Wednesday, August 27, 2014

Millers Point: three new homes for every property sold?

Last night a second government owned property in Millers Point was sold. Family and Community Services Minister Gabrielle Upton reports it sold for $2.56 million. This follows the first property sale price of $1.911million.

Minister Upton says for each property sold in Millers Point, the government's public housing portfolio could be increased by three. But not so long ago the Secretary of FACS said the current State Budget would deliver a 'line-ball' increase in social housing supply this financial year.

More recently, the Minister herself told the Budget Estimates committee (see page 5 of the transcript) that for every million dollars her department spends on its housing portfolio, only $190,000 – 19 per cent – goes towards new housing. Of the rest, $340,000 is used for 'improvements' (for example, kitchen upgrades), and $470,000 goes to repairs and maintenance.

Now, we're all for spending money on overdue repairs and maintenance of the government's housing portfolio, but it's a bit rich to sell other people's homes in order to pay for it. Especially when much-needed growth of the portfolio is implied, to justify the sales.

Anyway, on the basis of Minister's Estimates statement, we thought we'd see what we could do with the $4.471 million raised so far. Within the confines of the Budget, of course...

First things first, we'll have to put about $1.52million aside for 'improvements', and a further $2.1 million aside for repairs and maintenance. This leaves us with just under $850,000 to tip into the 'new housing' bucket.

$800,000 will get you a pretty swish flat in Sydney, leaving change for stamp duties, legal costs and perhaps even some champagne to celebrate.

Cunningham St Sydney - from www.realestate.com.au

Or, if you wanted to replace the two Millers Point properties with a pair of dwellings, you can get a nice little studio in the same complex...

Cunningham St Sydney - from www.realestate.com.au

... a spacious walk up in Parramatta...

Early Street Parramatta - from www.realestate.com.au

... or a respectable family home in Campbelltown, for around $400,000.

Lindesay Street Campbelltown - from www.realestate.com.au

Of course, if you wanted to replace the two Millers Point properties with six homes in Sydney, you'd be hard pressed to do it. You'd be looking at around $140,000 per home. A quick look at the real estate pages tell us you can still find homes at such low, low prices, but nowhere near Sydney. You'd have to look in places like DeniliquinSouth Grafton, Dubbo, Jindabyne, Albury and Orange.

Which leaves us with two possible conclusions to ponder: either the money will be used to buy houses in regional NSW, or more of our existing metropolitan public housing will be demolished so that we can 'replace' the Millers Point homes on land already owned by the NSW Government.

Help us keep track of what's happening with public housing sales and estate redevelopment. Check out our Clearing House blog for more information.

13 comments:

  1. Sorry, but your analysis is flawed. The proportions of spend reported to the budget estimates committee are proportions of existing budget, not additional budget over and above the existing budget. The money being raised from the sales are separate to the existing budget. Your analysis is also flawed in that the government would build houses at cost price, not retail price i.e. no inbuilt profit margin, and it probably already owns the land on which the properties would be built. This blog borders is nonsense.

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    1. Hi Anon,

      When the Minister or the Land & Housing Corporation tell us exactly what they plan to do with their Millers Point profits, we'll try to come up with some more sensible analysis. In the meantime, we can only go on the information available...

      As to the idea of replacing at 'cost price' on land that is already owned by the Corporation - that's kind of the point. Most of that land will already have tenanted dwellings on it, so we can expect more demolition & displacement as the Corporation slowly works to reinvent its portfolio.

      This is something to keep an eye on.

      Cheers,
      Ned.

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    2. Hi Ned, they're not the government's profits. They're the NSW taxpayer's profits. Even if it forms part of consolidated revenue, what difference? So long as their is a commitment to provide appropriate social housing (which there appears to have been) - why do you need the government to tie its hands before it prepares its budget? Equally, if they had committed to invest a specific dollar figure, then now the properties are being sold at higher prices than expected, pundits would accuse the government of not committing *all* the funds. I just don't get what gets unionists so worked up about this. Is it just because it is a liberal government in power and the community is mainly mainly harks from (maritime) unionist roots? Anon

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    3. Careful there, Anon... you seem to be putting words in my mouth.

      The Corporation gets told how to spend its money, but it more or less funds itself. It lives off rents, and the proceeds of sale... Your taxes simply don't come into this equation.

      Hence, I referred to the Corporation's profits. Not the Government's profits.

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    4. Are you saying that because something isn't 100% funded by government, it's not a government service? There are lots of government entities that earn revenue (fares, fines, fees etc.) but it doesn't make them non-government entities. I consider that I help fund social housing because I am a NSW taxpayer; I don't think you can claim that I don't.

      In the same way that I help fund railways even though they charge fares. Even if a government entity were fully funded by its own activities, taxpayers are still responsible for it.

      If you start from the premise that "your taxes don't come into the equation", you're immediately alienating people who pay taxes from your cause, because you don't allow them to feel good about contributing to social housing at all, even though they realise its importance and are lucky enough to not to need it themselves at present). It is a delicate social contract, I agree; and the chains of causality are not obvious and direct (e.g. my GST revenue> reallocated to states> spent by states) but your approach makes all those you represent 'on the nose' to those you don't.

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    5. Anonymous, let me reassure you of the two key points here:

      1. We'd like the Minister and the Corporation to come clean on just how the proceeds of the Millers Point sell-off are to be reinvested.

      2. Reinvestment within Sydney is unlikely without further interruptions to public housing tenants and their communities.

      Cheers for your interest in this issue.
      Ned.

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  2. i dont agree anon, i believe it makes sense to show how it is broken down.

    my comment concerns the $1.52 m for improvements and $2.1m for repairs. with that sort of extra money in the kitty can we expect all properties to be brought up to a basic standard? there should now be little excuse for work not getting done as this money is 'surplus' to budget.

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    1. Indeed, Anon. At the same time, the Corporation is working on its new repairs and maintenance contracting arrangements, which we're told will make a big difference... This should come into force sometime next year. Let's keep an eye on this, too.

      Cheers,
      Ned.

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    2. Anon, in terms of new builds and how current budget is being put into effect, do you not find the testimony encouraging?
      "Mr COUTTS-TROTTER: I will keep it quick. We are more than tripling the number of new starts this year: 759 compared to 270 last year and we are completing 443 homes compared to 359 last year"

      The government cannot count any of the money from the sale of properties in MP until settlement actually occurs on the properties.

      The money isn't surplus to anything, it's a realisation of the value of an asset which isn't producing a good social outcome (dilapidated, unsuitable housing) to another use, which includes
      an overall $612 million commitment to the public housing system; of which $120 million of that will go to build of new homes, $207 million into improvements and $284 million into maintenance.

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    3. Other Anon,

      As encouraging as those words may seem, they neglect to mention the number of properties lost through sale or demolition. And as Mr Coutts-Trotter has said, the net gain of social housing coming from those 759 new starts will be "line ball".

      As to what is or is not producing a 'good social outcome', we might have to agree to disagree on that one.

      Cheers,
      Ned.

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  3. Hi, Brown Couch, do you actually accept that anywhere near the full amount will be used for housing, either new or in the form of upgrades and maintenance? i'm not convinced. It seems more likely that the bulk of the sales revenue will be directed to the State's Treasury coffers. But of course they do have to re-house the beleagured tenants. How are they planning to do that? Are there new developments on the way, presumably in far-flung suburbs. If there were, then the asset sales revenue would have to be directed to re-housing these tenants. Have you done an earlier blog post on the curious issue of how/where they are planning to re-house the Millers POint tenants? I'm speaking as a Victorian tenant.

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    Replies
    1. Hi Matilda,
      No, we haven't written anything about how affected tenants are to be relocated. Redfern Legal Centre has written an article about 'Choice Based Letting' that you may find useful - http://rlc.org.au/article/millers-point-tenants-and-choice-based-letting.
      When time permits, we intend to put some further info up on the Clearing House blog about what we know of the process, and how it has been used to date.
      Cheers,
      Ned.

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