What Victoria’s $535 million affordable housing hole means for developers

Developers are asking: “Why the constant push for more affordable housing through the planning system?”

Historically, Australia has been comparatively well served by a housing system comprising home ownership for the majority, private rental housing as a transitional tenure on the path to home ownership, and long-term public housing leased to lower income households (“social housing”). However, long-term structural shifts in the economy, society and housing markets have challenged the very notion of home ownership. It has also driven what is now considered an affordable housing crisis.

For Victoria, let’s review some data:

• Currently Victoria has just 3.5% (the lowest percentage in Australia) of dwellings considered social housing (i.e. owned by either the Government or not for profit organisations)
• Based on current population growth projections – and to maintain this very small 3.5% – an extra 30,800 dwellings will be required by 2031. That’s 1,800 new dwellings every year!
• Let’s say that each dwelling costs $350,000 (land, design and construction, fees, etc.) That means to maintain a steady 3.5% of social housing, the Victorian Government needs to find $635 million annually. And this is on top of the cost of maintaining its ageing housing assets.

The Victorian Government’s Homes for Victorians strategy nominates approximately $100 million per year in funding.  So where is the remaining $535 million going to come from?

This is the essence of the non-market housing challenge facing government. And this is why the planning system is being used as a lever to make developers help achieve our society’s urgent need for more affordable housing. As developers in any initial development or feasibility work there needs to an understanding of what affordable housing may/will be required and what is the impact to the financial position of the project.

Urbanxchange understands how to address affordable housing outcomes in a manner that will have the least effect on the developments financial and market position.