Unlocking Affordable Housing

The Property Council of Australia has emphasized the importance of a developer density bonus in achieving Prime Minister Anthony Albanese's goal of constructing 1.2 million new homes over the next five years.

They assert that this strategy, detailed in their forthcoming report "Unlocking Affordable Housing," offers an efficient way to boost housing supply while minimizing government spending.

The report also recognizes the potential need for interim policy measures.

Under the National Housing Accord, the government has allocated $3.5 billion to expedite the construction of 1.2 million homes, offering financial incentives to local councils. States and territories surpassing their per capita housing targets can access $3 billion in performance bonuses. Instead of rent controls, the National Cabinet aims to establish a nationally consistent renters' rights policy and limit rent increases to once a year.

The Property Council, representing major developers like Stockland, Lendlease, and Mirvac, has briefed the Victorian government on their findings, anticipating that the state's housing policy, set to be released soon, will serve as a blueprint for other regions.

A comprehensive analysis by property and infrastructure consultants APP found that, in the medium term, development density bonuses outperform other policy measures such as land tax exemptions, capital grants, discounted government land leases, and rental subsidies.

The density bonus concept grants developers permission to build more dwellings if a percentage of the development meets affordable housing criteria, typically around 10% to 12%, and is sold to affordable housing providers.

While APP's urban economist, Richard Brice, praised the density bonus as a potentially cost-free government solution, he acknowledged current challenges, including rising construction costs affecting the build-to-sell apartment market. However, he expects improvement over the next three to five years.

Brice suggested that, initially, government intervention through capital grants or rent subsidies is advisable. Still, the ultimate goal should be to establish a developer density scheme, projected to begin in 2026, contingent on a strong built-to-sell sector.

Property Council Victorian Executive Director Cath Evans emphasized that the report's conclusions resulted from extensive industry consultations, including discussions with institutional investors. She highlighted the potential for bridging the investment gap to unlock thousands of new affordable homes annually, provided the right policies and incentives are in place. The report underscores the developer density bonus as the most favorable option for both housing supply and government spending, emphasizing its role in broader planning system reforms in the long term.

Source: https://www.afr.com/property/residential/developer-bonus-silver-bullet-for-housing-crisis-20230820-p5dxxd