Investing in Tomorrow: Victoria's Housing Statement Set to Reshape Property Development

The Victorian Government’s Housing Statement puts forward a plan to tackle the housing crisis using a combination of investment and reform initiatives. Sweeping changes and commitments to strengthen housing market conditions over the years ahead to 2034 will have implications for various sectors, including construction, tourism and real estate. So what exactly does Victoria’s Housing Statement entail, and how will it affect the state’s housing market in the next decade?

Social Housing vs Public Housing vs Affordable Housing

What is Social Housing?

Social housing is a term that encompasses public and community housing. Only people on low incomes or those who can’t find accommodation due to extenuating circumstances are eligible for social housing. Community housing is managed by not-for-profit organisations, with some specialising in affordable housing and others in social housing. Community housing properties have their rent capped at 30.0% of the combined gross household income, excluding Commonwealth Rent Assistance.

What is Public Housing?

Public housing comprises state government-managed properties rented to eligible tenants who can’t afford market rate housing costs. This program provides long-term security for individuals and families on low incomes. Public housing is seen as the most tenant-supportive property operation due to its strict pricing requirements and asset-tested tenant requirements. Medium- and high-rise apartments are popular public housing developments because of their density. Rent for these properties is capped at 25.0% of the household’s income, including any Centrelink payments.

What is Affordable Housing?

Affordable housing is the bread and butter of Victoria’s Housing Statement. Unlike social and public housing, affordable housing tenants’ rent isn’t tied to a percentage of their income, but instead discounted from the estimated market cost. Only those who meet income requirements are eligible to rent these properties. Affordable housing rent is set at least 10.0% below market rate in metropolitan Victoria and at market rate for regional Victoria.

The Five Housing Statement Focus Points

The Victorian Government has identified that a housing supply shortage has the potential to cause long-term pains and bring about a housing market crash. To prevent this, it has unveiled an expansive and ambitious strategy outlining multiple action plans to address this issue and related concerns.

What are the most important components of Victoria’s Housing Statement?

1. Good decisions, made faster: Accelerating property development approvals and revising expectations for water corporations
2. Cheaper housing, closer to where you work: Targeting investment towards activity centres and selling public land for property development
3. Tax on short-stay accommodation: Introducing a levy to generate more funding for social and affordable housing
4. More social housing: Redeveloping several high-rise public housing estates and using the Social Housing Accelerator to construct hundreds of social housing homes
5. New homes in regional Victoria: Providing a Regional Housing Fund, investing in a Regional Worker Accommodation Fund and allocating as share of Big Housing Build homes to regional Victoria.

How does this compare to the Federal agenda?

The Federal Government's strategy is centred around a $10 billion investment in social and affordable housing, representing the single biggest investment in over a decade. This fund aims to create 30,000 new social and affordable rental homes nationally in its first five years, with a particular focus on supporting women and children impacted by family and domestic violence or older women at risk of homelessness.

The federal strategy also includes:

• An additional $1 billion investment in the National Housing Infrastructure Facility to support new homes
• $200 million for the repair, maintenance, and improvement of housing in remote Indigenous communities
• $100 million for crisis and transitional housing options
• $30 million to build housing for veterans who are homeless or at risk
• New incentives to boost the supply of rental housing, including a significant increase in the maximum rate of Commonwealth Rent Assistance.

How do they fit together?

The Victorian Housing Statement and the Federal Government's Housing Australia Future Fund complement each other. While the Federal Government's strategy places a strong emphasis on financial investment in housing infrastructure and providing financial assistance to renters, the Victorian Housing Statement focuses on accelerating property development approvals and refining the process to create more housing stock.

In essence, the Federal Government's strategy provides the financial resources, while the Victorian plan sets the stage for these resources to be effectively utilised. By working together, these strategies have the potential to significantly improve housing affordability and availability in Victoria and across Australia.

How can industry winners capitalise?

House Construction

The government is boosting investment while the Affordable Housing Investment Partnership (AHIP) program aims to facilitate improved communication with stakeholders. Construction companies can streamline their regional housebuilding capabilities to capitalise on a surge of funding and planning assigned to regional Victoria as part of the Housing Statement. Carving out this geographic niche could secure work over the decade, a vast change to the pandemic downturn seen in previous years. 

Multi-Unit Apartment and Townhouse Construction

More affordable and social housing developments are set to ease pressure in the apartment rental market. With a new goal of making 80,000 more homes available per year to 2051, residential construction companies will be chomping at the bit. Construction companies that generate a strong track record of social and affordable housing projects and deliver reliable results will find themselves in high demand as urban renewal projects take centre stage.

Residential Property Operators

Residential property operators will have plenty to do, with industry activity set to accelerate over the coming years. Operators that quickly hire and train up their workforce can take advantage of this heightened activity. As the government focuses on reducing a backlog of project approvals and hastening approval processes moving forwards, those with a strong workforce can acquire a larger share of the work.

Real Estate Services

Building 800,000 houses over the next decade is no mean feat, with this ambitious goal set to empower the real estate sector. Real estate service providers will need to pay close attention to how the approval process changes, potentially taking advantage of faster approvals to streamline their own operations. Real estate service providers with a taste for social and affordable housing will find additional opportunities as well.

Hotels and Resorts

Hotels and Resorts will compete more effectively with short-term accommodation services after the 7.5% Short Stay Levy in introduced. Not only will the levy improve hotels’ reputations and bolster their competitive position, but savvy hotel operators could calculate appropriate discount rates and long-term deals to take advantage of weaker demand for their short-stay competition.

What can industry losers do to mitigate risks?

Tourism

The 7.5% Short Stay Levy will hamper tourism activity, combining with cost-of-living pressures to discourage would-be travellers. Property owners relying on short-term tourist rentals will need to adjust their pricing models to stay competitive. Local tourism operators may need to petition local governments to introduce more tourist activities and attract tourists to their regions through other means.

Commercial and Industrial Building Construction

A shift in resources towards alleviating housing shortages will exacerbate material and labour shortfalls for non-residential construction sectors. Commercial construction companies may need to seek funding elsewhere as the government prioritises other construction sectors. Private loans and investors will become increasingly important to maintain project momentum.

Heavy Industry and Other Non-Building Construction

The government’s shifting priorities will threaten some major projects, particularly with an imminent federal review by the Minister for Infrastructure. The review will axe some projects and delay others by years. Major construction companies will need to diversify their project portfolios and lean into government initiatives to salvage revenue streams.

What key strategies are needed to align with the new projects?

Construction Companies

• Specialise in social and affordable housing projects. Both the Victorian and Federal plans highlight the need for more social and affordable housing. Companies with a strong track record in delivering such projects will be in high demand for the foreseeable future. If your company doesn't already have experience in this area, consider investing in training and resources to develop this expertise.
• Make the most of regional housing commitments to develop a reputation within this accelerating market. Focus on strengthening regional housebuilding capabilities to take advantage of this opportunity.
• Secure favourable, risk-averse contracts amid rising construction costs and labour shortages to hold a business in good stead.

Property Investors

• Explore opportunities in the key activity centres targeted for housing and infrastructure development.
• Leverage the streamlined approval process, anticipating a greater volume of development work.
• Take advantage of AHIP incentives and grants involving the government, the Property Council of Australia, Master Builders Victoria, the Urban Development Institute of Australia, the Housing Industry Association and Super Housing Partnerships.

Real Estate Operators

• Stay informed and adapt by monitoring updates and changes in local regulations and policies.
• Consider diversifying property portfolios and becoming more familiar with social and affordable housing.
• Monitor the speed of apartment approvals under the new Development Facilitation Program.
• Analyse the extent to which regional services should be expanded in line with government investment initiatives.