Rapid increases in housing costs, stagnant wage growth and limited government funding have created a housing affordability crisis in many cities, including Australia’s. Unlike elsewhere in the world where affordable housing contributions are secured through inclusionary zoning or other planning processes, the Australian context is largely devoid of any mandatory requirements for affordable housing provision in new development.
Recent changes to legislation in Victoria have enabled planners to negotiate with developers to secure voluntary affordable housing contributions by offering alternative incentives. However, the lack of financial literacy and understanding of development feasibility and the effects of affordable housing provision on development viability and profit is likely to limit the success of this change.
This paper reports on the conceptual framework and development of an Affordable Housing Negotiation Calculator to assist in educating local and state government representatives, community housing providers and developers about affordable housing provision and its effects on development feasibility. The calculator utilises existing valuation and development feasibility theory and practice, which can demonstrate the financial implications of affordable housing contributions and possible incentives. It is hoped this calculator will enable those decision-makers to better understand and negotiate positive outcomes for an increase in affordable housing whilst considering the factors that impact development feasibility and enabling better understanding of the challenges of development.