Affordable Housing & Urban Development

From my submission on the 2007 Draft Annual Plan & LTCCP Review…Recommendation: 

That GDC develop Inclusionary Zoning requiring developers to include social housing and affordable housing equivalent to at least 20% of new developments of 5 or more houses for social and affordable housing.

– That GDC remove any exclusionary regulations prohibiting affordable housing from being built in new developments.

– That GDC develop a housing policy that makes an explicit commitment by GDC to do  everything it can to ensure decent housing is affordable for all people living in the Gisborne District.

Rationale:

Inclusionary zoning has developed in the UK (PPG3), US (developer set-asides) and Canada as a tool to provide affordable housing partly driven by a belief that most zoning in those jurisdictions is exclusionary and implicitly (and sometimes explicitly) excludes certain types (low cost) of housing. Inclusionary zoning sees a certain proportion of new housing in a development set aside for low-income households. This can be site specific or in the locality or a cash-in-lieu payment. A not-for-profit housing provider and manager (or other) will generally purchase the affordable housing units developed off the developer. Hill et al (2004) note that in countries that apply inclusionary zoning, planning legislation is reasonably explicit in terms of the need for planning rules to achieve social objectives in their own right (e.g. Town and Country Planning Act 1990, S106 in the UK) and the justification requirements of planning rules, compared with New Zealand, are generally less complex. In Ireland, for example, local authorities require developers to set aside up to 20% of new developments of 5 or more houses for social and affordable housing. Each local authority has to include these provisions (i.e. commitment to providing a percentage of social and affordable housing) in its housing strategy, which form part of the development plan for its area. Assuming such a planning framework (mandatory and explicit social objectives) is in place, a raft of issues would need to be addressed including affordability definition, restrictions on resale, eligibility criteria, the appropriate percentage of units to be ‘affordable’, development size threshold, developer acceptance and mechanisms to ensure affordability in perpetuity etc. Such an approach when used in the US and the UK often has a density bonus or Transferable Development Right (TDR) attached to facilitate the mandatory requirement. Scale factors may mean that inclusionary zoning is not necessarily easily applied to small markets with small average development sizes, i.e. number of units per development. The US and UK experience shows that when a market is buoyant and developers can afford to proceed, the volume of affordable housing delivered can be significant but the converse also applies. A similar conclusion can be reached in terms of the inclusionary zoning approach pursued in Vancouver, Canada where developers of major projects have been required since the late 1980s to set aside 20% of sites for non-market housing. It is hugely dependent upon developers being able to generate a ‘market’ profit, which is easier under buoyant market conditions. A report by Crook et al (2002) looking at the UK experience around inclusionary zoning concluded that while a large number of affordable units are developed annually who actually bears the cost of their development is difficult to establish as is whether the units are genuinely additional. Whitehead (2005) argues, however, that there is no alternative means of producing new build affordable housing. At a fundamental level inclusionary zoning would seem to depend upon a planning process, which creates a land value premium.

 

Removing any exclusionary restrictions entails a reform of zoning requirements, subdivision regulations and building codes to eliminate exclusionary provisions. Katz et al (2003) in a review of the US literature, which has looked at exclusionary regulatory regimes, suggested that getting rid of such exclusionary regulations works. MDL (2004) notes that in New Zealand, developers would argue that exclusionary measures provide the amenity demanded by purchasers.

A common benchmark of housing affordability is those households experiencing ‘housing stress’ which are in the lower 40% of the household income distribution and pay more than 30% of their gross income on housing costs, whether renting, buying or existing homeowners.

A distinction is increasingly being made between housing affordability issues for those accessing social housing, (i.e. generally households in the lowest household income quintile) and those identified as part of the ‘intermediate’ housing market where households are neither poor enough for social rented housing nor rich enough to buy or rent affordably in the open market.

Several interrelated factors contribute to the affordability of housing:

  • Income (ability to pay and save);

  • House prices and rents (level of payment required);

  • Financial factors (cost and availability of credit);

  • Demographic factors (household formation rate and migration inflows);

  • Employment and labour market conditions (ability to participate);

  • Supply factors (zoning, labour & resource availability and costs).

 Rents and house prices in New Zealand have increased over the last twenty years at a faster rate than household incomes. Consequently, there has been an escalation of household housing costs as a percentage income. The growing disparity between house prices, rents and low to medium household incomes is not confined to New Zealand and has occurred in most OECD countries.Affordability across a range of measures has reduced for would-be homeowners and, most significantly, for renters in New Zealand.References:

Fact Sheet: Housing Affordability in New Zealand (2007), Centre for Housing Research Aotearoa NZ

Affordable Housing in Nelson, Tasman and Marlborough: Taking Action, Motu Project Group, August 2006 

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