17 May 2024

In this Edition... 

1. Federal Budget – a Eureka moment* for housing supply and market housing?
2. Federal Opposition ignores the economics of housing supply
3. Time now the enemy of the Albanese Government when it comes to housing
4. Only months in – the Affordable Housing incentives prove for more effective than levies
5. Inner West Council wants to embark on its own housing strategy? So let's see some detailed plans before Council elections
6. Urban Taskforce on apartment supply – the market will best meet demand
7. NSW Greens bring in Affordable Housing Bill to stop affordable housing supply
8. Ku-ring-gai Council mounts legal challenge to Government’s SEPP
9. RBA Chief Economist – turning around housing supply will take time
10. ALAND shows the NSW Government’s Affordable Housing Incentives can work
11. Other News
12. Members in the news

1. Federal Budget – a Eureka moment* for housing supply and market housing? 

The Federal Government 2024-25 Budget made its first tentative steps towards supporting the provision of new market housing with the allocation of $1 billion through a New Housing Support Program – Priority Works Stream. The good news is the money is available right away – NSW should be doing whatever it takes to get proposals to the Commonwealth for support. Time is key here. Sydney Water and Transport for NSW need to get on their bikes and get application, supported by business cases in NOW!

The $1 billion comes on top of the $2 billion for Western Sydney roads, already announced in the lead up to the Budget.

Privately built and delivered market housing is key to solving the housing supply crisis. After all, more than 95% of the housing required under the National Housing Accord will need to be delivered by the private sector.

We trust this is a Eureka moment for the Commonwealth – realising that it needs to be an active player in the market housing space.

We would have liked the sum to be much bigger - $1 billion is not going to go a long way across 8 States and Territories.

However, after being missing in action for well over a decade – both under Labor and Liberal – it is pleasing to see the Commonwealth’s first foray into the housing enabling infrastructure space.

Not so pleasing was the Commonwealth’s refusal to bring forward the housing supply incentive payment – the $3 billion New Home Bonus – announced in August last year – which as it stands is a potential reward for those jurisdictions that exceed their original targets. This $3 billion should be made available up front as an incentive for States doing the right thing in terms of planning reform.

The Premier himself is saying NSW will struggle to deliver on the National Housing Accord targets.

With interest rates, construction costs, construction company insolvencies, labour and skill shortages and the endless State/Local Government fees/taxes and levies on new housing, there are plenty of hurdles for the production of these new homes.

Right now, there is every chance that the Commonwealth will not have to part with any of this money.

Good for Federal Treasury – bad for solving the housing supply crisis.

Just seven weeks from the commencement of the Accord, the failure to rejig this funding program is a huge opportunity missed.

To read the media release from Urban Taskforce on the budget – the good, the bad and the indifferent, click here.

* Archimedes' alleged discovery of the concept of volume while sitting in a bathtub and subsequently shouting “Eureka”, running naked through the streets of Syracuse (now part of Sicily) was a solution to a problem posed by the Greek tyrant of Syracuse, Hiero II, on a way to assess the purity of a gold crown.

Hiero had suspected that his goldsmith had cheated him by removing some of the gold and substituting it for silver. As gold is twice as dense as silver, Archimedes bath and displacement was a way of determining whether you were being swindle in your gold crown purchases! It is unclear of the fate of the dodgy goldsmith, although Hiero was by all accounts an unforgiving character.

Archimedes running through town with the “gold” crown

2. Federal Opposition ignores the economics of housing supply 

While the Albanese Government’s budget missed some opportunities, the response from the Federal Opposition was woeful.

Peter Dutton’s solution to the housing supply crisis was to cut the permanent migration intake and bolster demand by allowing people to access their superannuation for home purchases through the “Super Home Buyers Scheme”. 

Absolutely nothing on how he would boost housing supply. Nothing.

Our ageing population is the key driver of what economists call the fiscal gap.  With more people retiring (most without the benefit of superannuation through no fault of their own – it simply did not exist when they were working), and fewer “taxpayers” in the economy – expenses are heading up and revenue is heading down.  Migration helps us close this gap and keep our economy going.

The ageing population from the baby-boomer generation typically own their own home and are now entering or are in retirement.  Those who own their own home are asset wealthy – but they nonetheless often draw a pension (low superannuation balances and the non-inclusion of the family home in asset tests).

As this cohort grows as a proportion of the population (and it is growing fast) you get what economists at Treasury call a “fiscal gap” – or the fiscal jaws of death.  Expenses grow.  Revenue declines.  The ratio of tax-payers to non-tax payers is in decline (ie. there are less and less people working and paying tax and there are more and more people not working and driving up expenses). Unlike other factors, the rise in the ratio of Non-tax payers to tax payers acts on both revenues and expenses – but it drives them in opposite directions.

Source:Australian Government, Commonwealth Integrational Report, P51-78.

To read our Urban Ideas from April 2021, “Migration Matters: Immigration and the economy”, drafted and launched by BIS Oxford Economics’ Dr Sarah Hunter - coincidentally now in the hotseat as an Assistant Governor and the Chief Economist of the RBA (see story 9), click here. 

The reason why young people cannot afford a new home is the baby boomers won’t allow a “change in the character of their precious suburb”.  They oppose high rise; they oppose growth in housing supply.

The problem with the Leader of the Opposition’s “small Australia” solution to the housing crisis is: by  looking to cut back on immigration and stimulate demand through allowing people to access their superannuation for home purchases, the economy goes backwards, the labour force goes backwards (so who builds these new homes?) and the amount of money in new home buyers’ pockets goes up – further exacerbating the affordability crisis.

Not a jot from Peter Dutton on how to drive up housing supply.

However, the Opposition’s proposal for an extension of the value of assets eligible for the instant asset right off to $30,000 would be positive for the many small businesses in the construction industry.  Under a Coalition Government, tradies will be able to buy almost half a new EV Ute!

3. Time now the enemy of the Albanese Government when it comes to housing

Tempus fugit (and waits for no-one…)

Two years and three budgets into their first term, time is the biggest threat to the Albanese Government when it comes to demonstrating achievements in  addressing the housing supply crisis.

The article picked up on Urban Taskforce’s response to the budget – seeing the private sector as key to solving the housing supply crisis and Government backing the private sector rather than crowding them out.

The Albanese Government’s investment in housing enabling infrastructure is a good start, but it needs to be built on by the States – not just in terms of funding for new roads, water and social infrastructure, but pulling back on a range of fees, taxes and levies.  Urban Taskforce’s attention now turns to the upcoming NSW Budget – to be handed down on June 18.

As CEO Tom Forrest told the AFR:

The travails of the Albanese Government and the two years lost in terms of getting traction on housing supply, should serve as a warning to the Minns Government. It has come out of the blocks quickly since forming Government in March 2023. It has delivered some good pro housing policy. But more needs to be done and done urgently.

Time is still on the Minns Government’s side, which does not have to go to the polls until March 2027. But to have a good story to go back to the NSW voters on housing – it needs to bed down remaining reforms, such as the Tier 1 Transport Oriented Development Accelerated Precinct Program, fast. 

It doesn’t want to be left in the predicament the Commonwealth now finds itself.

To read the AFR article on the Albanese Government temporal challenges, click here.

*Please note, the link may be paywall protected.

4. Only months in – the Affordable Housing incentives prove for more effective than levies

Much more effective than levies when it comes to producing housing – market + affordable

DPHI planning portal SSD data shows that the early signs show the Affordable Housing Bonus through the SSD pathway is having a significant impact on new home application numbers.

Planning has issued SEARs (Secretary’s Environment Assessment Requirements) for 21 projects – comprising potentially 5,000 new market dwellings plus 1,500 new affordable homes.

Three applications have already been lodged, and there have been almost 50 pre-SEAR enquiries.

Compared with the track record of inclusionary zoning and local Council affordable housing levies – delivering a pitiful amount of affordable housing if any at all - incentives for market and affordable housing is the way forward.

These are really positive signs for industry, the Minister for Planning Paul Scully, and the Minns Government – demonstrating what we have always said - that given incentives, rather than feasibility killing inclusionary affordable housing levies – the private sector will respond – delivering more market housing, more affordable housing.

Cut the fees, taxes and charges, improve the feasibility of housing supply through incentives and the applications will flow!

5. Inner West Council wants to embark on its own housing strategy? So let's see some detailed plans before Council elections

Parramatta Road, indicative of all that is wrong with planning in the Inner West

The SMH today reported on the Inner West Council seeking to move a motion to delay the low to mid rise reforms – saying it would come up with its own strategy. The article said Council would allow for upzoning around Ashfield, Dulwich Hill, Marrickville and Croydon stations, and provide density incentives for the amalgamation of land in Leichardt, Taverners Hill and Kings Bay.

Fine sentiment - but the detail would prove whether this would be another under-done con job by Inner West Council.

Their strategy on Parramatta Road, released for consultation last year, was pathetic, and they have consistently pushed back on housing and density in the past in areas like Marrickville and Dulwich Hill.

The Minns Government needs to flush out their real intentions quickly.

Let’s get serious here. Inner West should table its strategy well before the local government elections in September.

While controlled by Darcy Byrne and Labor now (just), the flavour of the next council is uncertain and there is a prospect of the Greens going in the opposite direction.

Of course, this could all be a delay tactic by Inner West Council to push action on housing to the never-never – or at least beyond the September local Government elections.

The Minister for Planning, Paul Scully, was diplomatically silent on the proposal.

The message should be – get on with the job, or get out of the road.

To read the SMH article on the Inner West Council’s push to do its own housing strategy, click here.

*Please note, the link may be paywall protected.

6. Urban Taskforce on apartment supply – the market will best meet demand

Urban Taskforce CEO Tom Forrest spoke with the Sydney Morning Herald over the weekend on the shortage of family friendly apartments.

It was pleasing the note the comments of the NSW  Planning Minister and his faith that the market, aided by a more flexible planning system, was the best approach to responding to changing patterns of demand for housing.

Our clear message is that if there is demand for family-friendly apartments, the market would meet it:

This will come as a shock to urban designers and landscape architects (in particular), but this is why Urban Taskforce consistently argues for less prescription when it comes to design or planning regulations and guidelines. More often than not they hamper an efficient and effective response to changing demand.

To read the SMH story on the need for larger apartments and the Urban Taskforce defence of the need for an unshackled market to properly respond, click here.

*Please note, the link may be paywall protected.

7. NSW Greens bring in Affordable Housing Bill to stop affordable housing supply

The latest news from the world is made up of magical pixie dust…

With efforts to introduced rent caps in tatters, the Greens spokesperson on Planning and Member Newtown, Jennie Leong MP, introduced an Affordable Housing Bill to NSW Parliament this week.

The Bill would require rents for affordable housing to be set at 30% of a tenant’s income and held in perpetuity.

So no affordable housing in NSW – which suits the NIMBY burghers in the electorate of Newtown no doubt. Who knew, the Greens in a pact with Ku-ring-gai Council??

Unfortunately the Member for Newtown is not a subscriber to the Urban Living Network, so perhaps is unaware of the economics of housing.

Ignorance is bliss (and dangerous)!

To read the Second Reading Speech that starts the procedure of consideration of the Bill in the NSW Parliament, click here.

Let’s hope that’s where this Bill ends its journey.

8. Ku-ring-gai Council mounts legal challenge to Government’s SEPP

Last week we noted Ku-ring-gai Council's resolution to mount a costly legal challenge to the Government’s amendments to the Housing SEPP to facilitate transport oriented development.

The challenge highlights the very worst traits of local governments in the wealthier areas of our cities – selfish, small minded, inward looking, I’m alright Jack attitude which considers broader societal problems like the housing as someone else’s problem.

Yes we need more affordable and diverse housing – but not here….

A cursory glance at the DPHI’s Urban Development Program dashboard shows the problem with Ku-ring-gai Council:

Rolling annual activity and forecast – Ku-ring-gai Council

Source: DPHI, UDP Dashboard

A pitiful 500 or so approvals last year and many of these would have been replacement dwellings. This anti-housing agenda from Ku-ring-gai is a variation of the free rider problem in economics– happy to capture the benefits of the growth of Sydney  but not willing to meet any of the costs.

Some wit once described local government as the mezzanine level of Government in Australia. We think Ku-ring-gai Council are cellar dwellers – exhibiting the very worst tendencies of some councils towards selfishness and parochialism. And they will spend ratepayers’ money on full page ads and legal challenges to push their agenda.

A scene in Ku-ring-gai Council’s basement…

And what is their constituency? One only requires about 4,500 votes to make it on to Ku-ring-gai council. No wonder they are concerned about having more ratepayers and electors!

According to some reports, part of the legal challenge if that Council believes migratory birds will somehow get confused if any apartments spring up in suburbs like Roseville and Killara.

To read an SMH article on the legal challenge, including concerns over the plight of apparently dim-sighted migratory birds like the channel-billed cuckoo, click here.

Watch out for those apartments in Roseville!

9. RBA Chief Economist – turning around housing supply will take time

The time that it will take to turn around housing supply, given current commercial and financial challenges, an underinvestment in housing enabling infrastructures, along with devils in the planning policy detail still inhibiting development in areas where there is interest, will mean there is no quick fix to the housing supply crisis.

In a speech this week, the Reserve Banks’ Assistant Governor and Chief Economist, Dr Sarah Hunter, rightfully pointed to a perfect storm of constraints inhibiting the private sector from responding to Government’s housing targets.

Dr Hunter, laid out the challenges for the industry, challenges which Governments were adding to rather than solving:

The conclusion drawn by Dr Hunter was what everyone in the industry is acknowledging – that things will get worse before they get better.

Investment has dropped substantially since the mid 2010’s, and recovery looks anaemic over the next couple of years.

Economists around the country, Productivity Commissions, the Reserve Bank, State and Federal Treasuries, and private sector think tanks are all pointing to the cost pressures being placed on the private development sector and making it difficult for supply to meet demand.

Governments need to listen more carefully to this chorus of experts and respond. Help the private sector deliver the housing needed – not hinder them.

The role of Government is to seek to remove constraints where they can.

What we are seeing are some noble intentions, fine words, but still the persistence of planning restrictions, lack of investment in infrastructure, delays in approvals and ongoing addiction to fees, taxes and levies on new housing that is making the job for the private sector all the harder.

To read Dr Hunter’s speech, click here.

10. ALAND shows the NSW Government’s Affordable Housing Incentives can work

Previously approved for 137 apartments, the Minns Government’s Affordable Housing Bonus, where additional height and density is offered in return for the provision of more affordable housing, has prompted a revised proposal which will deliver an additional 42 apartments – 27 of which will be delivered as affordable housing.

Edmondson Collection is 500 metres from Edmondson Park railway station, so it makes a lot of sense in terms of well-located housing.

ALAND Founder and Director Andrew Hrsto says the company re-submitted its DA for The Edmondson Collection following important changes to NSW planning policies in late 2023.

Work on the development will begin later this year.

It just shows how planning reform can unlock more market and affordable housing close to transport.

11. Other news

New Division for Biodiversity Credits Supply Taskforce

Urban Taskforce has been advised the Biodiversity Credits Supply Taskforce has been consolidated into a new division of the Biodiversity, Conservation and Science group in the NSW Department of Climate Change, Energy, the Environment and Water (DCCEEW).

This new division is called Nature Markets and Offsets (NMO). It brings together a range of existing programs and functions, including the Credits Supply Taskforce, the Biodiversity Offsets Scheme branch and input into nature markets and natural capital accounts.

The programs led by the Taskforce will continue to be delivered by the new division, including continued work to increase the number of biodiversity stewardship agreements, supporting landholders to consider opportunities to create biodiversity credits and the Supply Fund.

The key contacts on these programs remain in place.

12. Members in the News

*Please note, the links used below may be paywall protected.
 

“… The Deicorp founder says an integrated model is key to affordability in the “wild west” of the construction industry… read more …

The Urban Developer, May 10

“… What would it be like to live in the grand two-storey, four-bedroom, 674-square-metre residence on the 83rd and 85th floors – no number 4s allowed – of the 235-metre-tall Greenland Centre building in the CBD?.. read more…

SMH, May 12

“…It is harder to sell apartments now than ever before,” said the Meriton Apartments founder, who has just put the finishing touches to his $515m Uccello apartment towers in Sydney’s Pagewood… read more …

The Australian, May 14

“… Fabcot, the development arm of supermarket giant Woolworths, has won gateway approval for eight storeys of homes and offices as well as a basement supermarket on Sydney’s lower north shore…read more…

The Urban Developer, May 15

“The nation’s largest legal partnership, HWL Ebsworth, has anointed key executives Russell Mailler and Kris Hopkins to lead the firm … read more…

AFR, March 16

“… Bilbergia’s pipeline of work would accommodate about 3000 people, including those seeking social and affordable housing, across three mixed-tenure developments at Lidcombe, West Ryde and Arncliffe… read more…

The Urban Developer, May 16

"Top-tier law firm Allens will ditch its Deutsche Bank Place digs for the top floors of a revamped Circular Quay development, with Sydney’s legal map set to get a major refresh... read more...

Financial Review, May 17