Budget Review October 2022–23 Index
Matthew Thomas and Elliott King
Housing for the most vulnerable has remained a persistent
issue in Australia for decades. In recent years increasing housing costs have
become a problem for more people; there are housing supply and affordability
issues across the entire housing continuum, from crisis housing to home
ownership.
Disasters which have devasted
regional communities in the last few years have highlighted the absence of emergency
housing for people rendered homeless by natural disaster, or by other abrupt
changes in their personal circumstances. There is insufficient social housing
stock to meet the present and projected need of low-income households unable to
afford or access suitable accommodation in the private rental market. This is
especially so in regional and remote Indigenous communities, where overcrowding
is common and the quality of housing frequently poor. The latest house price
boom, which began in late 2020, has seen the prospects of home ownership
deteriorate for many, particularly would-be young home purchasers, in both the
capital cities and regional centres.
The drivers behind Australia’s housing crisis are highly
complex and Australia’s housing problems are unlikely to be resolved without
coordinated action across the three tiers of government, and the involvement of
the construction sector and private investment in the design and implementation
of policy responses.
In the lead up to the Federal Election the Government
signalled its intention to establish a framework for tackling housing
affordability problems over the longer term. To this end the Budget contains
the following measures:
- $13.4
million over 4 years to develop a 10 year National Housing and Homelessness
Plan in 2023
- $15.2
million over 4 years and $4.4 million per year ongoing to establish a National
Housing Supply and Affordability Council
- $0.5
million over 4 years and $0.1 million per year ongoing to establish Housing
Australia and
- $8.3
million over 4 years for the administration of a newly created Housing
Australia Future Fund (HAFF).
The Budget also includes measures to respond to acute housing
needs. It should be noted that these measures, listed below, are to be funded
using returns from $10.0 billion invested in the off-budget HAFF.
Over the first 5 years returns from the HAFF are intended
to fund:
- 20,000
social housing properties – 4,000 of which are to be ‘allocated for women and
children fleeing domestic and family violence and older women on low incomes
who are at risk of homelessness’
- $200.0
million for the repair, maintenance and improvements of housing in remote
Indigenous communities
- $100.0
million for crisis and transitional housing options for women and children
fleeing domestic and family violence, and older women on low incomes who are at
risk of homelessness and
- $30.0
million to build more housing and specialist services for veterans who are
experiencing homelessness or who are at risk of homelessness.
The Budget also provides funding to assist some people to
purchase a home:
- $324.6
million over 4 years to establish the Help to Buy shared equity scheme for low
to moderate income earners and
- redirects
funding from the previous Government’s Regional Home Guarantee to establish a
new Regional First Home Buyer Guarantee, under which first home buyers in
regional areas will be supported to purchase their home with a minimum 5%
deposit (see the Library’s previous Budget
Review article for background and comment on the Government’s loan guarantee
arrangements)
This brief largely examines the changes to the
Commonwealth’s role in housing policy announced in the lead up to the Federal
Election and enabled by the Budget, and the HAFF.
Current regulatory settings
A high-level overview of policy levers available across the
levels of government is set out in Figure 1. Generally speaking, the
Commonwealth does not hold responsibility for the main policy levers that
directly impact housing provision, but it does control many of the levers which
influence housing demand (as discussed in the Parliamentary Library’s Briefing
Book article Housing
Market Interventions). As Figure 1 shows, most of the Commonwealth’s
interventions are focussed on the demand side of the housing market.
Source: Australian Housing and Urban Research Institute (AHURI),
‘Understanding
the housing policy levers of Commonwealth, state and territory, and local
government: an overview of demand and supply side policy levers’, AHRUI
website, 27 September 2018.
The need for a housing plan
As noted above, the Budget provides funding for a number of
measures that establish the basis for a more comprehensive and collaborative
approach to housing policy in Australia. Housing experts and other key
stakeholders in the housing sector have been calling for the Commonwealth Government
to develop an overarching, long-term national housing strategy, or plan, for
some time. The Budget signals that the Government intends to become more
involved in other aspects of the housing system, particularly housing supply.
Previous attempts at a plan
Arguably, there have been two main previous attempts to
develop a national program of housing policy reform in Australia. The first of
these was the Chifley Government’s appointment of an investigatory body—the
Commonwealth Housing Commission (CHC)—to assess the state of Australia’s
housing stock and its post-war housing requirements. The second was the National
Housing Strategy (NHS) which was commissioned by the Keating Government in 1990
and reported in 1992. (Patrick Troy, Accommodating Australians, (Sydney:
The Federation Press, 2012)).
Of these attempts, the CHC appears to have had the more
demonstrable impact, in part because it contributed to the development of the
earliest Commonwealth-State Housing Agreement (CSHA) in 1945. Since 1945, Australian
Governments have introduced housing policy initiatives and, along with state
and territory governments, provided funding for housing and homelessness
services through the CHSA and subsequent iterations of this Agreement (Troy, Accommodating
Australians, pp. 104–235).
Current arrangements
Instead of a national housing plan, Australia currently has in
place the National
Housing and Homelessness Agreement (NHHA). This is an on-going compact that
is subject to a five-year review and may be amended as necessary by agreement
of the parties.
In August 2022, the Productivity Commission published the findings of
its scheduled review of the NHHA. The Commission was highly critical of the
Agreement, arguing that it is ineffective in fostering intergovernmental
collaboration and enabling nationally important reforms.
The Plan and the Agreement
In the context of the 2022 Federal Election, the Labor Government
committed to the development of a National Housing and Homelessness Plan
that would ‘set out the key short, medium and longer term reforms needed to
make it easier for Australians to buy a home, easier to rent, and put a roof
over the heads of more homeless Australians’.
The Government also pledged
to establish a National Housing Supply and Affordability Council (NHSAC) that
is intended to play a key role in the development and implementation of the
Plan, and ‘ensure the Commonwealth plays a leadership role in increasing supply
and improving housing affordability’. Based on publicly available information,
it is not yet clear if the NHSAC will operate in the same manner as the former National
Housing Supply Council.
The Budget provides funding for the establishment of both the
NHSAC, and Housing
Australia, in which it is to be housed. Housing Australia is to be created through
renaming and expanding the remit of the National
Housing Finance Investment Corporation (NHFIC).
The Plan is
to be developed ‘with the support and assistance of key stakeholders
including States and Territories, local government, not for profit and civil
society organisations, industry bodies, superannuation funds and other experts
in housing, finance and urban development’. It is not clear at this stage whether
the Plan is to be enshrined in legislation.
Housing policy researcher Hal Pawson has
expressed some reservations with regard to the Budget and what he sees as
its undue focus on the supply side of the market to the exclusion of policy
settings that impact on demand, such as migration, tax, social security and
financial regulation. In his view, ‘It would be hoped the more holistic
analysis of Australia’s housing problems and solutions that’s essential to
address these issues will underlie the government’s forthcoming National
Housing and Homelessness Plan’. Pawson is concerned that the Plan should not be
focused exclusively on homelessness and affordability at the lower end of the
market, as examining these aspects in isolation ‘risks misdiagnosis and the
prescription of palliative solutions’.
The NHHA was due to expire no later than 30 June 2023 but
has been extended for one year ‘to allow for the development of the new
arrangement, in consultation with the National Housing Supply and Affordability
Council and states and territories’ (Budget measures: budget paper no. 2:
October 2022–23, p. 183). This implies that the new arrangements will
be in line with the Productivity Commission’s suggestion
that the Plan ‘should be the overarching document, and the narrower Agreement
the key avenue for implementing parts of the Plan’ (p. 160).
National Housing Accord
In keeping with its shift towards a broader and more
cooperative approach, the Government has developed a National
Housing Accord 2022 with state and territory governments, the
Australian Local Government Association (ALGA), institutional investors
including superannuation funds, and residential development, building and
construction industry representatives. The Accord sets out immediate actions, commitments
and areas for further work, with a view to increasing ‘quality, affordable housing
supply over the medium term’. (NHA, p. 1). The Accord will be administered by
NHFIC and ‘complements the Government’s investment in the [HAFF]’ (Budget
paper no. 2, p. 189).
Under the Accord, the Government has set ‘an initial,
aspirational national target of one million new, well located homes over 5
years from 2024’ (NHA, p. 1). There is some contention as to whether this is an
attempt to take credit for the anticipated growth of housing, or if the
residential construction sector will be able to supply that many dwellings in
current circumstances. Centre for Independent Studies Chief Economist Peter
Tulip takes the former view, and argues that, relative to the size of the economy,
and based on housing construction figures for the past 5 years, this figure will
in fact amount to an unambitious ‘step down’. Hal Pawson
draws attention to the industry’s downgraded forecasts for housing completions
over the next 3 years. Moreover, Pawson highlights that the Budget proposals
remain supply side focused, with no attention having been paid to policy
settings that influence housing demand.
The Accord’s target may yet prove aspirational depending on the
extent to which supply constraints, such as limits on housing construction
materials and labour shortages caused largely by COVID-19 restrictions, are
ameliorated. A recent research
note issued by the NHFIC explores these issues. Interestingly, the note
highlights the shift in the drivers of material price inflation between 2021
and 2022. As the HomeBuilder scheme wound down, dampening the demand component
which had accounted for 75% of cost inflation in the 2021–22 fiscal year, the
supply component of price inflation increased significantly in 2022, now
accounting for 83% of material cost inflation in the 2022 fiscal year.
The Government will provide an additional $350.0
million over 5 years from 2024 to support funding of an additional 10,000
affordable homes as part of the Accord. The funding is
intended to ‘incentivise superannuation funds and other institutional
investors to make investments in social and affordable housing by covering the
gap between market rents and subsidised rents’. The states and territories are
to support an additional 10,000 affordable homes over the same time period
through in-kind or financial contributions that can
include ‘already announced but not yet committed projects’.
Housing Australia Future Fund
As noted above, the funding for the affordable housing is to
come from returns generated from $10.0 billion invested in the HAFF—managed
by the Future
Fund Board of Guardians—and transferred to the NHFIC/Housing Australia (Budget
paper no. 2, p. 191). Similar
to the New South Wales Government’s Social
and Affordable Housing Fund (SAHF) ‘a proportion of the investment returns
will fund annual service payments that will be paid to community housing
providers over 25-years to bridge the gap between rental revenue and operating
costs’ enabling them to build more dwellings.
The exact funding mechanism for the HAFF’s establishment is
not outlined. However, it is likely that it will be set up similarly to other
Future Funds through the creation of a special
account under legislation. Budget Paper no. 1 states that the HAFF will
require legislation, which will be introduced in 2022–23 (Budget paper no.
1, p. 191).
It should be noted that the
Government’s HAFF policy announcement implies that the amounts available
for maintenance and crisis housing expenditure through the fund are dependent
on investment returns generated by the fund. In other words, if returns are low
in a given year, then the available funds for expenditure will be low. This
raises the question as to whether a shortfall in a given year will lead to the
Commonwealth ‘topping-up’ funding from consolidated revenue. Further, will a
bumper year lead to returns in excess of the amounts indicated being returned
to consolidated revenue? Lastly, are the figures a realistic amount to meet the
stated objective of the fund, particularly in a high-inflation environment?
Economist, John
Quiggin has questioned whether the hypothecation model that underpins the HAFF
is appropriate for the goal of increasing social housing, arguing:
To the extent that the hypothecation is genuine, it means
that the money available for social housing depends on the performance of the
share market. And this dependence is the wrong way around. The case for public
spending on social housing is strongest, both in terms of need and the
availability of resources, when the economy and the share market are doing
badly.
On these grounds, Quiggin maintains that ‘the Housing Fund
is, quite simply, a poor substitute for direct public expenditure’.
Quiggin’s views find some support in the findings of an AHURI study
which examined alternative methods for financing social housing. Based on an
extensive assessment of relevant variables and different financing models, the
study’s authors argue that the capital grant model (with its direct capital
investment) is the most cost-effective investment pathway to deliver required
housing outcomes in Australia.
Comment
The Budget, and the Government’s election commitments, mark what
might be considered a measured return of the Commonwealth to housing policy. While
the Budget does not provide funding at the levels required according to most
housing experts, it does establish the beginnings of a potentially more cooperative
and productive national approach to solving Australia’s housing affordability
problems.
Much of the success or failure of the Commonwealth’s return
will depend on whether its involvement in national housing policy is
sufficiently broad and sustained. Housing
researchers Vivienne Milligan and Anne Tiernan maintain that one of the key
problems with housing policy in Australia to date has been the Commonwealth’s
‘erratic and patchy’ policy capacity with regard to housing policy and
provision (p. 391).
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