Following is an edited transcript of the Let’s Hack Housing event held on 5 December in Sydney.
- See the overview article by Lynne Blundell: Funding affordable housing – how do we do it?
Panel 1 – Macro issues
Steve Driscoll, head of CBD projects portfolio, UrbanGrowth NSW
Stephanie Barker, director urban and regional planning, Greater Sydney Commission
Wendy Hayhurst, CEO, NSW Federation of Housing Associations
Nigel Edgar, general manager – residential, Frasers Property Australia
Peter Phibbs, geographer, planner and social economist, University of Sydney
Panel 2 – Micro issues and delivery
David McFadyen, fund manager, development and opportunity funds, ISPT
Garry McLean, partner, national real estate leader, social and affordable housing sector specialist, PPB Advisory
Jason Twill, innovation fellow, school of architecture, UTS; director, Urban Apostles
Jessie Hochberg, general manager, Nightingale Housing
Tina Perinotto, Editor, The Fifth Estate
We could not have picked a better timing for this event. We’ve seen the issue of housing become the most heated I’ve seen for a long time.
This is understandable. Median house prices in Sydney are nearly $1 million. Young technology workers who are badly needed are no longer moving to Sydney. They are actually choosing to go to another country because of the cost of living – housing in particular.
But it’s not just the talented millennials we’re concerned about. Service workers are struggling. I had to a chat to Graham Jahn, the City of Sydney’s director of city planning, development and transport a few weeks ago and he pointed out that if you’re a nurse or a gurney pusher at St Vincent’s Hospital and you finish in the middle of the night, guess what, St Vincent’s doesn’t provide you a car park. You have to find your own way home. And because of your low salary it’s probably nowhere near St Vincent’s Hospital. That’s one of the realities of life we all have to deal with. I think it’s this industry’s job to try and solve this problem.
Another reason this is such a hot agenda item is that Rob Stokes, NSW planning minister, made sure housing hit the headlines in recent weeks by calling for a review of negative gearing. That’s a hotly contentious topic. The property industry says mum and dad investors need negative gearing for their nest egg. But what about mum and dad’s kids?
And we have huge claims and counterclaims about supply as the answer to affordability. Maybe supply is part of the answer, like negative gearing, like inclusionary zoning, like better transport connectivity, and like the sharing economy that looks like it’s finally discovered the property sector.
I was trying to explain this event to a bunch of people on the weekend. The first thing they said when I mentioned housing was “Oh, it’s the greedy developers and they’re in league with government and it’s all the reason prices are so high.” It’s so much more complex than that. But how does the ordinary person know what really goes on in the property sector? They might be intelligent and highly educated but they still know nothing about what it means to be a developer; what it feels like to buy a site, plan the project, design it and sell it off the plan two to three years before the building starts kicking over. It’s a huge risk. Then they have the cycles to deal with. So there’s always winners and losers, and it must be pretty horrendous to be caught on the wrong side of the cycle.
Developers can also benefit from listening to the community and what it really wants, and what it’s prepared to do without, what it’s prepared to change, and that might be completely different to what we’ve had in the past. I think the leading developers are actually starting to do that.
So partly because of this driving necessity to produce affordable housing and housing affordability and partly because of the political tension around the world right now, we have an amazing opportunity for change.
There are so many people willing and ready to do something different and be serious about it.
We have two panels – one will be dealing with the macro issues, such as tax and zoning policies; and the second is about delivery, the micro side – how do we deliver the housing of the future? We also have hot seats, so we can invite special guests to do a quick five-minute intensive about what particular area they’re working on.
Then the panel and audience might have a comment. Throughout we want you to jump up on the soapboxes.
It’s possible not everyone will get a say tonight, so please keep your comments brief and give others a chance. And jump back in later if you need to.
So what is a surround sound? It’s a bit like at the movies that have surround sound. You don’t know where the sound is going to come from. So you don’t know where the next great idea is going to come from, what could spark it. And don’t forget you can keep those ideas flowing with us at The Fifth Estate.
Steve Driscoll, head of CBD projects portfolio, UrbanGrowth NSW
We’re thrilled to be supporting today. This is the second one these events we’ve supported. We really think the debate is worth having, the discussion is worth having, and that’s why we’re happy to support an event like this. We don’t particularly care who’s fostering the debate and who’s doing the talking, so long as there’s talking and listening going on, we end up in a better place. Thank you and welcome all.
MC, Patrick Fensham principal and partner SGS Economics and Planning Pty Ltd
We’ve got a couple of hot topics that have been in the press. Negative gearing is certainly making the news, and inclusionary zoning, now advocated by the Greater Sydney Commission.
NSW Planning Minister Rob Stokes in recent weeks made negative gearing front page news. NSW had presided over a very significant supply boom, he said, but he didn’t think that was going to be sufficient to address the affordable housing issue. His federal colleagues quickly rejected the notion but he was bold enough to say negative gearing needed to be reviewed, to have a wider approach to the issue. So Wendy Hayhurst, what do you think?
Well I was really pleased to hear that announcement. I think in Sydney and throughout NSW we’ve recently seen a great increase in supply, but not a great impact on affordability, and not an increase in the numbers of affordable housing. I really want to take the debate to a bit of a distinction between housing affordability, and also what we think is the real, real problem, which is the lack of affordable housing.
Housing affordability can affect anyone. It can affect me as well. But a really critical point to make, is that in Sydney there is insufficient supply of affordable rental housing for people really up to 60 per cent of the population now, if you’re talking from very low to moderate incomes.
So it’s great to see a minister stand up and say something [that might be controversial] but that supply – on its own is great, we need more supply, we have a growing population – but is not sufficient.
So a lack of lower-priced affordable housing in the market is a major part of the problem. So Steve Driscoll, are you about to endorse the planning minister and come out officially that UrbanGrowth’s position is we need to abandon negative gearing?
No, thanks Pat for that question! That’s a cracker. The minister has certainly got people talking, and I think without wanting to speak for the minister, that may well have been his prime objective. I think the interesting thing is that the notion that there’s going to be a simple, single silver bullet that will solve this problem is one we should leave behind.
“The planning system has proven it’s not as adept as dealing with affordability as perhaps everybody hoped.”
I don’t think there’s a single system we’re looking at or should be looking at as the means by which housing affordability or affordable housing should be addressed. Traditionally, it’s been the planning system that was looked at as the best system to try to do this. But the planning system has proven it’s not as adept as dealing with this as perhaps everybody hoped.
So it’s good other systems are being looked at. Perhaps rules towards investment on superannuation funds should also be looked at as part of a wider solution. They are clearly things beyond the purview of the state, but it’s good a state minister is prepared to initiate that discussion.
Nigel Edgar, what’s the package of reforms? The development sector typically says we need to retain negative gearing – it’s a way of inviting capital into the rental sector. Is there a world in which the development sector changes its mind if there’s another package put forward?
I think supply by far is the biggest issue today. The development sector is very flexible and has the capacity to change once we have a balanced situation. But let’s look at where we are today. We have a rental vacancy rate of circa 1.7-1.8 per cent. And that’s pretty consistent right across the Sydney basin. We have auction clearances going off around 80 per cent. Demand is far exceeding supply in those auction markets. You have greenfield markets where land and house and land packages are selling out easily inside a month. You have the apartment sector which has quietened a little since the investors have but we’ve got to get supply in order.
In my view, what the minister had to say the other day about negative gearing was a real distraction. And it’s taking the focus off what the real issue is today, which is getting supply in place.
Look at the Perth market. Prices are going backwards in Perth, they’re in balance in Brisbane and they’re showing signs in Victoria where apartment prices are sliding back in oversupplied sectors. So you can see what supply and demand does when supply is in balance. But it’s 20 years since there was enough new supply being brought into the market in Sydney, and we have a long way to go before we start to get to a position where developers can react sensibly and come up with products that meet affordability [criteria].
I’ve got a 22-year-old. He’s talking about moving to Melbourne or Brisbane. The reason for that is because he can’t afford to buy in Sydney. Anybody with kids has that issue.
I think Peter Phibbs will have a few things to say about that. Tell us what you think about supply solving the problem.
As an economist in the room, prices are indeed affected by supply. They’re also affected by this thing called demand. Now what drives demand? A fairly large subsidy – $11 billion shovelled every year into the purchases of Australian real estate.
So if you want to get supply and demand in balance, there’s two things you can do. You can build more stuff or you can try take the heat off demand. Why do you think Perth prices are flat? Miners have stopped buying apartments because they have no cash. They’re not working. I’m an economist. I think supply is incredibly important, but I’ve never seen so many people – including a federal treasurer [Scott Morrison] who reinvents economics; we call it ScoMo economics at the University of Sydney – where demand disappears; all you see is a supply curve on an economic graph.
Now that is just so much bullshit, I’m almost lost for words. If we can’t have a sensible debate about what’s going on … the federal treasurer tries to reinvent economics – ScoMo says it’s all about supply. It’s about both!
Why has the Vancouver market gone flat? There’s a 15 per cent tax on foreign buyers that’s knocked the guts out of the top of their market. Why did prices go back in Sydney November last year. It’s because APRA came in and whacked banks about investors. So we have to do both things.
The other thing I’d say if you’re a rental investor, go and have a look at the rent and sales report. Two-bedroom apartment rents in Sydney have been flat – zero per cent growth for a year. So you’ve just got to look at, are we getting close to the top? And I think the biggest problem about supply is not what’s happening during the boom, it’s how we’re going to maintain supply once interest rates go up and we’re over the top. And I think that’s the supply question we should be focusing on. Not just bowing to supply without thinking about the total economic equation.
Is there any responses from the floor? Chris Johnson, of course.
Chris Johnson, Urban Taskforce:
The supply is a dramatic issue. We need, according to the average number for the next 20 years, about 37,000 dwellings. We’re way under, 20-30 per cent below what we should be providing, according to the Department of Planning’s own numbers. This is not a small miss. It’s giant miss. And it must be addressed in a major way.
Peter, what makes Sydney different to another market?
[Sydney has a load of money, with people trying to get rich quick. It’s geography is also constrained, compared to Melbourne’s]. Melbourne can put a lot more stock in the first home-owner product that is essentially less than an hour from the CBD. Sydney is always going to be more expensive than Melbourne for that reason.
On apartment projections, seriously I’ve got a case of beer with the guy running those projections, if they get to 36,000 next year.
The point that everyone is forgetting about the projections, it’s the price factor. What do people do in an expensive market? They adjust.
We’re doing a research project on sharing households. Go to a website called flatmates.com.au and have a look at the number of people living in a two-bedroom apartment in a lot of the inner-city areas. It’s like between 10-12 people. Right. They split bedrooms up with curtains. Now, the problem people like the Department of Planning have got is they’re using ABS figures. No one reports that to the ABS. But I’d be worried about building my projections as a developer based on those changing demographics around, essentially, people adjusting to price.
So what do kids do? They either stay at their folks’ from now until the end of time, or my kids are living in a place in Newtown. There’s about 400 people in a three-bedroom flat. Every time I go in there I meet someone else. I actually almost crushed a kid the other day whose bedroom was the hall. We’re looking at a paradigm change because of price. Projections and forecasts for a whole range of things have to adjust.
What’s driving Sydney is a $73 billion infrastructure program that still has at least a another six years to run. So the state government is what’s driving Sydney right now and it’s jobs. And for every dwelling we create, there is an equal number of jobs created, and it still has a lot longer to run.
SGS’s release of the city GDP will say that 63 per cent of Australia’s growth in the last 12 months was Melbourne and Sydney. So it’s still happening.
I just want to bring the conversation back to some of the people that need this affordable housing, as well. Because we’re in danger of starting to talk about our sons and daughters, who are probably going to make it eventually. What we’ve got to think about are some of those people who’ve got a job but they’ve not got the sort of job that pays very much. Supply would have to go exponential to have to address the affordability problem for a lot of those people. We’re talking on people on less than a $60,000 a year income. There’s no way additional supply is going to solve that. It needs much more market intervention.
[In an interview with a developer in recent weeks I asked to imagine a scenario where Sydney suddenly increased its supply by 50 per cent or even 100 per cent. Would young people be able to buy an apartment for $480,00 or $550,000 again? No was the answer. It wouldn’t bring prices down, but it would stop them increasing by 10 per cent a year. So for Sydney is the debate about supply worth the time we are devoting to it? – Tina Perinotto]
INCLUSIONARY ZONING AND VIABILITY TESTS
Okay, we’re going to move onto Steph Barker. What’s been happening at the Greater Sydney Commission, and in particular what are the inclusionary zoning targets, and what does it mean for Greater Sydney?
As you probably all know two weeks ago the Commission released the draft district plans for Greater Sydney across the six districts. We have some higher employment numbers there, and employment targets for the district and strategic centres that show that strong economic growth. We’ve got the five-year housing targets that do show there is a significant amount of capacity under current planning controls and programs to deliver supply, but of course it’s subject to market conditions, that conversion of that capacity into additional supply.
One of the things I’m most excited about with the draft district plans is the introduction of the housing continuum. Rather than taking a narrow supply focus and just giving councils a target, which has been done in the past, looking at housing across the full spectrum of housing types. Going through from the homeless strategy to the Communities Plus work and introducing an affordable housing target, through to issues of addressing supply but diversity amongst that, and different housing types.
So we have introduced an affordable rental housing target across Greater Sydney, sitting at 5-10 per cent. And that’s looking at what would work across Sydney. There’s some councils that are of course ahead on that, but bringing other councils up that haven’t had a chance to look at it. It’s interesting. I’ve been at a Shelter NSW function this afternoon; they’d like the target to be higher.
There’s probably people here that want it higher, want it lower. So that’s part of the debate the Commission has introduced. We have submissions open until the end of March.
So the thing that we’re really happy with the discussion that has come out in the last two weeks is we’re not talking about whether we should have an affordable housing target or not; it’s about what level it should be at. So we think that’s a great step forward.
Nigel, what level should it be at?Nigel Edgar:
I’ve taken a look at this over the last couple of weeks. My view is that if you’re going to have a five per cent affordable housing requirement, there needs to be an equivalent 10 per cent increase in gross floor area to offset the cost of that. If you do that you break even as a developer. I don’t think anyone is going to notice any difference on a 10-storey building to have one extra level. And in my view that’s the approach that should be taken.
Peter Phibbs. Do you have a view on the 5-10 per cent target?
I think it’s a good place to start. I think the use of the viability test is a good idea. I mean, I’m a economist. I’m not trying to spike supply. I actually think there’s real opportunities in the rezoning process. I think what you’re really doing is capturing some of that value uplift and you’re sending it towards affordable housing. An example I give, a little film clip on the university website if you want to have a look, Marrickville Sydney to Bankstown line going to single houses to 4-8 storey apartments. The uplift there for a really crappy house is probably a $1-3 million. You simply clip the ticket on that uplift and some of that change goes into the affordable housing.
So I think if you look at it that way, where you actually have large uplift, you can get to 10 per cent without really whacking viability in a lot of scenarios.
Does anyone have a view on the viability test? Is that not just a recipe for confusion and consultant reports on feasibility?
I think it’s the way you do it. I think in the UK, in the London mode, there’s hired guns that will say nothing’s viable. I think you need to set up a more structured process where you might have representatives from the development industry and government and basically setting some rules – and the community. It could even be a job for IPART.
“Here’s a chance to get out of the nonsense, the name-calling, the world’s going to end, and have a sensible conversation with the community, open up your books.”
I just think you don’t want to get bogged down. You don’t want to make everything a war around that process. One of the thing I’d say is to the development industry, here’s your chance to step up. Here’s a chance to get out of the nonsense, the name-calling, the world’s going to end, and have a sensible conversation with the community, open up your books. and show … if the community says, “Okay, you guys are getting whacked. We’re not getting any supply,” they’ll be okay.
But you can’t just sit on the streets and say the world will end because you have to apply 5-10 per cent in a market like this. Seriously? Developers are coming out of nursing homes doing projects and making so much cash at the moment. This is an opportunity.
WHAT ARE THE RULES OF THE GAME?
John Nicolades, Bridge Housing [from the floor]:
Two issues. To Nigel’s point, I wonder if your viability test also deals with passing the costs back to the landowner. Because what you’re saying seems to be that the developer has to absorb the cost within their own development cost. So when you’re going out and buying a bit of land, what we need is some clarity about what the government’s intention is within certain development zones so it’s clear what the rules of the game are.
What’s really interesting about London, while the Greater London council put in place a viability test, the problem is that when consultants use that viability test it remains commercial in confidence.
So who is able to question or review the viability test? Because as we know whatever is put into a model will determine what the outputs will be. So if we are going to look at viability tests, those viability tests need to be made public.
I’ll get Steph just to give us a bit of background on the 5-10 per cent, and maybe a comment on the viability test and how you think it rolls out.
I think the 5-10 per cent was one that was considered the right setting. There are quite a lot of people on the Commission with a lot of experience, particularly [CEO] Sarah Hill, who has a background in this. The 5-10 per cent was considered appropriate to apply broadly across Greater Sydney, and to provide some clarity and a starting point. It is subject to the viability testing so there are those elements that need to be considered, and the Commission are fully aware there are competing development costs like state infrastructure contributions, Section 94 plans that need to be taken into account.
Also one of the things we’ve looked at it is with the housing market areas. There’s 18 different housing market areas across Sydney that all behave differently as well. So it’s not going to be a one-size-fits-all.
Chris Johnson, Urban Taskforce:
Peter said that there’s no problem with the Bankstown [train] line adding 5-15 per cent for affordable housing. But [transport and infrastructure minister] Andrew Constance has also said to fund the railway he wants 20 per cent. So poor old Nigel and his developer group have got now 25-30 per cent they’ve got to provide. So there needs to be some sorting out here. Is it for affordable housing or is it for infrastructure?
A lot of developers [have already taken positions on land in Sydney that is forecast to be released], some of it some of it speculative, but they’re having to pay pretty much close to rezoned value in those positions.
So if you’re expecting when that land is going to be rezoned to have 5-10 per cent applied to it probably with 15-25 per cent value capture, you’re going to have viability issues – banks won’t lend on viability issues. And so we end up with a stalemate.
In Sydney we have flawed issues in respect to items that should be transparent. We should know what zoning is going to be. We should know how you’re going to be taxed. You should have transparency as to what your yield’s going to be. There shouldn’t be any side deals where you’re sitting having to deal behind closed doors so the community doesn’t know about your viability testing. That’s not right.
We need transparency so developers know exactly what they can afford to pay. And that way you set land prices at realistic pricing.
Part of the problem at the moment is that all these land vendors talk to each other if they’re in greenfields or if they’re in in-fill areas with industrial areas and they’re going to take apartments, they all talk to each other, they all know what each other sold for and none of them will accept a lower number than what the highest price next door is. And it’s a real challenge and we have so many uncapped, uncontrolled future taxes coming that we need serious clarity around it.
INCENTIVES AND SUBSIDIES
This is a question that will tie onto that a bit. My experience is doing development in New York City, and we had 20 per cent requirement inclusionary zoning, but it wasn’t a unilateral decision. That was just kind of a stick on the development world.
There were a lot of carrots to help the private sector achieve those targets – tax exempt bond financing, different ways to acquire land with government property, low market housing solutions with community housing providers. So in the report you’re doing [to the GSC] on the government side, are you looking at the incentive and subsidy structures? Because I think we need to go way above 5-10 per cent. It’s an economic crisis issue. If your son is moving to Melbourne I guarantee a huge swath of that age group is going to move out of the country. Because you don’t have a lot of other cities to choose from in Australia.
The Commission is working on a guidance note for early next year that will look at the aspects of the viability testing and thresholds and how the mechanics of it will work.
We’re after a simple, easy-to-understand system that’s going to work, not one that is ad-hoc and creates that uncertainty from site to site. But in saying that, we want to work with industry. So forums like tonight are great to get the feedback and to get that input as well.
One of the actions in the district plans is also to undertake broad approaches to facilitate affordable housing, because the Commission has an opportunity to investigate and advocate for different settings as well, and look at other levers that government may be able to pull, particularly state and local government, as well as working with industry. And there’s a list of different things, whether it’s planning approaches or more cost-effective and innovate building approaches. So yes, we’re very interested in looking at those other aspects as well as broader approaches.
Wendy, what about your thoughts on all this?
Well someone said there’s no silver bullet, so the planning system on its own isn’t going to solve the problem. We’ve got Steve here, so I wouldn’t mind putting him in the hot spot on government land, and what can be achieved there. If this is an important problem that needs government intervention, there’s probably a case to be made for not just UrbanGrowth land but transport land as well.
And then there’s the social and affordable housing fund. Perhaps there should be more of the windfall gains from stamp duty going into that so that we have a subsidy there. The affordable housing working group at the Council on Financial Federal Relations and Scott Morrison [issued a press release] saying even they recognise there is an issue there, and tasking their treasurers with looking at an affordable finance intermediary – aggregating the deb requirements for community housing providers.
So there’s a whole range of issues. Not one will solve it. I think the 5-10 per cent targets are great. They’re a great start that get the conversation going. But on their own, I agree, they won’t be sufficient.
LOOK AT THE LANDOWNER FOR VALUE CAPTURE UPLIFT
I will declare I’m an ex-Frasers employee, I was there 18 years, but very involved in the social housing space. But just taking Nigel’s point, because developers do feasibility studies – they put all the costs in to realise how much they pay for the land. So if we’re really fair about it, is the state government prepared to take the value from where it really is, which is the land owner.
Are you prepared to tax the land owner that uplift to stop the developer pushing up the price? Because that’s where the uplift is, not the developer. And people just don’t understand how developers actually work. They run a very, very tight feasibility. All the costs are in there, and the residual adds what you can afford to pay. The uplift is with the landowner. So is the state government prepared to tax the landowner that uplift?
I suppose what I’m hearing is it’s about the timing, and the district plan takes a position to say it won’t apply retrospectively, that it will apply to planning proposals in the future. What I’m hearing is you’re saying that, “Well, it might not be a planning proposal yet but there are already investment decisions that have been made on a speculation of that uplift”. So, I can take that feedback back.
One of the issues I see is that it sets up another system of negotiation. It seems to me it might be a better approach to say the land value shift after rezoning in all situations is the share that needs to be looked at in terms of value capture arrangement or a development license levy. Whatever it might be. Peter Phibbs, any thoughts on that?
I think it’s unlikely that what governments are going to do is tax the landowner, but they want you to pick up the ticket. The politics won’t work out. If a developer has bought a site at full price, assuming it’s going to be rezoned, isn’t that part of the game? You’re hoping that they’ll rezone it under the existing system. If you’re speculating on the future, that’s why your returns are high.
Sometimes the world travels against you. I just think there’s a lot of small land owners that are going to get their lots rezoned. If you give those guys $2 million dollars because you give some to affordable housing and some to transport, you’re not going to disturb their transaction. They’re still going to sell their land. It just becomes part of the feasibility. That’s the world. You can do it in a market like Sydney because there is so much value in land.
The rezoning action creates so much value. There’s some money on the table to do some socially useful things rather than shovelling it into the pockets of the landowner, who’s pretty cashed up anyway because they bloody own a house in Sydney. I think having a sensible conversation across the community – and I completely agree with Nigel, we need an open and honest conversation so people can see what’s happening.
But we’ve got to get some more things on the table than just planning and value uplift. The real obvious thing from the American thing is tax credits for low income housing that could help sweeten the deal for Wendy’s members.
THE LAND ISSUE
Steve, what’s going to happen on government land? Is there more ambition there?
There’s no limit on ambition, Pat. It’s just a matter of what you do with it. Look, the government has put its policy position, and that says 5-10 per cent. That’s open for consultation.
So it’s 5-10 per cent on government land as well?
Yep, it’s on all land within the limits Steph’s explained. No retrospectivity. So if the consultation process suggests there be another result, and the government backs that, then that becomes government policy, then that’s government policy. We follow what the policy says.
Wendy what’s your submission going to be?
“As a government entity, we should be trying to do more than a minimum.”
Can I just say one thing before Wendy says that’s very weak. The important thing is that what the Commission has set up is a series of minimum requirements. That’s where I said your ambition needs to be more than just perhaps a minimum. As a government entity, we should be trying to do more than a minimum.
Just before Wendy does say that’s not sufficient and you need to go further, what is the issue with higher rates on government land?
Well, look, I could pretend I was Treasury for a moment, and they would mount an argument that perhaps there are other economic uses the money could be put to, or the foregone revenue on that land could be for another purpose.
That’s not to say that housing is not an important purpose, there is an argument on the other side of the coin, which says budgets are limited, health care costs are rising, and so maybe the money goes to consolidated revenue and is reallocated to another purpose.
So it’s not like anybody is making any more money in the system, necessarily. I think that is one of the difficult things for government itself to deal with in this wider government space.
60 PER CENT OF INCOME ON RENT IS NOT OK, AND A LOSS OF ECONOMIC INPUT TO THE CITY
We will certainly be arguing for more than 5-10 per cent, nearer 30 per cent, because we think that would be a mixed community, which is what most of us want to live in. It’s more successful.
But we think there’s an economic rationale for putting more affordable housing on the ground as well. Because we’re talking about people who are paying up to 60 per cent of their income on rent, and where that money that could go if they were paying more reasonable rents.
It’s going to be a virtuous circle, I think. If people pay more moderate amounts of rent, they’ll invest. We heard earlier that people have been going to Melbourne or Brisbane to find a job. It’s because, again, they can’t find that housing. So there’s an economic rationale. It isn’t just social outcomes. It’s a good economic reason for the government more in affordable housing and to show the way.
And to that point that’s exactly why you’ve seen the moves that you have. The government has, I think, realised that we are not talking about a social issue; we’re talking about an economic issue as well, and the two are blending so significantly that it’s hard to distinguish.
So what we’re not hearing at the moment is who is going to own the affordable housing after it’s been zoned. And I think it’s worthwhile talking here about is it being transferred to community housing providers? What about an asset class where a bit like the American model with multi-family housing?
I know our company would be very interested in holding residential dwellings, affordable residential dwellings, but at the moment we’re really struggling to get the returns to work, and there are a multiple of different issues there that need to be addressed. I’m raising this because I think we need to keep moving ahead.
HOW CAN WE INCENTIVISE LAND SALE?
Oliver Steele, Steele Associates:
This value capture notion is fascinating and so powerful. The obvious argument is that if someone owns a house owns a house worth $1 million, government makes a decision, it’s suddenly worth $3 million, why should they get $2 million windfall? That’s just not fair when other people need affordable housing.
The counter argument is, well, you’ve got to incentivise these people to sell. Because they might have been there for a long time, and if you get five wanting to sell and the one in the middle doesn’t want to sell, no one can build apartments and have affordable housing. So does anyone care to give any specific mechanisms whereby this value sharing might occur, where there’s still the incentive to sell, but still sort of clip on the ticket that can be dedicated to affordable housing?
At the moment we have different councils doing different things. And we’ve got the state government saying there’ll be value capture coming. There is a group of people in the development industry that aren’t really opposed to inclusionary zoning. We just want clarity on it. The same with value capture.
Once we get clear measures we can price it in. It’s like what Rob was saying before, you then factor it in to the land value. You’re still going to get a few people who hold out saying they’re going to get their $3 million a hectare, but that will eventually come into some balance. But it’s transparency that we want. I would still like to see us start to talk about the asset models and how you hold these assets, because that’s where a lot of the debate needs to be.
THE ARCHITECTS, THE AMENITY AND THE SIZE ISSUE
Peter McGregor, McGregor Westlake Architects:
I wanted to raise an issue in our small architectural world. On Friday we lodged a DA for 87 boarding house rooms on 10 levels. In the last month we’ve looked at four other projects and I’m pleased to say at our boarding house, with the developer’s cooperation we were able to, conform and work to SEPP 65 standards.
We have seen the most atrocious, slum-like plans in our research approved by the City of Sydney and Marrickville Council, and I guess everyone’s talking about these things in the abstract, but the reality is there’s slums being built as we speak, of very, very poor quality. We were lucky. We were working with a good developer. We talked about building apartment-like boarding houses, like micro-apartments, as they’re called. But what can an architect do when they’ve got a boarding house to design and there’s no standards?
Call from audience:
Have you been to Melbourne?
Well that’s right. It’s the equivalent of a Melbourne apartment.
Everybody likes to see good design …
Can I just interrupt. It’s not about good design. It’s about amenity.
The point I’d make, if the places are as bad as you say, one of the things that will happen is there’ll be some price adjustment. And I’m not saying that’s a good or bad thing. But some variance in the market sometimes isn’t as bad as you’d initially think.
I don’t think the market rules, but I was never a great supporter of SEPP 65. And I think sometimes just having that variation and letting people make choices about where they end up, and are willing to trade off some rent for amenity – that becomes a decision that ends in their hands.
I know it’s a very unpopular thing to say in an architectural practice, and I was almost hounded out of the Faculty of Architecture when I said SEPP 65 was an overreaction to the problem, but I just think some variance might be useful.
Central Park is a great example. We have variations in floor space, We have studios in there 30 square metres in size, probably similar to what you were talking about. Good design doesn’t mean that it has to have a mandated minimum size. Design excellence is about getting all the urban living elements right. And that could mean wonderful outside space, good group facilities, it’s not about the mandated, controlled, structured model of SEPP 65 we have in Sydney.
Can I just temper that by saying, yes, SEPP 65 can be a bit of a sledgehammer. I’m not saying it’s the bible. But what I’m saying is the reality of the plans we’ve seen, we’re looking at a common courtyard half the size of this room [very small] with eight rooms looking onto it where you can lean across the courtyard to borrow sugar from your neighbour, and that’s your outlook.
Yeah, but I can afford that.