Affordable Housing Strategy
Urban Land Development Authority
Affordable Housing Strategy June 2009
The information contained herein does not represent Commonwealth, State of Local Government policy. The Urban Land Development Authority does not guarantee or make any representations as to its accuracy or completeness, nor will they accept any responsibility for any loss or damage arising from its use.
Table of Contents
1.0
EXECUTIVE SUMMARY ............................................................................................ 1
2.0
INTRODUCTION .................................................................................................... 3
3.0
AFFORDABLE HOUSING DEFINITION AND TARGETS ....................................................... 5
4.0
TARGET GROUP, TENURE AND PRICE POINTS .............................................................. 7
5.0
AFFORDABLE HOUSING OUTCOMES............................................................................ 8
6.0
IMPLEMENTATION ............................................................................................... 11
APPENDIX A ............................................................................................................. 13 APPENDIX B ............................................................................................................. 14 APPENDIX C.............................................................................................................. 16 APPENDIX D ............................................................................................................. 19
ULDA Affordable Housing Strategy June 2009
ULDA Affordable Housing Strategy 1.0 Executive Summary Affordable Housing Defined A key purpose of the Urban Land Development Authority Act 2007 (the Act) is to facilitate the provision of an ongoing supply of affordable housing. This Strategy targets household incomes of generally between $40,000 and $80,000. Housing will be considered to be affordable if households are spending no more than 30 percent of gross household income on rent and no more than 35 percent for home purchase. Affordable Housing Objectives The Urban Land Development Authority (ULDA) has set an affordable housing target of a minimum of fifteen (15) percent of all dwellings developed across the Urban Development Areas (UDAs) to be affordable to people on low to moderate incomes. The ULDA will seek to ensure the seamless integration of affordable housing into UDAs by: •
Mixing affordable housing throughout the community, not clustering together or segregating from other dwellings in the UDAs; and
•
Requiring quality design outcomes for affordable dwellings to avoid identifying them or setting them apart from the community.
ULDA Actions The ULDA will apply three specific approaches to achieve this fifteen (15) percent affordable housing target in the UDAs namely: 1.
Including provisions within the Development Schemes that mandate a percentage of dwellings in residential projects be required to meet prescribed affordability criteria;
2.
Requiring an affordable housing development contribution, either monetary or built product, if a proponent of a development elects to utilise the higher development yield arising from a Development Scheme; and
3.
Where the ULDA undertakes development activities, reinvestment of surplus funds into affordable housing outcomes.
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Social and Community Housing While the ULDA’s mandate does not include the provision of social housing, the ULDA will facilitate its inclusion in UDAs by working with: •
Registered Not For Profit Community Housing organisations; and
•
The Department of Communities in relation to its purchase and/or construction program.
Implementation Where a subsidised affordable housing outcome arises under this strategy, the ULDA will require that a development agreement be entered into between the development proponent and the ULDA which covers such matters as: •
Amount, timing and bonding of monetary contributions;
•
Provision of built product in lieu of monetary contributions; and
•
Mechanisms to ensure an affordable product retains its affordability over the long term.
Other specific implementation actions will include: •
A monitoring and evaluation program;
•
Facilitating access to Australian Government and Queensland Government affordable housing programs; and
•
Defining roles and responsibilities of government, registered Not for Profit housing organisations and the private sector in the UDAs.
In conjunction with stakeholders, the ULDA will build on this affordable housing strategy, including addressing matters such as covenants on title and the consideration of a shared equity scheme, as the strategy is implemented in the UDAs.
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2.0 Introduction Background There has been a decline in housing affordability in Queensland which had, until market events in 2008, been exacerbated by increases in interest rates and strong growth in the economy. Declining housing affordability is particularly pronounced in the inner suburbs of Brisbane as a result of inner urban gentrification and in areas of the state where there is rapid population growth such as the Bowen Basin. Some indicators of the problem include: •
In March 2004 a first home buyer in Queensland required an income of $76,000 to purchase a median priced home. This had increased to $98,000 by March 2009i;
•
In February 2004 the Queensland average wage was $48,000 per annum compared to $62,000 in February 2009ii;
•
In 2004 the median weekly rent for a three bedroom house was $220. This had increased to $325 by March 2009 with vacancy rates falling below 2% in some parts of the Stateiii;
•
The National Centre for Social and Economic Modelling (NATSEM) data shows that 23iv percent or 346,960v Queensland Households are in housing stress; and
•
The median detached house price in Queensland for March quarter 2004 was $268,000 and increased to $386,000 by March quarter 2009vi.
In addition to these social impacts a lack of affordable housing also has economic impacts. “Another downside of not providing affordable housing is the effect on local labour markets and consequently on prospects for growth in local economies. Labour market participants have little choice but to relocate elsewhere, leaving employers unable to find appropriate skills to fill vacancies”vii.
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ULDA Mandate and Role The ULDA is an independent statutory authority established in 2007 as a key element of the Queensland Government’s Housing Affordability Strategyviii to help make housing more affordable and deliver a range of housing options for the changing needs of the community. The Minister for Infrastructure and Planning is responsible for determining UDAs and through this process outlines the desired development outcomes for each UDA which builds on the legislative provisions. The role of the ULDA is to facilitate the development of declared UDAs, to improve housing affordability by enabling land to move quickly to market and to deliver high quality urban development outcomes. The Urban Land Development Authority Act 2007 specifically states that one of the main purposes of the ULDA is to facilitate the provision of ‘an ongoing availability of affordable housing options for low to moderate income households’ix. The ULDA does not intend to own or manage affordable housing. The ULDA will facilitate partnerships between the private, community and public sectors including leveraging resources from affordable housing programs established by the Australian Government or the Queensland Government to maximise the delivery of affordable housing outcomesx. The funding and management of social housing in the UDAs is the responsibility of the Department of Communities and registered Not for Profit Community Housing providers. The ULDA will encourage and facilitate these parties to develop and deliver projects within the UDAs. The purpose of this strategy is to outline: •
How the ULDA will facilitate the provision of affordable housing in Urban Development Areas (UDAs);
•
The range of types of affordable housing that will be provided in the UDAs;
•
The target group for this housing; and
•
The mechanisms which will be applied to achieve these outcomes.
The notes (NOTES:) provide further information on the policy intent of the strategy.
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3.0 Affordable Housing Definition and Targets The ULDA has a role in improving ‘housing affordability’ as well as in facilitating the provision of ‘affordable housing’ through its powers and activities in the UDAs. Housing Affordability Housing affordability relates to the impacts of the prevailing economic, financial and social costs associated with housing demand and supply that may constrain the ability of households to own or rent their own home and represents the underlying costs of developing housing for the market. To improve housing affordability in the UDAs the ULDA will reduce the cost of development by bringing land to market, by streamlining the development approval process and removing impediments to public and private housing and urban development providers. Other mechanisms could include debt funding of infrastructure enabling reduced sale prices for the land where the debt funding is repaid by the landowner over a period of years by way of a special rate. Through Development Schemes the ULDA will also require the development of diverse housing options including facilitating the delivery of affordable housing in well serviced locations. Affordable Housing Affordable housing relates to the ability of sections within our community to be able to afford the cost of housing whether through ownership or the rental market. The ULDA will adopt the following definition of affordable housing: Affordable housing refers to housing which can be reasonably afforded by low to moderate income households and encompasses: •
Private rental housing and home purchase options (including housing aimed at the first home owners market); and
•
Social housing (including public and community housing).
As mentioned above, the ULDA has no legislated role in the provision of social housing but will collaborate with public and community providers in relation to the inclusion of social housing in the UDAs. Section 4.0 of this Strategy provides a description of the affordable housing target groups, tenure and price points adopted by the ULDA.
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Affordable Housing Objectives The ULDA believes that healthy communities require a range of housing options to address different lifestyles, household compositions and budgets. Improving housing delivery, affordability, design and choice will result in more diverse and inclusive communities. The ULDA housing objective is to take proactive actions to increase the provision of affordable, appropriate and accessible housing for low to moderate income earners. This will be achieved by: •
setting a minimum target of fifteen (15) percent of all dwellings developed across the UDAs, to be affordable to households on low to moderate incomesxi. The ULDA will seek to address impacts of any loss of social and affordable private rental housing that occurs as a result of the development schemes
•
ensuring affordable housing in the UDAs supports affordable living through sustainable design. This will reduce living costs for households and lifecycle costs for owners and
•
facilitating affordable housing which is designed and located so that affordable housing tenants and home purchasers are well integrated into the community. This includes: o
Mixing affordable housing throughout the community, not clustering together or segregating from other dwellings in the UDAs
o
Providing high quality design outcomes for affordable dwellings to avoid identifying them or setting them apart from the community
o
Designing affordable housing to contribute to the safety, wellbeing, and the quality of life of the community and neighbourhood
o
A target of 10% across each UDA, including the affordable housing, to conform to universal and sustainable design principlesxii to meet the changing needs of people and households over time and
o
Locating affordable housing close to centres, employment, transport and services.
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4.0 Target Group, Tenure and Price Points As stated in the Act, the ULDA’s target group for affordable housing includes households assessed as having low to moderate household incomes. The ULDA has determined two reference points to assess the household income level of the target group, namely: •
Household incomes of generally between $40,000 and $80,000.
•
Households spending no more than 30 percent of gross household income on rent and 35 percent of gross household income on home ownership.
NOTES: Typical households that fall into these income ranges are: •
Family (e.g. construction worker and teacher) $75, 986 xiii;
•
Young couple (e.g. police officer and beauty therapist) $65,741xiv;
•
Single income family (e.g. ambulance officer) $40,944xv; and
•
Single person (e.g. nurse) $40,114xvi.
Utilising the above criteria, Table 1 below provides an indication of the affordable rent and affordable purchase thresholds for defined household incomes within the target range. Table 1 Household Income and Affordable Housing Thresholds Gross Household Affordable Rent 1 Income ($p.a.) ($/wk) $80k 460 $70k 405 $60k 345 $50k 290 $40k 230
Affordable Purchase 2 ($k) 398 349 300 251 203
1. Rental Affordability has been calculated at 30% of weekly gross income and rounded-up. 2. Affordable Purchase cost has been calculated on a five percent deposit and a first home owner’s grant of $7,000 and amortisation period of 25 years with monthly repayments. Interest rates are based on current standard variable rate (5.75% as at April 2009). Available debt for service is calculated at 35% of monthly gross income and rounded-up.
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5.0 Affordable Housing Outcomes As discussed this Strategy is based on the premise that healthy, sustainable communities require a range of housing options for different lifestyles and household incomes. The provision of affordable housing is a key strategy to enable the retention of diverse communities and to avoid the dislocation of low income households. The provision of affordable housing facilitates economic benefits for communities by assisting the employment and retention of key workers on low to moderate incomes. The ULDA will implement strategies to deliver the affordable housing target of fifteen (15) percent in the UDAs in two ways; by direct actions of the ULDA and indirectly through the facilitation of others.
NOTES: Examples of housing affordability outcomes for the declared UDAs at Northshore Hamilton, Bowen Hills and Fitzgibbon are at Appendix A. Direct ULDA Actions Housing Diversity Requirements The ULDA will include provisions in Development Schemes requiring all residential projects to have a diversity of product including a prescribed percentage of residential product that is affordable by the target market. Each UDA, due to its specific circumstance, is likely to attract different requirements. Factors such as percentage of government land, existing dwelling prices and need will be required to be taken into account when determining the prescribed affordable housing provision. Where the provision of the affordable product will require a subsidy to meet the target market affordability criteria, then a development agreement (refer Section 6.0) will be required to be entered into with the ULDA. This agreement will include amongst other things, the type of product, duration of subsidy and legal mechanism to protect the subsidy. The ULDA recognises that in certain circumstances a development proponent may not practically be able to provide product within a project to meet this requirement. In that circumstance, payment of a monetary contribution in lieu will be considered and the calculation of this monetary contribution will be carried out in accordance with the principles contained in Appendix B. Development Contributions The ULDA Development Schemes may result in a higher development yield when compared to the current BCC City Plan. However this uplift of land value will require
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significant infrastructure to support it as well as proactive facilitation of affordable housing and a focus on ecologically sustainable principles. The ULDA has proposed that where a development proponent wishes to utilise the higher development yield arising under the relevant Development Scheme, a sharing of the uplift of land value will occur. In this circumstance a development contribution towards major infrastructure, affordable housing and ecologically sustainable outcomes will apply, over and above standard infrastructure charging requirements. The ULDA has a preference for the affordable housing component of the development contribution to be provided as affordable product rather than as a monetary contribution. A development agreement entered into with a development proponent will document the value of the contribution and/or the provision of product and Section 6.0 below provides more details on this aspect. Conversion of the affordable housing component of the development contribution into equivalent product is at Appendix C.
NOTES: Transitional Provisions In certain circumstances, for the purposes of calculating the total development contribution to be included in a Development Agreement, the ULDA may adopt a development yield greater than that shown in the Brisbane City Council City Plan. This would apply where the landowner purchased the property prior to the date of declaration of the UDA on the basis of a reasonable expectation that a higher development yield would have been approved by the Brisbane City Council. A landowner is to provide information that demonstrates a higher development yield would have been achieved. Refer to the relevant development scheme to determine whether these provisions apply.
ULDA Development Activities Under the Urban Land Development Authority Act 2007, the ULDA can develop land. Where the ULDA develops a site, affordable housing outcomes may be generated in two ways: Firstly, due to having greater control by being the developer, additional affordable housing provision and diversity of product can be achieved. Secondly, any surplus generated from these activities can be utilised to fund the ongoing operations of the ULDA and to deliver additional affordable housing outcomes. The affordable housing outcomes possible under this approach will be dependent upon the level of surplus, the market conditions of the UDA and the development project characteristics.
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NOTES: Affordable housing provisions for the Northshore Hamilton, Bowen Hills and Fitzgibbon UDAs, including an example of ULDA Development Activities in Fitzgibbon, is at Appendix D.
Facilitating Others Apart from the above direct actions, two other means are available for the ULDA to influence the delivery of affordable housing outcomes within UDAs. These include facilitating Not for Profit housing and collaboration with the Department of Communities. Facilitating Not for Profit (NFP) housing NFP organisations may already own, or acquire sites for the delivery of affordable housing within a UDA. Contingent on the NFP having the necessary funds to develop, the ULDA has the ability to assist the NFP with design, development requirements and approval processes to expedite the delivery of the project. In addition, NFPs may provide an appropriate mechanism to manage affordable housing outcomes arising from the diversity requirement on private developments or from development contributions. The contribution to the total affordable housing numbers from this approach is anticipated to be modest, however, it will be an important contribution given the ability of these organisations to address the lower end of the target household income range. Collaboration with the Department of Communities Social housing is the responsibility of, and is funded by, the Department of Communities. The dwellings are managed by the Department of Communities or by registered Not For Profit Community Housing organisations and are targeted on a needs basis through the housing register maintained by the Department of Communities. The ULDA will seek to work closely with the Department of Communities to facilitate its involvement in the UDAs, through its standard purchase program.
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6.0 Implementation Development Agreement Where a development agreement is required (refer to relevant Development Scheme), it will include specific provisions in relation to affordable housing. This development agreement will be required where: •
A housing diversity requirement leads to the provision of housing product that requires a subsidy to meet the affordable housing target;
•
A proponent is permitted to ‘convert’ provision of affordable housing product to a contribution in lieu; and
•
An agreement is reached with a proponent to ‘convert’ a monetary contribution to the provision of product in lieu.
The provisions of a development agreement relating to affordable housing may include amongst other things: •
the amount, timing and bonding of monetary contributions
•
the arrangements for providing a bank guarantee securing payment of the monetary contributions
•
the arrangements for credit for the provision of works or product in lieu of monetary contributions (refer Appendix B for development agreement inclusions)
•
mechanisms to ensure an affordable product retains its affordability over the long term (refer section 6.2 below) and
•
any other matter that the ULDA deems appropriate in the achievement of the Act’s purpose such as provision of built product in lieu of monetary contributions (refer Appendix C for development agreement inclusions).
Mechanisms to Retain Affordability The ULDA is seeking to maximise affordable housing outcomes in the UDAs over the long term. Affordable housing product delivered using some level of subsidy will require mechanisms to ensure: •
Affordable purchase product is not resold providing a windfall gain to the first purchaser; and
•
Affordable rental product remains affordable to the target group for a significant period of time.
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There are a number of ways of achieving this outcome including: •
A requirement that where the affordable housing provider has been approved for the National Rental Affordability Scheme (NRAS)xvii they will be required to retain affordability for 10 years under Australian Government program requirements;
•
Formal management agreements with either the Department of Communities or a registered Community Housing organisation;
•
Potential development of shared equity arrangements with an appropriate equity partner;
•
Limiting the trading of a dwelling to a particular target and income group through a title covenant. This means that affordable owner occupied units are only on-sold to other eligible buyers, with transfer of ownership occurring through a controlled process which excludes wills, private sales or bequests; and
•
Placing a covenant on the title of a property which ensures it is rented at affordable levels to an identified target group for 15 years or more.
The preferred mechanism will be determined on a project by project basis between the ULDA and the development proponent at the time of development approval and will be set out in the development agreement.
NOTES: Other Matters In addition to the above provisions the ULDA will develop a detailed implementation plan for the Affordable Housing Strategy covering issues such as: •
monitoring and evaluation
•
applying the Affordable Housing Strategy within the development assessment process
•
universal and sustainable design guidelines
•
facilitating access to Australian and Queensland Government affordable housing programs
•
roles and responsibilities of governments, registered Not for Profit housing organisations and the private sector and
•
policy and program development required to support affordable housing delivery including addressing priorities such as covenants on title and the potential for development of a shared equity scheme.
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APPENDIX A AFFORDABLE HOUSING OUCOMES IN NORTHSHORE HAMILTON, BOWEN HILLS AND FITZGIBBON Achievement of the affordable housing targets outlined in this Strategy will deliver 2800 affordable housing dwellings across the three UDAs at Northshore Hamilton, Bowen Hills and Fitzgibbon. Within the two inner urban UDAs, Northshore Hamilton and Bowen Hills, the majority of product will be affordable rental due to the cost of building product in these UDAs. A larger percentage of product within the Fitzgibbon UDA will be able to be affordable purchase due to the cost structures applying in that UDA. Table 3 below provides a summary of the expected affordable housing outcomes within each UDA. Table 3 Anticipated Affordable Housing Outcomes by UDA UDA
Total Dwellings
Target Affordable Housing (%)
Affordable Dwellings
Northshore Hamilton
8500
15
1270
Predominantly affordable rental, low NFP & Department of Communities no’s.
Bowen Hills
5000
15
750
Predominantly affordable rental, low NFP & Department of Communities no’s.
Fitzgibbon
1300
60
780
Mix of affordable rental and affordable purchase. Modest Department of Communities no’s.
Total
14800
19
2800
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Comment
APPENDIX B CALCULATION OF MONETARY CONTRIBUTION Where affordable housing product is to be provided under the housing diversity requirements of 5% of a residential project, the ULDA may allow a monetary contribution to be made in lieu of product as part of the development approval process. The following process will apply to the conversion of the housing diversity requirement to an equivalent monetary contribution. 1.
No. of Dwellings The number of dwellings that would have been provided will be calculated using the following formula: No. of Equivalent Affordable Dwelling (EAD) = Project residential floor area / 80 * 5% (Rounded to the nearest whole number) Where: 80 is the estimated size in square metres of an affordable two bedroom unit.
2.
The Affordable Housing Rent (AHR) The affordable housing rent (AHR) to be used in calculation of the monetary contribution in lieu will be: AHR = Median Annual Household Income in the Local Government Area * .3
Where, the Median Annual Household income data is calculated by adjusting the most recent ABS census based median household income using Consumer Price Index. 3.
Equivalent Monetary Contribution The equivalent affordable housing monetary contribution (AHMC) in lieu of providing the product will be calculated by the following: AHMC = EAD * (MR-AHR) * 15* 1.1 Where MR = estimated annual market rent in the area for a two bedroom unit of around 80 square metres AHR = estimated annual affordable house rent 15 = Number of years the dwellings are to be made available for affordable rental * is multiplication
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The increment factor (1.1) is included to approximate the administrative and transaction costs in sourcing alternative product elsewhere under a long term lease arrangement in lieu of product in the project. The Development Agreement which will be entered into as part of the development approval process will contain, as a minimum, the following information in relation to the delivery of housing product: •
The number of rental dwellings to be provided at affordable rental rate;
•
The median annual household income;
•
The estimated market rent of equivalent product in the local area;
•
The affordable housing monetary contribution;
•
The expected timing for the delivery of product and any requirements for bonding against the requirements; and
•
The required affordability retention mechanisms and associated documentation.
INDICATIVE WORKED EXAMPLE – CONVERSION OF AHC TO PRODUCT Assumed -
Affordable Housing Contribution
1,000,000
Ownership Product Income Target Market Sale Price Affordable Price
70,000 500,000 254,000
80,000 500,000 290,000
Price Difference (MP_AHP)
246,000
210,000
Number agreed to be delivered Product Value Rental Product Income Target Market Rent Affordable Rent Weekly Difference
1
1
246,000
210,000
80,000 480 460
70,000 480 405
=
50,000 480 290
20
75
190
Price Difference (MR-AHR) (annualised as 365/7) Number of Years Number agreed to be delivered
1,043
3,911
9,907
15 5
15 2
15 2
Product Value (Price difference * years *number)
78,375
117,330
(456,000)
297,210
=
(493,915) 50,085
Residual Payment Required in Cash
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APPENDIX C CONVERSION OF THE AFFORDABLE HOUSING COMPONENT OF THE DEVELOPMENT CONTRIBUTION INTO EQUIVALENT PRODUCT Where a development contribution includes an affordable housing component and the ULDA has a preference to take product in lieu of cash, the following conversion process will apply to convert the cash contribution to product. 1.
Monetary Contribution The applicable affordable housing contribution (AHC) will be as determined by the relevant development contribution.
2.
Product Type and Mix The residential product type and mix proposed to be provided in lieu of the monetary contribution will be negotiated between the ULDA and the development proponent. The ULDA will consider the household income level and tenure type (e.g. purchase or rental) to ensure they are suitable to be used in the product in lieu calculation. Standard rates for the applicable household income level and tenure type applying at the time of development approval will be applied for this calculation. Table 1 set out a range of these rates that would apply in October 2008. Table 1 Standard Household and Tenure Type Rates Gross Household Income
Affordable Rent (AR)
($p.a.)
($/wk)
Affordable Purchase (AP) ($k)
$80k
460
398
$70k
405
349
$60k
345
300
$50k
290
251
Notes: Affordable purchase cost is calculated on a five percent deposit and a first home owner’s grant of $7,000 and amortisation period of 25 years with monthly repayments. Interest rates are based on based on current standard variable rate (5.75% as at April 2009). Available debt for service is calculated at 35% of monthly gross income and rounded-up. Rental Affordability is calculated at 30% of weekly gross income and rounded-up.
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3.
Conversion of Affordable Housing Contribution to Product in Lieu The conversion of the affordable housing contribution (AHC) to product in lieu will be based on the mix of tenure type (affordable rental and affordable purchase) as agreed with the ULDA based on the following: Affordable Purchase The value of affordable housing product to be provided for ownership will be assessed using the following formula: Ownership Product (OP) = N * (MP-AHP) Where: N = Number of dwellings MP = Estimated market price of the product at completion AHP = Affordable house purchase price that the product sold for Where a range of product is to be delivered to differing income groups the formula will be calculated for each dwelling type / income target and then added together to provide a value for ownership product. Affordable Rental The value of affordable housing product to be provided for rental will be assessed using the following formula: Rental Product (RP) Where: N MR AHR Y
= N * (MR-AHR) * Y
= Number of dwellings = Estimated annual market rent of the product at completion = Estimated annual affordable house rent of the product at completion = Number of years the dwelling is to be made available for affordable rental
Where the rental products are to be targeted at different income levels the formula will be calculated for each income level and then added together to provide a value for rental product. The Development Agreement will establish the percentage below market rent that is to be charged for the agreed term. The calculation is to approximate the value of the rental difference over the term and otherwise would be payable at the start of the period. Inherent in the calculation is that income and rental growth over the term will be the same, to avoid the need for a complex discounted cashflow analysis. Residual Cash Payment Where the value of the product assessed as stated above, is less than the affordable housing contribution the residual value will be required to be paid in cash using the following formula; Residual Cash Payment = AHC – OP - RP Page 17 of 24
The Development Agreement entered into as part of the development approval process will contain, as a minimum, the following information in relation to the delivery of housing product in lieu of the payment of the affordable housing contribution (AHC): •
The number of dwellings to be delivered in an ownership or shared equity arrangement, the market value of those properties and the agreed value for purchasers;
•
The number of rental dwellings to be provided at affordable rental matched against the income target group and the associated market rents and affordable rents to be charged;
•
The agreed percentage below market rent that rental product will be delivered at and the number of years that the rental product will be delivered as affordable;
•
Any residual cash payment required and when that payment is required;
•
The expected timing for the delivery of product and any requirements for bonding against the requirements; and
•
The required affordability retention mechanisms and associated documentation.
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APPENDIX D AFFORDABLE HOUSING PROVISIONS FOR THE NORTHSHORE HAMILTON, BOWEN HILLS AND FITZGIBBON UDAs To date, two different provisions have been included in ULDA Development Schemes. Northshore Hamilton and Bowen Hills: The Northshore Hamilton and Bowen Hills Proposed Development Schemes require that a minimum of five (5) percent of dwellings in residential projects be affordable product. For these UDAs, affordable product has been defined as being able to be rented by a household on the median weekly family household income in Brisbane; currently $1262.07xviii. In these UDAs, development proponents indicate that the minimum priced product that can be produced will be within the high $300k’s or low $400k’s. However a development application lodged in October 2008 for a residential project in Northshore Hamilton includes a one bedroom product which is expected to sell for less than $300k. Figure 1 provides an example of a lower priced dwelling unit to achieve these price points. On this basis, even the lowest priced product will be outside the affordable purchase range, but within the affordable rental range. Consequently, affordable purchase product in these UDAs, if desired, will need to be provided by other means. The Northshore Hamilton and Bowen Hills Proposed Development Schemes include these provisions and state that thirty (30) percent of this development contribution will be applied towards affordable housing. Fitzgibbon: The Fitzgibbon Interim Land Use Plan (ILUP) includes provisions that require two thirds of housing product in the first precinct be at or below the median house price in Brisbane; currently $509,000xix. The first development application for Precinct 1 under the ILUP, lodged in September 2008, includes a diverse range of housing product resulting in anticipated dwelling prices ranging from low $200k’s to $400k+. Figure 2 provides as example of a lower priced dwelling unit to achieve these price points. The ULDA has developed a commercially based business model for Precinct 1 in Fitzgibbon that shows a diversity of product can be produced to significantly address the entry level housing package price, and the diversity of product and price points. Table 2 shows the potential product mix and price points that can be achieved in the Precinct 1 using this approach. The lower priced product falls within the affordable purchase range, while the medium priced product will be within the affordable rental range.
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Figure 1 – Entry Level Apartment
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Figure 2 ‘Fonzie Flat’ Entry Level Product Fitzgibbon
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Table 2 Proposed Fitzgibbon Dwelling Mix Precinct 1 Product Type
Mix
No. of Dw’s
(%)
Package Price ($k)
Detached - Large
1
4
$460+
Detached Medium
15
41
$400+
Detached - Small
28
80
$320+
Attached - Medium
38
107
$280-350
Attached - Small
18
50
$200-280
Total
100
282
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ENDNOTES i Required income to purchase a median priced house is calculated on the available debt to service a mortgage based on 30% of monthly gross income and rounded-up. Including in the calculation is a five percent deposit of the applicable median house price ($225,000 for June 2003 & $400,000 for June 2008) and a first home owner’s grant of $7,000 and amortization period of 25 years with monthly repayments. Interest rates are based on current standard variable rate (5.75% as at April 2009) (Department of Communities, Department of Environment and Resource Management).
ii
Australian Bureau of Statistics, Catalogue 6302.0.
iii Residential Tenancies Authority. iv
Percent figure based on 2005-06 results from the AMP-NATSEM Income and Wealth Report: Issue 19 released March 2008.
v Calculated by applying the percentage of households in stress to total number of households across Queensland as at time of 2006 census.
vi Department of Environment and vii SGS Economic and viii
Resource Management.
Planning, Urbecon Bulletin, January 2008, p 6.
Queensland Government, Queensland Housing Affordability Strategy, Brisbane, Department of Infrastructure and Planning, 2007.
ix Urban Land Development Authority Act, Part 1, Section 3.2(e). x
Department of Families, Housing, Community Services and Indigenous Affairs, National Rental Affordability Scheme (NRAS) and Housing Affordability Fund (HAF) 2008. xi This is based on an assessment of Queensland households in housing stress. National Centre for Social and Economic Modeling
(NATSEM), Housing Stress in Australia, 2007. This data shows that 23% or 346,960 Queensland Households are in housing stress. xii
Refer to “Smart and Sustainable Homes: Design Objectives. Department of Public Works (2008). Booklet available from: http://www.build.qld.gov.au/smart_housing/pdf/design_objectives_08.pdf
xiii Construction worker - labourer, Level 1- $17.18 an hr/ 38 hour week - $652.84 wk/ $1305.68 fn/, $ 34, 064 pr annum Teacher - Band 1, Step 1, $41, 922 pr annum Labourer:http://www.workplaceauthority.gov.au/docs/Payconditions/2008ePSS/AN140043.pdf Teacher:http://www.wageline.qld.gov.au/awardsacts/showDoc.jsp?Awards/T0110/SCHEDULE+2+-+SALARIES+-+TEACHERS Date accessed: 17 October 2008 xiv Police officer - Constable, 1st pay point,
$37, 665 pr annum Beauty therapist - Wage Level 1, $14.16 hr/ 38 hr week - $538.08/ $1076.16 fn/ $ 28, 076 pr annum Police officer:http://www.wageline.qld.gov.au/awardsacts/showDoc.jsp?Awards/P0290/5.1+Salaries Beauty therapist:http://www.workplaceauthority.gov.au/docs/Payconditions/2008ePSS/AN140026.pdf Date accessed: 17 October 2008
xv Ambulance - paramedic $1569.40 pr fn/ $40, 944 pr annum
Ambulance officer:http://www.wageline.qld.gov.au/awardsacts/showDoc.jsp?Awards/A0400/5.2+Wages Date accessed: 17 October 2008 xvi
Nurse - Occupational Health Nurse Grade 1 - 4th year. $40, 114.88 pr annum Nurse: http://www.wageline.qld.gov.au/awardsacts/showDoc.jsp?Awards/N0130/5.1+Wages
xvii Department of Families, Housing, Community Services and Indigenous Affairs, National Rental Affordability Scheme (NRAS)
http://www.fahcsia.gov.au/internet/facsinternet.nsf/housing/nras.htm xviii
ABS, Basic Community Profile, 2006, B02 (Selected Medians and Averages) ABS, cat Number 6401.0- Consumer Price Index, Australia, Dec, 2008
Page 23 of 24
xix DNRW Sales Database June Quarter 2008
Page 24 of 24
Affordable Housing Strategy June 2009
The information contained herein does not represent Commonwealth, State of Local Government policy. The Urban Land Development Authority does not guarantee or make any representations as to its accuracy or completeness, nor will they accept any responsibility for any loss or damage arising from its use.
Table of Contents
1.0
EXECUTIVE SUMMARY ............................................................................................ 1
2.0
INTRODUCTION .................................................................................................... 3
3.0
AFFORDABLE HOUSING DEFINITION AND TARGETS ....................................................... 5
4.0
TARGET GROUP, TENURE AND PRICE POINTS .............................................................. 7
5.0
AFFORDABLE HOUSING OUTCOMES............................................................................ 8
6.0
IMPLEMENTATION ............................................................................................... 11
APPENDIX A ............................................................................................................. 13 APPENDIX B ............................................................................................................. 14 APPENDIX C.............................................................................................................. 16 APPENDIX D ............................................................................................................. 19
ULDA Affordable Housing Strategy June 2009
ULDA Affordable Housing Strategy 1.0 Executive Summary Affordable Housing Defined A key purpose of the Urban Land Development Authority Act 2007 (the Act) is to facilitate the provision of an ongoing supply of affordable housing. This Strategy targets household incomes of generally between $40,000 and $80,000. Housing will be considered to be affordable if households are spending no more than 30 percent of gross household income on rent and no more than 35 percent for home purchase. Affordable Housing Objectives The Urban Land Development Authority (ULDA) has set an affordable housing target of a minimum of fifteen (15) percent of all dwellings developed across the Urban Development Areas (UDAs) to be affordable to people on low to moderate incomes. The ULDA will seek to ensure the seamless integration of affordable housing into UDAs by: •
Mixing affordable housing throughout the community, not clustering together or segregating from other dwellings in the UDAs; and
•
Requiring quality design outcomes for affordable dwellings to avoid identifying them or setting them apart from the community.
ULDA Actions The ULDA will apply three specific approaches to achieve this fifteen (15) percent affordable housing target in the UDAs namely: 1.
Including provisions within the Development Schemes that mandate a percentage of dwellings in residential projects be required to meet prescribed affordability criteria;
2.
Requiring an affordable housing development contribution, either monetary or built product, if a proponent of a development elects to utilise the higher development yield arising from a Development Scheme; and
3.
Where the ULDA undertakes development activities, reinvestment of surplus funds into affordable housing outcomes.
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Social and Community Housing While the ULDA’s mandate does not include the provision of social housing, the ULDA will facilitate its inclusion in UDAs by working with: •
Registered Not For Profit Community Housing organisations; and
•
The Department of Communities in relation to its purchase and/or construction program.
Implementation Where a subsidised affordable housing outcome arises under this strategy, the ULDA will require that a development agreement be entered into between the development proponent and the ULDA which covers such matters as: •
Amount, timing and bonding of monetary contributions;
•
Provision of built product in lieu of monetary contributions; and
•
Mechanisms to ensure an affordable product retains its affordability over the long term.
Other specific implementation actions will include: •
A monitoring and evaluation program;
•
Facilitating access to Australian Government and Queensland Government affordable housing programs; and
•
Defining roles and responsibilities of government, registered Not for Profit housing organisations and the private sector in the UDAs.
In conjunction with stakeholders, the ULDA will build on this affordable housing strategy, including addressing matters such as covenants on title and the consideration of a shared equity scheme, as the strategy is implemented in the UDAs.
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2.0 Introduction Background There has been a decline in housing affordability in Queensland which had, until market events in 2008, been exacerbated by increases in interest rates and strong growth in the economy. Declining housing affordability is particularly pronounced in the inner suburbs of Brisbane as a result of inner urban gentrification and in areas of the state where there is rapid population growth such as the Bowen Basin. Some indicators of the problem include: •
In March 2004 a first home buyer in Queensland required an income of $76,000 to purchase a median priced home. This had increased to $98,000 by March 2009i;
•
In February 2004 the Queensland average wage was $48,000 per annum compared to $62,000 in February 2009ii;
•
In 2004 the median weekly rent for a three bedroom house was $220. This had increased to $325 by March 2009 with vacancy rates falling below 2% in some parts of the Stateiii;
•
The National Centre for Social and Economic Modelling (NATSEM) data shows that 23iv percent or 346,960v Queensland Households are in housing stress; and
•
The median detached house price in Queensland for March quarter 2004 was $268,000 and increased to $386,000 by March quarter 2009vi.
In addition to these social impacts a lack of affordable housing also has economic impacts. “Another downside of not providing affordable housing is the effect on local labour markets and consequently on prospects for growth in local economies. Labour market participants have little choice but to relocate elsewhere, leaving employers unable to find appropriate skills to fill vacancies”vii.
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ULDA Mandate and Role The ULDA is an independent statutory authority established in 2007 as a key element of the Queensland Government’s Housing Affordability Strategyviii to help make housing more affordable and deliver a range of housing options for the changing needs of the community. The Minister for Infrastructure and Planning is responsible for determining UDAs and through this process outlines the desired development outcomes for each UDA which builds on the legislative provisions. The role of the ULDA is to facilitate the development of declared UDAs, to improve housing affordability by enabling land to move quickly to market and to deliver high quality urban development outcomes. The Urban Land Development Authority Act 2007 specifically states that one of the main purposes of the ULDA is to facilitate the provision of ‘an ongoing availability of affordable housing options for low to moderate income households’ix. The ULDA does not intend to own or manage affordable housing. The ULDA will facilitate partnerships between the private, community and public sectors including leveraging resources from affordable housing programs established by the Australian Government or the Queensland Government to maximise the delivery of affordable housing outcomesx. The funding and management of social housing in the UDAs is the responsibility of the Department of Communities and registered Not for Profit Community Housing providers. The ULDA will encourage and facilitate these parties to develop and deliver projects within the UDAs. The purpose of this strategy is to outline: •
How the ULDA will facilitate the provision of affordable housing in Urban Development Areas (UDAs);
•
The range of types of affordable housing that will be provided in the UDAs;
•
The target group for this housing; and
•
The mechanisms which will be applied to achieve these outcomes.
The notes (NOTES:) provide further information on the policy intent of the strategy.
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3.0 Affordable Housing Definition and Targets The ULDA has a role in improving ‘housing affordability’ as well as in facilitating the provision of ‘affordable housing’ through its powers and activities in the UDAs. Housing Affordability Housing affordability relates to the impacts of the prevailing economic, financial and social costs associated with housing demand and supply that may constrain the ability of households to own or rent their own home and represents the underlying costs of developing housing for the market. To improve housing affordability in the UDAs the ULDA will reduce the cost of development by bringing land to market, by streamlining the development approval process and removing impediments to public and private housing and urban development providers. Other mechanisms could include debt funding of infrastructure enabling reduced sale prices for the land where the debt funding is repaid by the landowner over a period of years by way of a special rate. Through Development Schemes the ULDA will also require the development of diverse housing options including facilitating the delivery of affordable housing in well serviced locations. Affordable Housing Affordable housing relates to the ability of sections within our community to be able to afford the cost of housing whether through ownership or the rental market. The ULDA will adopt the following definition of affordable housing: Affordable housing refers to housing which can be reasonably afforded by low to moderate income households and encompasses: •
Private rental housing and home purchase options (including housing aimed at the first home owners market); and
•
Social housing (including public and community housing).
As mentioned above, the ULDA has no legislated role in the provision of social housing but will collaborate with public and community providers in relation to the inclusion of social housing in the UDAs. Section 4.0 of this Strategy provides a description of the affordable housing target groups, tenure and price points adopted by the ULDA.
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Affordable Housing Objectives The ULDA believes that healthy communities require a range of housing options to address different lifestyles, household compositions and budgets. Improving housing delivery, affordability, design and choice will result in more diverse and inclusive communities. The ULDA housing objective is to take proactive actions to increase the provision of affordable, appropriate and accessible housing for low to moderate income earners. This will be achieved by: •
setting a minimum target of fifteen (15) percent of all dwellings developed across the UDAs, to be affordable to households on low to moderate incomesxi. The ULDA will seek to address impacts of any loss of social and affordable private rental housing that occurs as a result of the development schemes
•
ensuring affordable housing in the UDAs supports affordable living through sustainable design. This will reduce living costs for households and lifecycle costs for owners and
•
facilitating affordable housing which is designed and located so that affordable housing tenants and home purchasers are well integrated into the community. This includes: o
Mixing affordable housing throughout the community, not clustering together or segregating from other dwellings in the UDAs
o
Providing high quality design outcomes for affordable dwellings to avoid identifying them or setting them apart from the community
o
Designing affordable housing to contribute to the safety, wellbeing, and the quality of life of the community and neighbourhood
o
A target of 10% across each UDA, including the affordable housing, to conform to universal and sustainable design principlesxii to meet the changing needs of people and households over time and
o
Locating affordable housing close to centres, employment, transport and services.
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4.0 Target Group, Tenure and Price Points As stated in the Act, the ULDA’s target group for affordable housing includes households assessed as having low to moderate household incomes. The ULDA has determined two reference points to assess the household income level of the target group, namely: •
Household incomes of generally between $40,000 and $80,000.
•
Households spending no more than 30 percent of gross household income on rent and 35 percent of gross household income on home ownership.
NOTES: Typical households that fall into these income ranges are: •
Family (e.g. construction worker and teacher) $75, 986 xiii;
•
Young couple (e.g. police officer and beauty therapist) $65,741xiv;
•
Single income family (e.g. ambulance officer) $40,944xv; and
•
Single person (e.g. nurse) $40,114xvi.
Utilising the above criteria, Table 1 below provides an indication of the affordable rent and affordable purchase thresholds for defined household incomes within the target range. Table 1 Household Income and Affordable Housing Thresholds Gross Household Affordable Rent 1 Income ($p.a.) ($/wk) $80k 460 $70k 405 $60k 345 $50k 290 $40k 230
Affordable Purchase 2 ($k) 398 349 300 251 203
1. Rental Affordability has been calculated at 30% of weekly gross income and rounded-up. 2. Affordable Purchase cost has been calculated on a five percent deposit and a first home owner’s grant of $7,000 and amortisation period of 25 years with monthly repayments. Interest rates are based on current standard variable rate (5.75% as at April 2009). Available debt for service is calculated at 35% of monthly gross income and rounded-up.
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5.0 Affordable Housing Outcomes As discussed this Strategy is based on the premise that healthy, sustainable communities require a range of housing options for different lifestyles and household incomes. The provision of affordable housing is a key strategy to enable the retention of diverse communities and to avoid the dislocation of low income households. The provision of affordable housing facilitates economic benefits for communities by assisting the employment and retention of key workers on low to moderate incomes. The ULDA will implement strategies to deliver the affordable housing target of fifteen (15) percent in the UDAs in two ways; by direct actions of the ULDA and indirectly through the facilitation of others.
NOTES: Examples of housing affordability outcomes for the declared UDAs at Northshore Hamilton, Bowen Hills and Fitzgibbon are at Appendix A. Direct ULDA Actions Housing Diversity Requirements The ULDA will include provisions in Development Schemes requiring all residential projects to have a diversity of product including a prescribed percentage of residential product that is affordable by the target market. Each UDA, due to its specific circumstance, is likely to attract different requirements. Factors such as percentage of government land, existing dwelling prices and need will be required to be taken into account when determining the prescribed affordable housing provision. Where the provision of the affordable product will require a subsidy to meet the target market affordability criteria, then a development agreement (refer Section 6.0) will be required to be entered into with the ULDA. This agreement will include amongst other things, the type of product, duration of subsidy and legal mechanism to protect the subsidy. The ULDA recognises that in certain circumstances a development proponent may not practically be able to provide product within a project to meet this requirement. In that circumstance, payment of a monetary contribution in lieu will be considered and the calculation of this monetary contribution will be carried out in accordance with the principles contained in Appendix B. Development Contributions The ULDA Development Schemes may result in a higher development yield when compared to the current BCC City Plan. However this uplift of land value will require
Page 8 of 24
significant infrastructure to support it as well as proactive facilitation of affordable housing and a focus on ecologically sustainable principles. The ULDA has proposed that where a development proponent wishes to utilise the higher development yield arising under the relevant Development Scheme, a sharing of the uplift of land value will occur. In this circumstance a development contribution towards major infrastructure, affordable housing and ecologically sustainable outcomes will apply, over and above standard infrastructure charging requirements. The ULDA has a preference for the affordable housing component of the development contribution to be provided as affordable product rather than as a monetary contribution. A development agreement entered into with a development proponent will document the value of the contribution and/or the provision of product and Section 6.0 below provides more details on this aspect. Conversion of the affordable housing component of the development contribution into equivalent product is at Appendix C.
NOTES: Transitional Provisions In certain circumstances, for the purposes of calculating the total development contribution to be included in a Development Agreement, the ULDA may adopt a development yield greater than that shown in the Brisbane City Council City Plan. This would apply where the landowner purchased the property prior to the date of declaration of the UDA on the basis of a reasonable expectation that a higher development yield would have been approved by the Brisbane City Council. A landowner is to provide information that demonstrates a higher development yield would have been achieved. Refer to the relevant development scheme to determine whether these provisions apply.
ULDA Development Activities Under the Urban Land Development Authority Act 2007, the ULDA can develop land. Where the ULDA develops a site, affordable housing outcomes may be generated in two ways: Firstly, due to having greater control by being the developer, additional affordable housing provision and diversity of product can be achieved. Secondly, any surplus generated from these activities can be utilised to fund the ongoing operations of the ULDA and to deliver additional affordable housing outcomes. The affordable housing outcomes possible under this approach will be dependent upon the level of surplus, the market conditions of the UDA and the development project characteristics.
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NOTES: Affordable housing provisions for the Northshore Hamilton, Bowen Hills and Fitzgibbon UDAs, including an example of ULDA Development Activities in Fitzgibbon, is at Appendix D.
Facilitating Others Apart from the above direct actions, two other means are available for the ULDA to influence the delivery of affordable housing outcomes within UDAs. These include facilitating Not for Profit housing and collaboration with the Department of Communities. Facilitating Not for Profit (NFP) housing NFP organisations may already own, or acquire sites for the delivery of affordable housing within a UDA. Contingent on the NFP having the necessary funds to develop, the ULDA has the ability to assist the NFP with design, development requirements and approval processes to expedite the delivery of the project. In addition, NFPs may provide an appropriate mechanism to manage affordable housing outcomes arising from the diversity requirement on private developments or from development contributions. The contribution to the total affordable housing numbers from this approach is anticipated to be modest, however, it will be an important contribution given the ability of these organisations to address the lower end of the target household income range. Collaboration with the Department of Communities Social housing is the responsibility of, and is funded by, the Department of Communities. The dwellings are managed by the Department of Communities or by registered Not For Profit Community Housing organisations and are targeted on a needs basis through the housing register maintained by the Department of Communities. The ULDA will seek to work closely with the Department of Communities to facilitate its involvement in the UDAs, through its standard purchase program.
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6.0 Implementation Development Agreement Where a development agreement is required (refer to relevant Development Scheme), it will include specific provisions in relation to affordable housing. This development agreement will be required where: •
A housing diversity requirement leads to the provision of housing product that requires a subsidy to meet the affordable housing target;
•
A proponent is permitted to ‘convert’ provision of affordable housing product to a contribution in lieu; and
•
An agreement is reached with a proponent to ‘convert’ a monetary contribution to the provision of product in lieu.
The provisions of a development agreement relating to affordable housing may include amongst other things: •
the amount, timing and bonding of monetary contributions
•
the arrangements for providing a bank guarantee securing payment of the monetary contributions
•
the arrangements for credit for the provision of works or product in lieu of monetary contributions (refer Appendix B for development agreement inclusions)
•
mechanisms to ensure an affordable product retains its affordability over the long term (refer section 6.2 below) and
•
any other matter that the ULDA deems appropriate in the achievement of the Act’s purpose such as provision of built product in lieu of monetary contributions (refer Appendix C for development agreement inclusions).
Mechanisms to Retain Affordability The ULDA is seeking to maximise affordable housing outcomes in the UDAs over the long term. Affordable housing product delivered using some level of subsidy will require mechanisms to ensure: •
Affordable purchase product is not resold providing a windfall gain to the first purchaser; and
•
Affordable rental product remains affordable to the target group for a significant period of time.
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There are a number of ways of achieving this outcome including: •
A requirement that where the affordable housing provider has been approved for the National Rental Affordability Scheme (NRAS)xvii they will be required to retain affordability for 10 years under Australian Government program requirements;
•
Formal management agreements with either the Department of Communities or a registered Community Housing organisation;
•
Potential development of shared equity arrangements with an appropriate equity partner;
•
Limiting the trading of a dwelling to a particular target and income group through a title covenant. This means that affordable owner occupied units are only on-sold to other eligible buyers, with transfer of ownership occurring through a controlled process which excludes wills, private sales or bequests; and
•
Placing a covenant on the title of a property which ensures it is rented at affordable levels to an identified target group for 15 years or more.
The preferred mechanism will be determined on a project by project basis between the ULDA and the development proponent at the time of development approval and will be set out in the development agreement.
NOTES: Other Matters In addition to the above provisions the ULDA will develop a detailed implementation plan for the Affordable Housing Strategy covering issues such as: •
monitoring and evaluation
•
applying the Affordable Housing Strategy within the development assessment process
•
universal and sustainable design guidelines
•
facilitating access to Australian and Queensland Government affordable housing programs
•
roles and responsibilities of governments, registered Not for Profit housing organisations and the private sector and
•
policy and program development required to support affordable housing delivery including addressing priorities such as covenants on title and the potential for development of a shared equity scheme.
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APPENDIX A AFFORDABLE HOUSING OUCOMES IN NORTHSHORE HAMILTON, BOWEN HILLS AND FITZGIBBON Achievement of the affordable housing targets outlined in this Strategy will deliver 2800 affordable housing dwellings across the three UDAs at Northshore Hamilton, Bowen Hills and Fitzgibbon. Within the two inner urban UDAs, Northshore Hamilton and Bowen Hills, the majority of product will be affordable rental due to the cost of building product in these UDAs. A larger percentage of product within the Fitzgibbon UDA will be able to be affordable purchase due to the cost structures applying in that UDA. Table 3 below provides a summary of the expected affordable housing outcomes within each UDA. Table 3 Anticipated Affordable Housing Outcomes by UDA UDA
Total Dwellings
Target Affordable Housing (%)
Affordable Dwellings
Northshore Hamilton
8500
15
1270
Predominantly affordable rental, low NFP & Department of Communities no’s.
Bowen Hills
5000
15
750
Predominantly affordable rental, low NFP & Department of Communities no’s.
Fitzgibbon
1300
60
780
Mix of affordable rental and affordable purchase. Modest Department of Communities no’s.
Total
14800
19
2800
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Comment
APPENDIX B CALCULATION OF MONETARY CONTRIBUTION Where affordable housing product is to be provided under the housing diversity requirements of 5% of a residential project, the ULDA may allow a monetary contribution to be made in lieu of product as part of the development approval process. The following process will apply to the conversion of the housing diversity requirement to an equivalent monetary contribution. 1.
No. of Dwellings The number of dwellings that would have been provided will be calculated using the following formula: No. of Equivalent Affordable Dwelling (EAD) = Project residential floor area / 80 * 5% (Rounded to the nearest whole number) Where: 80 is the estimated size in square metres of an affordable two bedroom unit.
2.
The Affordable Housing Rent (AHR) The affordable housing rent (AHR) to be used in calculation of the monetary contribution in lieu will be: AHR = Median Annual Household Income in the Local Government Area * .3
Where, the Median Annual Household income data is calculated by adjusting the most recent ABS census based median household income using Consumer Price Index. 3.
Equivalent Monetary Contribution The equivalent affordable housing monetary contribution (AHMC) in lieu of providing the product will be calculated by the following: AHMC = EAD * (MR-AHR) * 15* 1.1 Where MR = estimated annual market rent in the area for a two bedroom unit of around 80 square metres AHR = estimated annual affordable house rent 15 = Number of years the dwellings are to be made available for affordable rental * is multiplication
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The increment factor (1.1) is included to approximate the administrative and transaction costs in sourcing alternative product elsewhere under a long term lease arrangement in lieu of product in the project. The Development Agreement which will be entered into as part of the development approval process will contain, as a minimum, the following information in relation to the delivery of housing product: •
The number of rental dwellings to be provided at affordable rental rate;
•
The median annual household income;
•
The estimated market rent of equivalent product in the local area;
•
The affordable housing monetary contribution;
•
The expected timing for the delivery of product and any requirements for bonding against the requirements; and
•
The required affordability retention mechanisms and associated documentation.
INDICATIVE WORKED EXAMPLE – CONVERSION OF AHC TO PRODUCT Assumed -
Affordable Housing Contribution
1,000,000
Ownership Product Income Target Market Sale Price Affordable Price
70,000 500,000 254,000
80,000 500,000 290,000
Price Difference (MP_AHP)
246,000
210,000
Number agreed to be delivered Product Value Rental Product Income Target Market Rent Affordable Rent Weekly Difference
1
1
246,000
210,000
80,000 480 460
70,000 480 405
=
50,000 480 290
20
75
190
Price Difference (MR-AHR) (annualised as 365/7) Number of Years Number agreed to be delivered
1,043
3,911
9,907
15 5
15 2
15 2
Product Value (Price difference * years *number)
78,375
117,330
(456,000)
297,210
=
(493,915) 50,085
Residual Payment Required in Cash
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APPENDIX C CONVERSION OF THE AFFORDABLE HOUSING COMPONENT OF THE DEVELOPMENT CONTRIBUTION INTO EQUIVALENT PRODUCT Where a development contribution includes an affordable housing component and the ULDA has a preference to take product in lieu of cash, the following conversion process will apply to convert the cash contribution to product. 1.
Monetary Contribution The applicable affordable housing contribution (AHC) will be as determined by the relevant development contribution.
2.
Product Type and Mix The residential product type and mix proposed to be provided in lieu of the monetary contribution will be negotiated between the ULDA and the development proponent. The ULDA will consider the household income level and tenure type (e.g. purchase or rental) to ensure they are suitable to be used in the product in lieu calculation. Standard rates for the applicable household income level and tenure type applying at the time of development approval will be applied for this calculation. Table 1 set out a range of these rates that would apply in October 2008. Table 1 Standard Household and Tenure Type Rates Gross Household Income
Affordable Rent (AR)
($p.a.)
($/wk)
Affordable Purchase (AP) ($k)
$80k
460
398
$70k
405
349
$60k
345
300
$50k
290
251
Notes: Affordable purchase cost is calculated on a five percent deposit and a first home owner’s grant of $7,000 and amortisation period of 25 years with monthly repayments. Interest rates are based on based on current standard variable rate (5.75% as at April 2009). Available debt for service is calculated at 35% of monthly gross income and rounded-up. Rental Affordability is calculated at 30% of weekly gross income and rounded-up.
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3.
Conversion of Affordable Housing Contribution to Product in Lieu The conversion of the affordable housing contribution (AHC) to product in lieu will be based on the mix of tenure type (affordable rental and affordable purchase) as agreed with the ULDA based on the following: Affordable Purchase The value of affordable housing product to be provided for ownership will be assessed using the following formula: Ownership Product (OP) = N * (MP-AHP) Where: N = Number of dwellings MP = Estimated market price of the product at completion AHP = Affordable house purchase price that the product sold for Where a range of product is to be delivered to differing income groups the formula will be calculated for each dwelling type / income target and then added together to provide a value for ownership product. Affordable Rental The value of affordable housing product to be provided for rental will be assessed using the following formula: Rental Product (RP) Where: N MR AHR Y
= N * (MR-AHR) * Y
= Number of dwellings = Estimated annual market rent of the product at completion = Estimated annual affordable house rent of the product at completion = Number of years the dwelling is to be made available for affordable rental
Where the rental products are to be targeted at different income levels the formula will be calculated for each income level and then added together to provide a value for rental product. The Development Agreement will establish the percentage below market rent that is to be charged for the agreed term. The calculation is to approximate the value of the rental difference over the term and otherwise would be payable at the start of the period. Inherent in the calculation is that income and rental growth over the term will be the same, to avoid the need for a complex discounted cashflow analysis. Residual Cash Payment Where the value of the product assessed as stated above, is less than the affordable housing contribution the residual value will be required to be paid in cash using the following formula; Residual Cash Payment = AHC – OP - RP Page 17 of 24
The Development Agreement entered into as part of the development approval process will contain, as a minimum, the following information in relation to the delivery of housing product in lieu of the payment of the affordable housing contribution (AHC): •
The number of dwellings to be delivered in an ownership or shared equity arrangement, the market value of those properties and the agreed value for purchasers;
•
The number of rental dwellings to be provided at affordable rental matched against the income target group and the associated market rents and affordable rents to be charged;
•
The agreed percentage below market rent that rental product will be delivered at and the number of years that the rental product will be delivered as affordable;
•
Any residual cash payment required and when that payment is required;
•
The expected timing for the delivery of product and any requirements for bonding against the requirements; and
•
The required affordability retention mechanisms and associated documentation.
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APPENDIX D AFFORDABLE HOUSING PROVISIONS FOR THE NORTHSHORE HAMILTON, BOWEN HILLS AND FITZGIBBON UDAs To date, two different provisions have been included in ULDA Development Schemes. Northshore Hamilton and Bowen Hills: The Northshore Hamilton and Bowen Hills Proposed Development Schemes require that a minimum of five (5) percent of dwellings in residential projects be affordable product. For these UDAs, affordable product has been defined as being able to be rented by a household on the median weekly family household income in Brisbane; currently $1262.07xviii. In these UDAs, development proponents indicate that the minimum priced product that can be produced will be within the high $300k’s or low $400k’s. However a development application lodged in October 2008 for a residential project in Northshore Hamilton includes a one bedroom product which is expected to sell for less than $300k. Figure 1 provides an example of a lower priced dwelling unit to achieve these price points. On this basis, even the lowest priced product will be outside the affordable purchase range, but within the affordable rental range. Consequently, affordable purchase product in these UDAs, if desired, will need to be provided by other means. The Northshore Hamilton and Bowen Hills Proposed Development Schemes include these provisions and state that thirty (30) percent of this development contribution will be applied towards affordable housing. Fitzgibbon: The Fitzgibbon Interim Land Use Plan (ILUP) includes provisions that require two thirds of housing product in the first precinct be at or below the median house price in Brisbane; currently $509,000xix. The first development application for Precinct 1 under the ILUP, lodged in September 2008, includes a diverse range of housing product resulting in anticipated dwelling prices ranging from low $200k’s to $400k+. Figure 2 provides as example of a lower priced dwelling unit to achieve these price points. The ULDA has developed a commercially based business model for Precinct 1 in Fitzgibbon that shows a diversity of product can be produced to significantly address the entry level housing package price, and the diversity of product and price points. Table 2 shows the potential product mix and price points that can be achieved in the Precinct 1 using this approach. The lower priced product falls within the affordable purchase range, while the medium priced product will be within the affordable rental range.
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Figure 1 – Entry Level Apartment
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Figure 2 ‘Fonzie Flat’ Entry Level Product Fitzgibbon
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Table 2 Proposed Fitzgibbon Dwelling Mix Precinct 1 Product Type
Mix
No. of Dw’s
(%)
Package Price ($k)
Detached - Large
1
4
$460+
Detached Medium
15
41
$400+
Detached - Small
28
80
$320+
Attached - Medium
38
107
$280-350
Attached - Small
18
50
$200-280
Total
100
282
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ENDNOTES i Required income to purchase a median priced house is calculated on the available debt to service a mortgage based on 30% of monthly gross income and rounded-up. Including in the calculation is a five percent deposit of the applicable median house price ($225,000 for June 2003 & $400,000 for June 2008) and a first home owner’s grant of $7,000 and amortization period of 25 years with monthly repayments. Interest rates are based on current standard variable rate (5.75% as at April 2009) (Department of Communities, Department of Environment and Resource Management).
ii
Australian Bureau of Statistics, Catalogue 6302.0.
iii Residential Tenancies Authority. iv
Percent figure based on 2005-06 results from the AMP-NATSEM Income and Wealth Report: Issue 19 released March 2008.
v Calculated by applying the percentage of households in stress to total number of households across Queensland as at time of 2006 census.
vi Department of Environment and vii SGS Economic and viii
Resource Management.
Planning, Urbecon Bulletin, January 2008, p 6.
Queensland Government, Queensland Housing Affordability Strategy, Brisbane, Department of Infrastructure and Planning, 2007.
ix Urban Land Development Authority Act, Part 1, Section 3.2(e). x
Department of Families, Housing, Community Services and Indigenous Affairs, National Rental Affordability Scheme (NRAS) and Housing Affordability Fund (HAF) 2008. xi This is based on an assessment of Queensland households in housing stress. National Centre for Social and Economic Modeling
(NATSEM), Housing Stress in Australia, 2007. This data shows that 23% or 346,960 Queensland Households are in housing stress. xii
Refer to “Smart and Sustainable Homes: Design Objectives. Department of Public Works (2008). Booklet available from: http://www.build.qld.gov.au/smart_housing/pdf/design_objectives_08.pdf
xiii Construction worker - labourer, Level 1- $17.18 an hr/ 38 hour week - $652.84 wk/ $1305.68 fn/, $ 34, 064 pr annum Teacher - Band 1, Step 1, $41, 922 pr annum Labourer:http://www.workplaceauthority.gov.au/docs/Payconditions/2008ePSS/AN140043.pdf Teacher:http://www.wageline.qld.gov.au/awardsacts/showDoc.jsp?Awards/T0110/SCHEDULE+2+-+SALARIES+-+TEACHERS Date accessed: 17 October 2008 xiv Police officer - Constable, 1st pay point,
$37, 665 pr annum Beauty therapist - Wage Level 1, $14.16 hr/ 38 hr week - $538.08/ $1076.16 fn/ $ 28, 076 pr annum Police officer:http://www.wageline.qld.gov.au/awardsacts/showDoc.jsp?Awards/P0290/5.1+Salaries Beauty therapist:http://www.workplaceauthority.gov.au/docs/Payconditions/2008ePSS/AN140026.pdf Date accessed: 17 October 2008
xv Ambulance - paramedic $1569.40 pr fn/ $40, 944 pr annum
Ambulance officer:http://www.wageline.qld.gov.au/awardsacts/showDoc.jsp?Awards/A0400/5.2+Wages Date accessed: 17 October 2008 xvi
Nurse - Occupational Health Nurse Grade 1 - 4th year. $40, 114.88 pr annum Nurse: http://www.wageline.qld.gov.au/awardsacts/showDoc.jsp?Awards/N0130/5.1+Wages
xvii Department of Families, Housing, Community Services and Indigenous Affairs, National Rental Affordability Scheme (NRAS)
http://www.fahcsia.gov.au/internet/facsinternet.nsf/housing/nras.htm xviii
ABS, Basic Community Profile, 2006, B02 (Selected Medians and Averages) ABS, cat Number 6401.0- Consumer Price Index, Australia, Dec, 2008
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xix DNRW Sales Database June Quarter 2008
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