title: Enhancing affordable housing policy through green building principles: An integrated participatory system modelling approach
Creators: name: MacAskill, Stefen A
Publisher: name: Griffith University
Year: 2021
Subjects: subject: Green building principles
subject: affordable housing policy

description: This thesis establishes new insights into the provision of affordable, operationally efficient rental housing in Australia, within the context of government-supported affordable rental housing schemes. A revision to the Australian ‘Affordable Housing Bond Aggregator’ (AHBA) model is proposed, which includes the integration of a green building mandate on affordable rental housing stock and the utilisation of sustainable financing pathways – notably green bonds. Linkages between the operational utility efficiency of rental housing, sustainable financing avenues, and outcomes for low- and middle-income households are investigated; furthermore, how ongoing operational utility efficiencies, achieved through green building principles, may be captured to improve the efficacy of government social support schemes as a system is examined. This research has implications for the Australian affordable housing sector. This thesis applies a mixed-methods approach to address and synthesise the following three concepts: 1) Green building principles as a demand-side subsidy to improve tenant outcomes within affordable housing policy. A case study is presented. 2) The application of green versus conventional housing bonds as a financing mechanism for affordable housing policy. A systematic literature review is undertaken to reveal plausible financing cost savings and ‘green premium’ determinants. 3) Lastly, an operational system dynamics model is developed to examine the outcomes of the AHBA in South East Queensland, and also to forecast the implications for integrating green building principles, including green bonds, against environmental, social, and economic outcomes. First, this research engages with a case study to investigate the financial value of green building principles within South East Queensland. Rising energy, water, and gas costs exert increasing financial pressure on low- and middle-income rental households, which are often subject to issues of split-incentives. The split-incentive problem concerns the lack of appropriate incentives for landlords to implement green building principles and associated utility efficiency measures. Little incentive exists for landlords to invest in operational utility efficiency upgrades to rental housing within existing Australian affordable housing policy. In addition, the financial implications of doing so are not well understood. This study therefore seeks to identify the financial value of green building principles over a 10-year rental tenancy. A multi-residential affordable housing development in Yeronga, Brisbane is analysed from the design stage; two scenarios are studied to determine the estimated household utility savings between a ‘Business as usual’ and ‘Green-certified’ case. Operational utility efficiencies, achieved through green building principles, are modelled to reduce total housing costs by 1.7–3.8% (an average approximate saving of AUD $5–18 per week) for one- and four-person low-income households, respectively. These savings are regarded as a demand-side subsidy that directly benefit tenants. The costs for implementing green certification are assessed, which are found to be marginal when compared with the longer-term operational cost savings of the improvements. The findings provide evidence to suggest that a case exists within public affordable housing policy to expand on the conceptual notion of ‘housing assistance’ from a direct discount to market rent approach (or cash subsidy) to one that includes a broader set of factors – such as operational utility efficiency. The study proposes that incentives provided under government-supported affordable housing policy offer an avenue for mediating split-incentive problems through an incentive structure that utilises a mix of demand- and supply-side subsidies to reduce housing stress for low- and middle-income households, and to promote the supply of affordable housing options. The implications of the study relate to innovative perceptions of affordable rental housing subsidies through green building practices. The second study employs a systematic literature review to investigate plausible debt financing benefits for affordable housing policy by engaging with the green bond market. The green bond market is emerging as an impactful financing mechanism towards climate change mitigation efforts. Studies have revealed the notion of a ‘green premium’ or ‘greenium’ within green bond pricing, including insights into influential characteristics and the drivers that govern it. However, methodological heterogeneity among these studies has resulted in general ambiguity regarding a consensus over the existence of the green premium. This research addresses this gap through a systematic literature review that aims to establish a consensus on the existence – or nonexistence – of a green premium in the green bond market. The review examines studies published between 2007 and 2020. A ranking of the green bond characteristics most likely to exhibit a green premium is organised, including a framework of driving factors. The findings confirm a consensus on the existence of a green premium within 56% of primary and 70% of secondary market studies, particularly for those green bonds that are government-issued, investment grade, and that follow defined green bond governance and reporting procedures. The green premium varies for the primary market; however, an average green premium of −1 to −9 basis points on the secondary market is observed. The study has implications for bond pricing theory by suggesting that future bond pricing should consider noneconomic motives of investors, such as environmental preferences. Furthermore, they suggest plausible financing benefits should future Australian affordable housing policy integrate a mandate for green building certification. This is particularly the case for the AHBA with regards to linkages between a large pool of green-certified housing assets and government-issued housing bonds. Lastly, the thesis organises the concepts of green building and sustainable financing into an operational system dynamics model. System dynamics is a method for analysing the dynamic complexity of social systems with a strong emphasis on computer simulation. Building on the aforementioned foundation studies, the model is framed around the recently introduced AHBA policy framework. Its purpose is to assess two policy scenarios: a business as usual and a green-building policy scenario. The latter establishes a mandate on green building standards within affordable rental housing together with the use of green versus conventional bonds. The impact on social, environmental, and economic outcomes of the framework over a 20-year horizon is assessed. The boundary of the model is within the South East Queensland metropolitan area of Australia. Overall, it is found that the green building framework will deliver 2.37% less housing due to higher initial capital costs. However, green affordable housing delivers substantial long-term energy and water efficiency benefits, improved affordability for tenants due to reduced utility costs, deferred water and energy infrastructure benefits, and considerable contributions towards Australia’s carbon emission reduction targets. Tenants are expected to benefit from a 45–59% reduction in energy and a 27% decrease in water bills. Moreover, a shift to affordable green building policy could contribute to 2.9% of Australia’s Conference of Parties 2030 carbon emissions reduction target if applied nationally. The thesis concludes with a sensitivity analysis, revealing policy refinement recommendations that would yield the benefits of green affordable housing without sacrificing the small reduction in housing stock delivered by the proposed program. It is determined that a green building grant provided to developers would mitigate the reduction in affordable housing supply, and at a net financial cost that is lower than the aggregated benefit. Overall, this research has implications for the future of Australian affordable housing policy through providing evidence to suggest that a focus on green building principles at a policy level may offer a broad base of economic, environmental, and social benefits, which are detailed in this thesis.