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5 August 2019

‘Affordable Housing’ - Update and Implementation

Following on from our recent affordable housing series and ongoing advocacy in this area, we were interested to read that Councils from across the nation met recently in Canberra for the Australian Local Government Association’s National General Assembly where a motion was put forward by the City of Darebin to require that affordable housing be provided as part of all new developments across Australia. The motion was subject to a lengthy debate and was the only one of the 120 motions to be voted down.

As the full details of the motion are not available at the time of writing, we are not able to comment on the specifics, but we suspect the mandatory aspect would have been a sticking point. Local Governments across Australia are incredibly diverse and present a wide range of social and economic issues - not all are as fortunate as the inner and middle ring suburbs of Melbourne or Sydney when it comes to attracting investment.

Whilst it is applaudable that Darebin is advocating for affordable housing on a national scale, it is clear that a ‘one size fits all’ approach to affordable housing policy is not appropriate. A more nuanced approach, which gives Councils the discretion to tailor policy to reflect whether, where, how much and what type of affordable housing they require is needed to ensure that the right housing is provided in the right locations.

This follows a series of seminars recently ran by DELWP which explored how affordable housing can be effectively delivered through the planning system. The sessions delved into the financial implications of including an affordable housing component of a development, for example gifting a certain percentage of dwellings to a Housing Association. Generally speaking, the success of this approach largely depends on when the requirement is introduced and consequently how it can be factored into the financial considerations of the developer. 

For example (and put simply), a developer pays a certain amount for a site based on a reasonable estimate of how many dwellings they expect they’ll be able to build and what their likely return will be. Then, they need to convince the banks of their plan in order to get funding for the project. In situations where a portion of those dwellings are required to become affordable housing, and this is only raised towards the end of the process, it becomes incredibly difficult to re-jig the financial calculations and maintain funding from the banks.

Alternatively, if expectations regarding the provision of affordable housing are known upfront (prior to the purchase of the site), the requirement can be factored into the purchase price as a known “cost” of development. The cost of the land is one of just a few key variables for a new development - whilst there are many different costs involved with developing a site, most of them fall largely within a set range. For example, consultant fees and construction costs can generally be predicted and are reasonably consistent from development to development, so it’s unlikely there will be an opportunity for any big cost savings in these areas. The price of a development site is basically determined by the development opportunities it presents, and this (of course) factors in planning controls and policies which provide guidance in terms of permissible land uses, built form, density and other requirements such as financial contributions

All of this may sound obvious, but we think it needs to be acknowledged. As we advocate for the provision of more affordable housing, we need to advocate for it to be done in the right way. Conditions on permit are simply not the way to make this happen, nor is a request in a further information letter. By this stage, it’s too late and will very likely render the development unviable – meaning it does not progress and no affordable housing is delivered. As with all planning policy, expectations need to be clearly stated within the planning scheme. They need to be transparent. It’s just good planning. The tools exist – inclusionary zoning and density bonus schemes have been shown to deliver affordable housing throughout the world. 

One fantastic initiative we’ve been hearing about recently is Homes for Homes. The organisation provides a simple avenue for homeowners and property developers to provide a donation of 0.1% of the sale price to Homes for Homes when the property is next sold, whenever that may be. It’s achieved through a legal mechanism on title, which the homeowner can opt-out at any time but works on the logic that people are less likely to ‘opt-in’ than they are to opt-out, especially at a time when they are (hopefully) making some money off the sale. When sufficient funds are available, registered organisations can submit applications for funding towards their social or affordable housing project. Estimates suggest that Homes for Homes could raise $1.8 billion of new funding over 30 years.

We commend organisations like Homes for Homes and Darebin City Council on their enthusiasm on this important issue and hope to see some positive movements soon!

Author: Claire Whelan, Senior Planner

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