The NSW housing market is not working for anyone. Private housing is too expensive to buy, affordable housing can't keep up with demand, and public (or social housing) housing waiting list is 40,000 long. What if it could be better? What if these three sectors of the housing market no longer worked in silos, but were merged together into a model that was affordable enough for everyone to have a home of their own, yet flexible enough to give low-income families the assistance they need. What we are proposing is a fairer, more equitable model of housing, the Equity Housing Model.
Lower-income households are the least able to absorb high housing costs and rising costs of living. They are generally grouped according to income levels defined by the NSW government:
- Very-Low Income households earn less than 50% of median household income and are generally pensioners, disabled, or other vulnerable groups living in Public or Social Housing.
- Low-Income households earn less than 80% and are eligible for Affordable Housing, but most are renting in the private market.
- Moderate-Income households earn between 80-120% and are also eligible for Affordable Housing. They generally have enough income to rent in the Market Housing but may not be able to afford to buy a home to own.
These three groups are all impacted by housing affordability in vastly different ways, which makes solving the issue much more difficult.
Inspired by the Singaporean model for affordable housing development, the Equity Housing Model proposes three strategies to creatively reduce development costs.
- Land is leased, not sold, at an affordable price for housing development. Land ownership would remain with the landholder, such as a not-for-profit or government, with an annual lease fee for the purposes of affordable housing development.
- Investor returns and interest are capped at a fixed rate, which requires support from Social Impact Investments and governments to address the housing crisis.
- Housing developed will be a mix of Life Lease, Affordable Rental & Social Housing. Affordable and Social Housing tenants can later buy their home as a Life Lease and gain permanent ownership and security.If all three strategies can be implemented, the resulting cost savings would allow the sale of just 60% of the housing as Life Leases to cover the development costs. The remaining 40% would be saved and allocated as Affordable Rental and Social Housing.
Under the Equity Housing Model, households of different incomes have a choice between different housing types and can choose the one they can most afford.
- Moderate Income Households can choose to own their home through a Life Lease priced at 5 times their household income, which offers leasehold ownership for 99 years.
- Lower Income Households can be offered secure Affordable Rental housing priced at 30% household income
- Very Low-Income Households can be offered Social Housing at a nominal rent of 25% household income.
The model cross subsidises between higher and lower-income households to achieve a balance between affordability and financial viability.Because all three housing types exist within the same building, households in Social and Affordable Housing can have their housing costs increased proportionally if their incomes increase, without the threat of eviction. Once they reach the income levels of a Moderate Income household, they may choose to purchase their home as a Life Lease.The additional revenue from new Life Lease purchases can then be used to fund more housing.
The Equity Housing Model reimagines how we could develop housing in a way that improves the lives of people while making housing better, more affordable, and more equitable.The model proposes an alternative vision where:
- Land is retained and used as a Social Impact investment into society and to house our citizens, not sold off to generate market returns. Land lease fees also provide a stable, regular return for landholders, suitable for social impact investors, not-for-profits, and governments.
- Investors expect to make a reasonable level of return, rather than profiteering to make a limitless profit off our basic human need for shelter and security.
- Households at different levels of income are given the assistance they need to secure housing and provided a clear path to homeownership and long-term security, which can be provided in the form of a 99-year lease.
- The private, affordable, and social housing sectors work together in one cohesive system to give people better, more equitable access to housing.