INSIGHT

The health and economic crisis shines a spotlight on the need for greater social and affordable housing

By Zainab Mahmood, James Hogan, Tina Tran
Build-to-rent Infrastructure Property & Development

Why we need to create change for our cities

The pandemic has laid bare Australia's overextended and under-invested social and affordable housing market. The economic recession, prompted by this health crisis, will likely increase the demands on this market and may intensify Australia's homelessness crisis, particularly once JobSeeker and JobKeeper payments are scaled back.

However, as had been identified by the infrastructure industry and housing groups, the pandemic has also provided state governments with an opportunity to prioritise investment in, and undertake much-needed reform of the planning process governing this space. 

Here we look at some of the investment initiatives that have been pursued to date by the state governments. We  also suggest some regulatory and planning changes that can be made to ensure this investment is applied effectively to provide the additional social and affordable housing required, both in the short term and long term.

Current state of affairs

The pandemic has prompted significant and, in some states, unprecedented investment by state governments into more social and affordable housing.

In Victoria (which historically has had the lowest public housing investment rates, and some of the highest rates of homelessness, in the country), the government recently committed $5.3 billion to construct around 12,000 social housing homes across the state. The package, which is part of Victoria's 2020/2021 budget, is expected to inject around 43,000 jobs to the economy, a welcome announcement as the state emerges from a protracted lockdown.

At the start of the pandemic, the Victorian Government also established the Building Victoria Recovery Taskforce to identify planning and investment opportunities, and shovel-ready construction projects to fast-track through the planning approvals phase. Projects that have been green-lit for fast-tracking include a $250 million development in Caufield which includes a build-to-rent scheme and affordable housing; and a $110 million mixed-use development in Glen Iris, which includes 11 dwellings funded under the NDIS.

Other states have similarly ramped up their spending on social and affordable housing since the commencement of the pandemic.
For instance, the NSW Government's 2020-2021 budget includes a commitment of $812 million on building or upgrading social housing.

Similarly, on 14 October 2020, the WA Government launched the WA Housing Strategy 2020-2030, which sets a target of a 6% net increase in social homes over the next 10 years.

On 30 October 2020, South Australia began the consultation process on a proposed revamp of its social housing system, looking to build on the work it began at the start of the year through its 'Our Housing Future 2020-2030' strategy, which is a 10-year plan for better housing in SA.

Where to next?

To maintain momentum, support these investment initiatives and ensure the private sector is incentivised to develop in this space, we consider what steps the state governments should take:

1. Facilitate build-to-rent developments

COVID-19 has likely accelerated the trends in the housing market, including the move away from home ownership towards renting among young professionals.

In our latest report, we've highlighted the benefits of the build-to-rent (BTR) model as a key circuit-breaker in the housing affordability crisis, and the need for policy reforms at the state and federal level to facilitate such developments.

In July 2020, the NSW Government announced a 50% land tax discount for new BTR housing projects, until 2040. As the pandemic is likely to only increase demand for secure, stable rental options, the other state governments should consider similar legislation and facilitate BTR developments across the country. Notably, Damian Graham of First State Super, recently called for similar land tax concessions across all of Australia to make BTR investments more financially viable.

2. Incentive payments or tax concessions

Another option, and one that has the support of the Property Council of Australia, is for the state governments to pursue incentive payments or tax concessions. For developers, that includes higher numbers of affordable housing dwellings in their developments.

3. Create streamlined, uniform legislative framework

In addition, the state governments should also strongly consider implementing mandatory targets for social and affordable housing (as a percentage of the housing made available by larger housing developments) into their respective planning legislation.

Currently, in each state, targets are primarily provided for in local planning schemes. The heavy-duty work of deciding on, and implementing, these targets, is left largely to local councils that do not have the staff resources or the funding to enforce these targets, particularly when dealing with developers of large-scale projects.

The ad hoc approach also creates an uncertain development space, with the lack of clarity making it hard for developers to invest as they cannot properly factor in the cost of an affordable housing contribution.

In our view, a unified, state-wide approach to implementing these targets would facilitate further social and affordable housing supply and provide a more consistent investment landscape for developers.

Stay informed

Subscribe to our insights and updates