Amazingly Sydney is the second most expensive place to buy a home in the world.
The Demographia International Housing Affordability Survey 2017 has positioned Sydney as the second most expensive city after Hong Kong and ahead of Vancouver, Auckland, San Jose and Melbourne – the survey measures average household income related to the average cost of housing with the result being the number of years it takes for an average income to purchase an average home. In Hong Kong this is 18.2 years, in Sydney 12.2 years, Auckland is 10.0 years and Melbourne is 9.5 years.
Sydney seems to be the big problem of Australian cities as Demographia had the index at below 9 in 2012 and the chart of Australian cities indicates that Sydney has become far less affordable in the last 5 years compared to other Australian cities. The Australian government has announced that it is looking at developing a bond aggregator to be able to provide funds to Community Housing Providers at very low interest rates. To be really effective the bond funds should be accessible to any developer of affordable housing so that very large numbers of affordable houses can be built.
State governments are now developing housing supply and affordability policies. Victoria is first off the block with a range of actions including provide joint equity and reduced stamp duty for first home buyers. The NSW Government has announced that funds from the Social and Affordable Housing Fund have been distributed to 5 parties to deliver social and affordable housing.
There are however many more initiatives that can help speed up housing supply particularly in Sydney. Here are ten key actions that could drive Sydney’s housing supply and affordability.
1 – Fast track housing projects caught up in the Sydney planning system
There are a large number of housing projects caught up in Sydney’s complex and slow planning system. These are often delayed awaiting studies on road capacity by state government agencies or the local council’s planning documents are out of date. Auckland along with the New Zealand government have established a fast-tracked approach to getting housing projects approved and underway. Sydney could l;earn from the Auckland example.
2 – Government owned land should be used to build significant amounts of affordable housing
To date UrbanGrowth NSW have been selling government owned land at the highest price with no requirement to provide affordable housing. Clearly governments will get less return from the land if say 30% of new housing is affordable but the government needs to lead by example as has been done in London. Sydney could learn from the London example.
3 – The NSW Affordable Rental Housing State Environmental Planning Policy to enable up to 40,000 new affordable homes over 10 years
The NSW Government produced an affordable rental housing approach in 2009 that gave a floor space uplift to provide up to 20% of apartments as being affordable for a 10 year period. Unfortunately the uplift is not sufficient to make these projects viable. A change to the uplift formulas could lead to tens of thousands of affordable homes being built.
4 – Remove restrictive zoning in centres and industrial land that stop new housing
The recently issued draft District Plans for Sydney have changed previous mixed use policies and prohibited residential development in strategic and district centres and introduced a precautionary principle for the renewal of decaying industrial land. Other cities in Australia support mixed use and the policies need to be reviewed to allow new housing in these desirable locations.
5 – Remove excessive cost adding standards in SEPP 65 for CBD sites
While State Environmental Planning Policy (SEPP) 65 has many worthwhile guidelines it has become a mandatory document at councils and in the courts. A Melbourne architect, Craig Yelland, has estimated that if SEPP 65 was introduced in Melbourne it would add $145,000 to the cost of an average apartment. Many of the controls are difficult to achieve in high rise CBD areas and a special category is needed with different standards in these areas.
6 – Establish a One-Stop Shop to speed up referrals to government agencies
Many projects are delayed in the planning system by them having to be referred to government agencies like roads, transport, water or environment for their input. This can add months to the approval process. Queensland has established a One-Stop Shop that speaks this process up. Sydney could learn from the Queensland example.
7 – Restructure planning proposal processes to support changing environment
The NSW Government changed the rules for planning proposals that responded to draft government plans in September 2016 and made it tougher to be considered as a case that could be exhibited. This change has stopped a lot of housing projects that are deemed to not have strategic merit. The September changes need to be reversed to get these housing projects to be realised.
8 – Develop a code for 6 storey apartments with quick approvals
The NSW government has recently proposed that education buildings up to 22 meters in height should be complying development. A similar approach to 6 storey apartment buildings would encourage the development industry to build this housing type. This would add to the supply of housing suitable for families in Sydney.
9 – Ensure value capture and infrastructure contributions do not stop housing projects
All levels of government have been promoting the concept of value capture as an extra tax on new housing. If this is not carefully co-ordinated then the accumulated impost of payments to help fund infrastructure or affordable housing will be too excessive in terms of the financial viability of a project. Part of the reason housing is unaffordable is the layering of extra costs.
10 – Support stamp duty reforms and institutional funding for affordable housing
Stamp duty clearly adds to the cost of housing and it could be phased out and replaces with a broad based land tax. The federal government proposals for a bond aggregator could help with the provision of more affordable as would the involvement of superannuation funds in investing in an affordable housing asset class.