It was pretty clear three months ago when Steve Mann stepped aboard as chief executive of the NSW chapter of the Urban Development Institute of Australia that there was a single issue jumping to the fore of his members’ attention, whether they liked it or not – housing affordability.

“It’s a contentious issue,” he told The Fifth Estate this week.

“The development industry wants to meet those challenges. They’re discussing the issues with government.”

Already he has set up a housing affordability taskforce that includes the chief executives of development companies, executives from banks and other professional groups to study solutions and present an action plan by mid-year.

Sustainability is also high on the agenda.

“It’s crucially important to have that as a key plank and I think it is a key plank in terms of our story.”

The residential sector, he says, has tried to rely on things like BASIX to “tick the box” but there is a push now for more ambitious outcomes.

Mann has been managing director of listed retirement village operator Aevum Ltd, and chief executive commercial and industrial for Stockland, as well as a senior executive at a Central Coast council, so he’s well placed to understand the underlying drivers of property development and its offspring, housing affordability.

According to Mann there are three elements in poor housing affordability – low interest rates, high population growth and lack of supply.

On the supply argument he does not object to the argument that even with much greater supply, prices would probably not come down. (Because if prices fell it would not make sense to keep building).

“I see this as one of the huge challenges in the market. There is huge debate around negative gearing and capital gains.”

But working with the demand side, such as through tax initiatives, is “fiddling” because we don’t have sufficient supply, he says.

The issue isn’t about whether there is another 5 or 10 per cent margin for the developer.

“Developers are not in the market to suck out every single cent; they’re there to create a sustainable business,” he says. “It’s not about that last bit of margin. It’s about having a more consistent model.”

Industry and government have been doing quite a bit of good work but more needs to be done with infrastructure and the “noise” needs to be removed from the process such as with some councils fighting “silly arguments and different parts of state government not talking to each other”. The industry needs greater co-ordination, he says.

Mann also dismisses the idea of tailoring tax incentives such as capital gains tax discounts and negative gearing to geographic areas the government wants to stimulate as more “tinkering around the edges”.

Even though, we argue, that currently, these taxes are blunt instruments that apply equally to stimulate investment in areas that need it and areas that are way too hot.

“I don’t think we should ignore the demand side, as long as it’s strongly weighted with supply,” he responds.

There are signs of optimism in the work under way by institutional investors and their supporters to create an affordable housing asset class.

This would be good for our cities, he says.

“Cities are under stress. There is this big gap between housing costs and affordability, and the impact on young people.

“Right now it’s mum and dad investors who are providing the rental stock and it’s not as if we have affordable rents, so governments should encourage institutional investment.”

There’s a bunch of people working on this issue but they need to get the tax structures right, he says.

“It’s an incredibly exciting and important time for the development industry together with the changing face of our cities.

“We’ve got record infrastructure investment in Sydney and at the same time higher housing prices. It’s a confluence of great opportunities and challenges.”

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