The Australian Housing and Urban Research Institute (AHURI) recently released its Stimulating private sector involvement in social and affordable housing report, investigating the Australian private sector’s involvement in social and affordable housing – and the findings on the state of low-income housing in Australia may not be surprising.  

The overarching element of the findings found private investors, developers, and industry leaders displayed a strong appetite for affordable housing partnerships.

For reference, the study defines the private sector as any non-government or non-public entity, including both not-for-profit and for-profit housing providers.

Nationally, prior to the pandemic, there were 3,000 affordable social housing properties built per annum against the estimated annual need of 36,000 (727,000 by 2036), the report revealed.

There was an overall agreement that the public private partnerships (PPP) model is a workable approach to public involvement in social and affordable housing supply.

One hindrance to this model is the very lengthy and complex government tendering and planning approval processes that lead to additional costs.

Often integral to PPPs, the mixed tenure strategy cross-subsidises new housing developments, and private developers and investors deem the model attractive for reducing risk and receiving an acceptable return.

However, some larger developers reported they struggle to make mixed tenure projects work, although the model is standard practice in the United Kingdom.

The private sector participants advised that tax subsidies such as the National Rental Affordability Scheme (NRAS) successfully leverage private investment in new affordable housing supply.

However, some participants believe that this may lead to developments in cheaper, less well serviced, and lower demand areas where the tax incentive has the greatest benefit to project feasibility, but less benefit to housing need.

The report additionally discussed Build-to-Rent programs, constraints on private sector participation, inclusionary planning mechanisms, subsidies, homeownership schemes, and uncertain policy settings and regulation.

Overall, the research highlighted that a range of established and emerging affordable housing product types can be supported through collaboration with private not-for-profit and for-profit partners.

Although they depend on different combinations of government subsidies, policy settings, and regulations, they are suitable for delivery across different development contexts.

The report recommends the Australian Government set a national housing strategy set, implemented by state, territory, and local governments, to address the long-term demand for housing across all market segments.

REIA: report findings ‘confirm the obvious’

Real Estate Industry of Australia (REIA) president Hayden Groves said the report’s findings “confirm the obvious”.

“Whilst this will assist in addressing an acute problem, the private rental market is predominantly mum and dad investors supplementing their superannuation savings, and they will remain an integral part of the rental market moving forward,” Mr Groves said.

“Australian real estate agencies – family owned and operated small businesses – manage a combined property management portfolio worth $3 trillion, and manage $78 billion in rents each year.

“To keep this critical component of the housing sector, you need to similarly provide an appropriate ‘playing field’, which includes negative gearing as interest repayments increase.”

Mr Groves thinks the housing sector does not need “draconian measures” such as rent freezes or additional land taxes.

“The Federal Government’s recent announcement to host round tables with lenders and developers in a bid to address housing affordability is unlikely of itself to be a circuit breaker,” Mr Groves said.

“While the Treasurer is busily consulting superannuation funds and banks on how to finance additional investment, it is unlikely this will result in a single new house being built.

“You need to have local and state governments approving developments, setting standards, and working with the building sector and estate agents who bring current market intelligence, involved in the process.”

Mr Groves said the REIA supports a national plan that benefits all stakeholders, addresses housing affordability, and helps Australians into homes.

Get all the latest Canberra news, sport, entertainment, lifestyle, competitions and more delivered straight to your inbox with the Canberra Daily Daily Newsletter. Sign up here.