Housing affordability and social housing

Australia’s housing affordability situation is dire, and looks set to worsen. The figures, as outlined in a recently released AIHW report, are stark. They indicate that between 2001 and 2011 national average house prices increased by 147 per cent, from $169,000 to $417,500, while median household disposable income rose by 57 per cent. Further, the proportion of Australian households in housing stress (that is, spending over 30 per cent of their gross household income on housing costs, either mortgage repayments or rent) has increased from 14 per cent in 1994–5 to 18 per cent in 2011–12, with 2 in 5 (42 per cent) of these being low-income households (in the lowest 40 per cent of the income distribution).

According to the recently abolished National Housing Supply Council (NHSC) the fundamental problem is one of supply and demand. As a result of a number of factors, chief of which are: Australia’s growing and ageing population; the trend toward smaller household sizes and larger dwelling sizes; major changes in household composition and relationships; taxation policy; land release and zoning; and labour costs, the NHSC argues that housing supply is simply not keeping up with underlying demand. As at June 2011, the Council estimated this shortfall at 228,000 dwellings. It projects growth in the overall gap between demand and supply to increase to 370,000 dwellings by 2016 and 492,000 dwellings by 2021.

Judging by a speech made in July 2013 by Kevin Andrews, Minister for Social Services, and a closing address given by Minister Andrews to the National Housing Conference in November 2013, the Government is well aware of the scale and potential consequences of Australia’s housing affordability problem. While the Government’s intentions in relation to housing and homelessness policy have not been specified at this stage, Minister Andrews has provided some indication as to the Government plans to address the national housing problem. Minister Andrews has suggested that, among other things, the Government wishes to make the National Affordable Housing Agreement (NAHA) ‘competitive and performance-based’. As such, it intends to introduce benchmarks for the states’ and territories’ delivery of new dwellings and to tie a percentage of Federal funding to state and territory outcomes against these benchmarks.
The Government has also intimated that it is considering making changes to the National Rental Affordability Scheme, which offers incentives to investors to make new properties available to low- to middle-income earners at 20 per cent below market price. Specifically, Minister Andrews has suggested that the scheme could be opened up to direct small investor participation, as opposed to the current system which is based on allocating bulk incentives.

These strategies, along with others that the Government may adopt, could help to increase the nation’s overall housing supply. However, given the size of the shortfall, it is likely that the gap between supply and demand will continue to grow, and that housing affordability in Australia will deteriorate.

In this context, there is a clear need for a significant supply of social housing stock to meet the needs of Australia’s low- to moderate-income households, who cannot afford private market rental in many areas of Australia. Without this essential safety net, financial stress among low-income earners in particular is likely to increase, as is the incidence of homelessness.

In his recent speeches, Minister Andrews has indicated that the Government is reluctant to invest directly in public (that is, government-owned) housing. It intends to support, where appropriate, the transfer of public housing to the community housing sector, as did the previous Rudd-Gillard Government. Perhaps the main rationale behind such a transfer (whether this be management out-sourcing or actual stock transfer) is that community housing providers are in a position to leverage their assets and seek private finance in order to build more housing stock. Because they have more ways of funding their housing services than do state housing authorities—they have access to tax subsidies and donations and many of their tenants may be eligible for Rent Assistance where public housing tenants are not—community housing providers are potentially able to fund the construction of more social housing stock (and to maintain this stock) in a way that state and territory governments are not.

The question is, just how successful is this approach likely to prove?

The policy of transferring public housing to community housing providers is relatively new in Australia and thus far only small scale transfers have been enacted. As a result, it may be some time before it is possible to assess the policy’s success in increasing the overall stock of social housing. That said, based on the limited evidence available, a number of housing researchers have observed that achieving substantial growth in affordable housing provided by the community housing sector will be ultimately dependent on increased public investment.



Flagpost is a blog on current issues of interest to members of the Australian Parliament

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