Speech to regional affordable housing forum
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Introduction
I would like to acknowledge the traditional owners of the land we meet on today, and pay my respects to their elders, past and present
Thank you for your welcome, Darren, and for inviting me to this regional housing affordability forum today.
I also thank my other federal colleague, Richard Marles, for his role in what is a terrific local initiative.
It is great to see two Labor people representing the great working city of Geelong in the Federal Parliament.
I would also like to acknowledge the Victorian Minister for Planning, Justin Madden.
Being from Sydney I never really followed Justin’s football career, but I am guessing that not all his visits to Geelong in the past were quite so pleasant!
I also acknowledge the Mayor, Bruce Harwood, and his colleagues from the City of Greater Geelong.
The fact that all three levels of government are represented at this forum shows that there is a real drive in this region to improve housing affordability.
One of the things I enjoy about visiting different parts of Australia is discovering the origin of their names.
It is terrific how places are linked to our Indigenous heritage, and the names of the federal electorates of Corangamite and Corio are no exception.
I recently learned that ‘Corangamite’ it comes from an Aboriginal word for ‘bitter’, which described the salt content of Lake Corangamite.
Corio was named after Corio Bay, which originated from an Aboriginal word ‘coraiyo’ meaning ‘small marsupial’ or ‘sandy cliffs’.
These local names certainly have much more going for them than a list doing the rounds on the worst ever real estate titles.
Yes, we love our polls so much these days that people were even asked to rate the all-time shocker names for housing developments.
Not surprisingly, Death Row topped the chart with Mildew Mountain, Whispering Sludge, Dead Possum Run and Methane Meadows all in the mix.
And who could ever pass up living at an exotic address like Asbestos Acres, Termite Terrace or Allfalldown Hill?
Thankfully I do not recognise any of these names from Australia.
I can assure you the Australian Government’s response to housing affordability does have genuine appeal, and I would like to share more about it with you now.
Affordable housing
As we all know, access to secure and affordable housing is fundamentally important to our everyday lives.
Housing is critical to living a good life: to looking after ourselves, raising our children, getting an education and going to work.
It is very easy to become complacent about housing when you have a safe, stable place to come back to every night.
It is easy to forget how many other things in life would be impossible without secure housing.
So it was not by accident that Labor made housing affordability such a big issue in the public debate in the lead up to the federal election last year.
We made it a big issue because we had listened to what Australians were telling us – in their letters, in their emails and in our meetings around the country.
The May Budget delivered on our election commitments.
It included $2.2 billion worth of new investment in housing – the first Budget in over a decade to include a serious housing reform agenda.
The Prime Minister and the Treasurer are committed to this agenda because they have heard first hand from the families, singles and pensioners struggling to buy or rent a home, and from the young Australians who are giving up on home ownership.
Consider the statistics:
- Today the average house costs seven-and-a-half times the average annual wage, compared to four times in 1996.
- The typical home buyer now spends a third of their income on housing costs – almost double the proportion they were spending in 1996.
- Rental vacancy rates are now below two per cent in most capital cities with some cities below one per cent.
- First home ownership is increasingly not an option for low income households, with only 17.6 per cent of first home buyers coming from the bottom 40 per cent of earners – compared to over 20 per cent from this group a decade ago.
- Households in the bottom 20 per cent of earners that are lucky enough to achieve home ownership are spending two-thirds of their income to pay for the privilege.
This shows that Australians and their families are having trouble finding affordable and secure accommodation, and using up an increasing proportion of their income to keep it.
Research by the National Centre for Social and Economic Modelling found 1.1 million low and moderate income families around Australia were in housing stress in December 2007.
There were an additional 220,000 families in this situation last year than in 2004 – an increase of a quarter in just three years.
In regional Victoria, more than one in nine low and moderate income families are spending more than 30 per cent of their income on housing.
Even more locally, in the federal electorates of Corangamite and Corio, nearly a quarter of all households with a mortgage – nearly 6,500 households in total – are spending more than 30 per cent of their income on loan repayments.
If you are renting, the situation is worse, with over 35 per cent of renting families – or nearly 5,700 households – spending over 30 per cent of their income just to pay the rent.
At a time when other everyday living costs – like the price of groceries and petrol – keep increasing, this makes life very stressful.
Improving this situation will take great cooperation across all levels of government, business and the not-for-profit sector.
This is not something we are going to be able to fix overnight – you cannot fix a problem that has developed over many years quite as quickly as that.
But it is important that we take action now to try and make a real difference and help make housing more affordable again.
Housing Affordability Fund
The Budget included a $512 investment in a new Housing Affordability Fund to lower the cost of building new homes, with an emphasis on proposals to improve the supply of entry-level housing.
The Fund will help minimise red tape and work to reform infrastructure and planning requirements, and will address two significant barriers to the supply of housing development:
- ‘Holding costs’ associated with planning and approval delays such as interest, land taxes, council rates and staff costs.
- Infrastructure costs such as water, sewerage, transport, and open space. The Fund will be distributed by direct grants to high priority areas through a competitive process to the projects demonstrating the greatest reduction in house costs.
Proposals will be assessed against transparent, needs-based selection criteria and will have to demonstrate that cost savings are passed on to new home buyers.
Up to $30 million will be used to develop IT infrastructure and software for a national roll-out of an electronic development assessment (eDA) system and online tracking service to reduce red tape and streamline planning approvals.
We are prepared to work with the States, Territories and local government to support reform in this area, but we need a matching commitment from developers that savings will be passed on to home buyers.
National Rental Affordability Scheme
It is now tougher than ever before for low and moderate income earners to find affordable rental housing for themselves or their families.
Vacancy rates are at critically low levels and rents are increasing faster than other everyday living costs.
The NATSEM research I mentioned earlier shows that 685,000 low and moderate income families are now spending more than 30 per cent of their limited incomes just to pay the rent.
Australians who in the past would have rented as a stepping stone to buying their own home are now finding it much tougher to do that.
That is why increasing the supply of affordable rental properties is a major priority.
The Scheme is a $623 million investment by the Government to create 50,000 affordable rental properties for low and moderate income earners in its first four years.
The Scheme aims to leverage significant new institutional investment to boost the supply of affordable rental housing.
Under the Scheme, the Australia Government will provide institutional investors with an annual incentive of $6,000 as a refundable tax offset to build new homes and rent them to low and moderate income earners at 20 per cent below market rates.
There will be the capacity to provide the incentive as a grant instead for non-taxable entities – like some operators in the community housing sector.
State and Territory Governments have agreed to contribute $2,000 each year in cash or in kind.
Each property will attract the Incentive, including State and Territory Government assistance, for 10 years, after which the property may be rented at market rates or sold.
The Scheme will be introduced in two phases – a two-year Establishment Phase starting in July 2008 involving 11,000 homes followed by Expansion Phase between 2010 and 2012 for the remaining 39,000 homes.
Access to the Scheme will be determined by competitive processes and the first expressions of interest tender, planned for July, will focus on new homes in 2008-09.
Tenants will be subject to a clear income test that will target low and moderate income earners.
Our aim with the National Rental Affordability Scheme is to create an incentive for the market to invest and build large portfolios of affordable rental housing.
If demand from renters and investors remains strong a further 50,000 homes will be made available from 2012.
National Housing Supply Council
In April I announced the appointment of Dr Owen Donald as the inaugural Chair of the National Housing Supply Council.
The other members of the Council are:
- Brendan Crotty – former managing director of Australand
- Saul Eslake – ANZ Chief Economist
- Sue Holiday – former Director General of Planning NSW
- Chris Lamont – HIA Chief Executive, Policy
- Marcus Spiller – Director SGS Economics
- Marion Thompson – WA Urban Development Coordinator
- Stuart Wilson – Managing Director of Wilson Homes
- Judy Yates – one of Australia’s pre-eminent housing researchers
The Council will assist the Government and industry to assess current and future demand for housing across Australia.
It will publish an annual State of Supply report to analyse the adequacy of construction rates and land supply across Australia for the next 20 years.
It will examine issues like demographic change, the impact of migration, market distortions, construction and availability of housing, structural barriers to the release of land and zoning approval, and the construction of new housing.
If all levels of government can work together to better target housing supply to meet demand, then we can go a long way to improving housing affordability.
Land release
The previous government was slow to release key parcels of land across the country.
This held back urban development in growth areas – like Sydney’s south-west suburbs – and undermined efforts to increase the supply of affordable housing.
The Government is making changes to its property sales policy to ensure land sales are used to help increase the supply of affordable housing.
Future land sales will be evaluated against three criteria:
- Whether it increases the supply of housing without adversely affecting surrounding property prices.
- Whether it improves the amenity of local suburbs through the addition of parks, playgrounds, child care centres or other facilities.
- Whether it creates new jobs.
I am currently working with the Minister for Finance and Deregulation, Lindsay Tanner, to revamp our disposals policy.
The new arrangements will help to ensure that the creation of affordable housing in areas of need is central to the disposal of Commonwealth-owned land in the future.
First Home Saver Accounts
One of the biggest barriers to becoming a first home owner is saving a decent deposit.
To help overcome this barrier, the Government is investing $1.2 billion to establish First Home Saver Accounts.
The Accounts are the first of their kind in Australia – the biggest revolution in our savings culture since Labor introduced compulsory superannuation.
The new accounts, which will be available from 1 October 2008, will provide a simple, tax effective way for Australians to save a deposit for their first home through a combination of a Government contribution and low taxes.
The Government will provide a 17 per cent contribution on the first $5,000 of individual contributions made each year.
This means that anyone who contributes $5,000 to their account will receive an $850 deposit from the Government.
Earnings on the accounts will attract the low superannuation level tax of 15 per cent and withdrawals will be tax free when used to buy or build a first home.
At the same time as helping Australians to buy their first home, the new accounts will also help the Government’s fight against inflation by encouraging greater private saving.
By 2012, it is anticipated there will be more than $6.5 billion in new accounts.
Affordability and sustainability
The Government is committed to improving housing affordability and creating sustainable and innovative urban development without compromising our environment.
Addressing climate change includes being smarter in the way we build our homes and communities.
We need to encourage developments where energy and water efficiency is a first principle.
New developments, which are environmentally sustainable, will have lower future running costs but also reduce red tape, simplifying development processes between councils and jurisdictions.
The States and Territories have led the way on sustainability by introducing a raft of programs to encourage more sustainable housing – rain water tanks and grey water systems.
These systems will become commonplace in the future, as we all seek to make a personal contribution to tackling the threat of climate change.
The May Budget delivered an extensive set of measures to complement the work of the States and Territories, and to take the use of these systems to the next level – by investing in the energy and water efficiency of our schools and community facilities.
In the future, as people start to count the savings in their pockets from energy and water efficiency, I have no doubt that affordable housing and sustainable housing will be seen as one and the same.
Recently I have visited VicUrban’s Aurora development on Melbourne’s northern fringe, and the Delfin Lend Lease estate at Waterford on Brisbane’s southern outskirts.
Aurora and Woodlands are terrific examples of what can be done if you bring builders, developers, planners and environmental experts together to deliver high quality urban design and affordable and sustainable housing.
I do not underestimate the challenge of driving the cultural change needed to make this sort of development the norm rather than the exception as we move forward – but I think it is the way of the future.
With growing community concern about environmental sustainability, these are the sorts of developments that Australians will demand in the future, as we all seek to minimise our carbon footprint – and reduce our energy and water bills in the process.
Conclusion
As I said earlier, the Government’s approach to housing policy is to provide the incentive the market requires to improve housing affordability.
Over the next few months local government and developers have the opportunity to create the kind of projects that will show that Government incentives can produce results on housing affordability.
There is now an opportunity for developers and investors to help create urban development that deals with the major issues of our time – environmental sustainability, integration with transport and employment and creating socially cohesive communities.
I am not going to pretend that we can fix a decade of neglect of the housing market overnight.
But I am confident that by having a comprehensive, national housing policy agenda, the Rudd Government is on the right track to help make housing more affordable again.
Thanks again for asking me to speak to you today.
ENDS