Local councils put affordable housing supply in the too hard basket

Alan Morris, University of Technology Sydney and Catherine Davis, University of Technology Sydney

Public concern about housing affordability in Australia is well documented. It would be reasonable to assume our local governments are giving the supply of affordable housing the attention it deserves. However, our national survey reveals that while it’s a growing concern for many local governments across the country, especially in metropolitan areas, most councils do not view the provision of affordable housing as a priority for them.

The survey results strongly suggest that local governments do not feel they have the capacity to intervene in a meaningful way.

The survey included a range of questions about local governments’ engagement with housing-related activities in their area. We asked about the priority given to housing issues, how important housing is relative to other council issues, and what kinds of policies and initiatives they plan to implement to help resolve the problem.

All 546 local governments in Australia were invited to participate in the survey. We received 213 responses. The majority, 72%, came from non-metropolitan areas (there are a lot more non-metropolitan local governments).

Do councils think it’s a problem in their area?

Almost all the metropolitan councils saw housing affordability as an issue (Figure 1). Half saw it as a very substantial or substantial issue. Only 13.5% said it was not an issue.

In contrast, only 26.6% of non-metropolitan councils responded that housing affordability is a substantial or very substantial issue.

Author provided

 

The responses to the question about what proportion of housing stock in the council area is affordable were remarkable (Figure 2).

Half of the metropolitan councils said only 5% of the housing in their local government area (LGA) was affordable. Three-quarters said 10% or less. Even in the non-metropolitan areas, 43% of councils said only 15% of housing was affordable.

Author provided

What are councils doing about it?

Despite recognising the problem, very few councils appear to be making the provision of affordable housing a priority. Just 13.5% of respondents from metropolitan areas and 15.5% from non-metropolitan LGAs said their councillors gave housing affordability a substantial or very substantial amount of attention (Figure 3).

Author provided

 

Linked to this lack of attention, few councils viewed “finding ways to provide adequate affordable housing” in their LGA as a priority (Figure 4). Not one metropolitan council answered to a “very substantial extent”. Only a quarter said to “a substantial extent”.

About four in ten metropolitan councils and over half of the non-metropolitan councils viewed finding ways to provide adequate affordable housing locally as a non-priority. These councils had put this on the far backburner.

Author provided

Local governments were also asked what priority had been given to housing relative to other council issues (Figure 5). Just 1.8% of respondents in metropolitan areas and 5.2% in non-metropolitan areas said housing had been given “very high” priority.

More encouraging was that about four in ten councils in metropolitan areas did say they had given it high priority relative to other issues. Very few non-metropolitan councils, about one in five, said housing was a high priority or very high priority relative to other issues.

Author provided

Do councils have policies, targets or strategies in place?

Fewer than half of those surveyed said they had a “housing policy, housing plan or housing strategy” in place (Figure 6).

Author provided

 

Those that reported having a formal policy said it focused on such issues as housing affordability, residential land development, population change, urban design, social and public housing, and energy efficiency.

However, our survey reveals that those policies are not perceived as being particularly extensive. Figure 7 shows just one in four local governments in metropolitan areas and 10% from non-metropolitan areas believe their council’s housing policies are “comprehensive” to a very substantial or substantial extent.

Author provided

The data suggest that having an explicit housing affordability target was viewed as unrealistic. Only 17.3% of metropolitan councils and 10.1% of non-metropolitan councils said they had an explicit target (Figure 8).

Author provided

Whose responsibility is it to provide affordable housing?

It’s noteworthy that, out of 213 councils, only one felt local government should be primarily responsible for “addressing the problems associated with housing in Australia” (Figure 9). The overwhelming sentiment was that state government or a combination of all levels of government should be responsible.

Author provided

 

The results suggest that improving housing affordability in a meaningful way is beyond the remit of local government. State and federal governments need to take the lead.

Although many councils are well aware that housing affordability is an issue in their area, they feel unable to respond in a meaningful way. An explanation for this is a unanimous view that Australia’s housing affordability problem is beyond the capacity of local governments to resolve. Almost all councils believe the provision of affordable housing is the responsibility of state and/or federal governments.

This is not surprising when we consider that local government accrues only 3.5% of all tax revenue. Local councils lack the fiscal capacity to develop affordable housing.

Further, state governments often override local governments’ efforts through the planning approvals to ensure all new developments have an affordable housing component.The Conversation

Alan Morris, Research Professor, University of Technology Sydney and Catherine Davis, Research assistant, University of Technology Sydney

This article was originally published on The Conversation. Read the original article.

National: House Prices Continue to Fall in Sydney, Melbourne and Other Capital Cities

House prices slid in many of Australian state capitals in the end of April.

According to property data agency CoreLogic, Melbourne had the steepest weekly decline with 0.2 per cent, followed by Sydney and Brisbane with 0.1 per cent. So far in 2018, the home prices in all five mainland state capital cities have fallen, ranging from Brisbane’s 0.1 per cent to Sydney’s 2.1 per cent.

Many factors could be attributed to these drops, including the higher-than-usual supply of properties. Currently there are 26,879 homes for sale Sydney and 31,195 in Melbourne, indicating a 28.2 per cent and a 11.4 per cent increase from this time last year respectively. Weak household income growth and a decline in the number of foreign buyers also contributed to this weakness.

The amount of properties listed for sale in Sydney. Source: CoreLogic

National: Negative Gearing Should Favor Lower Income Property Investors, Says Report

Excluding richer property investors from negative gearing can help improve housing affordability, according to a report coming out today.

In a research released today, the Australian Housing & Urban Research Institute (AHURI) said negative gearing reforms that prioritise ordinary “mum and dad investors” could save the federal government $1.7 billion.

A proposed model suggests denying the top quarter of income earners any deductions from rental losses, while the bottom half could continue receiving 100 per cent deductions.

The researchers also propose a reduction of capital gains tax discount to limit negative gearing activities and reduce inequities between higher and lower income investors.

Another option the report models is capping negative gearing deductions to up to $40,000.

“Current negative gearing policies are heavily skewed towards high-income earners, raising concerns about the extent to which these policies exacerbate income and wealth inequality in Australia,” said Alan Duncan, Curtin University economics professor and co-writer of the report.

The negative gearing tax breaks policy has been blamed for the surge in housing prices in Sydney, Melbourne and Brisbane. The Labor party has advocated for limitation of negative gearing to only new properties and reduction of CGT discount to 25 per cent, but the Turnbull government said the opposition’s proposals would jeopardise the property market.

The report follows Grattan Institute’s review released on Sunday, which found that housing affordability can be improved by cutting CGT discount, getting rid of negative gearing, and building extra 50,000 homes per year.

Finance: Spring Auction Market Opens with Strong Sales in Australia’s Big Cities

Auction market opens the spring season with significant clearance rate in Sydney, Melbourne, Brisbane, Canberra and Adelaide.

Sydney market remains strong with its fourth consecutive weekend of a clearance rate above 80 per cent, well above the rate recorded at the same weekend last year of 75.1 per cent.

Melbourne market is also at its strongest since last winter, achieving 77.5 per cent clearance rate on Saturday and making it the sixth consecutive weekends of clearance rates above 75 per cent.

Domain senior economist, Andrew Wilson told AFR Weekend that other cities are experiencing similar trend. “Brisbane saw a clearance rate of 54 per cent when it is usually travelling in the 40s, Canberra hit 82 per cent and Adelaide 74 per cent,” said Wilson.

Observers believe that this market boom is motivated by lower number of listings and cuts in interest rates by the Reserve Bank of Australia last month. Wilson reports that this weekend, Sydney only saw 537 auctions compared to 815 auctions at the same weekend last year while Melbourne had 718 auctions compared to 880 last year.