housing affordability – Page 9 – Digital Finance Analytics (DFA) Blog

Sensible reform to finance affordable housing deserves cross-party support

Treasurer Scott Morrison’s visit to cold old London last week in the middle of the Australia summer was time well spent. Morrison made time in his hectic schedule for a lengthy meeting with the UK’s Housing Finance Corporation (THFC) to discuss an affordable housing financial intermediary with its chief executive, Piers Williamson.

Founded in 1987 to make up for the shortfall in public funding, THFC is a finance aggregator and intermediary that co-funds affordable housing for rent and ownership. And Williamson is no stranger to Australia’s housing problems. He has been a source of advice and advocate for policy reform in various Australian industry and government forums. He also has the ear of our largest superannuation funds.

And, much like Australia, the UK has a serious problem with housing affordability and supply, made worse by policy and market settings that fuel instability rental housing. In this context, channelling investment via a specialist financial intermediary towards newaffordable housing provided by landlords with a social purpose makes good sense.

The idea just needs an effective champion in Australia. In fact, it needs a bipartisan team of champions.

How does this financing model work?

Long identified as a glaring gap in Australia’s affordable housing system, bonds issued via a specialist intermediary would steer investment to where it is sorely needed. If combined with appropriate incentives and public programs, it would go a very long way towards producing more affordable housing choices, as in the UK.

International research found the UK’s Housing Finance Corporation to be one of the world’s leading examples of good practice. It funds not only affordable housing but also ensures that investment flows towards registered landlords meeting real accommodation needs.

Researchers have adapted this model in proposals for an Australian Affordable Housing Finance Corporation. Combined with a well-designed guarantee and revolving capital loans program, it’s a feasible approach, as a New South Wales government-funded study found in 2016.

In the UK, THFC combines the borrowing demands from small social landlords with committed public assistance to source the most favourable financing terms available from capital markets. With a guarantee, these enabled housing associations to borrow at a cheaper rate than the UK government.

THFC acts as the landlords’ principal. It issues mortgage bonds on their behalf, raising and passing on funds at a lower cost than would be individually possible.

Public funds on both the supply and demand side are also an important part of the equation. The NSW feasibility study makes it clear that a stable government co-investment strategy is required to ensure affordable supply.

Such a strategy was well established in the UK. But in recent years it has become less generous and stable, which has affected both supply and affordability. The UK experience demonstrates that the greater the share of public investment and stability of revenue settings, the lower the cost of private finance and the more affordable dwellings can be.

Over the past 30 years, THFC co-financed more than 2.4 million dwellings through well-regulated landlords with a commitment to secure affordable housing. These registered social landlords allocate dwellings on the basis of need rather than to the highest bidder. Renting affordable homes to those who need them is their business focus, not capital gains.

These landlords are well regulated for this purpose. In return, they have access to favourable public loans, tax incentives and direct revenue support via the UK’s Housing Benefit.

With detailed knowledge of providing sustainable social housing, THFC is able to assess the financing needs and credit risks of the housing assistance sector. Large institutional investors have little time for this. THFC’s hands-on scrutiny has ensured a zero-default record and stable A credit rating from Standard and Poor’s.

When an intermediary like THFC is combined with a government guarantee it can be even more effective in reducing perceived risks and thus financing costs, as our international research shows. Since 1991, the Swiss government helped to build, then backed, a thriving bond-issuing co-operative. This created a new market for bonds and drove down mortgage interest rates for affordable rental housing.

The UK’s Affordable Housing Guarantee delivered A$4.15 billion at or below the rate of government bonds in its three-year existence. The not-for-profit Housing Finance Corporation was licensed to manage this scheme. With the UK Treasury guarantee, it was able to obtain and pass through funds from the European Investment Bank below government gilts.

What conditions are needed for success?

The longest-term and lowest-cost investment flows to where the risks are known and predictable. In the UK, these risks have been reduced by four key conditions:

On the revenue side, rents have been underpinned by adequate levels of assistance for those who need it.

Landlords are registered and regulated in England and Scotland to ensure they are not only financially sound but also socially responsible and thus eligible for government support and tax incentives.

On the supply side, government funding instruments provides subordinated loans, guarantees and equity.

Planning mechanisms provided well-located land for affordable housing development.

These conditions have been in place throughout successive governments, Conservative and Labour. More recently, the emphasis has shifted from social rental dwellings towards affordable home ownership.

The situation in Australia is different. The small community housing sector offers long-term tenancies and shared-ownership housing in a supportive context. However, the sector needs a more sustainable business model to grow.

Current policy settings affecting supply (capital investment, planning provisions) and rent assistance are too weak and uncertain. This can change; it’s all a matter for policy reform. Other countries have moved ahead and Australia needs to catch up.

With an intermediary and appropriate government support behind them, Australian community housing organisations will have the potential to grow, as they have in the UK, US, Switzerland and Austria.

By now Morrison and his team should be well informed, having spoken to the UK experts, boned up on international evidence and consulted Australian industry.

Following the recommendations of the Senate inquiry into affordable housing and Treasury’s own Affordable Housing Working Group, sensible policy reforms such as these are likely to attract cross-party support. They not only draw on proven best practice elsewhere but can be adapted to Australian market conditions and growing needs.

Author: Julie Lawson, Honorary Associate Professor, RMIT University

Building Approvals Past Peak – HIA

The December 2016 update for ABS Building Approvals confirms we are well passed the peak for the cycle, said the Housing Industry Association.

In December 2016 total seasonally adjusted building approvals fell by 1.2 per cent with detached houses down by 2.2 per cent and ‘other dwellings’ sitting flat at +0.1 per cent. On a three month annualised basis total approvals remain above the 200,000 threshold at 204,692.

In December 2016, seasonally-adjusted building approvals increased by 19.5 per cent in Tasmania and 17.0 per cent in Victoria, while in trend terms there was an increase of 1.2 per cent in the Northern Territory. Building approvals fell in Western Australia (-16.3 per cent), New South Wales (-13.2 per cent), South Australia (-5.4 per cent), and Queensland (-0.1 per cent). In trend terms approvals fell by 2.1 per cent in the Australian Capital Territory.

“While a downward trend in building approvals is firmly entrenched, residential construction activity itself will hold up well throughout 2016/17,” said HIA Chief Economist, Dr Harley Dale. “From 2017/18 we will see a sharper decline in new home building activity, primarily due to the medium/high density segment of the market.”

“Building approvals peaked in July 2016, but by December last year were only 18 per cent lower than that peak. Given approvals reached an all-time high last year that’s a modest fall – we can take that away and bank it as a good outcome for the Australian economy.”

“This has been an extraordinary cycle for new home building – the biggest and longest in history. A long tail to the cycle will be helpful for the Australian economy.”

“It is important to focus in 2017 on ensuring Australia has the correct longer term policy settings to ensure we adequately house our growing and ageing population. The recent appointment of Michael Sukkar as Assistant Minister to the Treasurer, with a focus on housing affordability allows the Federal Government to lead from the front in meeting this crucial national objective.”

Social Impact Investing

The Treasury has release a discussion paper to explore ways the Australian Government can develop the social impact investing market. It is potentially linked to the question of housing affordability.

The Treasurer’s media release said:

There are currently over 180,000 people on social housing wait lists across Australia. The number of social housing dwellings would need to grow by almost 50 per cent in order to accommodate this number of people.

We need to create an investment environment to make a meaningful increase to the available stock of affordable housing, one where the involvement of private investment can contribute to increasing supply as demand grows.

One of the challenges faced by all countries developing affordable housing is access to longer-term, low-cost finance. Access to capital is a critical issue for the affordable housing sector and the ability to leverage private sector investment is required to boost the supply of affordable housing.

While in the UK, I am meeting with leading institutions and entities that have been developing more innovative forms of investment. This includes institutions involved with the £1 billion “build to rent” policy that leverages public spending to encourage large private investors into providing more affordable housing.

This week, I visited the Lendlease Elephant Park site in London, UK. The visit provided an opportunity to view first-hand the affordable housing being offered by the project.

The UK Government has been successfully implementing innovative forms of finance to provide additional sources of funding for social infrastructure, including affordable housing.

The Elephant Park project in London offers 25 per cent affordable housing. Half of the 550 affordable homes will be available as a mix of affordable and social rent, with the other half available under shared ownership. The L&Q Group will take ownership and manage the affordable housing to be built at Elephant Park by Lendlease.

Housing affordability is an important issue for Australia. The Turnbull Government is continually looking at ways to improve supply in the area of affordable housing.

At present, the Commonwealth and state and territory governments combined are spending over $10 billion a year on housing, but it is failing to improve outcomes, particularly for those with low-moderate incomes.

The discussion paper proposes that the Australian Government could primarily support social impact investing by creating an enabling environment for private sector-led social impact investing and by funding (or co-funding with State and Territory Governments) investments which generate savings or avoided future costs to fund reforms and deliver better outcomes for Australians.

Taking a social impact investment approach provides the Australian Government with an opportunity to fund ‘what works’ and reinvest spending that would otherwise not achieve beneficial outcomes.

In many policy areas relevant to social impact investing, the Australian Government is a funder or regulator. For example, the Australian Government has funded social impact investments in the Indo-Pacific region as part of a move towards innovative financing across the whole Australian aid program. The Australian Government is also responsible for financial market regulation, including the regulatory settings that affect social impact investing.

State and Territory Governments are leading on social impact investing, consistent with their responsibility for the delivery of many services which could be delivered through social impact investing, including justice, homelessness and out of home care services. The discussion paper also seeks views on areas where the Australian Government has direct policy responsibility.

The Australian Government could form partnerships with other levels of government to develop social impact investments. Such partnerships could involve sharing data critical to determining the outcomes of interventions. The split of roles and responsibilities between the Commonwealth, State and Territory and local governments shapes the role each level of government could effectively play in developing the social impact investing market.

Two reports have recommended the Government consider moving towards a social impact investment model for funding some social services. The 2015 review of Australia’s welfare system, A New System for Better Employment and Social Outcomes (known as the McClure Report), recommended that the Government consider expanding outcomes based social impact investment models to target financial investments towards addressing social problems.

In 2014, the final report of the Financial System Inquiry recommended that the Australian Government ‘explore ways to facilitate development of the impact investment market and encourage innovation in funding social service delivery’. As part of the Australian Government’s response to the Financial System Inquiry, the Australian Government agreed to prepare a discussion paper to explore ways to facilitate the development of the social impact investment market in Australia.

Social impact investments are investments made with the intention of generating measurable social and/or environmental outcomes in addition to a financial return. Social impact investing is an emerging, outcomes based approach that brings together governments, service providers, investors and communities to tackle a range of social issues.

This discussion paper seeks comments on issues that are relevant to the role of the Australian Government in developing the social impact investing market in Australia.

This discussion paper invites consultation on the Australian Government’s role in developing the social impact investing market. We encourage participants from the community, charitable and private sectors, State and Territory Governments and the public to consider the issues set out in this paper and make a submission.

There are three key components for consultation in this discussion paper:

1. The role the Australian Government should play in the social impact investing market. This discussion paper proposes that the Australian Government could primarily support social impact investing by (i) creating an enabling environment and (ii) by funding (or co-funding with State and Territory Governments) investments which would likely achieve savings to fund the intervention and deliver better outcomes for Australians.

2. The principles for social impact investing have been developed by looking internationally and at the State and Territory level to identify the key principles for effective social impact investments. The principles have also been informed by the Australian Government’s experience in this field to date and consultation with stakeholders. We seek feedback on these principles from interested parties before they are finalised. Once the consultation closes, we will create a revised version of the principles that takes into account submissions.

3. This discussion paper also outlines potential regulatory barriers to the growth of the social impact investment market identified by stakeholders and research on the sector. It seeks views on potential ways that the Australian Government can act to address these barriers, with the aim of facilitating social impact investing.

The submission is open until 27 February 2017.

Housing Affordability Takes Another Dive

The latest Housing Industry Association (HIA) Affordability Report shows how further gains in dwelling prices have caused housing affordability to deteriorate sharply during the December 2016 quarter.

Affordability worsened in six of the eight capital cities during the December 2016 quarter. The biggest deterioration was in Melbourne (-11.6 per cent), followed by Canberra (-10.7 per cent) and Sydney (-7.3 per cent). Affordability has also become more difficult in Darwin (-3.8 per cent), Brisbane (-2.9 per cent) and Adelaide (-2.3 per cent) during the December 2016 quarter. Only Perth (+2.1 per cent) and Hobart (+1.2 per cent) saw affordability improve during the quarter.

Based on the HIA Affordability Index scores for December 2016, affordability conditions are the most challenging in Sydney (54.7), followed by Melbourne (66.0), Canberra (76.6), Brisbane (85.3) and Darwin (85.3). By some margin, Hobart (117.8) is the most affordable capital city. Perth (96.6) is the second most affordable capital, followed by Adelaide (93.0).

“During the December 2016 quarter, housing affordability across Australia worsened by some 7.3 per cent due to the recent uplift in dwelling prices,” explained HIA Senior Economist, Shane Garrett.

“However, Perth experienced a further improvement in affordability and today’s report also shows how home purchase remains particularly accessible in markets like Tasmania, regional South Australia, regional Western Australia and regional parts of the Northern Territory,” added Shane Garrett.

“Nationally, housing affordability has managed to move in the wrong direction in many major cities despite the fact that interest rates are at very low levels. The sluggish pace of earnings growth in the economy has been an impediment to better affordability,” Shane Garrett pointed out.

“Achieving sustained improvements in affordability requires stepping back and looking at the big picture.

Housing affordability is front and centre in everyone’s mind once more. Whilst there is no single solution, there are some key policy levers that governments could use to provide some relief,” concluded Shane Garrett.

Government slammed for lip service on affordability

From Australian Broker.

The national discussion about housing affordability and boosting supply is how politicians make the public think they care without acting, one leading academic has said.

“People have been pushing this line that new supply is going to suddenly generate housing affordability outcomes for five or six years, but if you draw a graph of supply and prices they’re going up together,” the chair of urban and regional planning and policy at the University of Sydney, Peter Phibbs, told News.com.au.

“If politicians were really interested in putting downward pressure on property prices, there are other things they could do.”

Scrapping federally-controlled negative gearing concessions – which Phibbs said was the “single most important” method for combating affordability issues – has been rejected by the new NSW Premier Gladys Berekilian.

As well as this, the government could also adjust tax settings by doing away with stamp duty or introduce a more efficient land tax, he said.

By focusing on fixing supply, politicians could be seen as taking action while in fact doing nothing at all, Phibbs said.

“If you leave it to the market, it’s an incredibly blunt tool. It’s like trying to put a bushfire out with a garden hose.”

While the government knows the topic of housing affordability is important for voters, the issue will never be seriously prioritised, he said, especially while politicians act in the interests of owner occupiers and property investors.

“What will probably change in Australia is a lot of people that in previous generations would be homeowners, are no longer going to be. We’ll end up with more renters than homeowners and that’s probably when we’ll see some real change from governments,” he said.

“But until then, the politics just don’t work.”

A housing affordability crisis in regional Australia? Yes, and here’s why

From The Conversation.

The newly released annual Demographia report on housing affordability has found – once again – that Australia has some of the least affordable housing markets in the world. Sydney was ranked as the second-least-affordable housing market behind Hong Kong.

This news came just a day after incoming NSW Premier Gladys Berejiklian announced that improving housing affordability would be a priority for her government.

What was more surprising was that Australia had the dubious distinction of having four of the ten least-affordable housing markets covered by the survey. Melbourne was ranked the tenth-most-unaffordable housing market. Wingecarribee and Tweed Heads came in at seventh and eighth respectively.

This is sobering news given the report covers major world centres such as London and New York. And for many commentators this outcome came as a shock: how could regional Australia – which is perceived as less dynamic than the capital cities and with ample space for housing – be so unaffordable?

But the result has been signalled previously. In 2012, Port Macquarie on the New South Wales mid-north coast was named among the five least affordable housing markets globally. It was the most unaffordable housing market in Australia – beating even Sydney.

Indeed, housing researchers have been discussing the housing crisis outside our capitals since the early 1990s.

Cashed-up newcomers have an impact

What are the factors that have given rise to this outcome? And why are some regional communities so badly affected?

First, and perhaps most importantly, the housing affordability crisis in communities such as Wingecarribee and Tweed Heads reflects change in where and how Australians live. Wingecarribee in the southern highlands of NSW and Tweed Heads on the Queensland-NSW border are attractive destinations for retirement and leisure living.

Baby Boomers and cashed-up Gen Xers move to these communities for lifestyle reasons. In the process, they push up the price of housing. Often these wealthy city buyers are buying a property they will occupy for only two or three weeks in the year, but the impact on the housing market is long-term and cumulative.
An influx of cashed-up newcomers to regional communities for lifestyle reasons is one factor pushing up property prices. Sandy Horne, Author provided
Second, the common perception that country Australia is less prosperous – and less frenetic – than our major cities has an element of truth. Average incomes are lower in country towns and along our coastal seaboard when compared with the cities.

But this means households need to spend a higher percentage of their earnings to pay the rent or meet their mortgage. That task becomes more difficult when they have to compete with city residents looking for holiday homes or rental investments.

Challenges in building new housing is a third factor affecting affordability across the regions. While housing construction costs are slightly higher outside the capitals, the biggest barrier to the construction of affordable housing is land cost.

Preservation comes at a price

In some communities, planning restrictions meant to protect valuable and productive agricultural land, in combination with measures placing buffers around water courses and laws protecting native vegetation, mean there is simply no land available for urban development. In numerous small towns across Australia it is near impossible to build a home.

The self-interest of existing home owners – the Not In My Back Yard (NIMBY) phenomenon – has contributed to the affordability crisis in many rural and fringe metropolitan communities. New arrivals from the cities as well as long-term residents have lobbied governments to impose restrictive conditions that preserve the quality of life of existing home owners.

This resistance to change has locked out new entrants, especially if they are seeking affordable housing. In some parts of Australia it has meant those raised in a community are forced to move to less attractive places to find accommodation they can afford.

Finally, we need to acknowledge the sale of public housing by state governments has had an impact on city and regional housing markets alike. Many governments have shed both their employee and public housing stock in rural and regional communities. This has resulted in a reduced supply of affordable homes and increased competition in both rental and home-buying markets.

In some townships the withdrawal of government investment and ownership has also led to a noticeable deterioration of dwellings. This is because low-income buyers have been unable to afford the maintenance of properties purchased at low prices.

The housing affordability crisis in regional Australia is not news to long-term observers of Australia’s housing markets. The challenge we face as a nation is that solving this problem of housing affordability is likely to be more difficult in our regional centres – because of their differing circumstances, their geographic spread, the large number of governments involved – than in the capitals.

However, solutions are needed if our country towns, coastal communities and regional cities are to remain vibrant and productive places.

Author: Andrew Beer , Dean, Research and Innovation, University of South Australia

Is big business, super funds the key to fixing social housing problem in Australia?

From The Herald Sun.

PHILANTHROPISTS, charities, superannuation funds and publicly-minded big business will be encouraged to build and manage social housing developments in a bid to dramatically boost the number of social houses available across Australia.

Treasurer Scott Morrison said major changes were needed in the way social housing was provided, to make it more attractive to the private sector.
The Lend Lease housing development in London is designed to provide affordable housing but also ensure profits for developers. Picture: Ella Pellegrini
Speaking at a $3.8 billion new housing estate in London which has set 25 per cent of its new houses aside for affordable housing, Mr Morrison said governments provided almost all of the social housing in Australia, but demand was outstripping supply.

“There are currently over 180,000 people on social housing waiting lists across Australia,’’ he said.

“The number of social housing dwellings would need to grow by almost 50 per cent in order to accommodate this number of people.

“At present the Commonwealth and state and territory governments combined are spending over $10 billion a year on housing but it is failing to improve outcomes, particularly for those with low-moderate incomes.’’

Mr Morrison will today launch a discussion paper on ways to increase the practise known as social impact investment, to get private sector involvement in the social housing market.

The aim is to make building, supplying and managing social housing an attractive business proposition, as well as being a good thing to do for the community.

At its core it is designed to deliver better outcomes for the people who use the service but it also needs to provide a financial return.

“If social impact investing doesn’t make money then people won’t do it,’’ Mr Morrison told News Corp.

“It’s not social impact benevolence. It’s social impact investment.’’

The Government could play a role by reducing the cost and burden of compliance, being a co-owner of a development, getting rid of legal barriers, helping organisations access low-cost, long-term finance, and potentially direct-paying Commonwealth rental assistance to landlords.

“A key objective is to create an enabling environment for social impact investment that doesn’t displace private sector financing,’’ Mr Morrison said.

Social impact investing can be done through issuing social impact bonds, which the New South Wales and South Australian governments are already doing on a project-by-project basis.

But large-scale private projects do not yet exist in Australia.

Mr Morrison this week toured the Elephant Gate project being developed by Lend Lease in Southwark, south London.

The project saw the notorious, crime-riddled Heygate council estate bulldozed, and a new development of 3000 homes go up in its place, incorporating community facilities such a skills centre, where trainees worked on the site.

A quarter of the properties were set aside for affordable housing — half of them available under shared ownership, where the owners buy just a portion of their home, according to their incomes.

The other homes are social housing, scattered throughout the entire complex, where tenants pay a capped rent, under the deal between Lend Lease and the Southwark Council.

“We don’t really have projects like this in Australia and it is does require a capacity in state governments, a capacity even in the Federal Government as well as building up our social organisations,’’ he said.

“You’ve got to get the returns, that’s the other challenging thing.

“You’ve got to get the security of income and that really does require you to rethink using your Commonwealth rental assistance and how you’re using welfare payments and getting a guarantee that rent is going to turn up in the bank account.

“When you start getting a more guaranteed income stream for these types of developments that’s far more attractive to the developers, far more attractive to the institutional investors.’’

Unaffordable housing: the nanny state fix we need

From The NewDaily.

Incoming NSW premier Gladys Berejiklian and federal Treasurer Scott Morrison have raised expectations they will actually do something about unaffordable housing.

With capital city median house prices cooling but still relentlessly rising there is broad consensus that supply, in the form of more land release and fast-tracked apartment development, will never bring acquisition costs down for young home buyers.

Demand is also relentless through population growth from migration and the natural birth rate. Australia is on track to reach 40 million people by 2055. The Sydney home-unit tsar Harry Triguboff has become Australia’s richest man tracking demand through migration and building blocks of flats to cash in.

Endemically low interest rates have pumped up prices in hotly competitive city real estate markets. The federal government has failed to stop the distorting impact of too-generous negative gearing with aggressive property investors now building substantial multi-dwelling portfolios. We are becoming a nation of landlords.

NSW Opposition leader Luke Foley on Friday produced State Revenue Office figures showing a 61 percent growth in investor-owned property over the past three years.

Premier Berejiklian has said an “average, hard working” person should be able to afford a home in Sydney. But first-home buyer numbers have dropped from 18 per cent in 2011 to 8 per cent of total purchases today.

Hey Barnaby … there are no jobs in Tamworth

Why can’t people abandon their aspiration for a harbour view and move to an eminently affordable house in Tamworth, Deputy Prime Minister Barnaby Joyce asked in his deeply superficial contribution to the national affordability debate.

The answer is that the jobs are in the cities. There are fewer jobs in Tamworth, as there are in all Australian regional towns.

To buy a house you need a job. A worker on $75,000 a year with no dependants or credit card debt can borrow $512,000 for housing on this income. That would buy this income earner a good house in Tamworth, but at current prices, only a studio or one-bedroom apartment over-looking an industrial bin (forget the harbour view) in Sydney. You can add in Melbourne, Brisbane, Adelaide, Perth and Hobart to this calculation with some variations.

Young couples, each in full-time work, can combine their incomes to go deeper into debt to acquire their first home, and many do. But the barriers to entry remain extortionate, leading to the recent ‘smashed avocado’ kerfuffle where a demographer provocateur, Bernard Salt, lamented that millennials now preferred to spend $22 on this delicacy rather than save up for a house deposit.

Young people have given up, staying at home with mum and dad or sharing accommodation indefinitely, well past their student days.

What are legislators for?

Treasurer Scott Morrison has been fact-finding in London to see how the UK has addressed the affordability problem. A package of measures could come in the May federal budget. In spite of dissent from some Liberal MPs, any reform is not expected to include confronting the market distortion of negative gearing.

Premier Berejiklian is gathering insights from the fine policy minds available to her in the NSW government and is expected to announce some lever-pulling soon. First-home buyers’ grants and stamp duty holiday concessions can help to get more young people deposit-ready to buy, but they compete in already hot markets further pushing up prices.

The answer is in legislation. This will be derided as ‘a nanny state’ solution by ideologues and rapacious developers but with the market having so demonstrably failed to deliver the dream of home ownership for ‘average, hard-working people’, now is the time for a state plan. After all, what are legislators for? Do they always have to stand around, thumb in bum and mind in neutral? Why do we pay their salaries and helicopter expenses?

Let us now see if Premier Berejiklian is prepared to enact laws to establish state-wide inclusionary zoning for affordable housing. This has been done in London and New York. This would establish a public land register for affordable and social housing. The Greater Sydney Commission, a NSW planning agency headed by Lucy Turnbull, has already recommended government mandating six district plans for affordable housing for low-income households ranging from $42,300 to $67,600 per year.

The Committee for Sydney, a think tank, has proposed that under-utilised land could be slugged with higher taxes to get private owners to release it from their speculative ‘land banking’ grip. Most affordable housing in London, both freehold and rental, is high density around transport hubs for easier job access.

In the UK there is a social/affordable housing bond market which could be adapted by the Australian equivalent state-owned housing finance corporations to kick start affordable housing development with the not-for-profit and private sectors including investment-hungry superannuation funds.

So the answer to unaffordable housing in Australia? L-A-W … law.

Smashed Housing Aspirations

From The NewDaily.

Australian politicians have sleepwalked into a housing affordability “crisis” because they were hooked on property taxes and votes, a think tank has warned.

Demographia, a global company based in the US, released an annual report this week that ranked Sydney as the second-most expensive city for housing in the world.

It divided Sydney’s median house price ($1.077 million) by its median household income ($88,000) to roughly estimate it would take 12.2 years’ wages to buy a home – better than Hong Kong (18.1 years) but worse than Vancouver (11.8), Auckland (10) and San Jose (9.6).

Using the same measure, Melbourne (9.5 years), Adelaide (6.6), Brisbane (6.2) and Perth (6.1) also made it into the top 20 of the 406 cities on the list.

Wayne Matthew, the Australian spokesman for Demographia, told The New Daily that our politicians are “only just starting to realise” the extent of the problem.

The report’s release coincided with the first press conference of newly appointed NSW Premier Gladys Berejiklian, who pledged on Monday to tackle housing affordability, calling it the “biggest issue people have across the state”.

On the same day, senior figures in the Turnbull government made it known that housing affordability will be an “extraordinarily high” priority in 2017.

Politicians have sleepwalked into the “crisis” because they initially saw no problem with the rapid increases in prices, or were too scared of voter backlash to intervene, Demographia’s Mr Matthew said.

“Initially, the Australian dream seemed to be paying fabulous dividends. People’s property prices were going up and they felt good about that. As prices went up, people were able to leverage the equity in the increased property to buy other properties as investments to rent out,” he said.

“That all looked good and enterprising, however it has now caught up with us, particularly in Sydney.

“There have been too many people benefiting from the investment wave, but the goose that laid the golden egg is becoming a millstone around the necks of young people.

“It’s going to create great chasms in our society, with young people being bitter that they can’t afford the home their parents had and that they can’t realise the same dreams. Australia has always been a country where people have had a right to a roof over their head that they could aspire to own themselves, but that great Australian dream is being smashed.”

There are two distinct sides to the debate over housing reform. There are those who argue for supply-side measures (often conservatives, such as the Liberal Party) and those who argue for demand-side measures (such as Labor, which has promised to reduce negative gearing).

Demographia’s argument, as a conservative think tank, is that land prices are high because of an artificial undersupply imposed by state governments, who fear voter backlash if they free up large plots of land for development or allow more high-rise apartments.

“State governments have been concerned about stepping into the market and offering lower-priced land on the basis that they’re fearful it could affect other property prices where investors are dependent upon equity to maintain a balance in borrowings they’ve undertaken,” Mr Matthew said.

“The reality is, and international experience has shown, that’s not what occurs.”
We need more than just more land, says one expert. Photo: Getty
Dr Ashton De Silva, an economist with expertise in the housing market, agreed that supply is “probably the most important factor”, but said Demographia’s data should be treated with caution.

The measure used by the think tank – median house price divided by median household income – is “problematic” because the way home loans are funded varies widely between countries, Dr De Silva told The New Daily.

“I’m very circumspect about this kind of report. I know that Sydney and Melbourne house prices are very high, and I know this causes a great deal of hardship in the community. However, I’m not sure if the problem is as extreme as they say.”

Professor Tony Dalton, a housing expert at the Australian Housing and Urban Research Institute, said supply is an “important” factor because of the nation’s high rate of immigration, but does not tell the “full story”.

Overly generous tax concessions for landlords, a lack of social housing, and a concentration of “good jobs” in the inner city are also crucial factors, Professor Dalton told The New Daily.

“There are very big differences between house prices in central city areas and the periphery. That’s because of the way we’ve organised and designed our cities. We’ve got all the good jobs, those with greater security and higher income, within a 10 to 12km radius of the central business district.”

To fix the problem, governments shouldn’t focus just on freeing up land. They should also curb negative gearing and capital gains tax concessions and invest more in outer suburb infrastructure and social housing, Professor Dalton said.

“We’ve got first home buyers bidding for properties alongside cashed-up, affluent people who are able to bid for properties for investment purposes.

“Meanwhile, most western developed countries have a social housing system that’s much bigger and more robust than Australia. We are a standout in terms of how little of that sort of housing we provide.”