Matching Approaches to Markets

The research on inclusionary housing approaches suggests, like planning mechanisms generally, particular strategies will work best under different market conditions. Understanding the different market characteristics and trends is important for identifying opportunities for affordable housing inclusion. Gurran et al. (2008) identified a loose categorisation of housing market characteristics as a basis for selecting inclusionary strategies:

  • • Market value—The value of housing and residential land affects the extent to which affordable housing is able to be provided and the degree of subsidy required for particular schemes. For instance, a moderate affordable home purchase scheme may be viable without subsidy in lower-value greenfield markets, whilst in higher-value locations, the uplift associated with planning approval might support a significant ‘set aside’ or contribution towards affordable rental or shared equity housing.
  • • Development activity/cycle (i.e. the extent to which development activity is taking place within an area, or indeed across the whole market). Significant rates of new housing development or redevelopment present an opportunity for affordable housing provision, but also a risk of gentrification in existing areas of the city. Without buoyant market activity, additional strategies including subsidy for affordable housing development may be needed to ensure ongoing rates of production. This variable may arise from local market conditions or reflect broader macro-economic trends. In weaker markets, there may actually be less need for additional affordable housing, which could compete with market provision. On the other hand, the ability of community housing organisations to take some units may lower the risk to private developers in downturns.
  • • Development opportunity (i.e. the availability of housing development opportunities). If there are few opportunities for new housing development, but high demand, strategies which offer additional development combined with affordable housing are likely to be attractive. This can be seen on a small scale in the British experience with rural ‘exception sites’. By contrast, if available development capacity is not being taken up, there may be limited value in offering additional floor space or height bonuses. Similarly, if an analysis demonstrates significant barriers are preventing new development from taking place, a barrier removal strategy might be an effective way of leveraging new supply (Gurran et al. 2008).

As shown in Table 11.2, it is important to avoid broad-brushed strategies for affordable housing inclusion but rather to select mechanisms which best fit prevailing market conditions. In nations affected by affordable housing pressures but sluggish new production, it is common for planning measures to emphasise land and housing supply strategies. However, these measures will be ineffective and potentially counterproductive in lower-value and lower-demand markets. Similarly, planning-based i ncentives for affordable housing develop-

Table 11.2 Matching planning mechanisms for affordable housing to market characteristics and opportunities

Approach

Market/opportunity

Land/housing supply strategies

If overall demand exceeds supply and planning system unresponsive Consider sub-markets

Barrier removal

Introduce in contexts where regulation (from development controls to procedural requirements) prevent diverse, lower-cost housing forms

Protective mechanisms

Gentrification, rapid urban development

Incentives

High land values, leverage increased profit

Mandatory mechanisms

  • 1. Contributions for low-cost rental housing/shared equity home ownership
  • 2. Housing inclusion—low- cost home purchase/social housing acquisition
  • 1. High land value, high level of development activity
  • 2. Low land value, but moderate/strong housing demand and development activity

Source: adapted from Gurran et al. (2008) ment usually depend on high land values, where density and related bonuses are lucrative. Alternatively, it may be tempting to seek to incentivise development in low-value areas by lowering development standards, but care must be taken to ensure that this does not result in substandard housing in locations where adequate supplies of affordable housing already exist.

 
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