Thursday, July 13, 2017

Economically viable supply

Speaking at a Sydney Alliance assembly on housing affordability last night, the NSW Minister for Planning and Housing, the Hon. Anthony Roberts MP, dismissed targets for affordable housing in new residential developments as a simplistic and unrealistic housing solution. "In reality all these targets do is reduce the supply of affordable rental housing because it makes many developments economically unviable." Instead, he talked up the Government's intention to solve Sydney's housing affordability crisis by rezoning large swathes of the city and fast-tracking new supply.

Inclusionary zoning is like a box of chocolates...?
This is a curious position for a Housing Minister in the Berejiklian "housing-affordability-matters" Government to take, given the overwhelming evidence suggests a single-minded focus on new supply is a simplistic and unrealistic housing solution.

Since the beginning of 2017 - dubbed "the year of the renter" by Domain as there will soon be more renters than homeowners in Sydney - we've discussed the issue of housing affordability and supply many times on the Brown Couch.

In late January we released a Rent Tracker report, which highlighted how rents have gone up even in suburbs where large numbers of properties are being added to the rental market. In February we discussed how Sydney's new housing development is producing the wrong kind of supply, driven by the demands of investors rather than householders and home makers. In April we noted the findings of Anglicare's seventh Rental Affordability Snapshot, showing that rental affordability is as bad as it has ever been and still gets worse every year.

In May the latest Rental Affordability Index was released, confirming what Rent Tracker and the Rental Affordability Snapshot had already suggested about deteriorating rental affordability despite increasing residential development activity. We dug in a little to look at exactly what's going on, exploring how the wrong kind of supply has changed the shape of the rental market. It produces higher rents rather than improving rental affordability.

In June we joined the dots on housing affordability, looking at how the NSW Government's housing affordability package is likely to impact upon the market for supply. We suggested it might be combined with both the NSW Opposition's housing affordability package, which includes targets for affordable housing, and some of the Australian Government's Federal Budget measures, which includes a method for funding new affordable housing, to help keep residential property developers afloat while ensuring at least some new supply is delivered into the affordable rental housing sector.

Also in June we discussed the release of data from the 2016 Census, which shows that the renting population is still growing faster than the population generally, and the stress of high housing costs affects renters far more than it does homeowners.

Something we haven't yet discussed is the Australian Housing and Urban Research Institute's recent report into "Housing supply responsiveness in Australia". This report found that most of the growth in Australia's housing supply has been taking place in the mid-to-high price segments, rather than low price segments, and suggests "there seems to be structural impediments to the trickle-down of new housing supply". It also says that "targeted government intervention might be needed in order to ensure an adequate supply of affordable housing." The report hasn't received a lot of attention other than a quick report in the Guardian when it was released earlier this year. It could do with some more, so we'll take a closer look at it when we can.

In the meantime, let's get back to the Minister's words from last night. "In reality all these targets do is reduce the supply of affordable rental housing because it makes many developments economically unviable."

On the other hand, current developments are causing rental affordability to deteriorate again, and again, and again. So at what point do we stop and wonder - if we still can't afford to live in them, what is the value of an economically viable development after all?

The answer to that question might make more sense to someone who values housing as nothing more than a financial asset, rather than a place to call home.

No comments:

Post a Comment

Please keep your comments PC - that is, polite and civilised. Comments may be removed at the discretion of the blog administrator; no correspondence will be entered into. Comments that are abusive of individual persons, or are sexist, racist or otherwise offensive will be removed, so don’t bother leaving them.