The role of renewal agencies in generating affordable & diverse housing

For many households in Sydney, the gap between incomes and median house prices is wide, as can be seen in Figure 1.1 Those ranging from pensioners to teachers earn less than the amount needed to service a loan to buy a median-priced apartment – even if they had the necessary $71,000 deposit.

Sydney recently leap-frogged Vancouver becoming the second most expensive city in the world, now sitting behind only Hong Kong.2 With population growth continuing to drive demand for housing, and the resulting upward pressure on prices, the gap between incomes and house prices shows no sign of shrinking.

Landcom needs to respond, as stipulated in the NSW Government’s strategy, A Plan for Growing Sydney: ‘The government will provide affordable housing in government-led urban renewal projects and on government-owned sites to meet the shortfall in affordable housing’.3

We are working with government agencies, experts and industry, sharing ideas and research on the best approaches to this longstanding problem. This is leading us towards a new view that breaks the challenge into simple components.

Although our projects may be 20 or 30 years in the making, we intend to start supplying more affordable and diverse housing as soon as practicable.

Simplicity and supply

There is broad consensus that we need more new homes in Sydney, but that alone will not resolve affordability issues. We need to work on what sort of housing we’re supplying. We think there are three key aspects to address:

  • Providing affordable housing to rent for those on very low to moderate incomes
  • Creating housing diversity to match the budgets and circumstances of a broader range of renters and potential home owners
  • Maximising delivery of housing by community housing providers and industry
  • through innovation and leveraging a range of planning, design and financial support.

Affordable housing – and targets

If not addressed, our renewal projects, and probably all other new developments across Sydney, will not feature any housing that is ‘affordable’. Meaning housing that rents between $236 and $567 per week, or sells between $224,000 and $538,000— considered affordable for very low to moderate income households.4

If interest rates rise and rents follow suit without a corresponding rise in incomes, more people will be in need of this housing right across Sydney. Affordable housing, along with the social housing program within the ambit of Family and Community Services, will help meet some of the need amongst very low to moderate income households.

Having a numeric target for the proportion of new affordable housing provided on site in perpetuity is a logical step for Landcom as a public commitment and something to be relied upon and measured against.

Community housing providers (CHPs) – let’s support them

Learning from overseas, we need to build the CHP sector. They ably create and manage affordable housing without financial gain, but with presumably significant societal and economic benefits. CHPs increased their number of tenancies in NSW by 60% over 5 years.5 The bigger the sector becomes, the more it can attract bigger and better finance and to snowball into a rolling program of housing delivery.

Figure 1 LR

Figure 1: Diagram of Incomes and Housing (Source: Landcom using data from Fair Work Ombudsman 2016, ABS Census 2011 Data pack and community profiles B02)

Housing for all

We also propose housing choice across the spectrum, to both buy and rent. If, as illustrated in Figure 1, financially well-off people can’t afford to buy a home, then they necessarily compete against lower income groups for limited rental stock. This type of purchase housing is included in the affordable housing target in places such as London.

Longer leases would give long term renters more stability, and different ownership options should be available. Housing stock also needs to suit our smaller household sizes rather than continue to build the biggest homes in the world.7 Smaller homes are cheaper to build, have lower utility bills and will suit some people who value a convenient location and affordability above other drawcards like a big kitchen or undercover car parking. Diversity also means housing for singles, seniors, students, people with disabilities, and acknowledging that smaller homes will not suit everyone – housing for families with children and other housing types needed to suit the population.

Playing to our strengths and everyone pitching in

As a state owned corporation with a range of exciting projects we have an opportunity to encourage private sector innovation in the delivery of affordable and diverse housing. We can use our tender requirements and precinct planning to consider opportunities and set clear expectations. Flexible criteria allow industry to come back with new ideas and firms can differentiate themselves from competitors by innovating to help solve the problem.

This is also the way to prove-the-concept for broader industry adoption, something which Landcom has a strong history of doing. Equally important is a combination of reasonable concessions from a range of stakeholders along all steps of the development process to optimise affordable and diverse housing development. To some extent this is happening already – for example: some financiers providing favourable terms, stronger planning system support for affordable housing delivery, local authorities waiving development fees, the development industry innovating and accepting lower profits as their social contribution, support from nearby residents for this form of housing, as well as renewal agencies targeting affordable and diverse housing. If everyone pitches in like this, we can expect to see more results.

Costs and benefits

Anecdotally, there is unprecedented willingness to start to improve affordability in Sydney in particular. However, rightly or wrongly, the reduced amount paid by a not-for-profit CHP. who will rent at lower than market rates is considered in commercial terms as ‘foregone profit’. Whether subsidised housing is a more beneficial outcome for society than the ‘foregone’ dollars that could be spent on other priorities is a live debate. Some of the instinctive benefits are hard to measure, for example the positives of socially diverse places, the productivity gains of workers near jobs, attracting ‘city makers’, shorter journey-to-work times and being able to down-size or move to aged-care locally.

As for any new development, the quality of the built form and urban design is paramount for it to be acceptable. Why would the community be happy to absorb an increased level of density and change if there isn’t evidence of improvement, new services, convenience and quality design? Proven real case studies with excellent outcomes will help allay local concerns. Bob Hamilton, one of the Landcom Board Directors, was recently inducted into the Property Council of Australia’s Hall of Fame. In his speech he said ‘One of my great joys has been driving around Australia and seeing the projects I’ve left behind. It’s an incredibly satisfying industry to be part of – and it’s important not to be fixed on how much can be made on a deal, but what you will leave behind’

Janet Chappell works in the Strategy Unit at Landcom. Her background is in architecture and urban design in Melbourne and Sydney, the NSW Urban Design Advisory Service and NSW Department of Planning team preparing the last three metropolitan strategies for Sydney.

Endnotes
1 See: www.housing.nsw.gov.au/centre-for- affordable-housing/about-affordable-housing
2 Day, B, Cox, W, Pavletich, H, 2016, 12th Annual Demographia International Housing Affordability Survey: 2016, 2015: 3rd Quarter, Table 9, p15.
3 NSW Department of Planning, A Plan for Growing Sydney, Action 2.3.3, Sydney, Australia
4 See: www.housing.nsw.gov.au/centre-for-affordable-housing
5 See: www.communityhousing.org.au
6 See: www.london.gov.uk/what-we-do/planning/london-plan/current-london-plan/london-plan-chapter-3/policy-311-affordable
7 See: reneweconomy.com.au/2013/how-big-is-a-house-average-house-size-by-country-78685