1. Explanatory statement
Failing to develop geographically diverse affordable housing can result in recruitment difficulties for business having staff in lower paid (but functionally necessary) occupations and the need to offer higher wages to offset high housing or expensive commuting costs.
Currently Australian cities are losing their geographically diverse affordable housing; between 1986 and 2011 the number of people on low income living within 10 kilometres of Sydney's job-rich CBD dropped by 129,324 (or 82%).
2. A real world example
The city of New York in the USA has initiated a 10-year plan (from 2015 to 2024) to build and preserve 200,000 affordable housing units NYC so as to support approximately 500,000 New Yorkers living in households with a 'range of incomes, from the very lowest to those in the middle class.' In 2012, almost 55 percent of all households renting in New York paid more than 30 per cent of their income in rent, which was an increase of more than 11 per cent since 2000.
The plan recognises that New York's economic and cultural strengths benefit from its 'unparalleled diversity. That diversity allows people from every imaginable background to live and work side by side, share aspects of their cultures, exchange ideas, then mix, match, and innovate to generate the art, literature, fashion, technology, and conceptual breakthroughs that are the envy of the world. And that diversity drives economic growth, as employers decide to locate in the City to take advantage of its incredible and multidimensional talent pool.'
3. Scope of the practice
Of the 200,000 households who will benefit from the New York Plan:
- 11 per cent will be middle income households (i.e. earning 121–165% of AMI – Area Median Income)
- 11 per cent will be moderate income (81 to 120% of AMI)
- 58 per cent will be low income (50 to 80% of AMI)
- 12 per cent will be very low income (below 50% of AMI)
- 8 per cent will be extremely low income (below 50% of AMI).
The New York Housing Plan proposes that 60 per cent of the affordable housing will be from preserving housing that is currently affordable but is vulnerable to future high rent increases or building demolition/refurbishment, and 40 per cent from the construction of new affordable housing.
The Plan identifies that 'preservation is often a more cost-effective way of securing affordability and protecting tenants from the risks associated with poor maintenance and disinvestment. On average, the preservation of existing affordable housing requires fewer government and private resources, and can leverage past investments'.
Maintaining the quality and affordability of housing that is currently affordable to low- and moderate-income New Yorkers is critical to meeting the City’s long-term housing needs. That housing stock includes publicly subsidised units, privately owned units, public housing operated by the New York City Housing Authority (NYCHA), rent-regulated units and housing that is rented at a market rate, but in a neighborhood where market rents are currently affordable to many families.
New York's existing affordable housing is at risk due to the end of rent restrictions on previously subsidised affordable housing stock and the reality that many NYCHA units are falling into physical disrepair, while US Federal funding for NYCHA has nearly been cut in half over the last decade. Currently the NYCHA houses more than 400,000 tenants, with another 235,000 tenants receiving subsidised rental assistance in private rental.
New York City is seeking to create a new tax incentive program to provide rental building owners a partial or full tax exemption in exchange for entering into a regulatory agreement that ensures affordability for the life of the exemption.
The Plan estimate the total cost of the policy strategy, including all possible public and private sources, will be $41.4 billion (US $2015).
A previous affordable New York housing plan, the New Housing Marketplace Plan, operated from 2004–15 and resulted in 175,000 dwellings being made available for affordable housing at a cost of $8.5 billion, with 31 per cent for home buyers and 69 per cent for rental tenants. 64 per cent of the dwellings were existing dwellings that were preserved for affordable housing, and 36 per cent were newly constructed dwellings. Three quarters (76%) of the dwellings were targeted at low income households, 11 per cent were targeted at moderate income households and 10 per cent at middle income households.
In Australia, to maintain similar geographically diverse affordable housing, state governments in Victoria and Western Australia have released plans to provide a larger range and supply of affordable housing that is close to the city centre and other major employment centres. Plan Melbourne 2014 and Perth’s Directions 2031 note that providing affordable housing close to activity centres will increase the catchment populations near these centres, which will in turn increase the consumption base needed for businesses to flourish. This would encourage business to expand and increase staff levels, creating more employment.
It is too soon for any measurement of effectiveness of the Australian plans; however, neither features measures to preserve existing affordable housing.
5. Guide to evidence
Evidence on geographically diverse affordable housing is found in AHURI Final Report No. 251 Making connections: housing, productivity and economic development, and in AHURI Final Report No. 247 Addressing concentrations of disadvantage in urban Australia.