Australia needs to get clear headed about delivering more social and affordable housing. There are multiple community housing providers – imagine if they teamed up to become empowered social landlords that because of their scale can more easily borrow in the market and are more trusted not to fail because they’re regulated by government that won’t let them fail.
My two worlds collided last week as I co-hosted an event in Sydney with Fiona Fletcher-Smith, chief executive officer of London & Quadrant Group (L&Q), one of the biggest social and affordable housing providers in the UK, thus the world. Also co-hosting was the chief executive officer of Australia’s biggest social and affordable housing provider, Scott Langford of St George Community Housing.
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I realise it’s not fashionable in some Aussie circles to seek to learn from the mother country – and some from the mother country can’t be bothered to find out what’s going on in Oz either – but one area of mutual interest and relevance is definitely this: What is the housing future for both of our countries, and what is the role within each of the social and community housing sector?
One understudied shared experience is that both have experienced vertiginous growth in house prices since the 80s, with massive growth since the crash, when asset prices were — until COVID subsided — stoked up on a rising tide of cheap cash and low interest rates.
Of course, in both countries the ”restrictive planning system” has been blamed, when the one thing the two don’t share is identical planning systems. At any rate, Australia has six separate planning systems, all producing high home price inflation except in regions where no one wants to live.
Both seem to forget that, as the definition of inflation is ”too much money chasing too few goods,” seeking to increase the number of goods – housing supply – without a single thought given to the ”too much money” bit, is bound to end in tears. As it has done and continues to do.
While we are on the demand side of housing, I might as well point out that another thing both share is a passionate desire to provide more housing, faster (”better” is seldom mentioned), while radically expanding in-migration to historically high levels. Does not compute.
To put some flesh on this: The Australian federal government, usually aloof from housing and planning, which are in the jurisdiction of the states and territories, has put some new money on the table to incentivise raising the number of social and submarket homes. These are to be built as part of a bigger delivery program for all homes, taking the 180,000 average per annum before COVID, and 200,000 in a very good year, to around 240,000 a year for the next five years. Great.
Yet at the same time, a highly neoliberal approach to in-migration by the same government means that something in excess of 150,000 extra people are now in Sydney compared to a year ago. Before this happened, the housing system there had been struggling to get over 40,000 homes a year for a population 150,000 lower. Result? Rents have exploded.
One would think we are asking the pollies, here and in the UK where the same policy contradictions apply, to understand quantum mechanics, when basic arithmetic is all that’s required.
Anyway, in the context of some shared confusions and contradictions around the housing market in the two countries, one difference and an area where I do think Australia can learn a bit from the UK is in terms of the social housing sector.
I’m talking particularly about the need to grow its capacity and resources to become a developer in its own right, to do both subsidised and for-profit, mixed tenure projects, as we have done in the UK over the past three or four decades. And to do so while not quite losing a sense of the social and community mission of this sector.
Don’t get me wrong: New South Wales has some great and growing community housing providers (CHPs) which have been going in this direction for a while. The capacity and experience of the bigger ones, and their capacity to do sophisticated deals between the public, private and not-for-profit sectors, is exponentially greater than it was a decade ago. It’s also a country mile in front of the large number of small CHPs.
We need a radical program of mergers and acquisitions in Australian states of community housing providers to raise the scale of these organisations, and thus their resources and capacity.
Which brings me to the first point of reform in the UK’s direction. We need a radical program of mergers and acquisitions in Australian states to raise the scale of these organisations, and thus their resources and capacity.
Governments can help do this moderately, through persuasion, regulation, a preference in tenders for scaled-up CHPs, and government programs (such as recent federal government ones) that incentivise developments that include sub-market rental units and the involvement of CHPs.
Or they can do it radically.
This brings me to the second reform point (or is a revolution?) That is to follow what we saw in the UK from the 80s through to the Blair era, which is to incentivise stock transfer of public housing units into the social housing sector. In that way, over half of public housing in the UK, from memory, almost 1.5 million properties, were transferred with land titles and a dowry into the social housing network.
Although I remain a strong supporter of public housing, if governments are not willing to directly develop new public housing, or even properly look after what they already have, then as someone who cares more about outcomes for people than inputs, I support such transfer.
Empowered social landlords can borrow in the market in ways that governments can’t or won’t. They can also borrow more cheaply than private developers
because they are regulated by government
Especially as the empowered social landlords that result can borrow in the market to invest in existing and new properties in ways that governments can’t or won’t. They can also borrow more cheaply than private developers because they are regulated by government, with the implied guarantee that government will not let social landlords fail or go bankrupt.
In NSW, the government retains 100,000 public housing units and homes, and actually owns the titles to tens of thousands of units that it has ”transferred” on relatively short leasehold terms to CHPs. The result is – with good people on all sides of this – an underfunded public housing sector and an under-resourced community housing sector. I can see no alternative here to going down the UK path where relevant and feasible.
Fiona Fletcher Smith’s L&Q shows what can be achieved through a conscious strategy to grow the CHP sector. This not-for-profit started out 60 years ago with a bunch of socially-minded clergy putting in two quid each to borrow money to buy their first property.
Fiona now manages 108,000 properties, and because of their scale and the robust regulatory framework in which they operate, which reduces risk, banks in the UK will lend more cheaply to L+Q than to companies like Lendlease.
Before you ask, Fiona and her team are so concerned that their own culture does not forget its roots and the social purpose they perform for tenants and the community, that she is working towards reducing the number of homes they own and manage, perhaps back to 100,000!
This point of scale and social purpose is important to me. I want to grow the CHP sector in Australia and enable some to go in the direction of L+Q in terms of capacity and market share. This is because we need more than one “private homes for sale” delivery model in our housing market, but I also don’t want the sector to lose its soul as it gets bigger.
Fiona reminded us that scale and efficiency might actually enable the sector to have more social benefits and impacts, not less.
Tim Williams is practice leader, cities, Grimshaw