Stanhope / Unaffordable housing is my biggest regret

“For a large and growing sector of Canberra residents, extending possibly beyond the two lowest quintiles, housing is not affordable,” writes a regretful former chief minister, JOHN STANHOPE

SINCE leaving politics I have often been asked what was it that I most enjoyed about being chief minister and what things that the governments I led (between 2001 and 2011) did that I felt particularly proud of.

jon stanhopeInterestingly, I have never been asked, presumably out of politeness, whether there was one thing I would nominate as my greatest frustration or regret while chief minister.

The answer is “yes” and the issue is housing affordability, and land planning and supply.

The Affordable Housing Action Plan, which I initiated in 2006, was not fully implemented at the time I left office in 2011 and has clearly still not been realised. This is despite all the levers for implementing the plan being in the hands of the ACT Government. It is not only in the position of a monopoly owner of all the land for sale it also controls and operates the land planning and regulatory regime applying to its use and disposal.

The Affordable Housing Action Plan is a comprehensive and innovative plan aimed at improving housing affordability for renters and these entering ownership. In particular, it provided a blueprint for overcoming barriers to home ownership experienced by a growing proportion of Canberra residents.

Those most affected by the crisis in affordability are, of course, young families and a large and growing cohort of Canberra households on moderate incomes who have been priced out of the market for a modest sized (three bedroom) detached house in suburban Canberra.

The extent of the affordability problem for entrants into home ownership in Canberra is consistently masked by the aggregate affordability indicators that are rolled out to illustrate, for instance, how Canberra compares to Sydney or Melbourne or the other capital cities.

The use of aggregate indicators to prove that Canberra housing is affordable ignores the unique double-peaked nature of the income distribution in the ACT, which illustrates the high proportion of households on moderate or high incomes and the relatively low number on average income. The reporting of housing affordability in the ACT is seriously distorted as a result.

The median household income according to ABS is around $110,000 but there are, of course, thousands of households in Canberra on incomes less than that.

Rather than relying on aggregate affordability indicators, a far more relevant and meaningful way to assess affordability is to focus on the majority of households that are below the median income, and count the number of affordable houses available to them in the market.

The generally accepted standard measure of affordability applied to the low-to-moderate income, is: “Housing that is safe, appropriate and accessible and where housing services are purchased for 30 per cent or less of a household’s gross income”.

Applying the standard affordability measure to a household with a gross income of, say, $90,000 (which is more likely to be prevalent than the median income) an “affordable house” would be one valued at around $360,000.

As we all know there are virtually no houses in Canberra for sale for under $400,000 and very few available for under $500,000. A family on a gross income of under $100,000 would be under financial stress servicing a mortgage on a house valued at more than $400,000 assuming that they could raise a deposit in the first place.

It is insulting in the extreme to suggest to all those families that housing in Canberra is affordable.

Among specific initiatives that were mandated in the Affordable Housing Plan was a requirement that over-the-counter sales of land be introduced by the LDA at a range of block sizes and prices with a particular emphasis on the release of land for between $60,000 and $120,000 to provide the capacity for houses in the price range of $200,000 to $300,000 (2007 prices).

The Plan did not presuppose that this requirement would be met by providing units within this price range.

At least one third of land releases were to be through regular englobo sales; land development costs were to be independently benchmarked every two years; a four-year builders’ and developers’ pipeline (one year builders and three years developers) maintaining inventory on the shelf at each stage of the pipeline to ensure responsiveness was to be established; an additional on-the-shelf inventory of development-ready land for housing for up to eight to twelve months of demand was to be established and maintained at all times.

The Land Development Agency advises that it currently has no land for sale in Canberra.

The advice I received consistently as chief minister from officials was that the affordability of housing in Canberra is directly related to the rate, timeliness and manner of release of development-ready land.

Although the pace of implementation was frustrating, I was mindful that establishing a responsive land supply system would take some time. However, I am disappointed that eight years after the Plan was adopted, some of the key measures have not been achieved.

I believe that for a large and growing sector of Canberra residents, extending possibly beyond the two lowest quintiles, that housing is not affordable. I think it is time to look again at the Affordable Housing Action Plan and to undertake an audit of the effectiveness of its implementation.

Jon Stanhope was chief minister from 2001 to 2011 and represented  Ginninderra for the Labor Party from 1998. He is the only chief minister to have governed with a majority in the Assembly.

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