There’s a lot of talk at present regarding to role of superannuation funds, their purpose, tax concessions and their involvement (or not) in affordable housing.

But for all the positive ESG talk surrounding super funds working with government to deliver affordable housing, very few have specifically addressed the elephant in the room – the constraints and delays associated with securing a planning approval.

The timeframes associated with approvals, as well as an academic obsession with inclusionary zoning (where affordable housing is built within the re-zoned building envelope) among some ivory tower planners has significantly contributed to the problem.

In Greater Sydney, the Greater Cities Commission (GCC) have added to this by naively setting an affordable-housing target of 5-10% without any guidance as to how that might be realised through FSR and height incentives; or through making dwellings available to Community Housing Providers; or simply a donation of 10% of the development to Councils who then commission a CHP to manage the homes for a designated cohort of worthy key workers.

In what appears to be an afterthought, the GCC did include a reference to any changes to Local Environment Plans being subject to feasibility, but many Councils duly ignored that and simply presumed that all affordable housing would be a taken permanently from the development and, through the Council, handed to a CHP to provide affordable housing in perpetuity.  This has proven to be unfeasible in most cases and has perversely resulted in less housing of any type being development

The Assistant Treasurer and Financial Services Minister, Stephen Jones appears to have nailed half the story saying “the housing crisis can only be fixed by improving supply.”

But no one can build anything without a development approval.

We are now caught in a public discussion on this topic in the context of the Federal Parliament’s consideration of the Housing Australia Future Fund Bill 2023, the Housing Affordability Fund (the HAF) and the possible involvement of institutional funding (Superannuation funds). This has been caught up in the debate over the objective of superannuation funds.

But David Murray, former CEO of CBA and Chair of the 2014 Financial Services Inquiry, has tolled the bell in the AFR (21/2/23) saying:

“The reason that we have a housing problem is we don’t build enough houses and that’s a land zoning and supply problem, which state and local governments have not addressed,”

“If there are good alternative investments, why is there not superannuation money already in them? The trustees and their managers have the wherewithal to identify good investments for their members to make sure they’re diversified and that they work for members.”

The point is clear, super funds are responsible for maximising the financial returns to members within a selected risk profile.  Unless there is a clear path to a return on investment to match or better alternative investment options, investment funding will not be allocated.  Government support to assist financial feasibility of affordable housing supply is a welcome shift from the former Morrison government’s counterproductive obsession with demand stimulus measures.

But, as David Murray says, it’s the State and Local planning systems (and performance) that represent the most overwhelming obstacle to the delivery of housing.  There is insufficient incentive to provide affordable housing on privately owned land in Sydney or Melbourne (where the plight of key workers is most dire).  Without an incentive in height or FSR, it is simply unfeasible to develop sites with a significant contribution to affordable housing in most cases, even when there has been an uplift in the zoning.

The nation’s planning systems have failed to deliver sufficient market housing approvals to cater for demand.  In some states, they have actually worked against government funded demand stimulus measures.

In NSW, land has been zoned for increased housing density, but the same land has not been serviced with critical infrastructure like roads, water or sewerage systems.  It is disingenuous for any government to rezone land where there is no clear plan for servicing that land.  But this is exactly what has happened across a massive swathe of land in Sydney’s West and South West and surrounding the Western Sydney Airport.

The property development community is responsible for the delivery of 95% of new housing.  The vast majority of this is not funded by super funds.  Only CBUS has been a significant player in property development and housing.  While we certainly welcome the super funds further engagement with the residential property sector, Governments (collectively) need to address the key risk and constraint on supply: the restrictive, slow and unresponsive nature of our planning systems.