Tone Wheeler of Environa Studio says there are three options to find land for affordable housing: government, churches and philanthropists. The government seems little interested and same with philanthropists, he says. In a new position paper on affordable housing commissioned by Churches Housing, Wheeler makes the case for social housing on church land.
Social housing is seen as a solution to both the current housing crisis and as a possible sector for post COVID-19 stimulus spending.
This discussion is encouraging, but too general, avoiding the key issue of delivery. A number of church groups wish to address this need by converting existing church property into social housing.
Before setting out this proposal there needs to be an understanding of what we mean by social housing, who it serves, the current situation and thus the best way forward.
For the second half of the 20th century we have occupied three types of housing: 70 per cent or more owner-occupied and 30 per cent renters (made up of 20 percent or more market-based renters and less than 10 per cent public housing).
This has shifted significantly in the last 20 years. Owner-occupiers have declined towards 60 per cent and renters have increased to almost 40 per cent (made up of 35 per cent market-based renters and 5 per cent in public housing).
This presents several issues. Firstly, little attention has been paid to rental dwellings and occupants, as we focus on owner-occupiers – for example, the media thinks “affordable housing” is about purchase costs and mortgage rates, not rental affordability. As such, we have little data and intelligence to address the increase in renters.
Secondly, and crucially, the value of all dwellings has ballooned, so rental rates have increased steeply beyond consumer price index (CPI) for all renters. Many households who could previously pay the recommended 30 per cent of income for market based rental dwellings are now being squeezed. They either pay an increasing portion of income for shelter, or they look to “subsidised” or “social” housing. But social housing has shrunk relative to the increase in population and demand.
We build far too little public housing, so the waiting lists have expanded, even as eligibility has tightened.
The 40 per cent of households that rent face affordability issues of two kinds that each have different solutions.
As all dwelling values rose beyond CPI, renters with reasonable incomes needed to pay an increasing share of their household income, forcing them into housing stress. The relief of significantly lower rental rates is unlikely; neither housing values will fall substantially, nor supply increase sufficiently. An alternative is needed.
“Build-to-rent” is a movement to design and build specifically for rental, to reduce costs by eliminating the sales profit, and to improve quality for less maintenance. But it assumes near median incomes for occupants. This form of housing can address housing provision for about half of all renters or 20 per cent of all occupants, but it is not social housing.
In the past this was called public housing (as it is publicly funded by the state) or subsidised housing. The occupants are the working poor, the socially waged, people with disability or mental health issues, people in extreme housing stress (particular older women without support), couch surfers, even the homeless.
The occupants’ income is too low to rent in the conventional market. Current rising housing costs and static – or declining – incomes mean that social housing will be needed to house up to 20 per cent of all households.
Housing for these occupants has been provided on a subsidised basis by either a) the state through housing agencies, or b) not-for-profit providers, such as Community Housing Providers and churches.
The existing social housing stock has a lower value for a number of reasons. Where the state has held it for a long time, it is often poorly maintained and is inappropriate for current occupants (built for families, not singles).
Public housing was often built in “estates” during the last century, which has concentrated occupants of one socioeconomic status that often presents behavioural issues requiring additional counselling or policing. It has created nothing less than ghettoes, and Housing NSW is seeking to divest itself of the housing (Millers Point) or rebuilding estates (Waterloo).
There is a growing demand for the state government to build more social housing, but it is nowhere near meeting the increased demand.
Not-for-profits and Community Housing Providers
Housing held by the NSW Housing Commission is still viable, but the building value has depreciated while the land has not. Maintenance and management present ongoing issues, so it has commenced a program to divest some housing stock to Community Housing Providers – CHPs – which are “not-for-profit” organisations committed to providing social housing. There are over 100 registered in NSW.
Effectively the CHPs gain housing at no initial capital cost, enabling them to provide social housing at lower rents, but they are charged with maintaining and expanding that stock from the rental income. Social housing dwellings held by CHPs mostly have a lower average value as they are often smaller in size, lower in quality, and in poorer locations, all of which can help to reduce the overall costs.
The social housing held by CHPs are very welcome but totally insufficient to meet current housing needs.
New social housing
New social housing is an urgent need, particularly in Sydney. There are three design targets to meet: it must be of small scale (to avoid large ghettoes), it must be evenly distributed (to avoid a lack in some areas and concentrations in others) and it must be affordable.
Repurposing church sites for social housing meets the first two issues: they are small in scale, throughout many suburbs. The issue of affordability is the most contentious if the design and construction is to be “commercially” or “market” based, that is, it is not subsidised.
To understand how social housing can be built at commercial rates but be cheap enough so that the rental covers the borrowings, requires an understanding of how the conventional “build-to sell” construction market works, as this is the basis for all residential construction.
Housing construction costs
Comparing four different ways to develop a residential development can illuminate each project’s feasibility: apartments for sale, apartments “built to rent”, social housing apartments or micro apartments.
1. Commercial apartments for sale have three roughly equal components: land construction and profit.
An apartment selling for, say, $600,000 would be based on a land value for each of about $200,000,
construction costs of $200,000 for each and a developer would expect $200,000 profit for financing and developing. An apartment investor buying that apartment to lease it out would look for 5 per cent return, which would require a rental of $600/week.
2. A “build to rent” project will have the same land and construction costs, but the immediate profit on sale is deferred and included in the rent to be collected over a period of time. For a commercial development, the rent may only be marginally less than a “for sale” unit. A “not-for-profit” CHP may forego the profit, and seek to cover only the project costs, in which case the rent can be reduced to, say, $420-$450/week.
3. A social housing provider who already owns the land (the government, church or philanthropic foundation) can discount the cost of the land and the profit. Only the construction costs are recovered. In this study that might be $250,000 – $300,000 (since it will be of better quality and there may be financing and other overheads). The rental return required at 5 per cent would be and average of $250 -$300/week.
4. If the same social housing provider builds “micro apartments” (twice the number of apartments at half the size) in the same size building the apartments will cost a bit more than half the larger (extra bathrooms and kitchens) so the construction cost will be $125,000 -$150,000. The rental return required at 5 per cent would be and average of $125 -$150/week.
The key to driving the costs, and therefore the rental down is firstly to remove the land and profit costs and only then to look at the design in terms of dwelling size.
Social housing on church land
For several churches the congregations are changing direction, from worship in church to providing mission in the community. This means that the church buildings are becoming redundant – they no longer serve any desired church function. These churches are seeking ways to repurpose this valuable, well-located land by converting existing churches or building new facilities for social housing.
Defunct churches are an ideal opportunity. The land is often a good size and often ideally located close to facilities. It has established a social licence as part of the church’s ministry. All that is required is support in order to demolish or rework the existing church and an understanding that supported social housing is a community good that addresses a very real need.
The way forward
For this to happen two outcomes are desired. Firstly, the NSW government should recognise the potential benefit of “not-for-profit” providers of social housing and encourage their participation. One way could be for the NSW Department of Planning Industry and Environment to provide for bonuses and incentives for the repurposing of churches for social housing in their draft SEPP for Housing Diversity.
Secondly, our politicians should be supporting and explaining to the community that these small interventions of social housing, in key locations throughout the community, are a benefit to the community as a whole; rather than being seen as a planning ill.
We need both the NSW Department of Planning, Industry and Environment to lead on planning matters and our politicians to lead on social progression.
Tone Wheeler is a director at Environa Studio. He is an architect, author, educator and consultant with an abiding interest in triple bottom line design.