Australia has long been a country where owning a home has been an achievable reality. In recent years, however, falling home ownership rates nationwide has seen this become merely a dream for many. To counteract this, the ACT Government released a new Affordable Housing Action Plan earlier this year. The new Action Plan includes changes for those providing and purchasing affordable housing in the ACT. In particular it adds a significant degree of administrative obligations on Developers. But what do you need to know?
The requirements imposed on Developers
Developers purchasing multi-unit sites directly from the ACT Government will now find additional obligations regarding affordable housing in the Project Delivery Agreement (PDA). In addition to a requirement to provide a minimum number of affordable homes, the PDA requires Developers to provide the Suburban Land Agency (SLA) with a copy of the development application (including a plan showing the location of the affordable homes) upon lodging the DA and again once upon the DA being approved by ACTPLA.
The SLA must also approve the DA and provide the Developer with a list of eligible affordable home buyers. If the SLA does not approve the DA, the Developer must within seven working days amend the DA and provide the amended DA to the SLA for review before the SLA will provide a list of buyers to the Developer.
The Developer is then required to make reasonable efforts to sell the affordable homes to the Buyers on the list provided by the SLA. This includes contacting buyers and providing a Contract for Sale in the form required by the PDA (which must be substantially consistent with the ACT Law Society Contract for Sale, allow part payment of the deposit with the sum of 1% or $5,000 to be provided on exchange and include the Scheduled of Finishes mandated by the SLA).
What if a Buyer refuses to exchange?
Should any buyer not exchange a Contract within the mandated timeframe despite the reasonable efforts of the Developer, the Developer may withdraw from negotiations. In these circumstances, the Developer must request the details of another eligible buyer from the SLA and begin the negotiation process with any new buyer once such details are provided. While providing a list of eligible buyers may speed up the process of exchange, if buyers are not agreeable to exchange occurring within the timeframes or if there are delays with buyers being found, the Developer may find it difficult to sell affordable housing stock as it will be unable to put such stock on the market until all eligible buyers have been exhausted or the date 60 days after a certificate of occupancy and use has issued for the complex.
What if a Developer does not comply?
To secure a Developer’s obligations under the PDA, the Developer is required to provide a security deposit directly to the SLA. This will be released following compliance with the Developer’s obligations under the PDA (including providing evidence of completed sales of affordable homes to the SLA). Developers must also be aware of the right of the SLA to restrict the Developer (or any associated entity) from participating in any future release of Land in the ACT if the Developer does not comply with its affordable housing obligations. Accordingly, Developers must ensure compliance with the new obligations of the PDA or be exposed to these risks.
Those looking to purchase affordable housing
The process of applying to purchase an affordable home has also changed. Those who meet the eligibility criteria must now register their interest directly with the SLA. The SLA will then contact Buyers once a Developer has submitted the DA to request a formal application be submitted. This application must be submitted within 14 days of being contacted by the SLA and any further information required must be provided within 30 days of request.
Those who have an application to become an eligible buyer accepted will enter into a ballot to purchase affordable housing and, if successful, their details will be provided to the Developer to commence negotiations to enter into a Contract for Sale.
Once the details of the buyer have been provided to the Developer, the buyer will be required to exchange contracts within 15 working days (unless the developer is acting unreasonably). While there are restrictions on the form of Contract for Sale provided by the Developer and the Contract must include the mandated inclusions list provided by the SLA, there is a risk buyers will be pressured into exchanging a Contract in a form that is not in their best interests.
There are risks involved for both Developers and Buyers of affordable homes under the new Action Plan.