Funding opportunities, rather than household need, shape affordable housing developments

Complex funding opportunities, rather than the housing needs of low income households, are shaping the development of new affordable housing projects, new AHURI research reveals.

The research, ‘Paying for affordable housing in different market contexts’, was undertaken by researchers from the University of New South Wales. It analysed six recently completed affordable housing developments across Australia to determine how affordable housing project costs, revenues and subsidies interact to deliver affordable housing.

The funding opportunities available by the developers included access to state and local government public land; capital raised from state governments, private developers and not-for-profit housing providers; tenant rents, including from commercial tenancies; and sales of properties to the private market. Having to gather together this diverse range of funding solutions added complexity, cost and financial risk to delivering the affordable housing projects.

...where disparate funding opportunities drive affordable housing developments, rents may not be affordable to those on the lowest incomes...

As a consequence, community housing providers are having to reduce the proportion of their developments dedicated to social and affordable housing as they have to cross-subsidise the cost of developments through selling or renting some dwellings at full market prices.

‘Our research identified a number of key findings including where disparate funding opportunities drive affordable housing developments, rents may not be affordable to those on the lowest incomes or those who need larger housing,’ says Dr Laurence Troy from the University of New South Wales. ‘We also found subsidising the private sector to produce affordable housing that is available for a defined period of time is less efficient over the longer term than directing such subsidies to not-for-profit community housing providers.’

Complicated funding arrangements also work against the affordable housing industry being able to achieve a scalable and replicable set of standards for financing their projects.