Analysis of Affordable Housing Supply

Analysis of Affordable Housing Supply

Introduction

In 2009, an affordable rental housing strategy was put forward and developed collaborating with non-profit organizations or private institutions. (City of Sydney Housing Issues Paper April 2015). Affordable housing is“housing that is stipulated by the regulations and under the planning guide of the environmental instrument.” And it is provided for very low-income families, low-income families or middle-income families. (Environmental Planning and Assessment Act 1979)

In Australia, housing market pressures and concerns have appeared and expanded in the residential market during recent years, with the need to increase the affordable housing supply. In the mid-1980s, housing prices started to have discrepancy from real incomes. (Lawson, J. et al. 2012) This trend was owing to the several changing factors. First, housing demand pressures have become larger with the increasing population. Second, households are able to gain more incomes with better capability to purchase. In addition, deficiency of useable land has caused supply restrictions. The combined influence of these factors has caused so much affordability pressures.

1 Mechanisms and Options

A series of planning mechanisms can be used to help provide affordable housing, which are more detailed examinations of the planning decisions that affect housing outcomes. These involve mandatory mechanisms, including inclusionary zoning, improvement of taxation, linkage fees, and developer contributions. Besides, voluntary mechanisms are also included, such as planning bonuses, flexible development standards, and concession agreement. (William,2000)  Furthermore, there are also a lot of options which assist in subsiding directly or indirectly to promote affordable housing, or to stimulate private investors to invest.

1. Inclusionary Zoning

Inclusionary zoning mechanism is perhaps the most well-known compulsory mechanism. It means a defined area that is appointed to be used for affordable housing development, with legal enforcement and planning control. (Gurran, N. 2011) Inclusionary zoning mechanism includes Mandatory Inclusionary Zoning, Voluntary Inclusionary Zoning or a mixture of both.

Inclusionary zoning has a disadvantage that it may cause jurisdictions to pass increased costs to consumers, thus decreasing overall affordability. However, if applied properly at a wide range of metropolis, added with incentives and with alternative payment options with cash for affordable housing, it is an appropriate way of dealing with negative externalities.

1. Mandatory Inclusionary Zoning

Mandatory inclusionary housing programs are achieved through the implementation of a compulsory inclusionary zoning ordinance which mandates that developments must include a certain percentage of below-market-rate housing units. 

1. Voluntary Inclusionary Zoning

Voluntary inclusionary zoning is a program with the aim of achieving affordable housing by employing density bonuses. However, compared with voluntary inclusionary zoning, the mandatory program provides benefits of more integrated socio-economic housing supply.

1. Improvement of taxation and concessions

Except for the mandatory requirements for affordable housing supply, other incentives will also affect the planning system, including tax improvement and concessions. (Gurran, 2011) With the help of these subsidies, mandated requirements are probably to gain better efficiency and lower developers’ opposition to their appearance. Besides, private sectors also play an important role in the development of affordable housing supply. This kind of development will be promoted taking these incentives and subsidies into consideration.

1. Developer contributions

There is no doubt that inclusionary zoning requires the involvement of developer contributions.

However, it is on a negotiated basis about the actual level of contribution, site-by-site. (Gurran, 2011). Without sufficient development contributions, the local councils will be forced to undertake the public infrastructure cost.

1. Financial Mechanisms

In Australia, the traditional financing mechanism for affordable housing is that the properties are built by the government fully funded capital projects. However, the scale of rental accommodation has exceeded the government may supply. This finance mechanism can have various forms, including grants, bonds, and commercial loans, helping to show that miscellaneous funding forms for affordable housing can produce solid for affordable housing investment.

1. Oppositions and Challenges

In recent years, the government has begun to conduct activities with the aim of promoting affordable housing supply. However, these initiatives have aroused public opposition from community citizens. They hold the opinion that affordable housing was placed in the wrong place without considerations about infrastructure and traffic issues. Apart from that, between 2009 and 2011 there are also concerns about the limited budget of government with the increasing levels of new residential construction. (Davison et al, 2012).

2.1 Oppositions from community members

The location of affordable housing is probably the main concern of community members. First of all, community people wish to keep affordable housing away from their neighborhoods. As we all know, there are potential impacts of the neighborhood, including criminal rate, property values, and traffic issues. In addition, community members are worried about the types and behavior of tenants that are going to live in the affordable housing. Moreover, the physical form of the new dwellings construction is also another fear.

1. Neighborhood impacts

No matter what kind of housing is, it will definitely have some negative external impacts on its nearby living and working environment, including the life quality and traveling condition. Opponents are mainly concerned about “crime, density, loss of good public transport, insufficient parking space, and poor maintenance condition.” (LGSA, 2011).

1. Tenants

The second pivotal issue about affordable housing supply is to deal with the anticipatory tenants who will finally live in the housing project. They assume that those residents are lazy, deviant, and useless with low productivity. Or there is another possibility that they regard it as unfair for them to live in the same neighborhood as those people who receive welfare benefits. However, most of the times these oppositions come from individual prejudices and a tendency of negative assumptions. Actually, there may not be real impacts on the life quality and property values.

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