Dan Carton | A smarter way to address the territory's housing crisis

Builders and developers take material risks when they invest capital in the pursuit of profit - they are less likely to supply new dwellings when markets are weak or uncertain. With build costs remaining high for now, this is adding to uncertainty for builders and developers created by rising rates.

Anecdotally, I am hearing about developers putting projects on hold, builders closing up shop and builders struggling to move stock.

The viability of build to rent projects in the short to medium term is now tenuous at best.

The latest ballot price list for new land lots for release at Whitlam shows eye-watering land prices remain.

The price list shows a large number of land lots that are good to build on right now. This suggests that land contracts have been falling over as the cost of finance increases and what people can borrow decreases. This will only get worse in the short term.

Where does that leave policymakers seeking to address the current housing crisis by boosting supply? With borrowing costs climbing as they are, dramatic investment in public housing is not feasible.

The federal government and some state jurisdictions are introducing shared equity schemes. These are a positive, but such schemes primarily add to aggregate demand for housing rather than directly increasing supply.

In the current climate there is a smarter way to do shared equity - the ACT government can contribute land as shared equity to community housing providers (CHPs) to build on. Public and community housing can boost supply in a weak market as they do not have the same profit motive as the private sector.

To go back a step, the lingo used in the supported housing sector can sound obvious but it can be confusing.

Community housing is typically owned by not-for-profit organisations and Public Housing is owned by the government - and in the ACT public housing is delivered and managed by Housing ACT which sits within the Community Services Directorate.

Social and affordable housing can be either community housing or public housing. Social housing is typically available for members of the community on very low incomes and/or with high or complex needs.

Tenants pay a proportion of their income for social housing. Affordable housing is available to members of the community who have jobs but do not earn enough to afford to buy or rent in the Canberra property market. Tenants pay a proportion of market rent for affordable housing - around 75 per cent.

Community Housing in Australia is highly regulated via both the Australian Charities and Not-for-profits Commission and the National Regulatory Scheme for Community Housing. Canberra has a thriving community housing sector - CHC Australia and Havelock Housing are the largest CHPs with many other operators in the local sector including YWCA and Catholic Care.

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Contributing land to CHPs to build on offers the additional benefit of also providing employment at a time when the construction sector is slowing. And most importantly it will deliver an additional supply to house Canberrans.

The government's contribution of land can be recognised as equity in the property equivalent to the value of the land provided. The title is transferred to the CHP so they can more easily borrow to fund the construction.

The ACT government locks in its equity share by placing an encumbrance on the title.

It could be a condition of the encumbrance to enable the CHP to sell the property after 25 years (should they choose to) and release the government's equity share - which will include capital growth.

Residential property over the long run returns around 7 per cent per annum in capital growth alone. This policy option should not be considered a caveat laden gift - it should be considered an investment and as effectively deferred land sales revenue.

Boosting the supply of community housing would be a long-term investment in our community and would help ensure all Canberrans have a safe secure roof over their heads.

And when interest rates drop in the future, why not take out long term 30 to 50 year debt to fund a boom in public housing? Invest $1 billion to deliver an additional 1000+ homes in the ACT when debt rates are back down around the 1 per cent 2 per cent range again.

Even raising this potential future opportunity should make us all reflect on the massive opportunity missed by governments of all kinds across Australia during the recent era of record low ultra-cheap interest rates - it is easy to say in hindsight but imagine how much housing could have been delivered or at a minimum, given constraints associated with an economy's ability to get houses on the ground, the finance committed?

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