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Why affordable, social & public housing must be redefined as economic infrastructure

Read the full article at Australian Property Journal

OPINION: EVERYONE knows that Australia is in the midst of a housing crisis.

Firstly, in terms of its general affordability and secondly in terms of the availability of homes for key workers such as police, fire fighters, nurses, teachers (affordable or workforce housing) and for the socially disadvantaged (social or public housing). Rather than continuing this discussion as a social issue, it is vital that we also recognise it as an economic one. By housing all Australians, rich or poor, we minimise the long term costs to a future society that result from the unintended consequences in areas of mental and physical health, family violence, justice, policing and long term welfare dependency. This provides both a challenge and an opportunity, especially for the timber prefabrication industry.

It is estimated that the current shortfall of affordable/social housing nationally is well in excess of 500,000 new dwellings. In a 2021 review of the National Housing Finance and Investment Corporation (NHFIC), which is now called Housing Australia, federal government actuaries quantified the housing shortfall at $290 billion. This is too big for governments to solve alone, and it must engage the private sector and unlock new forms of capital to fund the investment needed.

The challenge we have is to elevate the discussion into the national consciousness so that all Australians realise the long term economic cost, and social implications that we pass on to our grandchildren if we don’t address this significant housing shortfall. This requires a long-term investment approach and will require an annual pipeline of additional housing to be delivered over several decades.

The opportunity for industry is to create new financing, development and construction approaches that are able to achieve this new additional supply, at scale, without putting an upward pressure on costs. The only way this can be achieve is by prefabrication becoming mainstream. Approaches integrating a significant amount of timber prefabrication into the construction process, as was done by Frasers Property Australia at The Green in Melbourne, have shown it can reduce construction costs and construction timeframes.

In many US cities including New York, Chicago and San Francisco, both sides of politics understand the importance of housing key workers and believe that investing in social and affordable housing makes good business sense. It is seen as good for the economy, as it brings workers close to their jobs and lowers the overall cost to government (and ultimately taxpayers) of providing services. It generates jobs and makes for a happier society, and a happier society leads to an increase in productivity.

It’s no different in Australia. Well placed, affordable housing for key workers, located in areas where society needs their services, and public housing, where tenants have ready access to existing infrastructure and services also makes good and rational business sense. In Australia today, crime, suicide, domestic violence and depression are huge problems which have both social and economic consequences. In 2022, Housing All Australians commissioned an economic report by SGS economics into the long-term costs to Australia of not providing sufficient social and affordable housing. It calculated that the additional cost to Australian taxpayers by 2032 will reach $25 billion PA and growing. It also determined that a very attractive cost benefit ratio of 2:1 existed for the creation of housing that mitigated long term government (read taxpayers) costs. It actually makes good business sense to build more homes.

The scale in the shortfall of affordable/social/public housing problem is so significant, it needs a quantum shift in thinking both about the issue itself and its social and economic consequences. We need new and innovative funding mechanisms that minimise any short term impact to respective Federal and State Budgets, otherwise it can’t be funded. Governments on their own cannot fund the entire quantum needed to produce this type of housing and therefore must unlock the use of private capital.

The reality is that we have to start to see affordable, public and social housing as ‘economic infrastructure ‘— just like privately funded roads, tunnels, hospitals and schools, all of which receive some form of government subsidy. Such recognition will mobilise private capital and change the dynamics so that it will become economically viable to invest in this essential type of housing. We need this investment to secure the long-term economic wellbeing of our cities and society and it will take decades to deliver. Housing all Australians is the economic platform needed to ensure Australia’s future prosperity.

A tremendous dividend is also available to industry in participating in delivery of this new housing supply, and the prefab timber industry must play a significant role. However, it still needs to demonstrate the benefits of prefabrication and how it has matured and modernised into providing cost effective and aesthetically attractive options, at scale. But it won’t happen unless we, collectively and pro-actively, make that happen. We can do this by demonstrating to the general public (and government) that the prefabrication industry acknowledges the economic impact that housing stress is having in society, that we are concerned with the long term costs we are leaving our grandchildren and that we must invest in more economic infrastructure called housing. The question is, how does the prefabrication sector deliver that message?

I was privileged to present at the recent FTMA Conference and shared my views with industry leaders that timber prefabrication must be part of the solution. But we have a perception problem with a number of key stakeholders. The only way to address that is by leading with a high profile demonstration project.

I outlined to the audience one such project that we, Housing All Australians, are assisting with in Marrickville in NSW. While it is a significant investment towards a charitable purpose, I see it as a great marketing opportunity in demonstrating how using timber prefabrication can transform Australia’s housing landscape and help solve Australia’s housing crisis. I strongly believe that purpose and profit are not mutually exclusive.

But we have no time to waste. We must all collectively unite in the pursuit of a more compassionate and economically prosperous Australia, and we can only do that through strong leadership from business. We must give it our best shot.  The only thing we have to lose is the future we want for our grandchildren.

By Robert Pradolin, former General Manager for Frasers Property Australia, Founding Director – Housing All Australians.