It’s one of the mysteries of modern political life that the issue that everyone agrees on – the unaffordability of housing in NSW – seems to pass without serious policies or commitments from the parties at every election. Adam Farrar explores the housing affordability crisis facing lower income people in NSW and spells out what Shelter NSW thinks the NSW Government should do to address the problem.
The only government policy responses on housing affordability we hear about seem to respond to demands from industry groups to release more land, in the hope that this will solve the problem of affordability. Of course, supply is part of the picture. But increasing supply, either through new release areas or increased density, does not outweigh the main drivers of house price inflation and housing poverty – speculative investment and the steady loss of low-priced rental.
In fact, if there are few election statements on house prices, there is a deep silence on rental affordability. But rental affordability for lower income households is where the real hardship and exclusion in our state is felt. In Sydney, there is a shortage of rental housing that is affordable and available to very low income households (those in the bottom 20% of incomes) of 52,600 dwellings – there is a shortage of 85,600 across NSW.
When you add low income households and look at the bottom 40% of incomes the shortage of housing that is affordable and available (not occupied by higher income households) becomes 135,000 across NSW.
Shelter NSW’s Response
Shelter NSW’s election platform, Housing at the right price, in the right place, with the right amenity, says: ‘Despite the dire state of affordability in NSW, for far too long governments have turned away from the systematic action needed to make a real difference. We must start by acknowledging the scale of the challenge. Research is clear that we need around 100,000 more homes to be affordable for low income renters – quite apart from making entry to home ownership more affordable.’
A new government needs to commit to a sustained ‘boost’ in both the private and public rental markets that would seriously work towards the target of 100,000 additional affordable rental housing (starting with at least 20,000 extra units of social housing dwellings over 10 years). This challenge can be achieved if government makes housing a priority once again, and acts on a number of fronts at once.
Shelter NSW has identified 10 varied areas for action that will begin the task of making our housing system work for everyone in NSW.
- Increase social housing — with a ‘Social Housing Boost’ to increase supply by at least 2,000 new properties a year for 10 years.
- Establish new ways to finance affordable-rental housing — by widening the purposes for which Restart NSW Fund moneys may be spent to include affordable housing.
- Protect lower-income homeowners and tenants in strata-titled buildings from developer-led dispossession and displacement — by tightening controls on dissolution of owner’s corporations.
- Share the benefit of windfall development gains — by allowing developer contributions for affordable housing, using the principle of value sharing.
- Promote opportunities for all in urban renewal initiatives that involve increased dwelling densities — by requiring 15% of new dwellings in areas earmarked for higher density development to be affordable housing.
- Stop dividing our cities between rich and poor areas — by protecting both public-housing estates and dispersed public housing located in high-value locations.
- Target the real causes of homelessness and barriers to reducing it — by increasing the number of rental properties available to low income people at affordable rents and meeting the full cost of effective services.
- Establish a capital-funding stream to appropriately house people with disability with high support needs and people with disability who want to live more independently — by supplementary funding to that committed under the National Disability Insurance Scheme.
- Make private rental more secure — by amending residential tenancies law to prohibit ‘no cause’ evictions.
- Reduce barriers to mobility for homeowners — by phasing out conveyance /stamp duty for owner-occupiers, offset by increased revenue from land tax.
Together, these would begin to tackle the failures in our market – at least those the NSW Government can influence – that have made it so unfair, as well as unaffordable.
Increase housing supply
Four of the proposed measures directly address the challenge of increasing the supply of affordable rental.
The most direct of these is to increase the supply of social housing by 2,000 dwellings a year over the next 10 years. Housing that is affordable to very low income households will never be delivered by the market alone. It demands public investment. The current strategy of simply stabilising the public housing portfolio within existing resources is simply not tenable.
The level of affordable rental housing needed cannot just be financed from consolidated revenue. Just like other infrastructure, funds to make these sorts of major investments in the future of our state have to be raised from a variety of sources. The government has already established ‘Waratah Bonds’ to raise money for infrastructure through the Restart NSW Fund. But the money in the Restart NSW Fund may only be used for major infrastructure or for certain types of infrastructure indicated in the Act. Adding affordable housing to the purposes for which the Restart NSW Fund can be used would create a new source for financing affordable housing.
The planned growth of Sydney (and other urban centres) can also carry its share of the job of making sure the reshaped city is fair and efficient. Across the city there are plans to rezone land to allow for new housing and increased density to meet population growth. When the government rezones land to enable this kind of development the land increases in value and the government gives the land owner/ developer a windfall gain. Without imposing any ‘big new tax’ on development, this sort of windfall gain should be shared with government to contribute community benefits, such as affordable rental housing.
Currently this is only possible in a couple of brownfield precincts in inner Sydney (Ultimo-Pyrmont, Green Square, and also UrbanGrowth NSW Development Corporation’s affordable housing scheme in Redfern-Waterloo). But the State Government’s proposed changes to the Planning Act would have removed the provisions (Section 94F) that allow this. What is needed is to make this section more effective by amending the state environmental planning policy (SEPP 70) to identify all the local government areas in the Greater Metropolitan Region and North Coast and South Coast regions as areas with a need for affordable housing.
As well as the planning mechanism, Shelter is calling on government to establish a proportion of new dwellings in precincts earmarked for higher-density development to be affordable rental housing. Shelter believes this must be 15% of such new dwellings. This will ensure that lower-income households also have access to the benefits that are expected to come from higher densities. This will contribute to greater social mix, countering the polarisation of our towns and cities by wealth and income.
Stop the loss of low priced housing
Increasing supply is only one part of an effective approach to making our housing more affordable and fairer. It is also just as important to make sure that the loss of low priced housing is stopped. With every low–priced house that’s lost, another household is forced farther away to find a place they can afford – further dividing our city.
The new development that is seen as the solution to our housing shortage is often the cause of the loss of housing that is affordable to low or very low income households.
Hence, Shelter calls on all Parties to begin to stem this loss in two important areas.
The first is to reject the current proposal to make it easier to dissolve strata schemes so developers can get access to these sites. The strata-titled buildings that are likely to be targeted for this redevelopment are the very ones that house lower income owners and renters – often older owners of apartments. But if they are forced to sell up or move, they are very unlikely to have satisfactory, alternative, options in housing markets where the redevelopment pressures are greatest.
The government currently proposes to reduce the votes required by an owner’s corporation of a strata-titled building to accept a developer’s proposal and dissolve the strata, from the current 100% to 75%. Shelter calls on the new government to keep the present requirement for unanimous agreement, because it protects the homes of households with lower incomes.
Another direct way to avoid further dividing our cities between rich and poor areas is to maintain the social mix in part already provided by our public housing. Last century, a lot of public housing was built in inner and coastal areas which were not then considered desirable. These days the land on which this housing is sitting is valuable and government is selling and redeveloping some of it. This public housing, especially in inner-urban areas undergoing intense gentrification, contributes to social mix.
The government must keep public housing in high-value locations (e.g. The Rocks, Millers Point and other suburbs in inner and eastern Sydney) to allow for a fairer distribution of housing opportunities and access to services and employment opportunities.
One of the more shocking arguments in public policy these days is that it is not ‘fair’ for some public tenants to have access to the amenity that goes with high value areas, since other public tenants miss out – but to ignore the far greater unfairness of a divided city.
Make it easier for home owners to move
While a fair housing system must not force people to move in search of affordable housing, neither should it make moving so expensive that home owners stay in housing that no longer meets their needs.
A number of government inquiries have highlighted the negative effect that conveyance duty (stamp duty) has on mobility. A ‘typical’ NSW homebuyer of a median-price dwelling pays about $19,230. However, conveyance duty is the second most important of state taxes, contributing over $6 billion.
In contrast, the other property tax, land tax, contributes only $2.3 billion. Yet economists recognise that land tax is a more efficient tax, so, it would be better to phase out conveyance duty for owner-occupied dwellings and replace the lost revenue with more revenue from land tax. The base of land tax should be broadened by applying it to all landowners, but a low threshold should be set, under which the rate of tax would be zero — with this threshold set so that there would be no tax liability on most agricultural and other low-value land; and landowners who were ‘asset rich but income poor’ could defer their liability until the owner sells
So four of Shelter’s ten key areas for action look at increasing the supply of affordable rental, three others focus on ensuring that movements within our cities are fairer and more efficient. One other tackles the major structural change in how we live.
Make private rental more secure
Nearly a quarter of NSW households now live in private rental housing. Low and moderate income households in particular can’t afford home ownership, but are no longer eligible for dwindling social housing. Private rental is now where lower income households will make their long-term homes, but the laws around residential tenancies have not caught up – and leave tenants without decent security.
A Tenants Union of NSW survey (2014) found that two-thirds of the tenants surveyed had moved between 1 and 4 times in the last 5 years. Over 90% of the tenants in the survey said they would be worried about finding a suitable place at a rent they could afford, if they had to move from their current housing.
The government must consider how this tenure can offer people homes not just insecure shelter; and should amend the Residential Tenancies Act to prevent evictions where there is no just cause. It should only allow a landlord to terminate a tenancy for reasons that are specified in law and can be challenged in the Civil and Administrative Tribunal.
Housing for those the market fails
Our final two key areas for action recognise that there are some people, for whom the present housing market is simply failing – those who are homeless and many people with a disability.
The best thing to fight homelessness is to intervene early — to prevent people becoming homeless in the first place or from sliding back into homelessness. While this is a central plank of the new ‘Going Home, Staying Home’ restructure of homelessness services, it won’t happen if people at risk of homelessness can’t afford a home.
Homeless prevention depends on the availability of affordable housing and on preventing the poverty that lies behind almost all homelessness. To be serious about preventing the risk of homelessness, the new government should adopt our 10 year target of making 100,000 more rental properties available to low income households at affordable rents.
The National Disability Insurance Scheme has increased the expectations of people with disability that they can now live more independently in the community.
But the ‘individualised funding’ to participants in the Scheme is not available to pay for direct housing costs, apart from home modifications. It is clear that there must be a mechanism to address any such extra demand for independent living. As yet, there has been no announcement how the modest amount earmarked by the NDIS to help raise funds for capital – at least for some people with disability – will be used or by whom.
Whatever the NDIS provides, the government must commit to a supplementary initiative to contribute to affordable-housing supply projects in NSW, and help leverage whatever the NDIS provides to help with the cost of capital.
The failures of the housing system as it is are too serious to ignore. The cost being borne by low and moderate income households is not tolerable. So Shelter is calling on the government to take the big actions that are needed. A fair housing system would enable all its citizens to find their housing at the right price, in the right place, with the right amenity and security.
Adam Farrar is a senior policy officer at Shelter NSW. The proposal can be found on www.shelternsw.org.au