Submission to the ACT Government. Towards a New Housing Strategy

Transcription

1 Submission to the ACT Government Towards a New Housing Strategy 15 September 2017

2 ABOUT THE HOUSING INDUSTRY ASSOCIATION INTRODUCTION DISCUSSION PAPER GOAL 1: REDUCING HOMELESSNESS & GOAL 2: STRENGTHENING SOCIAL HOUSING ASSISTANCE GOAL 3: INCREASING AFFORDABLE RENTAL HOUSING GOAL 4: INCREASING HOME OWNERSHIP... 8 APPENDIX...10 Housing Industry Association contact: Greg Weller Regional Executive Director Housing Industry Association 28 Collie Street, FYSHWICK ACT 2609 Phone: g.weller@hia.com.au - i -

3 ABOUT THE HOUSING INDUSTRY ASSOCIATION The Housing Industry Association (HIA) is Australia s only national industry association representing the interests of the residential building industry, including new home builders, renovators, trade contractors, land developers, related building professionals, and suppliers and manufacturers of building products. As the voice of the industry, HIA represents some 30,000 member businesses throughout Australia. The residential building industry includes land development, detached home construction, home renovations, low and medium-density housing, high-rise apartment buildings and building product manufacturing. The association services the ACT and Southern NSW from the HIA Home Inspirations Centre in Fyshwick, which is a local hub for home building services and advice. HIA exists to service the businesses it represents, lobby for the best possible business environment for the building industry and to encourage a responsible and quality driven, affordable residential building development industry. HIA s mission is to: promote policies and provide services which enhance our members business practices, products and profitability, consistent with the highest standards of professional and commercial conduct. The residential building industry is one of Australia s most dynamic, innovative and efficient service industries and is a key driver of the Australian economy. The residential building industry has a wide reach into manufacturing, supply, and retail sectors. Policy development is supported by an ongoing process of collecting and analysing economic and demographic data, forecasting, and providing industry data and insights for members, the public and on a contract basis. The association operates offices in 22 other locations around the nation providing a wide range of advocacy, business support including services and products to members, technical and compliance advice, training services, contracts and stationary, industry awards for excellence, and member only discounts on goods and services. Page 3 of 13 Towards a New Housing Strategy

4 1. INTRODUCTION Shelter is a basic human necessity. Without access to housing, families and individuals are denied the opportunity to contribute to society to their true social and economic potential. Housing is the bedrock upon which all other aspects of society are built - from health, education, employment and economic contribution, to community engagement, social interaction and personal development. For many Canberrans, housing options offer alternatives that cater for individual preferences, opportunities and limitations. How they secure their form of shelter is essentially a matter of choice. Whether to buy and own a home, rent or cohabit with family or friends can be a matter of preference, and over time, the priorities that underpin those preferences will change. Home ownership has and continues to be the preferred option for the majority of Australians. Yet home ownership rates are declining, and for too many Australians, it has become an unachievable dream. Inevitably, these otherwise would-be owner-occupiers move into and remain in private rental properties, placing upward pressure on rental prices, particularly in a supply constrained rental market. The aspirations, motivations and capacity of a first home buyer to purchase an owner-occupier home are inevitably linked to access to private housing at an affordable price. However, the supply of private housing at entry level prices has failed to keep pace with this demand, adding further pressure on rental prices. The combination of a rapidly growing population during a period when new dwelling supply was significantly constrained in the ACT has resulted in a systemic deterioration in housing affordability over the last decade. HIA welcomes the initiative of the ACT Government to host an Affordable Housing Summit and for providing the opportunity to comment on the pre-summit discussion paper. Over recent years there have been many state and commonwealth government inquiries into affordable housing and home ownership in Australia. A common theme from these inquiries has been the challenge in clarifying what the actual target of the inquiry is, with various definitions for housing affordability and affordable housing cited by lobby groups, community housing providers, governments and regulators. Housing affordability means different things to different people based on their housing circumstance, such as those who are: on public housing waiting lists; waiting on community housing providers; requiring housing support (housing for the disabled and for emergencies); in private rental housing, supported by Commonwealth rental assistance payments; experiencing unsustainable increases in private rental costs; and those saving for a first home. Attempts to address Canberra s, and the nations, housing affordability challenges first require a clear definition and scoping of the problem. With this in mind, HIA welcomes the approach of the authors to describe key characteristics of the five income quintiles within the ACT that relate to housing affordability, and segment each to identify groups that require support (figure 1 below). Page 4 of 13 Towards a New Housing Strategy

5 Figure 1. ACT Income quintiles. Where HIA diverges from this approach is the decision to focus only on the first two quintiles for action on affordable housing. The discussion paper correctly identifies the following groups within these two quintiles as needing some form of intervention: An estimated 1,700 homeless people in various forms 9,000 households in public or community housing A private rental market cohort paying more than 30% of household income on rent Around 15,000 households paying affordable rents whom could be candidates for home ownership in the near term The paper importantly identifies a final group for which its suggests there is limited role for government intervention, being those that own their own home or have a serviceable mortgage. The five quintiles rightly recognise that there is no other greater means of creating household economic security than increasing rates of home ownership across the entire spectrum of housing types. HIA describes the relationship between the different housing situations in Figure 2 below, as the Housing Continuum. Figure 2. The Housing Continuum (May 2015) Page 5 of 13 Towards a New Housing Strategy

6 This interpretation recognises a relationship between all types of housing, rather than the silo approach of income quintiles. Indeed, there are clearly members of the first two quintiles across all levels of the housing continuum. Rather than limiting the approach to two strict income bands, it should be recognised that policy decisions made more generally for the housing industry will impact across the continuum. Where first home buyers across all levels of the market - cannot purchase a home, they either compete for homes at a level below where they were initially seeking to enter the market, or revert to renting. This puts additional stress on the rental market, increasing rental rates and invariably pushing another rental participant potentially into public housing. Over recent years commencements of detached home building have fallen to levels not seen for a decade, with a lack of available land the primary cause. As several key developments come online over the next year and the strong performance of apartment building moderates, the balance between detached homes and multi-residential units is expected to change. It is important that the government has a strategy to support the growth of new housing supply in both infill and greenfield locations, through ensuring that the supply of land is not only increased, but maintained at a sustainable rate year on year to avoid the fluctuations that have been allowed to occur. Housing affordability in the ACT remains a challenge for the government and the community, with access to land, planning constraints and business red tape imposing cost burdens directly and indirectly on the industry and home buyers. The real cost of home building has remained stable over many years and any reduction would have implications for building quality. Therefore, affordability must come from productivity improvements focused on decreased holding costs for developers and builders, improving delivery times through design and approval reforms and effective policies that support the intention to increase densities across the region. Central to this is increasing the supply of shovel-ready land for housing development. Notwithstanding the measures and interventions being considered by government to address the immediate problems facing affordability and home ownership, if the supply of housing into the market can be improved across the board, then the role of government and cost to the broader community can be minimised. Page 6 of 13 Towards a New Housing Strategy

7 2. DISCUSSION PAPER 2.1 GOAL 1: REDUCING HOMELESSNESS & GOAL 2: STRENGTHENING SOCIAL HOUSING ASSISTANCE HIA does not have the expertise or experience to provide comment on these goals. 2.2 GOAL 3: INCREASING AFFORDABLE RENTAL HOUSING While HIA recognises and promotes the economic and social virtues of home ownership, for reasons of affordability, choice or other circumstances such as employment and family, there is a key role for the private and public rental market in housing the community. Rental rates are a function of many variables, though the limited supply of properties available for rent in an environment of strong population growth in the ACT is clearly a factor. The cost of a home, being land price and construction, directly influences the level of rent that must be charged by a landlord to cover their financing costs and provide an acceptable rate of return. In the case of the ACT where the cost of building or purchasing an existing home are substantial, this creates a significant barrier to entry for new participants, which could in turn put upward pressure on rental rates. This will be considered in more detail below, however, it is worth noting that to reduce rents in the ACT, issues such as access to land (and the impact of high cost of land on home prices), government charges and the regulatory burden on building must be addressed. Introduce incentives for private landlords who provide affordable housing HIA supports the suggestion that incentives be introduced for private landlords to provide properties to the community at below market rate rents. The paper references the National Rental Affordability Scheme (NRAS), which HIA considers was a good approach to addressing affordability, even if not in terms of its implementation in all cases. The introduction of a Territory based NRAS-style scheme which allows access to both institutional investment and one off investors would be supported by the industry. The following approach should be taken: Ideally the scheme would be available to all residential investors. Barriers to participation in the scheme should be minimal to encourage all classes, and sizes, of investors to participate and maximize the number of available properties. The paper notes the Victorian model of the HomeGround Real Estate for encouraging landlords to provide properties for a low rent housing pool. This appears to be a positive program, however, it appears to only involve those landlords that wish to participate for philanthropic reasons. To achieve a considerable number of dwellings available below market rental, it is likely that additional financial incentives will be needed. A government backed HomeGround style scheme could be a worthwhile means of ensuring the equitable distribution of properties and oversight of the program. In introducing an NRAS-style scheme, the ACT Government would need to use the levers at its disposal, in the absence of the measures through the federal taxation system. Concessions on rates, land tax and stamp duty are all ideal mechanisms. Page 7 of 13 Towards a New Housing Strategy

8 Where applicable, relief from the Lease Variation Charge (LVC) is another means to provide incentives for developers seeking to build to rent and manage the ongoing rental of homes at below market rent. With respect to the question of financing these measures, this is a question for government alone, as access to housing for the more vulnerable is a challenge for the entire community. Any suggestion that there is opportunity to fund measures through an additional levy, tax or quota should be rejected. Additional taxes on private housing or quotas of affordable housing units simply inflate the prices paid by other home purchasers, further exacerbating the overall problem. In the case of the most recent increase in the LVC, government policies effectively threaten to restrict supply further through rendering many projects potentially unviable. 2.3 GOAL 4: INCREASING HOME OWNERSHIP As the discussion paper acknowledges, home ownership holds a special place in the Australian mindset. And for very good reason, as not only are there many social motives to support home ownership, but it provides a platform for a family to contribute economically to society through employment and education. Even more importantly, there is arguably no single measure more essential to security in retirement than owning a home. This is clearly recognised by the paper, with the acknowledgement that despite being in the bottom two income quintiles, the families that own their home are, in the main, self-reliant. Government policy too often seems at odds with this goal, through the imposition taxes and charges on housing supply, restrictions on availability of land and the contribution to holding costs through unnecessarily lengthy planning processes and design constraints. A particular problem is what HIA sees as an inherent contradiction within many government policies and aims. While individually each social, environmental or fiscal goal may have merit, a disproportionately large number of policies impact negatively on the total cost of housing, defeating the ultimate objective of government in promoting housing affordability. HIA has listed a number of these areas that it has identified as an Appendix. Introduce a shared equity scheme HIA would endorse the introduction of a scheme based on the successful Keystart program from Western Australia, including both shared equity and accessible loans. Introduce planning and building code amendments to boost affordable housing supply Public funding for subsidised affordable housing, including not for profit housing providers, is not keeping pace with community needs for low income housing. Governments are increasingly shifting the burden onto new home buyers in the private market. As part of its Affordable Housing Action Plan, the ACT government has introduced a requirement that at least 20% of all new estates include affordable housing. By requiring some land or homes in a development to be sold below the market rate, the economic loss for the development from these properties will be shifted to the cost of other dwellings in a development to meet the required rate of return. Affordable housing quotas are effectively a tax on new housing, as it is the new homebuying public in that development, and not the general community, that pays this cost. Perversely, this Page 8 of 13 Towards a New Housing Strategy

9 arrangement then exacerbates the problem the measure is designed to fix, with house prices in that development being higher. These types of quotas also have limited long term effect on the supply of low income private accommodation as the homes are not required to be managed after the initial sale to ensure they remain at the required price or remain in the ownership of a household that they are intended to support. If a need for subsidised affordable housing is identified, then it is the responsibility of governments to provide appropriate mechanisms to deliver and manage these homes and contribute to such schemes. Where government seeks to work with industry to develop lower cost product in specific estates, it should offer incentives for developers such as: tax concessions; bonuses on heights, plot ratio and density requirements; a fast-tracked planning process; and or other planning scheme concessions. However, where this is done it is important that concessions are a genuine incentive that provide an economic benefit to offset additional costs of developers, rather than an imposition on a development for the approval of a project that should be approved as of right. It is also incumbent on government to establish appropriate management frameworks to remove any perverse incentives to on-sell designated affordable housing units. Page 9 of 13 Towards a New Housing Strategy

10 APPENDIX Measures that impact negatively on housing affordability in the ACT FINANCIAL: Taxation on Housing In 2011 HIA commissioned an independent report 1 into taxation on new housing from the Centre for International Economics (CIE). Information on all the taxes that contribute to the purchase price of a new home were collated, with figures then verified with many residential building businesses. When all taxes are included (direct and indirect), the taxation on a new house and land package in Sydney is an estimated 44% of the purchase price, for Melbourne the figure is 38% and for Brisbane the figure is 36%. The level of taxation of apartments was found to be comparable by CIE, being Sydney 35%, Melbourne 33% and Brisbane 34%. These figures have since been replicated in a further study conducted by CIE, which focused on smaller capital cities and regional centres. The burden of tax falling on the housing sector is considerably higher than the average for all other sectors. New housing is inequitably taxed, accounting for around 1.2% of value added in the economy while contributing 2.8% of government taxation revenues. The average tax burden on the new housing sector is estimated at 31% of the value of output compared with an economy-wide average of 24.4%. This percentage for new housing makes it the second most heavily taxed large industrial sector in the Australian economy. Consequently, the taxation system influences the stock of dwellings available for occupation and the extent to which new housing is added to the stock. Several the taxes imposed on the housing sector, and on new housing are inefficient. The Australia s Future Tax System report 2, commonly referred to as the Henry Tax Review found that among the vast array of taxes paid by the housing sector, about half of them were highly inefficient. The Henry Tax Review highlighted inefficient and excessive costs within infrastructure charges, such as is being considered by Icon Water. The housing industry was shocked to see measures in the most recent ACT Budget that significantly increased the LVC on various blocks within the ACT. This was in direct contrast to the ACT government s polices to increase density closer to town centres and improve housing affordability. While it satisfies the need of government to raise revenue, the decision is clearly in contrast to other policy objectives. To its credit, the ACT government has embarked on an ambitious program to replace stamp duty with a broad based land tax, which is welcomed by the housing industry. Stamp duty is an inefficient tax, which limits the capacity of workers to relocate to pursue employment opportunities, and discourages the most efficient use of housing stock, by acting as an inhibitor for people to move to more appropriate accommodation, freeing up often larger homes and blocks for families. 1 Taxation of the Housing Sector, Centre for International Economics, September Australia's Future Tax System, Henry, 2010 Page 10 of 13 Towards a New Housing Strategy

11 However, prior to the implementation of the government s tax reform process, the amount of stamp duty collected on residential property in the ACT for was $198 million. In stamp duty has again grown back to $ million, effectively negating some of the benefits of this essential tax reform. Whilst as a percentage of the median house price, at 3.0% the ACT performs well on the national stage when it comes to stamp duty, due to the excessive cost of housing in the ACT, Canberra house buyers pay the fourth highest amount of stamp duty on a median priced home, being $18,200. If the ACT is to continue to lower the burden of taxation on new home buyers and promote the ACT as an attractive opportunity for investment and employment, it is essential that the ACT government continue this important reform process. FINANCIAL: Infrastructure charging It has been an ongoing trend that governments across Australia have sought to push the burden of public infrastructure related to residential development onto households, where it would it would have previously been funded by the community. As a recent example, Icon Water is asking the Independent Competition and Regulatory Commission (ICRC) to allow it to levy new home buyers in the ACT over the next 20 years to upgrade the system in Canberra to meet future population needs. Governments, and publicly owned monopoly utilities like Icon Water, have a responsibility to implement infrastructure programs to sustainably support the anticipated population growth. Developers, and therefore the people that buy new homes, should rightly pay for infrastructure related to their project. However, is not equitable that new home buyers also pay to upgrade external elements of the water and sewerage network that are used by the entire community and may be kilometres away from their property. PLANNING: Land supply Access to land for detached housing remains a significant problem for the housing industry in the ACT. The delivery of limited quantities of shovel-ready land to market has inflated prices, which in turn impacts on the final cost of housing. The supply and release of greenfield land in the ACT is predominantly managed by government agencies, previously the Land Development Agency (LDA) and now the Suburban Land Agency (SLA) and City Renewal Authority (CRA). As instruments of government, these organisations are put in the position of managing the sometimes competing roles of carrying out its activities in a commercial manner, while delivering land to the market that is affordable for the community. The system for accessing land in the ACT has been problematic for many years, with a commonly cited problem being the participation of speculators in builder s only land ballots. Although these speculators may hold a licence, they do not have the capacity or intention to build homes on these lots. Combined with an already constrained supply of land, the price of has reached a point whereby land consumers are unable to afford current prices and sales are stalling. Ways of providing increased competition in marketplace between rival developments to put downward pressure on prices and limitations on the capacity for speculation must be investigated. There remains a high level of turnover of established houses, which is a clear sign that there is strong demand for detached houses. However, the ACT ranks as one of the weakest jurisdictions in the country for detached house approvals, detached house commencements and the number of detached houses under construction. Page 11 of 13 Towards a New Housing Strategy

12 This divergence between conditions in the established house market and the new house market suggest that after factoring in the high cost of new residential lots in recent land releases, households are finding it increasingly difficult to justify a newly built home given prices of comparable established homes. PLANNING: Solar Envelope HIA expressed strong opposition to the provisions introduced into the Territory Plan in 2013 under Draft Variation 306, which created a solar fence on the southern boundary of new developments of 2.4 m. HIA indicated that this would not provide a good outcome for home owners in relation to both the solar access and the usability of open space for new homes in both new and existing suburbs. These concerns were subsequently validated, with an exaggerated dominance of north-south blocks in new developments and excess cutting into blocks being required to comply. The recognition of the problems caused by DV306, and the subsequent drafting (and implementation) of DV346 to increase the solar fence to 3.0m has been welcomed by the housing industry. These changes implemented in 2016 maintain reasonable access to direct sunlight for neighbours while allowing flexibility in sighting and design for those proposing buildings. The new height acknowledges the impact of sloping topography and hopefully will encourage better estate designs into the future, correcting the failings of Variation 306. HIA considers that an opportunity has been missed in the decision to only apply these changes to new suburbs, and the provisions under DV346 should extend to existing suburbs. To not do so will mean that access to sunlight and corresponding building controls are treated differently for existing suburbs where a significant level of rebuilding will occur in future years to meet the government s objectives for urban consolidation. With around 1,000 Mr Fluffy blocks coming online within existing suburbs, these controls will constrain the options for future homeowners and do little to support the existing streetscape and open space of existing adjoining properties. PLANNING: Tree protection rules on residential blocks Applying for the removal of trees from a residential block can be a long and expensive process which adds unnecessary costs to housing projects, and in some cases, means they do not proceed. The process for gaining approval to remove regulated trees in a private backyard adds unwarranted complications to straightforward home extensions and knock-down rebuilds. While many trees have intrinsic cultural or heritage value, many do not. Quite often there has been little forethought as to the consequences for the location or species of tree that has been planted by a home owner - not considering the size of fully grown trees, future housing requirements or building design. Many residents are now being constrained by trees that are disproportionate in scale to the size of the block and the future safety of the houses on those blocks. Many trees technically meet the current limitations that require approval for their removal, yet they are poorly located and inhibit re-development in existing suburbs which is now the focus of government policies to increase housing densities. Other states have effectively managed this situation by allowing trees within, and close to, the footprint of a proposed dwelling to be approved for removal as part of the development application. PLANNING: Limitations on density and housing choice Canberra is an extremely low density city. Increasing the number of households in our existing suburbs is a necessity for the future to maintain viable services and communities. Retaining the character of our suburbs can be achieved with increased density, with appropriate controls that encourage the type of buildings that Page 12 of 13 Towards a New Housing Strategy

13 suit the area. Canberra s new suburbs are proving that the unique character of the bush capital can be maintained, while building to a higher dwelling rate per hectare. It is critical that we promote opportunities for young families to be able to live in our ageing suburbs to keep schools, public transport and shops sustainable. It is also important to keep pace with the demand for housing and thus address affordability. As families grow up and move away, household sizes decrease in our larger properties. Enabling our ageing population to relocate to appropriate sized and designed houses in our suburban cores will free up the outer ring of for younger families. This is the principle of age in community rather than age in place. It is critical that the ACT government introduce initiatives that support the policy to increase density in our existing urban areas. Further stamp duty reductions or concessions for downsizing, removal of third party appeal rights for Code compliant infill development projects and other initiatives that provide greater certainty for home owners and the housing industry could significantly reduce the current road blocks. BUILDING & PLANNING: Livable Housing Australia s age profile will see a marked increase in the number of seniors over coming decades, placing pressure on government housing and health services for the aged. Ageing needs to take its rightful place in housing policy, however, the temptation to focus on the regulation of new housing under the guise of livable or adaptable housing should be resisted. The reality is that most households containing an individual with some impairment are in existing dwellings, so policy needs to address the matching of household needs with the current housing stock. There are more than 9 million dwellings in Australia and new dwellings account for about 1.7 per cent of additions to the housing stock in any year. By 2050, most of the dwellings will still have been built before today. Many new dwellings may never have the requirement for accessible features, which would unnecessarily add significantly to the cost of housing, particularly when the sloping topography of most of Canberra s new developments is considered. It is also the case that many home owners do not wish to incorporate livable features in their new home, whether due to the extra cost or they simply do not view themselves as requiring these features. Accessibility to private homes for people with disabilities needs to be addressed through voluntary marketbased incentives, improved consumer and industry information, and direct government assistance to people with disabilities. Page 13 of 13 Towards a New Housing Strategy