“The housing affordability crisis in Canberra is in large measure a direct consequence of decisions deliberately taken by Andrew Barr and his Labor and Greens colleagues to abandon Community Housing Canberra,” writes former chief minister JON STANHOPE.
CHIEF Minister Andrew Barr is reported in “The Canberra Times” on October 11 as claiming that the “simplest, quickest and most effective way” to boost social housing stock in Canberra and across Australia would be for the Commonwealth to forgive all existing housing debt.
That is clearly not true.
So far as the supply of social housing in Canberra is concerned the simplest, quickest and most effective way to increase the stock of social housing would be for Barr and Minister Shane Rattenbury to forgive the $50 million housing debt that they are demanding Community Housing Canberra (CHC) repay to the ACT government.
As chief minister implementing the 2007 Affordable Housing Plan, I arranged for CHC to have access to a $50 million revolving finance facility and entered into a memorandum of understanding with CHC guaranteeing it access to 120 blocks of land a year.
I also agreed to increase its asset base by $40 million by transferring to CHC title to 135 dwellings and providing it with a $3 million capital injection.
In return CHC undertook to increase the supply of affordable rental dwellings by 500 within 10 years and further to increase the supply of affordable dwellings by 1000 dwellings within 10 years. The objective was to increase the growth in CHC-owned dwellings by 10 per cent a year.
CHC met all of its targets of dwellings for rent and sale and would be doing so today if Barr, on becoming Chief Minister, had not with Greens’ support, cancelled the $50 million revolving finance credit, called it in and abandoned the MOU guaranteeing a supply of land to CHC.
As a consequence of these decisions of ACT Labor and the Greens CHC is now not only forced to compete with commercial developers for land but its primary focus is no longer on increasing its stock of affordable housing but meeting the government’s demand that it repay the finance.
The government has called in the finance in the way a bank might call in a mortgage before its intended expiry leaving the borrower a choice between either refinancing or selling.
I understand that in the last year CHC increased its stock of social housing by a mere four dwellings and is facing the very real possibility that it will need to begin to sell off existing rental stock in order to meet its operating expenses while paying off its debt to the ACT government. This is because, having lost the revolving finance facility, CHC is obliged to obtain finance from the market while providing rental accommodation by at least 25 per cent less than market rates.
To put this in perspective just 10 years ago CHC was meeting its target of delivering in Canberra, 100 affordable dwellings a year. In a recent critique of affordable housing initiatives in Australia the Australian Housing and Urban Research Institute of the University of Sydney ranked CHC as among the most effective affordable housing initiatives in Australia.
The housing affordability crisis in Canberra is in large measure a direct consequence of decisions deliberately taken by Andrew Barr and his Labor and Greens colleagues to abandon CHC, dramatically reduce the supply of land for detached housing, emasculate the land rent scheme and to subvert the intention of the taxation reform program to massively increase revenue.
My colleague Dr Khalid Ahmed and I, in pursuance of our roles with the Institute of Governance and Policy Analysis at the University of Canberra, have had occasion to look in some depth at aspects of the ACT government policies on housing and land supply as well as related finance and budget issues. We have recently started a blog on which we now post our analysis.
In our most recent post we explore in some depth the implications of the ACT government’s reliance on land sales to support the operating budget and the influence this is having on land supply policy.
One of our findings is that revenue from land agency activities increased by more than 500 per cent in the three years from 2013-14 to 2016-17 from $93 million to $476 million.
This quite remarkable increase in land sale revenue has translated into a more than three-fold increase in gross profit from 25 per cent in 2010-11 to 84 per cent in 2017-18. These are supernormal profit margins which are being achieved through the predatory exploitation by the ACT government of its monopoly on land supply.
However, this increase in revenue was not achieved through higher volumes of land sales, but by constraining supply, in particular, of single residential dwellings.
The four-year supply target was cut to 13,500 sites in the 2014-15 budget compared to 19,500 sites in the 2012-13 Budget. In 2012-13, 2208 sites, or 51 per cent, were for stand-alone homes while over the following three years only 23 per cent of the total supply was for stand-alone or detached housing and in 2014-15 only 329 sites or 9 per cent of the dwelling sites released were for detached houses.
Worryingly for young families, working-class families and other Canberrans from low-income households the 2019-20 Budget has reduced the four-year land supply target to 15,600 sites from 17,000 in the 2018-19 Budget, the lowest since the 2014-15 Budget.
A reduction in supply, particularly of land for detached housing, at a time of population growth will inevitably, as every single Labor and Greens member of the Legislative Assembly must know, result in a further increase in house prices and rent.
The Stanhope/Ahmed blog is accessed at governanceinstitute.edu.au/events/canberra-conversation-blog