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The future of public housing in Australia

A house nearing the final stages of construction
The Australian Institute of Health and Welfare (AIHW) has just released a significant report on public housing in Australia. The report provides an extensive profile of public housing delivered under the last Commonwealth State Housing Agreement and the first six months of the National Affordable Housing Agreement (NAHA), which commenced on 1 January 2009. This report closely follows the release of an Australian Housing and Urban Research Institute (AHURI) publication that critically analyses the future of public housing in Australia.

While they differ substantially in their approaches to the subject matter, both the AIHW and AHURI reports highlight the need to maintain and expand existing public housing to meet the needs of Australia’s low income households.

For some time, housing supply in Australia has not kept up with underlying demand—that is, the need for new housing stock as a result of population growth and trends in household formation (that is, household size and demographics). This has resulted in an estimated shortfall of almost 180 000 dwellings as at June 2009 and contributed to significant levels of housing stress, especially among low income households. For example, the COAG Reform Council found that, in 2008–09:

• almost half of the low-income households renting privately were in rental stress
• only 3 per cent of dwellings were affordable to low-income households (negligible for low-income Indigenous households) and
• of all low-income households with a mortgage, almost half were in mortgage stress.

The Government has recently introduced a number of reforms that are calculated to tackle Australia’s housing supply crisis. Among other things, the Government:

• introduced a National Rental Affordability Scheme
• established an Office for Housing and the National Housing Supply Council (NHSC)
• provided for up to 19 300 new social housing dwellings and repairs and refurbishments of over 60 000 existing social housing dwellings through the Social Housing Initiative
• introduced the A Place to Call Home initiative which aims to provide 730 new dwellings for the homeless
• supported the Residential Mortgage-Backed Securities Market during the GFC
• provided a temporary increase in the First Home Owner’s Grant to stimulate housing construction and
• established a Council of Australian Governments (COAG) process to clear infrastructure planning and provisions obstructions.

However, it may be years before many of these reforms yield significant results given the entrenched and complex nature of Australia's housing supply problem. In this context, according to current National Housing Supply Council (NHSC) projections, the gap between supply and demand will continue to increase and exacerbate the nation’s housing affordability problem.

For those low income households most in need, the federal, state and territory governments provide public housing. However, a reduction in the size of the public housing stock has reduced the ability of governments to provide affordable housing to these households. Waiting lists for public housing are high and increasing, and the housing affordability problem has contributed to sustained high levels of homelessness in Australia.

If the situation of all of Australia’s low income households is to be improved in the short to medium-term then this may require the introduction of further housing policy reforms.

The Henry Review of Australia’s tax and transfer system noted the stimulatory effect on housing demand of the current highly favourable treatment of owner occupied housing. It therefore recommended a number of changes aimed at making housing more affordable and better matching supply and demand. These include:

• removing stamp duties
• streamlining land taxation so as to remove disincentives to property investment
• moving to a more neutral tax treatment of negative gearing and capital gains on investment in residential property
• reviewing infrastructure charges to remove impediments to housing development activity and
• refining Rental Assistance and increasing its maximum rate to ensure that renters are able to afford an adequate standard of dwelling.

While some of these proposed reforms are likely to prove controversial and difficult to implement, the introduction of any or all of them could potentially assist in increasing Australia’s supply of housing. This would undoubtedly benefit low income households individually and collectively. It could also help to improve the fairness of Australia’s housing policy. However, while reforms such as these - and those already being implemented under the NAHA - are likely to help meet the growing need for affordable housing in Australia, it is clear that the demand for strong government commitment to public housing will continue.
(Post co-authored with Peter Hicks)
(image sourced from: http://www.nhsc.org.au/foto.htm)