Affordable Housing and the RWA North Eveleigh Concept Plan May 2008

Draft Blueprint for North Eveleigh Released - Extracts from (Ministers Media Release)

Minister for Planning and Redfern-Waterloo Frank Sartor today previewed draft plans that will help deliver an upgrade to Redfern Station and new affordable housing to the area reports this media release from Minister for Redfern Waterloo, Planning and the Arts Frank Sartor.

“It is our intention that between 12% and 16% of residential dwellings on the site be affordable housing – which breaks down to between 150 and 200 dwellings, depending on size,” Mr Sartor said.

Further detailed plans will also be developed for the station upgrade and affordable housing component.

RWA Update May 2008

More than $1.3 billion will be invested in Eveleigh's transformation, which will result in:

• 2400 residents living in 1260 new dwellings at North Eveleigh including a significant proportion of affordable rental dwellings.

North Eveleigh Concept Plan Environmental Assessment

Executive Summary –

• The provision of a significant proportion of affordable housing dwellings.
  

1.2

• Introduction of a range of initiatives for the conservation of water and energy, provision for community facilities, and affordable housing.
  

1.4 Requirements 

Provision of affordable housing in accordance with the Redfern Waterloo Authority Affordable Housing Contributions Plan

5.2.1.

• A range of initiatives for the conservation of water and energy, provision for community facilities and affordable housing
  

5.2.4 SEPP 65 Principles Social Dimension

In addition it is proposed to provide a significant amount of affordable housing units on site.

5.2.12 RWA Affordable Housing Contributions Plan

This Plan requires a contribution equivalent to the estimated cost of the provision of affordable housing comprising $59/m2 of the total gross floor area of development in the Operational Area reduced by the gross floor area of existing buildings. The gross floor area of existing buildings has been estimated by the RWA at 45,854m2.

6.13.2

• Housing affordability is also an issue for lower income city workers i.e. workers within the hospitality and service industries. These workers are critical to the efficient operation of Global Sydney and play an important role in its economy. They are however becoming increasingly priced out of living in inner city area’s (in favour of more affordable locations in Western Sydney) or having a greater dependence on commuting. The latter trend placing particular strain on city shift workers.
• The RWA’s provision of a component of affordable housing on the Subject Site will not only seek to address issues of social equity but also the economy. This is because the provision of affordable homes within the inner city will enable the retention of a diverse workforce in close proximity to Global Sydney. This will support the function of businesses within Global Sydney and their economic success.
• Maintaining diversity in the Global Sydney labour force will also minimise the potential for labour shortages. Should labour shortages occur for a range of lower income jobs, businesses would need to attract staff through higher salaries and other incentives. These additional costs would in turn need to be passed onto the consumer through the costs of services and goods.
• The provision of affordable housing on the Subject Site will also enhance the economic wealth of disadvantaged families through a number of measures. Firstly more affordable housing options allows for a greater proportion of a households income to be directed to quality food, health services and care. Improved health and access to employment opportunities increases the ability for these households to break the cycle of disadvantage.
  

6.13 Summary

• provide affordable housing options to create a socially equitable and inclusive community and a diverse local labour force;
  

8 Draft Statement of Commitments

• Affordable Housing - A significant proportion of the new dwellings in North Eveleigh will be affordable housing which will be managed by a registered community housing organisation or government agency. This will be funded by the RWA’s affordable housing developer levies. - To be addressed at Project Application Stage
• Payment of Affordable Housing Contributions - Affordable Housing Contribution will be made in accordance with the Redfern-Waterloo Authority Affordable Housing Contribution Plan 2006 (as amended) - Prior to issue of Construction Certificate
  

Appendix V - North Eveleigh Social Impact Assessment Prepared by Redfern-Waterloo Authority April 2008

Executive Summary - Housing and Population page 4

• It is anticipated that the North Eveleigh site will provide for up to 1,258 dwellings and a population of up to 2,400 new residents. Housing will comprise a mix of studios, one, two and three bedrooms.
• Based on the RWA’s initial calculations taking into account development contributions collected from the RWA Affordable Housing Contributions Plan and contributions from the former Carlton United Brewery site, the North Eveleigh site can provide a proportion of affordable housing.
  

Social Impact of North Eveleigh (page 13)

North Eveleigh will draw a working/student population who want to live in close proximity to the Sydney CBD for access to universities, work and entertainment.

The North Eveleigh redevelopment will respond to a market which is relatively more affordable than comparative residential markets close to the City such as Barangaroo, Pyrmont, and Victoria Park.

6.7 Affordable Housing (pages 17-19)

The definition of Affordable Housing has been endorsed by Federal and State and Government to mean housing for very low income households, low income households or moderate income households whose gross incomes fall within the following ranges:

• very low income - below 50% of the gross median income ($30,837)⁷
• low income - between 50% and 79% of the gross median income($49,339), and
• moderate income – between 80% and 119% of the gross median income ($74,008).
  

The definition also includes housing that is appropriate to the household, and housing that is priced so that households are able to meet other essential basic living costs.

Based on data compiled by the ABS using the 2006 Census for the RWA’s Operational Area, in the postcode areas 2008, 2016 and 2017 (Redfern, Waterloo, and Darlington) 1,450 households earning very low, low and moderate incomes are expending more than 30% of household income on private rental accommodation. The total number of households in private rental accommodation in the above postcodes was 4,502. Based on this figure, 32% of private renters are in housing stress.⁸

431 households earning very low, low and moderate incomes are expending more than 30% of household income on home purchase. The total number of households purchasing in the above postcodes was 2,400. 18% of households purchasing in homes in the RWA’s Operational Area in 2006 were in housing stress.

In 1996 and 2006, the proportion of dwellings which could be affordably rented by very low income households fell from 4% to 1.7% respectively. In the same years the proportion which could be affordably rented by low income households fell from 16.9% to 9.2%. 59% of all dwellings could be affordably rented by moderate income households in 2006.⁹

Between 1996 and 2006 none of the dwellings which were for sale were priced such that they could be purchased by very low income households. The proportion which could be purchased by low income households fell from 5.1% to zero in the years 1996 and 2006. The proportion which could be purchased by moderate income households fell from 31.7% to 7.3% in 1996 and 2006 respectively.¹⁰

There are 361 indigenous households in the RWA Operational Area. 58% of indigenous households in RWA’s Operational Area live in public housing. Of those purchasing 24 out of 361 indigenous households fully own or are purchasing a house (2006 ABS Census).

Social Impact of North Eveleigh

It is estimated that under the Redfern–Waterloo Authority Affordable Housing Contribution Plan approximately $7million in affordable housing contributions will be received from the eventual purchaser of North Eveleigh site over an estimated 5-7 year development horizon.

It is estimated that under the Voluntary Planning Agreement between the RWA and the owners of the former Carlton and United Brewery site a further $25 million will be received by the RWA over a similar development period for affordable housing.

The RWA believes that the North Eveleigh site presents an ideal opportunity for the provision of affordable housing and that a proportion of the new dwellings in the site would comprise of affordable housing dwellings.

The RWA has made a commitment that $16 million worth of contributions would be directed at providing affordable housing for Aboriginal people in the RWA’s Operational Area.

A possible approach for managing the affordable housing may be to transfer affordable housing to a registered community housing organisation such as City West Housing which has successfully delivered affordable housing in Pyrmont and Green Square.

It is intended that the Statement of Commitments for the North Eveleigh Concept Plan include a provision requiring that affordable housing be provided on the site and be managed by a registered community housing provider.

⁷ Income ranges are for 2006 and provided to the RWA from the NSW Department of Housing, Office of Affordable Housing.

⁸ Note that these figures are based on information provided to the ABS.

⁹ Rents for new bonds lodged with the Renting Services Branch, Office of Fair Trading, Department of Commerce (1996 and 2006).

¹⁰ Land Sales Contracts notified to the Land and Property Information NSW (1996 and 2006).

(North Eveleigh Social Impact Assessment pp17-19)

Appendix W – North Eveleigh Economic Impact Assessment March 2008 by Hill PDA Consulting

Key Study Findings - Other Economic Considerations (page 8)

• 4. The RWA’s provision of a component of affordable housing on the Subject Site will not only seek to address issues of social equity but also the economy. This is because the provision of affordable homes within the inner city will enable the retention of a diverse workforce in close proximity to Global Sydney. This will support the function of businesses within Global Sydney and their economic success.
• 5. Maintaining diversity in the Global Sydney labour force will also minimise the potential for labour shortages. Should labour shortages occur for a range of lower income jobs, businesses would need to attract staff through higher salaries and other incentives. These additional costs would inturn need to be passed onto the consumer through the costs of services and goods.
• 6. The provision of affordable housing on the Subject Site will also enhance the economic wealth of disadvantaged families through a number of measures. Firstly more affordable housing options allows for a greater proportion of a households income to be directed to quality food, health services and care. Improved health and access to employment opportunities increases the ability for these households to break the cycle of disadvantage.
  

1.5 Conclusion (page 9)

• provide affordable housing options to create a socially equitable and inclusive community and a diverse local labour force
  

4.4 Summary (page 23)

Owing to the broad range of local residents and their diverse socioeconomic , cultural and ethnic characteristics, there are significant challenges that need to be addressed to ensure social cohesion and equity. The following sections of this report address how the proposed uses, that form the North Eveleigh Concept Plan, may help to address some of these challenges through the creation of local employment opportunities, the provision of local services and affordable homes.

6.1 Affordable Housing (page 32-36)

The Affordable Housing Scenario

It is widely acknowledged that NSW is facing serious problems in relation to the affordability of housing. In fact over 265,000¹⁸ households in the State are estimated to be experiencing housing stress (generally defined as households that spend over 30% of their gross income on housing related costs and thereby have to sacrifice their ability to meet other necessities). The following section of the report investigates the potential economic impact of the proposed North Eveleigh Concept Plan to the residential industry and local residents in accordance with the Director-General’s Requirements provided in accordance with Section 75F of the Environmental Planning and Assessment Act 1979.

Housing stress in Australia has grown as a result of the quadrupling of housing prices over the past 20 years without the commensurate growth in incomes. Within Sydney this issue has become particularly pronounced. In Sydney it was found that the median housing price of $520,000 would need to drop to $180,000¹⁹ in order for the average household to avoid housing crisis.

One parliamentary report found that the median house price ($560,000) of a dwelling within Sydney’ inner ring would require an annual mortgage repayment over a 25 year period of $47,500 (or $913 a week).²⁰

The mismatch between housing costs and household incomes has resulted in a significant decline in the proportion of persons buying first homes and greater pressures on the rental housing market.

The RWA Operational Area has historically been associated with low to moderate income housing, reflecting its location on the CBD fringe in close proximity to industrial areas. As a result it has been generally regarded as an affordable location for a mix of lower income city and CBD fringe workers, students and families. As a result of increasing gentrification and the growing popularity of living in inner city areas by professionals with higher incomes, this perception has begun to change.

The changing demographic characteristics and resurgence in housing demand in CBD fringe areas has affected the value of dwellings significantly over the past 10 years alone. Based on the Department of Housings Rent and Sales Reports the median dwelling price in the City of Sydney LGA (inclusive of the former South Sydney LGA) increased from $298,000 in September 1998 to $483,000 in January 2008 or by +62%. The growth in values is in part a result of the gentrification the area experienced over the period, housing shortages and changes in planning policies permitting a greater component of residential dwellings within the city.

 “Housing is affordable when households that are renting or purchasing are able to pay their housing costs and still have sufficient income to meet other basic needs such as food, clothing, transport, medical care and education. - NSW DoH - Centre for Affordable Housing

Much of the supply of new dwellings within city areas has been however at the higher end of the market reflecting a trend for the development of high value private rental dwellings. This trend was so pronounced across Australia between 1996 and 2001 that despite the 7.6% growth in the number of private rental units achieved, there was a net loss of rental units in the bottom four rent quintiles²¹.

Relating the trends discussed above to the Subject Area, it was found that between 2001 and 2006²²:

• no dwellings for sale were of a value that could be purchased (without other assistance) by households within the very low income band (annual combined income of approximately $29,900²³). Over the same period the proportion of affordable rental dwellings fell from 6.7% to 1.7% for this group;
• the proportion that could be purchased by low income households (annual combined income of approximately $47,840²⁴) fell from 0.8% in 2001 to zero in 2006. Over the same period the proportion of affordable rental dwellings fell from 14.1% to 9.2% for this group; and
• the proportion that could be purchased by moderate income households (annual combined income of approximately $71,760²⁵) fell from 7.8% in 1996 to 7.3% in 2006. In 2006 this group could afford to rent 59% of stock however it is reasoned that there are still significant pressures for this group as they compete with higher income households for the same stock.
  

The table below compares these figures to the proportion (and actual numbers) of residents with the suburbs of Darlington, Redfern, Waterloo / Zetland and the City of Sydney LGA that were in the very low to moderate income bands as of the 2006 Census. It shows that in the order of 14,000 households in the immediate vicinity of the site are within these bands and competing for the limited affordable housing stock outlined above.

Table 11 - Proportion of Households by Suburb by Income Band

          Suburb Population Very Low Band Low band Moderate band Total Households

Darlington             2,183             43%                  8%                   15%      66% (1,441)

Redfern               11,344            31%                  4%                   16%      51% (5,785)

Waterloo/ Zetland 11,251            41%                  4%                   14%      59% (6,638)

City of Sydney  156,573             25%                  5%                   18%      48% (75,155)

Source: ABS 2006, Hill PDA

The figures above are a combination of public and private households. They show that within each suburb the greatest proportion of household incomes fall within the very low to moderate bands and that between 31% and 43% of all households fall within the very low income band.

By focusing on public housing tenants, the average household income in the Redfern – Waterloo Area (2,696 dwellings) was $337 per week or $17,500 per year²⁶.

The analysis provided above highlights the existing gap between housing costs and incomes in the area immediately surrounding the site. This mismatch is forecasted to grow with the attractions of inner city living and the associated gentrification of inner city and city fringe areas.

The Economic Implications of Low Housing Affordability

The merits of providing affordable housing are often associated with the issue of social equity. Affordable housing is however more than a social equity issue and in fact an economic one. The economic implications of housing affordability are becoming increasingly recognised. This is because a range of household types and their respective incomes has a direct relationship with labour type. The Australian

Housing and Research Institute (AHURI) in fact identify that:

“This link between the supply of affordable housing and labour market shortages is one of the ways in which the chronic instability of housing markets can impact upon the efficiency of the economy²⁷”.

Whilst a significant proportion of jobs within Global Sydney (Sydney CBD and North Sydney) relate to professional and managerial occupations associated with the Global companies and institutions based in these locations, there is still a need (and will continue to be a need) for services that support the operation of these businesses. The workers employed in service industries (such as sales assistants, cleaners, administrators) can not command the salary expectations of other inner city professions however they are equally required to access jobs and housing within the city.

This is an issue however when housing prices in inner city areas significantly exceed the affordability of low to moderate income households as discussed above. This issue has been identified by the Government with particular respect to Action A3.2 of the Metropolitan Strategy – Economy and Employment which seeks to:

“increase the integration of employment and housing markets’ in order to ensure a range of labour is available for the spectrum of jobs required to support Sydney’s economic function.”

A study by AHURI into the connection between housing affordability and labour shortages across Australia found that the incidence of housing affordability problems amongst working households was highest for those working in Sydney and particularly inner Sydney. Prior to 2001, the AHURI study found that the mismatch between housing costs and staff wages in inner city areas of Sydney was addressed through a range of methods including:

1. commuting to Global Sydney from more affordable areas (this was the case for the majority of workers); and
2. reliance on a higher income partner to afford to live in inner/ central Sydney; and
3. the relocation of lower income households to more affordable areas and new employment markets in Sydney’s outer suburbs.
   

The same study highlighted that the post 2001 housing boom would have created greater strain on these methods as a result of the growth in property values. This factor together with the predominance of new luxury apartments in inner city areas has further outpriced lower income workers. This is particularly a concern for industries that depend on shift workers who need to locate in close proximity to their work as they can not rely on public transport because it does not correlate with the hours of their work.

One example of such an industry is the hospitality industry. A key industry in Global Sydney, the AHURI study found that 34% of all workers in the industry lived in inner city areas (compared to 21% of all occupations). This high rate, despite the mismatch between income and housing costs, indicates the dependence of workers in this industry on locating in close proximity to their jobs.

Whilst the AHURI study found that the greatest pressures were being experienced by industries such as hospitality, cleaning and health care, the Department of Housing’s centre for affordable housing also identifies that the issue is prominent amongst key workers, stating that:

“Individuals working in key services on low-to-moderate incomes such as those working in childcare and aged care, police, ambulance personnel, nurses, community development workers and transport workers, are finding it increasingly difficult to find affordable housing close to their work places.

Over time, we risk these individuals choosing not to work in high cost areas that are too far from their accommodation”.

In any case it is apparent that the pressures on low to moderate income households will exacerbate if current property trends continue. This will force more low income households to relocate from inner city areas to more affordable housing markets. As a result more employees will be required to commute daily to employment in Global Sydney and pay the associated transport costs as a trade off for housing costs. This will also exacerbate traffic congestion and transport issues to and from the city and the environmental implications all of which are contrary to the objectives of the NSW State Plan.

An alternative scenario is that a greater proportion of lower income households that relocate to more affordable locations choose to work in close proximity to their home. Whilst this would create a more environmentally sustainable scenario it would also be likely to result in labour shortages for businesses within inner city areas dependant on key services.

Should labour shortages in lower income industries occur in Global Sydney, many businesses would be required to attract staff through financial incentives and pass these costs onto the client. This would have a knock on impact to the cost of goods and services within Global Sydney and potentially have an affect on the attractiveness of businesses moving to or staying within the city.

The prospect of growing service costs and labour shortages would not be considered favourably for Sydney’s economy and its role as a Global City. The economic implications of this would be difficult to quantify however there is no doubt that they would be far reaching.

At the household level, a range of housing affordability within inner city areas also has economic implications. This is a result of the employment opportunities access to Global Sydney may provide to individuals through training, experience with prestigious firms and higher salaries.

Providing opportunities for wealth creation is a key element of the RWA’s Employment and Enterprise Plan.

It states that:

“Empowering people to create their own wealth (through meaningful employment or starting their own enterprise) is one aspect of addressing the root causes of social disadvantage experienced in sectors of the community.”

By restricting access to these networks there is reduced opportunity for all socioeconomic groups to benefit from Sydney’s economic growth. This will further exacerbate the divide between Sydney’s community.

Affordable Housing as Part of the North Eveleigh Concept Plan

The RWA’s Affordable Housing Contributions Plan establishes clear objectives to ensure that a socially diverse residential population is created and maintained within the RWA’s Operational Area. Furthermore the plan seeks to ensure that:

“people of all social and economic groups have access to a range of opportunities provided in the area.”

A range of housing choice is a major mechanism to achieve the RWAs objectives. Accordingly the RWA’s Affordable Housing Contributions Plan seeks to secure a contribution equivalent to the estimated cost of 1.25% of the total gross area of development in the RWA’s Operational Area.

The proposed Concept Plan supports this position by providing in the order of 92,000sqm of residential floorspace. It is estimated that this would translate into

between 1200 and 1300 dwellings. 1.25% of the gross floor area of these units will be secured as affordable housing in perpetuity.

In light of the discussion provided above, the provision of such a significant component of affordable housing by the proposed Concept Plan is considered valuable in not only social terms but important with respect to the efficiency and strength of Sydney’s economy.

“By increasing access to affordable housing, we work towards integrated and sustainable communities that function in a way that benefits the whole community.” NSW DoH - Centre for Affordable Housing

¹⁸ NSW Housing Fact Sheet – Shelter NSW

¹⁹ The Dimensions of Australia’s Affordable Housing Problem - URBISJHD

²⁰ John Collett, “Home Savings” – SMH Nov 2005

²¹ The Dimensions of Australia’s Affordable Housing Problem - URBISJHD

²² NSW Department of Housing, Housing Analysis and Research, based on land sales contracts notified to Land and Property Information and rents for new bonds lodged with Renting Services Branch, Office of Fair Trading, Department of Commerce

²³ NSW Department of Housing 2007

²⁴ NSW Department of Housing 2007

²⁵ Department of Housing 2007

²⁶ Based on information Provided By Housing NSW – compiled by G.Turnbull www.redwatch.org.au

²⁷ Are Housing Problems Creating Labour Shortages? – AHURI 2006

6.4 Investment Stimulus (page 41)

The Redfern - Waterloo Built Environment Plan 2006 identifies in the order of $286 million of investment in the RWA Operational Area over the next ten years by a range of government and private agencies. This investment relates to wide variety of uses including art and media centres, performing arts centres, a national Indigenous development centre, affordable housing, community health facilities and infrastructure.

7 Conclusion (page 43)

• provide affordable housing options to create a socially equitable and inclusive community and a diverse local labour force;
  

RWA CEO Robert Domm on affordable housing - answer to Inquiry into Indigenous disadvantage (uncorrected transcript page 62):

The Hon. GREG DONNELLY: You have been provided with some questions on notice. I will refer to a couple of them and seek your response. The second question asks you to explain the Redfern-Waterloo Authority's proposed share equity model of home ownership. Can you provide some detail about that proposal?

Mr DOMM: I got into trouble a year our so ago at the budget estimates hearings when I answered that question by saying that that forms part of stage two of the built environment plan and that we had not started working on that. I tried to be helpful and answer some questions and dug myself a hole. Stage two of the built environment plan has commenced and we are working actively with the Department of Housing on revitalisation of the public housing estates and trying to see what potential that creates for new and better public housing and also an element of affordable housing, including the potential for some sort of shared equity home ownership scheme.

The leaflet I handed out today indicates that on Saturday the Minister for Redfern Waterloo, the Hon. Frank Sartor , announced a major affordable housing initiative at North Eveleigh . The concept plan for the redevelopment, which is going on exhibition this week, will contain between 150 and 200 affordable rental dwellings. That comprises about 12 per cent to 16 per cent of total dwellings on that site. The total is estimated to be about 1,260. That is a very high percentage of dwellings. However, I emphasise the word "rental". In other words, we made a strategic decision in respect of that site that affordable rental dwellings would be a more enduring solution than a one-off, lower-cost sale process. There are two ways to provide affordable housing: one is to sell at an affordable rate and the other is to set affordable rental rates. We have made the decision that the more enduring solution in North Eveleigh is for the Government to set aside the land from the sale process and then to use developer levies to construct the dwellings over the development horizon of the project and retain them in ownership and use them for low-cost rental accommodation.

When it comes to stage two of the built environment plan and looking at the public housing estates we are still not at the point at which we have started to work out the detail of a shared equity home ownership scheme. Therefore, I am not able to go into any detail in respect of that today. However, the underlying philosophy of that proposal is whether we can find a way whereby low-income, disadvantaged people living in public housing can in some way gain a stake in that housing so that they can generate wealth through capital growth. Having said that, there is no proposal to sell public housing or anything like that. We need to look at what is happening interstate and overseas to see whether there is some capacity to create wealth through a shared equity scheme. We have not come to any conclusions about that and ultimately it will go to Cabinet and a decision will be made. That is all I can say about shared equity at this stage.