In a Conversation article a year ago we applied negotiation theory to changes to the Victorian Planning and Environment Act. The changes were designed to support local councils in negotiations with developers to secure affordable housing. A council may now negotiate with a developer to deliver or fund affordable housing as part of a development approval or planning amendment process.
We wrote that these arrangements were likely to be ineffectual. Our survey of almost 150 affordable housing stakeholders now suggests we were right about this system of voluntary negotiations.
Tellingly, a majority of each class of stakeholders – developers and financers, local government and non-profit providers – would prefer to have consistent mandatory affordable housing requirements applied to all developments.
What’s the incentive to negotiate?
We argued in our 2019 article that negotiations are shaped by stakeholders’ interests, the potential for mutual gains, and access to information. Our survey has since found one of the key barriers to successful affordable housing negotiations is a lack of incentives to be involved.
Respondents also identified the lack of capacity to enforce affordable housing contributions as a key issue, as the table below shows.The Conversation. Data: Author provided. (Percentages might not add up to 100 because of rounding)
Even when affordable housing is agreed upon, the development might not be completed for many years. Over that time, council staff may change many times. And things can slip through the cracks if no one is championing affordable housing delivery.
Researchers have identified a similar trend of non-compliance and under-compliance with sustainability requirements in building codes.
The other key barrier is a lack of effective mechanisms to give developers and councils incentives to engage in time-consuming and potentially costly negotiations.
Floor area uplift or density bonuses (allowing a developer to build more dwellings than would otherwise be permitted) are commonly offered as an incentive to build affordable housing. However, it is only effective in areas where being able to increase density is a valuable asset to a developer and doesn’t greatly add to construction costs.
How is information (ab)used?
We also found a lot of distrust in the industry. Developers referred to a “complete lack of understanding of […] commercial reality” in councils. Other respondents accused developers of looking for ways to “wriggle out of their obligations”.
Across sectors, respondents felt it was almost inevitable developers would manipulate information and operate unfairly in negotiations. Developers felt this way about local councils.The Conversation. Data: Author provided The Conversation. Data: Author provided
Large variations in the skills and knowledge held by individuals across sectors add to this lack of trust. These information and skill discrepancies affect power relations in negotiations.
Private developers reported substantial knowledge of development feasibility. But they typically don’t understand the affordable housing sector or relevant legislation well.
State and local government representatives report having lower levels of skill in development feasibility. And they also have lower confidence in leading negotiations. These patterns are also reflected in the amount of formal training different sectors have received in development feasibility.
Authors: Katrina Raynor, Postdoctoral Research Fellow, Transforming Housing Project, University of Melbourne