Affordable housing

Advocacy priorities:

• Introduce mandatory affordable housing controls in the Victorian Planning System to deliver social and affordable housing with certainty and at scale
• Establish sustained and diverse funding streams to enable long-term social and affordable housing delivery
• Deliver new supported social housing and resourcing for assertive outreach to address the homelessness and rough sleeping need across the M9 region.

Across the M9 region, there is a significant shortfall in social (public and community) housing and (private) affordable housing. As housing prices increase, greater numbers of households are unable to afford suitable private rental housing or enter home ownership.

Figure 1: Spectrum of Housing Products

In large parts of the region, housing is unaffordable to the lower 70% of the household income range, based on the benchmark of households paying no more than 30% of gross household income on rent or mortgage costs. This results in greater pressure on the private rental market and increased housing stress, and subsequently, increases demand for social and affordable housing.

All social and most affordable housing requires subsidy, and successive State and Federal Governments have not adequately invested in both new growth and maintenance of social housing. This has resulted in a reduction in social housing, both as a proportion of total households, and in some cases, in real numbers.

The combination of increased rent and house prices is creating additional demand for social and affordable housing, and the lack of earlier government investment, has:

• Created a significant shortfall in social housing supply in contrast with demand. Victoria has the lowest rate of social housing provision in Australia (3.0% compared with the National average of 4.2%).
• Created an affordable housing problem with a depth and breadth that requires social and affordable housing contributions (in addition to directly funded public and community housing) from housing sectors that are emerging or undeveloped. This applies to the private sector via new affordable housing models and affordable housing planning mechanisms (voluntary agreements and mandatory planning mechanisms, such as Inclusionary Zoning); and greater involvement from the philanthropic sector.

Participating M9 councils are each addressing this issue, in a variety of ways, as outlined below:

• Direct investment through cash and land contributions for delivery of social and affordable housing.
• Facilitating social and affordable housing projects in partnership with the community housing and private housing sectors.
• Partnering with the Victorian Government to facilitate public housing renewal where there is a clear social benefit.
• Using planning mechanisms and incentives to increase private sector uptake of voluntary planning mechanisms.
• Advocacy and research into ways to increase social and affordable housing or identify new housing models.
• Service provision and support for people who are homeless or at risk of homelessness, in partnership with specialist agencies and community groups.

The key issue in relation to social and affordable housing is the need for subsidy. Subsidy is highest at the lower end of the spectrum (supported housing to address homelessness and very low-income households), lessens for social housing, lessens further for affordable housing products targeting moderate income households, and is not required for market priced housing targeting upper income households.

Social housing does not generate profit, and some form of subsidy or capital funding will always be required. The State and Federal Governments have, over the past decades, failed to adequately subsidise and fund social and affordable housing. Because of the necessity of this subsidy and current market conditions, social and affordable housing cannot be provided by the private market, without introducing ways to increase private sector involvement in delivery of social and affordable housing, including through targeted funding planned under the Big Housing Build, and the introduction of mandatory affordable housing planning mechanisms.

As supported social housing requires the greatest level of subsidy, this will remain a role for government to deliver in partnership with the community housing sector and support agencies.

More broadly, housing affordability is impacted by a large range of factors, including tax settings (e.g. untargeted negative gearing), market forces, and demand-side incentives (e.g. First Home Owners Grant). Advocacy in relation to these broader issues is not addressed in this paper, as the ability of local and state government to impact these issues is limited.

Key opportunities that should be considered to improve outcomes in this space are:

• Introduction of a mandatory planning mechanism by the State Government:
  • There has been substantial work undertaken, including the establishment of a Ministerial Advisory Committee to advise on potential affordable housing planning mechanisms, which received submissions in 2019 and subsequently reported to the Minister for Planning. Officers understand that the State Government may have delayed the implementation of these mechanisms due to COVID-19. Given recovery is underway and the proposal is to introduce mandatory controls in a staged manner, i.e. over several years, it is timely to advocate for the introduction of these provisions.

• Sustained funding for long term social and affordable housing delivery:
  • This can leverage the opportunities presented by the Big Housing Build and the State’s 10-year Strategy for Social and Affordable Housing (under development). Key opportunities relate to capture of the recently announced rezoning tax and direct this to housing delivery and the proposed Compact with Local Government (mooting rate waivers as a revenue source).
  • Negotiation of the Compact also provides the opportunity to seek formal consultation with Councils where housing development are progressed through new stream-lined planning approval processes.

• Provision of supported housing to address homelessness:
  • There is significant demand for supported housing across the M9 region and this demand has been exacerbated by the COVID-19 pandemic. The strategic priority for increasing supported housing for persons who were sleeping rough builds on an applied research project funded under the Inner Metropolitan Partnership, Common Ground Housing Model Practice Manual, completed in June 2021. The manual provides guidance on how to scale up the delivery of Common Ground and similar facilities based on Housing First principles. It will be publicly released when authorised by the relevant Minister in the Department of Jobs, Precincts and Regions soon.