Scale of investment required in social housing
The data presented above has estimated that 13 500 new social housing dwellings will be required in Geelong to respond to the estimated need for social housing by 2041. This figure includes the replacement of 1 500 existing public housing dwellings that will come to the end of their economic life within that period.
This demand for social housing equates to an average of approximately 675 dwellings per annum at a total development cost of about $275 million (assuming an average development cost of $350 000 per dwellings)
Responding to this demand is far beyond the capacity of any Local Government to finance. Council must therefore look to the other tiers of government to participate in a partnership that can address the desperate need for more social housing.
The City of Greater Geelong Social Housing Plan 2020 – 2041 is developed within a broader Commonwealth State and Regional policy context (see table 20 for Summary)[20]. Key policies that guide the planning and provision of social housing are summarised below. This Section considers key policies and programs that have the potential to provide funding to enable the City of Greater Geelong Social Housing Plan to achieve its objectives.
Commonwealth Government contributions
While the Commonwealth Government exercises the greatest influence on the housing market through its influence on monetary policy fiscal policy immigration policy and industry policy it does not have constitutional responsibility for Housing Assistance.
However as a legacy of the desperate need for a national approach to overcome housing shortages at the end of the Second World War the Commonwealth struck a deal with the States under a Commonwealth State Housing Agreement to fund home ownership and public housing (which at that time was an open rental housing tenure). That agreement evolved over time and is the forerunner to the current National Housing & Homelessness Agreement.
Table 20: Policy Context
| Commonwealth Government of Australia | State Government of Victoria | Regional Level Initiatives | City of Greater Geelong |
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National Housing & Homelessness Agreement
Under this Agreement the Commonwealth provides funds to the State for social housing and homelessness programs. While recent Agreements have provided some boost for homelessness funding there has been no increase in social housing funding for 20 years. This means that in real terms the current value of the Commonwealth investment in social housing is less than a third of what it was at the turn of the century. The key implications of this agreement are:
- The Commonwealth does not fund the expansion of the social housing sector with current funding (approximately $1 billion per annum) being considered an operating subsidy to State Housing authorities for public housing in lieu of the fact that public housing tenants are not eligible for Commonwealth Rent Assistance and therefore public housing rents are insufficient to meet all operating costs
- The Agreement sets a target for of 35 percent of all social housing in each jurisdiction to be community housing and the only way for State Housing Authorities to reach this target is through the transfer of public housing to community housing - Victoria has still not reached this target and hence there is ongoing expectations that public housing transfers will continue in Victoria
Commonwealth Rent Assistance (CRA) - The biggest Commonwealth expenditure on housing is through the social security budget – Commonwealth Rent Assistance – at about $4.8M per annum and growing. As noted above CRA is not available to public housing tenants however community housing tenants are eligible for this financial support.
National Rental Affordability Scheme (NRAS) - The National Rental Affordability Scheme was introduced as a 10 year operating subsidy to approved landlords for every dwelling that they provided to eligible tenants at 80 percent of market rent or less. Approximately 35 000 incentives were allocated before the scheme was discontinued under the Coalition government. However the bureaucratic structure continues to exist as the incentives allocated still have between 2 and 6 years to run.
The Commonwealth Government having expressed no interest in renewing the scheme may find it an attractive mechanism if the decline in residential construction continues and they want to provide a supply stimulus. A key feature of NRAS is that community housing providers are eligible to receive the subsidy for their social housing properties whereas State Housing Authorities cannot access it for new public housing.
National Housing Finance Investment Corporation (NHFIC) - The most recent intervention of the Commonwealth government has been the establishment of the National Housing Finance Investment Corporation. This entity has the capacity to raise bond finance at Commonwealth rates and on lend to support affordable housing via two funds.
National Housing Infrastructure Facility (NHIF) - Under NHIF low cost loans can be made available to local government authorities to borrow funds for vital land infrastructure provided the reduced cost of finance leads directly to the inclusion of affordable housing (including social housing) in the residential development serviced by that infrastructure.
Affordable Housing Bond Aggregator (AHBA) - Under AHBA low cost loans can be made available directly to Registered Housing Associations to invest in affordable housing (including social housing). In the first 12 months of operation NHFIC has negotiated loans to RHA’s in excess of $350 million at approximately 1.75%.
State Government contributions
The State Government has the constitutional responsibility to plan for and provide housing assistance including social housing. The Victorian government has assigned this responsibility to the Department of Health & Human Services with the statutory responsibility for social housing being allocated to the Director of Housing. In 2018 the government released a major housing policy platform Home for Victorians which outlined a range of strategies to increase housing supply improve housing affordability and particularly increase the supply of social housing.
Key State Government Policy and Legislation that impacts on the provision of social housing and the related implications for the City of Greater Geelong Social Housing Plan are summarised below:
| Relevant Policy/Legislation | Key Issue for Increasing the Supply of Social Housing | Implications for City of Greater Geelong Social Housing Plan |
|---|---|---|
| Planning & Environment Act 1987 - Amendments 2008 | Amendments to the Planning & Environment Act which have been outlined above have opened the door for planning authorities to negotiate the inclusion social housing in new private developments | While such negotiations remain voluntary it has been estimated that this might result in up to 10 percent of dwellings in a new development being provided for social housing at approximately 25-30 percent discount to market value. |
| Inclusionary Housing | The State Government has committed to the identification of underutilised and surplus government owned land which can then be fast tracked through the governmental processes for release into the market with a requirement that they include a component of social and affordable housing – usually about 30 percent . | The development of a site in East Geelong by Barwon Water provides an example of how this policy may be enacted - this will require the strong support of Council through the planning process and access to social housing investment finance |
| Public Housing Renewal Program | The Strategy commits $341 million to renew and expand public housing with a target of approximately 3 500 new dwellings to replace about 2 500 existing dwellings. This program is primarily focused on ageing public housing estates which have not previously been the subject of Neighbourhood Renewal Schemes such as Corio Norlane and Whittington. | In order to have Geelong’s suburbs with high concentrations of public housing included in this program (and for the funds necessary to complete the urban renewal that been subject to a number of stop-start initiatives) it will be necessary for Council to advocate strongly and offer support in both planning and resourcing renewal strategies |
| Public Housing Stock Transfer | The Strategy also commits to the transfer of 4 000 public housing dwellings to Registered Housing Associations under management transfers. | There may be substantial financial and social benefits if public housing in Corio Norlane and Whittington were included in this transfer particularly if this transfer was incorporated into a ‘public housing renewal’ program. However for this to be negotiated with DHHS it will take concerted effort by the City to communicate the benefits to both the DOH and to the tenants involved. |
| Social Housing Growth Fund (SHGF) | One of the central planks of Homes for Victorians is the SHGF – a $1 billion fund established to provide an ongoing revenue stream to fund new social housing through Registered Housing Agencies. While it has been presented as a flexible funding program it is primarily intended that the fund will make long term (up to 30 years) operating subsidies available to Registered Housing Associations to support debt servicing. | If social housing projects in Geelong are to access this subsidy stream then it will be necessary for a Registered Housing Association to present a program of developments demonstrating value to government (that is: community land or planning contributions) and this will require the leadership and commitment of the City. |
| Low Cost Loans | In order to get the greatest value from the SHGF the Victorian government has also committed to making available $1.1 billion in low cost loans (similar to NHFIC) to Registered Housing Associations. Half of this will come as direct Treasury Loans while the other half will be via private finance with a state guarantee. | As above - if social housing projects in Geelong are to access this low-cost finance then it will be necessary for a Registered Housing Association to present a program of developments demonstrating value to government (that is: community land or planning contributions) and appropriate security arrangements and this will require the leadership and commitment of Council. |
| Community Housing Regulatory System | While pre-dating Homes for Victorian the Victorian government now has a robust regulatory regime for community housing providers. As discussed above the Housing Registrar (established under the Victorian Housing Act) registers and then regulates community housing providers assessing them against 7 performance criteria. In order to access any form of housing assistance from the Victorian government (and increasingly the Commonwealth government) an organisation must be registered. If that agency is to access programmatic funding (that is: for a program of social housing projects over an extended [period) then that organisation will have to be registered as a Housing association not a Housing Provider. | This implies that the success of any Social Housing Plan that aims to achieve substantial increase in the supply of social housing it will be imperative for a Housing Association to make Geelong a priority work collaboratively with the City have an established local presence and become an active participant in the local property market. |
| Victorian Housing Register | Victoria’s social housing system is geared towards supporting those who are most disadvantaged and unable to maintain suitable and stable housing within the private market. This has led to the establishment of a Victorian Housing Register which serves as a common waiting list for social housing from which all public housing and community housing allocations are made. The list has two categories – high priority and wait turn. High priority applicants are generally the clients of the DHHS and have other presenting issues such as family violence mental health issues disability. Both public housing and community housing providers are required to tale 75 percent of their tenants from the priority category. | For the City this means that any Registered Housing Association that it engages with in terms of delivering on the objectives of a Social Housing Plan must be a highly competent manager of housing for tenants with a range of special needs. |
Local Government contributions
Across Victoria other Local Government Areas (LGAs) are at various stages in the development of affordable and social housing policies and actions. All LGAs express concern about the reduction in housing affordability and the lack of accommodation options. Some LGAs particularly the inner metropolitan Melbourne LGAs have been seeking to address the provision of affordable and social housing in their municipality for many years.
In the inner city this has been exacerbated by gentrification and a lack of investment in social housing generally. The focus of these LGAs is on infill development and the use of LGA land (and air space).
Outer LGAs in growth areas such as Cardinia Shire Council and Whittlesea City Council are planning for considerable population growth over the next 20 years associated with new broad hectare development. As a result there are different emphases revealed in planning documents.
Outer LGAs may have greater opportunities to include consideration of social and affordable housing when re-zoning occurs. In addition homelessness and risk of homelessness is more likely to be ‘hidden’ and experienced as rental and mortgage stress possibly compounded by lack of transport and social infrastructure. As a result Outer LGAs are particularly concerned with planning the provision of adequate infrastructure as well as housing diversity and the creation of new communities which are healthy inclusive and which have access to employment.
Generally however all LGA plans indicate the following potential roles for LGAs in the provision of affordable and social housing:
- Advocacy and leadership
- Investment
- Land use planning
- Social planning and action
- Community development [21]
In terms of investment in social housing the principle mechanisms are:
- Small Council owned land (including air rights above car parks and community facilities) transferred to a Registered Housing Agency for development as social housing
- Larger Council owned sites put to the market for development with a required outcome for a certain yield of social housing – this will generally require a proponent to be a joint venture between a private developer and a Registered Housing agency
- Site specific planning controls to guide negotiations for voluntary contributions from private developers to social housing either by way of land assignment to a registered Housing agency or cash contributions to a social housing fund
- In a limited number of cases LGAs may make an annual budget commitment to a locally based social housing fund to enable a Registered Housing Agency to leverage State Government contributions to locally based social housing projects
Benefits of working with a Registered Housing Association – lessons from other LGAs
In order to access the State and Commonwealth finance and subsidies required to implement a Social Housing Growth Strategy that aims to achieve the levels of social housing needed in Geelong it is clear that Council will have to engage with the Registered Housing Agency sector.
In Victoria Registered Housing Associations have significant financial advantages:
- As Tax Concession Charities with public benevolent Institution status they have access to tax deductible donations (including philanthropic funds).
- Their charitable status also provides a range of other tax exemptions including Income Tax Stamp Duty Land Tax Payroll Tax and Fringe Benefits Tax.
- Subject to charging rents that are less than 75 percent of market rent they qualify as a GST free supply are eligible for a GST Rebate on all inputs – this reduces the cost of development by about 9.1 percent .
- They are eligible for project grant funding from programs such as the Victorian Property Fund and any other State government capital funding programs.
- They are eligible for public housing stock transfer which can generate additional revenue which can underpin reinvestment in the public housing stock as well community development activities which address community capacity.
- They are eligible for program recurrent funding for the development of a social housing program (that is: SHGF).
- They are eligible for low cost loans such as those offered by NHFIC at the Commonwealth level or the Victorian Treasury at the State level.
In addition Registered Housing Associations may have significant social advantages including:
- A commitment to a community development approach which engages with local communities and seeks to empower them through local decision making and participation processes designed to build local capacity.
- A commitment to place based service delivery which includes a local office and seeks to implement local procurement policies.
- A ‘client focused’ approach which aims to address the needs of their tenants by linking with other agencies to ensure tenants receive all of the services they are entitled to and which they may need to ensure a safe and sustainable tenancy.
- A particular expertise in designing housing and managing tenancies for individuals and families with complex needs.
Options for developing a relationship with an RHA are demonstrated by the approaches of two Victorian municipalities who have recently decided to create an Affordable Housing Trust as part of their affordable housing strategy and appoint a Registered Housing Agency as the manager of that trust. These case studies provide an insight into the relationship between local government and affordable housing.
- The City of Hobsons Bay has recently established the Hobsons Bay Affordable Housing Trust to receive all Council investment in social and affordable housing including the benefits of planning contributions and has subsequently sought expressions of interest from Registered Housing Associations to act as manager of the Trust
- The City of Moreland has established a Moreland Affordable Housing Trust which will also receive all Council investment in social and affordable housing including the benefits of planning contributions but has also taken the step of establishing a new Moreland Affordable Housing Company to act as Trustee and to obtain Registered Housing Association status so that it can obtain access to State and Commonwealth Housing Assistance to drive the implementation of Council’s social housing objectives
Before assessing the merits of the two approaches it is instructive to consider two previous Victorian initiatives.
City of Melbourne
In 2005 the City of Melbourne established the Inner-City Social Housing Trust and Inner-City Social Housing Fund invested $1 million into the Fund identified some inner-city sites for development as social housing and established a Trustee Company to manage the two vehicles. The company soon merged with Ecumenical Housing to form Melbourne Affordable Housing which subsequently merged with Supported Housing Ltd to form Housing Choices Australia – a company with a national agenda to grow social housing particularly in capital cities.
Housing Choices has gone on to become one of the largest and most successful RHA’s nationally however its footprint in the City of Melbourne is limited and the partnership with the City of Melbourne did not grow beyond the first projects within the Inner-City Social Housing Trust.
Council’s 2018 Annual Report does not mention the Trust nor is it mentioned on the City of Melbourne web site. Interestingly in its current Housing strategy the following commitment is made:
As part of the comprehensive redevelopment by the City of Melbourne of land it owns we will consider including up to 15 per cent of dwellings constructed being made available as affordable housing to a registered Affordable Housing Provider.
It is reasonable to conclude that the national focus of Housing Choices Australia the manager of the Inner-City Social Housing Trust has not led to a concentrated focus on the social housing needs of the residents of the City of Melbourne as was originally intended when the Trust was first established. The City now adopts a tendering approach on a site by site basis.
City of Port Phillip
The City of Port Phillip is perhaps the best-known municipality for supporting social housing in Australia. The first phase of Council’s Housing Program covered two decades beginning in 1984 and resulted in Council developing 14 Council owned sites yielding 311 units through a series of joint ventures with the Director of Housing. While Council owned these dwellings it appointed a Council created entity Port Phillip Housing Association (PPHA) to manage them. During this phase Council contributed the 14 sites with a land value of $13.4 million and leveraged $19.4 million in State and Commonwealth funding – Council’s contribution being 41 percent .
In 2004 Council undertook a review of the sustainability of the Housing Program in the context of increased demand for affordable housing from Port Phillip constituents and changes in government housing policy (particularly at the State level) which increased the opportunity for not for profit charitable organisations to access housing subsidies subject to obtaining registration under new regulatory controls in the Housing Act.
Following the Review Council adopted a plan to ensure the long term sustainability of the Program; maximise the growth of affordable housing through accessing the tax benefits of charitable status raising debt finance and securing Victorian government funding and reposition the Program to emphasise the primary responsibility of the Victorian government for the supply of affordable housing and reduce the exposure of Council to the risks inherent in the program.
This involved Council transferring the role of social housing developer to PPHA creating a Port Phillip Housing Trust (PPHT) and transferring the 311 dwellings into the Trust and appointing PPHA as the Trustee. Council then entered a 5-year agreement with PPHT to transfer additional sites and contribute $500 000 per annum in cash to grow the PPHT portfolio. Council also supported PPHA’s application for registration as a Housing Association under the new legislation and the submission for funding under the “Affordable Housing Growth Strategy” of the State government.
During the second phase (2005-2015) Council contributed one additional site valued at $2.3 million and a total of $4 million in cash to the PPHT which generated 3 additional projects yielding 72 dwellings in PPHT – approximately $16 million in State funding was leveraged.
However the creation of PPHA as an independent entity and its registration as a Housing Association enabled the company to secure private finance and attract additional funding for investment in social and affordable housing within the City of Port Phillip. A further 4 projects yielding 193 dwellings were completed in the municipality during this phase with PPHA contributing $16.7 million of debt and equity and securing $48.6 million in State funding.
Thus PPHA was able to deliver 7 projects during that period yielding 265 additional social housing dwellings with Council only contributing directly to 72. Council’s contribution of $6.3 million during this phase represented only 7.2 percent of the total of $87.6 million invested. Clearly the creation of the PPHT and the establishment of PPHA as an independent RHA paid handsome dividends for the City.
Brisbane Housing Company
One other example from another state is also instructive. In 2002 the City of Brisbane and the Queensland State government collaborated on the establishment of the Brisbane Housing Company as a special purpose affordable housing development and management company. The company was initially capitalised by both parties (total of approximately $30 million) and then operated on an independent basis accessing Council sites and government subsidies to build a portfolio which today is in excess of 1 700 dwellings with an asset value exceeding $400 million. It is a Tier 1 Registered Housing Agency under the national regulatory System for Community Housing.
Given the geographical size of the municipality the parties did not see it as necessary to create a Trust to hold the assets but limited the scope of activity to the City via clauses within the constitution of the company.
In summary:
- Registered Housing Associations have significant financial benefits and may have substantial social benefits for implementing a Social Housing Growth Strategy
- Registered Housing Associations also have preferential access to State and Commonwealth housing assistance programs without which the implementation of a significant social housing growth strategy would be impossible
- A number of Victorian municipalities are currently adopting aggressive social housing growth strategies and are including the establishment of an Affordable Housing Trust as an investment and security vehicle for Council and other investments under the management of an appointed Registered Housing Association
- History suggests that the most effective relationships between a Local Government authority and a Registered Housing Association is one where the Council takes the initiative to establish a Housing Association which is then appointed manager of the Council created ‘Housing Trust’ and retains continuing ‘ownership’ of the company.
The City of Greater Geelong Social Housing Plan 2020 – 2041 builds upon the key issues emerging through Part B: Context for a Social Housing Plan.