Submission: Inquiry into the supply of homes in regional Victoria
We understand the Victorian government’s preference for township development, but we are concerned that this rewards land bankers surrounding each town. Most towns generally have a dominant landholder who owns valuable land sites and holds it for rent-seeking purposes.
The Vacant Residential Land Tax is a step in the right direction to incentivise such land supply into play. It is still too early to see whether this is having an effect, but anecdotally it does appear to be a step forward.
The Need for For-Purpose Housing Models
Victorian regional land prices are still well above the pre-pandemic pricing. We believe that for purpose housing is the key to affordable outcomes. Too often a town relies on one major development where manufactured scarcity is used to enable further profit seeking. Neither the Victorian Auditor General nor the ACCC monitors how land is drip-fed to the market, inferring that such practices go unhindered.
The reduction in the Victorian land tax threshold may also be impacting such behaviours. But as of yet, the evidence is not in.
Modular Housing, Deliberative Development, and CLTs: A Scalable Solution
The Grounded in Affordability report shows how a combination of modular housing, deliberative development and the powerful Community Land Trust model can see residents access secure housing with a 60% lower deposit. Such a resident would save 39% in overall housing occupancy costs over time. The financial model underpinning Community Land Trusts enables a sufficient surplus to support the development of a new CLT each decade, ensuring long-term scalability of any public investment.
We need more housing models like this, where local communities can collaborate to secure their own wellbeing. Many of these regional towns have been on the front line of rampant change driven by short term rentals. Grounded believes its Airbnb cap and trade system is better than the short term Levy, as it provides a social license for the asset class, whilst funding the provision of self-sustaining and scalable Community Land Trusts.
Short-Term Rentals and the Case for an Airbnb Cap and Trade System
Vacant church land is now opening up in regional areas, thanks to the closure of the land tax exemption. This also offers an opportunity for CLTs to enter into long term, discount land lease rates.
One would like to think that surplus government land, now rumoured to have been audited for 3-4 years, is finally readying for its deployment. If such sites are to be repurposed, the majority of the supply – we recommend 65% – should be for affordable housing. Not many renters can save up a $130,000 deposit for a home. A CLT enables just a $44,000 deposit, which is much more suitable for regional wage earners. A caveat is placed on entry, with preference given to locals with a history to the area, as residents or as workers.
Rural Exception Sites: Lessons from the UK
To support for-purpose development and those wanting to sidestep the market power land bankers have in small communities, we believe the Victorian Government should also look at the UK example of Rural Exception Sites. Such a concept has now been written into the UK Planning Act.
These are sites where the local council agrees to bring a farm site into the residential zoning that is outside of a town’s boundary. This occurs when a farmer, a local affordable housing advocacy group and a for-purpose builder come together to approach council with a drive to improve affordability outcomes – over the long term.
Government support for Rural Exception Sites—where at least two-thirds of homes are genuinely affordable—is vital to ensuring the longevity of these communities.
We note in New South Wales, where multiple occupancy was once available in 12 municipalities, it has now fallen to just two. The prevalence of such developments down dirt roads in the middle of nowhere stretched local council budgets (roads, rubbish etc). If Rural Exception Sites were kept within two kilometres of an arterial road, many of the distributed costs would be minimised.
Environmental Sustainability Through Rural CLT Developments
Such CLT developments could also commit towards a shared electric vehicle, bulk buying of foods to reduce waste and effective on-site septic systems. Alongside water storage, solar heat pumps and solar power, the on grid requirements can be reduced. The environmental footprint would be lower under such an arrangement, and any said Rural Exception Site would benefit from having more labour on often poorly maintained land that needs significant regeneration.
With the ability to minimise the need for council resources, affordable farming pods offer potential. Affordable dwellings of between 3 to 10 homes should be encouraged to ensure farm-based labour has a long term commitment to the land. More ‘eyes to the acre’ are needed to enhance the productivity of land without large chemical inputs.
Regenerative principles also allow small scale farming to be more productive. This includes an increasing number of farming collectives and cooperatives where multiple small farms are co-located, sharing infrastructure and resources.
Such an approach can also provide more localised labour that are better equipped to respond to seasonal changes. Admirable recent adaptions to improve on-site farm housing are still limited due to their short term nature. In this environment of record low vacancies amidst rising rents, few workers will be willing to run the gauntlet of moving for work when they cannot stay for even one year.
Farm-Based Affordable Housing Pods: A Regenerative Opportunity
CLT-based farm pods offer that opportunity, long term. This would encourage ‘more jobs and opportunities closer to where you live.’ Innovative thinking could require such CLTs to commit to carbon sequestration practices such as biochar production or tree plantings to offset the effects of sprawl.
By encouraging more small scale farming, the necessary demographic change that our aging farming community requires could be assisted. With farm land prices well beyond the productive yield of the farm gate, CLT pods may be a pathway worthy of further investigation, particularly for young farmers. At the other end of the scale, we are currently working with wealthy farming families who do not have a succession plan in place and are looking for neighbouring young farmers to share their deep knowledge with.
The future could offer hope at least cost to government with some support for the CLT model.
Policy Recommendations for State Government
The recommendations for State government as listed in the Grounded in Affordability report include:
STATE RECOMMENDATIONS
- A statutory definition of CLTs enacted by government.
- A prescribed lease prioritised and approved.
- That an adaptation of the Retirement Villages Act be produced with respect to nonprofit Community Land Trusts. Particular emphasis is to be placed on the separation of land from improvements.
- Removal of SDDs and FHBGs in favour of funding for purpose housing models (CLTs, co-ops and shared equity schemes with an affordability lock in place). This could be facilitated by a Community Housing Fund run by the Department of Treasury.
- Planning amendments to allow for Community Led Exception sites. These are sites that may fall outside residential zoning, but due to the public interest dividend, could be rezoned to assist if under the stewardship of a CLT.
- Rural Exception Sites – similar to the above, Rural farming sites are brought into the residential scheme for dedicated CLTs with an affordability lock in place. Helps break the reliance on land monopolists surrounding towns.
- That mandatory inclusion for affordable housing be included in englobo rezonings, at 25% of supply.
- Government shared equity policies to include an affordability lock so that public subsidy is not lost upon sale.
- Regional affordability policies such as the Key Worker Affordable Housing Fund (Vic) must have an affordability metric tied to any subsidy, with a minimum holding period of 15 years. Like any shared equity program, there should be a best practice that any public incentive is maintained for a minimum of three owners.
- Build to Rent tax incentives must be for a minimum of 20 years.
a. A minimum occupancy rate of 98% should be maintained to ensure rental supply is not massaged to deliver scarcity rents. - Any development with perpetual affordability locked in should be prioritised via the Planning Act and brought to the front of any planning queue.
- An AirBnB cap n trade levy be implemented, with revenues going to support for purpose housing via a Community Housing Fund.
Additional Opportunities: Repurposing Vacant Caravan Parks for CLTs
An additional ask would be to audit the list of vacant caravan parks around the state. These have the most appropriate zonings that allow the separation of land from improvements. Hepburn has a vacant caravan park in a perfect location that has not been used in 20 years. This would make an ideal location for a pilot CLT project in the nation’s most progressive state.