Subsidised affordable rental housing

118 Pages·2016·2.2 MB·English

by  Steven Rowley

Subsidised affordable

rental housing: lessons

from Australia and

overseas
authored by
Steven Rowley, Amity James, Catherine Gilbert,
Nicole Gurran, Rachel Ong, Peter Phibbs,
David Rosen and Christine Whitehead
for the
Australian Housing and Urban
Research Institute
at Curtin University
at The University of Sydney
August 2016

AHURI Final Report No. 267
ISSN: 1834-7223
ISBN: 978-1-925334-29-6
Authors Rowley, Steven Curtin University
James, Amity Curtin University
Gilbert, Catherine The University of Sydney
Gurran, Nicole The University of Sydney
Ong, Rachel Curtin University
Phibbs, Peter The University of Sydney
Rosen, David David Paul Rosen and Associates
Whitehead, Christine London School of Economics
Title Subsidised affordable rental housing: lessons from Australia and
overseas
ISBN 978-1-925334-29-6
Format PDF
Key words subsidised affordable rental housing, housing affordability,
institutional investment
Editor Anne Badenhorst AHURI National Office
Publisher Australian Housing and Urban Research Institute Limited
Melbourne, Australia
DOI doi:10.18408/ahuri-8104301
Series AHURI Final Report; no. 267
ISSN 1834-7223
Preferred citation Rowley, S., James, A., Gilbert, C., Gurran, N., Ong, R., Phibbs,
P., Rosen, D. and Whitehead, C. (2016) Subsidised affordable
rental housing: lessons from Australia and overseas, AHURI
Final Report No. 267, Australian Housing and Urban Research
Institute, Melbourne, http://www.ahuri.edu.au/research/final-
reports/267, doi:10.18408/ahuri-8104301.
[Add the date that you accessed this report: DD MM YYYY].

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AHURI
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AHURI has a public good mission to deliver high quality research that influences
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AHURI undertakes evidence-based policy development on a range of issues,
including: housing and labour markets, urban growth and renewal, planning and
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economic productivity, and social cohesion and wellbeing.

ACKNOWLEDGEMENTS
This material was produced with funding from the Australian Government and state
and territory governments. AHURI Limited gratefully acknowledges the financial and
other support it has received from these governments, without which this work would
not have been possible.
AHURI Limited also gratefully acknowledges the contributions, both financial and in-
kind, of its university research partners who have helped make the completion of this
material possible.

DISCLAIMER
The opinions in this report reflect the views of the authors and do not necessarily
reflect those of AHURI Limited, its Board or its funding organisations. No responsibility
is accepted by AHURI Limited, its Board or funders for the accuracy or omission of
any statement, opinion, advice or information in this publication.

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original research to a diverse readership of policy-makers, researchers and
practitioners.

PEER REVIEW STATEMENT
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The AHURI journal series employs a double-blind peer review of the full report, where
anonymity is strictly observed between authors and referees.

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COPYRIGHT
© Australian Housing and Urban Research Institute Limited 2016
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0
International License, see http://creativecommons.org/licenses/by-nc/4.0/.

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CONTENTS
LIST OF TABLES .......................................................................................................VII
LIST OF FIGURES ..................................................................................................... IX
ACRONYMS ................................................................................................................ X
EXECUTIVE SUMMARY .............................................................................................. 1
1 INTRODUCTION ................................................................................................. 7
1.1 Research questions and methodology ................................................................. 7
1.1.1 Research questions and conceptual framework .......................................... 7
1.1.2 Conceptual framework ................................................................................ 7
1.1.3 Methodology ............................................................................................... 9
1.2 Affordable rental housing in Australia ................................................................. 10
1.2.1 Federal and state housing assistance ....................................................... 11
1.2.2 The need to expand the affordable rental housing sector in Australia ....... 12
1.2.3 Private investment in the supply of affordable rental housing .................... 13
1.2.4 Current directions in federal and state affordable housing policy ............... 13
1.3 Subsidising affordable housing: Australian and international research ............... 14
1.3.1 Learning from international approaches .................................................... 15
1.3.2 Overview of international experience ........................................................ 15
1.3.3 Subsidies for private investment in affordable rental housing .................... 16
1.4 Summary and implications ................................................................................. 21
2 NATIONAL RENTAL AFFORDABILITY SCHEME: POLICY MECHANISM...... 22
2.1 Mechanics of the scheme .................................................................................. 22
2.1.1 Eligible tenants ......................................................................................... 23
2.1.2 Incentive distribution ................................................................................. 24
2.1.3 Conditions of allocation ............................................................................. 24
2.1.4 Application process ................................................................................... 24
2.2 Discontinuation of NRAS .................................................................................... 25
3 NRAS: SPATIAL OUTCOMES .......................................................................... 28
3.1 What was delivered up to June 2015? ............................................................... 28
3.2 Understanding the distribution of NRAS incentives ............................................ 29
3.2.1 Geographic distribution of incentives......................................................... 30
3.2.2 Changes to the spatial distribution of total incentives ................................ 31
3.2.3 Analysing the spatial distribution: a composite measure ........................... 31
3.2.4 Characteristics of typical suburbs using the composite measures ............. 35
3.3 Where are NRAS dwellings being produced? .................................................... 36
3.3.1 Spatial distribution of dwellings across metropolitan regions ..................... 37
3.3.2 Socio-economic characteristics of metropolitan suburbs receiving NRAS
dwellings ................................................................................................... 42
3.3.3 Investment potential characteristics of metropolitan suburbs receiving
NRAS dwellings ........................................................................................ 43
3.3.4 Delivery of NRAS dwellings in regional suburbs ........................................ 43

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3.3.5 Has the distribution of NRAS dwellings achieved the scheme objectives? 45
4 NRAS: AFFORDABILITY OUTCOMES ............................................................. 46
4.1 Impact of the 20 per cent rent reduction on housing affordability ........................ 47
4.2 Impact of NRAS on housing affordability for eligible tenants .............................. 49
4.3 Were NRAS dwellings targeted effectively? ....................................................... 52
4.4 University-based accommodation ...................................................................... 55
4.5 Summary of affordability outcomes .................................................................... 57
5 SUBSIDISED AFFORDABLE RENTAL PROGRAMS IN THE UNITED
STATES AND ENGLAND: OUTCOMES AND LESSONS................................. 59
5.1 Low Income Housing Tax Credits (United States) .............................................. 59
5.1.1 Allocation of LIHTCs ................................................................................. 59
5.1.2 Investment structure ................................................................................. 60
5.1.3 Investment returns .................................................................................... 61
5.1.4 LIHTC program affordability structure ....................................................... 62
5.1.5 LIHTC program outcomes ......................................................................... 62
5.1.6 Summary .................................................................................................. 63
5.2 Affordable Rents regime (England, United Kingdom) ......................................... 63
5.2.1 The mechanics of the Affordable Rents regime ......................................... 65
5.2.2 Affordable Rents regime affordability structure .......................................... 65
5.2.3 Affordable Rents regime outcomes ........................................................... 66
5.3 What can Australia learn from international approaches to subsidised rental
housing supply? ................................................................................................. 70
5.3.1 Diversity of product delivery ...................................................................... 70
5.3.2 Defining affordable rent and incorporating housing assistance.................. 71
5.3.3 Spatial patterns of delivery and housing mix ............................................. 71
6 THE FUTURE DELIVERY OF SUBSIDISED RENTAL HOUSING IN
AUSTRALIA ...................................................................................................... 73
6.1 Advantages and disadvantages of NRAS ........................................................... 73
6.2 Moving towards a new model of subsidised affordable rental dwellings ............. 75
6.2.1 Clear, measurable and achievable objectives ........................................... 75
6.2.2 Consistency and longevity ........................................................................ 76
6.2.3 Build on the momentum of NRAS ............................................................. 77
6.2.4 Administration ........................................................................................... 77
6.2.5 Cross-subsidisation ................................................................................... 77
6.2.6 Delivering a variety of products ................................................................. 77
6.2.7 Social infrastructure .................................................................................. 78
6.2.8 Long-term affordability .............................................................................. 78
6.3 Lessons from international schemes: a view from the US and UK ..................... 79
6.3.1 Understanding the key differences between countries .............................. 79
6.3.2 Key messages .......................................................................................... 80
7 POLICY IMPLICATIONS ................................................................................... 83
7.1 Summary of NRAS outcomes ............................................................................ 83

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7.2 Key recommendations ....................................................................................... 83
7.2.1 Scheme design ......................................................................................... 84
7.2.2 Finance and funding ................................................................................. 86
7.2.3 Capacity building....................................................................................... 86
7.2.4 Summary .................................................................................................. 86
REFERENCES ........................................................................................................... 88
APPENDIX ................................................................................................................. 98

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LIST OF TABLES
Table 1: Agreement types under the Rental Accommodation Scheme ...................... 21
Table 2: NRAS incentive amounts and contributors (2008–15) ................................. 23
Table 3: Summary of quarterly progress ................................................................... 28
Table 4: Incentive status by state/territory ................................................................. 29
Table 5: Dwelling type by incentive status (June 2015) ............................................. 29
Table 6: Number of total incentives by state and geographic distribution .................. 31
Table 7: Socio-economic indicators ........................................................................... 33
Table 8: Investment potential indicators .................................................................... 33
Table 9: Examples of the composite measures in practice ........................................ 34
Table 10: Characteristics of typical suburbs—socio-economic composite measure .. 35
Table 11: Characteristics of typical suburbs—investment potential composite measure
.......................................................................................................................... 36
Table 12: Distribution of incentives ............................................................................ 37
Table 13: Comparison of socio-economic measure across four capital cities ............ 42
Table 14: Comparison of the investment potential measure across four capital cities 43
Table 15: Comparison of the socio-economic measure by state................................ 44
Table 16: Comparison of the investment potential measure by state ......................... 44
Table 17: NRAS impact on existing suburbs ............................................................. 47
Table 18: The proportion of Sydney metropolitan region suburbs in which households
with eligible NRAS incomes can rent an affordable house ................................. 48
Table 19: Proportion of suburbs in metropolitan regions which become accessible to
eligible households under NRAS ........................................................................ 48
Table 20: Impact of NRAS on mean housing cost burdens for NRAS eligible
households (2011) ............................................................................................. 51
Table 21: Impact of NRAS on housing stress for NRAS eligible households (2011) .. 52
Table 22: Distribution of NRAS eligible households residing in and outside of NRAS
areas by remoteness area (2011) ...................................................................... 53
Table 23: Distribution of NRAS eligible households residing in and outside NRAS
areas by SEIFA decile (2011) ............................................................................ 54
Table 24: Housing expenditure profiles of NRAS eligible households residing in and
outside NRAS areas (2011) ............................................................................... 55
Table 25: Impact of NRAS on the housing affordability positions of NRAS eligible
households residing in and outside NRAS areas (2011) .................................... 55
Table 26: Annual tax expenditure on the LIHTC program .......................................... 59
Table 27: Affordable Housing Programme average gross rents as a proportion of
market rent (including service charges) by HCA Operating Area (end of
September 2014) ............................................................................................... 66
Table 28: Affordable Rent units by region (2014)1 ..................................................... 68

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Table A1: Details of French taxation policies to increase the supply of rental dwellings
for the intermediary sector and middle-income families ...................................... 98
Table A2: 2014–15 household income eligibility limits ............................................... 99
Table A3: Incentive distribution ................................................................................. 99
Table A4: NRAS selection criteria ........................................................................... 100
Table A5: State and territory affordable housing priorities for NRAS ....................... 102
Table A6: Profile of dwelling types by state/territory (%) .......................................... 103
Table A7: Profile of dwelling size by state/territory (%) ............................................ 103
Table A8: Affordable Rent units by size ................................................................... 103
Table A9: Comparison of supply mechanisms ......................................................... 104
Table A10: Comparison of affordability measures ................................................... 105

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LIST OF FIGURES
Figure 1: Subsidised affordable rental housing: actors and outcomes ......................... 8
Figure 2: Spatial distribution of NRAS incentives in Sydney ...................................... 38
Figure 3: Spatial distribution of NRAS incentives in Melbourne ................................. 39
Figure 4: Spatial distribution of NRAS incentives in Brisbane .................................... 40
Figure 5: Spatial distribution of NRAS incentives in Perth ......................................... 41
Figure 6: Additional affordable homes* provided by type of scheme, England ........... 66
Figure 7: Affordable Rents housing stock as a proportion of social rental housing stock
(all sizes) ............................................................................................................ 69

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