REDWatch Submission on Redfern Waterloo Draft Affordable Rental Housing Strategy 2011 – 2030

Thank you the opportunity to comment on this Strategy.

REDWatch is pleased to note that the SMDA has confined itself to Affordable Rental Housing rather than contemplate the affordable home ownership options previously floated by the RWA. REDWatch had major concerns about how affordable home ownership would operate on a perpetual basis.

REDWatch notes the Strategy on exhibition “will form the policy basis for a review of the Redfern Waterloo Authority Affordable Housing Contributions Plan, 2006 that will occur as part of the Redfern Waterloo Urban Renewal Study under the SEPP (Urban Renewal) 2010”.

We welcome the release of the draft Strategy prior to any review of the 2006 Affordable Housing Contributions Plan. REDWatch has long argued that the 2006 AH Contributions Plan should have been proceeded by a strategy / policy document.

REDWatch is concerned however that the document seems focused only on the contributions plan element and does not set out what the SMDA proposes in its affordable housing strategy for either housing size mix or tenant mix.

The Strategy proposes changing the average AH dwelling size from 100sm to between 80 – 85 sm but it provides no indication of what this means for the stock created. A decision to provide an increased number of affordable boarding house type rooms for example would reflect in the average unit size, alternatively the plan could be proposing to cut 15-20sm off each unit on the basis that AH should be smaller than normal housing so it can be delivered more cheaply. It is not clear what the SMDA proposes. It has all the signs of still not having looked closely at the areas needs for  AH size / mix but rather working from a standard contributions plan estimate with the detail to be worked out later. REDWatch is of the view that the SMDA must do the work to assess the mix of AH sizes needed and then work out what the contributions plan will buy in total units. 

A proper strategy would identify the affordable housing needs of the area in terms of household type, and propose a distribution of dwellings across one, two and three bedroom dwellings accordingly.  Construction of smaller dwellings will increase delivery against benchmarks based on dwelling numbers but may not meet the demonstrated need for affordable housing in the area.  In the absence of detailed demographic data around those in housing stress, including household size and type, it is impossible to form a view regarding an appropriate distribution of dwelling sizes.  If development focused on the KPI of proportion of affordable dwellings in total dwellings, then an unsophisticated response would lead to construction of bedsits or similar to maximise performance, but may not meet priority local need.

REDWatch is very concerned that the document is in effect silent on what the mix of Household Income bands the SMDA proposes for its AH when it says the “mix should be determined on a case by case basis, taking into account the need to create social mix by through the allocation of dwellings across a range of income bands, in consideration of the demand and waiting lists existing within the precinct in which the housing is situated”.

On a basic level the AH definition simply adds in the option for AH to also have moderate income households in addition to the income levels covered by “social housing”. We find this lack of detail about what the SMDA propose for their AH very concerning. The SMDA needs to clarify what it proposes for its mix of Affordable Housing and provide an evidence base in support of that mix based on demographic analysis of those households in housing stress., both a present and in the future.

Generally, the most cost efficient way of providing ‘affordable housing’ is to target single person households at the upper end of the moderate income band thereby maximising rents and maximising dwelling yield.  However this is unlikely to reflect the real need for affordable housing in inner city markets such as City of Sydney. The evidence generally suggests that the majority of those in housing stress are very low and low income renters, who are the most likely to be in ‘severe’ housing stress (paying more than 50% of gross household income on rent), and to be displaced from the area in a gentrifying market. Again, the strategy needs to be informed by a demographic analysis of those households in housing stress with regard to income distribution, and ensure dwelling mix reflects the proportional distribution of very low, low and moderate income households to be effective and equitable.

While the Affordable Housing Policy context material in section 3 is useful background there is no assessment of what the SMDA thinks of the issues thrown up or the different possibilities. This also applies to section 6 where it specifies what City of Sydney Council proposes as far as other planning mechanisms that can be used to protect and facilitate AH, but provides no indication of whether the SMDA plans to go down a similar route. REDWatch would be concerned if some of these measures were used in relation to short term – 10 year AH land banking.

Section 3.1 deals with the Affordable Rental Housing SEPP and notes that it only requires property to be used for AH for 10 years. There is no indication as to if the SMDA propose to use this mechanism to deliver some AH. REDWatch has requested clarification from the SMDA regarding its proposed use of the 10 year provision since the AH Strategy release, the silence is concerning. REDWatch is strongly of the view that AH delivered by the SMDA must be delivered in perpetuity regardless of ownership type of the property – perhaps by conditioning the title and that the land banking mechanism inherent in the ARH SEPP is not an acceptable way to address the areas long term AH requirements.

The model chosen by the SMDA seems to be one that promotes AH separate from the developments that fund AH through contributions even though Appendix 1 says it can be provided in kind. The SMDA should explore options for encouraging developers to include AH within their developments rather than encouraging developers to pay out to have no AH on their site.

The largest contribution to the SMDA AH fund came from a legislated removal of AH contributions from the CUB site (formalised under a VPA) in favour of them being placed in Redfern Waterloo. Ironically Frazer’s last year received NRAS funding for 828 dwellings in the Frasers Property site on Broadway. The SMDA affordable housing strategy must encourage developers to build AH within their sites for vesting to AH providers. This is also consistent with the strategy’s position that AH should not be concentrated in one place.

One major oversight in the strategy is that it makes no recommendation about priority being given to people who have a connection to the area other than aboriginal people. This is an accepted AH principle and it is important in areas where people are being driven out by higher rents, where children cannot afford to live near parents or people are pushed out of long term public housing if their income becomes too high. The Strategy needs to include preference for those with links to the area. Given the long and tortuous path expected for the Social Impact Assessment REDWatch does not believe this should be left until the final SIA. It should be a principle of SMDA’s Affordable housing strategy to be implemented alongside all the others.

We note that the City of Sydney AH targets for growth to 2030 are that AH should make up 18% of growth to provide a target of 7.5% of all residential units. Like many areas it is not clear if this is SMDA policy or just part of the context. REDWatch wants to underline the importance of significant AH in new development in inner city areas with large conservation areas that will yield little new AH. We assume the SMDA is not signing up to the City Council’s targets otherwise the contribution rate would need to be a lot higher to deliver 216 units on North Eveleigh rather than the 61 proposed.

REDWatch is very concerned at the maths in the section 4 table on Current Affordable housing targets. It is simply misleading to have a table purporting to show Current AH Dwelling Targets in Redfern Waterloo without also showing the loss of 700 public housing units the SMDA propose to have removed from Redfern Waterloo. The Strategy does not indicate what the rules will be for this 700 units which it excludes from its own calculations.

REDWatch welcomes the SMDA’s proposal to place some levy on private development sites within the BEP2 area in addition to whatever arrangements might be made between HNSW and the developers for contributions towards renewal of public housing and the provision of the 700 units.

There are other concerns regarding the AH targets.  There seems to be little or no substantiation for the contribution level other than that “the 1.25% affordable housing levy was determined having regard to achieving sufficient funds for the relief of housing stress to some extent while at the same time not presenting a disincentive for future potential development”.^[1]  The only substantiation is that the number is similar to that for comparable developments.  Dwelling yields are then back calculated from the levy and assumptions regarding dwelling size. 

This is the reverse of a proper evidence-based approach, which should start with dwelling need and then determine the ability of the development to deliver affordable housing (based on balancing the cost impost on purchasers of the levy, reduction of developer profits and the public benefit associated with affordable housing), and thereby determine an appropriate levy.

An evidence-based assessment of the appropriate levy would consider the opportunities for profit associated with the redevelopment (based for example in uplift in value of land through rezoning or intensification of development opportunities) and provide for redistribution of some portion of profit above a normal level  to the community for public goods such as affordable housing. A normal profit is generally calculated 10%, which is generous.

The strategy does neither assessment (need or net benefit), so that the levy and hence the amount of affordable housing to be provided appears to be arbitrary. The community potentially misses out an important benefit from this land, and there is no way of assessing from the current documentation what the quantum should reasonably be.

REDWatch will welcome a full review of the population projections in the Redfern Waterloo Urban Design Study. The pro-rata distribution of the Metropolitan Plan increase into Redfern Waterloo is clearly inadequate. The table in section 4 shows the SMDA delivering 5500 new dwellings in BEP1 & 2 areas out of a total of the 7,930 projected for Redfern Waterloo. On this basis all the developments elsewhere in Redfern and Waterloo between 2006 and 2036 will only account for 2,430 units! We would be surprised if this number had not already been delivered in Waterloo since 2006 given the change between 2001 and 2006.

Table 5 is also of concern as it shows “Frasers” as part of the AH contribution from Redfern Waterloo.  This is incorrect as this is “double dipping”.  These dwellings are part of the affordable housing contribution of a separate development, however they have not been delivered within the development.  If the table is read properly, then the affordable housing contribution from the development is 2.12%.  The only substantiated target appears to be the 18% developed by City of Sydney.  The proposal by the authority is one ninth of this target.

The costs shown above Section 6 are also of concern.  $200,000 is likely to represent the construction cost of a typical dwelling, while $472,000 is probably based on the sales price which will also include a land component.  It is of concern that the SMDA is not clear on the basis on which the levy will be converted to units, that is whether it will be at the marginal cost (the construction cost) or whether the builder will make profit from the levy or use it to amortise his land costs. Again, this should be made transparent.

Section 2.3.1 also talks of “low occupancy rates of social housing dwellings” this is ambiguous. We have been assured by HNSW that places are not left vacant for significant periods of time and occupancy is quite high. This may be referring to the mismatch between unit size and number of people supposed to be living in the premises leading to a lower person per unit figure that that for private developments. We urge some caution however because there is a lot of under-reporting of occupancy in public housing for fear of benefit loss which makes the statistics quite unreliable.  If the paper means small household size, then it should say so.

While we recognise that Student Housing is excluded from what the SMDA proposes it is incorrect to say it is catered for by the market. Very few people can afford the rents any longer to share in inner-city terraces or to pay the fees for rooms at Urbanest. There remains a need for low cost student housing and a successful model in the form of STUCCO Student Housing Cooperative exists in Wilson Street. STUCCO made a submission to BEP1 setting out their interest in expanding to a refurbished building on the North Eveleigh site. This form of low income student housing should be considered by the SMDA as it is an important part of the housing mix required in the area and it is not met by the market.

REDWatch has concerns re the use of the phrase Social Housing. This phrase has changed in its meaning and application from its historic usage as a descriptor for government owned infrastructure used as affordable long term rental housing commonly referred to as Public Housing. The current usage of the phrase Social Housing covers collective reference to the former Public Housing sector [which is now fixed term rental to special needs category tenants], the Community Housing sector and more recently the Affordable Housing sector. REDWatch believes that there needs to greater clarity given on each occasion the term Social Housing is used. This confusion is evident in the Draft BEP 2 where the overall Social Housing stock level remained constant whilst 700 units of Public Housing disappeared.

In closing REDWatch requests the SMDA to set out much more clearly its position on AH policy. Some specific areas include the provision of a substantive evidence base based on an assessment of the quantum and demographics of those in housing stress to support dwelling targets; the provision of detailed economic analysis around construction costs, market prices and profits to substantiate the proposed quantum of levies; and an assessment of social housing need and delivery in all sectors of the social housing spectrum as this is the target group most likely to be in housing need in an inner city market and least likely to be catered for in such a development.

Thank you again for the opportunity to comment on this strategy and we hope the final document will be stronger as a result.