Urban regulation and diverse housing supply: An investigative panel

Abstract

© 2020 Australian Housing and Urban Research Institute. All rights reserved.

Key points • Diversifying housing supply in response to changing demographic profiles and declining housing affordability has become a significant policy aspiration in Australia's major cities. • However, despite this aspiration, the majority of housing is delivered in the form of detached housing in greenfield locations and, to a lesser extent, high-rise apartments, both of which are sold at market rates to owner-occupiers and small-scale buy-to-let investors. • In this context, this study engaged the expertise of 50 housing and built-environment professionals in Sydney, Melbourne and Perth on Investigative Panels to examine barriers and challenges within the housing system for delivering housing supply that is more diverse in terms of size and built form, tenure, development model and, importantly, affordability level. • Across these three cities, the housing industry and built-environment experts who took part in the study perceived a need for: greater diversity in housing types and sizes, particularly in lower-density suburban areas; medium- and higher-density housing forms able to accommodate a wider variety of household types and lifestyle preferences; rental housing that can offer greater security of tenure; and, more housing supply across tenures that is affordable to very low to moderate income households. • In addressing these gaps, panellists saw a need for more mediumdensity housing such as townhouses and other attached housing types with ground access; dwelling designs that cater to different household needs and preferences (in terms of size, facilities, adaptability, etc.), and alternative processes for developing new supply, including deliberative development models managed by future residents/owners. Panellists also emphasised the importance of affordable home ownership and rental housing options and increased supply of social housing. • The Investigative Panels revealed that these types of projects can face a range of development challenges. In terms of the planning system, challenges can include difficulty accessing sites where medium- and higher-density built form is permitted and financially viable; lack of clarity as to the permissibility of unconventional housing or development types within land-use zones; lack of flexibility in development controls to allow for design innovations, such as reduced car parking; and uncertainty around the time frame and outcome of development assessment decisions. • Uncertainty has a particular impact on less conventional developments with tight development margins, which are less able to cope with unexpected costs associated with time delays. At the same time such projects-often lower cost rental or home ownership developments -can also face greater community opposition in established areas, potentially prolonging assessment processes and uncertainty regarding an application outcome. • Other important challenges relate to factors beyond the planning system. These include high urban land costs; challenges obtaining development finance; and a lack of appropriate skills and expertise in the housing industry. • Competing for access to land and finance can be particularly difficult for housing projects that do not constitute highest value land use and that are initiated by start-up organisations and small developers without significant balance sheets or development track records. • Projects designed for long-term affordability and affordable housing projects by not-for-profit housing providers face additional economic viability challenges, while subsidies to support project viability are limited and inconsistent. • The drive for innovation in new housing supply must ultimately come from the private housing development industry, which currently produces more than 97 per cent of Australia's new homes. • However, all levels of government can play a role in de-risking and supporting the viability of diverse housing projects through subsidies in the form of land, grants, and access to special mortgage products for purchasers of diverse housing products; as well as through access to development finance, and special development assessment pathways. • State and local governments can ensure that land-use zoning allows for or requires a range of dwelling densities in different locations. Zoning rules can also be designed to limit competition from higher value land uses where a particular form or tenure of housing is desired. • Flexibility and concessions on development requirements and fees and charges, where appropriate, could also help to support the viability of diverse housing projects. • While planning-based interventions can play an important role in supporting the permissibility and viability of projects delivering diverse housing dwelling types and sizes, tenures and development models, deeper forms of subsidy are required to support significant supply of housing that is affordable to low-income groups. • All levels of government can play an important role in communicating the need for more diverse housing supply and enabling more diverse housing supply through strong leadership. In addition to Commonwealth financial support, state governments should take a leadership role in establishing targets and strategic directions for increasing diversity of housing supply; and supporting innovation through demonstration projects that can be replicated across the industry. Local governments have a crucial role in building support for housing designed to meet the full spectrum of needs in their communities, and in helping developers and community organisations interested in delivering diverse types and tenures of housing and development models to navigate the planning system.