Social housing and homelessness

Budget Review 2017–18 Index

Matthew Thomas

The 2017–18 Budget includes two main measures that are calculated to help increase Australia’s stock of social housing—reform of the National Affordable Housing Agreement (NAHA) and the establishment of an affordable housing bond aggregator.[1]

National Housing and Homelessness Agreement

The NAHA was introduced by the Rudd Government in 2009. It replaced the Commonwealth-State Housing Agreement (CSHA), which had, since 1945, been the main vehicle through which Australian governments introduced housing policy initiatives and, along with state and territory governments, provided funding for housing.

Under the NAHA a number of existing Commonwealth housing and homelessness assistance programs were rationalised with a view to introducing a whole-of-housing system approach to housing affordability and placing affordable housing at the core of the national agenda.

The NAHA is supported by the National Affordable Housing Specific Purpose Payment (NAHSPP) and a number of National Partnership payments made to the states and territories to support affordable housing services in particular areas. The national partnership payments are not tied to specific programs but are outcomes-based. This is in recognition of the fact that:

while state and territory governments have similar broad objectives for providing social housing, the emphasis each places on an individual objective differs depending on historical precedents and processes for interaction with community sector providers. Private housing markets also vary across jurisdictions. Accordingly, policy responses and associated forms of assistance vary across jurisdictions.[2]

The Government has for some time expressed dissatisfaction with the performance of the states and territories under the NAHA.[3]

Figures from the 2016 Council of Australian Governments (COAG) Report on Performance 2016 indicate that three of the four key benchmarks identified in the NAHA have not been met.[4] Australia’s stock of public housing has fallen consistently over recent years. While this reduction has been offset to some degree by an increase in the supply of community housing, the overall stock of social housing is not increasing at a rate sufficient to keep up with demand.[5] As at 30 June 2016, there were 194,592 applicants on the waiting list for social housing across Australia.[6]

The Government has also criticised the NAHA for a perceived lack of transparency and accountability.

Under the NAHA, the states are not required to report on their allocation of funding. This is because, as noted above, under the agreement there is no identified program funding. Instead, the states are responsible for determining the amount of funding to be directed to particular government programs and services.

In view of the failings of the NAHA, the Government is introducing a new National Housing and Homelessness Agreement (NHHA). Under this agreement, funding to state and territory governments is to be linked to specified outcomes in priority areas, including: targets for social and affordable housing; residential land planning and zoning reforms; inclusionary zoning arrangements; renewal of public housing stock and transfer of public housing to community housing providers;[7] and homelessness services.[8] Performance against these outcomes is to be monitored through schedules with clear targets, to be negotiated with the states. Funding of $6.5 million has been allocated to the National Competition Council (NCC) to ‘assist with the implementation and ongoing assessment of state and territory performance’.[9]

Funding under the NHHA is to be maintained at the current level provided under the NAHSPP of around $1.3 billion per annum. However, under the NHHA, funding currently allocated under the NAHSPP and the National Partnership Agreement on Homelessness (NPAH) will be combined. Hence, total NHHA funding over the forward estimates period will be around $6.5 billion.[10]

Homelessness funding

The Government will provide $375.3 million over three years from 2018–19 towards the provision of homelessness support services, to be matched by the states and territories.[11]

When the NPAH was introduced, it was funded over five years from 2009 to 2013. Since then, funding for homelessness services provided under the NPAH has been allocated through interim funding arrangements, on an annual or bi-annual basis. Providers of homelessness services have expressed concerns over recent years that without ongoing funding certainty they might need to dismiss staff or close referrals from people in need of long-term support, resulting in a crisis in service delivery.[12] In light of these concerns, the Government announced on 9 December 2016, in advance of the Budget, that it would be providing $117.2 million to the homelessness sector for one year.[13]

The commitment of ongoing funding in the Budget should help to ensure the continuity of homelessness services, as should the indexation of this funding by Wage Cost Index 1.[14]

The Government has also allocated $10.2 million over 10 years from 2017–18 towards the trial of Social Impact Investments that fund innovative programs calculated to improve housing and welfare outcomes for young people at risk of homelessness.[15] 

National Housing Finance and Investment Corporation, affordable housing bond aggregator and National Housing Infrastructure Facility

In October 2015, Commonwealth, state and territory treasurers agreed at their COAG meeting to request analysis of ‘innovative finance models’ to increase the supply of affordable housing.[16] This led to the establishment of the COAG Affordable Housing Working Group.

The Working Group released an issues paper calling for submissions on four possible innovative finance models, including a bond aggregator.[17] Essentially, an affordable housing bond aggregator is ‘designed to aggregate and source large amounts of capital from the bond market so as to provide lower interest, long-term loans to not-for-profit community housing providers (CHPs) developing housing for lower income households’.[18]

The Budget provides $63.1 million over the forward estimates period towards the establishment of a National Housing Finance and Investment Corporation (NHFIC), which will be responsible for operating an affordable housing bond aggregator. The design of the bond aggregator and the NHFIC are both to be developed by the Affordable Housing Implementation Taskforce.[19] The NHFIC will also administer a National Housing Infrastructure Facility, which is to provide financial assistance to local government for infrastructure that supports new affordable housing (see Budget Review article ‘Housing affordability measures’).[20]

Comment

The establishment of the NHFIC and a bond aggregator have been welcomed by a number of experts in the housing policy field.[21] As Michael Perusco and Guy Johnson see it, ‘the benefits of this approach are twofold. Firstly, it enables institutional investors, including superannuation funds, to invest in social housing at scale. Secondly, it provides community housing providers with cheaper finance for longer periods’.[22]

Based on the experience of the UK Housing Finance Corporation (HFC), which has operated a housing bond aggregator for some years, a bond aggregator could, over time, attract significant institutional capital into Australia’s social and affordable housing sector. Perhaps the key issue that will determine whether or not this is the case is the size of the government subsidy.

Affordable housing delivers relatively low market returns, and, if it is to prove attractive to most investors, this suggests the need for a government financial contribution. Perusco and Johnson have argued that this contribution will need to be in the order of $2.5 billion per year.[23] (The Budget includes tax incentives to encourage private investment in affordable housing—see Budget Review article ‘Housing affordability measures’.)

Some of the borrowing by the UK’s HFC has been government guaranteed; if the Australian Government were to take a similar step, this could lower costs for community housing providers, but increase risks for government. The budget papers do not identify a clear approach to the risks and benefits associated with government guarantees—this may be addressed in the final report from the Taskforce.

Another factor that is likely to determine the success or otherwise of the approach is the degree of stability in the policy environment. If substantial changes were to be made to the model, once established, or to housing policy settings more generally, this may undermine investor support.



[1].          Social housing is affordable housing provided by the government and community sectors to assist people who are unable to afford or access suitable accommodation in the private rental market. It includes public housing, state owned and managed Indigenous housing (SOMIH) and community housing. Public housing is owned and managed by state and territory governments while community housing is housing that is either owned or managed by not-for-profit community sector organisations.

[2].          Steering Committee for the Review of Government Service Provision, Report on Government Services 2017 volume G: housing, Productivity Commission, Canberra, 2017, p. 18.6.

[3].          When he was Minister for Social Services, Kevin Andrews indicated that the Government intended to make the National Affordable Housing Agreement ‘competitive and performance-based’—making more demands of the states and reintroducing tied funding. K Andrews (Minister for Social Services), Remarks to the Community Housing Federation of Australia (CHFA) Housing and NDIS Forum, 27 March 2014.

[4].          Department of the Prime Minister and Cabinet, Council of Australian Governments: Report on performance 2016, March 2016, pp. 11–14.

[5].          From around 2007, the states and territories have been transferring an increasing amount of public housing to community housing providers, and, at the 2009 Housing Ministers Conference, a target was set to increase community housing stock to make up 35 per cent of the social housing sector.

[6].          Steering Committee for the Review of Government Service Provision, op. cit., Table 18A.3.

[7].          The rationale behind this approach is that community housing tenants are eligible for Commonwealth Rent Assistance (CRA) whereas public housing tenants are not, and this enables community housing providers to charge higher rents without reducing tenant net incomes. Where they have a sufficiently sized asset base, community housing providers are able to use this to leverage financing and further expand their housing stock.

[8].          Australian Government, A new National Housing and Homelessness Agreement, Reducing pressure on housing affordability fact sheet 1.7, current at 12 May 2017, p. 2.

[9].          Ibid. It is not clear whether or not the Government intends to withhold payments to the states if they do not meet agreed targets.

[10].       Australian Government, Federal financial relations: budget paper no. 3: 2017–18, 2017, p. 42.

[11].       Australian Government, Budget measures: budget paper no. 2: 2017–18, 2017, p. 155.

[12].       See for example P Karvelas, ‘Kevin Andrews extends homeless funding after crisis warning’, The Australian, 30 March 2014.

[13].       M Turnbull (Prime Minister), S Morrison (Treasurer), C Porter (Minister for Social Services) and Z Seselja (Assistant Minister for Social Services and Multicultural Affairs), $117 million in new homelessness funding, media release, 9 December 2016.

[14].       Australian Government, Federal financial relations: budget paper no. 3: 2017–18, 2017, p. 43.

[15].       Australian Government, Budget measures: budget paper no. 2: 2017–18, p. 156.

[16].       Both the New South Wales and Victorian Governments have recently established or are in the process of creating funds to support the growth of social housing. 

[17].       The Treasury, ‘Council on Federal Financial Relations Affordable Housing Working Group – innovative financing models’, Treasury website.

[18].       Australian Housing and Urban Research Institute (AHURI), What is a bond aggregator and how does it help build affordable housing?, AHURI Brief.

[19].       S Morrison (Treasurer), Turnbull Government establishes affordable housing taskforce, media release, 10 March 2017.

[20].       Australian Government, Budget measures: budget paper no. 2: 2017–18, p. 170.

[21].       Including Australian Housing and Urban Research Institute (AHURI) researchers, who have contributed to the development of the model. See J Lawson, M Berry, C Hamilton and H Pawson, Enhancing affordable rental housing investment via an intermediary and guarantee, AHURI final report no. 220, AHURI, Melbourne, 2014.

[22].       M Perusco and G Johnson, What the Federal Budget 2017 means for housing and homelessness, ProBono Australia, 10 May 2017.

[23].       Ibid.

 

All online articles accessed May 2017. 

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