I am often asked how I define affordable housing. It is an important question and one I am pleased to always discuss.
At the 2015 National Housing Conference US housing expert Dr David Paul Rosen noted five policy and practice requirements for successfully delivering and financing affordable housing, drawing on six decades of US experience. The first requirement Rosen noted was to define affordable housing.
It is somewhat telling then of the state of affordable housing policy development in Victoria that this question continues to be asked. We need to quickly address this first step and agree to a common definition in order to move on to defining the level of need and the means by which we will collectively respond.
It is not surprising there is confusion when we consider the multiple ways in which ‘affordable housing’ is referred to. It is a term that is often used broadly and interchangeably with ‘housing affordability’, particularly when made in reference to the housing market and the housing desires and needs of Australian families. Housing affordability is critical and important to all households, but it is not the same as affordable housing.
Examples of how affordable housing is referred to include:
- developers using it to market new estates;
- industry or government talking about it as a specific housing need for ‘key workers’ – yet another undefined term, and in doing so potentially positioning it as different to public or community housing;
- researchers using it when analysing subsidised housing responses, primarily public and community housing that is targeted to very low income households who are typically defined as households in the bottom 40 per cent of income distribution; or
- housing organisations and advocates using it as a single term or as a separate term to social housing, with affordable housing used in reference to discounted market rental housing compared to income-based social housing.
No wonder there is confusion. None of these responses are necessarily incorrect but they are all using the term in relation to different housing responses which creates further confusion in the industry and wider community.
Defining affordable housing
When I am asked how I define affordable housing I reference a definition that was agreed to by all State, Territory and Commonwealth Housing, Local Government and Planning Ministers in 2005. Gaining national agreement to this term was no small feat and the definition remains just as appropriate today.
Paraphrasing the national definition I define affordable housing as:
Housing that is appropriate for low to moderate income earners – defined as households earning up to 120 per cent of the gross median household income for a defined area – that is affordable to rent or purchase; which is considered to be no more than 30 per cent of income on housing costs.
‘Appropriate’ under this definition was also defined nationally, being:
- appropriate for that household in terms of size, quality, accessibility and location;
- integrated within a reasonably diverse local community;
- does not incur unreasonable costs relating to maintenance, utilities and transport;
- provides security of tenure and cost for a reasonable period.
I often add one more term when discussing the definition – ‘available’. Affordable housing needs to be appropriate and affordable for low to moderate income household’s needs but it also needs to be targeted and available to them to occupy.
The nationally adopted definition is important for a number of reasons including that it:
- clearly defines the term and sub-terms including income groups that are targeted, and can be quantified into income bands and price points for these households for a given area. This supports clear numerical measures being set as a basis for determining need, targeting outcomes and monitoring performance;
- recognises that low and moderate income households have limited financial capacity to meet their housing needs, may subsequently experience housing stress and may require government support;
- can capture a range of programs under one umbrella ‘affordable housing’ term, including public and community housing, discounted market rental (such as NRAS), shared-equity or rent-to-buy, rather than highlighting and potentially further stigmatising particular housing programs;
- provides a framework for developing policy responses that promote and support improved socially and financially sustainable outcomes by allowing for a greater range of products and income profiles to be supported depending on where government wants to direct its investment; and
- is likely to result in greater community and private sector understanding and support for policy intervention.
It is notable that the national definition reflects international best practice and has been adopted in many other Australian jurisdictions’’ housing and planning legislation and policy. As the Victorian Government shapes its affordable housing policy it is critical it addresses the need for a common and clear definition as a first step. The nationally adopted definition would be a very good choice.