This paper presents an assessment of alternative mechanisms that Government can consider in supporting the delivery of new affordable rental accommodation – particularly over the short to medium term – to take pressure off the broader housing market. The Paper also examines how the Tasmanian Government can work with the private investor market to accelerate the supply of affordable rental accommodation.
A feasibility model has been established for two alternative project types to illustrate the challenges in the delivery of private market housing and whether support mechanisms would assist a process whereby a proportion of a development project could be on-sold to a Community Housing Provider at a discount. This would therefore enable a pipeline of affordable accommodation via rent or shared equity arrangements.
Mechanisms assessed include:
Findings show for Medium Density (Infill) Projects, given the significant feasibility constraints medium density projects are experiencing at present in the Tasmanian Market, substantial Government support would be required to elevate returns to a position where private investment into projects that include a proportion of affordable housing become viable.
Examining the impact of support mechanisms on feasibility measures, the following key insights are unveiled.
- The Capital Grants and Density Bonus were the only mechanisms to improve feasibility measures beyond the market case
- With the exception of a 50% Capital Grant, no mechanism was able to independently improve feasibility measures beyond target thresholds to attract substantial private investment into the asset class
- Combining multiple mechanisms has the potential to consistently achieve feasibility hurdles.
Some possible combinations include:
- Density Bonus + Discounted Sale of Government Land
- Capital Grant (10%) + Density Bonus + Accelerated Planning
- Capital Grant (25%) + Reduced Finance + Reduction in Stamp Duty
Findings show for Greenfield Subdivision Project that assuming the demand for delivered stock is sufficient to completely absorb all delivered lots in a timely manner, multiple support measures have the capacity to improve feasibility beyond target rates despite the inclusion of a 10% affordable housing requirement in a Greenfields subdivision project.
Examining the impact of support mechanisms on feasibility measures, the following key insights are unveiled.
- The Discounted Sale of Government Land and Capital Grants were the only mechanisms to improve feasibility measures beyond the market case
- The Discounted Sale of Government Land is notably more powerful as a support mechanism in the case of a Greenfield development due to their impact on land acquisition costs
- The significant improvement in feasibility as a result of certain mechanisms invites questions surrounding scaled down versions of potential supports. This could include a reduced discount on the sale of Government Land or a reduced Capital Grant
- A combination of supports is still recommended to enable scalability of measures, notably where capacity to scale is limited such as in the case of the discounted sale of Government Land.
