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“We need a definition for affordable housing” - and round and round it goes

“We need a definition for affordable housing” said at least two panel members at the UDIA / Community Housing Federation forum (‘Delivering Affordable Housing’) on Wednesday 1 February 2017 in Melbourne.

So, after many years of concern and discussion on this topic of ever increasing importance, we are told we need a definition – round and round it goes!

There was little new that came out of the forum, opened by Treasurer Tim Pallas, who spent the first part of his speech being a typical politician (bagging the Federal Government – that just happens to be on the other side of the political fence) and the second part talking about his / the Victorian Government initiatives.  Most were laudable but few addressed in any direct way the forum topic, other than as these initiatives address total living costs.

Some of the issues / problems raised by the panel (Damien Tangey, UDIA Victoria; Nicola Foxworthy, Common Equity Housing Limited; Brett Wake, Community Housing Federation Victoria, Dean Rzechta, 94Feet and Sean Hogan, ISPT Pty Ltd) included:

  • good supply of land under residential zones versus significant lags in such land being approved for housing development;
  • ‘affordable housing’ verses ‘attainable housing’;
  • ‘affordable housing’ versus housing needing subsidy;
  • inconclusionary zoning (to require affordable housing) being useless with the funding stream being in place to implement it;
  • housing (and particularly affordable housing) needing to be seen as ‘infrastructure’ and given its fair priority with other infrastructure such as roads and public transport;
  • the fiduciary duties of investment fund providers and their inability to subsidise housing;
  • funding and taxation regimes and the impact on housing;
  • the noted but long – awaited Melbourne (sorry, Victorian) housing strategy (“a few weeks away”) and whether it will do anything to help set up solutions to housing affordability;
  • the complexity of the problem being the reason little has occurred in their way of solutions.

It was interesting that for such a complex issue whose solutions include clearly the need for the regulators, financiers and providers to work together, in the summation by the Chair of Community Housing Federation, she thanked the Treasurer, said the solutions needed “a whole of government approach”, encouraged Federal Government involvement but did not mention the panel members and made no mention of the role of the commercial housing sector, despite three of the panellists being from that sector – but perhaps this is nit picking.

I left the forum with the clear view that it again was a discussion of the problems but with very little on “delivering” affordable housing – but perhaps I am being too cynical?

 

This article appeared on Collie's website on February 3rd. Michael Collie is Director at Collie Pty Ltd, a multi-disciplinary Southbank-based firm with interests in strategic planning, development planning, urban design and landscape architecture.

4 comments

theboynoodle's picture

I find that I am increasingly skeptical over the possibility that 'affordable housing', as most understand it, is a viable objective in the current (or any conceivable) political and/or economic systems.

Let's look at it at the most basic level.. affordable housing is housing that people on average and lower incomes can afford to buy. And, of course, that housing needs to be suitably located (re jobs, transport, services etc) and suitably sized/configured (it's no good saying that an average person can afford a docklands bedsit if the average person cannot reasonably live in a docklands bedsit).

Crucially, I think, we want this housing to be available for everyone who needs it.. not just a lucky few. And that is the problem.

If you want 'true' affordable housing, available for all, then you can't be delivering it 'by exception'.. by which I mean.. you can't allocate certain developments or portions thereof as 'affordable'. All you're doing is delivering some subsidized/discounted units for the lucky few. That's just a band-aid and you can never do enough. You can only deliver *real* affordable housing by getting the market price down to an affordable level.

Housing is a monopoly (i.e. if I own a house, nobody else can) and locations are scarce. High housing costs are driven by people paying as much as they can to get the best 'monopoly' they can. The price of a house is a dollar more than what the next highest bidder pay. This is why so many movements in other key economic levers (wages, interest rates, living costs etc) all flow straight into house prices.

So the only way you get that market price down is by getting supply to a point where that 'next highest' bidder can go elsewhere. And that's the rub.. it's not going to happen; You will never run out of people who would like to live in the most desirable locations, so you'll never be able to build enough to do much to those prices. Supply isn't the answer. If it was then we wouldn't find the highest property prices in the most populous places (aka cities).

Everyone wants to live in a Toorak mansion. Or a Fitzroy townhouse. Or a Richmond terrace. Or a Brunswick duplex. Or whatever.. they'll pay as much as they can afford to get the best they can. Ability to pay is our only way of deciding who gets to monopolize which location. You can provide more units and that will mean that more people have the chance to live in better areas (which is good, and I support increasing supply wherever possible for that reason) but you won't make much difference to the price in those preferred locations.

I mean.. look at the amount of development that's happened in Melbourne over the past ten years.. then chart it against house prices.. I really do thing, worthy as the objectives are, the whole 'affordable housing' debate is one giant exercise in missing the point, and from a government perspective it's all just a diversion tactic to avoid people talking about the underlying economic structure that makes housing so expensive (and 'unaffordable' for so many) in the first place.

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Bilby's picture

There are other options, of course - rent control being the obvious one. Australians would do well to read up on the history of rent stabilization in New York and elsewhere - at least as a point of comparison if nothing else:

https://www.theguardian.com/us-news/2015/aug/19/new-york-rent-controlled...

http://scholarship.law.cornell.edu/cgi/viewcontent.cgi?article=1583&cont...

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George D's picture

It's all about supply.

"I mean.. look at the amount of development that's happened in Melbourne over the past ten years.. then chart it against house prices.. "

Then chart that against population growth.

When Melbourne is growing by approximately 100,000 people per year, you need to build a new Geelong every 20 months. Because of a historic undersupply, it's taken a while to catch up in new builds. The Federal Government is also starving Victoria of infrastructure spending (just 7%), and so it's much harder to make provide necessary services to Melbourne's new suburbs.

There will always be a scarcity of the "best" houses in any environment, but it is this scarcity which results from cultural and hard values about where to live (aesthetics, travel to employment & education etc) which can be built around. If there's one tower beside a beach and near a tram line, those will be expensive. If there are enough to saturate demand, those will decrease to nearer the cost of supply plus developer profit - or even below if there is an oversupply.

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3000's picture

In this market even with supply catching up with demand I still see rents becoming higher and higher. I think the current model of "Market overseas and thats a wrap" will only go so far.

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