New York City is taking great strides towards making the cost of living more affordable. What can Australia learn about this for its residential market?
Australia is not unique in the challenges its housing sector is facing. In my recent trip to New York as part of the UDIA (QLD) Tour Of Excellence, I found that the city is not only dealing with the same concerns as us, it's also leading the way when it comes to finding practical solutions.
One particular challenge developers are facing in New York is the concept of affordable housing and what this means for new projects. Like Australia, the city has a growing population and rising accommodation prices, but it also has greater challenges in regards to density, as the intense urbanisation means space is at a premium.
While Australia is unlikely to reach this level of population distribution in the near future, a changing mindset that welcomes high-density living is just one of the solutions that could make housing for affordable, especially in metropolitan areas.
How New York City approaches affordability
Various tax benefits incentivise developers in New York City to include affordable housing options in their projects. To gain access to these tax benefits, 20 per cent of new buildings need to be dedicated to affordable housing.
However, the definition of affordable in Australia is very different to what is going on in New York City. More than 30 per cent of rental houses holds are serverly rent-burdened as they spend more than 50 per cent of their income on housing. According to Housing New York: A Five-Boruogh, Ten-Year Plan, nearly one million households earn less than or just under $42,000 for a family of four. This shows the difficultly for a lot of people who live in one of the most expensive cities in the world.
For living to be affordable in New York City, the majority of people rent. Therefore, their concept of home ownership is nowhere near as ingrained as it is here.
A New York City model for affordable housing in Australia
Creating affordable housing stock in Australia could depend as much on a change in mindset as it does on tax benefits or other incentives. The concept of owning a home outright on a large piece of land, while attractive, is becoming an outdated concept and could be one that fades between generations.
As housing becomes more expensive in Australia, two things will have to give, just like in New York City. The first will be a shift to higher-density and smaller apartments, as that's one way to make the cost of renting or purchasing cheaper while also acknowledging that space is becoming a premium.
This solves the affordability problem, but doesn't necessarily make these residences more attractive. To do that, Australian developers need to follow the example of New York projects such as Mercedes House, which bring a communal element to these buildings. In this case, while people may rent a smaller living space, they have access to greater communal areas that make it a more enticing place to live.
The scale may be different, but by learning from New York City, Australian developers can find the balance between affordability and density that will make the housing market more accessible to everyone.