Speech to the 2008 Planning Institute of Australia National Congress
E & OE – CHECK AGAINST DELIVERY
I respectfully acknowledge the Traditional Owners of the land on which we meet today, the Gadigal people of the Eora nation.
Thank you Jeremy (Lasek, MC for the event) for your introduction.
I’m grateful to Di Jay and her team at the Planning Institute of Australia for inviting me here today to speak to you about the Government’s housing policy reform agenda.
I also like to take the opportunity to acknowledge the outgoing National President, Sue Holliday, for her hard work in that role since 2005, and the incoming President, Neil Savery.
It is an exciting time for the Government, as well as for me personally as the first Minister for Housing since 1996, to have the big challenge of implementing the new commitments that we promised to the Australian people last year.
As we all know, access to secure, sustainable and affordable housing is fundamentally important to our everyday lives.
It is very easy to become complacent about housing when you have a safe and secure place to come back to every night.
For many Australians today, getting access to affordable housing – let alone hanging onto it – is harder than ever before.
Consider the statistics:
- To buy an average priced home you now need a six figure salary to service the loan.
- In 1996 the average house cost about five times the annual wage, today it is seven and a half times.
- A typical home buyer now spends a third of their income on mortgage repayments – this compares to less than two out of every ten dollars earned in 1996.
- Rental vacancy rates are now below 2 per cent in all capital cities with some cities below 1 per cent.
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.
The National Centre for Social and Economic Modelling recently undertook new research for the Government that found that 1.1 million low and moderate income families are in housing stress.
These families – who are in the bottom 40 per cent of all earners in Australia – are all spending more than 30 per cent of their disposable income on housing costs.
There were 220,000 more families in this boat last year than in 2004 – an increase of a quarter in just three years.
Families with children have been particularly hard hit, along with young singles entering the housing market for the first time.
The number of older families in housing stress is also on the rise – with the number of families headed by a person aged over 70 doubling since 2004.
While the growing cost of housing is tough on the family budget, it also has important implications for the wider economy.
For a start, the availability of affordable housing is one of the keys drivers of labour mobility – it helps to determine whether people are prepared to move to take up job opportunities in areas where there are labour shortages.
There are also intergenerational problems with declining affordability and the effect of more limited home ownership:
Owning a home is an important source of economic security for working families, and most particularly for older Australians as they reach retirement age.
As I said earlier, older Australians are not immune from the lack of affordable housing around the country.
In the long run, declining housing affordability presents real challenges for the residential property market.
There is no point building houses that people cannot afford to buy or rent – yet there is a clear need to stimulate construction of homes at the affordable end of the market – both home ownership and rental accommodation.
We have a serious supply problem.
We are forming households more quickly than we are building homes – immigration, mobility within Australia, divorce, more people living on their own, and living longer.
We are simply not keeping up with demand from these new households, and according to Treasury we have not been since 2004.
Australia is now at least 30,000 homes short, and you all keep telling me that it is going to get worse before it gets better.
That is why the Government is embarking on a comprehensive housing policy reform agenda.
Housing Affordability Fund
Under the Housing Affordability Fund the Government will invest $500 million to lower the cost of building new homes by working with all levels of government, particularly local government, to reform infrastructure and planning requirements.
The Housing Affordability Fund will be available to local government, potentially in partnership with developers, or even to State and Territory Governments, for projects that will make a real difference to the cost of new homes.
Funds will be allocated through a competitive process to the projects that demonstrate the greatest reduction in house costs.
We will ask bidders to explain how they will pass the benefit on to home purchasers.
The Government is looking for innovative and practical projects that support long term reform in this area and which result in measurable savings to home buyers.
I will soon release an Information Paper on how the Housing Affordability Fund could operate.
I encourage you all – and your colleagues in the property, building, local government and development sectors – to participate in that process.
Up to $30 million from the Housing Affordability Fund will be invested in the national roll-out of electronic development assessments (eDAs) and online tracking services to streamline planning approvals.
Starting with high growth areas and then moving to all councils by the end of next year, the program will fund IT infrastructure, particularly software, so local governments can streamline their planning processes.
This new initiative will reduce costs and development times, thereby reducing the costs ultimately passed on to homebuyers.
Recently I met with Planning and Local Government Ministers in Brisbane to discuss the best way to kick this new commitment along.
They have agreed to send me their thoughts about how to make the system work, including possible ideas for fast-tracking eDA best practice in particular local government areas.
There are clearly real gains to be made by focusing on more streamlined processes for planning and development applications – particularly given the serious shortage we have for planners in this country.
I also recognise we will need to take action to increase the number of planners.
The Government is committed to increasing investment in training and ensuring this is targeted to address skills shortages across the Australian economy, including the shortages faced by the planning industry.
The Government will invest in Australia’s economic future by funding an additional 450,000 training places over four years and will work with all stakeholders to develop a truly responsive, demand-driven training system.
The first batch of 20,000 places was made available at the beginning of this month for jobseekers to gain qualifications in a range of skill shortage areas.
While these qualifications are targeted at Certificate II and III level, urban and regional planning have been identified as priority occupations in demand and we will be encouraging training providers to sign up to deliver higher level qualifications in these areas from July.
I am aware that planners are included on the skilled occupation list for migration purposes. I would urge you to keep the Department of Employment, Education and Workplace Relations aware of recruitment difficulties in your industry so that skilled migration can provide the right assistance to addressing the housing supply problem in Australia.
National Rental Affordability Scheme
The National Rental Affordability Scheme is perhaps the most ambitious of the Government’s new housing policy commitments.
We are aiming to create a new asset class for institutional investors in affordable residential housing.
The Scheme will provide an annual incentive to institutional investors to build new homes and rent them to low and moderate income earners at 20 per cent below market rates.
The Australian Government will provide institutional investors with an annual $6,000 refundable tax credit for new buildings.
There will be the capacity to provide the credit as a grant instead for non-taxable entities – like some operators in the community housing sector.
State and Territory Governments have agreed to contribute at least $2,000 per annum in cash or in kind.
Each property will attract a credit plus State Government assistance for 10 years, at which time the property may be rented at market rates or sold.
In the first five years the Government aims to bring 50,000 properties.
If successful, the Government will expand the Scheme to 100,000 properties over the following five years – a major new investment in Australia’s affordable housing stock.
Tenants will be subject to a clear income test that will target low and moderate income earners.
The Scheme will not just be another form of welfare housing – rather it will provide affordable accommodation for lower income singles and families in the workforce.
We expect that key workers earning moderate incomes – such as apprentices or part time workers in retail and hospitality – will benefit from the Scheme.
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.
I expect new partnerships to emerge between institutional investors, property developers and community housing agencies.
I will soon release a Technical Paper on the operation of the Scheme that will deal with a number of specific issues of program design.
I encourage you all to provide feedback on that document, because the Government wants to get the details of the Scheme right, to make sure it is administered in a way which allows a market to develop in affordable housing.
National Housing Supply Council and land release
I will shortly be announcing the creation of a new National Housing Supply Council to assess current and future demand for housing across Australia.
This Council will publish an annual State of Supply report to analyse the adequacy of construction and land supply for the next 20 years.
The report will coordinate local, state and national supply and demand information and adopt a consistent, national standard for measuring and assessing the supply of land and housing.
It will examine issues like:
- Medium and long-term demographic changes.
- The impact of immigration.
- The movement of families between States and Territories.
- Trends in household types, like the growing number of single-person households.
- Market distortions and possible future shortfalls in land supply.
- Construction and availability of a diversity of housing for different household incomes.
- Structural barriers to the release of land and zoning approval and the construction of new housing.
I expect to announce membership of the new Council very soon, so that it can get cracking on the first State of Supply report.
The work of the Council will also contribute to the Government’s new approach to the sale of surplus Commonwealth land.
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 revamping its policy for property sales to ensure that land sales are used to help increase the supply of affordable housing.
In future, the sale of land 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.
First Home Saver Accounts
One of the biggest barriers to becoming a first home owner is saving a decent deposit.
Increasingly, first home buyers are shut out of the housing market:
- First home buyers now account for 18 per cent – or barely one in six – of all home purchasers – compared to 22 per cent in June 1996.
- The first home mortgage has more than doubled in 10 years, from $104,000 in December 1997 to $231,000 in December 2007.
- The proportion of 18-34 year olds buying their first home fell from 48 per cent to 44 per cent between 1994 and 2004.
To try and reverse these trends, the Government has committed $850 million to establish First Home Saver Accounts.
These new Accounts will be up and running in the second half of this year.
The Accounts are the first of their kind in Australia – the biggest revolution in our savings culture since a Labor Government introduced compulsory superannuation.
The Accounts will provide a simple, tax effective way for Australians to save a meaningful deposit for the purchase of their first home.
Since the announcement of these new Accounts, the Government has increased the benefits to low income earners.
The scheme has been extended to provide assistance to low income earners through the provision of a minimum 15 per cent Government contribution on after tax contributions of up to $5,000 each year.
A couple earning average incomes and putting aside 10 per cent of their incomes for their first home, could be able to save a deposit of $80,000, depending on returns.
The Accounts are also an important element of the Government’s efforts to increase national savings.
We estimate that the Accounts will contribute around $4 billion to national savings within four years.
Given the theme of this year’s National Congress – A Climate for Change – it would be remiss of me not to mention the Government’s commitment to sustainable housing.
The States and Territories have led the way on sustainability by introducing a raft of programs to encourage more sustainable housing – like rebates for solar power, rain water tanks and grey water systems.
These systems will become commonplace in the future, as well all seek to make a personal contribution to tackling the threat of climate change.
The Government went to the last election with 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 visited VicUrban’s Aurora development on Melbourne’s northern fringe.
Aurora is a terrific example of what you can do 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, this is the sort of development 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.
I hope to see many more developments like Aurora in the coming years.
Time to take advantage of the new opportunities
There has been little discussion and little interest at a federal level in housing affordability for much of the past decade.
Times have changed.
It was not by accident that Labor – when in Opposition – tried to focus the political debate on housing affordability.
We did this because we knew that housing was a burning issue in the Australian community, and many people were hurting.
I am pleased that Labor’s commitment to housing is a major priority in Government.
The Government is prepared to make a major policy and financial commitment to housing, both in specific programs and in related areas such as skills and infrastructure.
The Government has increased the annual quota for skilled migrants by 6,000 and is looking at using the increase in the skilled migration quota to help address the specific needs of the construction industry
Just so you know, I have heard the Planning Institute’s message that we also need to focus on the shortage of skilled planners, and related professions to building and construction.
Our collective challenge is to show that an investment of this size can produce real results for the nation.
Put simply, it is now your responsibility – and the responsibility of your colleagues in the property, building, local government and development sectors – to make this work.
The Government’s approach to housing is to use innovative policy to create the incentive to improve housing affordability.
Our plan is not to micro-manage the system but to create an environment where investors, developers and the community can show real results.
We have deliberately chosen to offer competitive funding processes so that the best possible, industry-initiated projects can be supported.
We want to support innovation and creativity: a variety of local solutions.
We want to encourage urban development that deals with the major issues of our time – environmental sustainability, integration with transport and employment and creating socially cohesive communities.
We need projects with measurable results – that will demonstrate to taxpayers that funds spent to improve housing affordability is money well spent.
This is not going to happen without some heavy lifting at your end.
My challenge to you, today, is to work out how your product needs to change, how your way of doing business has to change, how your relationships have to change, to take advantage of the opportunity we are offering you.
The opportunity is not one of making a quick buck, but of delivering affordable housing to parts of the Australian community who are in desperate need of it.
From July this year, we will be going out to the market requesting applications under both the Housing Affordability Fund and the National Rental Affordability Scheme.
I strongly encourage you to start thinking now about how the projects you may be involved in can include elements of affordable housing.
Thanks again for asking me to speak to you today – I hope you all enjoy the rest of the day’s program of events.
I look forward to working with you to shape the future of housing in Australia.