Opening plenary address to the Urban Development Institute of Australia (UDIA) Queensland State Conference
I would like to acknowledge the traditional owners of the land on which we are gathered, and pay my respects to elders, past and present.
Thank you, Brett (Gillan, President, UDIA Qld), for your introduction and also Chief Executive of UDIA (Queensland), Mr Brian Stewart.
Thank you both for inviting me here to speak today.
And I’d like to acknowledge Don Betts from National Australia Bank.
I’m certainly pleased that the National Australia Bank is showing leadership through its commitment to pass on any drop in official interest rates.
I think returning confidence to people who are thinking about buying a first home is very important.
I am grateful for the opportunity to be here today; both to talk about the Rudd Government’s housing reform agenda, and to hear your ideas for the future.
Good housing policy is one of the foundations of the economic and social life of the nation, and a central concern for all levels of government.
It is a pleasure to say that housing policy is a priority for the Rudd Government.
The new initiatives that we promised during the 2007 election campaign were at the centre of our first Budget.
It included $2.2 billion worth of new investment in housing – the first Budget in over a decade to include a serious housing package.
Housing is important to families and important to the economy.
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.
- 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.
Although Queensland is booming in so many ways, it also has the highest incidence of housing stress in the nation, with nearly one in every eight low and moderate income families spending more than 30 per cent of their income on housing costs.
That is over 250,000 Queensland families on low and moderate incomes who spend more than three dollars out of every ten they earn to the cost of housing.
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.
Queensland is one of the fastest growing states in Australia.
The population is now estimated to be almost 4.3 million people.
Queensland is an attractive destination for people in other states.
In 2007, more than 25,000 people from other parts of Australia decided to make Queensland their home.
This makes Queensland the leading destination for interstate migration.
This has had serious implications for housing affordability.
As the sunshine state becomes more popular, the cost of living, particularly housing, is taking off.
In the year to June, Brisbane had the highest CPI growth of any capital city in Australia, with prices rising by 5.1 per cent.
Housing costs were a key driver of this increase, rising by 8.0 per cent in a year, with rents growing by 9.3 per cent.
Since 2005-06 Queensland has led the nation in housing starts and, according to the Housing Industry Association, this trend will continue for the next couple of years.
Supply has had to keep up with demand.
Underlying demand for new housing stock is now 41,000.
This is expected to rise to 44,000 dwellings by 2010.
According to figures released by HIA last month, housing starts show that Queensland is meeting that demand and will continue to do so into the next decade.
But these statistics do not reflect what people are telling the Government about housing affordability.
Here on the Gold Coast the Mayor told me how difficult it is for hospitality and tourism workers to find a place to rent.
Take Mackay in Queensland – where the local economy has boomed in recent years, thanks to nearby mining communities.
Rents skyrocketed, with the greatest impact on key workers, young people and pensioners.
People who had lived in Mackay all their lives had to leave town because they just could not afford to live there any longer.
These people were crowded out by others who got the big, new pay packets as a result of the mining boom.
I saw figures in the Australian Financial Review newspaper last Saturday that said that in the town of Dysart in the Bowen Basin – which has a population of fewer than 3,500 people – a four-bedroom house will set you back $1,000 a week in rent.
Basic two-bedroom units in Mackay are renting at $750 a week.
No wonder it is getting harder to attract key workers like teachers and nurses – let alone people who work in retail or hospitality.
This has a flow on impact, in convincing workers with families to move to mining areas, when local schools and hospitals cannot find staff.
Mackay, and other Queensland boom towns like Emerald and Gladstone, are not alone.
The recent Senate Select Committee report on housing affordability in Australia cited Karratha and the Pilbara region in Western Australia as facing the same issues.
I was in the west just last week, and a story about the new K-mart in Broome.
The store was ready to go, but the opening was delayed by four months while the search for staff occurred.
Even when the new K-mart finally opened, there was only ever one check out operator.
This highlights a problem for all of us – not just in the booming towns of Queensland and Western Australia – but everywhere.
There is a very real prospect that in the future, we just are not going to have the key workers – in retail, transport, hospitality, nursing and child care – to be able to support many local communities around Australia.
Without the social infrastructure and services that these workers provide, the fabric of many towns around Australia could collapse.
This demonstrates the importance of housing to the economic and social life of our nation.
The Queensland Government’s blueprint for the Northern Economic Triangle succinctly articulates the challenge where it says:
‘Communities are faced with a lack of housing stock, a lack of available land for housing expansion and the impact of market-driven high priced accommodation on non-mine workers who can no longer afford to rent housing in the area.’
I know that State Government has already started to take action to address these issues.
Importantly, the states are now supported by an Australian Government that is prepared to show national policy leadership on housing as well.
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.
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 National Rental Affordability 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.
Tax incentives will be offered to stimulate the supply of new houses for rent at 20 per cent below market rates.
If market demand stays strong, the Government will expand it to 100,000 properties over the following five years.
This represents a substantial investment in affordable housing for low and moderate income Australians.
I am confident that a broad range of institutional investors and other potential participants will see the attractiveness of the refundable tax offset and the benefits of the new Scheme.
As many of you would be aware the Prime Minister released a Technical Discussion Paper setting out the key design features and operating conditions of the Scheme.
We received more than 120 responses to the Technical Paper, including a response from UDIA Queensland.
The submissions strongly supported the level of flexibility provided through the Scheme and that flexibility has been maintained in the administrative design.
The UDIA also raised issues regarding minimising risks for participants.
Work has commenced on drafting legislation to support the Scheme to demonstrate the Government’s commitment and to minimise risks for investors.
We are working to ensure that compliance is not administratively burdensome.
The UDIA submission agreed that the Scheme should be flexible and highlighted the need for state and local governments to actively support participants, and it was important that a broad range of participants should be involved.
The Queensland Government has demonstrated its commitment to this important new initiative by providing a $2,000 contribution to the National Rental Incentives and by matching the Commonwealth’s rate of indexation.
They will assess requests for other assistance on a case by case basis.
A number of Queensland local governments have also expressed interest in and support for the new Scheme.
I have met with a number of different Queensland based organisations in recent weeks including affordable housing organisations, developers and law firms, and also national financial institutions interested in participating in a range of Queensland locations.
I expect new partnerships to emerge between institutional investors, property developers and community housing agencies.
Across Australia there are groups working on proposals, which will include housing projects.
Generally we are looking to develop large scale portfolios of investment in affordable rental property, but the scheme does incorporate some smaller scale opportunities – including projects with a minimum of 30 dwellings.
This will provide smaller organisations a chance to make use of the National Rental Affordability Scheme, which has now been broadened to take into account some of the issues raised in these submissions.
Tenant eligibility requirements have also been broadened with more than 1.5 million Australian households now eligible to rent dwellings under the Scheme.
Housing Affordability Fund
The Budget also included a $512 million investment in a Housing Affordability Fund, to lower the cost of building new homes, with an emphasis on proposals that improve the supply of entry-level housing.
The Fund will also tackle this problem by working with other levels of government to reform planning rules and infrastructure charges.
This will cut costs and development times – and thereby lower costs for homebuyers.
The Fund will cut red tape and work to reform infrastructure and planning requirements, and will address two significant barriers to the supply of housing development
That is, the holding costs associated with planning and approval delays such as interest, land taxes, council rates and staff costs, and infrastructure costs such as water, sewerage, transport, and open space.
The Fund will be distributed by direct grant to areas experiencing high demand for new houses through a competitive process to projects demonstrating the greatest reduction in house costs.
The Housing Affordability Fund Consultation Paper outlined our plans to implement the fund, and provided an opportunity for feedback to ensure our aim of improving the availability of new affordable homes is met.
The input received will help inform the development of the program guidelines, distributed when expressions of interest are sought by the end of this month.
Applications will be selected in a two round process, with an initial expression of interest process being used to short list applications.
States, Territories and local governments will have the opportunity to provide advice to the Commonwealth on applications.
Electronic Development Assessment (eDA)
Earlier this month, I announced how the Australian Government was allocating $30 million from the Housing Affordability Fund to progress the implementation of Electronic Development Assessment, or eDA, nationally.
Queensland received around $6.5 million of this new funding.
The eDA state-by-state allocation was determined by relative growth across different regions.
I anticipate that final allocation of funding to councils will occur in September.
A further $3.6 million is being used to implement and refine a common protocol for the electronic lodgement of planning and development assessments, so we do not end up with the 21st century equivalent of different rail gauges in each State and Territory.
We are prepared to work with the States, Territories and local government to support reform, but we need a matching commitment from developers that savings will be passed on to home buyers.
National Housing Supply Council
The housing market needs to know how many houses we need, where they are needed and what kind of housing will fill the void.
That is why one of our early announcements was to establish the National Housing Supply Council.
The Council will improve the evidence base for housing policy development by providing research, forecasts and advice to government.
The Council, chaired by Dr Owen Donald, has been given the task of pulling together the data we have available on housing demand and supply.
This will give us the ability to look into the future and see any bumps in the road ahead.
Every year, from next January, it will produce a State of Supply report to improve the information available to the market.
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.
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 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.
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.
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.
You are at the ‘pointy end’ of the future of housing, and many of you have innovative ideas for what comes next.
We need you to continue thinking about your projects and how they can include elements of affordable housing and sustainable design.
Thanks again for asking me to join you today.