Tuesday, November 4, 2008

Affordable Housing In The “Too Hard Basket”

The New South Wales greens have introduced a bill into the Legislative Council calling for up to 25% of new multi unit housing developments to be set aside for affordable housing. Under the plan, the housing could be managed by Councils, non profit housing organizations or the Department of Housing. Rents would be kept affordable by fixing them at no more than 30% of the tenants’ income.

Some such schemes already operate successfully abroad, and also on a limited basis in some Council areas here in New South Wales. The obstacle is that under current law Councils need special permission from the State Government to introduce such an arrangement. In the absence of adequate numbers of public housing properties, the need for more affordable housing of any sort is becoming more pressing.

Developers blame the affordability crisis on the undersupply of housing in the market, and in turn blame the undersupply on the tangle of red tape that strangles development, along with the excessive levies and charges that are imposed on new developments. For that reason, they say that the Greens’ scheme amounts to just another tax on development, likely to strangle the market even further and ultimately prove counterproductive in terms of affordability as it could force open market prices up, not down.

Unless the Government suddenly decides to inject more money directly into public housing, and with a budget black hole dominating their finances at the moment that is about as likely as pig farming on the Moon, the proposal by the Greens offers a way to address the shortage of affordable housing that would otherwise be ignored. The success of the scheme would depend upon developers being able to see a viable return from the project. That means those big fees need to go.

The developer levies and charges that currently add as much as $100 000 to the price of a property are the real villains in the affordability equation. They are up front charges for future infrastructure and services for which residents are already paying rates and taxes. If those unjustifiable levies and charges can by cut or at least reduced, then there would be scope for the Greens’ plan to actually provide at least part of the solution to a problem that has spent far too long in the “too hard basket”.

The challenge is for Premier Nathan Rees to keep his promise to empty out that basket, and support this plan.

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