Affordable Housing - theoretical utopia or achievable reality
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Loading ...Australia, it has recently been widely speculated, is facing a housing affordability crisis.
So much so that whereas from the post war period to as recently as the early 2000’s the cost of housing was around four times the median household income in recent times this has risen to as high as seven or eight times median incomes (RDC, 2007).
To be in housing stress is broadly considered as being when a household both spends more than 30% of income on rent or on mortgage repayments and their income is ranked in the bottom 40% of the income distribution (NHS, 1991). Therefore due to the scope of people this definition includes, affordable housing is not confined to households eligible for social and emergency housing but also the working poor.
According to the OECD Australia’s capital cities are now among the least affordable places to live in the world, with the most overvalued houses in the western world. They said that the price of housing relative to incomes is 50 per cent higher in Australia compared to other countries studied (in Spoehr, 2006).
Slow land release or low interest rates?
Sustainable planning calls for consolidated and integrated cities with medium density and a curb to the sprawl that has made Australian cities so car dependent. Many aspects of Melbourne 2030 respond to this, such as with the implementation of the Urban Growth Boundary (UGB) and the increase of densities in the inner city and around activity centres.
The Federal Government however, citing studies from the international research institute Demographia, blame the State Government’s for the increased housing affordability crisis for holding back on land release as an attempt to curb urban sprawl. Many leading economists including from the ANZ and Macquarie Bank dispute this view, identifying a decade of low interest rates, increased migration and cuts to capital gains tax - making negative gearing more attractive, as the cause (Schneiders & Millar, 2007). From this perspective poor housing affordability has thus been due to heightened demand not lack of supply.
The Demographia study has been highly criticised by a number of experts including Peter Newman a Perth planning academic (in Lucas, 2007) and Macquarie Bank’s Rory Robertson (in Gruen, 2007) who believe the study simplistically compares inland American cities such as Detroit and Austin that are considered to be in economic decline to booming, international coastal Australian cities such as Perth and Sydney.
The response to this has been a campaign called ‘The Great Australian Dream’ led by right-leaning thinktanks the Institute of Public Affairs along with the Housing Institute of Australia (HIA) which is designed to secure more land release. Whilst there is no argument to the fact that housing affordability is at an all time low, to rush into the rapid release of more land on the outskirts of major cities perpetuating urban sprawl compromises any ability to create sustainable urban areas on the outskirts of major cities, and from a planning perspective should be immediately rejected. Particularly given that the assumption that growth area development is automatically affordable, recent Oliver Hume Research (OHR, 2007) statistics show that in the past six months only 1/3 of purchasers in Melbourne’s south-east growth area were first home buyers.
So what is the answer and whose responsibility is it?
A number of independent initiatives have been proposed and/or implemented throughout the country as a means of providing affordable housing.
Subsidised housing
Subsidy aimed at making individual houses cheaper on purchase
Federal Labour proposal (Housing Affordability Fund)
Link
Legislate a % of affordable housing in all new significant developments
10% affordable + 5% social housing through a Statutes Amendment (Affordable Housing) Bill
South Australian State Labor Government
Link
Other policy proposals include but are not limited to:·
- Cheaper housing design and delivery
- Developer “density bonuses” (Link)
- Shared Equity Schemes (Link)
- Land gifting (Link)
- Early availability to housing associations
I would argue that due to the convergence of issues such as economy, housing and land use, affordable housing is an all of Government issue and therefore would ideally require a coordinated policy response from the three tiers of decision making authorities to effectively achieve an affordable outcome.
Questions?
Is a coordinated response to the affordable housing crisis possible? Am I heading out of the realm of Planning? Is a response at all needed, should we maybe let sleeping dogs lie and let the market dictate?
References
National Housing Strategy (NHS) 1991, ‘The Affordability of Australian housing’, Issues Paper no.2, AGPS, Canberra.
Australian Bureau of Statistics, (ABS) - 4130.0.55.001 - Housing Occupancy and Costs, Australia, 2002-03 (Released: 23/02/2005)
Gruen, N, ‘Nailing the cause of sky-high prices’, The Age, 12 July 2007, p.10.
Lucas, C. ‘It’s tale of two cities as fringe dwellers pay the petrol price’, The Age, 14 May 2007, p.3.
Oliver Hume Research (OHR), ‘Bi-annual purchaser profile and sentiment survey: encompassing metropolitan Melbourne’s growth areas’, June 2007, www.oliverhume.com.au
Residential Development Council (RDC). ‘Beyond Reach: A workforce housing crisis in the making’, July 2007, www.affordablehome.com.au
Spoehr, J. ‘Waking up to a Great Australian Nightmare’, Adelaide Review, 19 June 2006.
Schneiders, B & Millar, R. ‘Australian dream just a recession away’, The Age, 17 Feb 2007.
Posted in Housing |
TMB provides a great introduction to this critical issue faced by contemporary Australia, however my own research lead me to the ’stress’ endured by Australia’s private rental market. Kath Hulse’s recent paper ‘Housing - Affordability is about renters, too’ (2007) argues that the housing debate often ignores the two million who rent.
Hulse’s paper makes reference to the St Vincent de Paul report ‘Don’t Dream It’s Over - Housing Stress in Australia’s Private Rental Market’ from July this year, which provides a valuable perspective on this issue. The report discusses the increased number of people seeking immediate accommodation and that the pressure on…homeless services has never been greater (St Vincent de Paul, 2007:ii).
TMB has already defined housing ’stress’ but St Vincent de Paul goes further in defining ‘housing crisis’, which refers to a household that spends more than 50 per cent of its weekly income on housing costs (ibid:2).
The report identifies a number of important causes of increasing housing stress:
1. Low investment in public housing to alleviate housing stress.
2. Demographic shifts and increases in the number of households including through household break-up.
3. The tendency for affluent young Australians to want to live in the inner-city, which increases rents and forces low-income earners out of even relatively low-standard, un-renovated housing.
4. The long economic boom which has raised incomes which have been fed into housing costs (ibid:8).
St Vincent de Paul believe that the answer lies in switching the thrust of government policy to supply-side measures, namely, direct investment to increase the supply of the very best form of housing for low-income families - public and social housing (ibid:10). They argue that rent subsidies ultimately benefit landlords, First Home Owner’s Grants simply push the price of housing upwards, and additional tax breaks for investment properties has not met the obvious demand for low-income housing and is unlikely to in the future.
This is clearly a national issue requiring a strategic approach by federal, state and local governments. Addressing the pressures of Australia’s private rental market appears a good place to begin.
Are planners in a position to successfully influence local government in encouraging initiatives such as requirements for affordable rental properties for low income families as a part of medium and large scale residential developments? What other incentives could state and local government offer for private sector residential development to integrate affordable rental accommodation into such projects?
References
Hulse, Kath (2007), ‘Housing - Affordability is about renters, too’, Institute for Social Research, Swinburne University of Technology, Melbourne 14-09-2007
[Accessed Online: 16/09/2007]
Available: http://www.apo.org.au/webboard/comment_results.chtml?filename_num=174819
St Vincent de Paul Society (2007), ‘Don’t Dream It’s Over - Housing Stress in Australia’s Private Rental Market’, St Vincent de Paul Society, Australia, July 2007
[Accessed Online: 16/09/2007]
Available:
http://www.streetsmartaustralia.org/documents/StVincentDePaul_Report_Aug07.pdf
The unemployment rate remained at 33-year low of 4.3 per cent (Sun [online]) while the affordability is in crisis. The causes of such situation are probably multiple. Whether or not planning can have a positive impact on the situation Herald depends on how planning reacts to the issue.
A coordinated response to the affordable housing crisis is needed but it is difficult. It requires sectors of the society including government departments, both public and private sector to work together. While planning may play a role it probably cannot do everything (Wildavsky 1973). The contribution of planning to affordable housing depends on the public toleration for planning to evolve through both failures and successes.
Although there is a historical reluctance to recognise the connection between housing standards and poverty in Australia (Marsden 2000, p.30) there are international experiences for planning to contribute to affordable housing. There have been some institutions in Australia which have an interest in exploring the opportunity to apply international experiences in Australian context (International practice in planning for affordable housing [online]). Some Australian state and local governments have also started to address affordable housing through planning. For instance, South Australian government has used its affordable housing innovations program to incorporate affordable housing in its advice to local councils on how to incorporate it into development plans and strategic plans (Planning for Affordable Housing [online].
As Hardin (1968) argues, planning solutions come from not only natural sciences but also human values and morality ideas. Planning used as coercive devices with education to reveal the necessity of coercive devices can help avoid the tragedy or the horror of the commons. Planning can at least help, if does not determine, affordable housing.
References
Herald Sun, 6 September 2007, Jobless rate at record low, [online] http://www.news.com.au/heraldsun/story/0,21985,22372576-662,00.html [accessed 16 September 2007]
International practice in planning for affordable housing, Australian Housing and Urban Research Institute [online]
http://www.ahuri.edu.au/publications/p60322 [assessed 16 September 2007]
Marsden, S. (2000) “The Introduction of Order”, ch. 2 in Troy, P (ed) A History of
European Housing in Australia, Cambridge University Press, Melbourne, pp. 26-
40.
Planning for Affordable Housing, Government of South Australia [online] http://www.housing.sa.gov.au/affordable/Default.aspx?tabid=293 [accessed 16 September 2007]
Wildavsky (1973) “If Planning Is Everything, Maybe It’s Nothing” Policy Sciences, 4, pp. 127-53.
Housing affordability debates often focus on the reduced ability of first home owners to initiate the purchase of a home. This has certainly been the subject of a Productivity Commission report to the federal government (http://www.treasurer.gov.au/tsr/content/pressreleases/2004/051.asp) which recommended action in the key areas of land release, improvements in approvals processes, and developer contributions, but at the same time seeming to overlook major areas of potential housing reform such as the of strategic national leadership and exploration of alternative housing schemes such as shared equity programs. Housing programs need to consider all sectors of the community including the homeless, those on welfare and the poor who are employed but who have very limited potential to own their own home. Such a comprehensive scheme will require a long term strategic approach, involving coordination between state and commonwealth governments, with funded infrastructure program linkages.
Although contemporary urban consolidation policy such as that reflected in Melbourne 2030, is providing for denser housing, the gains made are being offset by a reduction in average household sizes. Furthermore the increasing trend to build larger houses for fewer inhabitants is not consistent with urban consolidation / sustainability policy. Knee jerk land releases on the outskirts of existing metropolitan areas are seen by some commentators to be inconsistent with consolidation policy. Developer contributions to infrastructure provision contributes significantly to housing costs and can result in unfair financial burdens on home buyers in supplying infrastructure which will be used by the broader community.
In answer to your question TBM, if urban consolidation /sustainability /social equity goals are to be achieved, strong coordinated governance interventions are required. Such interventions should include (but not be confined to) increasing the stocks of public housing, piloting alternative housing ownership programs and undertaking strategic housing and infrastructure planning programs. http://www.onlineopinion.com.au/view.asp?article=799
Affordable housing is based on a number of factors and according to the Queensland Government and should include:
-Appropriateness of the dwelling. Being that the needs of the people of occupy the house are met in terms of space, physical aspects and safety.
-Housing and Social Mix. There should be a range of housing to meet different economic classes and social classes.
-Tenure Choice. There should be a variety of consumer options and protection.
-Location of housing. The houses should be located in relation to places of employment and a range of services required to meet the demand of the household.
-Quality of environmental planning and design. House plans and design should be responsive to surrounding environmental conditions.
-Cost. All households should be able to meet the cost of their dwellings while still being able to maintain other lifestyle needs.
The current amount of household income that is used for mortgage repayments is 9.5%. Over the last couple of years there have been four interest rate rises and eight interest rate rises since 2002. There has been record high house prices and record levels of debt than before (Australian Labour, 2007).
While there are a number of reasons for declining affordability including rising interest rates, demands being higher than supply, land release, infrastructure charges, planning process and the increase cost of building a house it seems that there are larger factors than planning contributing to this problem. There are a number of outside influences that are directing planning processes in the direction that they are going but factors such as interest rate rises are having just as much influence if not more on the affordability of housing.
REFERENCES.
Queensland Government. Department of Housing. What is ‘affordable housing?’
http://www.housing.qld.gov.au/partnerships/affordable/whatis.htm
Australian Labour. June 2007. New Directions for Affordable Housing. Addressing the declining in housing affordability for Australian families.
http://www.alp.org.au/download/now/new_directions_for_housing_affordability_final13.pdf
I was wondering while mentioning housing affordability if it is worthwhile to estimate a value range of what we define affordability to be? One person’s affordability may and most probably would differ from the next person. Taking Victoria, would $200,000-$250,000 in rural areas and a range of $350,000-$500,000 in urban areas be considered affordable?
In attempting to reply to this blog question of whether affordable housing is an achievable reality, I believe it still is and it is not yet an utopia (although it seems spiralling towards that state). TMB has raised a few solutions aimed at increasing housing affordability and while researching my reply for this post, I came across this article by Russ Grayson where he suggested a “co-housing” scheme which I think goes some way in addressing the fewer heads per house/ household scenario in many urban areas. This scheme aims to raise density per house/building by offering freehold title to a dwelling in a medium density development and shared ownership of communal facilities (doesn’t it remind you of uni). I think it’s a solution that is worth exploring and perhaps encouraging at a time where there are also more single people around who may prefer such a living arrangement.
And as TMB has said, tackling housing affordability is not a job simply for the government or planners or private developers but requires an integrated and co-operative effort from most parties (including communtiy feedback) to ensure house ownership in Australia can still be a dream come true.
Reference:
Grayson, R., “Housing Affordability needs a vision that goes beyond the next election” in On Line Opinion, accessed on 10 October 2007, http://www.onlineopinion.com.au/view.asp?article=798
When people speak of housing affordability, it is generally assumed that we are speaking of homeownership. In response to critics of negative gearing, Affordablehome.com.au (a website initiative of the Residential Development Council) ‘private investors provide the bulk of private rental housing in the Australian market. They do so only because negative gearing provides an incentive to do so – otherwise this capital investment would go elsewhere and there would be a chronic shortage of rental housing.’
So if it is well known that the property industry is a multibillion dollar industry were investors are in it to make money, would it be feasible to further encourage more investors, so that there is more competition and hence a check on the rental prices? Or is it an innate human need to own our own home? It is also interesting to see that while the government is happy making such tax concessions for those who have money, there has not yet been any further increase to the First Home Buyer’s grant. With a surplus of $17.2 billion in the 2006/07 budget (Pannett 2007), the government could easily subsidise those struggling to afford their own home if it give this issue a high priority.
The forefathers of planning came into light as a response to the dismal level of urban dwelling as a result of the Industrial Revolutions when rich landowners were dictating their prices (Mumford 1961). Hence history has shown us that a free market does not help those on the lower end of the economic scale. And the recent tumble of the US economy lead by the sub-prime lending has shown that such lending is not sustainable.
Therefore is we agree that not everyone necessarily needs to be able to afford to purchase their own home, what is the relationship between the numbers of investors and how can we manage rental?
So if we leave the market as it is and accept that not all can afford to own their own homes, the populations growth still shows that there will be a shortage of housing. Currently the shortage is just under 13,000 lots, in 20 years that will be 185,076 or almost 15 times worse (Elliot 2007). Therefore perhaps the planner’s role should just be to ensure that enough housing exists for the population and let the market determine its affordability and who can have access to homeownership. Planners also need to ensure that developments are of a standard that will not lead to a repeat of history.
Elliot, Ross (2007), ‘Australia facing massive shortfalls in homes within 20 years’ in Residential Development Council – Press Release, Jan 12th 2007
Mumford, Lewis (1961) ‘Commercial Expansion and Urban Dissolution), ch. 14 in The City in History: Its Origins, Its Transformations, and its Prospects, London, Seeker & Warburg
Pannett, Rachel (2007), ‘Australia Cotello: 2006-2007 Budget Surplus’, Dow Jones Newswire – http://www.smartmoney.com
http://www.affordablehousing.com.au
http://www.propertyoz.com.au/