City West Housing's Exordium affordable housing development in Zetland (City of Sydney council)

NSW’s newly amalgamated Inner West Council will push the state government for a 15 per cent affordable housing target, following the endorsement of its draft affordable housing policy.

Under the policy, on land that has been rezoned for higher density development, 15 per cent of gross floor area on developments 1700 square metres or over would need to be affordable housing. And on government-owned land in the Bays Precinct, the figure would be 30 per cent.

The targets are an increase on the 5-10 per cent suggested in the recently released Greater Sydney Commission draft district plans.

However, the council will need state government approval for an amendment to State Environmental Planning Policy 70 to make the relevant changes to its Local Environment Plan, which would enable it to levy Mandatory Affordable Housing Contributions to create affordable rental housing in perpetuity.

A paper presented to council on Tuesday night said the Inner West had experienced some of the most significant and rapid increases in rental and purchase prices over the past decade, with even the lowest priced strata dwellings now unaffordable to people on low and very low incomes.

The paper said this had led to “serious impacts on the social and economic fabric of the local community”, which included:

  • a large, disproportionate and growing number of local people in housing stress, and sacrificing basic necessities to pay for their housing costs
  • a considerable displacement of historical populations through ongoing gentrification and non-replacement of affordable and lower cost housing
  • very high current and projected levels of unmet need for affordable housing for low income emergency and service sector workers, as well as for more vulnerable groups such as aged pensioners and people with a disability

Without intervention no new housing stock would be affordable to those on low and very low incomes, it said.

The council’s economic modelling said there would be significant land value uplift through rezonings across the LGA, and capturing a share of that before rezoning occurred was “reasonable and feasible”.

“It is important to stress that this is not a tax,” the paper said. “Rather, it is a mechanism for capturing a reasonable share of the unearned increment in land value uplift created through the planning actions of councils and the state government.”

It said the implementation of value capture would “not adversely impact on development feasibility and takes into account normal development profit”.

The NSW Federation of Housing Associations welcomed the move, saying it would help to maintain a “thriving inner city community threatened by rising rents and house prices”.

“Gentrification of the Inner West is pushing house prices and rents way beyond the artists, hospitality workers, teachers, pensioners, emergency services staff and ordinary working families who create a real sense of community,” NSW Federation of Housing Associations chief executive Wendy Hayhurst said.

“According to the council, low income earners and younger key workers have been pushed out of once affordable areas such as Tempe, St Peters, Ashfield, and Lewisham at a rate four times higher than the rest of the Greater Sydney.”

She said the council had shown “real leadership” in recognising that the Greater Sydney Commission’s proposal of 5-10 per cent affordable housing needed to be higher.

Ms Hayhurst said that when land was upzoned to enable higher density development, landholders were reaping the benefits without providing any new housing or infrastructure. She noted an example of a Lewisham property bought for $8.5 million and sold to developers for $48.5 million after rezoning – a profit of 471 per cent.

“Developers have said they would not oppose affordable housing targets if the rules were clear up front so that costs can be factored into the purchase price of land up front without making developments unprofitable or housing more expensive,” she said.

“Targets should be even higher on UrbanGrowth renewal projects such as the Bays Precinct where much of the land is government owned – where treasury profits should not come at the cost of community good.”

However, not everybody is happy.

Property developer lobby Urban Taskforce said the target represented a 15 per cent levy on new housing that would be passed onto home purchasers.

“The other outcome of a 15 per cent levy would be to make new development financially unviable so no new projects happen, which may be in the interest of well-off inner city residents,” Urban Taskforce chief executive Chris Johnson said.

The council’s Draft Affordable Housing Policy and Position Paper: Best Practice in Value Capture will be on public exhibition until 13 February 2017.