New priority planning pathways for social and affordable housing development

There is currently a significant affordable housing shortfall in Victoria. Victoria’s Big Housing Build program presents new opportunities for private sector developers to work with Registered Housing Associations to deliver this much needed housing stock.

The Gadens Real Estate & Construction Team recently hosted a virtual Boardroom Briefing on the new planning priority pathways for social and affordable housing developments.

The briefing was led by panellists Steph Harper, Director – Residential Investment, CBRE, Mia Zar and Jackie Kirby – Associate Town Planners at Tract Consultants.

A summary of the key discussion points are set out below.

What is affordable housing?

Although the terminology is often used interchangeably, the definition of ‘affordable housing’ in the Planning & Environment Act includes ‘public housing’.

When you are referring to affordable housing which is required by the Planning Scheme, the term is defined in the Planning and Environment Act:

Affordable housing means ‘housing, including social housing that is appropriate for the housing needs of very low, low and moderate income households’.

The reference to ‘social housing’ includes:

• Public housing – owned and managed by government.
• Community housing – controlled or managed by a Registered Housing Association (RHA).

What is the current state of play in Victoria?

There is currently a significant affordable housing shortfall in Victoria.

Victoria’s Big Housing Build program is an unprecedented $5.3 billion investment in social and affordable housing, and will deliver over 12,000 new dwellings, including 9,300 new social housing dwellings, replacing 1,100 existing dwellings. The investment, delivered throughout metropolitan and regional Victoria, will boost total social housing supply by 10 per cent.

This funding presents new opportunities for private sector developers to work with Registered Housing Associations to deliver this much needed housing stock.

How does the delivery of affordable housing impact development site values?

As conditions of approval, affordable housing must be offered at a discount to low to moderate income earners.

Recent approvals granted by the Minister for Planning, via the Development of Land Environment Water and Planning (DELWP), suggest that the expectation is:

• 35% discount on sale price.
• 35% discount on rent for 30 years.

The ‘cost’ of this discount is the ‘value burden’ (or public benefit) of the affordable housing contribution.

It is critical that an appropriately qualified valuer, with specific expertise in the affordable housing sector, is engaged at the outset of any project to properly quantify this value burden – so that this can in turn be captured in the development feasibility analysis.

Funding and valuation considerations

• Historically ‘market value’ has been paid by RHA for stock which would provide Affordable Housing accommodation to eligible income earners.
• There would be a ‘slight’ discount to the stock if sold as stock in one line and also if sold as an entire unit/apartment/townhouse development.
• Funding including availability of future grants has not been announced and it is likely that both Government & RHA cannot continue to pay ‘market value’ in the long term. It should be noted the RHAs may consider making offers for stock based on proposed or projected social and affordable rents, which would ultimately see some sort of significant discount, particularly for inner locations.
• There are opportunities to obtain density uplifts, through feasibility advice which could offset some loss of value for the inclusion of an Affordable or Social Housing requirement.
• Best steps are to engage with RHAs initially, to understand funding opportunities and availability of their own equity. This will directly feed into development considerations and developer’s feasibility.

Consultation with Registered Housing Associations   

As a starting point, it is critical that developers engage with the RHAs as early as possible.

Early discussions with the RHAs will identify their preferred location, housing stock types, target rents and fit out requirements (i.e. DDA design requirements for NDIS housing), and how much they can afford (e.g. the discount required) – based on the relevant RHA waiting list.

Failing to consult with an RHA at the outset of a project, may ultimately mean that a developer is left with affordable housing stock that they cannot sell or lease to an RHA.

New planning priority pathways for affordable housing

New priority pathways have been introduced to the Victorian Planning Provisions, which are designed to fast-track the delivery of social and affordable housing projects in Victoria.

Opportunities and constraints under the new priority pathways program

• Streamlined planning process saving 6-12 months from the usual process.
• Western metro Melbourne requires greatest social and affordable housing. Preston is suburb with greatest demand for social housing.
• Uncertainties around planning consultation requirements.
• Uncertainties around the criteria for developments to be considered ‘by or on behalf of the Director of Housing’ (which is a requirement of both streams).
  • It is anticipated that criteria will include:
    • Quantum of adorable housing
    • Dwelling mix
    • Specific ESD standards
    • Specific accessibility standards
  • Value of land and feasibility differs.

It is anticipated that many of the current uncertainties will be clarified when DELWP releases the Criteria and Practice Note for housing projects funded under the Big Housing Build – ‘on behalf of the Director of Housing’. 

Gadens will circulate the Clause 52.20 Eligibility Criteria as soon it is released.

Please get in touch with Andrea Towson, Brihony Boan or your usual Gadens contact with any queries.

If project specific information is required, please feel free to contact any of the panellists directly.

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Authored by:

Andrea Towson, Partner
Brihony Boan, Partner
Jackie Kirby, Associate Town Planner, Tract Consultants
Mia Zar, Associate Town Planner, Tract Consultants
Steph Harper, Director – Residential Investment, CBRE