supply. This is currently the case in Victoria.
Funding models that recognise the gap between household capacity and cost and support co-investment by government, not-for-profit housing organisations and private investors are required if we are to achieve outcomes at the scale that is required. Governments have a significant role to play in underpinning these models and their investment will be critical to the long-term success of any model. Government investment can and should come in multiple forms, including direct subsidy, which can be provided as both cash and land contributions, as well as through financial support such as through government guarantees or low-interest loans. Linking funding models to planning processes and incentives would further leverage government investment while supporting delivery of outcomes in priority locations.
The NSW Social and Affordable Housing Fund is one new approach to financing affordable housing with that could have wider Australian application. Internationally tax-credits and Bonds offer other models that we should continue to explore and develop for the Australian context.
From your point of view, what are the prevalent challenges faced in the community housing sector?
The community housing sector is a growing industry that has proven to have the skills and experience to partner, co-finance, develop and manage affordable housing for often highly vulnerable households.
Capacity for the sector to continue to grow and support additional households in need is primarily limited by the historic lack of long-term and stable government strategies and investment in affordable housing delivery. Ensuring a sustainable business operation is always going to be a challenge when revenue is restricted by your target household’s income capacity but this is certainly further limited by the current lack of a range of housing models from which different income streams can be achieved.
This is an ongoing challenge that the sector continues to seek to resolve through developing new models and engaging with government and potential partners on investment solutions, all while continuing to provide accountability to their stakeholders – governments, financiers, and importantly, their tenants.
In your own words, how would inclusionary zoning impact the housing market in Australia?
There are a number of ways in which planning systems can be structured to support affordable housing delivery and have a positive economic impact on the market, including approaches that incentivise and support private sector delivery while contributing to an overall increase in housing supply. There is also evidence that a market-wide ‘inclusionary zoning’ requirement will not adversely impact the housing market if structured appropriately, backed by government investment in affordable rental and home ownership products, and developed with a sound understanding of development economics and sufficient notice to the market.
The benefits of an inclusionary zoning approach will include a more diverse housing market providing increased housing choices for consumers, particularly lower-income households, and wider economic and social benefits for both the individual and community.
What are 5 key takeaways developers and government representatives need to understand to allow them to efficiently meet the growing demand for affordable housing?
- Affordable housing is key economic infrastructure and generates significant social and economic cost-benefits. Governments at all levels should invest in affordable housing renewal and growth accordingly.
- Government leadership and investment in creating the structures and framework that allow private industry to invest and deliver are required.
- The not-for-profit housing sector shares the same core interest as government – supporting lower income and vulnerable households to achieve appropriate, stable and affordable housing. We need to agree to common objectives and work together to determine and deliver the best means by which to achieve outcomes.
- Acknowledging and supporting a continuum of housing options to support different household circumstances and aspirations makes sense from both a social and economic sustainability point of view.
- There are a range of tools governments have available that can support growth in affordable housing, including land, planning and finance. There are many able and willing partners if the conditions are right to co-invest.
How have revisions in national housing policies affected the demand for affordable housing?
The impact of a long history of underinvestment in social housing, occasionally buoyed by short-term government investment against a backdrop of significant increases in house prices relative to income growth helped in part by non-targeted first home owner grants and policies supporting negative-gearing benefits and capital gains exemptions for investors have all played a role in the increased demand for affordable housing.
The impact is most particularly evidenced in the decline in housing affordability particularly rental for lower-income households but also home ownership for moderate and even higher income households. In some instances, this culminates in homelessness or significant levels of housing stress being experienced. National public housing waiting lists and the number of households in housing stress despite receiving Commonwealth Rent Assistance highlight the demand that needs to be met and importance of a focussed and comprehensive set of national and State housing policies.
What are some of the things stakeholders need to establish in order to ensure affordability and long term sustainability as an end result?
Deciding upfront the objectives we want to collectively achieve and the cost implications and benefits of doing so should guide the investment decisions and delivery and management structures. While ensuring long-term affordable housing outcomes is an important goal this shouldn’t be at the expense of people being able to improve their individual circumstances and transition into different tenancy or ownership arrangements potentially while remaining in the same dwelling. Long-term outcomes will need to be relative to the level of government investment to support private capital investment.
From an ‘affordable living’ and environmental sustainability perspective it is important we are building quality housing with high environmental performance. The cost-benefits of what may be a greater upfront investment are increasingly well documented. Recent investments in social housing by the Clean Energy Fund demonstrate that supporting environmental performance while delivering affordable housing outcomes are not mutually exclusive.
Any added views you wish to highlight on your upcoming presentation at this event?
The Affordable Housing Australasia Conference is a timely event for different stakeholders to come together to continue to discuss and refine the range of strategies that are required to address a complex problem. I look forward to sharing how different planning system approaches are structured and have been utilised internationally to contribute to affordable housing outcomes and to discussing some of the complexities and policy questions we need to be cognisant of as we consider similar approaches in Australia.
About the event
The Affordable Housing Australasia will create a one stop shop for all stakeholders to discuss and deliberate on the challenges facing them and brainstorm innovative ideas by generating sustainable practices that are proven in the development of housing. This highly-interactive and information packed event will highlight case studies from some of the finest and at the same time provide an excellent networking platform for the public and private sectors, global professionals and industry leaders who are all directly involved with the growth and development of affordable housing, enabling Australia to overcome the unaffordability issue they are currently facing.