tag:theconversation.com,2011:/global/topics/housing-finance-26662/articleshousing finance – The Conversation2022-10-27T02:12:04Ztag:theconversation.com,2011:article/1932892022-10-27T02:12:04Z2022-10-27T02:12:04Z1 million homes target makes headlines, but can’t mask modest ambition of budget’s housing plans<p>Housing took centre stage in Treasurer Jim Chalmers’s <a href="https://budget.gov.au/2022-23-october/content/documents.htm">first budget</a> this week. Relatively modest but positive steps were made towards tackling Australia’s <a href="https://cityfutures.ada.unsw.edu.au/documents/689/Waithood_final.pdf">worsening shortage</a> of affordable social housing, as well as the broader challenge of housing affordability. But parts of the package cast some doubt on the new government’s analysis of the problem and its ambitions to tackle it.</p>
<p>The most substantive aspect of budget housing plans was the confirmation of <a href="https://www.alp.org.au/policies/safer-and-more-affordable-housing">promised funding</a> for 30,000 new social and affordable rental homes over five years via the new Housing Australia Future Fund. This will involve a <a href="https://insidestory.org.au/a-new-era-for-housing/">A$10 billion, debt-funded, equity investment</a>. Resulting annual returns will be ploughed into building subsidised housing available at below-market rates. </p>
<p>The 2022 ALP election platform had <a href="https://www.alp.org.au/policies/safer-and-more-affordable-housing">outlined this initiative</a>. The budget added a bonus in the form of federal funding for another 10,000 affordable rental homes under a newly minted <a href="https://ministers.treasury.gov.au/sites/ministers.treasury.gov.au/files/2022-10/national-housing-accord-2022.pdf">National Housing Accord</a> with state and territory governments.</p>
<p>As part of that deal, the states have pledged to enable construction of “up to” 10,000 affordable homes on top of Commonwealth commitments. One way they would do this is by making well-located state land available for the purpose.</p>
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Read more:
<a href="https://theconversation.com/labors-proposed-10-billion-social-housing-fund-isnt-big-as-it-seems-but-it-could-work-174406">Labor's proposed $10 billion social housing fund isn't big as it seems, but it could work</a>
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<h2>How achievable is the 1 million homes pledge?</h2>
<p>To help make housing more affordable for Australians in general, the accord also commits Australian governments to enabling at least 1 million new homes over five years from 2024. </p>
<p>A million homes has a good ring to it, but how ambitious is it really?</p>
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<p>Critics have pointed out that <a href="https://www.theguardian.com/australia-news/2022/oct/25/australia-federal-budget-2022-jim-chalmers-announce-national-housing-accord-to-build-1m-homes">985,000 homes were built</a> over the past five years. However, in Australia’s notoriously volatile housing system, that was a period of peak activity unlikely to be repeated soon. In the five years to 2014, for example, the total was only <a href="https://www.abs.gov.au/statistics/industry/building-and-construction/building-activity-australia/jun-2022/87520033.xlsx">860,000 homes</a>. And official and industry forecasts suggest <a href="https://www.theguardian.com/australia-news/2022/oct/25/australia-federal-budget-2022-jim-chalmers-announce-national-housing-accord-to-build-1m-homes">only about 180,000</a> housing completions per year on average over the next three years.</p>
<p>By these measures, the million homes target could be quite challenging. So how can it be achieved? </p>
<p>Firstly, if governments directly fund 50,000 social and affordable rental homes, that will be a good start. </p>
<p>Secondly, according to the <a href="https://budget.gov.au/2022-23-october/content/documents.htm">budget statement</a>, it’s hoped measures such as stepped-up rezoning of non-housing land for housing and higher-density redevelopment near transport hubs will boost market housing output. These moves could lead to better-sited house building. </p>
<p>This approach also follows from the analysis that unreasonably high prices and rents are largely a result of “constrained housing supply”, in turn largely due to excessive planning restrictions.</p>
<p>Planning simplification can never be a bad aspiration. However, <a href="https://theconversation.com/the-market-has-failed-to-give-australians-affordable-housing-so-dont-expect-it-to-solve-the-crisis-192177">it’s questionable</a> whether market players would ever boost construction rates enough to significantly lower new house prices – and therefore existing property values too.</p>
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Read more:
<a href="https://theconversation.com/the-market-has-failed-to-give-australians-affordable-housing-so-dont-expect-it-to-solve-the-crisis-192177">The market has failed to give Australians affordable housing, so don't expect it to solve the crisis</a>
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<h2>A one-sided view of the housing system</h2>
<p>The real problem here is that the budget and Labor’s election platform focused solely on the supply side of the market. They turned a blind eye to the policy settings that affect housing demand such as migration, tax, social security and financial regulation.</p>
<p>It would be hoped the more holistic analysis of Australia’s housing problems and solutions that’s essential to address these issues will underlie the government’s forthcoming <a href="https://www.alp.org.au/policies/national-housing-supply-and-affordability-council">National Housing and Homelessness Plan</a>. </p>
<p>Positively, the budget allocated funds for the plan’s development. But that task has been assigned to the Department of Social Services. This seems to raise the risk of an unduly narrowly defined conception of what’s needed. The concern is it might focus exclusively on homelessness and affordability at the lower end of the market. </p>
<p>Certainly, these are crucial aspects of the wider housing policy challenge. But to examine them in isolation risks misdiagnosis and the prescription of palliative solutions.</p>
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<h2>Budget downplays need for institutional reform</h2>
<p>The budget papers also imply a substantial downgrading of another ALP election pledge – to emulate <a href="https://cityfutures.be.unsw.edu.au/documents/527/C4_Canadas_Housing_Story.pdf">countries such as Canada</a> by setting up a national housing agency. Just $500,000 a year is allocated to this task. In my book, Housing Australia should be leading on the national plan, as well as accommodating the re-established <a href="https://www.alp.org.au/policies/national-housing-supply-and-affordability-council">National Housing Supply and Affordability Council</a>.</p>
<p>With the right mandate, Housing Australia could create a much-needed permanent body of housing expertise within government, co-ordinating policy development and implementation across departments and levels of government. It could help to insulate housing policymaking from the short-term political dynamics that have plagued it for decades. This is an area where long-term thinking comes at a premium. </p>
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Read more:
<a href="https://theconversation.com/australia-has-been-crying-out-for-a-national-housing-plan-and-new-council-is-a-big-step-towards-having-one-188365">Australia has been crying out for a national housing plan, and new council is a big step towards having one</a>
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<p>Negotiating the multi-party Housing Accord within months of taking power is an impressive government achievement. More broadly, though, these developments seem to speak to a disappointingly lukewarm commitment to essential institutional reforms. </p>
<p>The governance structure for housing policy in Australia is outdated, fragmented and underpowered. It’s badly in need of an overhaul. </p>
<p>The decayed state of this framework, and the <a href="https://www.ahuri.edu.au/research/final-reports/278">long-term erosion of housing policy capacity</a> within government, help to explain the problems of the housing system itself.</p>
<p>After nearly a decade of Commonwealth neglect, the Albanese government has moved fast to flesh out its main housing commitments. Yet an administration with serious long-term ambition to restore the health of our housing system would also be embracing the challenge of wider policy governance reform. It’s a fairly low-cost undertaking, but a precondition for progress beyond this term of office.</p><img src="https://counter.theconversation.com/content/193289/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Hal Pawson receives funding from the Australian Housing and Urban Research Institute (AHURI), the Australian Research Council (ARC), Launch Housing, the Queensland Council of Social Service, and Crisis UK</span></em></p>Targets of 50,000 new homes for rent at below-market rates and 1 million homes to improve affordability in general are positive steps, but the budget neglects the need to reform an ailing system.Hal Pawson, Professor of Housing Research and Policy, and Associate Director, City Futures Research Centre, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1750632022-01-31T23:34:14Z2022-01-31T23:34:14ZWould you pass this financial literacy quiz? Many won’t – and it’s affecting expensive aged care decisions<figure><img src="https://images.theconversation.com/files/441204/original/file-20220118-19-16ka7jy.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C6720%2C4466&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>Paying for residential aged care accommodation in Australia is complex. Residents can pay a lump sum payment known as a refundable accommodation deposit (RAD), a rental style payment known as a daily accommodation payment (DAP), or a combination of both.</p>
<p>Deciding between the two is an important, complex financial decision and influenced by a host of factors unique to each person. And the stakes are high; it’s common to sell the family home to pay for aged care accommodation. Making the wrong accommodation payment decision could lead to reduced income and wealth, paying more for care, and having less to leave in bequests when you pass away.</p>
<p>Many residents get help from loved ones to navigate their way into residential aged care because they are experiencing age-related cognitive decline. So how do people make this decision and what role does financial literacy play?</p>
<p>To find out, colleagues and I measured financial literacy among 589 informal carers that substantially helped a resident decide. </p>
<p>Our <a href="https://www.mq.edu.au/__data/assets/pdf_file/0004/1182406/The-role-of-financial-literacy-when-paying-for-aged-care_FINAL.pdf">study</a> found less than half of all respondents were financially literate. Many were underconfident in
their financial literacy. Others were overconfident, potentially leading to accommodation payment decision mistakes.</p>
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<a href="https://images.theconversation.com/files/441205/original/file-20220118-15-nd1bgj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/441205/original/file-20220118-15-nd1bgj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/441205/original/file-20220118-15-nd1bgj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=398&fit=crop&dpr=1 600w, https://images.theconversation.com/files/441205/original/file-20220118-15-nd1bgj.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=398&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/441205/original/file-20220118-15-nd1bgj.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=398&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/441205/original/file-20220118-15-nd1bgj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=501&fit=crop&dpr=1 754w, https://images.theconversation.com/files/441205/original/file-20220118-15-nd1bgj.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=501&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/441205/original/file-20220118-15-nd1bgj.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=501&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Many residents receive help from loved ones to navigate their way into residential aged care.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
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Read more:
<a href="https://theconversation.com/weve-had-20-aged-care-reviews-in-20-years-will-the-royal-commission-be-any-different-103347">We've had 20 aged care reviews in 20 years – will the royal commission be any different?</a>
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<h2>The role of financial literacy</h2>
<p>Our study explored whether financial literacy influenced the decision to consult a financial adviser and whether financial literacy impacted decision confidence, stress, and perceived decision complexity. </p>
<p>We used a validated financial literacy measure known as the “Big Three” questions. You can do the quiz below; we defined someone as financially literate if they got three questions correct.</p>
<p><iframe id="tc-infographic-629" class="tc-infographic" height="400px" src="https://cdn.theconversation.com/infographics/629/31c0d4b67fe36d4880dc9342bc6736418d127b9d/site/index.html" width="100%" style="border: none" frameborder="0"></iframe></p>
<p>This measured literacy on inflation, interest rate, and risk diversification. We also asked respondents to rate their financial literacy.</p>
<p>We found:</p>
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<li><p>nearly one third of respondents were not certain the accommodation payment decision was the best for the resident financially</p></li>
<li><p>around 60% of respondents found deciding on how to pay for accommodation complex, and over half found deciding how to pay for accommodation stressful</p></li>
<li><p>less than half of all respondents were financially literate. Many were overconfident in their financial literacy, which could lead to worse financial outcomes for the resident. </p></li>
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<p>Many respondents may have ignored complex information or used a mental shortcut (what researchers call “simplifying heuristics”) when making an accommodation payment decision. For example, they might sell their home and choose a RAD without considering the capital gain they could have received if they had kept the home. </p>
<h2>Getting advice</h2>
<p>Just over one third of respondents used a financial advisor. More financial literacy was unlikely to have increased the use of a financial adviser. Highly financially literate individuals were more likely to use a financial adviser if they perceived their financial literacy as low. </p>
<p>Residential aged care providers also played a role. A respondent was more likely to use a financial adviser if the aged care provider suggested using a financial adviser, or informed them the resident had 28 days to make a payment decision once they entered care. While this condition should be in the final accommodation agreement, it may not be explicitly stated by the provider when discussing accommodation payment options. </p>
<p>We found higher financial literacy may help respondents understand the difference between a RAD and DAP, but was unlikely to increase decision confidence or reduce decision stress.</p>
<p>High financial literacy was associated with greater confidence only if respondents thought they had been enough time to make the decision. This suggests some people could make better decisions if aged care providers gave people more time to make a decision.</p>
<p>Respondents with high financial literacy were also more likely to be confident in their decision if the aged care provider didn’t say whether it preferred the resident to pay a RAD or a DAP. </p>
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<a href="https://images.theconversation.com/files/441206/original/file-20220118-27-1n06mjj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/441206/original/file-20220118-27-1n06mjj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/441206/original/file-20220118-27-1n06mjj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=404&fit=crop&dpr=1 600w, https://images.theconversation.com/files/441206/original/file-20220118-27-1n06mjj.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=404&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/441206/original/file-20220118-27-1n06mjj.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=404&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/441206/original/file-20220118-27-1n06mjj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=508&fit=crop&dpr=1 754w, https://images.theconversation.com/files/441206/original/file-20220118-27-1n06mjj.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=508&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/441206/original/file-20220118-27-1n06mjj.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=508&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Financial literacy education may help some people, but our study suggests benefits will be limited.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
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<h2>So what would help?</h2>
<p>It’s not possible to say whether RAD, DAP, or some combination of both is better; the answer depends on your circumstances. Selling the home when entering care may not be the best option financially.</p>
<p>The <a href="https://www.servicesaustralia.gov.au/financial-information-service">Financial Information Service</a> run by Services Australia can help people better understand their financial affairs and how to use financial planning advice, but does not advise on which accommodation payment type is best. </p>
<p>Financial literacy education may help some people, but our study suggests benefits will be limited. </p>
<p>Each resident has unique financial and personal circumstances. To make an informed accommodation payment decision, you need to factor in and predict the future value of financial assets.</p>
<p>The Australian government is still exploring whether it should remove RADs, as suggested by the Royal Commission on Aged Care Quality and Safety. This would simplify the accommodation payment choice but likely take years to implement. </p>
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<a href="https://images.theconversation.com/files/441888/original/file-20220121-9299-620icq.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/441888/original/file-20220121-9299-620icq.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/441888/original/file-20220121-9299-620icq.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=265&fit=crop&dpr=1 600w, https://images.theconversation.com/files/441888/original/file-20220121-9299-620icq.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=265&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/441888/original/file-20220121-9299-620icq.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=265&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/441888/original/file-20220121-9299-620icq.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=333&fit=crop&dpr=1 754w, https://images.theconversation.com/files/441888/original/file-20220121-9299-620icq.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=333&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/441888/original/file-20220121-9299-620icq.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=333&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">The Royal Commission on Aged Care Quality and Safety recommended RADs be phased out.</span>
<span class="attribution"><span class="source">https://agedcare.royalcommission.gov.au/sites/default/files/2021-03/final-report-recommendations.pdf</span></span>
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<p>When discussing accommodation payment options, all residential aged care providers should ensure residents know they have 28 days to make a decision once they enter care. </p>
<p>That will help reduce decision complexity and stress and increase decision confidence. </p>
<p>Providers should also not express their preference for receiving a RAD or DAP, as our results show, this can make the decision more complex for people and give them less confidence in their decision.</p>
<p>The Australian government should also explore subsidising access to financial advice or establishing its own financial adviser service. </p>
<p>This would align with other Australian government programs to improve health and wealth outcomes for older Australians, such as prostate and breast cancer screening and Life Checks.</p>
<p>When moving into residential aged care, good financial outcomes are as important.</p>
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Read more:
<a href="https://theconversation.com/older-australians-are-already-bamboozled-by-a-complex-home-care-system-so-why-give-them-more-of-the-same-173326">Older Australians are already bamboozled by a complex home-care system. So why give them more of the same?</a>
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<img src="https://counter.theconversation.com/content/175063/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>This research was funded using an unconditional grant from the Ecstra Foundation. MUCHE has received government funding for aged care related work. This story is part of a series on financial and economic literacy funded by Ecstra Foundation.</span></em></p>We measured financial literacy among 589 informal carers that substantially helped an older person make a decision about paying for residential aged care. Less than half were financially literate.Henry Cutler, Professor and Director, Macquarie University Centre for the Health Economy, Macquarie UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/910722018-02-13T19:07:20Z2018-02-13T19:07:20ZSix lessons on how to make affordable housing funding work across Australia<figure><img src="https://images.theconversation.com/files/205875/original/file-20180212-31377-1mn4n29.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">New affordable housing development in Melbourne</span> <span class="attribution"><span class="source">Ryan van den Nouwelant</span></span></figcaption></figure><p>A suitable construction funding model is the critical missing ingredient needed to deliver more affordable housing in Australia. Aside from short-lived programs under the Rudd government, we have seen decades of inconsistent and fragmented policies loosely directed at increasing affordable housing. These have failed to generate anything like enough new supply to meet <a href="https://www.ahuri.edu.au/research/final-reports/241">outstanding needs</a>.</p>
<p><a href="http://www.ahuri.edu.au/research/final-reports/293">Our latest research</a> looked at recently built, larger-scale affordable housing projects in contrasting markets across Australia. We examined each scheme’s cost, funding sources and outcomes. We then developed a housing needs-driven model for understanding the financial and funding requirements to develop affordable housing in the diverse local conditions across the country. </p>
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Read more:
<a href="https://theconversation.com/australia-needs-to-reboot-affordable-housing-funding-not-scrap-it-72861">Australia needs to reboot affordable housing funding, not scrap it</a>
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<p>Up to now, the key stumbling block has been the “funding gap” between revenue from rents paid by low-income tenants and the cost of developing and maintaining good-quality housing. The <a href="https://static.treasury.gov.au/uploads/sites/1/2017/06/C2016-050_Final_report.pdf">Commonwealth Treasury</a> acknowledged this problem last year. And the problem is greatest in the urban areas where affordable housing is most needed.</p>
<h2>What does the new model tell us?</h2>
<p>The Affordable Housing Assessment Tool (AHAT) enables the user to calculate cost-effective ways to fund affordable housing to meet specified needs in different markets. It’s a flexible interactive spreadsheet model with an innovative feature: it enables users to embed housing needs as the driver of project and policy, rather than project financial feasibility driving who can be housed.</p>
<p>Affordable housing developments have recently been relatively sparse. However, our research highlighted the varied and bespoke funding arrangements being used. </p>
<p>Despite this variety, too often project outcomes are driven purely by funding opportunities and constraints, rather than by defined housing needs. One notable constraint is the fragmented nature of affordable housing subsidy frameworks both within and across jurisdictions.</p>
<p>Our case study projects generated a diversity of housing outcomes. This can be seen as an unintended positive of the bespoke nature of affordable housing provision as a result of the need to “stitch together” gap funding from multiple sources on a project-by-project basis. </p>
<p>Equally though, the lack of policy coherence and fit-for-purpose funding added cost and complexity to the development process. By implication, this leads to a less-than-optimal outcome for public investment. Despite providers’ best efforts, current approaches are not the most efficient way to deliver much-needed affordable housing.</p>
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Read more:
<a href="https://theconversation.com/affordable-housing-finger-pointing-politics-and-possible-policy-solutions-75703">Affordable housing, finger-pointing politics and possible policy solutions</a>
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<h2>What are the lessons from this research?</h2>
<p>We applied the model to typical housing development scenarios in inner and outer metropolitan areas and regions. By doing so, we identified six key lessons for funding and financing affordable housing delivery.</p>
<p><strong>1) Government help with access to land is central to affordable housing development and enhances long-term project viability.</strong></p>
<p>Especially in high-pressure urban markets, not-for-profit housing developers cannot compete with the private sector for development sites. High land costs, particularly in inner cities where affordable housing demand is most extreme, can render financial viability near impossible. Having access to sites and lower-cost land were two of the most important components of feasible projects.</p>
<p><strong>2) Government equity investment offers considerable potential for delivering feasible projects and net benefit to government.</strong></p>
<p>How governments treat the valuation of public land with potential for affordable housing development must be reviewed. Conventionally, even where affordable housing is the intended use, governments typically insist on a land sale price based on “highest and best use”. </p>
<p>It would be preferable in such cases to treat the below-market value assigned to public land as a transparent subsidy input. This would mean the sale price reflects the housing needs that the development seeks to meet. That is, the land value should be priced as an affordable housing development for a specific needs cohort. </p>
<p>By retaining an equity stake, government could account for its input as an investment that will increase in value over time as land values appreciate.</p>
<p><strong>3) Reducing up-front debt load and lowering finance costs are critical to long-term project viability.</strong></p>
<p>Debt funding imposes a large cost burden over a project’s lifetime. This is ultimately paid down through tenant rents. Reducing both the cost and scale of private financing can have a significant impact on project viability. </p>
<p>The analysis reinforces the rationale for the Australian government’s “<a href="http://www.budget.gov.au/2017-18/content/glossies/factsheets/html/HA_18.htm">bond aggregator</a>” facility for reducing financing costs for affordable housing projects. But this must come in tandem with other measures to reduce up-front debt.</p>
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Read more:
<a href="https://theconversation.com/government-guarantee-opens-investment-highway-to-affordable-housing-88549">Government guarantee opens investment highway to affordable housing</a>
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<p><strong>4) Delivery across the range of housing needs helps to meet overall social and tenure mix objectives. This also can help improve project viability through cross-subsidy.</strong></p>
<p>Mixing tenure and tenant profiles can enable affordable housing providers to produce more diverse housing that meets the full range of needs. </p>
<p>Cross-subsidy opportunities arising from mixed-tenure and mixed-use developments can also enhance project feasibility. By improving a provider’s financial position, this helps advance their long-term goal of adding to the stock of affordable housing. And, by providing welcome flexibility, this enables organisations to better manage development risk across different markets and cycles.</p>
<p><strong>5) The financial benefit of planning bonuses is limited</strong></p>
<p>Inclusionary zoning mechanisms impose affordable housing obligations on developers through the planning system. This approach potentially offers a means of securing affordable housing development sites in larger urban renewal or master-planned areas. </p>
<p>However, our research demonstrated that planning bonuses allowing increased dwelling numbers in return for more affordable housing have little beneficial impact on project viability. This is because the additional dwellings allowed generate additional land and/or construction costs but no matching capacity to service a larger debt.</p>
<p>However, planning bonuses can be useful as part of a cross-subsidy approach. In this case, they may support project viability, without necessarily resulting in any additional affordable dwellings.</p>
<p><strong>6) Increasing the scale of not-for-profit provision offers financial benefits that help ensure the long-term delivery of affordable housing.</strong></p>
<p>Our analysis supports the case for targeting public subsidy to not-for-profit developers (government or non-government) to maximise long-term social benefit. Investing in permanently affordable housing ensures the social dividend of affordable housing can be continued into the future. </p>
<p>Comparable subsidies are not preserved when allocated to private owners. They will seek to trade out at some stage, capitalising the subsidy into privatised gain.</p>
<p>The results of our case study analyses and modelling highlight the need to develop comprehensive funding and subsidy arrangements that account for different costs in different locations. These arrangements also must be integrated nationally to support affordable housing delivery at scale.</p>
<p>This study reiterates the common finding of research over the last decade: both Commonwealth and state/territory governments need to develop a coherent and long-term policy framework to provide housing across the full spectrum of need.</p><img src="https://counter.theconversation.com/content/91072/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Laurence Troy receives funding from Australian Housing and Urban Research Institute and the South Sydney Regional Organisation of Councils.</span></em></p><p class="fine-print"><em><span>Bill Randolph receives funding from: The Australian Research Council; Australian Housing and Urban Research Institute; NSW Federation of Housing Associations; Frasers Property; Landcom.</span></em></p><p class="fine-print"><em><span>Ryan van den Nouwelant receives funding from the Australian Housing and Urban Research Institute (AHURI), the Collaborative Research Centre for Spatial Information (CRC-SI), the Greater Sydney Commission, the NSW Federation of Housing Associations, Frasers Property Australia, South Sydney Regional Organisation of Councils (SSROC) and Landcom. </span></em></p><p class="fine-print"><em><span>Vivienne Milligan receives funding from the Australian Housing and Urban Research Institute (AHURI) and the NSW Government. She is a member of the board of the NSW Federation of Housing Associations.</span></em></p>Based on research comparing projects across the country, a new assessment tool calculates cost-effective ways to fund affordable housing to meet specified needs in different markets.Laurence Troy, Research Fellow, City Futures Research Centre, UNSW SydneyBill Randolph, Director, City Futures - Faculty Leadership, City Futures Research Centre, Urban Analytics and City Data, Infrastructure in the Built Environment, UNSW SydneyRyan van den Nouwelant, Senior Research Officer - City Futures Research Centre, UNSW SydneyVivienne Milligan, Visiting Senior Fellow - City Futures Research Centre, Housing Policy and Practice, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/870992017-11-09T19:20:21Z2017-11-09T19:20:21ZVital Signs: business conditions are peachy, so why aren’t businesses investing?<p><em>Vital Signs is a weekly economic wrap from UNSW economics professor and Harvard PhD Richard Holden (@profholden). Vital Signs aims to contextualise weekly economic events and cut through the noise of the data affecting global economies.</em></p>
<p><em>This week: interest rates remained on hold as housing finance fell to a new low, conditions remain good for business, but they’re still not investing, and the US economy will likely miss Janet Yellen.</em></p>
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<p>On Melbourne Cup day, the RBA kept interest rates on hold at 1.5%, yet again. And why wouldn’t it?</p>
<p>There has been some progress in curtailing the runaway housing market, inflation is still low, and upcoming changes to the way inflation is measured seem set to push it lower than it would otherwise have been.</p>
<p>The Australian Bureau of Statistics (ABS) will now put more weight on rent and utilities and less on food and non-alcoholic beverages, beginning in December. Macquarie Securities analyst <a href="http://www.smh.com.au/business/the-economy/abs-tweak-has-big-impact-on-interest-rates-inflation-20171106-gzfzzc?deviceType=text">Justin Fabo suggested</a> this would have lowered the September quarter CPI by 25 basis points if the new method had been used.</p>
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Read more:
<a href="https://theconversation.com/explainer-why-some-economists-think-the-rba-should-drop-its-inflation-target-64265">Explainer: why some economists think the RBA should drop its inflation target</a>
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<p>Moreover, with Amazon set to enter Australia – and the Australian Competition and Consumer Commission <a href="http://www.huffingtonpost.com.au/2017/11/04/amazon-will-be-able-to-legally-set-super-low-prices-and-undercut-local-competition_a_23266601/">blessing its ability to charge low prices</a> without running afoul of competition laws – there could be more downward pressure on inflation. Note to ABS: put online shopping properly in the CPI basket!</p>
<p><a href="http://www.abs.gov.au/ausstats/abs@.nsf/mf/5609.0">ABS figures released Thursday</a> showed that housing finance for September fell 3.6% to A$32.5 billion (in seasonally adjusted terms) – the lowest it has been since April. In fact, the year-on-year level is unchanged. </p>
<p>Investor loans were down sharply, 6.2%. This appears to be connected to the Australian Prudential Regulation Authority’s regulatory clamp-down on interest-only loans. If this tightens credit growth relatively slowly, it could help the housing market from getting further out of control. But there’s a lot more evidence needed to feel comfortable that’s what we’re witnessing.</p>
<p>Meanwhile, on the business side, <a href="https://business.nab.com.au/nab-monthly-business-survey-september-2017-26604/">the NAB business conditions index</a> held steady at a robust +14 points.</p>
<p>NAB’s Chief Economist, Alan Oster, said: </p>
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<p>Business conditions at these levels tell us that the business sector in Australia is doing very well. We have certainly seen that reflected to some degree in areas like corporate profits and jobs growth, but other aspects of the economy – such as business investment – have been somewhat disappointing in comparison. In that context, it will be important to keep an eye on the recent softer trend in business confidence.</p>
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<p>And there’s the rub. “Conditions” isn’t the same thing as “confidence”. </p>
<p>Conditions are pretty good for business: low interest rates, low inflation, relative financial stability. But a weak consumer side has for a long time been related to sluggish business investment and a pronounced lack of confidence. As Oster put it:</p>
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<p>Limited pass-through of lofty business conditions to the broader economy could be signalling ongoing risk aversion and a preference to use profits for balance sheet repair. Additionally, our previous concerns around the consumption outlook remain well entrenched, especially following very poor retail sales in August and stubbornly weak retail conditions in the NAB Survey.</p>
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<p>The main news overseas was the much anticipated announced of Jay Powell as chair of the US Federal Reserve. Although Powell is a solid choice – and much better than some of the loopy possibilities that were floated by the Trump White House – it is certainly sad that Janet Yellen not be reappointed.</p>
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Read more:
<a href="https://theconversation.com/trump-picks-safe-choice-to-lead-the-federal-reserve-6-questions-answered-86661">Trump picks 'safe' choice to lead the Federal Reserve: 6 questions answered</a>
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<p>Yellen has done an extraordinary job as a steward of the US economy. Among other things, she held her nerve in keeping interest rates low to help the economy recover, despite all kinds of bed-wetting from inflation hawks who were convinced that low rates would lead to an inflation spiral.</p>
<p>Yellen seemed to understand better than anyone that we were living in a new economic era in which inflationary pressures were much more muted than they have been in the past – even with very low measured unemployment, such as 4.1% in the US.</p>
<p>She also advocated a relatively hard line on financial regulation, while signalling openness to reconsidering parts of <a href="https://www.investopedia.com/terms/d/dodd-frank-financial-regulatory-reform-bill.asp">Dodd-Frank</a>. This is the area where Powell needs to be watched. Will he go along with slashing financial regulations and opening up the possibility of another financial crisis?</p>
<p>Let’s hope not – but with Yellen we knew for sure.</p><img src="https://counter.theconversation.com/content/87099/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Richard Holden is an ARC Future Fellow.</span></em></p>Business conditions aren’t translating to confidence, despite growing profits and jobs.Richard Holden, Professor of Economics and PLuS Alliance Fellow, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/767932017-05-10T03:25:03Z2017-05-10T03:25:03ZBond aggregator helps build a more virtuous circle of housing investment<p>Following Treasurer Scott Morrison’s <a href="http://www.ahuri.edu.au/evidence-in-action/news/transcript-of-treasurers-address-on-housing-affordability-now-available">outburst</a> in April over the meagre supply outcomes delivered by state housing agencies, cool Treasury heads have prevailed in the budget. The Commonwealth has <a href="https://theconversation.com/australia-needs-to-reboot-affordable-housing-funding-not-scrap-it-72861">not withdrawn its support</a>. Rather, it will negotiate clear targets under a new national agreement, and aim to ring-fence capital investment to improve social housing outcomes. This will now complement the government’s new strategy of issuing bonds to finance affordable rental housing.</p>
<p>Morrison has already set up a <a href="http://sjm.ministers.treasury.gov.au/media-release/017-2017/">taskforce</a> to fine-tune a new <a href="http://www.ahuri.edu.au/policy/ahuri-briefs/bond-aggregator-model">bond aggregator</a>, which the budget proposes to roll into a larger <a href="https://theconversation.com/sensible-reform-to-finance-affordable-housing-deserves-cross-party-support-72059">National Housing Finance and Investment Corporation</a> (NHIFC). Establishment funding of A$9.8 million and a $1 billion loan facility will get things moving. </p>
<p>This is safe policy territory and sound strategy. The social housing sector and all major parties have supported housing bonds and a special-purpose intermediary since the 2015 report of the <a href="http://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Economics/Affordable_housing_2013">Senate Inquiry into Housing Affordability</a>. It demonstrates the explicit, long-term government commitment required to shore up investor confidence. </p>
<p>If the taskforce gets the design right, the intermediary will provide lower-cost, longer-term financing for affordable rental housing. This will mean public investment goes further and is recycled to build more affordable homes for those who need them. </p>
<p>Yet investment-ready social housing still has several requirements for success. These include good transparent planning, equity, revolving loans, and adequate revenue from rents and rent assistance. Appropriate national regulation is vital, which is also flagged in the budget. </p>
<p>However, without conditional public co-investment and good regulation, the government will miss its own targets and under-invest in this much-needed social infrastructure. </p>
<h2>No silver bullet – feasibility depends on subsidy</h2>
<p>The bond aggregator by itself cannot create a development pipeline. It needs co-investment from government to make it feasible. </p>
<p>Community housing providers can only afford the amount of debt that modest rents and rent assistance can support. Modelling for a 2016 <a href="http://www.communityhousing.org.au/mediareleases/NSWFHA%20Financial%20Intermediary.pdf">feasibility study</a> found that about 45% of the cost of dwelling construction can be raised when operated as social rental housing, even with the lower rate and longer term of finance the aggregator can provide. </p>
<p>Thus deeply affordable social housing will always require public subsidies. This takes the form of grants, soft loans, or land allocated via public land corporations or planning requirements. </p>
<h2>Policy orphan finally gets Treasury’s attention</h2>
<p><a href="https://theconversation.com/australia-needs-to-reboot-affordable-housing-funding-not-scrap-it-72861">Writing for The Conversation</a>, Chris Martin and Hal Pawson summed up past performance: </p>
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<p>It should be no surprise that Australia’s social housing has been largely static for 20 years. Everything we know about the system tells us it is not funded to even cover the costs of its ongoing operation, let alone growth to meet the needs of an expanding population. Aside from a one-off boost under the 2009 federal economic stimulus plan, social housing has been on a starvation ration for decades. </p>
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<p>National governments in Austria, the UK, France and the US have made up for shortfalls in social housing funding with good regulation and by attracting private finance since the 1990s. They have done so by establishing a market for special-purpose bonds, government guarantees, special intermediaries, tax credits and supporting circuits of investment in affordable and social rental housing.</p>
<p>These measures often favour not-for-profit housing providers, but can also <a href="http://www.ahuri.edu.au/research/final-reports/264">revitalise public housing agencies</a>. </p>
<p>Meanwhile, Australian social housing policy turned inward. Governments frittered away their skeletal public housing stocks, narrowly targeted the rest and diverted much-needed capital to reduce operating deficits. </p>
<p>This ultimately <a href="http://www.ahuri.edu.au/research/final-reports/106">bankrupted</a> state housing agencies, which were all but given their <a href="https://theconversation.com/australia-needs-to-reboot-affordable-housing-funding-not-scrap-it-72861">marching orders</a> by <a href="http://www.ahuri.edu.au/evidence-in-action/news/transcript-of-treasurers-address-on-housing-affordability-now-available">Morrison in April</a> and earlier by his assistant minister, Michael Sukkar, in <a href="http://www.news.com.au/national/politics/turnbull-government-to-axe-national-affordable-housing-scheme/news-story/6bdb60c21d24dbf188c18fea3701237f">February</a>. They ran into <a href="https://www.missionaustralia.com.au/news-blog/news-media/scrapping-naha-without-a-clear-replacement-is-illogical-and-extremely-disconcerting#MGUmGgHzQD7Z2hSf.97">strong opposition</a> from community and public housing providers (and the for-profit private sector) – which are eager to play a <a href="https://probonoaustralia.com.au/news/2017/04/affordable-housing-industry-capacity-lacks-government-certainty/">more active role in social housing supply</a>. </p>
<p>Recently, though, Treasury’s “debt and deficit” doctrine has been making way for a new vision of productive public investment to boost both economic and social development. Investment in social housing should be an integral part of urban plans. It needs to be part and parcel of every infrastructure strategy, <a href="https://theconversation.com/smart-cities-plan-offers-signs-of-hope-but-are-turnbull-and-taylor-just-dreamin-58628">Smart City Plan</a>, or <a href="https://theconversation.com/city-deals-still-no-more-than-a-pamphlet-after-budget-2016-58737">City Deal</a>. Bringing housing and infrastructure together under the new NHFIC could help, within an overarching plan with strategic housing targets.</p>
<p>Co-operative leadership and national funding remain essential. Morrison and Sukkar <a href="http://www.theaustralian.com.au/business/property/michael-sukkar-cooperation-key-in-housing-affordability/news-story/c7579d3ac313dfe4206faf3a85f8bafe">seem to appreciate</a> that a coherent and efficient approach to setting standards and creating funding certainty will induce financial institutions to invest in social housing.</p>
<h2>Wanted: dedication to social housing growth</h2>
<p>Investment not only reduces public housing waiting lists most directly, it ensures fairer allocation of housing opportunities. At the same time it provides a shock-absorber for the economy, especially as it transitions from the resources boom, to build more productive and resilient cities.</p>
<p>Social housing creates jobs for the construction industry and uses local commodities, with many <a href="http://www.csi.edu.au/media/uploads/AHURI_Final_Report_No265_What-are-the-health-social-and-economic-benefi..._2edQIWr.pdf">social and economic spin-offs</a>.</p>
<p>Well-designed social housing, such as revitalised public and green community housing mixed with a range of housing types, provides a tangible infrastructure asset and a vital community service. It’s especially important for tenants who are elderly, have disabilities, or were formerly homeless. </p>
<p>Emergency services, health care and homelessness shelters, among others, bear the much higher costs of neglecting these households. This ultimately harms both the <a href="https://www.ahuri.edu.au/research/final-reports/265">budget bottom line and our social fabric</a>.</p>
<p>Morrison has directed the <a href="http://sjm.ministers.treasury.gov.au/media-release/017-2017/">Affordable Housing Implementation Taskforce</a> to report on the bond aggregator in July. The taskforce comprises three senior (former) public servants. They are advised, as usual, by one of the big four accounting firms. </p>
<p>It must be hoped their work contributes towards a broader vision <a href="https://www.ahuri.edu.au/__data/assets/pdf_file/0016/12832/Ready-for-growth-Inquiry-into-Australias-affordable-housing-industry-capacity-Visual-Report.pdf">for social housing growth</a>. It should draw on <a href="http://www.ahuri.edu.au/research/position-papers/156">international best practice</a> as well as AHURI’s advice on an <a href="http://www.ahuri.edu.au/research/final-reports/220">Affordable Housing Finance Corporation</a>. Government policy needs to embrace the notion that social housing is not only good investment but essential social infrastructure.</p><img src="https://counter.theconversation.com/content/76793/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Julie Lawson receives funding from the Australian Housing and Urban Research Institute and has played a leading role in researching international experience of channeling investment towards affordable rental housing via special purpose financial intermediaries, bond instruments and guarantees, and defining the requirements for an Australian Housing Finance Corporation to invest in the supply of social and affordable housing. She has published her research on these issues with colleagues across the AHURI network including Mike Berry, Carrie Hamilton, Vivienne Milligan, Judy Yates and Hal Pawson and also contributed to numerous Senate and government inquiries on housing affordability and social housing finance.</span></em></p>The bond aggregator by itself cannot create a housing development pipeline. It needs co-investment from government to make it feasible.Julie Lawson, Honorary Associate Professor, RMIT UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/720592017-02-02T04:36:51Z2017-02-02T04:36:51ZSensible reform to finance affordable housing deserves cross-party support<p>Treasurer <a href="http://www.smh.com.au/federal-politics/political-news/scott-morrison-looks-to-london-to-solve-housing-affordability-crisis-20170121-gtw6un.html">Scott Morrison’s visit</a> to cold old London in January in the middle of the Australia summer was time well spent. Morrison made time in his hectic schedule for a lengthy meeting with the UK’s Housing Finance Corporation (<a href="http://www.thfcorp.com/">THFC</a>) to discuss an affordable housing financial intermediary with its chief executive, Piers Williamson. </p>
<p>Founded in 1987 to make up for the shortfall in public funding, THFC is a finance aggregator and intermediary that co-funds affordable housing for rent and ownership. And Williamson is no stranger to Australia’s housing problems. He has been a source of advice and advocate for policy reform in various Australian industry and government forums. He also has the ear of our largest superannuation funds. </p>
<p>And, much like Australia, the UK has a serious problem with housing affordability and supply, made worse by policy and market <a href="http://www.independent.co.uk/money/how-speculation-shaped-the-housing-market-a7229551.html">settings</a> that fuel instability in rental housing. In this context, channelling investment via a specialist financial intermediary towards <em>new</em> <em>affordable</em> housing provided by landlords with a social purpose makes good sense. </p>
<p>The idea just needs an effective champion in Australia. In fact, it needs a bipartisan team of champions.</p>
<h2>How does this financing model work?</h2>
<p>Long <a href="http://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Economics/Affordable_housing_2013/Report">identified</a> as a glaring gap in Australia’s affordable housing system, bonds issued via a specialist intermediary would steer investment to where it is sorely needed. If combined with appropriate incentives and public programs, it would go a very long way towards producing more affordable housing choices, as in the UK.</p>
<p><a href="http://www.ahuri.edu.au/research/position-papers/156">International research</a> found the UK’s Housing Finance Corporation to be one of the world’s leading examples of good practice. It funds not only affordable housing but also ensures that investment flows towards registered landlords meeting real accommodation needs. </p>
<p>Researchers have adapted this model in proposals for an Australian <a href="http://www.ahuri.edu.au/policy-development/ahuri-briefs/bond-aggregator-model?utm_source=website&utm_medium=homepage&utm_campaign=slider1">Affordable Housing Finance Corporation</a>. Combined with a well-designed guarantee and revolving capital loans program, it’s a feasible approach, as a New South Wales government-funded <a href="http://www.communityhousing.org.au/mediareleases/NSWFHA%20Financial%20Intermediary.pdf">study found in 2016</a>. </p>
<p>In the UK, THFC combines the borrowing demands from small social landlords with committed public assistance to source the most favourable financing terms available from capital markets. With a guarantee, these enabled housing associations to borrow at a <a href="http://www.socialhousing.co.uk/housing-associations-borrow-at-cheaper-rate-than-uk-government/7009981.article">cheaper</a> rate than the UK government. </p>
<p>THFC acts as the landlords’ principal. It issues mortgage bonds on their behalf, raising and passing on funds at a lower cost than would be individually possible. </p>
<p>Public funds on both the supply and demand side are also an important part of the equation. The NSW feasibility study makes it clear that a stable government co-investment strategy is required to ensure affordable supply. </p>
<p>Such a strategy was well established <a href="https://www.gov.uk/topic/housing/funding-programmes">in the UK</a>. But in recent years it has become less generous and stable, which has affected both supply and affordability. The <a href="http://eprints.lse.ac.uk/63399/1/__lse.ac.uk_storage_LIBRARY_Secondary_libfile_shared_repository_Content_Whitehead,%20C_Financing%20affrodable%20housing_Whitehead_Financing%20affordable%20housing_2015.pdf">UK experience</a> demonstrates that the greater the share of public investment and stability of revenue settings, the lower the cost of private finance and the more affordable dwellings can be. </p>
<p>Over the past 30 years, THFC co-financed more than 2.4 million dwellings through well-regulated landlords with a commitment to secure affordable housing. These registered <em>social</em> landlords allocate dwellings on the basis of need rather than to the highest bidder. Renting affordable homes to those who need them is their business focus, not capital gains. </p>
<p>These landlords are well regulated for this purpose. In return, they have access to favourable public loans, tax incentives and direct revenue support via the UK’s <a href="https://www.gov.uk/housing-benefit/overview">Housing Benefit</a>. </p>
<p>With detailed knowledge of providing sustainable social housing, THFC is able to assess the financing needs and credit risks of the housing assistance sector. Large institutional investors have little time for this. THFC’s hands-on scrutiny has ensured a <a href="http://www.ahuri.edu.au/__data/assets/pdf_file/0025/2887/AHURI_Positioning_Paper_No156_The-use-of-guarantees-in-affordable-housing-investment-a-selective-international-review.pdf">zero-default</a> record and <a href="http://www.thfcorp.com/investing-and-borrowing/investor-relations/credit-opinion">stable A credit rating</a> from Standard and Poor’s. </p>
<p>When an intermediary like THFC is combined with a government guarantee it can be even more effective in reducing perceived risks and thus financing costs, as our international <a href="https://www.ahuri.edu.au/research/position-papers/156">research</a> shows. Since 1991, <a href="http://www.egw-ccl.ch/">the Swiss government</a> helped to build, then backed, a thriving bond-issuing co-operative. This created a new market for bonds and drove down mortgage interest rates for affordable rental housing. </p>
<p>The UK’s <a href="http://www.thfcorp.com/investing-and-borrowing/affordable-housing-finance">Affordable Housing Guarantee</a> delivered A$4.15 billion at or below the rate of government bonds in its three-year existence. The not-for-profit Housing Finance Corporation was licensed to manage this scheme. With the UK Treasury guarantee, it was able to obtain and pass through funds from the European Investment Bank below government gilts. </p>
<h2>What conditions are needed for success?</h2>
<p>The longest-term and lowest-cost investment flows to where the risks are known and predictable. In the UK, these risks have been reduced by four key conditions:</p>
<ul>
<li><p>On the revenue side, rents have been underpinned by adequate levels of assistance for those who need it.</p></li>
<li><p>Landlords are registered and <a href="https://www.scottishhousingregulator.gov.uk/">regulated</a> in England and Scotland to ensure they are not only financially sound but also socially responsible and thus eligible for government support and tax incentives.</p></li>
<li><p>On the supply side, government <a href="https://www.gov.uk/topic/housing/funding-programmes">funding instruments</a> provides subordinated loans, guarantees and equity.</p></li>
<li><p><a href="http://www.pas.gov.uk/3-community-infrastructure-levy-cil/-/journal_content/56/332612/4090701/ARTICLE">Planning mechanisms</a> provided well-located land for affordable housing development. </p></li>
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<p>These conditions have been in place throughout successive governments, Conservative and Labour. More recently, the emphasis has shifted from social rental dwellings towards <a href="https://www.gov.uk/government/collections/shared-ownership-and-affordable-homes-programme-2016-to-2021-guidance">affordable home ownership</a>.</p>
<p>The situation in Australia is different. The small community housing sector offers long-term tenancies and shared-ownership housing in a supportive context. However, the sector needs a more sustainable business model to grow. </p>
<p>Current policy settings affecting supply (capital investment, planning provisions) and rent assistance are too weak and uncertain. This can change; it’s all a matter for policy reform. Other countries have moved ahead and Australia needs to catch up.</p>
<p>With an intermediary and appropriate government support behind them, Australian community housing organisations will have the potential to grow, as they have in the <a href="https://www.ahuri.edu.au/__data/assets/pdf_file/0013/3118/AHURI_Research_Paper_International_measures_to_channel_investment_towards_affordable_rental_housing.pdf">UK, US, Switzerland and Austria</a>. </p>
<p>By now Morrison and his team should be well informed, having spoken to the UK experts, boned up on international evidence and consulted Australian industry. </p>
<p>Following the recommendations of the <a href="http://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Economics/Affordable_housing_2013/Report">Senate inquiry</a> into affordable housing and Treasury’s own <a href="http://www.treasury.gov.au/%7E/media/Treasury/Consultations%20and%20Reviews/Consultations/2016/CFFR%20Affordable%20Housing%20Working%20Group/Key%20Documents/PDF/Final_report.ashx">Affordable Housing Working Group</a>, sensible policy reforms such as these are likely to attract cross-party support. They not only draw on proven best practice elsewhere but can be adapted to Australian market conditions and growing needs.</p><img src="https://counter.theconversation.com/content/72059/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Dr Julie Lawson is Honorary Associate Professor at RMIT University's Center for Urban Research and receives National Housing Research Program funding via the Australian Housing and Urban Research Institute.for her research on international developments in social housing finance and the development of financing instruments and intermediaries to channel public and private investment towards affordable and social housing in Australia. Her peer reviewed publications on this topic are available on the AHURI website.</span></em></p>Scott Morrison has been exploring a UK model for channelling investment via a specialist financial intermediary into new affordable housing provided by landlords with a social purpose. It makes sense.Julie Lawson, Honorary Associate Professor, RMIT UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/578702016-04-15T06:06:29Z2016-04-15T06:06:29ZAustralia’s housing finance in seven charts<p>The latest Australian housing finance statistics back-up what we already know: the national housing market is starting to cool.</p>
<p>Local housing economists have been <a href="http://www.realestate.com.au/news/industry-forecasters-predict-slow-and-steady-growth-ahead-with-no-bubble-in-sight/news-story/cc63e2d1297c79551127677cc388e1a8">pouring water on the notion of a “property bubble” recently</a>, arguing instead that rather than a bubble pop, we are on track for a gradual easing.</p>
<p>And at the aggregate level this is what’s happening. Home loan commitments are continuing to grow. However, this growth is occurring at a rate that has been slowing since the middle of last year. </p>
<p>The seven charts below unpick the latest housing finance figures.</p>
<h2>1. National growth in loans</h2>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/118834/original/image-20160415-11420-e5y16g.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/118834/original/image-20160415-11420-e5y16g.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/118834/original/image-20160415-11420-e5y16g.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=392&fit=crop&dpr=1 600w, https://images.theconversation.com/files/118834/original/image-20160415-11420-e5y16g.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=392&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/118834/original/image-20160415-11420-e5y16g.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=392&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/118834/original/image-20160415-11420-e5y16g.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=493&fit=crop&dpr=1 754w, https://images.theconversation.com/files/118834/original/image-20160415-11420-e5y16g.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=493&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/118834/original/image-20160415-11420-e5y16g.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=493&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Data source: ABS Housing Finance, Australia (5609.0), Released 11 April 2016.</span>
</figcaption>
</figure>
<p>According to data released this week by the ABS, the overall growth in loans for housing increased a modest 1.5% in February (seasonally adjusted terms). Despite a bounce after the slow January month, growth over the past 12 months sits below the last five years’ average annual loan commitments. (It’s the same story if we look instead at the value of loans.)</p>
<p>Where the picture gets really interesting is in the change in commitments to loans for the purchase of new dwellings. The number of loans in this category fell over 15% from January into February. Where this was the fastest growing category of housing finance at the end of 2015, it is now the leading area of contraction.</p>
<p>All-in-all this points to a market that, following a recent upsurge in building, is nearing saturation.</p>
<h2>2. Distribution of loans by state</h2>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/118846/original/image-20160415-11437-qbrwu7.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/118846/original/image-20160415-11437-qbrwu7.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=590&fit=crop&dpr=1 600w, https://images.theconversation.com/files/118846/original/image-20160415-11437-qbrwu7.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=590&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/118846/original/image-20160415-11437-qbrwu7.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=590&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/118846/original/image-20160415-11437-qbrwu7.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=741&fit=crop&dpr=1 754w, https://images.theconversation.com/files/118846/original/image-20160415-11437-qbrwu7.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=741&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/118846/original/image-20160415-11437-qbrwu7.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=741&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Source data:</span>
</figcaption>
</figure>
<p>The majority of housing finance is going to property purchases in NSW (30%) and Victoria (28%).</p>
<h2>3. Lending and house prices - National</h2>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/118836/original/image-20160415-11426-xqj0gm.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/118836/original/image-20160415-11426-xqj0gm.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=388&fit=crop&dpr=1 600w, https://images.theconversation.com/files/118836/original/image-20160415-11426-xqj0gm.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=388&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/118836/original/image-20160415-11426-xqj0gm.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=388&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/118836/original/image-20160415-11426-xqj0gm.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=488&fit=crop&dpr=1 754w, https://images.theconversation.com/files/118836/original/image-20160415-11426-xqj0gm.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=488&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/118836/original/image-20160415-11426-xqj0gm.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=488&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Data source: ABS Housing Finance, Australia (5609.0), Released 11 April 2016; ABS Residential Property Price Indexes (December 2015); CoreLogic Housing Market Update Figures (April 2016)</span>
</figcaption>
</figure>
<p>Growth in the value of Australian housing loans over time roughly tracks the Australian house price index. </p>
<p>The rapid increase in building, particularly high-density developments in urban growth centres in Sydney and Melbourne, in late-2015 saw loan value growth outpace broader property prices.</p>
<p>As property prices adjust to a new supply-driven equilibrium, easing loan volumes is expected.</p>
<h2>4. Lending and house prices - State-by-state</h2>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/118840/original/image-20160415-11420-z4cl5.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/118840/original/image-20160415-11420-z4cl5.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=392&fit=crop&dpr=1 600w, https://images.theconversation.com/files/118840/original/image-20160415-11420-z4cl5.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=392&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/118840/original/image-20160415-11420-z4cl5.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=392&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/118840/original/image-20160415-11420-z4cl5.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=493&fit=crop&dpr=1 754w, https://images.theconversation.com/files/118840/original/image-20160415-11420-z4cl5.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=493&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/118840/original/image-20160415-11420-z4cl5.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=493&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Source data: ABS Housing Finance, Australia (5609.0), Released 11 April 2016; ABS Residential Property Price Indexes (December 2015); CoreLogic Housing Market Update Figures (April 2016)</span>
</figcaption>
</figure>
<p>Year-on-year growth in property prices and housing finance by state shows massive diversity. Where Sydney, Melbourne and Hobart (who knew!) have recorded near- and above double digit average property price growth, it is still a struggle for resource-heavy parts of the country. </p>
<p>Brisbane, Perth and Darwin are experiencing the flip-side of the two-speed economy which through the mining boom saw their housing markets pull ahead of Sydney and Melbourne. </p>
<h2>5. Household wealth, income and debt servicing</h2>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/118842/original/image-20160415-11461-qtp2ii.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/118842/original/image-20160415-11461-qtp2ii.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/118842/original/image-20160415-11461-qtp2ii.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=389&fit=crop&dpr=1 600w, https://images.theconversation.com/files/118842/original/image-20160415-11461-qtp2ii.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=389&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/118842/original/image-20160415-11461-qtp2ii.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=389&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/118842/original/image-20160415-11461-qtp2ii.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=488&fit=crop&dpr=1 754w, https://images.theconversation.com/files/118842/original/image-20160415-11461-qtp2ii.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=488&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/118842/original/image-20160415-11461-qtp2ii.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=488&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Source data: RBA Household Finances (E2)</span>
</figcaption>
</figure>
<p>Overall, households are getting more wealth, relative to their income. This is coming from a combination of housing asset and financial asset capital gains.</p>
<p>It comes at a cost, however. Owner-occupier debt as a proportion of income is trending higher. Coupled with an increase in late 2015 of the proportion of income going to mortgage interest repayments, housing affordability issues may soon come into play.</p>
<h2>6. First home owners are missing out</h2>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/118843/original/image-20160415-11469-1r1oaly.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/118843/original/image-20160415-11469-1r1oaly.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/118843/original/image-20160415-11469-1r1oaly.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=390&fit=crop&dpr=1 600w, https://images.theconversation.com/files/118843/original/image-20160415-11469-1r1oaly.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=390&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/118843/original/image-20160415-11469-1r1oaly.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=390&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/118843/original/image-20160415-11469-1r1oaly.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=490&fit=crop&dpr=1 754w, https://images.theconversation.com/files/118843/original/image-20160415-11469-1r1oaly.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=490&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/118843/original/image-20160415-11469-1r1oaly.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=490&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Source data: ABS Housing Finance, Australia (5609.0), Released 11 April 2016.</span>
</figcaption>
</figure>
<p>As a proportion of all housing loans, the value of loans going to first-home buyers make up around 15% of the national market, and NSW is the worst place for first-home buyers.</p>
<p>The latest ABS figures show that first-home buyers are making up a smaller and smaller part of the loan market. The proportion of loans to first-home buyers decreased in every state except Tasmania in the beginning of 2016.</p>
<p>First-home owners in NSW make up only 12% of the value of housing finance commitments, the lowest of any state and representing a significant drop-off from a high of around 30% in 2009-10 (after which point the First Home Owners Grant was scaled back).</p>
<h2>7. Big banks are also missing out…</h2>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/118844/original/image-20160415-11426-i5j6ep.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/118844/original/image-20160415-11426-i5j6ep.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/118844/original/image-20160415-11426-i5j6ep.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=392&fit=crop&dpr=1 600w, https://images.theconversation.com/files/118844/original/image-20160415-11426-i5j6ep.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=392&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/118844/original/image-20160415-11426-i5j6ep.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=392&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/118844/original/image-20160415-11426-i5j6ep.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=492&fit=crop&dpr=1 754w, https://images.theconversation.com/files/118844/original/image-20160415-11426-i5j6ep.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=492&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/118844/original/image-20160415-11426-i5j6ep.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=492&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Source data: ABS Housing Finance, Australia (5609.0), Release.</span>
</figcaption>
</figure>
<p>Comparing the performance of the banks against non-bank lenders in terms of owner-occupier loan issuance, the traditional banks are lagging.</p>
<p>Banks are feeling the burn doubly: while their grasp of the market is trimmed by a more competitive offering from alternative lenders, the average Australian loan size is also falling.</p>
<p>Smaller loans are partly a response to a national housing market cool-down. It could also be attributed to <a href="http://www.apra.gov.au/mediareleases/pages/14_30.aspx">APRA’s review of lending practices</a> aimed at mitigating risk of property overvaluation introduced in December 2014.</p>
<p>This means the banks have to work harder (and their stock prices appear to be factoring that in!)</p><img src="https://counter.theconversation.com/content/57870/count.gif" alt="The Conversation" width="1" height="1" />
Where investment loans were the fastest growing category of housing finance at the end of 2015, it is now the leading area of contraction.Danika Wright, Lecturer in Finance, University of SydneyLicensed as Creative Commons – attribution, no derivatives.