Defining affordable housing in Victoria

Justification of the demolition of public housing in Victoria has mentioned creating new, “affordable” housing in redevelopments.

It has been a story of change in Victoria, though, when it comes to its definition and calculation by Labor governments.

When the first Ground Lease Model project was announced in 2020, it was advised that rents in this type of housing would be set at 25 per cent below local market rents in the suburbs they were being built in. See bottom of pg 14 in this document. 

This is a percentage that has been used in past programs and is being used (74.9 per cent) in current government programs. 

Two years later with the second Ground Lease Model, “affordable” housing rents were increased to just 10 per cent below local suburb market rents. See bottom of page 18 in this document. 

This increase was in a joint media release from then Premier Andrews and Housing Minister Wynne. 

No justification for the increase has ever been provided. 

Included in their joint statement was a promise that no rents in affordable housing would be set above of 30 per cent the “median income in Melbourne”. It was stated that this would make the “new homes affordable wherever they are located”. Income is defined as gross, that is, before tax. Although not mentioned, it is clear that the “median income” being used is for households, not individuals.

As proof of this, rents for three-bedroom units at the Bills St, Hawthorn redevelopment were recently advertised at $720 per week. 

There is no public information from the ABS or any other reputable analysts on the current median household income in Melbourne. Homes Victoria have not disclosed the figure they currently use.

The ballot process for affordable housing encourages prospective applicants to assess whether they can afford the rents for what is on offer, using 30 per cent of their gross household income as an upper limit. It reads as caring but is really just a self-screening mechanism to deter households applying, if 30 per cent exceeds the advertised rents. It is a game of matching households to rents that have been set using a slight discount of market rents.

Just how the ballots are working is not being revealed. Are essential workers – teachers, firefighters and rescue workers, childcare workers, etc. – being selected to be able to live closer to where they work? This is something the government has boasted it would deliver.

Leases are also being promoted as having fixed rents for three years. The reality is, though, that most if not all will have five per cent per annum increases included in their conditions. Five per cent per annum is more than most workers expect their wages will increase by over the same period.

Demolition contracts

The state government is pressing on with the demolition of 33 Alfred St and 120 Racecourse Rd in North Melbourne, and 12 Holland St in Flemington even though the Supreme Court is scheduled to hear if residents’ human rights have been violated by the government’s decision.