10.12.2020City of Melbourne’s Affordable Housing Strategy 2030

The City of Melbourne has finalised its Affordable Housing Strategy 2030 (Strategy) outlining possible policy solutions to the affordable housing crisis. Committee for Melbourne (the Committee) has been advocating for an affordable housing approach to deliver greater supply of social and affordable housing across a spectrum of need, including for key workers.

The Strategy highlights, using pre-COVID data, that there is a shortfall of at least 5500 affordable rental homes for people on very low to moderate incomes and the shortfall is anticipated to increase to approximately 23,200 by 2036 in the city, if no action is taken. The shortage of affordable homes is likely to become even more profound, especially in the short-term, in the wake of the COVID-19 pandemic and the detrimental impact the virus is having on the economy.

Whilst the recent announcement of the Victorian Government of Victoria’s Big Housing Build, will add 12,000 new affordable homes across Victoria over four years, there is more that needs to be done to increase the supply of affordable housing in the city and across Victoria to meet the demand for this type of housing.

The Strategy focuses on increasing the supply of affordable rental housing in the city which can be developed and managed through registered community housing organisations. Recommendations in the Strategy cover five key priority areas:

1. Deliver more affordable rental housing on City of Melbourne-owned land.
2. Advocate for systemic change and new and ongoing investment for better affordable housing outcomes.
3. Facilitate more affordable rental housing through the planning system.
4. Partner with governments, industry, peak bodies and the community to increase affordable rental housing.
5. Respond to the COVID-19 crisis with affordable rental housing.

The Committee made a submission on 3 May 2020 to the City of Melbourne’s Draft Strategy. The submission highlighted that a range of policies should be applied to address the affordable housing crisis, and that recognition of the economic viability of development projects is vital. The Committee’s submission stated that “Any policy initiatives should ensure that there is a range of policies applied that can achieve a balance between delivering outcomes and ensuring the ongoing economic viability and sustainability of the economy and community.”

It is therefore pleasing that a greater range of policy levers are considered in the Strategy, and that recognition of the project costs for developers are taken into account in the recommendations. In relation to the recommendation for mandatory Inclusionary Zoning (IZ) for example, the City of Melbourne has highlighted that:

Mandatory IZ should be phased in over a period of time so that the market has adequate time to adjust to the change and at a rate that can be accommodated in project costs. The implementation of Mandatory IZ must be supported by guidance to make decision-making clear and consistent. (Page 28 of the Strategy)

The Committee supports the concept of the recommendation for the Victorian Government to develop a Homes Victoria Strategy for social and affordable housing in consultation with local councils, the industry and community housing sector, that would reposition affordable housing as essential infrastructure.

One of the mechanisms proposed to achieve greater supply of affordable housing is the creation of a levy, as a new funding mechanism that collects funds for affordable housing year-on-year. The fire services levy is provided as an example of this sort of funding, which is applied at a low rate to all businesses and households in Victoria. The Committee supports in principle consideration of this concept and agrees that:

…the solution to the affordable housing crisis doesn’t rest with one industry, government agency or group of people. It is a society-wide crisis that needs a society-wide response. (Page 27 of the Strategy)

However, the Committee raises concerns with the concept that such a levy could be used to directly fund new builds or used as an ongoing subsidy for affordable housing. (Page 27 of the Strategy) Any consideration of levy funding should be considered very carefully and applied to increase housing supply. The administration of an affordable housing levy would require the establishment of an appropriate governance frameworks and accountability mechanisms that would include industry involvement in decision-making and management of the use of levy funds. A stakeholder reference group that includes industry should be convened to consider any imposition of levy funds and how they would be collected and managed.

The Committee will continue to be an important contributor in the affordable housing discussion, particularly through its Housing Mix Taskforce. The Committee looks forward to working with the City of Melbourne and Victorian Government to consider appropriate policy mechanisms that would provide solutions to the affordable housing issue in Greater Melbourne and Victoria.

The Committee’s submission to the Draft Strategy can be viewed here.

Please contact Leanne Edwards, Director – Policy and Research on ledwards@melbourne.org.au for more information.