Defining Affordable Housing

For many years the term “affordable housing” has been used and abused. Is expensive housing affordable because millionaires have enough money to pay for it? Is cheap housing located far from public transport, employment, hospitals, schools and shops truly affordable?

Locking down a definition has been as hard as nailing jelly to a tree.

Like many things, that which is difficult is also incredibly important. We are in a housing crisis and we need to be able to judge how Governments and “markets” perform in delivering the affordable housing that we need.
On the demand side we can measure housing stress, being the number of households who pay 30% or more of their income on their rent or mortgage payments.

VCOSS has estimated that about 115,000 Victorian renters face housing stress. For home owners, modelling produced by Digital Finance Analytics showed that 300,000 Victorian households are struggling to afford their mortgage repayments, a figure that would almost double if interest rates were to rise by 2 per cent.

But in terms of supplying affordable housing, you can make it up as you go along. More to the point, developers can claim to have delivered affordable housing without any benefit at all going to those who are experiencing housing stress.

In their comprehensive housing policy ‘Homes for Victorians’ the Andrews Government attempted to define what is affordable;

“Affordable housing is housing that is appropriate for the needs of a range of very low to moderate income households, and priced (whether mortgage repayments or rent) so these households are able to meet their other essential basic living costs.”

Not the most definitive of definitions to be sure. On a policy level, the inclusion of moderate income households makes it far easier for developers to meet the definition in a technical sense without providing the kind of housing that many would consider truly affordable.

The definition we favour is the one developed by the Affordable Housing Working Group established by the Australian Government under the Council on Federal Financial Relations. It reads;

“Affordable housing is that which reduces or eliminates housing stress for low-income and disadvantaged families and individuals in order to assist them with meeting other essential basic needs on a sustainable basis, whilst balancing the need for housing to be of a minimum appropriate standard and accessible to employment and services.”

From our perspective, this definition hits all the right bases; housing stress, low-income and disadvantaged, minimum appropriate standard, accessible to employment and services.

Undoubtedly, it is more difficult to define “affordable housing” in legislation. To their credit, that is what the Victorian Government has tried to do.

The Planning and Building Legislation Amendment (Housing Affordability and Other Matters) Bill 2017 was introduced into the Victorian Parliament on June 20, 2017.

It includes the following definition;

“3AA Meaning of affordable housing

(1) For the purposes of this Act, affordable housing is housing, including social housing, that is appropriate for the housing needs of any of the following—

(a) very low income households;
(b) low income households;
(c) moderate income households.

(2) For the purposes of determining what is appropriate for the housing needs of very low income households, low income households and moderate income households, regard must be had to the matters specified by the Minister by notice published in the Government Gazette.

(3) Matters specified by the Minister by notice under subsection (2) cannot include price ranges or prices for the purchase or rent of housing.

(4) In this section—

low income households means households with a household income within the income range specified as a very low income range by Order under section 3AB;
moderate income households means households with a household income within the income range specified as a moderate income range by Order under section 3AB;
social housing has the same meaning as in section 4(1) of the Housing Act 1983;
very low income households means households with a household income within the income range specified as a very low income range by Order under section 3AB.

3AB Order in Council specifying income ranges

(1) The Governor in Council, on the recommendation of the Minister, by Order published in the Government Gazette, may specify—
(a) a range of household income as a very low income range; and
(b) a range of household income as a low income range; and
(c) a range of household income as a moderate income range.

(2) An Order under this section may specify a range of household income as a very low income range, a low income range or a moderate income range by reference to statistical data published by the Australian Bureau of Statistics.”

Again, moderate income households have been included. The actual dollar amounts that the Government ends up assigning to very low, low and moderate income households are obviously going to be vital. People described as being on a moderate income are those earning between 80 – 120 percent of the Victorian median income.

This may mean that households with incomes as high as $80,000 are included in the definition.

Housing affordability for people like teachers and police officers is an important issue, we don’t want to ignore the appropriate housing needs of this group. However, by including that group in this definition, the Government has lessened the likelihood that the market will respond to the affordable housing needs of low income households.

And of course, the term “appropriate housing needs” requires a definition of its own. To fully understand the Government’s intention in relation to that we will need to wait for the Minister for Planning to publish a notice in the Government Gazette.

We have already been told that it won’t include price ranges – which brings us full circle.

Under this proposed legislative definition rent of $575 a week may well meet the affordability standard – which will come as a bit of a surprise to a single person receiving $267 Newstart payments every week.