Housing can be affordable if you change who the developer is

Take a cool look at the numbers and formula for delivering housing. The affordability issue can be solved by switching the people who gave us the problem in the first place.  But so far NSW – and much of Australia – is stumbling. It’s no wonder voters look fondly on One Nation; sure, they’ll wreck the joint but could we tell the difference?

When selecting classical archetypes on which to model affordable housing policy, Sisyphus’s is not a good one to pick.

Kate Shaw observes that governments “…cling to the delusion that the market will build into surplus until prices come down, redressing housing precarity and homelessness, and leading us out of our affordable housing crisis, hallelujah”.

A recent SMH article reviewed the extent of NSW government affordable housing policy failure.

Initial goals of 30 per cent new affordable housing on public land were wound back to 10 per cent. Ambitions for 15 per cent affordable homes in high-density zones have been “whittled back” to 3 per cent in some instances.

This compares with two-decade old minimum requirements in some inner-city suburbs of about 2per cent – a whole 1per cent improvement!

It seems the “ole housing affordability rock” keeps rolling back down the mountain.

If only Sisyphus had bothered to bring three small rocks, he could have chocked his wayward boulder at the peak and then spent the rest of eternity working on his tan.

What, then, could be the small rocks for NSW affordably housing policy?

The policy drift of provider responsibility

The same SMH article briefly summarised the history of governments’ role in affordable housing provision.

Where governments used to delivery social housing directly, that commitment was gradually wound back to the present where regulatory fiat aims to direct the private market through; “…policies requiring developers to set aside a proportion of residential developments for low- to medium-income households, or pay the equivalent in cash”.

It is not working for the very simple reason that developers (quite reasonably) aim to maximise profits, a powerful motive that pulls in the opposite direction of affordable housing provision.

Shaw puts it bluntly; “The evidence is in, internationally and locally. Private markets will resist all attempts to bring prices down. They will never build properly affordable housing. They will build high-end product that brings the highest returns” (emphasis added).

It’s as silly as directing a crocodile to become vegan.

The problem springs from a kind of “category error”

It is suggested here that planners themselves should bear some responsibility for this failure by how they frame the issue.

Consider the recent thoughtful account of Aukland’s renaissance on these pages; “When the planning framework is clear, sequenced and credible, it gives the private sector greater confidenceto commit capital, bring forward projects and deliver homes.” (emphasis added).

Many expert disciplines – particularly those that affect a universalist worldview – actually suffer from a kind of conceptual fuzziness at their disciplinary edges, a bit like human vision.

Consider planning policy development, in which moving-part relationships of land uses are insightfully explored and finely defined and are then all codified into familiar tools like structure plans, development control instruments and the like.

Yet when these processes reach the edge of the discipline, planners understandably tend to adopt cruder approximations of the concepts of the disciplines they brush against.

In terms of process, planning delivery mechanisms are ultimately regulatory; the granting or withholding of licences to develop.

Yet, Australia’s is not a centrally planned but a market economy, which presumes a greater degree of commercial agency and autonomy from regulatory fiat.

Developer margins, which comprise almost 17 per cent of the cost of a new apartment and almost 9 per cent of the cost of a new house (both costs additional to the professional fees and construction costs) simply don’t apply to not-for-profit providers.

Furthermore, in terms of conceptualisation, “the private sector” actually comprises a wildly heterogenous mix of housing deliverers.

It is suggested here that this kind of housing policy suffers from a kind of category error in that highly differentiated housing delivery pathways are treated as equivalent and then summarised in very fuzzy economic concepts, like “the private sector”.

This “sin” is committed by both planners and economists.

The “category error” is the descriptive treatment of for-profit developers as essentially the same as individual home builders; cooperative housing providers the same as peri-urban estate developers.

Analogically, it’s a bit like applying the same culinary treatment to olives and peaches simply because they are both fruit.

It is therefore suggested that a clear-eyed acknowledgement of these delivery differences would enable housing affordability policy to be much better and more efficiently targeted.

Who builds for how much?

Another recent SMH article reports on claims by the Productivity Commission that the cost of new homes is elevated by up to $320,000 by “burdensome regulation”.

The article includes two interactive graphics from the commission that break down the costs of housing provision by states and by types – residential flats and separate housing.

It’s worth a look.

(An aside: against the headline claim of “burdensome regulation”, the graphic identifies taxes and government charges as adding only some 5 per cent to new home costs and 4 per cent to new apartment costs in NSW).

Both graphics refer only to conditions faced by the for-profit sector, so it is only possible to approximate or impute the cost breakdowns for other participants in the dwelling-provision sector.

For example, developer margins, which comprise almost 17 per cent of the cost of a new apartment and almost 9 per cent of the cost of a new house (both costs additional to the professional fees and construction costs) simply don’t apply to not-for-profit providers.

Likewise, if construction comprises almost 53 per cent of the cost of a new apartment, the promise of factory-based mass-production providers should deliver considerable savings.

Plainly, with land a staggering 48 per cent of the cost of a new house adding another dwelling to existing site would effectively halve the individual land cost of the resultant two dwellings.

The question is, what housing provision models should policy focus on to deliver these savings?

NFPs (not-for-profits)

Developer margins are eliminated in cooperative housing, like the Nightingale model, and thereby deliver an upfront saving of 17per cent on these metrics.

The model also relies on better design, simpler construction and community enhancing designs that promote community resilience, the collapse of which contributed to the demise of social housing schemes in many countries.

Importantly, the model aims to restrict ownership to one dwelling per occupant to prevent the property accumulation and financialisation that is a contributing cause of the current housing crisis, thereby prolonging the period during which this housing stays in the affordable sector.

Bunnings customers

Since WW2 the dominant Australian dwelling type has been the single house on a suburban lot, often commissioned by owners.

Our obsession with this type of dwelling is deep and persistent; just note the number of building improvement programmes on TV and the robust share price of Westfarmers, owner of Bunnings.

Crudely put, if these lots are suitable and another dwelling is permitted, the price of the land per dwelling would halve, but without diminishing the overall value of the original lot – surely a worthy target of sustained affordable housing policy.

According to the Census there were 1,108,781 separate houses recorded in the last Census. Sydney’s building stock would grow by 100,000 dwellings if a mere 10 per cent of those properties added an additional independent dwelling.

Compare this quantum to the NSW Housing Accord target of an additional 3700 new affordable dwellings within a total of 377,000 “new well-located dwellings.”

Home owners – either existing or newly purchased – would obtain direct agency as the principal drivers for such development. For-profit developers would have no role to play; hence the “developer’s margin” would also be saved.

Variety of affordable housing options

It is worth reminding ourselves of the sheer variety of housing options beyond the for-profit sectors.

ADU’s (accessory dwelling units) are well known in America to the extent that the Mayor of New York sees a significant role in alleviated affordable housing shortages there.

Terrace house development is regarded as a significant contributor to this state’s densification efforts through the low to medium rise initiative.

Repurposed office buildings were a feature of inner Melbourne’s renaissance three decades ago and are still relevant today.

A recent SMH article reviewed 10 workable affordable housing models worldwide.

Originating in Adelaide, the Bluefield Housing approach entails infilling Australia’s sprawling suburbs with secondary dwellings in the manner described above.

Many nations have imaginatively repurposed increasingly unsuitable airport land for housing and open space.

Examples abound.

Regulators as enablers, not Productivity Commission “furballs”

When reviewing what international affordable housing models might offer lessons for Australia, Anthony Burke’s final episode of the six-part housing affordability series stressed the importance of appropriate supportive government policy.

This is the crux.

Another SMH article reported with incredulity the haggling between two government agencies over the “price” of government owned land caused one of them to withdraw and not proceed with redevelopment – this is government land that would have been transferred to, errr, the same government.

The Productivity Commission is correct here in casting regulation as an impediment – “furballs” – to greater constructional efficiency.

Regulation more properly conceived is an enabler.

A government affordable housing policy that focused exclusively on those rowing in the same direction would more likely achieve government’s initially announced goals, now so embarrassingly diminished.

Such policy would smooth the passage from wish to realisation, not descend into inter-departmental bickering and Sisyphean policy.

Sadly, even the current Housing Delivery Authority appears like the reanimated corpse of the loathed decades-old Part 3A planning provisions that sought to speed up developer approvals; just rolling the rock back up the hill.

Ineffective affordable housing policy further corrodes our democratic governance

Promised vigorous effective affordable housing policy now merely provides an entirely unnecessary leg-up to the for-profit development sector in the delusional belief that increased supply will bring prices down.  

Meanwhile, children die in homeless camps despite their parent’s determined efforts to give then a good start in life, while a backlog of dwellings for them to live in remains untouched.

Shaun Carney’s trenchant summary of the democratic cost of cosy performative governance is therefore timely;

“It took decades of intentional deafness, unintentional cluelessness and ideological pigheadedness to bring about this situation. For 30 years, the established parties have let too many people down on affordable and available housing; appropriate, inexpensive and satisfactory education; secure employment and the ability to bargain for better incomes; quality of life and access to services, especially low-cost or free health services; and, generally, the maintenance of a sense of hope and the ability to feel comfortable within society”.

No wonder Australia’s hard right is surging in the polls with its unstated policy of “just blow it all up”.

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