HOUSING STRATEGY FOR SOUTH AUSTRALIA

Transcription

1 SUBMISSION TO GOVERNMENT OF SOUTH AUSTRALIA HOUSING STRATEGY FOR SOUTH AUSTRALIA GREEN PAPER DECEMBER 2011

2 Background on ECH Inc. ECH Inc. is the largest not-for-profit provider of independent retirement living in South Australia, with 1620 units across 96 locations in the metropolitan and some regional areas. The organisation was founded in 1964 with the purpose of providing quality affordable retirement housing for older South Australians. ECH has evolved into a diversified, modern organisation, offering support to over 5,300 older people, through retirement housing, residential aged care and community aged care and services. As a highly experienced provider of quality affordable housing for older South Australians, ECH welcomes the opportunity to contribute its thoughts and ideas on the South Australian Government s Housing Strategy for South Australia Green Paper (the Paper). Overall comments ECH supports the broad proposals and directions outlined in the paper but as always, the challenge lies in the detail. It is pleasing to see that the directions proposed in the Paper are intended, inter alia, to support the capacity and growth of larger not for profit providers. While acknowledging that South Australia s ageing population will bring its own particular challenges, we believe the vision for affordable housing in South Australia needs to be underpinned by strategies that address: 1. the underlying causes and drivers that make housing less affordable or unaffordable for the general population; 2. the factors that influence the ability of providers to deliver a product for older people that is not only affordable but, together with the surrounding neighbourhood, is age friendly; and 3. the aspirations and expectations of older people. As it is currently framed, the Paper focuses on possible responses to the symptoms of un-affordability rather than the causes. ECH supports the development of a single, coordinated approach by all levels of government to the issue of housing affordability. In particular, ECH supports previous repeated calls by Aged and Community Services Australia (ACSA) and COTA Australia for the development of a National Older Persons Housing Strategy. We are concerned that the Green Paper seems to have a focus on social housing to the detriment of the broader affordable housing market. While social housing is undeniably a need, the single biggest issue is the provision of affordable housing for the majority of South Australians, including older people. The Housing Strategy therefore needs to reflect this. We would also argue that the State Government s 15% affordable housing requirement has not and does not result in age-friendly housing. The reality is that to make the 15% affordable product work the developers often build on smaller blocks of land and resultant houses/units are multi-storey, with narrow access and mobility constraints. Affordable houses are also often poorly 1

3 located away from public transport and shops/facilities. As a result, the accommodation is not suitable for older people or for people to age in place. In addition, these so-called affordable products are subsidised by increasing the cost of the other land/houses in the development resulting in them being less affordable for the other buyers in the area. We would strongly encourage the State Government to base its housing strategy on the World Health Organisation s Active Ageing: A Policy Framework and Global Age-Friendly Cities: A Guide as promoted by the Adelaide Ageing Thinker in Residence, Dr Alexandre Kalache during his current engagement. Future consultation As acknowledged in the Paper, the ageing population will be a significant factor in shaping housing policy. As at June 2011 the South Australian Retirement Village sector operated 509 Retirement Villages comprising 16,871 residences and 23,619 residents. We would strongly encourage the South Australian Government to directly involve the not-for-profit aged care sector in its consultative framework and future deliberations. In the case of housing for older people, this should include Aged and Community Services (SA & NT), the peak industry body for not-for-profit aged care and housing providers in South Australia (and the state office of Aged and Community Services Australia, which is the national body). Future partnership with Government ECH is recognised as a leader within the industry as a result of our researchbased approach in developing our quality affordable housing strategy for older people 1 (see attachment). We believe we have something to offer in partnership with the SA Government. To this end ECH would welcome the opportunity to partner with the State Government as a Preferred Growth Provider to achieve its affordable housing objectives for older South Australians. We have the capacity and capability to be a major Preferred Growth Provider with a specific focus on 100% affordable housing for older people (as opposed to 15% required by other Growth Providers). To facilitate a partnership with ECH or aged care providers to address what could otherwise become an affordable housing crisis, particularly for the rapidly ageing population, the Government will need to be more flexible in its approach to Preferred Growth Providers and its desired housing outcomes. Currently the direction of Housing SA inhibits interest by the aged care industry by setting specific social housing outcomes and requiring densities that do not provide affordable age-friendly housing or communities. 1 Beer, Andrew et al, Our Homes, Our Communities: The Aspirations and Expectations of Older People in South Australia, May

4 Feedback on Direction 1 Creating sustainable neighbourhoods and communities of which affordable housing is a part Our concern is that many different agencies within all levels of government express the desire to develop sustainable neighbourhoods and communities with affordable universal design principles. No one could argue with these objectives. The issue is that each agency develops its own policies, frameworks and guidelines. What is required is a single coordinated approach by Government to housing. This would significantly reduce bureaucracy and therefore costs. The Federal Government has already developed the Liveable Housing Design Guidelines. The World Health Organisation has published Active Ageing: A Policy Framework and Global Age-Friendly Cities: A Guide as promoted by the Adelaide Ageing Thinker in Residence, Dr Alexandre Kalache during his current engagement. We need to consolidate our thinking and coordinate our approach to housing instead of going over the same ground. With respect to land supply the State Government has mutually exclusive objectives. The Land Management Corporation, which controls a significant amount of land supply, has an economic imperative from State Treasury to deliver a return. This is at odds with the Department of Families and Communities Housing strategy for the supply of affordable housing. The State Government could readily influence housing supply through the way in which it releases land. There is no intrinsic shortage of land in South Australia. It is the planning and regulation controls that create the supply issues and therefore the price issues. A fundamental question that arises is whether in fact there is a real undersupply of housing or under-utilisation of existing stock, particularly public housing. The answer may be a bit of both, in which case the State Government needs parallel strategies of increasing the supply of new housing while encouraging greater density within existing supply. Local Government has a key role to play in this respect through more flexible application of planning and zoning requirements. ECH welcomes the intention to promote greater housing diversity, including through innovative housing products and financing models. The infrastructure costs imposed by governments add considerably to the unaffordability of land and therefore housing. Virgin farm land costs approximately $10k per hectare or $1k per block. By the time infrastructure costs are added (e.g. Development Application fees, Council rates, stamp duty, augmentation costs for water, sewer, electricity and gas, and Telstra) those costs increase to $ k per block. According to the Institute of Public Affairs the cost of preparing land has increased 5-10 times in the last 10 years. On top of this, the State Government is now requiring developers to contribute to public infrastructure, such as roads, which ECH believes should be a government responsibility. This adds to the price of the land, making it even less affordable. 3

5 The State Government is moving to mandating that all housing must meet a minimum 6 Star energy rating. Sustainable housing that reduces the on-going running costs for residents is highly desirable. However, the challenge is achieving this while still making the housing affordable and age-friendly. Our current experience with a new development at Smithfield shows that environmental initiatives such as double glazing, solar power, water recycling and insulation will add approximately $21.6k to each dwelling. In addition, the cost to meet the Federal Government s Liveable Housing Design Guidelines is $12-15k per dwelling. With infrastructure costs estimated at $80k per block and building costs estimated at $150k per dwelling plus land costs, new environmentally sustainable, affordable age-friendly housing is not achievable in high needs areas such as Smithfield which have a median house price of $220k. If the Government is serious about affordable age-friendly housing then the challenge is how it can reduce the infrastructure, environmental and land costs. ECH fully supports placemaking and community development approaches to urban redevelopment. For older people, having a sense of place is a vital factor in their well-being and while we have been very conscious of this in planning our own new sites and redevelopments, we are limited largely to the site boundaries. Equally important is the age friendliness of the surrounding neighbourhood, which can often detract from the overall community amenity. For this reason, ECH would welcome the opportunity to partner with government in its placemaking developments. The Paper notes that older persons seeking to downsize into more affordable and accessible housing are being forced to choose housing that is located on the fringes or our cities. In this regard it should be noted that the Productivity Commission report, Caring for Older Australians (2011) has made observations and recommendations that could improve the ability of older people to move to more appropriate housing and to improve intergenerational turnover of housing stock. Chapter 12 of the report deals with a range of housing issues but the proposed Age Pensioners Savings Account scheme in Chapter 7 also has significant potential for encouraging downsizing and other accommodation moves. The Paper refers to the 30 year plan and the number and type of affordable housing outcomes that will be achieved. We question the validity of assumptions within the 30 year plan with respect to the need and demand for the number of medium to high rise apartments. Market research shows that most people, particularly older people, would prefer to live in a ground level detached or semi-detached dwelling. This preference is then influenced by a value decision should the cost to purchase such a dwelling and/or the inconvenience of commuting become too much at which stage some people would then consider an apartment. Given the land supply in Adelaide do we have, or will we ever have, the drivers to create the demand for the number of apartments being proposed in the 30 Year Plan? In addition, with the far higher costs associated with constructing multi-storey accommodation, do such developments really address the issue of affordability? 4

6 Feedback on Direction 2 Building the capacity of the housing industry, including the not for profit sector, to provide affordable housing We agree that any housing strategy for South Australia needs to be based on a sound urban plan that has the economy as the driver. If the Government is able to create an environment with a strong economy, it will assist to attract and keep people living and working in their community. This should be the primary consideration and then what training, education, infrastructure and housing is required to support them. An affordable housing strategy has to be linked to strategies to increase employment and continually improve the standard of living. Given that demographers are forecasting the number of workers to people aged over 65 will halve in the next 20 years this should be a critical focus for Government. The Housing Strategy does not mention building the capacity of the housing industry to provide affordable age-friendly housing for older people. ECH as the largest not-for-profit provider of quality affordable housing for older people in South Australia has the capability and capacity to partner with the Government to achieve affordable housing for older people. If this outcome is desirable for Government it will need to change policies to allow providers such as ECH to develop retirement villages for older people only and be flexible with respect to housing outcomes. We would prefer to achieve 100% affordable housing for older people than 5 % social housing and 15% affordable housing for the broader population, and then market priced housing to subsidise the affordable housing. In addition, requirements around density may need to be relaxed to provide age-friendly housing that meets the Federal Government s Liveable Housing Design guidelines to a Platinum level. One of the biggest issues contributing to increasing lending and financing costs in housing is the decline in the non-bank sector. Poor competition leads to higher interest rates. The ability to access funds by the non-bank sector has been affected by the Global Financial Crisis. Government could introduce schemes to provide cheap finance to the non-bank sector. For example, the Canadian Government has a Bond System which it uses to ensure an adequate supply of low cost mortgage funding to financial institutions and therefore increase competition in the residential mortgage market. Feedback on Direction 3 Facilitating more affordable and high needs housing opportunities ECH supports the development of a single, coordinated approach by all levels of government to the issue of housing affordability. In particular, ECH supports previously repeated calls by Aged and Community Services Australia (ACSA) and COTA Australia for the development of a National Older Persons Housing Strategy. 5

7 The Paper focuses on the symptoms of housing being unaffordable rather than addressing the causes. The Paper is also focused on social housing at the expense of broader affordable housing considerations. Many people who fall outside the social housing guidelines still require affordable housing, particularly older people. Any Government initiative to engage with the non-government sectors needs to reduce bureaucracy. This must be a priority to encourage organisations to be willing to partner or become involved with Government. The recent NRAS initiative is a good example whereby the onerous bureaucratic requirements make it unattractive to be involved. Our experience with the ever increasing reporting, inefficient reporting tools and over regulation of processes has required us to employ additional resources to manage our 120 NRAS units. Feedback on Direction 4 Improving housing outcomes for Aboriginal South Australians We believe our comments in relation to affordable housing apply equally to the proposed actions to improve housing for Aboriginal South Australians. Feedback on Direction 5 Improving the way people access and are supported in housing To engage the not-for-profit aged care sector to achieve affordable agefriendly housing outcomes for older people the Government will need to be flexible in determining its desired outcomes. What may be appropriate for disability, community and/or social housing may not be appropriate for agefriendly affordable housing for older people. We would welcome the opportunity to discuss this with Government to explore the opportunities. With respect to the Residential Tenancies Tribunal it is our view that the Retirement Villages Act is not well understood at the Tribunal. We would be able assist the Tribunal in developing a greater understanding of the growing retirement village sector. A challenge for Government to attract people into the affordable housing market will be to protect the interests of landlords while balancing the needs of the tenants. A risk for landlords is that the needs and protection of the tenants is greater than the interests of the landlord. If this is the case then it will act as a deterrent for people to invest in housing. As highlighted at the consultations in October 2011, the housing strategy in South Australia has tended to focus on first home buyers and the homeless but now needs to address the broader population. In this context, while social housing is unarguably an important aspect of the housing needs of low income and disadvantaged South Australians, different planning, design and financing approaches are needed for other parts of the affordable housing market. The proposed Development Initiative for the delivery of 45,700 new affordable housing outcomes therefore needs to accommodate these different requirements. 6

8 What are the Challenges and opportunities? Declining housing affordability The Paper makes reference to the worsening of housing affordability across Australia and acknowledges that the causes are complex but does not attempt to address any of those causes. We believe that strategies to mitigate the factors influencing high prices must be put in place before South Australia commits too far to large scale affordable housing programs. For example, the Senate Select Committee Report on Housing Affordability in Australia, A good house is hard to find: Housing affordability in Australia (June 2008) cites the following as some of the factors that may have contributed to price increases: loosening of credit standards; low interest rates from 2008 onwards (leading to increasing borrowing capacity); limited government release of new land (reducing supply); a tax system that favours investors and existing home owners; limited stock (there appear to be lower levels of existing property sales in as compared to previous years, reducing supply); high population growth (now about double the world average) 2008 foreign investment rule changes for temporary visa holders; unregulated promotion of the purchase of investment properties; and speculative demand for housing due to a public perception of real estate as a sure bet. Furthermore, a 2002 Productivity Commission report observed inter alia that "general taxation arrangements (capital gains tax, negative gearing, capital works deductions and depreciation provisions) have lent impetus to the recent surge in investment in rental housing and consequent house price increases." The Australian Institute of Public Affairs noted that the most recent Demographia study (2011) "demonstrated that government planning restraints creating a scarcity of housing land were the overwhelming cause of Australia's high prices. Tax Summit 2011 The Henry Tax Review, referred to in the Australian Government s discussion paper for the Tax Summit 2011, recommended: the introduction of land tax "on all land.. removing disincentives for institutional investment in rental property"; that "transfer taxes on property should be reduced, and ultimately removed"; and a move to "more neutral personal income tax treatment of private residential rental investment.. through a 40 per cent discount on all net residential rental income and losses, and capital gains. 7

9 Michael Pascoe (SMH, 11/10/2011) reported that housing affordability was a major topic in several sessions of the Tax Summit, including state taxation; transfer payments; and personal taxation, as well as in relation to zoning, supply, the relationships between local governments and developers, and migration (housing workforce) issues. In relation to Pascoe s observation that no-one is in charge, an important step forward in addressing Australia s housing affordability would be the development of a national housing strategy under the responsibility of a single Federal Housing Minister. The strategy should include a National Older Persons Housing Strategy, as jointly proposed by Aged and Community Services Australia and COTA Australia (2009). In this context, ECH also supports the call by COTA Australia and others for the creation of a Cabinet level Ministry with responsibility for a whole of government approach to population ageing. The Tax Summit acknowledged that both the Federal Government and State and Territory Governments have taxation policies that negatively affect housing. The Henry Tax Review favoured a broad land tax, which would not only be efficient in itself but would replace state taxes that present disincentives for people wanting to downsize or move to areas of higher employment (cheaper housing tends to be in areas of lower employment). Pascoe drew attention to the fact that while subjecting the family home to land tax would be unpopular with the Australian electorate, it is already subject to local government rates and to stamp duties. Like many others with whom we agree, he points out that scrapping stamp duties immediately lowers the purchase price of housing but also that land tax should act to reduce prices over time. The above examples serve to demonstrate the capacity for governments, both Federal and State, to act on the issue of housing affordability. Land supply and affordability In relation to South Australia, at present, the State Government appears to have mutually exclusive objectives in relation to land release and affordability. The Land Management Corporation controls a large amount of the land supply and is required by Treasury to deliver an economic return. At the same time, the Department for Families and Communities is pursuing a program of affordable housing. Such a contradiction does not support the achievement of the State s affordable housing objectives. Other challenges and opportunities Opportunities exist to affect the underlying causes of higher housing costs (refer to the previous section); The current 15% affordable housing target shifts costs to other land/housing, making it less affordable; The current 15% affordable housing target does not result in age-friendly housing; 8

10 A reduction in bureaucracy and regulation would help alleviate the cost of housing programs; Greater coordination is required between Federal, State and Local Government; The under-utilisation of public housing stock presents an opportunity to create incentives for turnover and developments of higher density than the typical suburban house block; Increasing regulations (e.g. the proposed OHS legislation) do add extra costs meaning that housing is less affordable; The effect of the carbon tax on housing is yet to be determined Are there specific demographic, economic, locational or other differences that call for special attention? The Paper notes that by 2031, South Australia will have the second highest percentage of people aged over 65. ECH agrees that this will affect the type and size of required housing and that we need to provide new and innovative solutions that support independence and choice. As stated above, ECH is pursuing a research-based strategy in its design and development of new affordable housing and redevelopment of existing stock. The research report represents the most comprehensive analysis of the housing desires and condition of older South Australians currently available. ECH therefore supports the proposal to develop state guidelines for Age Friendly Environments and Communities. We would suggest the government utilise the World Health Organisation s publications Active Ageing: A Policy Framework and Global Age-Friendly Cities: A Guide as promoted by the Adelaide Ageing Thinker in Residence, Dr Alexandre Kalache during his current engagement. Again we would welcome the opportunity to offer our experience in this area in partnership with government. The Paper rightly notes that environmentally sustainable construction of homes assists in reducing living costs, protecting the environment and improving the quality of life of residents. The observation that environmental efficiencies, together with location and neighbourhood design, can have the greatest impact on lower income households is especially true of older people. Unlike many younger people on lower incomes, older people very often have little if any prospect of increasing their household expenditure much beyond non-discretionary items. Any lowering of such costs, however small, can significantly improve the quality of life experienced by many older people. However, achieving environmental efficiencies comes at a cost that affects the ability of developers and providers to deliver an affordable product. In our experience with our new development at Smithfield, environmental initiatives such as solar, double glazing, storm water retention and additional insulation will add $21.6k to the cost of each dwelling. 9

11 The infrastructure costs imposed by governments add considerably to the unaffordability of land and therefore housing. Virgin farm land costs approximately $10k per hectare or $1k per block. Adding infrastructure costs (e.g. Development Application fees, Council rates, stamp duty, augmentation costs for water, sewer, electricity and gas and Telstra costs) it equates to $ k per block. According to the Institute of Public Affairs the cost of preparing land has increased 5-10 times in the last 10 years. On top of this Government is now requiring developers to contribute to public infrastructure such as roads, which should be a government responsibility. All this adds to the price of the land making it even more unaffordable. Examples or solutions elsewhere of policy settings or partnering arrangements that could be implemented in SA. ECH has no particular suggestions in this regard. What specific solutions should governments, private industry and the not for profit sector take? In relation to promoting new products, there is overseas experience and now some Australian interest in kit homes. While kit homes don t currently conform with the Liveable Housing Design Guidelines, it is critical that Local Government and regional development agencies are open to such innovations and encourage their development where appropriate. Currently the Retirement Villages Act defines a retirement village as a scheme established for retired persons and their spouses or domestic partners, or predominantly for retired persons and their spouses or domestic partners. A retired person is defined as a person who has attained the age of 55 years and retired from full time employment. Given the demographic research about the shortage of workers and ability of older people to fund their older years we would support the amendment of the definition of a retired person within the Retirement Villages Act to remove the need to be retired from full time employment from age 65. One of the biggest issues in lending and financing costs increasing for housing is the decline in the non-bank sector. Poor competition leads to higher interest rates. The ability to access funds for the non-bank sector has been affected by the Global Financial Crisis. Government could introduce schemes to provide cheap finance to the non-bank sector. For example the Canadian Government has a Bond System which it uses to ensure an adequate supply of low cost mortgage funding to financial institutions and therefore increase competition in the residential mortgage market. We would encourage the mitigation of the drivers of high and increasing housing costs through the following: taxation reform; abolishing stamp duty and first home buyers grants; increasing land supply; increasing the amount of medium density housing; 10

12 increasing competition in the non-bank sector which will decrease interest rates; synchronization of local government planning requirements with state government housing objectives. Local councils are risk averse (e.g. over zealous application of regulations by traffic engineers, arborists and environmental audits contribute to increased land costs); rethinking of proposed regulation around OHS&W that will increase building costs due to higher safety requirements; review of sustainability initiatives designed to keep on-going costs low that are too expensive to make the initial cost of housing affordable (solar pvc, solar HWS, double glazing, insulation, water recycling); reducing levels of bureaucracy and regulation governing housing partnerships that discourage providers and developers; encouraging councils to support developments like granny flats and other in-fill developments, along with more innovative housing options. ROB HANKINS Chief Executive - ECH Inc rhankins@ech.asn.au 11