Council says cheap homes in CBD developments will fix 'housing crisis'

Facing a shortfall of 5500 affordable inner-city homes, Melbourne City Council wants to force developers to provide cheap housing in private residential developments.

The council believes inner Melbourne is grappling with an affordable housing crisis that will surpass 23,000 homes by 2036 unless urgent action is taken.

The redevelopment of the Boyd school on Southbank will include 40 affordable units.

In a submission to the state government on affordable housing, the council says attempts at encouraging developers to voluntarily provide affordable units had failed to generate a major increase in homes.

The submission will be put to a vote at a council meeting later this week.

If adopted, the council will urge the government to introduce mandatory “inclusionary zoning” where developers must incorporate affordable housing in their developments.

Where affordable housing cannot be included in a new project, the submission suggests developers could provide “cash in lieu” to build cheap homes elsewhere.

Melbourne lord mayor Sally Capp. Credit: Scott McNaughton

The council also commissioned SGS Economics to examine local affordability, finding that across metropolitan Melbourne there are 231,250 households in need of affordable and social housing.

Lord mayor Sally Capp said affordable housing was critical to ensure that workers, including police officers, nurses, teachers and hospitality staff could live near their workplaces.

“In cities that don’t have adequate affordable housing, key workers have to travel more than 90 minutes each way to work,” she said. “Melbourne is Australia’s fastest growing city so this need is going to get significantly more critical unless we start doing something about it now.”

The council’s submission stops short of specifying a level of affordable housing that should be included in new developments state-wide.

But it suggested a 10 per cent requirement was “economically warranted” in the City of Melbourne.

Affordable housing can include many models, including developers renting out properties at a cheap rate or handing ownership of units to community housing groups who manage and lease out the properties.

Housing is defined as "affordable" when people on low to moderate incomes spend less than 30 per cent of their earnings on rent.

Community Housing Federation chief executive Lesley Dredge backed the call for mandated affordable housing, saying it created more vibrant communities. “It’s been very successful in so many countries around the world,” she said.

Ms Dredge said developers could adjust to the policy if they were given enough time to prepare.

She said mandated levels of affordable housing reached up to 40 per cent in some countries but suggested it could be phased in at a much lower level in Victoria.

Ms Dredge said there was a serious shortage of social housing in Victoria with the current level sitting below 4 per cent of overall housing.

The council’s planning portfolio chair, Nicholas Reece, said it had worked with developers to include affordable housing on two sites – the Boyd building in Southbank incorporated 40 affordable units while the Munro development near the Queen Victoria Market would include 56 units.

But Cr Reece conceded the existing “voluntary provisions” were delivering little affordable housing.

“Having a state-wide approach would ensure a level playing field and help to secure more affordable housing in each new development,” he said.

A spokeswoman for the state government said it was looking at how the planning system could be used to encourage more affordable housing and welcomed submissions on how that could be achieved.

Property Council of Australia’s Victorian executive director Cressida Wall said the property industry was ready to play its role in delivering affordable housing but it was critical the policy was balanced.

Urban Development Institute of Australia’s Victorian chief executive Danni Hunter said providing affordable homes was complex and did not yet have a “workable solution”.

“The development industry is in the business of making sure people can afford housing. No one wins when prices are out of reach for everyday Victorians,” she said.