The Department of Planning recently released a document called “Planning Provisions for Affordable Housing” which tries to tackle the thorny issue of affordable housing.

Once you move outside of the Department of Housing’s funded works there are only three options.  Either the developer pays, the other buyers cross-subsidise or some form of bonus is given, such as height or density, which offsets the cost.

In the first instance, if the developer has to build into the costings the provision of affordable (subsidised housing) it can make projects unviable, putting at risk the supply of housing.   If they are able to pass on the cost of the affordable housing to the other purchasers in the development we will see artificially inflated prices that may not pass muster when buyers seek finance.  “Bonuses” can work effectively, but only if the additional height or density actually delivers savings.  The assumption that “more” means that the product is cheaper to build per square metre is incorrect.  For example, if you progress from a three storey walk up to a four story apartment block, the cost of the lift will outweigh the additional yield from the project.

In the USA and other places around the world there are a range of taxation benefits for the delivery of policy priorities but ultimately somebody is still paying to subsidise affordable housing.

The other challenge, of course, is that in a free market how do you control the price of the affordable product on resale?  Does the first owner get a windfall gain?

So what do we do?

Affordable housing is all about the situation.  For government owned land under a redevelopment model, tenders can include an affordable housing component and the price of the englobo land adjusted accordingly.  We can also use density and height bonuses where they make sense.

The recent freeing up of ancillary housing means that the “granny flat” has been opened up to tenants.  This gives landowners the opportunity to have a rental income from a property in their back yard without the cost of subdividing which is good for both tenant and landlord.

What we must not implement is the Robin Hood theory of housing affordability where those buying at market rates cross subsidise the affordable dwellings in the project.

Access “Planning Provisions for Affordable Housing” here.