What a difference a month makes, but Victoria can still do more to get housing and planning right

The need for more affordable housing close to public transport and services is acute in Melbourne. Inner Melbourne has experienced a 74% increase in rough sleeping in the past two years. This is perhaps the most visible outcome of the lack of affordable housing options. Only 1% of advertised rental properties in the metropolitan area are affordable for households reliant on government assistance.

Buying or renting in the well-serviced inner and middle suburbs is increasingly out of reach for households on low and moderate incomes. A month ago, one of us wrote an article in The Conversation bemoaning the lack of government leadership on this issue. In the 15 months since its election, the Victorian government had not delivered promised revisions to the Plan Melbourne metropolitan strategy or an affordable housing strategy.

What a difference a month makes. It is almost as if some government leaders read the article. Every week (or to be more precise, weekend) since then has delivered a major policy announcement.

Now that Plan Melbourne and Homes For Victorians have been delivered, it is only fair that we provide a preliminary evaluation of how well these strategies meet the housing needs of Victorians on moderate, low and very low incomes.

These documents remain vague about the definition of “affordable housing”. They also do not designate various income groups. We have taken the liberty of defining these groups based on median income brackets.

Moderate-income households

We define moderate income as 80-120% of area median income – about A$68,500-$102,500 a year. In this group, first home buyers appear to be the biggest winners in Plan Melbourne and Homes For Victorians.

The Victorian government will waive stamp duty for first home buyers on homes worth up to $600,000 and taper stamp duty concessions on homes above that price. This is set to cost the government $851 million over four years and save the average buyer $8,000.

However, if previous first home buyer incentives have taught us anything, this is likely to inflate the cost of cheaper dwellings without delivering affordability benefits.

The government is also offering a shared equity program. This allows first home buyers to co-purchase their home with the government. The initiative is intended to support households that qualify for a bank loan but need help saving a deposit. Western Australia has a similar program, which has helped more than 1,500 households buy homes to date.

Low-income households

This group earns 50%-80% of area median income, in the range of $42,500-$68,500 a year.

As exciting as the above options are for some first home buyers, they are out of reach for low-income households that earn between $800 and $1,300 per week. These households are unlikely to qualify for social housing but struggle to afford market rent and purchase prices.

This group, which includes many service and trades workers and their families, need a steady stream of new, appropriately sized and affordable market rental options. However, neither the Housing for Victorians nor Plan Melbourne talks specifically about a new scheme to replace the National Rental Affordability Scheme, which the current federal government abandoned in 2013.

It is absolutely true, as the affordable housing strategy states, that federal policies like capital gains tax exemptions and negative gearing favour investors over first-time and other resident homebuyers. However, state government policies can have an impact on scaling up a rental housing market.

In other cities with similar housing affordability crises, such as Vancouver, New York and London, a combination of expedited approvals, development levy abatements, inclusionary zoning and other mechanisms have helped develop new below-market rental units. Located near public transport and services, these are usually provided at particular price points and kept affordable in perpetuity.

Very-low-income households

These households have income of less than 50% of the area median, or under $42,500. They are likely to be the primary beneficiaries of significant new social housing funding and development.

The Victorian government has set up a $1 billion fund to support new social housing. The government will work with community housing providers to deliver social housing through new construction and rental subsidies. This is estimated to deliver up to 2,200 new housing units over the next five years.

This funding injection is badly needed: Victoria has the lowest proportion of social housing stock in Australia.

The state government is also increasing funding, or providing new funding, for a Family Violence Housing Blitz, support for transitions out of homelessness, and rooming house renovation.

A new $1 billion loan guarantee fund for social housing providers will be linked to a shared social housing rent registry. This will make life a little easier for the 33,000 households on the public housing waiting list. They currently have to separately register with up to a dozen other community housing providers.

Plan Melbourne has identified a policy direction to use surplus government land to develop social and affordable housing. Launch Housing and VicRoad’s proposal for Ballarat Road in Maribyrnong offer an example of how these partnerships might work. Plan Melbourne also focuses on increasing the supply of social housing through regeneration and intensification of existing public housing sites.

However, the strategy does not recommend a level of social housing as a proportion of total existing and new housing stock. To provide for all households now eligible for social housing, Victoria would require 76,000 more social housing units. By 2051, that figure is projected to increase to 140,000

Furthermore, Plan Melbourne projects a need for 1.6 million new homes in the next 30 years. That’s over 50,000 new homes a year. Of these, 5,000 would be required to meet the needs of low-income seniors, people with intellectual and physical disabilities, female-headed households escaping family violence, and others who simply cannot compete in the private rental market.

Now to make these plans work

Plan Melbourne and Homes For Victorians provide several directions that could benefit all Victorians. Welcome aspects include greater emphasis on public transport networks, greater diversity of housing options, 20-minute neighbourhoods and practical mechanisms to get more housing closer to public transport and services.

The plans also make very encouraging noises about strengthening the role of planning in helping to deliver social and affordable housing. This includes overcoming the legislative and definitional barriers to the effectiveness of mechanisms like density bonuses or inclusionary housing.

The continuing lack of formal definition of affordable housing is a fundamental flaw in Victorian affordable housing policy that remains unsolved by Homes For Victorians and Plan Melbourne.

Plan Melbourne and Homes for Victorians together provide some welcome directions towards more well-located and affordable housing. But the previous Victorian planning strategy, Melbourne 2030, foundered in implementation.

Victoria will have to link infrastructure improvements to specific affordable housing targets in well-serviced areas. And the government should continue its work on value capture and development contributions to nail down implementation of its long-awaited affordable housing strategy.