Shelter NSW, in assisting the Sydney Alliance, made a brief submission to Penrith City Council on its proposed Affordable Housing Contributions Scheme for Glenmore Park Stage 3 and Orchard Hills North.
The rezoning of these formerly (mostly) agricultural tracts of land to residential and commercial zones presents a once-in-a-generation opportunity for local government to value-capture a portion of the uplift in land values for the purposes of Affordable Housing.
Council is proposing contributions rates in the order of 1 to 4 percent, short of the Greater Cities Commission’s aspirations for “a 10 per cent affordable housing target for new rezonings where there will be a housing uplift”.
Many in the property development and banking industry view 20-25% profit margins as healthy and conducive to project success (AHURI, 2014, p. 28; Property Mastermind, n.d.).
With this in mind, we were perplexed by the profit margins being allowed in test-cases put forward in the Economic Viability Assessment report that underpins the recommended 1-4% contributions range. Specifically, profit margins of 27 to 66 percent would still be achievable after proposed Affordable Housing contribution rates of 1-4% are factored into project costs.
We urge Penrith City Council to be more ambitious in its contributions rates requirements, given the generous profit margins that could still be enjoyed by developers if the contributions rates were raised to 10-15 percent.
