Loading...
Just In

Developer’s ‘deferred second mortgage’ model getting people out of public housing #australia #australia_news #ABC_News #Just_In


Posted

June 30, 2018 07:00:30

There are 82,000 names on Victoria’s public housing waiting list and it’s growing by 500 names a month.

There’s simply not enough public housing stock to meet the demand, but there’s also not enough opportunities for people to leave public housing.

And if people aren’t leaving, there’s nowhere for new tenants to move in.

It’s that quandary that got one Melbourne-based property developer thinking about how he could help.

He came up with a plan that Melbourne University post-doctoral research fellow Dr Kate Raynor has dubbed the “deferred second mortgage”.

In this model a developer builds an apartment block and splits the cost of each apartment into two parts.

About 63 per cent of the sale price will cover the developer’s costs — which includes land, construction and financing — and this is the mortgage that former public housing tenants take on through a normal lender.

The other 37 per cent is set aside as a deferred second mortgage.

Because it’s deferred, the ex-public housing tenants buying the apartments don’t need to come up with that money up front.

“So essentially, instead of going out and putting down a deposit and paying off a $600,000 apartment, people are paying off a $400,000 apartment, and when they sell their home they pay off that second mortgage at the end point,” Dr Raynor told ABC Radio Melbourne’s Alicia Loxley.

“And that second mortgage isn’t attracting interest or any kind of fees.”

The first apartment block of this kind was built in North Melbourne and received no government subsidies or grants.

It’s known as the Melbourne Apartment Project (MAP) and consists of 34 units.

Of those, 28 were sold to people moving out of public housing using the deferred second mortgage model and the other six were either rented or sold at market value.

“That helps with the cross-subsidisation aspect, but this organisation is also set up … such that when those second mortgages start coming back in, that money is going straight into a charitable foundation that is creating more crisis accommodation or MAP projects,” Dr Raynor said.

Home ownership ‘changed the way I see myself’

Gerson Hernandez grew up in public housing in Fitzroy and until recently was living there with his mother.

But when he was given the opportunity to buy a MAP apartment in North Melbourne he jumped at the chance.

“It has been amazing,” he said.

“Growing up in public housing and living in public housing all my life, I never really expected to be a homeowner, let alone a homeowner in an inner-city apartment here in Melbourne at a time when housing affordability is one of the biggest issues.

“So from my perspective it was just an opportunity that I couldn’t let go and something that I’ll be forever grateful to the developer for actually having done the project in the first place.”

Mr Hernandez said moving out of public housing and becoming a home owner had changed the way he looked at himself.

He said he used to have a “poor person’s mentality” and never thought home ownership was an achievable goal.

But now he looks to the future with more optimism.

It’s a feeling shared by his neighbours.

“There was definitely a sense of excitement in those first few weeks and I think we all felt that this was something that was really good that had just happened to us,” Mr Hernandez said.

But Dr Raynor, who investigated the costs and benefits of the project, said there were still many obstacles to reproducing this sort of development on a larger scale.

The most obvious obstacle is that in its current form, the model relies on the developer setting aside some of their own profit.

“This is a philanthropic venture,” she said.

“It would not be the kind of thing that a standard developer would take on, generally speaking, because they’re deferring a portion of the income that they’re getting from these apartments.”

She said government incentives could help make the model more attractive to developers.

“That wouldn’t even need to be a deep, deep subsidy; it could just be favourable access to land that could make for something that could scale up over time.

“At the moment there isn’t a lot of incentives for a private developer to take on a project like this and that’s why we don’t see a lot of projects like this.”

The public housing wait list may be long, but Dr Raynor said in reality it would be even longer if everyone who qualified put their names down.

Some hear about the long wait and simply don’t bother.

They may choose to stay at home with their parents, spend most of their income on rent, live in overcrowded accommodation, couch surf or even sleep on the street.

This lack of secure and affordable housing has wider implications and costs for society.

Dr Raynor said people who were homeless were more likely to present to hospital or have dealings with the justice system, either as perpetrators or as victims.

“There’s a massive human wellbeing story in that,” she said.

“We’re not looking after the very, very vulnerable people in society.”

Dr Raynor said government initiatives were slowly increasing the public housing stock but not at the rate required to address the vast level of need.

“We’ll see things like the Public Housing Renewal Program, which will only create 100 extra units, or we’ll see things like the Social Housing Growth Fund, which is going to create something like 5,000 units over the next couple of years.

“But what we need to see is something like 5,000 units a year, every year, for the next 20 years.

“There’s massive implications if we’re not doing something about it right now, all of the time, on the biggest scale possible.”

Topics:

housing,

government-and-politics,

community-and-society,

urban-development-and-planning,

people,

human-interest,

melbourne-3000,

north-melbourne-3051



Source link

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Most Popular

To Top
%d bloggers like this: