SESSION 8 – HOMES & COMMUNITIES

Copyright 2011 Vanessa Bennett

Lecture Outline

• What is affordable housing & why is it needed?

• Traditionally not confined to Planning- Why changes are occurring

• Levers/Mechanisms to help promote affordability

• Need to understand the housing environment

• Case Studies re: Government’s Intervention - ULDA, VicUrban and LandCom

Demand for Housing & Impacts of Gaps

1. Housing Demand• Population increases, with dependents forming their

own households• Couples & families forming and separating• Family lifecycle changes, changes of circumstance

2. Housing Demand increasing – affordability placing pressure on public system. Forecast to continue and worsen.

3. Many implications – challenge to ensure adequate housing supply to meet diversity. Affordability and appropriateness essential.

Housing Stress

• Housing unaffordable for a myriad of reasons1. The cost of housing 2. Inner City Gentrification 3. Diverse and smaller households, which often have a lower level of

income 4. Changes in employment circumstances

• Many people therefore find themselves in a position of housing stress.

• Housing Stress: - When housing costs of low-mid income families exceed more than 30%

for rental or mortgage payments

Consequences

1. The consequences of housing stress include a lack of money for essentials

2. Housing stress can also impact negatively upon, employment prospects, and family and community relationships

3. The physical manifestations of over-crowding and under-occupancy, homelessness, spatial segregation differentiated by socio-economic status, and physical dilapidation.

Consequences

1. Wider impacts include:• Hindering economic competitiveness • Lack of community cohesion • Negative impacts on local industries.

2. Consequences impact all parts of society - affordable housing is an important part of our community

3. Queensland Govt has supported Affordable Housing platform

Affordable Housing

Affordable Housing is defined as: – low-intermediate income households – housing is only truly affordable if it is well serviced, well-located,

safe, secure and accessible to people in need– it is not solely a physical or financial characteristic of the dwelling

and cannot be measured in financial terms alone

Affordable Housing

• Those in need of affordable housing are defined by those households in the lowest 40% of the income distribution – this includes moderate income households– Once a natural progression to homeownership, now faces major

hurdles

• Housing Stress: – When housing costs of low-mid income families exceed more than

30% for rental or mortgage payments

Traditionally... And Now• Growing debate in Australian community regarding innovative strategies re:

Affordable Housing

• Unmet need due to real budget decreases and increasing demand

• Social housing, while initially worker housing, now ‘residual’ housing for those in greatest need

• Concentration of stock and lower turnover has contributed to social disadvantage

• Traditionally, affordable housing not in the private sector

• However, due to rising housing prices relative to incomes the focus on affordability squeeze on a new group – ‘intermediate housing market’

• As noted, these face major hurdles to home ownership

Some Approaches in Jurisdictions

NSW - inclusionary zoning & LandCom

Vic - Fast Tracking Housing Associations & VicUrban

Qld - Special Purpose, not for Profit enterprise & now ULDA

Tas - Investigating risk sharing

SA - Similar to NSW and Active in not for profit affordable housing & LMC

WA - Innovation in home ownership, including shared equity & Redevelopment Authorities

Affordable Housing Mechanisms

• Housing Market Efficiency

• Affordable Housing Market Efficiency

• Supply Side Subsidies

• Demand Side Subsidies

• Fund Raising or Taxation Measures

• Ethical Investment and Charities

Draws extensively from research conducted for State & Territory Members,

Housing Ministers Advisory Committee 2003

Affordable Housing Mechanisms

• Housing Market Efficiency

-Policies and programs to improve the operation of the housing market generally

- Generally relate to:

• the promotion of competition,

• removal of barriers to entry and

• the improvement of information

• demonstration projects; and

• overcoming market failures.

1 Housing Market Efficiency1.1 Housing Finance

Superannuation applied to depositsNew finance productsGovernment backed mortgage insuranceDevelopment of community banks

1.2 Planning and InfrastructureState and Local Government Planning PolicyEfficient infrastructure provision & equitable user pays

1.3 Land SupplyGovernment businesses - competition in land supplyGovernment organisations to engage in land bankingAssemble land in urban consolidation areasPunitive rates to promote release of land for development

1.4 Other Housing Market EfficiencyDemonstration projects promoting innovation Appropriately structured and skilled workforce in housing sectors Provision of improved market information

Affordable Housing Mechanisms

Affordable Housing Market Efficiency

• Policies and programs to improve efficiency in the management / delivery of affordable housing

• These specifically ease the operation of affordable housing suppliers/financiers,.

• In general these can be regarded as institutional arrangements more than policy levers as such.

• They are likely to be useful, even essential, channels for some of the other policies to be effective.

Affordable Housing Mechanisms

Supply Side Subsidies

• These levers provide explicit or implicit supply side subsidies for the expansion of the stock of affordable housing.

• Many of these mechanisms require the State/Territory or another agency to forego revenue in order to assist particular players in the housing market.

3 Supply Side Subsidies3.1 Tax Based Subsidies

Low income housing tax creditsConcessions to affordable housing rental investmentCapital gains tax indexation for affordable housingLand tax rebates for affordable housingGST exemptions for social and affordable housing Accelerated depreciation for affordable rental housingLocal Government rate rebates and fee waivers

3.2 Other Subsidies and TransfersGovernment issued bonds for affordable housingFast tracking development assessment and approvals Rent ControlsGovernment guarantees for recognised affordable housing providersAffordable housing subsidy programCapital grantsDeveloper assistancePublic Private Partnerships

Affordable Housing Mechanisms

Demand Side Subsidies

• Policies and programs that provide explicit or implicit income assistance for lower income renters and buyers.

• Concessions/incentives for targeted groups

Public Private Partnerships4 Demand Side Subsidies

4.1 Taxation concessions / incentives for low-moderate income homebuyersHousing lifeline loansStamp Duty rebatesDeposit assistanceBelow Market Interest Rate LoansReduced threshold mortgage eligibilityMortgage interest deductibilityConverting rent assistance to subsidy for purchase

4.2 Taxation concessions / incentives for low-moderate income rentersDirect rental subsidyBond AssistanceTenancy Laws

Affordable Housing Mechanisms

Fund Raising or Taxation Measures

• These include administrative and taxation measures designed to raise cash or in-kind resources to fund the subsidies deployed in the mechanisms described in categories three and four.

• Betterment and Inclusionary Zoning examples

Tenancy Laws5 Fund Raising Regulatory or Tax Measures

5.1 Mandated Use or Management of FundsMandated super funds investment in afford housingRegulation of financial institutionsHousing first policies

5.2 Development Related ContributionsDeveloper contributions to affordable housing – via DCPDeveloper contributions - as impact mitigation paymentsDeveloper contributions - as negotiated arrangementsBonus/ incentive schemes for affordable housingBetterment taxesInclusionary ZoningLinkage fees – for major non-residential developments

5.3 Other Contributions or LeviesBroad based LG levy for affordable housingHypothecation of ‘landcom’ dividends

6 Ethical I nvestment and Benevolence

Affordable Housing Mechanisms

Ethical Investment and Charities

• These are measures and initiatives designed to tap ethical investment and benevolence as a means of funding affordable housing subsidies.

6 Ethical I nvestment and BenevolenceEthical investment streamJoint venture projects with charities / community organisationsCommunity Housing and Land TrustsJ oint venture projects with AH providersSweat equity schemes

Need to Understand Environment

Assessment Criteria:• Cost Effectiveness• Political acceptability• Sustainability (of benefits, funding)• Consistent with existing policies (NCP, labour laws, non-discrimination etc.)• Legality• Perceived equity• Avoidance of poverty traps• Consistency with other initiatives (existing Territory housing programs and other levers being considered)• Administrative complexity and compliance costs • Transparency• Allowance for choice, expression of preferences• Openness to adjustment• Minimization of unwanted market distortions• No or limited negative impacts on market efficiency

Synthesis of Assessment Criteria

Four Criterion:

1. Demonstrated effectiveness and Practicality

2. Cross Program Harmonisation

3. Implementation Readiness

4. Likelihood of Broad Stakeholder Support

Recommendations from NT Report

1. Strategy for accelerated development of the Housing Association Sector in the NT

2. Regulatory regime developed by Vic Govt for Housing Associations be adopted initially

3. Discussions with leading, large scale Housing Associations already operating in Australia (eg. Brisbane Housing Company) to explore potential franchise arrangements

4. Undertake risk and financial analyses of options, based on a scenarios of tenant mix and capitalisation requirements

Recommendations from NT Report

5. Amend Planning Act to include a holistic definition of environmental sustainability, including social mix being a planning matter where evidence is present

6. Planning policy for the promotion of affordable housing, featuring Inclusionary Zoning where applicable

7. Territory Government utilise COAG and other Ministerial forums to make the case for Australian Government Taxation programs for Affordable Housing

Conclusions

• Affordable Housing should be a key component of our social fabric

• Access to housing is a human right• It is a very difficult area to affect, and needs many

interventions and partnerships – no one solution exists• There are particular challenges for both cities and non-

Capital City jurisdictions• NT Shelter’s study has developed creative means of

capitalising on current innovations. Nonetheless, significant political will and commitment from the Government at all levels will be required

Conclusions

Affordability is a key issue in Queensland presently and will remain so into the future.

We need to move quickly and instigate appropriate mechanisms to ensure that Queensland remains accessible and liveable for all parts of the community now and for many years to come.

UDLA a start, but need further initiatives at all levels of Government.

Affordable Housing Vehicles

• Urban Land Development Authority (ULDA)

• Brisbane Housing Company (BHC)

• Landcoms (Vic Urban)

ULDA

What and Where:

• State Government entity to facilitate land development with inclusion of affordable housing (key component of Qld Housing Affordability Strategy)

• Focus on State Govt. land holdings – no statutory acquisition powers

• Bowen Hills, Northshore Hamilton and Fitzgibbon have been declared Urban Development Areas (UDA) and the ULDA is now responsible for master planning and assessing development applications in these areas

• Not for profit

ULDA

Affordability:

Focus on affordability by Streamlining Development Application approvals,

Simplifying planning requirements

Getting land to market faster

Also by facilitating the inclusion of affordable housing or requiring its inclusion by developers

ULDA:Northshore scheme: 16,000-18,000 residents

ULDA artists impression of high density riverfront units

ULDA

How much affordable housing:

• Overall target of 15% affordable housing both by direct ULDA action and through facilitation of others

• Target varies depending on; percentage of government land; existing dwelling prices; and need

• Eg. target of 60% in Fitzgibbon due to price structure but may change

• Where the provision of the affordable product will require a subsidy to meet the target market affordability criteria, then a development agreement will be required to be entered into with the ULDA (including the type of product, duration of subsidy and legal mechanism to protect the subsidy)

ULDA

Direct ULDA Provision:

• ULDA as developer has greater flexibility to provide affordable housing

• Any surplus could be used to fund ongoing operations and affordable housing outcomes

• But Challenges Present1. Vision - World Class Environments2. No assets provided or existing revenue base3. Infrastructure costs need to be recovered4. Looking at ICs, Value Capture plus special rates5. Limit to what market might accept

ULDA

Facilitating outcomes through others:

• Private sector development (as part of Urban Development Scheme)

• Payment of monetary contribution for affordable housing can be considered, where practical difficulties exist, but is not preferred

• Opportunity to facilitate involvement of NFP housing and Dept of Housing either 1.through direct development with ULDA assistance, or2.through management of affordable housing

ULDA

Infrastructure and uplift:

• Power to charge for infrastructure (complicated because some infrastructure charges to Council and some to State).

• Developers wishing to utilise the higher development densities allowed under a Development Scheme, will have to share the land value uplift

• In this circumstance a development contribution towards major infrastructure, affordable housing and ecologically sustainable outcomes will apply, over and above standard infrastructure charging requirements

ULDA

Retaining affordability:

• Preferred mechanism decided on a case by case basis and set out in development agreement

• National Rental Affordability Scheme (NRAS) – requirement to retain affordability for 10 years under Australian Government program requirements

• Formal management agreements with either the Department of Housing or a registered NFP

ULDA

Retaining affordability:

• Limiting the trading of a dwelling to a particular target and income group through a title covenant

• Placing a covenant and management plan on the title of a property which ensures it is rented at affordable levels to an identified target group for 15 years or more and managed by a registered NFP

Brisbane Housing Company (BHC)

What and where:

• Predominantly inner and middle suburbs of Brisbane (areas of least affordability), but can operate throughout the City

• Set up as company structure

• Seed funding and medium term funding from State Government, Council and developers

• All surpluses are reinvested and fund further projects

BHC

Initial Ordinary Shareholders:

•Queensland Department of Housing representing the State Government holding 2 shares

•Brisbane City Council holding 1 share

BHCCommunity Shareholders:

• Queensland Community Housing Coalition• Metropolitan Association towards Community Housing (MATCH)• Urban Development Institute of Australia• Property Council of Australia• Australian Property Institute• Royal Australian Planning Institute • Queensland Shelter• Queensland Disability Housing Coalition• Foresters ANA Friendly Society• Red Hill Paddington Community Care• New Farm Neighbourhood Centre• Churches of Christ Care• Centre Care (Archdiocese of Brisbane)• Bank of Queensland

BHCOperation:

• Aims to fill gap between market provided housing and social housing

• Mix of boarding houses, studio apartments and up to 3 bedroom units

• Tax advantages as a not for profit entity

• Company structure allows BHC to complete large scale developments

BHCEvaluation:

• Operating successfully and providing for part of target market

• While comparing favorably with standard of social housing the amenity that can be provided in inner city locations is less (however this is common to a lot of inner city housing)

• Affordability is good and tenure is secure for medium term

• Some tenancy management outsourced and relationships with social housing providers could be improved

• Ongoing self sufficiency is achievable

• Transition from BHC housing could be improved

Land Management & Development Organisations (LMDOs)

What and where:

• Legacy of the ‘Land Commissions’ set up in the 1970’s to curb land price increases through open market competition

• Several of these businesses have developed into robust and profitable enterprises, delivering sizeable annual dividends to their owner governments

• Landcom in NSW, VicUrban in Victoria and the Land Management Corporation (LMC) in South Australia are examples of currently operating, Government owned LMDO’s.

LMDOs

• Opportunity to hypothecate all or part of their dividend for use in subsidy streams to support affordable housing projects and programs delivered by other agencies, such as the State Housing Authorities or AHDV’s (Housing Companies)

• Allowing the Landcoms to focus on commercial objectives in their day to day work ensures that clarity of purpose in open market operations is maintained at the same time as affordable housing outcomes are generated.

• As the underlying purpose of Landcoms is improved housing affordability, hypothecation of their dividends is a logical progression. In the absence of such hypothecation, it may be argued that Governments could satisfy market competition objectives through means other than owning and operating a land development business

LMDOsVic Urban:

• Opportunity to acquire land and consolidate sites for more efficient development

• Works in partnership with developers, builders, and land owners

VicUrban uses market-based initiatives and partnerships to:

• Improve access to home ownership for moderate income households

• Increase the supply of affordable rental housing for low income and disadvantaged households

Questions & Answers