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The Commonwealth-State Housing Agreement

E-Brief: Online Only issued 29 November 2001

Greg McIntosh, Analysis and Policy
Janet Phillips, Information/E-links
Social Policy Group

Background

Governments in Australia provide a range of support and assistance for housing. The two main programs dedicated to specific housing assistance are the Commonwealth-State Housing Agreement (CSHA) and Rent Assistance (RA).

The CSHA is a joint Commonwealth-State arrangement which aims to assist both renters and purchasers obtain appropriate accommodation. It is mainly concerned with the provision of public housing, but also provides funding for other types of tenure as well. The main identified funding priorities of the CSHA are public housing, community housing, crisis accommodation, Aboriginal rental housing, private rental support and home ownership support. On average, the Commonwealth provides approximately two-thirds of total funding for the CSHA with the remainder being provided by the States and Territories. According to data published by the Commonwealth Department of Family and Community Services (see Table below for full details) the Commonwealth provided $957.6m for the CSHA in 1999–2000.

Rent Assistance is fully funded by the Commonwealth and provides rental assistance to low income households and individuals in the private rental market. Assistance is in the form of a non-taxable income supplement paid to people who receive income support payments or more than minimum family payment in recognition of housing costs in the private market. From the mid 1990s total outlays on RA have exceeded those provided on the CSHA, for example, in 1999–2000 an excess of $1.5 billion was spent on the provision of RA.

Other Types of Housing Assistance

As well as the CSHA and the provision of Rent Assistance to private renters, the Commonwealth also provides a range of other housing assistance. The main forms of this other assistance include:

Recurrent and capital funding for residential aged care, including funding for high care (nursing homes), low care (hostels) and Community Aged Care Packages (CACPs).
Specific Aboriginal housing programs that are largely administered by the Aboriginal and Torres Strait Islander Commission (ATSIC), for example, the Community Housing and Infrastructure Program (CHIP) and the Home Ownership Program.
Specific programs (many of which are jointly done with the States and Territories) that are designed to help people move into more independent living arrangements or to provide for their ongoing support needs. Examples of such programs include the Supported Accommodation Assistance Program (SAAP), the Home and Community Care Program (HACC) and the Commonwealth-State Disability Agreement.
Various concessional taxation arrangements such as negative gearing for rental properties, the First Home Owners Scheme and capital gains relief for the family home.

For an overview of the housing system as a whole, including the private market and details on social housing in general see the Australasian Housing Information Network portal.

Additional background and data can also be found in Chapter 16: Housing of the Productivity Commission's Report on Government Services 2001.

Development/Evolution of the CSHA

Initiatives by the Chifley Labor Government resulted in the first CSHA being finalised with the six States in November 1945. The main impetus for such an arrangement was provided by the Commonwealth Housing Commission in a report it released in August 1944. The Commission was appointed in April 1943 to assess the state of Australia's housing stock. It reported that there was an estimated housing shortage of 300 000 dwellings. The Commission advised the Commonwealth to take an active role in providing housing to overcome this shortage. Since 1945 the Commonwealth has made financial allocations to the States for this purpose. Commonwealth-State Housing Agreements were negotiated with the States in 1945, 1956, 1973, 1978, 1981, 1984, 1989, 1996 and 1999. The Northern Territory was included in the CSHA in 1981 and in 1989 the Australian Capital Territory became a party to the Agreement.

Section 96 of the Constitution, which allows for the Federal Parliament to 'grant financial assistance to any State on such terms and conditions as the parliament thinks fit', has been the legal avenue by which the Commonwealth has made available CSHA funds to the States and Territories to allow for the construction of public housing and the lending of funds for home purchase.

The 1945 CSHA

The first CSHA allocated funds for the construction of new dwellings only and 50 per cent of such housing had to go to ex-defence force personnel. The housing was to be for rental only—the Commonwealth provided loan funding and the States were to be responsible for service delivery. Much of the housing constructed via the first CSHA was on large estates on the outskirts of the major cities in Australia and was partly responsible for the urban sprawl that characterised the post war years.

The 1956 CSHA

Over the period 1956 to 1973 the main aim of the CSHA was to encourage home ownership via the provision of low interest loans to home builders and the sale of houses on highly concessional terms. Public rental housing was still important, particularly for low income households who could not afford to buy a home. Throughout this period the States had considerable leeway under the CSHA (including the level of rents, type of rebates, eligibility criteria and even the level of funding) and this resulted in substantial policy and funding differences between the various jurisdictions.

The 1973 CSHA

In the 1973 Agreement the emphasis moved towards targeting housing assistance to low income earners and new eligibility requirements were introduced for both rental and home ownership. As well, it was specified that only 30 per cent of new CSHA housing could be sold to home purchasers.

The 1978 CSHA

The 1978 Agreement further limited housing assistance to those in most need—grants were given for pensioner assistance and others in need. This Agreement also saw an expansion in the types of housing provided under the CSHA including the leasing of dwellings, joint ventures, community housing and interest subsidies for those buying a home. In the context of the 1978–79 Budget the Commonwealth included a requirement that the States match Commonwealth CSHA advances.

The 1981 CSHA

Whilst broadly similar to the 1978 CSHA, the 1981 Agreement included formal State matching requirements in terms of funding and an increasing proportion of Commonwealth funding was earmarked for specific groups. However, with respect to untied funds the States were free to allocate money to rental or home purchase assistance without restriction.

The 1984 CSHA

The main aim of the 1984 Agreement was to increase the level of public rental housing. Various 'ear marked' grants were replaced with a number of specific programs aimed at particular groups and segments of the housing market: rental housing for Aborigines, rental housing for pensioners, crisis accommodation, local government and community housing and mortgage and rent assistance. Home purchase loan repayments were to be set at market levels and rent levels for public housing were to be set on a formula outlined in the Agreement.

The 1989 CSHA

This Agreement also emphasised the need for additions to be made to the level of public housing stock, or at least to halt the decline in the level of stock available. Commonwealth assistance was to be made in the form of grants, not loans as in the past, and the States were required to match at least half of the Commonwealth's untied grants with funding of their own. Joint Commonwealth-State assistance plans were introduced and an increasing emphasis was placed on user rights for those in rental housing.

(From the mid to late 1980s the Commonwealth began to place a greater emphasis on private rent assistance via the Commonwealth Rent Assistance (RA) scheme. Expenditure on RA increased from approximately one quarter of CSHA expenditure in 1984–85 to approximately one and a half times the expenditure on CSHA by 1994–95).

The 1996 CSHA

One of the key features of this Agreement was an emphasis on housing outcomes for individuals as opposed to building up the stock of public housing. Another emphasis was on improving accountability for the housing assistance provided including the setting of targets and the measurement of outcomes.

The 1999 CSHA

The current CSHA is due to expire in mid 2003 and already there are moves underway to begin negotiations for a new 2003 Agreement. The 1999 Agreement focuses on helping families and individuals who cannot be adequately housed in the private market. It builds on the 1996 Agreement in terms of strengthening accountability and reporting mechanisms and also how outcomes are measured. A key feature of this Agreement is that housing assistance should be based on need as opposed to the earlier notion of security of tenure. As well, bi-lateral agreements between each jurisdiction and the Commonwealth have become the norm.

Funding

The following Table from the Commonwealth Department of Family and Community Services shows Commonwealth spending on the CSHA over the period 1994–95 to 2000–01. Figures are given for the main sub-sections and programs of the CSHA and State/Territory breakdowns are shown. It should noted that three Commonwealth-State Housing Agreements (the 1989, 1996 and 1999 Agreements) are covered, at least partly, in the data shown on the Table.

Commonwealth Funding for the CSHA: 1994–95 to 2000–01

The 1989 CSHA

1994–95	Untied Grants	Pensioner Rental Housing Program	Aboriginal Rental Housing Program	Mortgage and Rent Assistance Program	Crisis Accomm Program	Community Housing Program	Total
($'000)
NSW	267 845	18 960	20 597	10 495	18 261	21 253	357 411
VIC	199 978	11 432	3 638	7 785	9 987	19 335	252 155
QLD	133 783	9 518	30 313	5 498	8 946	12 085	200 143
WA	70 301	4 093	15 862	5 192	467	5 353	101 268
SA	53 592	3 852	9 224	2555	3 236	4 751	77 210
TAS	19 244	912	-	822	-	1 857	22 835
ACT	18 218	523	-	522	890	1 749	21 902
NT	13 518	523	19 247	297	398	358	34 341
TOTAL	776 479	49 813	98 881	33 166	42 185	66 741	1 067 265

1995–96
NSW	257 356	18 520	17 777	10 481	14 803	24 257	343 194
VIC	185 812	10 882	3 638	7 734	9 921	18 843	236 830
QLD	137 217	9 791	30 405	5 574	7 150	13 540	203 677
WA	70 714	4 153	15 862	2 956	7 096	7 119	107 900
SA	50 508	3 945	8 342	2 537	4 554	6 158	76 044
TAS	29 617	1 429	1 392	815	2 164	2 258	37 675
ACT	18 182	523	-	520	753	1 161	21 139
NT	13 510	523	19 669	297	476	1 016	35 491
TOTAL	762 916	49 766	97 085	30 914	46 917	74 352	1 061 950

The 1996 CSHA

1996–97	Base Funding (1) (Net of SFCs)	Aboriginal Rental Housing Program	Crisis Accom Program	Community Housing Program	Total	State Fiscal Contribution (Actual)
($'000)
NSW	290 663	17 777	13 432	21 675	343 547	0
VIC	213 536	3 638	9 868	15 924	242 966	0
QLD (2)	43 249	25 227	7 238	11 679	87 393	113 368
WA	82 498	15 862	3 812	6 152	108 324	0
SA	51 696	8 342	3 221	5 197	68 456	18 000
TAS	26 235	696	1 033	1 667	29 631	0
ACT	9 137	0	665	1 074	10 876	10 366
NT	14 370	19 458	386	622	34 836	0
TOTAL	731 384	91 000	39 655	63 990	926 029	141 734

1997–98
NSW	259 265	17 777	13 433	21 676	312 151	0
VIC	190 333	3 638	9 861	15 913	219 745	0
QLD (3)	22 321	25 227	7 263	11 720	66 531	117 857
WA	74 058	15 862	3 837	6 192	99 949	0
SA	41 351	8 342	3 178	5 129	58 000	20 000
TAS	23 628	696	1 021	1 647	26 992	0
ACT	12 615	0	664	1 071	14 350	5 308
NT	7 167	19 458	398	642	27 665	6 500
TOTAL	630 738	91 000	39 655	63 990	825 383	149 665

1998–99
NSW	256 461	17 777	13 425	21 663	309 326	0
VIC	188 181	3 638	9 850	15 896	217 565	0
QLD (4)	84 094	25 227	7 303	11 784	128 408	55 412
WA	73 653	15 862	3 855	6 221	99 591	0
SA	55 306	8 342	3 157	5 094	71 899	5 000
TAS	23 171	696	1 004	1 621	26 492	0
ACT	12 295	0	658	1 061	14 014	5 400
NT	10 621	19 458	403	650	31 132	3 043
TOTAL	703 782	91 000	39 655	63 990	898 427	68 855

Notes:
(1) Commonwealth allocations were reduced for 1996–97 to 1998–99 as some States chose to use CSHA funds to offset their State Fiscal Contribution (SFC) liabilities to the Commonwealth Government's debt reduction program, which was agreed at the 1996 Premiers' Conference.
(2) QLD 1996–97 SFC payment is comprised of reductions to several portfolios but payment was made from CSHA grants for administrative simplicity. Queensland agreed to transfer approximately $84m from other State sources for CSHA purposes.
(3) QLD 1997–98 SFC payment is comprised of reductions to several portfolios but payment was made from SHA grants for administrative simplicity. Queensland agreed to transfer approximately $89m from other State sources for CSHA purposes.
(4) QLD 1998–99 SFC payment is comprised of reductions to several portfolios. QLD agreed to transfer approximately $40m from other State sources for CSHA purposes.

The 1999 CSHA

1999–2000	Base Funding	GST Compensation	Aboriginal Rental Housing Program	Crisis Accom Program	Community Housing Program	Total Commonwealth
($'000)
NSW	253 020	-	17 777	13 417	21 651	305 865
VIC	185 864	-	3 638	9 856	15 905	215 263
QLD	138 124	-	25 227	7 325	11 819	182 495
WA	73 232	-	15 862	3 884	6 267	99 245
SA	59 068	-	8 342	3 132	5 054	75 596
TAS	22 705	-	696	990	1 598	25 989
ACT	17 394	-	0	649	1 047	19 090
NT	13 557	-	19 458	402	649	34 066
TOTAL	762 964	-	91 000	39 655	63 990	957 609

2000–01
NSW	249 635	23 000	17 777	13 410	21 640	325 462
VIC	183 463	15 000	3 638	9 856	15 904	227 861
QLD	136 954	19 850	25 227	7 357	11 872	201 260
WA	72 505	8 533	15 862	3 895	6 285	107 080
SA	57 878	9 517	8 342	3 109	5 017	83 863
TAS	22 260	2 617	696	977	1 576	28 126
ACT	17 208	5 900	0	647	1 044	24 799
NT	13 485	5 250	19 458	404	652	39 249
TOTAL	753 388	89 667	91 000	39 655	63 990	1 037 700

NB: The 2000–2001 table shows projected expenditure as at 28 February 2001.

Source: Answer to Senate Estimates Question on Notice No. 46(a) asked by Senator Evans on 20 February 2001. Senate Community Affairs Legislation Committee, Additional Information Received, Family and Community Services Portfolio, Volume 1, May 2001, pp. 117–119.

Commonwealth funding for the CSHA has been reduced in real terms over the period covered in the Table. During the course of the 1996 CSHA some State/Territory jurisdictions (Queensland, South Australia and the two Territories) did not take up their full Commonwealth CSHA allocations so as to offset their State Fiscal Contributions—see Notes for more details.If future projections of Commonwealth funding are accurate this reduction in support is likely to continue into the future. For example, projected Commonwealth outlays for the CSHA are $1028m in 2001–02, $1019m in 2002–03, $920m in 2003–04 and $911m in 2004–05. (Answer to Senate Estimates Question on Notice No 46 (b): Senate Community Affairs Legislation Committee, Additional Information Received, Family and Community Services Portfolio, Volume 1, May 2001, p. 120.)

As mentioned earlier however, it should be noted that as funding for the CSHA has been declining, Commonwealth funding for Rent Assistance has been increasing, for example, outlays on Rent Assistance have risen from $1.45 billion in 1994–95 to $1.7 billion in 2000–01 (Department of Family and Community Services, Annual Report 2000–01, p. 111). This is in line with the recent trend towards relying more on the private rental market to provide housing for those in need.

The increased expenditure on RA over the past 10 to 15 years has been driven by both increases in the amount of individual RA provided and expanded access in terms of those eligible for RA. The major changes to RA affecting access to the assistance have been:

July 1987 – the separate income test for RA was abolished and RA was paid as a component of the income test rate of income support payable. This considerably expanded access to RA to part-rate income support recipients.
December 1987 – For the first time RA was paid to families with children paid as a part of the Family Allowance Supplement. Previously RA was only payable attached to an income support pension/allowance. This considerably expanded access to RA.
June 1989 - $5 a week was added to the RA for families with children. Rent threshold above which RA was payable was raised to $20 per week.
June 1990 – higher RA rate paid to families with 3 or more children.
March 1991 – Twice yearly CPI indexation of the RA rate was introduced.
March 1993 – Universal RA rent threshold varied for families with greater numbers of children and the withdrawal rate up to the maximum rate eased to 17 cents in the dollar.
March 1994 – abolition of RA waiting periods for allowance recipients.
March 1996 – maximum RA rate was increased by $5 per fortnight for families with children.
July 2000 – the maximum rate of RA was increased by 4 per cent as part of the compensation for the GST.

The Key Issue

The Changing Nature of Public Housing and the Problem of Affordability

A key concern in relation to housing in Australia at present is the lack of affordable and appropriate housing, particularly for those families and individuals 'caught in the middle', i.e. those who find it difficult to access public housing but who cannot afford to buy or rent privately. Recent changes to public housing including declining CSHA outlays and changing tenure and eligibility requirements has meant that only those on very low incomes are being housed in the public sector. Notwithstanding increasing outlays on RA, the private rental market is increasingly out of reach for many families and individuals whose slightly higher incomes also make it difficult for them to access the public housing sector. Housing researcher, Owen Donald (Australian Housing and Urban Research Institute, Research and Policy Bulletin, Issue 3, August 2001) sums up the situation thus:

Many low income people are paying in excess of 30 per cent of their gross income for housing. This is commonly regarded as the limit of housing affordability for people on low incomes. Above this level they will need to make choices about cutting back on essential expenses.
Present policy settings are unable to generate a sufficient supply of affordable housing in vibrant labour markets. This is a crucial issue for achieving welfare reform and combating economic and social exclusion. It needs to be resolved to avoid concentrating low-income people in economically depressed regions with few job prospects.
The maximum rate of Commonwealth Rent Assistance is well below the level required to make private rents affordable for low-income people in most capital cities and some other locations.
Most states' public housing systems are under stress, with significant financial pressures associated with: falling rental income; the maintenance and refurbishment of ageing stock; and the need for major adjustments to take account of demographic and social changes.
A major challenge is to deliver more seamlessly a range of housing, health and welfare services to address the individual circumstances of people with complex and inter-related needs (such as for the frail aged or homeless people with substance abuse problems).
There is a profound shortage of affordable and adequate housing for Indigenous Australians. Many communities in remote areas lack access to basic facilities for essential good health.

The Commonwealth-State Housing Agreement