Shaping Futures Newsletter – June 2017

 Shaping Futures: Housing Policies for the 21st Century

Our Partner’s Meeting (May 22-23) & Symposium (May 24)

UK Housing Policy News

Housing White Paper
The UK Government published its long awaited housing white paper in February, Fixing our broken housing market; which sets out a broad range of plans to help reform the housing market and increase the supply of new homes. It sets out changes to planning powers to ensure the right homes are built in the right places – with particular support for higher densities in urban areas well connected by public transport. It shows how the government is keen to see homes built faster by a more diverse market; with extra support and funding for off-site construction. In a welcome move, letting agent fees have been banner, to improve the experience of renters.

The Bank of Mum and Dad
Parents now fund more than a quarter of house purchases as young people and first-time buyers struggle increasingly to get on the housing ladder. The Bank of Mum and Dad has become the equivalent of the ninth-biggest mortgage lender in the UK, up from 10th place last year, making it bigger than Clydesdale Bank in the mortgage market. Low or no interest rates, long or infinite repayment periods and a personal service: It’s not surprising the Bank of Mum and Dad is Britain’s has become a major player in the housing market. Research by Legal & General and the Centre for Economics and Business Research consultancy found that the Bank of Mum and Dad will lend more than £6.5bn this year.

London Mayor to Name and Shame Criminal Landlords
Criminal landlords and letting agents who exploit their tenants will be ‘named and shamed’ on a new online database to protect the two million private renters in the capital, recently announced by the Mayor of London, Sadiq Khan. The database will give renters and prospective tenants the chance to see which landlords and letting agents have been previously prosecuted for a criminal offence. The aim is to empower people to make an informed decision about who they rent from before signing a contract. Citizens Advice heralded this as a strong and positive step in support of London’s renters.

The UK is holding a ‘Brexit’ general election on Thursday June 8 2017. Housing supply has featured prominently with the opposition Labour party promising to build a million homes and to support council housing. The Liberal Democrats have promised more homes too along with direct commissioning of new housing. The Conservatives, currently in government, have made more modest though still ambitious plans to build more homes, including a social housing component (which during the campaign was ‘clarified’ to mean fixed-term tenancies of 10-15 years at affordable rents (80-85% of private market rents) then the properties would be returned to the market often through the right to buy). The main housing story was slightly more indirect. Graspng the nettle of the wicked problem of paying for social care I nan ageing society, the Conservative party announced that estates (ie largely housing equity) would be protected up to £100,000 for all but that at the same time, all receiving residential or non residential care would be expected to pay (either now or by deferral) with no upper limit other than the £100,000 limit at the end of the process. This was highly unpopular and just days later the Tory leader, Theresa May, announced that there would indeed be an upper lifetime limit but that this would be decided after the election. At the time of writing (5/6/2017), polls are volatile and the result a little uncertain.

In Scotland new legislation may herald major changes in the private rented sector, something watched closely by other parts of the UK. From December, new tenancies will move from generally being 6 months duration to open-ended tenancies with limited statutory grounds of repossession for landlords. This, it is hoped, will encourage long term tenancies and support families in the private rented sector by giving them greater security. Teannts will also be able to go to a third party to challenge what they consider to be excessive rent increases and rents can only be increased nce a year. Finally, the new law also includes provision for local councils to designate their area as a local rent pressure zone which will then lead to a cap on rent increases, probably CPI plus one per cent. Most feel that the only placw thus would currently apply to is the capital, Edinburgh – but it is an interesting development in ‘second generation’ rent controls. An interesting natural experiment will be be played out over how the sector evolve socmpared to those parts of the UK that retain the highly deregulated system that has applied since 1989. Note also that new affordable rent products (mid market rent) aimed at key workers will also adopt this more secure tenacy after it is introduced on new tenancies.

Canada Housing Policy News

Canada: National Housing Strategy
After years of relative inaction, the past year has seen a great deal of activity at all levels of government in Canada. Canada’s federal government is developing a National Housing Strategy, its first since the early 20th Century. This follows years of pressure on successive governments by housing advocates, including a court challenge under Canada’s Charter of Rights and Freedoms that sought a national housing strategy as a remedy. In 2016, the Trudeau government fulfilled a campaign promise with its national consultations for a housing strategy, Let’s Talk Housing, the report was released in October. The strategy is expected in the fall. The 2017 budget earmarked $11.2 billion over eleven years for housing – an announcement that has been criticized for its long time-frame and inadequate resources to address the scope of Canada’s need for affordable housing after decades of federal neglect.

New Policy Measures in Ontario
In March 2017, the average house purchase price in many municipalities across Ontario increased by 20% to 40% over the previous year.  In April, the Province of Ontario introduced its Fair Housing Plan to address rapid increases in rental and ownership costs.  The plan has 16 measures to improve affordability, increase supply, protect purchasers and renters, and stabilize the real estate market. These include a tax on speculative home purchases in the Toronto area by non-residents, expansion of rent control to units built after 1991, and new incentives for rental development.

Toronto: Landlord Regulation
In response to concerted demands from tenant organizations, the City of Toronto has passed a new bylaw for apartment buildings. Now landlords of rental buildings with three or more storeys and ten or more units, must register with the City, follow protocols for waste management and pest control, and implement procedures for receiving and tracking tenant requests for service. The bylaw also provides new monitoring and enforcement powers for the City’s Municipal Licensing and Standards unit. Recent studies have identified very poor building and unit conditions in Toronto’s purpose-built rental stock.

Australia Housing Policy News

Will the Federal Budget 2017 Signal Better Times Ahead?
The 2017 Federal Budget has some very real positives for the community housing industry but failed to deliver on the additional funds that are necessary to meet the backlog and future anticipated demand for social and affordable housing. Signs are that the real estate agencies and private sector developers see business opportunities arising from the proposed initiatives and are already lobbying for a slice of the action. We expect to hear much more about the community housing industry being an inefficient bunch of do gooders only lately discarding their sandals and hemp shirts. Below are a flavour of what we must look forward to – focusing on those aspects that might lead to more affordable rental housing rather than the schemes designed to promote home ownership.

A New National Housing and Homelessness Agreement
The Federal Government’s commitment to a new ‘National Housing and Homelessness Agreement’ (NHHA) and the setting of affordable housing supply targets is a real positive. It takes us a long way from the 2015 White Paper on Reform of Federation which had signs that the Commonwealth would walk away from its role in housing. Now, they seem to be promising a more transparent policy (which is needed) which would hold the states accountable for delivery. They also promise to secure homeless funding beyond the financial year – most providers have lived from year to year under threat from their funding being withdrawn. However, there is no additional funding proposed for social housing and homelessness – just indexation of the current funding level – which means a cut as costs are rising more than the commonly used indexation measure.

In NSW, a recent review of the rent models shows an operating subsidy gap just under $1B per annum, which leaves some doubt over how an increased supply will be funded while maintaining existing public and community housing. Simply transferring management of poorly maintained housing to community housing providers won’t make much difference even if Commonwealth rental assistance is guaranteed – and it isn’t in this set of proposals. Title transfer and the flexibility to develop sites would allow groups to invest gains into more affordable housing. The bond aggregator would create lower cost finance. Title transfer might be something the Commonwealth could influence via its NHHC negotiations with States.

Another positive sign is the suggestion the Federal Government want the delivery of inclusionary zoning outcomes in the new NHHA – and the Federal Government’s vocal support for mandatory measures would be very beneficial in seeing off the developer and property lobby.

The National Competition Council, will assist the Commonwealth with implementation and the assessment of State and Territory performance.  The Council has a mission ‘To promote the economically efficient operation of, use of and investment in the infrastructure by which services are provided, thereby promoting effective competition in upstream and downstream markets’.

A New National Housing Finance and Investment Corporation
A National Housing Finance and Investment Corporation will be established – a bond aggregator akin to THFC in the UK. It will also have a role in allocating its $1b National Housing Infrastructure Facility (NHIF) which will fund local councils to provide infrastructure (sewers etc.) to speed up new housing (not necessarily affordable) supply. The details aren’t clear but a sentence in the Budget Fact Sheet (1.2) ‘the Government is able to ‘direct the NHIF to invest projects where this addresses a significant housing supply issue,’ offers some hope.

Commonwealth Land Holdings Registry
The proposal that Commonwealth land holdings be listed and stakeholders encouraged to propose options for usage doesn’t include any detail about whether schemes that promote public good e.g. affordable housing supply will be prioritized.

Social Impact Investing
This initiative will see $10.2m invested by the Government over a 10-year period to trial innovative approaches to improve housing and welfare outcomes for young people at risk of homelessness. NSW have trialled some social impact investments without much success for the bricks and mortar element.

Investment Tax Incentives
The Federal Government is proposing increasing the capital gains tax discount for investors in affordable housing by 10% to 60%. The property must ‘qualify’ by being below market rent and eligible for people on low to moderate incomes. This housing must be managed by a registered community housing provider and held as affordable housing for three years. It seems a generous offer to the owner and seems to come with no strings of what is provided and in which locality.

The Federal Government is also proposing to introduce new rules enabling Investment Trusts – a REIT – to ‘acquire, construct or redevelop housing to hold for affordable housing’. Currently resident investors are taxed on income at a 30% rate on the basis that this is ‘active investment’, and don’t attract the tax concessions that apply to passive investment. The Government is proposing that the MIT keep affordable housing assets affordable for 10 years and at least 80% of their income must be derived from affordable housing in an income year. There will also be rules pertaining to the tax treatment of non-resident investors. This raises many questions and the Government has committed to further consultation. Managed MITs could represent a further entry into the affordable housing market by private sector providers as owners and managers of affordable housing tenancies. Already there are signs the development industry are seeking to dilute requirements on affordable housing percentages and/or seek government operating subsidy to get to their required yield.

The Government has suggested that it will work with States and Territories to strengthen the national regulation of community housing providers, making no commitment to reinstate its share of the funding.

Housing Package for Western Sydney
The Budget sets out support for the Western Sydney City Deal loosely modeled on the UK initiative without the tenders or involvement of community partners (or Councils thus far). The housing focus seems to be on planning reform – incentives and rezoning. The city deals do not have any specific commitment to affordable housing targets.

Shaping Futures is a Knowledge Exchange/Knowledge Building project involving the following partners: