In the lead-up to our upcoming event series ‘LET’S GET AFFORDABLE: Opportunities For Developers In Responding To Australia’s Housing Affordability Crisis’, we approached one of our panelists, Robert Pradolin (former general manager, residential, Frasers Property Australia) to provide his thoughts on the current and future state of Housing Affordability in Australia.
Everybody knows Australia is in the middle of a housing crisis. For those of us who live and work in our cities, the level of homelessness on the streets is a reminder of the lack of housing.
As the federal Treasurer has said: “It’s all about supply.” And he is right. It’s that simple.
But there are also two distinct segments of housing supply: housing created to be bought by the private sector (investors and owner-occupiers) and housing that is not economically viable because people cannot afford to rent it. They just don’t earn enough.
Historically, government would invest in that area of housing supply because it was uneconomic for the private sector.
A Melbourne University-sponsored SGS Report, The Case for Investing in Last Resort Housing, states there is a business case to invest in such housing to save costs in future budgets. The reality is that we don’t really consider long-term solutions because we accept politicians’ short-term focus — but we do so at our peril. That is what’s happening with society’s view on public/social/affordable housing.
It will cost future generations billions in additional social services costs if we do not invest in this key infrastructure. There has been a minimal net increase in affordable public housing, yet the private market has exploded. Both types of housing need supply if we are to put a downward pressure on price. Yet only one is being supplied: the private market.
The homelessness we see in our streets is the result of a lack of investment in affordable public housing by successive governments over decades. And it will get worse. Many Australians are just one pay-cheque away from being defined as homeless.
Having a stable form of shelter is fundamental to having a productive society. How can anyone be productive if they do not have a place to reside and sleep in safety? How can a parent bring up a family if there is no certainty about where to sleep and they are always having to move?
Jenny Smith, CEO of the Council of Homeless Persons, places the problem in the lap of the federal government. But it shouldn’t stop there. If we are serious about solving this problem, we need our federal, state and local governments to collaborate with the business sector. We need them to develop a national housing strategy that will improve housing affordability and reduce homelessness. But it will take several decades.
Malcolm Turnbull must show the leadership we thought he had when he became Prime Minister and call together the state premiers on behalf of all Australians. We must build more houses, and brave governments must think differently and adopt new and perhaps radical approaches to housing finance and management.
We are more than 200,000 dwellings short in the public housing sector and that represents an investment of more than $100 billion. Governments do not have the funds to do this alone. They must engage the private sector.
Reserve Bank chief Philip Lowe has said: “Can the government, can any of us, find assets to build that can generate a return for society?”
Yes we can. By creating and investing in social, public and affordable housing.
A separate report by SGS Economics indicates that for every dollar invested in public, social and affordable housing, the community benefits by $7 through savings in health, welfare, justice and productivity improvements. The benefits would flow to the entire economy through long-term budgetary savings. That type of return would be a no-brainer for any private business.
The Treasurer has been in the UK studying how the UK bond market works in generating long-term funding for community housing organisations. That’s part of an answer but we also need to create the investment environment where big institutional players, such as superfunds, invest their equity in creating tens of thousands of additional homes for rental.
In the US, they call it multifamily housing and within its residency mix is social and affordable housing. In Australia, that rental sector does not exist.
To produce more housing, Australia needs a shift in thinking to create innovative funding mechanisms similar to those in the UK and the US. Infrastructure Victoria classes this type of housing as key infrastructure and has it in its top three priorities.
Governments alone cannot find enough money to invest in this and must leverage their funds and encourage the use of private capital, recognising that such capital must achieve market returns proportionate to the risk of the investment.
Such an approach must be part of a national housing strategy and have bipartisan support.
We all need to show compassion and care for the less fortunate in our society. We must find them shelter — but we must also find long-term solutions.