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Affordable housing projects across Australia stifled by patchwork funding: AHURI

New research suggests affordable housing developments are being driven by "patched together" funding methods.New research suggests affordable housing developments are being driven by "patched together" funding methods. Photo: Nicolas Walker

Affordable housing across Australia could be rolled out much quicker and on a larger scale if organisations weren’t reliant on a hodgepodge of various limited funding opportunities, new research shows.

An analysis of six recently-completed affordable housing projects by the Australian Housing and Urban Research Institute (AHURI) revealed developments are being driven by “patched together” funding methods rather than being based on actual housing needs. 

“There’s a subsidy gap, but no one [in government] really wants to talk about that,” said report co-author Professor Bill Randolph, director of the University of New South Wales’ City Futures Research Centre. 

The supply of affordable housing is being hindered by inconsistent policies across the country.The supply of affordable housing is being hindered by inconsistent policies across the country. Photo: Peter Rae

“One of the things that was obvious from the six projects was the way each of them was a bespoke effort, patched together with money from all sorts of funding areas,” he added.

As it stands, to be financially viable affordable housing projects rely on a mix of government grants, partnerships and loans from the private sector, access to government land, rent from tenants and funds raised from the sell-off of properties to the private market.

The rollout of a consistent funding approach at a national and state level was key to getting projects of the ground, report co-author Laurence Troy, a research fellow at City Futures Research Centre, said.  

An artist's impression of one of two affordable housing blocks that will provide 99 homes for low to middle income earners in Glebe.An artist’s impression of one of two affordable housing blocks that will provide 99 homes for low to middle income earners in Glebe.

“On a state level, policies change so frequently that by the time certain projects finish, the benefits are no longer available for other projects to use,” Dr Troy said. 

The need for a government subsidy to help bridge the funding gap and for public land to be offered at a below-market rate, were among key policy recommendations.

 The combination of the two was crucial for increasing the “slow” supply of affordable housing, according to NSW Federation of Housing Industry chief executive Wendy Hayhurst.

While a snapshot released by the federation this week showed CHPs in NSW have more than 1400 homes in the construction pipeline, this was dubbed as little more than a “drop in the ocean”.

“At a federal level we need to have a form of tax-break or grant,” Ms Hayhurst said. “And state governments can contribute by offering up their own land or mandating inclusionary zoning [of affordable housing].”

Dr Randoph said state governments had to come the table and push back against political pressure to maximise land values. 

“What we have is state treasuries who insist on every scrap of public land being sold at highest and best land value,” Dr Randolph said. “That clearly is inappropriate [for land for affordable housing].”

The report also recommended directing any subsidies away from the private sector and targeting them to non-for-profit developers. 

Dr Randolph said the now defunct National Rental Affordability Scheme (NRAS), which encouraged private investment, showed subsidies delivered to non-for-profit developers had better social benefits long-term.

“If you want to make more bang for your buck, you’re better to just give the funding to CHPs,” he said. “It’s a completely wasted subsidy, if people are waiting 10 years and then selling off the property.”

Dr Troy added researchers had found using an interactive Affordable Housing Assessment Tool, that subsiding the private sector to produce affordable housing that was only available for a defined period of time, was also less cost effective long-term. 

The AHURI report also reinforced the need for a bond aggregator, and recommended mixed tenure developments, those with a mix of social, affordable and private housing, be encouraged, as well as a well-designed and funded national shared ownership program.

In Western Australia, which was dubbed the front runner for the funding of affordable housing by both Dr Troy and Dr Randolph, the government has retained ownership of land developed by CHPs, through shared equity schemes. 

“Some states have an asset sale mentality,” Dr Randolph said. “[But] what happens when you’ve flogged it all off, then where do you go, instead of getting rid of assets, governments could hold onto land and improve its value long-term with affordable housing.”