Incentives for Developers Could Help Create More Affordable Housing


Record house price growth in Australia has led to calls to ease supply-side restrictions to open up more affordable housing for low and middle-income households.

The Australian Housing and Urban Research Institute (AHURI) has weighed in on Australia’s housing affordability challenges, suggesting the answer may lie with planning schemes such as inclusionary zoning and density bonuses.

Requiring developers to including affordable housing when land is rezoned and incentives for projects offering lower rents or sale prices are two ideas outlined in AHURI’s latest report.

AHURI based their findings on positive experiences in the UK and USA, which found that between 2005 and 2016, planning schemes led to 2009 affordable homes being built in South Australia and 1,287 in NSW while in the UK similar schemes led to 83,790 new affordable dwellings.

Related reading: Increasing Supply is no Panacea for Housing Affordability

An artist's impression of one of two affordable housing blocks that will provide 99 homes for low to middle income earners in Glebe.

Mandating the development of affordable housing when land is rezoned, offering developers voluntary planning incentives and providing density bonuses are some of the opportunities to leverage the planning system to create more affordable housing.

“Our research found that, in England and Scotland, the general expectation is for 20 to 40 per cent of new housing developments to be affordable housing across the continuum of needs and options,” University of Sydney lead researcher Professor Nicole Gurran said.

“Local planning authorities identify the level of unmet housing need and use locally negotiated agreements to obtain contributions from private housing developments to supply affordable housing, with exact requirements determined in relation to site-specific considerations, including financial viability.”

In Australia, the South Australian Government’s inclusionary housing requirement, introduced in 2005, requires that 15 per cent of all housing in significant residential developments – including urban renewal and greenfield contexts – should be affordable to low or moderate-income earners. In addition to the 2009 affordable homes already built, a further 3,476 homes are in development.

In NSW, a voluntary “density bonus” offers developers increased floor space in return for affordable rental housing. The affordable units must be rented to eligible households at 20 per cent market discount for a minimum of 10 years.

“There is great potential to extend inclusionary planning approaches across Australia,” Professor Gurran said.

“Affordable housing inclusion can be mandated when land is rezoned for residential development, when planning rules are varied for particular projects, or following significant infrastructure investment,” he said.


Inclusionary zoning will “force apartment costs up”

Developer lobby group Urban Taskforce said that the use of inclusionary zoning to fix affordability may not work.

“The AHURI preferred approach is to have inclusionary zoning only applied to apartments yet apartments have already become the affordable way to live for many Sydney households,” Urban Taskforce chief executive Chris Johnson said.

“The average apartment in Sydney is around 40 per cent cheaper than the average house so this dwelling type has become the affordable way to live for many households.

“AHURI however proposes an inclusionary zoning system that can only lead to forcing apartment costs up.

“We should be getting other building types like detached houses, commercial and retail developments to contribute to affordable housing rather than add an extra cost to the most affordable dwellings in the city,” Johnson said.

The Planning Institute of Australia also said affordable housing supply was a critical issue for

governments – but so too is ensuring Australians have good access to meaningful employment, good social services and facilities, and quality environments.

Chief policy officer Rolf Fenner said PIA endorsed in principle the wider use of inclusionary zoning practices, but governments could not continue to ignore the fact that the housing affordability crisis stemmed in large part from demand-side factors.

“Wholesale adoption of inclusionary zoning provisions may lead to perverse outcomes if they’re implemented without due regard to local market conditions and specific city-wide, or regional plans,” he said.

“A surer bet would be affordable housing targets developed in consultation with the community and based on quality urban design and architectural foundations.”

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