The following post summarises our submission to the ACT Legislative Assembly’s Standing Committee on Economy and Gender and Economic Equality inquiry into Housing and Rental Affordability, which is available on the Committee website.
As rents and house prices in the ACT continue to rise, housing affordability has become major concern for many Canberrans. Thankfully, the ACT Legislative Assembly is listening to these concerns, with the Standing Committee on Economy and Gender and Economic Equality now conducting an inquiry on the issue of housing and rental affordability.
But what’s really causing ACT rents to keep rising, and what solutions should this inquiry consider? Greater Canberra’s submission to the inquiry (available online at the link above) makes the case for planning reforms as an essential part of response to rising rents.
Reducing vacant homes is good, but won’t solve our housing crisis
To start with, it’s worth remembering just how high Canberra’s rents are. While our population and economy have boomed, our home building hasn’t kept pace, meaning rents over the past 5 years have grown by 16%. This is much faster than Melbourne or Sydney, where rents have barely increased since 2017. This burden falls particularly hard on low income renters, who on average tend to pay more of their household income in housing costs than other Canberrans.
Why are rents so high? Well the Committee’s terms of reference for the inquiry largely focus on vacant homes, which is reflective of a lot of recent media coverage on housing affordability issues. For instance, you may have heard that 1m Australian homes were unoccupied on 2021 census night (about 12k in the ACT). But this number is down from the 2016 Census, and ultimately there’s just not enough vacant homes among this number to make a significant dent in our affordability issues.
Partly this is because the majority of unoccupied ACT homes on a given night aren’t vacant investments - they’re either already on the market, under renovation, or their owner-occupier is temporarily away. In fact, SGS Economics and Planning’s estimated breakdown of unoccupied homes in the 2016 Census indicates that around 20% were on the market or under renovation, while for 44% the usual resident was temporarily absent.
For comparison, the latest ICON water data indicates that around 2400 properties are currently vacant across the ACT. That’s bad, but it’s still less than half the number of homes we usually build in the ACT every year. In addition, it’s not clear how many of these vacant houses are actually safe to live in - even among those homes that are truly vacant for significant periods of time, there are still likely to be significant issues with poor quality housing and a lack of homes in many of our most high demand suburbs.
International evidence also suggests that increasing taxes on vacant homes will probably have a fairly modest impact on reducing the vacancy rates, with studies of vacancy taxes in France finding they led to a 13% reduction. That’s clearly not nothing, but applied against ICON water’s true vacancy stats, that’s around 312 homes, or a middling sized apartment block.
Obviously we should still look to push any vacant homes onto the market - every additional home matters. Canberra already levies land tax on vacant properties, and there’s potential to increase or better enforce it. But by themselves stronger vacancy taxes are not a solution to the housing crisis. We need to think bigger and act to create far more homes if we want to stabilise rents across the ACT.
It’s time for planning reforms to improve affordability
So what else can we do? Well as we argue in our submission, the ultimate goal of any rental affordability policy (vacancy taxes or otherwise) should be to increase the supply of homes on the rental market. More homes means more choices and more bargaining power for renters.
A range of studies have shown that building more homes puts downward pressure on rents and prices, and that planning laws that restrict infill development are a major barrier to building more much-needed homes. One well publicised study of planning reforms to allow more medium density homes in Auckland found that it almost double the construction rate of new homes in the city.
That’s why we’ve been calling on the ACT Government to permit more types of medium density dwellings, along the lines of the “gentle urbanism” the Chief Minister talked about as part of his pre-Budget commitment to build 30,000 new homes in the ACT.
Medium density homes like duplexes, townhouses, and row-houses have a range benefits. Not only do they allow for more housing options in inner suburban areas near to jobs, community, and transport options, they can also complement and compete with higher density apartment buildings, and reduce our current over-reliance on greenfield developments on the edge of Canberra.
So what’s stopping us building more of these kinds of social and market-rate housing to boost rental supply? Well, our planning laws have a lot to answer for. Medium-density homes are largely banned on the 80% of ACT residential land zoned RZ1. This means that even modest multi-unit developments, like the Stellulata co-housing project in Ainslie, require changes to our planning laws to enable them to be built.
In addition, many market-rate and social housing projects are held up in court by wealthy neighbours, because our planning laws allow almost anyone to appeal planning decisions to ACAT.
A positive plan to improve housing affordability
That’s why our submission to the inquiry includes a range of recommendations for planning reforms to allow more and better housing to be built across the ACT, from allowing more duplexes and townhouses in RZ1-zoned areas, to upzoning more areas near to rapid transit routes.
Our submission to the inquiry also includes other recommendations that go to increasing social housing investment, improving ACT Government monitoring of rents and rental supply, and improving enforcement of existing rent increase caps.
Ultimately, we’re encouraged to see the ACT Legislative Assembly taking this issue seriously. We owe it to the many Canberrans struggling through our housing crisis to get our policy response right. And that means looking beyond just vacancy taxes, to consider more impactful planning reforms that will ensure everyone in Canberra has a place to call home.