Land Supply Programs Overview

The resources and guidance in the Affordable Housing National Leading Practice Guide and Tool Kit is not designed to be relied upon. Users of the guide should consider the individual circumstances of each project or policy, use other resources and take independent advice. 

Land supply and development policies

As part of an overall residential land supply strategy, affordable housing land supply strategies ensure there is sufficient land zoned for the affordable housing requirements of the community.

Ensuring an adequate supply of developable land for new housing in response to forecast future demand is a basic expectation of effective land-use planning. An undersupply of land for housing relative to demand can increase housing prices.

Furthermore, the time taken to convert land to housing means that it is essential to predict housing demand well in advance; ensure land release efficiency when demand shifts; and continuously monitor the market.

This is achieved by undertaking the housing market analysis described above, identifying suitable new development opportunities in the local area, and taking steps to ensure these potential opportunities become available. This is likely to require changes to the land-use plan to ensure the land can be used for residential development (often a rezoning) and to specify requirements for that development. It will also require anticipating and providing or facilitating the necessary physical and social infrastructure. Specific planning strategies for providing infrastructure include ensuring sequential land release so that infrastructure can be provided efficiently and requiring developers to contribute to infrastructure provision through clear contribution plans or requirements that are known in advance when the land is purchased.

Informing different actors of likely need for housing and of new opportunities for residential development (for instance, by assisting in the assembly of sites) is also an important strategy in facilitating new housing supply.

More specific mechanisms for enhancing affordability through land supply and development policies might include:

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Land banking for affordable housing

By purchasing land where growth is anticipated or planned to occur, government agencies can assist in stabilising land markets, discouraging monopolistic or ‘price inflationary’ behaviour. The government may also realise increased values when that land is actually released for development. A portion of this increased value can be secured for affordable housing that is incorporated onsite as part of a larger development, or applied elsewhere.

Land development incentives/penalties

All major cities in Australia have growth management policies and land sequencing programs, setting out where development is to occur and establishing infrastructure provisions. While government’s role is to coordinate the planning for provision of infrastructure rather than assist with meeting infrastructure costs, governments might encourage the timely release of land by, for instance, making infrastructure contrib¬utions payable over a longer period of time or providing incentives for more efficient infrastructure delivery. Punitive charges to discourage withholding of land identified for development could include the imposition of urban rates for development sites that have not been released and developed within a time period specified by the development plan.

These policies can be reinforced by charges for releasing land out of sequence to offset the additional costs of providing infrastructure for this development.

Betterment capture

This refers to placing development conditions on land to recover, for public purposes, the increased land value arising from changes to regulation and/or major public investment. For example, a planning authority could introduce a requirement for affordable housing to be provided on the land as a condition of its rezoning, which would be offset by the windfall from the increased land value. Betterment capture is also a way of delivering the necessary infrastructure for development to occur. One approach to managing betterment capture is through the requirement for development contributions, which also has administrative implications.

To see examples and principles of best practice of land supply and development policies click on the link below

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What is this measure likely to achieve?

In broad terms, increasing land supply for residential development will only be an effective affordability measure if there is a shortage of land relative to demand. This situation was found to have developed in parts of the UK over the past 20 years. A definitive review of housing supply in the UK (‘the Barker Review’) found that inadequate provision of housing supply in response to increased demand for housing had contributed to a worsening of housing affordability, a widening wealth gap between home owners and others, significant regional house price differentials which reduced labour mobility and overall reduced economic welfare (Baker, K., 2004). Thus, raising housing numbers where there is a shortage of housing is likely to improve housing affordability in the private market, and offer greater housing market stability and a location of housing supply that supports patterns of economic development.

Even so, the Australian Productivity Commission inquiry into first home ownership emphasises that land supply is only one component in house price increases (Productivity Commission, 2004). Similarly, the Barker Review emphasised that the release of new land for housing is not sufficient in itself as a solution to affordability problems. It is critical to consider the location of this land in relation to actual demand for housing as well as the environmental and social externalities and costs of development. Barker considered reducing costs associated with urban sprawl and retaining open greenfield land significant in land supply decisions. Achieving new supply within established urban areas, by identifying sites suitable for redevelopment, and by enabling the adaptation of existing housing subject to appropriate design controls, remains important.

Another component of achieving a sufficient supply of housing is ensuring that the process of development approval for new housing is as efficient as possible. Uncertainty and delays in development approval add to the cost of producing housing, and delays also exacerbate housing shortages relative to demand. The Barker review recommended that the planning process in Britain achieve greater certainty and speed ‘though not at the expense of making bad decisions’ (Baker, 2004, p. 6).

In the Australian context, efficiency means that planning controls and expectations should be clear and consistently applied, so that a development achieving the stated controls and requirements will be approved quickly. Where negotiations or changes to planning controls are sought, a clear strategic planning framework establishing the objectives for the area, and desired outcomes of development, including affordable housing, as well as likely additional requirements associated with planning control variations, provides a basis for efficient development assessment.

The Australian states and territories have begun changing their planning systems to simplify development assessment, particularly for routine development like single dwellings. Changes include specifying standard templates or formats for local plans with mandatory state policy requirements (for instance, the Victorian Planning Policy Provisions for local planning schemes, and the NSW Standard Instrument for Local Environmental Plans), and identifying types of developments that will be approved if they meet specified codes or standards (for instance, ‘code assessable’ development under Queensland’s Integrated Planning Act 1997, ‘complying development’ under the NSW Environmental Planning and Assessment Act 1979 and in Western Australia, ‘acceptable development’ under the Residential Design Codes).

Greater consistency in local plan formats and requirements should reduce complexity and facilitate development processes. However, major development and redevelopment projects often seek a variation to existing planning requirements, necessitating a more stringent assessment and negotiation process, which may be more expensive or slower.

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In summary: Land supply and development policies

Advantages

• Systemic land supply and development enhancements seek to improve existing practice and are likely to be welcomed by many stakeholders. Similarly, simplifying planning requirements and reducing the potential for extended development assessment times also represent good planning practice and could significantly reduce the costs associated with housing development, in cases where avoidable planning delays have been occurring.
• Land development incentives and penalties, by deterring out of sequence development through punitive charges, achieve more efficient infrastructure, with overall savings in the cost of producing housing.
• Employment and facilities development in outer areas can reduce the cost of living by reducing the need to travel and reducing demand pressure on inner city housing (and therefore price inflation).
• Betterment capture could provide a significant source of funds for new affordable housing development.

Limitations

• Systemic land supply and development enhancements contribute to overall market efficiency but do not contribute to specific affordable housing development.
• Land banking by government organisations represents a significant long-term investment with associated opportunity costs. Specific direct gains to affordable housing supply are limited.
• Land development incentives and penalties have overall market benefits but will not contribute significantly to dedicated affordable housing supply.
• Betterment capture is technically and legally complex and difficult to implement.

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Where will this measure have the greatest impact?

Improving the responsiveness of land supply programs will have the greatest impact on affordability in markets and regions where there is a shortage of housing development opportunities relative to existing and forecast demand. It can be difficult to gauge the impact of new supply programs on affordability across a whole region as housing markets and sub-market characteristics can differ substantially. Therefore new supply programs on the metropolitan fringe may have only a minor impact on house prices or the availability of lower-cost housing stock in established or inner city housing markets. For this reason, attempts to improve the responsive¬ness of housing supply within even established urban areas by enabling the redevelopment of under-used sites and the appropriate conversion or intensification of existing housing are also important—where there is a demonstrated demand for such housing.

How to use these measures

1. Audit planning controls and processes for clarity, speed and responsiveness to demand for new housing supply.
2. Identify potential, well located sites for future residential development that are publicly owned or could be acquired by government.
3. Consider using a public land development agency to identify and assemble residential development opportunities, in line with specific affordability objectives, particularly in contexts of existing or potential high housing demand.
4. Identify potential areas for rezoning and signal any intended approaches to betterment capture (set levies or specific contribution requirements).
5. Consider allocating sites or setting a proportional requirement for the delivery of new affordable housing within large master-planned areas or new release areas.

To see examples and principles of best practice of land supply and development policies click on the link below

Click on the link below to determine whether this planning mechanism is recommended for your environment

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