Is Inclusionary Zoning Part of Australia’s Housing Affordability Solution? 1

By
Monday, October 10th, 2016
liked this article
Embed
advertisement
zoning property
FavoriteLoadingsave article

As is often pointed out in the media, home ownership for many Australians is becoming an increasingly distant dream.

Statistics tell the story. In the June quarter, ABS figures show that the average dwelling price in capital cities stood at $623,000 – almost double its level of 10 years ago and 7.6 times the average full-time adult wage. Census figures show that the portion of 25-to-35-year-olds who owned their own home dropped from 52 per cent in 1996 to 42 per cent in 2011; the 2016 results will probably show a further decline.

In the rental market, meanwhile, a report released late last year by SG Economics and National Shelter showed that average households who were living in rental accommodation across the Greater Sydney region, for example, were spending 28 per cent of their household income on rental costs – only marginally below the 30 per cent threshold which is considered to represent the point of housing stress. Almost all households in the lowest two quintiles, that report indicated, were facing ‘severely and extremely unaffordable rents.’

As housing costs rise, less well-off families are being pushed to the outer extremities of metropolitan areas where access to transport links and employment opportunities is often poor.

With this in mind, one concept which is occasionally talked about revolves around inclusionary zoning – a requirement for developers to provide a specified proportion of housing which is affordable to low and moderate income households as a condition of approval for new developments. This can be mandated through planning requirements or alternatively encouraged through offering incentives to developers such as the rights to develop additional floor space in exchange for delivering the lower cost dwellings.

Overseas, take up of this concept has been fairly broad, with the United Kingdom requiring one in every three homes to be affordable and places such as New York and Paris also having inclusionary zoning targets. Nevertheless, Australia has been slow to catch up. Whilst South Australia has a 15 per cent inclusionary zoning policy, the current government in Victoria promised this upon coming into power 18 months ago but has yet to act.

Is it a good idea?

According to Jenny Smith, chief executive officer for the Council to Homeless Persons, the answer is yes. Though cautioning that it should be part of a range of policies to address affordability, Smith would like to see the concept rolled out on a wider scale.

“A bit has been said about it but from my point of view not enough has been said about it,” she said. “And to the extent that things have been said about it, not nearly enough has been done.

“While we have some examples of use of some types of inclusionary zoning around the country, these have been very limited. We absolutely support it as a key ingredient but only one ingredient that we will need in this country to make sure that we have an adequate supply of affordable housing.

“And we are far from having an adequate supply of affordable housing in this country.”

Smith says the current approach of largely relying upon the market to deliver a suitable quantity of affordable housing is inadequate as many of those on lower incomes are seen as less attractive prospective clients by private sector developers.

Moreover, she said, the concept delivered a number of other advantages. By embedding a portion of lower cost housing into new development wherever this takes place, Smith says the supply of affordable housing will be topped up automatically when new development takes place. This avoids situations where extensive volumes of new development activity simply see the construction of dwellings which are beyond the price point of lower income families.

In addition, Smith said, inclusionary zoning has the added benefit of creating more affordable housing close to transport links and employment opportunities. At the moment, she said, lower income households are being pushed further out into the suburbs where employment opportunities are poor, costs associated with commuting to work are significant and access to transport is often poor or non-existent. Australian cities, Smith said, must provide ‘housing for bankers and housing for cleaners’. Forcing less wealthy people out to the extremities of metropolitan boundaries only serves to confound disadvantage, she said.

Finally, inclusionary zoning promotes a greater spread and mix of socio-economic diversity and having people of mixed ‘strengths’ living together. This, she said, helps to avoid the segregation of society along socio-economic lines and the concentration of wealthy and less wealthy people in specific areas.

Academics, too, largely support the concept. University of New South Wales Professor Bill Randolph noted Australia’s severe housing affordability crisis, adding that inclusionary zoning provides a mechanism by which to ensure that at least some portion of all new housing which came onto the market is accessible to lower income earners.

“I think it’s a pretty common tool in many other parts of the world,” Randolph said. “To have inclusionary zoning as a requirement of all new developments over and above a certain size is a way of ensuring that part of the new supply which comes on stream will be affordable.”

Randolph cautions, however, that inclusionary zoning should be accompanied by other measures such as an incentive scheme for developers to make housing available for rent similar to the former National Affordable Rental Scheme.

Not all, however, are enthused. Indeed, objections range from Property Council of Australia complaints that it represents a form of tax of one group within the housing market to assist another and that it can only ever produce a trickle of affordable housing against the scale of unmet need. The council also says it interferes with the rights of private land owners to develop their private holdings as they see fit.

And to be sure, there are concerns which need to be addressed. Would owners and occupiers of the less costly dwellings, for example, be subject to stigma and resentment from those who purchased more expensive units or houses within the same development? Would those who purchased more affordable housing resent having to share their complex with lower income earners? From the viewpoint of developers, meanwhile, would mandatory inclusionary zoning create a legitimate loss of revenue, and would the existence of lower income clientele within a given complex potentially deter some prospective purchasers for their market price stock?

Randolph says these concerns can be managed. The stigma issue could be largely addressed, for example, by designing and constructing the less costly dwellings in such a way that they are not dissimilar in appearance to others within the complex. It might also be possible to have the affordable dwellings concentrated more heavily within particular parts of the building or complex as opposed to having a more scattered approach throughout the building, he said.

As for developer concerns, Randolph says this should not be an impost and that inclusionary zoning would help drive down the price on which the land upon which the dwellings are built. Besides, he said, a well-managed scheme should allay many of the concerns from prospective buyers.

Smith, meanwhile, says Australia needs to move beyond viewing housing primarily as an investment and toward a greater line of thought whereby the critical priority is seen as the provision of a stable and secure home. She said greater urban densification and greater socio-economic diversity is a benefit to society, and that Australia needed to look beyond the commoditised viewpoint of housing and toward one in which social and community priorities are paramount.

As for how it should work, Smith would like to see different methods trialled but says that as a minimum, at least ten percent introduced in a mandatory way.

Randolph, meanwhile says the scheme must be mandatory, consistent across cities and bipartisan. He says density bonuses for developers are the wrong way to go as these can end up creating a ‘Dutch auction’ and generating friction amongst community members who may resent having to ‘pay’ for affordable housing with greater density.

Smith, finally, is frustrated with Australia’s lack of progress in this area.

“There is a lot of talk, there hasn’t been a lot of action as yet,” she said, referring specifically to Victoria.

“It’s really important that we get going?”

What do you think about inclusionary zoning? Would you be willing to share your new housing precinct with occupants of lower income and socio-economic status in order to help address affordability concerns?

Embed
FavoriteLoadingsave article

Comments

 characters available
*Please refer to our comment policy before submitting
Discussions
1
  1. Mark

    A great article and well overdue. Your introduction of the prnciples of social housing from other countries is needed. I know of families in western Sydney, where due to changes on house ownership (fueled by capital gain and negative gearing incentives), has seen rents double and tripple, with no corresponding increase in income. Many now work two incomes and up to seven days a week to get by in a very modest manner. A trip to bali is a pipe dream.
    I remeber attending a banking and developer event where the financial institutions were quite open about a 50% max risk. That indcates that the apartment that is being sold for $400,000 only cost $200,000 to build. Many commentators have listed builder margins at between 20% and 30%. At the 30% end, the $400,000 apartment only cost $140,000?
    So the question then becomes, why can I buy a zero energy home in the US for less than a simple and somewhat energy consuming house in Australia. And for the lucky few, may require a significant amount of cash support from parents.