Thinking | 28 July 2017
State Government housing affordability reforms and the effect on Local Government
The State Government’s affordable housing policy is designed to deal with the housing affordability and demand issues faced by New South Wales. However, the policy has put increased financial and resource strain on Local Government as the State Government increases their responsibility.
The housing affordability and demand crisis in NSW, and particularly Sydney, is well documented. Price barriers and increased rent has excluded low-moderate income families and individuals from the market and has contributed to exponential growth of the social housing waiting list.
The Domain Group’s market report for June 2017 notes that the median house price in Greater Sydney is $1.178 million, and the average unit price is $757,991. The Greater Sydney Commission anticipates that an additional 725,000 additional dwellings will need to be built by 2036.
The State Government has responded to this through the State Environmental Planning Policy (Affordable Rental Housing) 2009 and the State Environmental Policy No. 70 Affordable Housing (Revised Schemes) 2002. Indeed, an object of the Environmental Planning and Assessment Act 1979 is “provision and maintenance of affordable housing” and shared responsibility for environmental planning between the different levels of government in NSW.
In June 2017, the NSW Government released details of a new package of measures designed to improve housing affordability and access across NSW.
Broadly, the new measures continue the State Government’s trend in assisting individuals who may not otherwise purchase property to do so, namely first home buyers and low income households. This is to be achieved with a series of measures ranging from stamp duty discounts and exemptions, homeowners grants for low-value properties to accelerated rezoning.
Notably, the new policy stipulates that District Plans will contain housing supply targets for each Local Government area for periods of five and ten years; the Minister for Planning has the power to compel the Local Environment Plans (LEPs) of priority councils to be amended to align with these. This is complemented by an accelerated rezoning proceed whereby at least 30,000 additional dwellings in existing Priority Precincts through rezoning.
In total, there is a goal of 61,000 dwelling completions state-wide on average per financial year until 2020-21.
Strain on Local Government
Local councils have traditionally lacked the financial resources to maintain existing services and infrastructure, let alone invest heavily in growth and the new reforms serve to place a further burden on them.
The new policy notably includes are a series of support mechanisms for Local Government, including discounts on interest costs for commercial loans, increased coordination of infrastructure, zoning and assessment through centralised coordination teams, and increased funding.
However, given the scale of the plan for growth and the recently announced three-year phase out of the Local Infrastructure Growth Scheme (LIGS), which effectively subsidised infrastructure delivery in growth areas, it remains unlikely that Local Government budgets will be sufficient to cover the funding gap. Arguably, the phase out of LIGS suggests that the State government has become less willing to share infrastructure funding with Local Government.
Resources will be further stretched by the amendments to LEPs and rezoning applications that will be allowed, and enforced, by State Government, despite the assistance put in place by the policy. It is, at the very least, unclear whether councils have the capacity to update key planning documents efficiently enough to supplement growth.
State Government reform is necessary to deal with the housing affordability and demand issues faced by NSW. However, increased financial and resource support must be given to Local Government if such issues are to be properly addressed.
Given the resource needs facing Local Government, greater recognition of Local Government’s role in delivering infrastructure to local communities must be targeted in future policy reform. A reform of the revenue raising powers of councils appears overdue given increasingly shared public functions between Local and State Governments. This could also assist in providing councils with a more adequate, and flexible, revenue base to address housing affordability concerns.
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