UDIA SA Luncheon Adelaide

Location: Hyatt Regency Ballroom, Adelaide

Acknowledgements

• The Hon. Paul Holloway MP – Minister for Planning and Urban Development
• The Hon. Vickie Chapman – Deputy Leader of the Opposition
• Stephen Holmes – UDIA National President
• Mike Terlet – Chairman, Land Management Corporation
• Ladies and gentlemen

I would also like to acknowledge the traditional owners of the land on which we meet today, the Kaurna people, and pay my respects to their elders, past and present.

Introduction

• Thank you Terry (Walsh, UDIASA Executive Director) for your introduction.
• The Government was elected with an ambitious agenda on housing affordability.
• In our first budget we committed $2.2 billion to new programs to improve housing affordability – by helping young people save a deposit, working with councils and builders to reduce planning delays and infrastructure charges and by creating the incentive to build more affordable rental accommodation.
• Housing affordability is a long term challenge for Australia and the Government’s focus will continue to be to work with industry to deliver a greater amount of affordable housing.
• I would like to update you on some of those programs a little later and the opportunities they present for members of the UDIA.

Housing Market and the Global Financial Crisis

• In the last six months we have all become much more aware of the potential impact of the Global Financial Crisis on our economy including the housing market.
• The Australian housing market is not the same as markets overseas.
• Unlike the United States and the United Kingdom, Australia has not been building enough houses for many years.
• Mortgage default rates in Australia continue to be extremely low by international standards and Australia has never had the kind of sub prime lending that existed in the US.
• Nevertheless, you all know that Australia is not immune from what happens overseas and that the current difficult times are affecting the housing market in Australia.
• That’s why we took early action last October to support confidence in the housing market by providing the First Home Owners Boost.
• Our aim was to maintain activity in the housing market by helping first home buyers to get into the market now.
• It’s early days, but we are starting to see the first official data come through.
• ABS Housing finance figure from the end of November showed increases in the number of loans for owner occupied housing and the purchase of new dwellings.
• These are early figures, but I hope that we will continue to see signs that increased interest from first home buyers is translating to increased sales.
• The Government knows that the Global Financial Crisis is far from over.
• We are committed to working with industry to manage the impact of the crisis and to minimise the impact on the jobs of Australian families.
• The housing industry has a huge multiplier effect on jobs in the broader economy. Action to maintain confidence in housing is good for the economy as a whole.
• Many people have asked me whether the Government has plans to extend the First Home Owner’s Boost beyond July.
• While the Government stands ready to respond to changing economic circumstances, it is important to bear in mind that the reason there is a time limit on the Boost is to create a catalytic effect.
• We introduced the Boost to encourage people ready to buy to go out and do it. I do think people have responded more quickly because of the time limit on the grant.
• In the last few months many people have told me that access to private credit, particularly for developers of multi-unit developments is very difficult at the moment. Unfortunately there are no overnight solutions to structural problems such as this.
• You’d all be aware of actions the Government has taken to ease the credit crisis, from bank guarantees through to the Business Investment Partnership announced at the weekend, which provides more liquidity to the commercial property market.
• The important thing to emphasise here is that the Government is watching the fall out from this crisis extremely closely and is ready to take decisive action to minimise its impact on Australians.

Housing Affordability Fund

• Of course even without the current economic situation, Australia has a long term problem with housing affordability to tackle.
• One of the best examples of the Government’s attempts to stimulate the construction of affordable housing is the Housing Affordability Fund
• Through the HAF, the Government is seeking to improve housing affordability by increasing the efficiency of the housing market, and in particular by removing some of the supply roadblocks to new developments.
• Projects that cut red tape, promise efficiency reforms at local government level or leverage in-kind contributions from local governments or developers will have a competitive edge over those for which new infrastructure is the only deliverable.
• HAF will improve housing supply by bringing forward new housing starts and in some cases by reducing delays in the development assessment process. We are targeting it at homes that will be sold at market-entry level, with a price reduction to reflect the Commonwealth contribution.
• The Housing Affordability Fund is a demonstration of how the Government is wanting to work with all stakeholders – developers, builders and other levels of government – to lower the cost of housing for low and middle income Australians.
• Recently I announced a shortlist of projects that will share in $112 million of first round funding under HAF.
• Five of the projects on the HAF shortlist are from South Australia, and this State’s share of the first round funding is just under $16 million, which represents more than 14 per cent of the total allocation. This is a good result for South Australia – well above South Australia’s population share – and shows how competitive application processes can reap benefits for innovative local projects.
• Each project is unique. All use HAF funds to deliver better housing affordability in their local areas.
• Here is South Australia, I have shortlisted a project in Ceduna.
• This is a small project that will renew infrastructure in the Talbot Grove development.
• The Council and local builders are partners and have committed to pass on savings from the project as subsidies to young first home buyers.
• In fact the project will make it possible to pass on to those first home buyers a subsidy that is greater than the funding they will get through HAF.
• This is great example of all levels of government working together with industry to make housing more affordable in a local area.
• Many of the projects I have approved are for larger developments to bring new lots to market.
• One of those is just north of Adelaide in Gawler.
• I have provisionally granted $3.1 million to fund the construction of community infrastructure, which will allow the rezoning of land and enable 2170 lots to be developed. The new community infrastructure is also set to benefit 880 existing residents.
• The project will bring these lots on sooner than would otherwise have been the case and reduce the holding costs that would otherwise have been incurred.
• Other successful projects focused strongly on planning reforming and speeding up the development assessment process.
• A number of Councils in South East Queensland put in a joint submission to cut the time taken to approve non controversial housing developments.
• When implemented, the Councils would like to see developments assessment completed within 5 days.
• The Housing Affordability Fund was designed to help people deliver more affordable housing at a local level – both by supporting planning reform and contributing to the cost of infrastructure.
• Overall in the first round, the Housing Affordability Fund will deliver cost savings to 14,000 lots through the construction of bridges, water pipes, sewerage systems and community facilities.
• In total, over 300,000 new homes will benefit in the first round, via the installation of infrastructure and planning reforms that have ‘ripple’ benefits beyond the particular development funded, and across the local government area.
• Further funding rounds will follow, with applications for the next round being invited later this year.

Move towards electronic Development Assessment systems

• We also need to improve the efficiency of the planning and development process – to make it quicker to transfer information between applicants and local government, local government and consenting authorities
• $30 million has been allocated to fast track roll-out of electronic development assessment (eDA) systems.
• eDA brings the development assessment process into the 21st century by replacing paper-based systems in areas of high population growth
• The Australian Government is providing $1.79 million from the Housing Affordability Fund to South Australia to improve its eDA processes.
• In December I was pleased to announce that the Local Government Association of SA had signed the funding agreement for this money to be used for electronic processing of property subdivision applications, in a bid to reduce regulation costs and improve housing affordability.
• I have been impressed at how the South Australian State and Local Governments have been able to work together. Their collaborative approach has meant we could start using this funding to good purpose sooner than in many other States.

National Rental Affordability Scheme

• Of course not everyone can or will want to buy their own home.
• Currently about one-third of Australian families rent.
• It is tougher than it ever has been for low and moderate income households to find affordable rental housing.
• We need to build more affordable rental housing for low and moderate income households.
• We are doing this through a number of programs to stimulate building construction, but in particular through a $623 million program familiar to some of you called the National Rental Affordability Scheme (NRAS).
• Under NRAS, new homes will be built and owned by institutional investors, and must be rented at 20 percent below market rates to low and moderate income earners.
• The investors will receive an annual incentive of $8,000 per dwelling ($6000 from the Australian Government – $2000 from the States) to build these affordable rental homes.
• We completed the first round of allocation late last year after very strong interest from industry.
• I announced in December the allocation of incentives for 2,800 dwellings including 422 in South Australia.
• What the Government is trying to do is to provide a financial incentive to include affordable rental housing in new developments and plans for new communities.
• There are all sorts of ways in which the incentive can be used. We want projects to use the available funds in whatever way works for them.
• Again the projects that have been approved are all very different. They cater for different target groups, use different financing mechanisms and vest title in different partners.
• One proposal delivers group housing for special needs tenants, including the elderly or people with disabilities. The project will deliver five separate houses located across four suburbs, each accommodating five tenants in their own private suites but with some share living spaces to encourage and enhance community ownership of the dwellings.
• Another proposal will use an innovative financing and leasing arrangement where the tenancy manager will head lease from a developer of the dwellings who will retain ownership.
• This arrangement puts no debt or equity funding requirements on the tenancy manager, which will sub-lease the dwellings to the tenants.
• Round two is now open.
• My Department is working hard to make decisions as quickly as possible.
• The outcomes for the majority of applications for Round two will be advised by mid June.
• As part of our attempt to maximise awareness of the program, a series of information sessions are being held around Australia.
• The session planned for Adelaide will be held on 9 February, 10am – noon at the Stamford Plaza, 150 North Terrace, Adelaide.

National Housing Supply Council

• Another way we are acting to improve the housing market is through improved research.
• The Council, chaired by Dr Owen Donald, will present its inaugural report, State of Supply 2008, in a few weeks.
• The Council is an independent body that operates at arms length from government and reports annually to the Minister for Housing.
• The report draws on data that has hitherto been fragmented and gone under the radar of policy makers, as well as the knowledge of housing sector experts.
• The report is an important step towards establishing robust national information to inform government and industry on emerging trends and likely future scenarios in the demand for, and supply of, housing in Australia.

Conclusion

• The Australian Government is implementing more housing programs than have existed at the federal level for decades.
• Importantly, they share as an explicit aim an increase in the amount of affordable housing being built.
• This is both an exciting and a difficult time to be in the housing industry.
• The Australian Government is determined to play the most positive role we can.
• We want to work with industry to minimise the impact of the global financial crisis, particularly when it comes to employment.
• We are also committed to tackling the long term problems of housing affordability.
• I look forward to your involvement in both challenges.

ENDS

The Minister’s speech followed by Q&As