State governments need to better leverage planning power to boost affordable housing, AHURI report

State governments are failing to boost the supply of affordable housing and need to better leverage their planning powers to help to house key workers, experts say. 

Forcing the development of housing for low to moderate income earners is among the key missed opportunities, according to a report released on Tuesday by the Australian Housing and Urban Research Institute. 

While inclusionary zoning, which requires developers to help build affordable housing, is proven to boost supply, South Australia is the only state to extensively roll out such a scheme. 

“It’s extraordinary, that in Australia’s capital cities, which have some of most expensive housing in the world, [governments] haven’t rolled out mandatory affordable housing requirements,” said lead researcher Professor Nicole Gurran, from the University of Sydney.

“[The planning system] is failing to provide more affordable housing. We’ve heard that new housing supply alone would be enough to lower house prices and make housing more affordable … and that clearly hasn’t worked,” she added. 

The research looked to the UK and USA to examine how planning mechanisms could increase affordable housing. It identified voluntary planning incentives and density bonuses for developers, which are used in NSW, as other key ways to boost affordable housing.

“Our research found that in England and Scotland, the general expectation is for 20 to 40 per cent of new housing developments to be affordable housing across the continuum of needs and options,” said Dr Gurran.

Between 2005 and 2016 there were about 85,000 new affordable dwellings built in the UK. Over the same time there were 2009 affordable housing dwellings built in SA and only 1287 homes delivered in NSW. 

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In SA, where a 15 per cent target for residential developments applies, affordable housing makes up 17 per cent of homes already built or still in the construction pipeline. But in NSW, where developer contributions are limited to small pockets of inner Sydney, it accounted for 0.5 to 1 per cent of housing supply between 2009 and 2017.

Dr Gurran noted that the SA model focused on selling houses at below market rate, rather than renting them out, so it was easier to mandate inclusionary zoning. 

However she noted the lack of affordable housing in NSW showed developers couldn’t be left to choose whether to make a voluntary contribution. 

“That’s not to say there isn’t a place for voluntary approaches but there’s room for a more solid and ambitious approach to be signalled and gradually introduced,” she said.

Dr Gurran added the fact Victoria only recently introduced a pilot inclusionary zoning program, showed Australia’s planning had been “out of step with the rest of the world”. 

With more than 140,000 Victorian households experiencing rental stress, Victorian Council of Social Service chief executive Emma King said the state government needed to urgently legislate inclusionary zoning. 

“These are horrific figures. Every household represents a person, couple or family who are struggling to make ends meet,” she said.

A Department of Environment, Land, Water and Planning spokesperson said in addition to the pilot program, which will see 100 new social housing dwellings built on surplus government land, the Planning and Environment Act had been amended to allow the negotiation of voluntary affordable housing agreements between land owners and councils.

While Ms King said the recent measures were commendable, she said more needed to be done. 

“The Victorian government should urgently legislate mandatory inclusionary zoning for affordable housing in multi-unit developments, including a proportion of social housing,” she said. “In 2016, private developers began construction of about 30,000 apartments in Victoria. If only a few per cent of these were reserved for social and affordable housing, thousands of extra Victorians would be able to move into a home.” 

But governments needed to be careful with mandates for affordable housing, according to property developer lobby Urban Taskforce chief executive Chris Johnson. 

While there is the “naive” perception developers can reduce their profit margins to build affordable housing, Mr Johnson said, the prices of other homes would have to increase to offset losses on affordable dwellings, leading to a decline in overall affordability and possibly sales.

“You want to make sure you don’t kill the goose that lays the golden egg, where you just don’t get enough housing supply happening in the end to fund the affordable housing.”

Mr Johnson believes developer incentives are the way forwarded, but needed to be improved to ensure a great take up rate. 

“For instance in NSW [under voluntary incentives] if 20 per cent of a complex is affordable housing you can get an 8 per cent uplift, we propose you should get a 20 per cent uplift.”