Why Australia's housing policy has a record of failure

By David Donaldson

October 21, 2015

Australia’s housing policy system is not fit for the purposes of alleviating poverty and reducing housing insecurity, government has been told.

While Commonwealth rent assistance is ill-designed to address these issues, the problem is made worse by chronic under-supply of affordable housing and the financial unsustainability of social housing, according to Vivienne Milligan of the City Futures Research Centre.

Commonwealth rent assistance as it’s designed “is not sufficiently effective to alleviate poverty and insecurity in the private rental market”, the University of New South Wales Associate Professor told the Institute of Public Administration national conference last week. There are “fundamental issues” with its functioning.

“Rent assistance didn’t begin life as a housing program. It doesn’t have affordability objectives, its payment rates are derived from historic levels — they have not kept pace with rents — and maximum payments are capped and have no consistent or equitable relationship with rents across Australia,” she said.

“For example if I took out the figures for a two-bedroom home in Adelaide or Sydney, rent assistance in Adelaide would cover 26% of your rent; in Sydney 17% of your rent.”

But the answer is not just simply increasing rent assistance rates — any policy rejig would require a serious look at the relationship between demand-side assistance and supply-side assistance.

“Social landlords can’t offer a good quality product at an affordable rent with the funding, the rents that they receive.”

“We do need supply-side interventions, but there are no targets and not any more funding for additional affordable housing supply under the NAHA [National Affordable Housing Agreement] or the National Rental Affordability Scheme, which will cease in the near future,” argued Milligan.

The figures on supply of affordable housing are “quite shocking”. There has been no net addition to the supply of affordable social housing since 1996, except for the period of 2008-2012, when social and affordable housing were used to provide economic stimulus in the wake of the global financial crisis.

“The former National Housing Supply Council estimated that the backlog of affordable housing supply was 90,000 dwellings in 2012, and that it would rise to 150,000 in 2020,” she explained.

“On top of this we have to think about the future in growth, and that means at least another 8000 dwellings per annum after we overcome the backlog. So my second point is we do not have a framework for stimulating affordable supply.”

The other big problem, according to Milligan, is that the social housing system “is not financially sustainable”.

“Every public housing tenancy — and they’re now all tenancies for low income people, so rents are reduced — makes an operating loss. Social landlords can’t offer a good quality product at an affordable rent with the funding, the rents that they receive. That’s been glossed over and dealt with by taking funds from other places, such as the supply program, to eke out a future for social housing,” she said.

“The proposal in the options that public tenants be paid rent assistance sounds like a bit of a fix for this. But as I discussed it’s not a fit-for-purpose subsidy. In and of itself it will not generate a system that can self generate and grow into the future.”

What is needed, she thinks, is to work out an accurate cost benchmark for what it costs the social landlord to deliver good quality social housing. “We need then to subsidise the difference between that and what the appropriate tenants of public housing can pay as one component of our system and then we need to address the supply issue as the other,” she said.

The dangers of devolution

Forthcoming research by RMIT University’s Associate Professor Julie Lawson will show the risks of a poorly managed devolution of housing powers, Milligan continued.

The study, which will be published next month, examined four federated systems — Canada, Germany, Austria and the United States — all of which have, in the past decade or so, gone down the path of very significant devolution of roles and responsibilities in housing to lower levels of government.

It is “a cautionary tale” with a few positives, she observed. In Germany and Canada in particular, there have been very different responses by cities, states or provinces, with some jurisdictions not even retaining any public housing. “Not because of lack of need, but because it hasn’t had priority in the fiscal debates,” she said.

“When you untie funds for housing … it’s very, very hard for housing to compete …”

“If you start out with a model that doesn’t work and rely further on the market and further on poorly funded governments, then you have some quite serious consequences in terms of rent increases, endemic housing shortages, exclusion of low income people and increase in homelessness and so on.”

Alarmingly, an extreme example of that was many German municipalities privatising their housing without appropriate funding in place, which then ended up having had to buy housing back from the market. Canada, meanwhile, “don’t even have data on their problems any more because of the withdrawal of research and national public service bodies”.

The other risk is that “when you untie funds for housing — and I think we’ve seen this in the Australian context already — it’s very, very hard for housing to compete, particularly when most of our housing is market-provided and the welfare component of our housing system is quite small and has limited political support. It’s very hard for housing to compete with health and education and the other budget areas,” suggested Milligan.

On the upside, less centralisation can allow for greater institutional investment and delivery by the not-for-profit sector, which may be better placed to know and address needs in specific areas or communities.

Deputy secretary, Strategic Reform and Policy at the NSW Department of Family and Community Services, David de Carvalho, told the conference the idea of giving the states more power in housing isn’t as popular as in areas such as education and health.

De Carvalho — who has previously worked in senior positions in the departments of Education, Finance, Health and the Treasury — said there are three policy areas in particular where stakeholders said “the Commonwealth is our friend”: housing, indigenous affairs and regions — all policy areas dealing with marginalised groups afraid of being forgotten about by state and local authorities in the absence of the Commonwealth.

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