McKinsey Global Institute[i] (MGI - 2014) has identified the most important instrument available to stakeholders in the delivery of affordable housing - unlocking land at the right location.

Imbedded in the United Nations Universal Declaration of Human Rights Access is the right to decent, affordable housing, which is fundamental to the health and well-being of people and the smooth functioning of economies.

Yet in developing and advanced economies alike, government at all levels, the private sector and the not-for-profit sector (the relevant stakeholders) struggle with the dual challenges of housing their poorest and most disadvantaged citizens at any given point in time. Additionally, there is the challenge of providing housing at a reasonable cost for low- and middle-income populations.

MGI estimates that more than 60 million households are financially stretched by housing costs in the United States, the European Union, Japan, and Australia. The institute calculates that the global housing affordability gap is equivalent to $650 billion per year, or one per cent of global GDP. Broadly speaking, “affordability” is defined as housing costs that consume no more than 30 to 40 per cent of household income, where housing meets basic socially acceptable standards including basic amenities (running water, a toilet) as well as access to essential services such as schools and health clinics, and where possible, isno more than an hour’s commute from centres of employment.

In Australia, housing affordability has been a major political and social agenda item for many years. Individual capital cities are regularly in the listing of least affordable cities of the world. The recent decision by the Australian Government to reduce the level of support to housing-focused support agencies and the community/political response to the decision highlights the level of sensitivity the issue engenders in the community.

In January 2014, Sydney ranked as the second-most-unaffordable housing market in the English-speaking world

In January 2014, Sydney ranked as the second-least affordable housing market in the English-speaking world

The Australian Government’s Housing Affordability Fund (HAF) is designed to reduce housing-related infrastructure and planning costs, and to pass savings onto new home purchasers through the provision of grants to state, territory and local governments, as well as to work in conjunction with the private sector with the aim of increasing the supply of affordable housing through addressing:

  • 23 projects focused on the ‘holding’ costs incurred by developers as a result of long planning and approval times
  • 52 projects funded to address infrastructure costs, such as the laying of water pipes, sewerage, transport and the creation of parks.

Superficially, the HAF projects appear to be focused on the perpetuating a business-as-usual approach to development (and approvals), though it should also offer assessment within shorter timeframes or through location specific provisions and legislation. For a society such as Australia, which has a formal and well-established land registration/land tenure system, MGI and others have identified that the most efficient measures to achieve the delivery of more affordable housing include:

  • Developing new land (or repurposing existing buildings) around transportation infrastructure, made possible through quality planning scheme provisions and infrastructure agency relaxation of “separation from infrastructure” provisions within their legislation
  • Releasing government-owned land for development, possibly through peppercorn rent or reduced land valuation/infrastructure charging incentives to social/public/affordable housing providers
  • Using regulatory measures (such as idle-land regulations) to unlock private land, assembling or readjusting land to allow development to occur in a more cost effective sequence
  • Reforming urban land rules to increase housing supply for all income segments (e.g. by changing density limits, relaxing infrastructure service delivery standards)
  • Regulatory reforms and policy implementation at the local government level, which may involve “inclusionary” land-use rules to encourage development that includes affordable housing
  • Making planning legislation provisions for infrastructure charging regime exemptions for the delivery of social/public housing by registered providers similar to that available to some government agencies presently.

The “think globally, act locally” philosophy of the environment movement is equally valid for the affordable housing debate. Local government policy and planning measures need to be relevant for the local conditions and expectations, reflecting consumer choices, market conditions, and regulatory and fiscal constraints. These need to cover existing housing and future housing needs, positioning the approvals process for the repurposing of existing buildings to be equivalent to or more relaxed than those for new developments (particularly in greenfield areas), requiring consideration of both near-term and long-term planning and development objectives needed to reflect and support rising aspirations over time.

These measures require all of the relevant stakeholders to think about the current stock of housing, the timely delivery and appropriate location of new housing units, and to consider the needs of each income segment. City leaders and all government levels need to ensure the refurbishment of existing units (commercial, tourist and residential) in the mix, and also to invest in infrastructure and social services in informal settlements to improve conditions in the short term, possibly with explicit support (policy) identified in statutory documents such as corporate plans and planning schemes.

[i] McKinsey Global Institute – A blueprint for addressing the global affordable housing challenge, October 2014