17
January 2017
PDF version [529KB]
Dr Nathan
Church
Foreign Affairs, Defence and
Security Section
Executive
summary
- Prior to the establishment of the Defence Housing Authority (DHA),
much of the accommodation allocated for defence personnel was of poor quality,
with a reliance on state governments for its provision and maintenance.
- The creation of DHA provided a focus on improving the standard of
defence housing, and the Authority’s ability to trade in property allowed for a
complete overhaul of the defence property portfolio.
- However, as a government business, DHA has continued to be
susceptible to potential privatisation, despite contrary views that the
government’s role is critical in ensuring defence housing is appropriately
located, accessible and of the necessary standard to support personnel
retention.
- When compared to the defence housing services offered in New
Zealand, Canada and the United Kingdom, DHA rates well in terms of the efficiency
of its processes and the effectiveness of its service delivery. Policy
requirements, budgetary constraints, and even geography have meant each of the
four countries considered in this paper have unique methods of providing
defence housing. Yet all offer useful insights into the benefits and
liabilities of certain courses of action, especially regarding the impact of
reduced government involvement.
Contents
Executive
summary
Table of abbreviations
Introduction
The early years of defence housing
Defence housing reviews in the 1970s
and 1980s
Garland Review (1977)
Monaghan Review (1985)
Hamilton Review (1986)
Cross Review (1988)
The early years of DHA
DHA’s role in housing defence
personnel
Provision
Members’ Choice Accommodation
Rent Band Choice Accommodation
On-base accommodation
Increased emphasis on leasing
Other services
Maintenance and improvements
Relocations
The privatisation debate
Historical context
The 1990s
2000 to the present
Opposition to privatisation
The increasing commercialisation of
DHA
International comparisons
New Zealand
Canada
The United Kingdom
Key themes
Conclusion
Appendix – list of relevant
legislation and reports
Legislation
Reports
Table of
abbreviations
ADA – Australian Defence Association
ADF – Australian Defence Force
AHL – Annington Homes Limited
ANAO – Australian National Audit Office
APIN – Army Presence in the North
CDF – Chief of the Defence Force
CFHA – Canadian Forces Housing Agency
CSHA – Commonwealth and State Housing Agreement
DFWA – Defence Force Welfare Association
DHA – Defence Housing Authority/Defence Housing Australia
(from 2006)
FAM – Future Accommodation Model
GBE – Government Business Enterprise
GFC – Global Financial Crisis
HMC – Housing Management Centres
JCFADT – Joint Committee on Foreign Affairs, Defence and
Trade
LEAP – Living Environment and Accommodation Precinct
MCA – Members Choice Accommodation
MHS – Modern Housing Solutions
MoD – Ministry of Defence
MWD – Members With Dependants
NCHP – New Housing Classification Policy
NZDF – New Zealand Defence Force
RBC – Rent Band Choice
RSL – Returned & Services League of Australia
SCONDVA – Standing Committee on National Defence and
Veterans Affairs
SFA – Service Family Accommodation
SLB – Sale and Lease-back
UAC – Universal Accommodation Component
Introduction
Following the Coalition’s victory in the
2013 federal election, the subsequent National Commission of Audit recommended that
DHA be privatised, given it operates in ‘contestable markets’.[1]
However, in November 2015 the Chief of the Defence Force (CDF), Air Chief
Marshal Mark Binskin, publicly asserted his support for DHA to remain
government-owned, on the grounds that ‘DHA provides an essential service to
[defence] personnel and their families, which in turn supports Australia’s
military capability’.[2]
Since its establishment in 1988, DHA has often laboured under an identity
crisis, caught between those who perceive it as essentially a business which
supports military capability, and the contrary view which identifies DHA as a fundamental
military capability, which happens to be a business. The distinction is
significant, and the tension between these positions has played an important
role in DHA’s continued evolution and enduring speculation regarding its
future.
This research paper investigates the historical context in
which DHA was initially established, the reasons for its establishment, and its
current processes for housing defence personnel. The paper also assesses DHA’s effectiveness
in realising its stated objectives, framing this analysis within the enduring
debate around whether or not DHA should be privatised. The paper concludes by examining
how defence housing is provided in other contexts, through the case studies of
New Zealand, Canada and the United Kingdom. As in Australia, these countries
have significantly reformed their defence housing programs over the last 20 years
and provide useful perspectives and comparisons.
The early
years of defence housing
Pre-1945, no specific government program existed for housing
permanent defence personnel. Indeed, by the end of the Second World War,
requirements for defence-specific accommodation were largely overshadowed by a broader
national housing shortage across Australia, with a claimed deficiency of some
350,000 dwellings.[3]
In response to the need for new housing, the Commonwealth
and State Housing Agreement (CSHA) Act 1945 included the objective
to allocate dwellings for ‘members or discharged members of the Forces’
(including the Merchant Navy) and their dependants.[4]
However, despite its broad intent, this legislation focused predominantly on
supporting defence force veterans, as opposed to those currently serving.[5]
The subsequent Housing Agreement Act 1956 then became
the catalyst for the first large-scale provision by the Commonwealth (the
Australian Government) of housing for Australia’s full-time defence personnel.
Specifically, the Act called for the states to use a proportion of money
provided by the Commonwealth for constructing, allocating and maintaining
housing for serving defence personnel.[6]
Housing had become an increasingly pertinent issue for the military
in the immediate post-war years, as from 1950 to 1956 the number of permanent Australian
defence personnel increased by over 50 per cent, to almost 52,000.[7]
Such an increase also led to questions regarding the nature of the government’s
responsibility for providing accommodation to defence personnel; that is,
whether they should be regarded the same as all other employees of the
Commonwealth, or if their unique job requirements meant that their
circumstances should be treated differently. In presenting the Government’s
case for the Housing Agreement Act, the Minister for National
Development, William Spooner, asserted:
Surely, there is no difference
between a member of the 1st Battalion, or the 2nd Battalion, who lives in
Queensland or New South Wales, and a member of the staff of the Post Office or
the Department of Customs and Excise. They are citizens of the State, and the
State is responsible to help them, just as it is responsible to help other
citizens. The Commonwealth has a great problem in this respect, in that it
moves members of the defence forces about in the course of their employment. We
find that lack of housing is a great handicap to recruiting and to maintaining
the strength of the forces. We have, therefore, said to the States, "You have
accepted, since 1945, the principle that 50 per cent of the houses should be
reserved for ex-servicemen. We ask you to give serving servicemen priority
within the limits of that 50 per cent".[8]
In response, Labor Opposition Senator, William Ashley,
contended:
The Minister suggested that if
the Government is to be required to provide housing for serving personnel it is
equally logical to argue that it should also be responsible for housing the
staff of the Postal Department and, indeed, the staff of every Commonwealth
undertaking. I point out that the members of the defence forces are in an
entirely different position. The defence of Australia is the sole
responsibility of this Government, and it is important that service personnel
be housed. If the Government accepted responsibility for the housing of the
serving personnel, we should not have the waste of hundreds of thousands of
pounds that is now taking place in advertising for recruits. If people could be
assured that upon joining the services they would be provided with housing, I
am confident we should have many more recruits.[9]
The Housing Agreement Act 1956 facilitated the increased
availability of housing for defence personnel but also contained various
shortcomings which would not be remedied for at least another 30 years. The
most significant of these was the Commonwealth’s limited authority under the
Act to ensure defence houses were of sufficient standard, appropriately
located, and regularly maintained. This remained apparent when in 1973 the
Defence Minister Lance Barnard criticised the Queensland Government for
‘holding Federal defence housing monies which should have been spent two years
ago’.[10]
Growing costs were also an enduring issue and so the
subsequent Housing Agreement Act 1961 removed the spending limit on
defence housing for both the states and Commonwealth, to allow for expanded
development.[11]
Although the impact of this change was not realised immediately (the 1961–62
Budget had a reduction in the Commonwealth Government’s contribution to
the CSHA), by 1966–67 the Commonwealth Government was spending almost four and
a half times more on CSHA housing than in 1960–61.[12]
This increased expenditure led to a reported near doubling
of defence housing from 1964 to 1971, with the Defence Minister Malcolm Fraser
assuring that ‘of course, our forces have grown, but housing has more than kept
pace with that expansion’.[13]
That said, Fraser also acknowledged improvements still needed to be made in
reducing delays in housing availability for defence personnel after a new
posting.[14]
There appeared to be sufficient scope for improvement within the broader
context of defence housing that an interdepartmental committee was established
on 14 August 1970 to consider the matter.[15]
Defence
housing reviews in the 1970s and 1980s
Garland
Review (1977)
Defence housing remained contentious into the 1970s, with the
1976 Defence White Paper specifically noting the lack of quality defence housing
for families and the large amount of substandard accommodation for single
personnel.[16]
Defence housing was particularly inadequate in Darwin, due to the damage caused
by Cyclone Tracy in 1974 and uncertainty over redevelopment due to the proposed
transitioning of some defence infrastructure to RAAF Base Tindal, located near
Katherine.[17]
Defence housing was again addressed in 1977 when the House
of Representatives Standing Committee on Expenditure issued its report on
accommodation for married servicemen. Chaired by the Liberal Member of Parliament
(and former chartered accountant) Ransley Garland, the Committee undertook what
purported to be ‘the most comprehensive examination undertaken since these [defence
housing] programs were introduced in the mid-1950s’.[18]
The Committee’s report offered 16 recommendations, which strongly emphasised a
move away from government ownership of defence housing. The recommendations
included a call for an immediate end to Commonwealth funding for the building
or acquisition of accommodation for defence families, with only limited
exceptions.[19]
Underpinning these recommendations was the Committee’s view
that the current government approach did not represent best value for money,
nor did the provision of housing improve Defence’s capacity to recruit or
retain personnel. In regard to costs, the Committee concluded that ‘there is
still undue emphasis on CSHA, insufficient attention on acquisitions and the
virtual neglect of other methods such as hirings and the use of private builders’.[20]
In response to these circumstances, the Committee suggested:
An obvious, and we believe more satisfactory, alternative is
for married servicemen to rent from the market which, with its wider selection
of different qualities of housing, should be in a better position to satisfy
individual preferences. The market, though not perfect, can offer servicemen
accommodation of varying quality and location at different prices ... Indeed what
we envisage for the future is an abandonment of provision of accommodation as
the central thrust of Defence housing policy, and its replacement with a policy
of assistance to servicemen to find accommodation, and compensation for
cost-disabilities they face. Only where there is a special defence requirement
for on-base housing, or where the housing market could not physically cope with
the required number of dwellings (e.g. remote areas) would exceptions to the
principle of ‘no provision’ be accepted.[21]
In support of the Committee’s assessment, media reporting from
June 1977 suggested that $72 million could be saved over the next three years
by reducing the government-owned defence housing stock and instead using
private leasing arrangements.[22]
The Committee also questioned the role that housing assistance
provided in supporting recruitment and retention. In justifying this position,
the Committee noted that the total number of defence personnel in 1975 and 1976
was only slightly below target levels, even though more than 80 per cent of
defence housing stock was reportedly below standard.[23]
However, this ignores the fact that separation rates from Australia’s defence
force averaged almost 12 per cent from 1972–79 (with a high of 15.4 per cent in
1973–74).[24]
Additionally, the Committee’s own report referenced an earlier inquiry’s
finding that ‘housing, including availability, locations and standards ... have
been the most consistently recurring factors put to us as a cause of
dissatisfaction with Service life’.[25]
These separations, offset by new recruits, incur substantial costs in training
and administration, although it remains highly speculative beyond the anecdotal
level to attribute separations to poor housing.
The Government responded to the Garland Review with a ministerial
statement on 4 May 1978. With regard to the recommendation that
building/acquisition be suspended in all but exceptional cases, the Government
deferred any decision, and instead advocated the formation of an
interdepartmental committee to further review all aspects of defence housing. During
this review period, new funding for defence housing was suspended. However, the
Government did question ‘whether this far reaching change in established policy
would adversely affect the ready deployment of the Defence Force or the morale
and welfare of service families’.[26]
For its part, the Labor Opposition was critical of the
Review’s recommendations, with its Defence spokesperson Gordon Scholes stating
that ‘some of [the recommendations] are quite radical and I think it most
likely they could not be accepted in practice’. In specifically addressing the
economic emphasis of the Review, Scholes contended that ‘[Defence housing] is a
more complex problem than economics and pure expenditure. There are people and
families involved, families which have a minimal chance to lead the normal life
that another family would lead and which, therefore, need to be in a position
where housing is readily available’.[27]
The Department of Defence response to the Garland Review also concluded:
- modification of the existing system to the extent proposed by the
Garland Committee would force Defence to rely upon an unpredictable housing
market over which it has no control
- there are notable areas (including Sydney) where private rental
accommodation is scarce and expensive and
- service experience did not support the view that where no active
private market exists it is likely to be stimulated into existence by the
provision of a steady stream of demands.[28]
Monaghan
Review (1985)
In August 1984 the Government established the Task Force on
Australian Public Service and Defence Force Housing Programs to assess the
current arrangements and advise ‘on the most equitable and efficient means for
meeting the Commonwealth’s obligations’ for housing Defence and APS employees.[29]
The Task Force’s report, published the following year, revealed a complicated
array of oversight mechanisms for defence housing.
For example, the Defence Housing Policy Committee was cited
as the ‘main policy body’ for defence housing, which received input from the
Defence Facilities Policy Committee and the Force Structure Committee within
the Department. Yet by 1984 the entire program was in flux, with housing
responsibilities transferred from the Facilities Division (Defence Logistics
Branch) to the Industrial Division (Manpower and Financial Services Branch),
where a new Defence Force Housing Branch was established in August 1984.[30]
Despite this, the individual services of Navy, Army and Air Force retained
responsibility ‘for the day-to-day management and allocation of houses’.[31]
As part of its 23 recommendations, the Task Force identified:
...if delivery of Defence housing assistance were virtually to
be solely through physical provision, there would be a range of budgetary and
administrative implications and freedom of choice by members would be
precluded; and
generally it is availability of housing at a locality that is important, rather
than Defence control of housing stock.[32]
Having noted the inherent need for defence housing managers to
commercially trade in property, the Task Force recommended that either a
statutory authority within the Defence portfolio or a semi-independent body
take over control. However, it also proposed a range of other options,
including the provision of a housing expense allowance, which it noted could
potentially offer ‘long term improvements in equity, efficiency and
cost-effectiveness’ while being ‘consistent with more commercially orientated
management of the housing stock’.[33]
These options contrasted the differing views between the departments
of Finance and Defence. Finance had advocated for Australian Defence Force
(ADF) personnel to receive either a housing rental rebate or housing allowance,
with which they would pay full market rents for either government or private
accommodation. This course of action would allow ADF personnel much more choice
and flexibility in their housing location, quality and cost, while providing
‘considerable savings in administration’.[34]
However, the Defence Department countered that an explicit
allowance could not provide for its diverse housing requirements, in ensuring
sufficient capacity and flexibility. It also considered that such an allowance
could have unforeseen taxation consequences for ADF personnel. As such, Defence
asserted that ‘the present housing assistance program provided a sound
management platform and it should be retained’.[35]
Through recommending the establishment of a separate
statutory authority, the Task Force arguably sought a compromise between these
competing positions. In justifying this recommendation, it stated:
The Task
Force agrees with Defence that the management of housing stock should not be
outside the jurisdiction of the Minster for Defence, and that it should be
responsive to Defence policy initiatives and priorities.
But it does not necessarily follow that the management function should be
exercised within the present administrative framework.
The point
that needs to be grasped is that the management of a large housing stock is
essentially a commercial operation involving investment and production and
delivery of services. If efficient and effective management is to be achieved,
the function has to be exercised on commercial lines.
Responsibility for management of the housing stock which it is necessary to
maintain for defence purposes should, then, be recognised as a discrete
function, distinct from the provision of subsidy.
The management of the function would need to be empowered to
trade in houses and land, retaining the proceeds of sales to assist financing
the investment.[36]
The Task Force also argued, in opposition to Finance’s
position:
...the detriments to morale arising from housing related causes
do not lend themselves readily to monetary compensation in subsidy form.
Essentially these detriments are due to low quality housing in some cases, the
uncertainty attaching to standard of housing available at future postings, and
inequitable rent charging arrangements.[37]
Hamilton
Review (1986)
Having been commissioned by the Minister for Defence in
December 1985 to report on issues faced by Defence families, Sue Hamilton (Assistant
Secretary of the Office of the Status of Women) published the report, Supporting
Service Families, in April 1986. Her report was highly critical of the state
of defence housing and bluntly asserted that ‘in many cases I found it
profoundly embarrassing that people were being asked to live under the
conditions I was shown’. Hamilton further contended that such poor quality housing
was a ‘significant contributor to poor family morale’ across Defence.[38]
State Government housing (developed through the CSHA) was specifically
mentioned as a cause of dissatisfaction, due to low-quality and delayed
maintenance, as well as the social environment in which these defence houses
were located.[39]
However, Hamilton did not offer any specific recommendations regarding defence
housing, given the recent government announcement to establish DHA as a means
of addressing the Review’s concerns.[40]
Cross
Review (1988)
In October 1987, the Joint Committee on Foreign Affairs,
Defence and Trade (JCFADT) was asked to report on the issue of personnel
leaving the ADF. The location and quality of defence housing was one of the
reasons identified for this predicament, and the Committee’s findings largely
mirrored those of the previous Monaghan and Hamilton reviews.[41]
The Committee supported DHA’s recent establishment ‘as a major step towards
providing acceptable Service accommodation’ but expected that DHA should deal promptly
with enduring repairs and maintenance concerns. It also cautioned that such
improvements in housing quality should not disproportionately lead to rising
rents paid by ADF personnel. In its final report, published in November 1988,
the Committee specifically recommended that the relevant minister report to
Parliament in six months’ time regarding DHA’s achievements in housing repairs
and maintenance.[42]
In its May 1989 response to the Committee report, the Government noted the
recent release of DHA’s annual report which highlighted the agency’s achievements,
while citing tenants’ letters which attested to a high degree of satisfaction with
DHA’s recent work.[43]
The early
years of DHA
By the mid-1980s, the declining quality of defence housing
was becoming increasingly apparent, with the suspension of funding following
the Garland Review criticised for halting necessary repair and maintenance
work.[44]
The Defence Department later calculated that average levels of expenditure on
defence housing between 1977 and 1981 would have resulted in approximately
1,500 more houses for ADF personnel.[45]
Instead, by March 1984 more than a third of defence houses were reportedly
‘beyond economic repair’, with the Defence Minister acknowledging it would cost
$500 million to bring these properties up to standard. In response to this, a specific
housing management section within the Defence Department was proposed, while the
1984–85 Budget provided for a $78.6 million program over ‘about three years’
for Defence housing improvements, constructions and acquisitions.[46]
The quality of defence housing remained sufficiently poor
that in early 1985 the Public Works Committee requested a specific briefing by
the departments of Defence, Finance, and Housing and Construction in order to
assess the extent of the problem. This briefing revealed that approximately
12,000 of the nearly 23,000 total defence houses ‘cannot be economically
upgraded and should be replaced’, and noted the important work of the ongoing
Monaghan Review in analysing the provision of defence housing.[47]
On 30 January 1986, largely as a response to the Monaghan
Review recommendations, the Minister for Defence, Kim Beazley, announced the
proposed establishment of a Defence Housing Authority. This new statutory
authority would ‘streamline arrangements for the construction, upgrading and
maintenance of Service housing, and ... enable quicker disposal of housing stock
no longer needed for defence purposes, or unsuitable for occupation by Service
families’.[48]
The Minister also announced an extra $750 million in capital funding for
defence housing over the following decade to support this initiative.[49]
The formal creation of DHA as a statutory agency was delayed
until 1987. However, keen to begin as soon as possible, Beazley determined in
May 1986 that, in the interim, DHA could commence operating on an
administrative basis.[50]
In presenting the Defence Housing Authority Bill 1987 to Parliament on 18 March
1987, Beazley stated:
There are three essential elements necessary to remedy the
problems [of defence housing]. There must be a guaranteed level of funds
committed to Defence housing. There must be business enterprise and expertise
brought to the management task. There must be a single organisation established
which is dedicated to management of Defence housing and free from bureaucratic
controls.[51]
The Opposition ultimately supported this enacting legislation
for DHA, but was far from enthusiastic. In his second reading speech, the
Opposition Spokesman on Defence Wallace Fife sought to incorporate an amendment
which ‘expresses concern that [DHA] may not best address the housing needs of
servicemen and women’ and instead sought more involvement by base and area
commanders in the ‘acquisition, repair and maintenance of defence housing’.[52]
Fife also questioned the sincerity of the Government’s funding commitment to
DHA and indicated the Opposition’s desire for DHA’s 10 person board to include
at least three members from the private sector who could provide housing
industry experience.[53]
The Liberal Party’s pre-election defence policy statement also indicated its
position to maintain DHA ‘but review its charter and objectives’.[54]
Following the Labor Government’s
re-election in July 1987, the Opposition committed more fully to supporting
DHA, as demonstrated by Senator Jocelyn Newman. In her statement to the Senate
in September 1987, Senator Newman declared:
Warts and all, we welcome this
legislation. As a former Army wife I am delighted to see it in the Parliament.
I too spent my time moving through Army housing. We in the Opposition hope that
it will mark the beginning of an improved lifestyle for our service personnel.
They give a great deal more to our nation than the nation is often prepared to
acknowledge. We need to stem the loss of these trained men and women, who have
been trained at a great cost to the nation, and this legislation is a very
important first step.[55]
Later, in 1993, Senator Newman further contended:
...from the time [DHA] was set up by the government, the
opposition has given its solid and consistent support ... At every step of the
way the opposition has supported that organisation. We have tried to see that
it was properly funded and we have encouraged the improvement of Defence Force
housing.[56]
Shortly after DHA’s establishment, the JCFADT described
the initiative as ‘a major step towards providing acceptable Service accommodation’.
In supporting this assessment, the Committee noted DHA’s capacity to provide a
guaranteed level of funding, be a sole focal point in providing and managing
Defence housing, and to apply business enterprise and expertise in this
endeavour.[57]
A key initial challenge for DHA was extricating itself from
the CSHA, which had long tied defence housing to the various state governments.
As at 30 June 1988, a total of 14,221 defence properties were provided through
the CSHA, which comprised almost two thirds of the total defence housing stock.[58]
The Commonwealth and State Housing Agreement (Service Personnel) Act 1990
formalised a new arrangement in which DHA took ownership of half the CSHA
properties and the states received the other half over a five-year period.[59]
South Australia did not agree to the arrangement until early 1994, and the
entire dispersal of property was completed by 1995.[60]
DHA’s role in
housing defence personnel
Provision
The provision of defence housing is legislated under section
58B of the Defence Act 1903, which allows the Minister for Defence to make
determinations providing ‘benefits’ for members and their families.[61]
These benefits are explicitly stated in chapter seven of Defence’s Conditions
of Service, which specifies how housing is classified and the minimum
standards for housing.[62]
The most recent New Housing Classification Policy (NHCP) for Defence housing
was implemented on 1 July 2007.[63]
DHA receives Defence’s housing requirements through the
annual Defence Housing Forecast, which estimates how many ADF families
will require accommodation over the next five years. As part of its service
agreement with Defence, DHA is required to supply 85 per cent of this housing
requirement, with the remainder supplemented through the private rental market.[64]
The formal services agreement between DHA and the Defence Department took
effect on 1 July 2000 and is intended to clearly identify the provision of
services and risk-sharing arrangements.[65]
DHA noted in its most recent annual report that it currently
maintains a portfolio of 18,767 properties—a reduction of almost 20 per cent
from an initial housing stock of 23,335 properties in 1987.[66]
However, this reduction of housing stock has largely matched a similar decrease
in the number of total serving ADF personnel and the ratio of housing to
personnel numbers has generally been between 30 to 40 per cent.[67]
The largest reductions in defence housing from 1987–88 to 2015–16 occurred in Victoria
(–67 per cent), New South Wales
(–44 per cent) and South Australia (–35 per cent)—a collective decrease of 7,578
properties.[68]
These reductions have been partially offset by significant
growth in the Northern Territory (+164 per cent) due to the Army Presence in
the North (APIN) policy, and in the Australian Capital Territory (+158 per
cent) as the location of the central office of the Department of Defence. The
increases in both locations have collectively added 2,902 properties to DHA’s portfolio
since 1987–88.[69]
Queensland has also now exceeded its 1987–88 level of defence housing, with a
2015–16 total of 5,393 properties—an almost 45 per cent increase from a low of
3,736 properties in 2003–04.[70]
The main reasons for Queensland’s increase are the doubling of defence housing
at Ipswich (located near Australia’s largest air force base, RAAF Base
Amberley) from 2005–06 to 2014–15, and a 77 per cent increase over the same
period in Brisbane where the Army’s Gallipoli Barracks is located at Enoggera.[71]
As a response to the Global Financial Crisis (GFC), the Commonwealth
Government announced a ‘Nation Building’ program in 2009, which included $252 million
in new spending for the construction of 802 defence houses.[72]
A total of 829 properties were constructed through this program, which was
completed in December 2010.[73]
Approximately 80 per cent of these houses were built in the Northern Territory,
Queensland and South Australia, which included 127 houses built in Adelaide
prior to the 7th Battalion Royal Australian Regiment’s relocation from Darwin
and 118 houses built in Townsville in preparation for 3rd Battalion Royal
Australian Regiment’s arrival from Sydney.[74]
The majority of DHA’s properties are detached three or four
bedroom service residences, known as the Members with Dependants (MWD)
portfolio. However, DHA noted in 2015 that ‘46 percent of [defence] families we
accommodate have no children and 18 per cent have one child under four years of
age’.[75]
Accordingly, DHA has developed a growing portfolio of townhouses, courtyard
style houses, flats and apartments under the banners of either Members’ Choice
Accommodation (MCA) or Rent Band Choice (RBC) accommodation.
Members’
Choice Accommodation
Consisting of predominantly two bedroom apartments constructed
in recent years, MCA properties are available to members without dependants or
members unaccompanied by dependants, as an alternative to living on base or
renting privately.[76]
In November 2005, DHA and Defence agreed to an 18-month trial of 100 properties
of this accommodation type in Darwin, and in 2007 set a goal of increasing MCA
stock to 1,400 properties over three years.[77]
A long-term agreement for DHA to provide MCA properties was enacted in December
2008, limited initially to Darwin but with an option to expand to other
locations.[78]
The first expansion occurred in 2011–12, when Brisbane and
Canberra were allocated MCA housing, with the remaining mainland capital cities
receiving MCA properties in 2013–14. The MCA portfolio reached 1,000 properties
in October 2016 across 12 locations, with an eventual goal of 2,000 MCA
properties proposed.[79]
As at June 2016, Canberra had the highest number of MCA properties at 225, with
Darwin close behind at 210. These combined 435 properties represented almost
half of DHA’s total MCA portfolio. DHA owns approximately a third of its MCA
properties, while leasing the remainder.[80]
Rent Band
Choice Accommodation
The RBC properties are classified within the MWD portfolio,
but generally constitute apartments and townhouses and as such do not meet the
housing standards of other MWD accommodation. However, these properties are generally
chosen by members who prefer to offset their full housing entitlements by
living in the more inner-city urban areas where RBC properties are located.[81]
Known as ‘Defence Choice Housing’ prior to the 2007 NHCP, RBC was first
implemented in November 2002 following a consultants’ review and working group
assessment.[82]
As at June 2016, DHA’s RBC portfolio incorporated 977 properties, equating to
approximately five per cent of the total DHA housing stock. This level has
remained reasonably consistent since 2008 when the RBC portfolio comprised 839
properties.[83]
In 2014, DHA noted Defence’s intention to make RBC and MCA
properties interchangeable when the MCA portfolio reached 1,000 properties, in
order to ‘give more flexibility in meeting the housing needs of Defence
members’.[84]
However the mix of DHA’s housing solutions is inherently dependent on Defence’s
forecasted requirements, aligned where possible to commercial interests.
On-base
accommodation
In terms of Defence-owned on-base single accommodation, the
Government established Project Single LEAP (Living Environment and
Accommodation Precinct) in 2004–05 following the publication of a 2003 report
which identified significant deficiencies in housing quality.[85]
The project was divided into two phases; the first providing 1,395 units at
three military bases and the second providing 3,015 units at another 14 bases.[86]
DHA joined with Bovis Lend Lease and Transfield Services to tender for this
project, but Plenary Group was selected as the preferred participant for the 30-year
Public Private Partnership responsible for the accommodation’s construction and
ongoing maintenance.[87]
DHA manages the booking and allocation of ADF members’ transit, temporary,
permanent and course accommodation at ADF bases across Australia, under
agreement with Defence.[88]
Increased emphasis on leasing
DHA’s first annual report in 1987–88 revealed that it
maintained 285 leased properties from the private market. In May 1989, the
Minister for Defence Science and Personnel announced that DHA would
progressively take over further leases currently held by Defence families.[89]
By 1989–90 these leased properties had been removed from the housing stock as
DHA sought new ‘arrangements with major institutions for the formation of a
leasing entity’.[90]
Having unsuccessfully attempted this (including a failed deal with Jennings
Group in February 1991), by 1992, DHA Chairman John Graham acknowledged that
‘little interest is being shown in investment in residential property by major
institutional investors’.[91]
A renewed push for institutional investors occurred in 2006,
with Westpac Funds Management purchasing $98.2 million worth of DHA’s
residential property in April and another $121.9 million allocation in
December.[92]
But in the wake of the GFC, DHA reported that it would not pursue further
institutional sales and in 2009 Westpac commenced selling off its stake in defence
housing.[93]
DHA has continued seeking out institutional investors for its sale and
lease-back (SLB) program, and in 2013, DHA’s subsidiary DHA Investment
Management Limited acquired 79 DHA properties valued at approximately $50 million
through its DHA Residential Property Fund No. 1. However, in 2016 the fund investor,
Findex, planned to exit the fund, ceasing operations far earlier than the
expected 10-year timeframe.[94]
The fund’s proposed closure was reportedly due to the fund manager’s view that
residential property markets in Sydney and Melbourne had peaked.[95]
Despite such largely unsuccessful experience with
institutional investors, SLB arrangements have remained an enduringly prominent
aspect of DHA’s business model in terms of individual investors. Prior to the
1992 federal budget, media reporting indicated that some government ministers
were considering a plan for DHA to sell off a portion of its properties, which
it would then lease back.[96]
These proposed arrangements were subsequently enacted as a budget measure, with
receipt of $300 million anticipated through SLB arrangements.[97]
The SLB program received Coalition support, as it hoped the capital received
from these sales in major centres would be used to increase housing development
in the more remote areas used by Defence.[98]
By 1993 DHA suspended undertaking any new leasing
commitments, having identified ‘inflexibilities’ regarding rent adjustments,
maintenance and aligning leases to posting cycles.[99]
With these issues addressed, the SLB program was revived in 1996 and
incorporated a nation-wide property tender offer, with DHA using the
international property marketing group Kennedy Wilson to facilitate the sales
program, branded Operation HomeLease.[100]
However, financial commentators highlighted multiple concerns with the sales
program, including the relatively low return yields and unattractive investment
locations, which led to a poor response to the tender offer.[101]
Following this setback, DHA continued to refine its marketing approach in
actively pursuing its SLB program.
This persistence was rewarded, because from 1995–96 to
1997–98 the number of leased properties increased by almost 50 per cent, with
the Minister for Defence Industry, Science and Personnel, Bronwyn Bishop,
noting in March 1997 DHA’s ‘major policy change from ownership of housing to an
emphasis on long term leasings from the private sector housing investment
market whenever feasible’.[102]
The following year, Bishop signalled DHA’s specific ambition to have 60 per
cent of all off-base houses provided by individual investors by the year 2000.[103]
Although DHA missed this deadline, the goal was eventually achieved in 2004–05.[104]
To help maintain its SLB program, DHA uses multiple
marketing tools to attract investors. In 2015–16, DHA spent over $2 million on advertising
and market research, and a marketing agreement with the National Rugby League
team, the Canberra Raiders.[105]
DHA explained its reasons for such advertising in 2015, stating:
The marketing agreement with the Canberra Raiders forms part
of DHA’s marketing strategy to increase awareness of DHA’s property investment
program with DHA’s key target market. DHA’s primary investor demographic is
‘mum and dad investors’ which aligns with the NRL’s audience. The agreement
with the Canberra Raiders provides DHA with a targeted opportunity to reach NRL
fans and their families across Australia to promote the investment program.
Specifically, the marketing agreement entitles DHA to display its logo on
Canberra Raiders on and off-field apparel and signage at games which reaches a
national audience via television, online and in print.[106]
The marketing agreement with the Canberra Raiders expired on
31 October 2016.[107]
The number of properties leased by DHA grew by almost 700
per cent between 1990–91 and 2015–16, from 1,657 properties to 13,169. Since
2000–01, when DHA’s leased properties first totalled more than 10,000, the
number of properties has grown steadily at almost two per cent per year. As at
2015–16, 70 per cent of DHA’s total housing stock was leased from private
investors.[108]
Perceptions of higher quality tenants and secure rental returns are likely to
motivate many individuals to invest in DHA housing. Such investment also occurs
in the context of favourable taxation arrangements for all housing investors in
Australia, such as negative gearing.
Other
services
Maintenance
and improvements
During DHA’s first board meeting in January 1988, the
Minister for Defence Science and Personnel, Ros Kelly, indicated that housing
maintenance should be a significant priority for the agency.[109]
DHA acknowledged this in its first annual report, stating that ‘repairs and
maintenance has long been a source of complaint by Defence Force personnel and
their families’.[110]
Accordingly, just over $30 million was approved for improvements, repairs and
maintenance of DHA’s housing portfolio during 1987–88.[111]
A key component of DHA’s housing maintenance program is the
de-centralised system of Housing Management Centres (HMCs). The first of these
was opened at Moorebank in Western Sydney on 30 September 1988, with a view to
establishing approximately 20 HMCs nationally.[112]
By 1990 all HMCs used a standardised computer-based system to facilitate
repairs and maintenance, and engaged local contractors selected through public
tender.[113]
Alongside DHA’s program of non-economically viable property
disposal, its maintenance and improvements program has significantly improved
the overall quality of its housing stock. In the decade between 1987 and 1996,
the substandard proportion of DHA properties reduced from approximately 70 per
cent to just four per cent.[114]
However, these improving standards did not always meet DHA’s own internal
benchmarks for housing quality. In May 2003, the Minister Assisting the
Minister for Defence, Dana Vale, acknowledged that approximately 4,500 DHA
properties (just over a quarter of the total housing stock) were ‘inconsistent
with DHA’s housing standards’.[115]
Accordingly, in March 2007 the Minister for Defence, Brendan
Nelson, announced a new housing classification system which would adjust the
Conditions of Service agreement to provide housing with an increasingly high
standard of amenities, such as ensuite, security features and covered outdoor
living area, consistent with community expectations. This policy of
improvements would be rolled out over the following decade.[116]
DHA also tracks its tenants’ satisfaction with the quality
and timeliness of maintenance services, conducting an annual national client
survey since 1990–91. Satisfaction ratings have averaged almost 90 per cent
since then, with a low of 75 per cent occurring in 2000–01 and a high of 98 per
cent in 2009–10. The most recent
2015–16 satisfaction level for maintenance was similarly high, at 96 per cent.[117]
These results align with the CDF’s assessment in June 2015 that defence housing
in Australia was ‘world class’.[118]
Relocations
DHA gained responsibility for housing relocation services in
mid-2001, in addition to tenancy management, administering rent allowance and
removals administration.[119]
However, during the first peak posting cycle (November to January)
incorporating the movement of more than 300 ADF personnel a day, a lack of adequate
planning and appropriate training led to substandard results, including
families not receiving accommodation or financial allocations. DHA indicated
that this resulted in a customer satisfaction rating of 68.5 per cent for the
December/January period.[120]
Following a task force review and substantial changes to its
processes, DHA significantly improved its performance during the 2002–03 peak
posting cycle, achieving a customer satisfaction level of 85 per cent and
receiving only 37 complaints from its 13,200 relocations.[121]
DHA continued to provide the full suite of relocation services (except
furniture/furnishing removals) until mid-2010 when it lost the contract to Toll
Transitions.[122]
The
privatisation debate
Historical
context
The potential for privatising all, or elements of, defence
housing has been a source of debate for decades, even before the formal
establishment of DHA as a statutory agency. For example, in 1973 a Committee of
Inquiry appointed by the Minister for Defence to examine the conditions of
service for defence personnel considered in its report the ‘potential benefit’
of a private hiring scheme for defence housing.[123]
Following the Government’s announcement to establish DHA,
the Shadow Minister for Defence, Ian Sinclair, lamented in a June 1986 speech:
In [defence] housing, the present arrangements have clearly
failed, and I seriously doubt that the establishment of the Defence Housing
Authority will solve the problem ... the Services need to be able to handle
housing directly, rather than through yet another statutory authority. The
private sector could contract build new Defence houses for the amount currently
being spent on refurbishing existing ones.[124]
Sinclair reasserted this four months later in his reply to
the Defence budget ministerial statement, declaring that ‘while funds are being
provided for housing, I do not believe that the Defence Housing Authority gives
anywhere near the value for the defence dollar that we would get it we gave
land and the opportunity to build to private contractors’.[125]
The 1990s
In 1990, the Shadow Minister for Privatisation, Warwick
Smith, indicated that the Coalition in Opposition was currently investigating DHA
as a potential target for privatisation. This was part of a policy platform
which identified more than 20 institutions for privatisation across the
communications, aviation, health, financial and transport sectors.[126]
The subsequent 1995 report on ADF personnel policy, Serving
Australia: the Australian Defence Force in the Twenty First Century (Glenn Report),
further recommended that ‘alternatives for the provision of accommodation assistance
and subsidies be pursued’.[127]
Such alternatives essentially focused on a cash payment allowing ADF personnel
to ‘make up their own minds about their accommodation requirements’.[128]
This concept of a direct payment received tacit support from the Armed Forces
Federation of Australia, although the group opposed any proposals to privatise
DHA.[129]
The stated benefits of providing cash payments to ADF
personnel for accommodation included simplifying processes and motivating recruitment
and retention through better opportunities for home ownership (as defence
personnel would be able to use the housing allowance for a home deposit or
mortgage repayment). However, the Glenn Report acknowledged:
If the cashing out proposal is adopted, there will be a need
to ensure that any subsidy cashed out will be maintained in real terms, that
differences in regional costs are accommodated, and that arrangements are made
to ensure that members exposed to commercial housing markets, particularly on
reaching gaining localities, are not distracted from their jobs. In respect of
the last of these matters a commercial fee for service approach could be
adopted which would identify suitable accommodation at the gaining locality
prior to or immediately on a member’s arrival. Such a service could be provided
by local agents or an organisation such as the Defence Housing Authority.[130]
An Australian National Audit Office (ANAO) report published
in December 1994 further warned:
It is possible that all members could be eligible for a cash
subsidy regardless of home ownership. If this were the case, the number of
members with family eligible for housing assistance would increase by 20% (i.e.
members presently occupying their own home). Payment of a cash subsidy could
lead to a significant increase in home ownership by other members and a
reduction in the demand for DHA houses, particularly in the lower cost
localities, putting more pressure on the viability of the GRS [group rent
scheme]. It is also possible that the cash subsidy payment could be extended to
MWOF [members without families] which would significantly increase the number
of eligible members and create a need to establish the value of subsidies
associated with living-in accommodation for MWOF.[131]
Following the Coalition’s election to government in March
1996, it established a National Commission of Audit, which reported three
months later in June. Although the Commission’s report stopped short of overtly
advocating for DHA’s privatisation, it did state:
The Commission questions whether there is still a need for
continued nationwide direct Commonwealth control of, and involvement in,
defence housing. There may be a need for Commonwealth ownership in remote areas
or on defence bases. However, in other locations there appears to be no reason
why defence families could not be served equally well by dealing individually
on the open housing market with, say, a salary based housing allowance. Such an
arrangement would provide eligible defence personnel with more freedom of
choice and would be simpler and cheaper to administer than existing
arrangements. It would also free up part of the Commonwealth’s $1.6 billion
investment in defence housing.[132]
Also at this time Treasury released a Commonwealth Competitive
Neutrality Policy Statement that sought to increase the efficiency of
government businesses, such as DHA. The statement also asserted that Government
Business Enterprises (GBEs), such as DHA, ‘have a principal function of selling
goods and services in the market for the purpose of earning a commercial
return’.[133]
As part of the implementation strategy contained in the policy statement,
Treasury proposed that DHA undergo a review of its operations and ownership.[134]
Following the review, in June 1998 the Government
announced its decision not to privatise DHA but to re-structure it instead ‘on
a more commercial basis’, following a comprehensive steering committee review
jointly established by the Department of Defence and the Department of Finance
and Administration.[135]
In reasserting the Government’s position, the Minister for Defence Industry,
Science and Personnel, Bronwyn Bishop, stated in Parliament that DHA:
...will remain in government ownership because this is a proper
function for government to carry out. It is not in business, competing with the
private sector; it is providing an important part of service provisioning which
means that families have the opportunity to have quality of life while their
serving personnel carry out their duties and responsibilities in a
straightforward manner.[136]
However, the Opposition was far from assured by this and
contended that ‘given the Coalition’s declared position on privatisation, and
the approaching Federal election, this statement really only rules out selling
the Authority for the time being [sic]’.[137]
2000 to the
present
The 2001 Review of Australian Defence Force Remuneration
(Nunn Review) recommended that a regional and family-based ‘Accommodation
Assistance Allowance’ be established—essentially a cash payment to ADF
personnel to cover a proportionate cost of either rented or purchased housing.[138]
This ‘shift from paternalism to greater self-reliance’ proposed to provide ADF
personnel with greater housing choice, reduce administrative complexity and
save the Commonwealth an estimated $25 million per year.[139]
Although the Nunn Review did not explicitly advocate for
DHA’s privatisation, it was essentially implied, through the pronouncement that
‘as it would no longer be tied to Defence, DHA could also expand its business
to support commercial organisations’, such as property development and
management.[140]
The review also acknowledged that Defence may need to contractually maintain
ties to DHA as a ‘landlord of last resort’ in remote or limited housing
markets. Yet even in this instance the Nunn Review suggested that this could be
tendered ‘in the longer term’ to provide further competition.[141]
In response to the report, the Opposition stated that
‘Defence families can be assured that Labor totally rejects these regressive
proposals’, arguing that the Nunn Review’s recommendations ‘would inevitably
mean that [Defence] would have no direct control over the availability, quality
or location of housing for Defence families’.[142]
The Government also rejected the recommendations, stating:
The Government recognises that existing housing arrangements
for married personnel, administered by the Defence Housing Authority, continue
to work well and do not need to be changed. Accordingly the Government,
following extensive consultation with the National Consultative Group of
Service Families and the Armed Forces Federation of Australia, has decided to
set aside the recommendations concerning accommodation in Chapter 8 of the
review.[143]
However, in May 2002 Finance Minister Senator Nick Minchin
announced that a scoping study would be established to ‘examine whether ... the
assets of DHA should be sold’.[144]
Macquarie Bank was selected to conduct the study, with Coudert Brothers acting
as legal advisers.[145]
Despite his initial comments proposing DHA’s potential sale, the Finance
Minister later nuanced his position, stating:
...the DHA scoping study will assist the Government in its
consideration of the optimal mix of owned and leased property assets of the
Authority but will not affect the Government’s commitment to provide members of
the Australian Defence Force with high quality housing. DHA will continue in
government ownership, with a financial and operating capability to meet ongoing
Defence requirements.[146]
A further study into defence housing was commissioned in
2008 to assess whether DHA was the most effective provisioning model. According
to DHA’s former managing director, Peter Howman, the study, which concluded in
2011, found DHA to be effective and efficient, though some areas could be enhanced.[147]
The 2013 Commission of Audit recommended that DHA ‘should be
considered for privatisation’, asserting that ‘it is highly likely the private
sector can meet the housing needs of the Australian Defence Force and members’
families’.[148]
It further contended that DHA received $1.2 billion in funding ‘mostly from
Defence’, a claim that was disputed by DHA’s managing director, Peter Howman, in
his evidence to a Senate Estimates Committee in 2014. In his evidence, Howman stated
that ‘DHA does not get direct appropriation from the government’.[149]
He went on to assert that Defence’s annual payments to DHA as fees-for-service
were approximately $515.6 million, which equated to less than half of DHA’s
total revenue.[150]
One of the Commission members, Robert Fisher, was later appointed to the DHA
board in February 2016.[151]
In May 2014 the Finance Minister, Mathias Cormann, announced
that scoping studies into the ‘future ownership or delivery arrangements’ of
four government-owned entities, including DHA, would soon commence. Cormann
further noted that if DHA were to be sold following the scoping study, ‘all
proceeds will be re-invested through the Asset Recycling Fund’.[152]
The Government subsequently announced in August 2014 that Lazard Pty Ltd had
been selected as the business advisers and Ashurst Australia the legal advisers
for the scoping study.[153]
The results of the study were announced in May 2015, with the Finance Minister
declaring that ‘the Government will not proceed with a sale of Defence Housing
Australia at this time. However, the Government will review Defence Housing
Australia’s accounting, information technology and business reporting systems
to improve the transparency of the cost of providing services’.[154]
The advisory firm KordaMentha was subsequently contracted to undertake a
‘forensic review’ of DHA.[155]
Despite the Government’s public statement committing to
maintain ownership of DHA, the departure of DHA’s managing director Peter
Howman in late 2015 and the appointment of former Department of Finance Deputy
Secretary Jan Mason to replace him in an acting role led to further concerns
from the ALP and the Alliance of Defence Service Organisations over DHA’s
potential privatisation.[156]
But according to the Chairman of DHA’s board, Sandy Macdonald, the transition
occurred because:
[Howman] ... no longer was the best person to lead the
organisation. Under the DHA Act, he served at the board’s pleasure, and it had
come to the board’s notice that there was a loss of confidence with our
stakeholders—namely, the departments of Defence and Finance. There was also a
level of dysfunction in our head office.[157]
Jan Mason was appointed as DHA’s managing director on 2 November
2016.[158]
In DHA’s 2015–16 Annual Report, Ms Mason described her role’s two main
areas of focus as:
-
to ensure sustainable government ownership for the long-term
following confirmation in May 2015 that DHA would not be privatised and
- to help rebuild DHA’s foundation stones to ensure that, as a
government-owned business, it operates commercially.[159]
Opposition
to privatisation
The Labor Party has consistently opposed DHA’s
privatisation, starting from less than a fortnight after initially proposing
DHA’s establishment, when the Defence Minister Kim Beazley affirmed in Parliament
that the Government would not privatise service housing or move to charge ADF personnel
full market rents. According to the Minister, ‘both those options would
seriously damage the operational capabilities of the defence forces and would
be a marked injustice on service personnel’.[160]
This stance has endured, with the Shadow Parliamentary Secretary for Defence,
Gai Brodtmann, asserting in 2014 that the potential privatisation of DHA ‘fails
the test of good fiscal sense’ as DHA provides reliable revenues to government
through annual dividends.[161]
In late 2014 the Defence Force Welfare Association (DFWA)
also criticised any potential sale of DHA, and directly made this point during
a meeting with Lazard consultants. According to the DFWA, it expressed the view
that ‘privatisation would, by definition, shift the focus away from the current
DHA role to one of simply generating a profit for shareholders ... and therefore
to the detriment of current DHA clients’.[162]
The DFWA has continued express its concerns about DHA’s potential future
privatisation.[163]
In 2015 the editor of the Australian Defence Magazine,
Katherine Ziesing, published her support for DHA to remain in government
ownership. Her article specifically cited DHA’s high level of service, minimal
cost to government and benefit to regional businesses through local contracts
(a point also made by the Real Estate Institute of Australia).[164]
Ziesing further noted:
The scoping study [undertaken by Lazard] has recommended that
DHA be sold for around the $2 billion mark [with Lazard the proposed
facilitator of the sale]. There is a case that the government would make back
the sale price of $2 billion in less than a decade of operations and still have
the asset base to leverage.[165]
More recently, in March 2016 at a Senate inquiry into the
operations of DHA, the Australian Defence Association (ADA) and Returned &
Services League of Australia (RSL) strongly objected to DHA’s potential
privatisation, with ADA Director Neil James declaring:
When the Commission of Audit and people in the Department of
Finance look at DHA, they look at it in the wrong context. They look at it as a
government business enterprise and an administrative function of government
that is a possible candidate for privatisation. As the RSL and we have argued
strongly: that is entirely an incorrect perspective in which to view the
organisation.[166]
Both Neil James and RSL National President Ken Doolan
advocated for legislative changes to further diminish the potential for DHA’s
privatisation, with the latter contending:
DHA should, in this instance, have primacy over the PGPA
Act [Public Governance, Performance and Accountability Act 2013]. In
other words, in the same way as other institutions, such as the Australian War
Memorial, have their own Act, in this instance the PGPA Act should be
second place to the DHA Act, because—as we have argued and will continue
to argue—DHA provides a force enabler. I reiterate what I said before: housing
for defence people is absolutely as important as the equipment we supply our
soldiers, sailors, airmen and airwomen to go into harm’s way.[167]
The increasing
commercialisation of DHA
Although the Government decided in 1998 to retain ownership
of DHA, it also determined to restructure it ‘on a more commercial basis’.[168]
This was not a straightforward proposition for DHA, which asserted the
following year that its fundamental requirement to meet the operational needs
of Defence ‘is not a commercial objective and indeed in certain circumstances
may conflict with commercial/market judgement’.[169]
The Defence Department’s head of personnel (and an ex-officio DHA board
member), Major General Peter Dunn, further contended:
[DHA] has to
operate with a number of non-commercialities which would drive any other
organisation out of business if they were to actually adopt the role. And I
would just like to place on the record that we found before, and every time we reviewed
the authority’s actions, that it actually is not a business.
The reason I
say that is that we, in Defence, require the authority to produce houses in
areas that are absolutely non-commercial, to produce them in numbers that would
be non-commercial, and to produce them in areas where there is simply no resale
value until such time as the communities develop around them. So it does make
for a very difficult decision at various times as to how the funds are
distributed and therefore what rents are set because there are no benchmarks in
certain remote areas.
The housing is provided to provide operational capability to
the Defence Force and that is something that we flag on every occasion because,
without the accommodation, clearly we could not have Defence members in those
locations—they would not simply go there.[170]
However, in acknowledging these constraints, DHA has
concurrently recognised its commercial obligations. It demonstrated this in its
1999–2000 Annual Report, stating that it ‘will need to substantially
improve its commercial performance in order to meet the rate of return expected
on the capital employed and the need to restructure the capital base’.[171]
This restructure included incrementally returning to the Government just over
$1 billion in capital between 2000 and 2004 as special dividends to reduce the
amount of Government-owned equity in DHA, and in turn taking on debt through
government loans. This debt liability grew from $100 million in 2000–01 to $510
million in 2014–15, but had remained steady at this level for the six years up to
2015–16.[172]
The result of these measures was an immediate improvement in DHA’s return on
capital employed from 1.9 per cent in 1999–2000 to 5.8 per cent in 2000–01, and
an average of 8.2 per cent per year over the past decade.[173]
The 2003 Review of the Corporate Governance of Statutory
Authorities and Office Holders (Uhrig Review) also had implications for
DHA, particularly in recommending the removal of representational board members
and instead emphasising commercial expertise and experience in board composition.[174]
This recommendation had also previously been expressed in 1997, as part of the
Humphrey Review of government business enterprise governance arrangements.[175]
The removal of DHA’s representational board positions was eventually formalised
in the Defence Housing Authority Amendment Act 2006, which mandated a
nine-member board comprising:
- a chairperson appointed by the Minister for Defence
- a member nominated by the Secretary of the Department of Finance
-
DHA’s managing director
- two members with a defence background and
- four commercial members.[176]
The previous representational board positions were
subsequently transferred to a newly created six-member DHA Advisory Committee,
chaired by a member of DHA’s board. Membership of the committee incorporated
the National Convenor of Defence Families Australia, a representative from each
of the three ADF Services and a DHA representative.[177]
The Commonwealth has also increasingly sought to reduce its own
costs regarding defence housing. For example, in 2014 the Finance Minister
announced DHA’s exemption from Public Works Committee oversight for
construction projects on non-Commonwealth land, which in its first four months
reportedly saved the Government $3.1 million.[178]
In 2014 the Government also amended regulations relating to the Fair Work
(Building Industry) Act 2012, which removed DHA’s obligation to only use
Federal Safety Commissioner-approved firms for construction of single dwellings.
This was likely designed to increase competitiveness in the tendering process
by allowing a more diverse pool of builders to bid for construction contracts.[179]
International
comparisons
New Zealand
Prior to July 2008, the New Zealand Defence Force (NZDF) either
directly provided housing to its personnel or compensated them for accommodation
costs through private rental or mortgage subsidies.[180]
But this came to be regarded as ineffective because the NZDF’s housing stock
was generally of poor quality, with most properties having been constructed in
the 1950s and since fallen below acceptable standards due to insufficient
maintenance or renovation.[181]
The management of the housing stock was also highly decentralised, through
local camp and base service centres.[182]
And finally, the method of determining housing subsidies meant that their value
varied among different personnel, including some who received nothing.[183]
In response to these circumstances, in 2008 the NZDF transitioned
to a Universal Accommodation Component (UAC) payment, incorporated into
personnel salaries, to subsidise housing costs in the private rental market. The
rationale behind the new policy was twofold. Firstly it was argued that
‘service personnel and their families should live among the communities they
serve’ and, secondly, that the new policy would also ‘reduce the ownership
costs associated with Defence housing’ and enable the Government to ‘reinvest
any sale proceeds into front line capabilities’.[184]
The UAC was established as part of the NZDF’s updated
military remuneration scheme, provided to personnel either privately renting or
residing in military barracks. Personnel living in defence-owned housing did
not receive the UAC because they received directly subsidised rent; however,
other NZDF personnel at that residence could receive UAC if they were not signatories
on the tenancy agreement.[185]
The UAC payment was also not affected by posting location, but a Variable
Accommodation Component has been recommended (but not yet implemented) to
offset higher costs in certain markets, such as Auckland.[186]
The July 2010 Defence Assessment acknowledged that NZDF
personnel obtaining housing from the private market allowed the NZDF to reduce
its expenditure, while also gaining revenue through selling off unused housing
stock. The assessment accordingly recommended that the NZDF continue its
housing disposal program and even ‘be more ruthless in disposing of facilities
that are beyond economic repair’.[187]
To achieve this, the 2010 Defence White Paper suggested that an ‘additional
financial incentive’ may be required to transition defence personnel out of
current service housing and into private accommodation.[188]
Additionally, the 2010 ‘Value for Money’ review of the NZDF suggested that the
‘NZDF should give personnel residing in Defence houses notice that they will
need to exit from housing within an agreed period’.[189]
In July 2011, the Minister for Defence, Wayne Mapp, affirmed this position by
informing an Estimates committee that ‘in future staff should make provision to
buy their own homes’ and that ‘we would prefer people to take their pay and, in
essence, rent their own premises’.[190]
The Ministry of Defence report Management of the Disposal
of Surplus NZDF Housing, published in November 2011, noted that
since the introduction of the UAC, approximately a quarter of the NZDF’s 2,400
service houses had been vacated.[191]
These properties were identified as ready for immediate sale, with another 30
per cent to be sold in the following two to five years.[192]
Ultimately, the Ministry of Defence forecast a significant reduction in total service
housing to only 464 premises by 2015.[193]
Reporting from August 2015 indicated that the NZDF’s current housing stock was
1,627 properties, revealing a much slower rate of disposal than earlier
predicted.[194]
Some factors potentially limiting a quicker disposal rate were
identified in the original November 2011 report. These included the need to
appropriately stagger the disposal of housing at each location, to ‘avoid
flooding the market’.[195]
The report also acknowledged that the reliance on external providers to facilitate
the disposal program created some disconnect between the various stakeholders
involved, and so additional reporting mechanisms and improved internal
communications were subsequently recommended.[196]
Previously, the 2010 ‘Value for Money’ review of the New Zealand Defence
Force further lamented that the payment of UAC to personnel housed
in barracks was also ‘likely encouraging individuals to stay in barracks
reducing NZDF’s ability to divest of old barracks stock’.[197]
In November 2008, the Ministry of Defence’s Briefing to
the Incoming Government noted that the improved housing and accommodation
allowances were implemented to directly reduce attrition of NZDF personnel
(alongside improved overall remuneration), and assessed that the UAC ‘appears
to be having a positive impact on personnel retention’.[198]
However, between 2010 and 2012, less than 60 per cent of NZDF personnel
surveyed were satisfied that accommodation assistance was appropriate and most
believed that Defence housing was of unacceptable quality.[199]
The recently published 2016 Defence White Paper (New
Zealand) noted:
The Defence Force is reviewing its personnel accommodation
assistance policy. While the review has not been finalised, the provision of
accommodation assistance will be fiscally responsible, be applied consistently
and transparently, and will be provided for personnel where there is a
demonstrable need and a clear benefit to operational effectiveness.[200]
Canada
The bulk of Canada’s defence housing was established
following the Second World War but construction ceased at the end of the 1950s.
This was due to changing military demands, a larger pool of available private
accommodation and, significantly, a Treasury Board decision which only
authorised Defence housing in locations with insufficient private housing.[201]
The National Joint Council’s ‘Isolated posts and government housing directive’
also affirmed:
Government accommodation is only provided where: (a) it is
necessary for the delivery of government programs to combine an employee’s
place of work and residence or for the employee to live at the job location; or
(b) no suitable living accommodation is available in the vicinity. It is the
policy of the government that occupants of government housing be accorded
treatment equivalent to that accorded to persons renting similar accommodation
from private or commercial sources ... [Rents] should not form part of an
employee’s compensation.[202]
As a response to high operating costs, a lack of management
accountability and poor maintenance services for defence housing, the Canadian
Forces Housing Agency (CFHA) was established in 1995.[203]
Although this Agency appears conceptually similar to DHA in Australia (and
CFHA’s first initial director of operations was seconded from DHA[204])
there were critical differences in the organisational structure and resourcing.
In terms of structure, the CFHA was created as a
‘provisional special operating agency’ within the Department of National
Defence, with the provisional status removed in 2004.[205]
Accordingly, as part of a government department, CFHA has no independent
legislative authority to act commercially and is accountable to the
Department’s Assistant Deputy Minister (Infrastructure and Environment).[206]
The CFHA’s position within the public service also produces significant resourcing
constraints, including deterrence from generating profits, the inability to
borrow funds for capital works, and regulatory hurdles in contracting and
property management.[207]
The CFHA’s founding CEO, Mike Nelson, explained in 1998:
The creation of CFHA was an important first step towards
resolving the Ministry’s housing problems but, as regards our mandate, funding
and flexibility, we are very limited. As I have pointed out, we have no power
in relation to the real estate sector. We can’t buy, we can’t sell, we can’t
rent and we don’t have access to real estate funding. As far as our mandate
goes, we are limited to maintaining and using existing housing units. We must
find a solution to these deficiencies, probably by giving the agency an organizational
structure that is better suited to the work it has to do.[208]
The Standing Committee on National Defence and Veterans
Affairs (SCONDVA) bluntly assessed in a 1998 report that ‘the Canadian military
is facing a housing crisis’ with ‘accommodations that are among the worst to be
found in this country’, based on ‘years of neglect’.[209]
Accordingly, it recommended that the CFHA be given an expanded operational
mandate and the ability to use the proceeds of housing stock sales to fund new
construction works and receive low-interest loans from the Government to fund
necessary improvements.[210]
However, these recommendations did not receive bipartisan support, as the
Opposition (Reform Party) instead called for the CFHA to be scrapped and
control of defence housing to be returned to local military base commanders.[211]
For its part, the Department of National Defence responded by allocating $40 million
for housing improvements in 1999 in addition to future unspecified annual
allocations.[212]
In the four years following the SCONDVA report, the CFHA
spent $219 million in bringing 30 per cent of its housing stock to a ‘minimum
maintenance standard’. The upgrade cost for the total housing stock was
estimated to be almost $600 million, with two-thirds of this needing to be financed
through government appropriations. In citing these figures in January 2003, the
National Defence Chief Review Services was further concerned that ‘there has
not been a stable target end-state for the ... housing portfolio’.[213]
This was despite there being an accommodation policy released in June 1999 and a
site-by-site housing requirements study completed in April 2001.[214]
In 2004 the CFHA’s ‘rationalization framework’ was approved
by the Treasury Board, with a view to rejuvenating its housing portfolio over
the next 20–25 years to an estimated requirement of 12,500 married quarters.[215]
In terms of housing for single personnel, a 2009 Defence survey of base
commanders and officers responsible for accommodation identified that just over
40 per cent of the 17,081 accommodation units were substandard, falling below
approved functional accommodation standards. The Canadian Army fared
particularly poorly, with two-thirds of its total single accommodation deemed
substandard, including six bases (comprising almost 5,000 housing units) where
more than 85 per cent was regarded as substandard.[216]
The survey further reported that more than 70 per cent of respondents supported
Defence-provided accommodation even where local rental markets were perceived
as adequate (in contrast to the current policy), and there was little support
for external providers building or managing on-base accommodation.[217]
A 2010 audit by Defence’s Chief Review Services further
highlighted that resource constraints had severely limited the housing
recapitalisation program, as CFHA’s insufficient revenues had led to a $155 million
cumulative funding gap over the past five years. This underfunding had enduring
implications for housing quality, as demonstrated by the audit’s analysis that the
percentage of the CFHA housing portfolio rated as good had only increased from
two to six per cent in the past four years.[218]
Additionally, the audit criticised CFHA for not having produced complete and
audited annual financial statements, despite this being a requirement in the
CFHA’s charter, and thus ‘reduc[ing] the credibility of CFHA’s annual report as
a whole’.[219]
Five years later, the most recent CFHA annual report continues to publish
unaudited financial statements.[220]
As part of a wide-ranging 2013 study into the well-being of
defence families, the Defence Ombudsman included an assessment of their
accommodation. The study contended that CFHA had not been appropriately
resourced since its inception and that nearly 30 per cent of its housing
portfolio remained of a ‘poor’ standard.[221]
This was largely corroborated by data in the CFHA’s own 2014–15 annual report
which indicated that only 74 per cent of occupants ‘are satisfied or somewhat
satisfied with their current accommodation’.[222]
The Ombudsman further claimed that an estimated $2 billion would be required to
‘bridge the current gap in the sub-standard quality’, but the Defence Department
has subsequently ruled out the possibility of such a large appropriation.[223]
In 2015 the Canadian Auditor General’s office assessed the
current state of the defence housing portfolio, which consisted of just over
12,000 housing units at 25 sites, accommodating approximately 15 per cent of
serving personnel.[224]
Its report identified that there continued to be no clearly defined
requirements regarding the appropriate amount of housing, despite Defence’s
accommodation policy being under review since 2009 and not being due to be formally
updated until late 2018 (with implementation in late 2019).[225]
The official Government response to the Auditor General’s report further
acknowledged that the Defence Department anticipated that a long-term
accommodation plan would be published as late as the end of 2019, though status
updates would be produced throughout the process. However, the Government
response also highlighted the more positive development of a new Housing Agency
Information Management System having been rolled out, to better assess and
record the condition of CFHA’s housing stock.[226]
In a subsequent hearing by the Standing Committee on Public
Accounts in March 2016, the Auditor General also criticised Defence for not
having a better understanding of the private housing market, as per its policy
directives, and lamented:
The [CFHA] spent about $380 million on military housing between
the 2012–13 and 2014–15 fiscal years without a plan to guide its spending and
without accurate information about the condition of units. As a result, it
cannot ensure that funds spent on housing units were used effectively on the
highest priorities.[227]
In response, the CFHA’s CEO, Dominique Francoeur, informed
the Committee that she had recently received more clarity regarding the annual appropriations
CFHA would receive and that this would assist in better planning, based on
economies of scale. She also asserted that the quality of housing stock was
improving, as 87 per cent was considered by CFHA as ‘average or above average,
which means “like new”’.[228]
The United
Kingdom
In 1992, the Ministry of Defence’s (MoD) ‘Housing Task
Force’ published its concerns regarding the poor quality of the Defence-owned service
family accommodation (SFA). Within the report, the Task Force specifically recommended
that a ‘Housing Trust’ be established to own and maintain this accommodation,
which could be leased back to the MoD.[229]
This appears to be a largely similar concept to DHA, in the Australian context.
However, such plans were abandoned in 1994 due to the Government’s position
that this concept did not go far enough in transferring ‘ownership and risk to
the private sector’.[230]
Instead, in 1996 the MoD sold approximately 57,000 properties across England
and Wales (almost 80 per cent of its total SFA stock) for approximately £1.7 billion
to Annington Homes Limited (AHL), which itself was bought for £3.2 billion by
the European private equity firm Terra Firma in 2012.[231]
Shortly after the sale to AHL, a National Audit Office
report highlighted assessments from MoD property advisers and internal MoD
analysis revealing that the sale price was potentially as much as £150 million
less than the assessed value of the estate. The MoD rationalised this
discrepancy through the belief that AHL was accepting the transfer of risk.[232]
But in May 2007, the Chief Executive of Defence Estates, Vice Admiral (VADM) Timothy
Laurence, acknowledged that ‘I think with the benefit of hindsight, looking
back now, [the sale to AHL] does not strike me as being a great deal; and the
price of the property that was sold has risen very significantly’.[233]
As part of the 1996 sale arrangement, the MoD would lease
back required SFA properties and retain responsibility for all maintenance and
improvements.[234]
Despite the MoD receiving advice that an estimated £470 million was required to
bring all married quarters up to standard, Treasury agreed to provide just £100
million (six per cent) of the total sale proceeds for housing improvements over
the following five to seven years.[235]
As at March 2016, the MoD leased 38,886 SFA properties from AHL. An additional
10,880 properties were either owned by the MoD, sourced from the private market,
or obtained through Private Finance Initiative (PFI) means.[236]
The PFI process essentially gives private sector contractors responsibility for
the design, financing, construction and operation of an asset.[237]
In late November 2005 the MoD began contracting out maintenance
and improvement works for its UK properties, with Modern Housing Solutions
(MHS)—a joint enterprise between Carillion, Atkins and Enterprise—being awarded
the £690 million seven-year contract.[238]
In 2007 VADM Laurence contended that maintenance arrangements ‘are
satisfactory’, while acknowledging that the contract with MHS ‘is taking time
to settle down but it is beginning to work a lot better’.[239]
Despite this assurance, maintenance standards failed to improve, and a July
2008 House of Commons Defence Committee report stated that ‘we were very disappointed
that the Government ... failed to acknowledge the serious shortcomings in the administration
and maintenance of Service accommodation’.[240]
Later, in June 2010, Prime Minister David Cameron affirmed
his desire to establish ‘a new military covenant that’s written into the law of
the land’.[241]
The Armed Forces Covenant, established by the UK Government in May 2011, stated
with regard to housing:
In addressing the accommodation requirements of Service
personnel, the MoD seeks to promote choice, recognising the benefits of
stability and home ownership amongst members of the Armed Forces where this is
practicable and compatible with Service requirements, and also that their needs
alter as they progress through Service and ultimately return to civilian life.
Where serving personnel are entitled to publicly-provided accommodation, it
should be of good quality, affordable and suitably located.[242]
Just over a year after the Covenant was initiated, concern
regarding the poor state of housing remained, as demonstrated by Julie
McCarthy, the Chief Executive of the Army Families Federation, who stated:
In terms of housing, it is probably fair to say that most
families feel it is failing. There are the reductions in funding for general
upgrades, but look at the funding pause between 2013 and 2015, where there will
be no upgrades at all. Families feel that that could be addressed. As part of
the Covenant, they feel that that should be addressed first. Before we get into
all the other stuff, that should be right.[243]
The proposed three-year ‘pause’ in MoD’s planned SFA
upgrades, instigated as part of a department-wide savings program, was
calculated to save less than £150 million over the three-year period, but
result in almost £200 million of additional costs over the following decade.[244]
The House of Commons Defence Committee labelled the pause a ‘false economy’ and
chastised the decision as sending ‘the wrong signal to Armed Forces personnel
about the importance the Government attached to the Armed Forces Covenant’.[245]
The Armed Forces Covenant process also included a specific
task force, which published its report in September 2010. The report suggested there
was a possible benefit to having ‘a single independent housing provider’ for
defence housing, much like the Defence Housing Trust proposed almost 20 years
earlier. It also proposed that a ‘one-stop shop’ for SFA needs, queries and
complaints could be established through a commercial provider.[246]
Instead, the Government’s response to the report stated that it would focus in
the near term on developing a new National Housing Prime Contract, and
optimising current contractual arrangements.[247]
The Defence Infrastructure Organisation subsequently announced
the National Housing Prime contract in May 2014. This contract, awarded to the
joint venture CarillionAmey (Housing Prime) Ltd, included provision for posting
relocations, property allocation and furnishing.[248]
Two years later, CarillionAmey’s performance was heavily criticised in the
House of Commons Committee of Public Accounts’ report into the state of SFA.[249]
This criticism largely stemmed from CarillionAmey’s inaction in response to
required maintenance, with it only having achieved its responsiveness target in
one of the 14 months from December 2014 to January 2016.[250]
The number of maintenance-related complaints CarillionAmey received also rose
over 70 per cent in the 12 months from February 2015.[251]
Following the intervention of the UK Defence Secretary in February 2016 and the
enacting of a three-month improvement plan, CarillionAmey’s performance improved
markedly; however, the Secretary of Defence has indicated that he will ‘consider
contract termination should performance drop below contractual levels’.[252]
The Defence Continuous Attitude Survey has also highlighted
service personnel’s high level of dissatisfaction with SFA. For example, the
2016 survey of Armed Forces personnel indicated that only 50 per cent were
satisfied with the standard of SFA (down from 57 per cent in 2015), 32 per cent
were satisfied with the response to maintenance requests (down from 42 per cent
in 2015) and 29 per cent were satisfied with the quality of maintenance (down
from 37 per cent in 2015).[253]
Another method Defence has used to provide housing is
through the previously mentioned PFI process.[254]
For example, the MoD PFI project, Allenby/Connaught, proposed to construct or
refurbish 562 buildings over eight years to accommodate 18,700 personnel, the
majority of which is single living accommodation.[255]
However, PFI projects have been criticised as representing poor value for
money, by providing short-term finance through higher interest inflexible
long-term contracts instead of conventional debt.[256]
As much of the current SFA program is regarded by the Government
as either physically unsuitable or economically unsustainable, the Ministry of
Defence is currently exploring a ‘Future Accommodation Model’ (FAM). This aims
to align with the 2015 Strategic Defence and Security Review’s commitment to
‘make a new accommodation offer to help more personnel live in private
accommodation and meet their aspirations for home ownership’. Further
objectives are to cease allocations of housing based on rank and relationship
status (currently SFA is unavailable to de facto couples) and instead provide
offers based solely on need.[257]
Additionally, the Director of MoD Service Personnel Policy,
Gavin Barlow, has raised the prospect of adapting some military career paths to
be made deliberately less mobile, or have less obligation to relocate.[258]
Barlow has also identified the possibility of an accommodation allowance,
noting:
That is very definitely something that we are actively
looking at. It looks on the face of it like a possible radical change that one
could make ... But it is not straightforward, particularly from a purely
financial perspective, especially in the MoD’s case. We have a large number of
personnel who do not take up their entitlements, particularly to Service Family
Accommodation. Essentially, they live on the market without any subsidy or
support from us for their own private housing. Moving to a situation in which
an allowance is made more generally available to personnel to enable a wider
range of choice for the majority might be quite expensive and difficult to do,
but it is certainly on the table. There are different ways in which you could
make such an allowance work—at least in theory.[259]
Fears that the FAM will push many Defence personnel into an
unaffordable private rental market, and create subsequent retention issues were
raised during a debate in the House of Commons in October 2016.[260]
In response, the Parliamentary Undersecretary of State for Defence Personnel,
Mark Lancaster, asserted that SFA would continue—and even be expanded in some
areas. However, the Undersecretary also contended that the current SFA system
‘is characterised by chronic wastefulness’ and as the Department’s rental costs
were set to rise, the FAM was a necessary change, with pilot programs due to
commence in late 2018.[261]
Key themes
Despite the differences
in geography and resourcing in each jurisdiction, New Zealand, Canada and the
UK share similar challenges to Australia when it comes to defence housing. A
consistent theme across all these case studies is the desire by governments to
reduce their own expenditure on defence housing as much as possible. In New
Zealand and the UK, this has resulted in their governments leasing the bulk of
defence housing properties while Canada has continued to limit spending on
maintaining and improving its defence housing stock. Although these expenditure
reduction policies have conceptually reduced the economic risk carried by these
governments, they have potentially increased the operational risk for each
country’s respective militaries in not being able to guarantee high-standard
accommodation for their personnel across all bases and facilities.
This has
resulted in relatively poor satisfaction with defence accommodation in New
Zealand, Canada and the UK, compared to that experienced in Australia. While
recent surveys in New Zealand, Canada and the UK have failed to show more than
75 per cent satisfaction with service accommodation, tenant satisfaction with
DHA-managed housing has averaged 88 per cent over the last five years.[262]
This is likely the result of DHA’s ability to more flexibly maintain and
improve its housing stock in comparison to Canada, and to be more responsive
and accountable in relation to maintenance requirements than in New Zealand and
the UK.
As the only
country assessed in this research paper to have privatised its defence housing
(selling off the majority of properties to a single commercial entity), the UK
example offers valuable and significant insights. The most apparent is that the
initial sale was almost certainly not the best deal achievable for the
Government, because while the commercial returns on residential housing might
not be especially attractive, the long-term value of such assets should not be
underestimated. Further, by locking itself into contracts for the provision and
maintenance of service accommodation without sufficient means of enforcing
standards, the UK Government has been unable to alleviate subsequent criticism
from defence personnel, their families, and advocacy groups.
Conclusion
The ADF, and by
extension the Australian Government, has long sought the most effective means
of accommodating its personnel. This has often meant navigating the problematic
balance between the military’s requirements for operational flexibility and
high levels of morale with the Government’s need to ensure the best value
possible where taxpayers’ dollars are involved.
While DHA’s
establishment has successfully reversed the previous trend of poor quality
defence housing, this has been achieved amid the tension between its obligation
to support the ADF, and its commercial imperatives to be self-reliant and
deliver financial returns. However, it has generally managed to harmonise both
objectives, gaining a high degree of satisfaction from defence personnel and
achieving consistent profit levels in a constrained property market.
Defence housing
will almost certainly remain a significant political, economic and military
capability issue into the future, given its national footprint and the $10
billion housing portfolio managed by DHA.[263]
Likewise, the potential for privatisation will also endure, as DHA will almost
certainly be mentioned in the context of the continuing role of government
business enterprises. The examples of New Zealand, Canada and the UK also offer
valuable lessons, most notably regarding the trade-off between economic and
operational risk and the impact this can have on defence personnel and their
families.
Appendix – list of relevant legislation and reports
Legislation
Reports
[1]. National
Commission of Audit (NCA), Towards
responsible government: the report of the National Commission of Audit – Phase
One, February 2014, p. 224, accessed 1 December 2015.
[2]. A Greene, ‘Defence
Force chief warns Government, Finance Department against privatising Defence
Housing Australia’, ABC News, Australian Broadcasting Corporation
(ABC), 3 November 2015, accessed 1 December 2015.
[3]. J Collings, ‘Second
reading speech: Commonwealth and State Housing Agreement Bill 1945’, Senate
and House of Representatives, Debates, 4 October 1945, p. 6449,
accessed 10 December 2015.
[4]. Commonwealth and State
Housing Agreement Act 1945 (Cth), clause
9 of the Schedule, accessed 10 December 2015.
[5]. Australian
National Audit Office (ANAO), The
Commonwealth-State Housing Agreement, Audit report, 17, 1999–2000, 15
November 1999, ANAO, Barton, ACT, p. 104, accessed 28 September 2016.
[6]. Housing Agreement
Act 1956 (Cth), accessed 15
December 2015.
[7]. J Beaumont, Australian
Defence: sources and statistics, The Australian Centenary History of
Defence, volume six, Oxford University Press, Melbourne, 2001, p. 244.
[8]. W Spooner, ‘Second
reading speech: Housing Agreement Bill 1956’, Senate, Debates, 14
June 1956, p. 1526, accessed 10 December 2015.
[9]. W Ashley, ‘Second
reading speech: Housing Agreement Bill 1956’, Senate, Debates, 14
June 1956, p. 1534, accessed 10 December 2015.
[10]. F Cranston,
‘Barnard campaign against critics’, The Canberra Times, 11 October 1973,
p. 9. South Australia and Western Australia would also be similarly criticised
during the later Garland Review process—see A Gray, ‘Service housing “below
standard”’, The Canberra Times, 9 October 1976, p. 9.
[11]. Housing Agreement Act
1961 (Cth), accessed 15 December 2015.
[12]. Australian
Government, Budget papers 1961–62, pp. 35–6; Australian Government, Budget
papers 1962–63, pp. 35–7; Australian Government, Appropriation (No. 1),
1967–68, pp. 157, 160, 164.
[13]. M Fraser, ‘Ministerial
statement: Defence’, House of Representatives, Debates, 10 March
1970, p. 241, accessed 16 December 2015.
[14]. Ibid.
[15]. M Fraser, ‘Answer
to Question in writing: Interdepartmental committee: defence housing’,
[Questioner: G Whitlam], Question 2024, House of Representatives, Debates,
17 February 1971, accessed 16 December 2015.
[16]. Australian
Government, Australian
Defence (1976 Defence White Paper), November 1976, p. 46, accessed 14
December 2015.
[17]. Joint
Standing Committee on Public Works, Report
relating to improvements to on-base housing, RAAF Base, Darwin, House
of Representatives, Canberra, 1984, pp. 2–4, accessed 28 September 2016.
[18]. The
Parliamentary Library, Australian parliamentary handbook, 19th edition,
supplement no. 1, 1976, pp. 70–1; House of Representatives (HoR) Standing
Committee on Expenditure, Accommodation
for married servicemen, House of Representatives, Canberra, May 1977,
p. 1, accessed 14 December 2015.
[19]. HoR Standing
Committee on Expenditure, Accommodation for married servicemen, op.
cit., p. viii.
[20]. Ibid., p. 12.
[21]. Ibid., pp.
18, 21.
[22]. A Gray, ‘Ultimate
aim to quit Defence housing’, Canberra Times, 2 June 1977, p. 22,
accessed 26 April 2016.
[23]. HoR Standing
Committee on Expenditure, Accommodation for married servicemen, op.
cit., p. 20.
[24]. Department of
Defence (DoD), Defence report (various years), Canberra.
[25]. ; Parliament
of Australia, Committee of inquiry into financial terms and conditions of
service for male and female members of the regular armed forces, Third report
(Woodward Review), Canberra, 1971, p. 2, cited in HoR Standing Committee on
Expenditure, Accommodation for married servicemen, op. cit., p. 7. By
way of comparison, the 2015–16 ADF separation rate was 8.3 per cent, from a
smaller total personnel strength—DoD, Defence
annual report 2015–16, volume 1, Canberra, 28 October
2016, p. 92.
[26]. J McLeay, ‘Accommodation
for married servicemen: ministerial statement’, House of Representatives, Debates,
4 May 1978, pp. 1784–86, accessed 11 January 2016.
[27]. G Scholes, ‘Accommodation
for married servicemen: ministerial statement’, House of Representatives, Debates,
4 May 1978, pp. 1786–88, accessed 11 January 2016, accessed 28 September 2016.
[28]. Task force on
Australian Public Service and Defence Force housing programs, Interim report
of program effectiveness review (Monaghan Review), January 1985, p. 32.
[29]. Ibid., p. 1.
[30]. Monaghan
review, op. cit., pp. 45–6; Department of Defence, Defence report
1984–1985, p. 79.
[31]. Monaghan
review, op. cit., p. 47.
[32]. Ibid., p.
xxxviii.
[33]. Ibid., pp.
xxxix, xl, xlii.
[34]. Ibid., pp.
96–7.
[35]. Ibid., p. 84.
[36]. Ibid., p.
214.
[37]. Ibid., p.
231.
[38]. K Beazley
(Minister for Defence), Problems
of service families, media release, 30 April 1986, accessed 18 December
2015; S Hamilton, Supporting
service families: a report on the main problems facing spouses of Australian
Defence Force personnel and some recommended solutions (Hamilton Review),
Office of the Status of Women, April 1986, pp. 20, 51, accessed 17 December
2015.
[39]. S Hamilton, Supporting
service families, op. cit., p. 51.
[40]. Ibid., p. 11.
[41]. Joint
Committee on Foreign Affairs, Defence and Trade (JCFADT), Personnel
wastage in the Australian Defence Force—report and recommendations,
Canberra, November 1988, pp. 304–7.
[42]. Ibid., pp.
311–2.
[43]. Australian
Government, Responses to the specific recommendations in the Joint Committee
on Foreign Affairs, Defence and Trade report on ‘Personnel wastage in the
Australian Defence Force’, Canberra, 11 May 1989, p. 17, accessed 28 September
2016.
[44]. F Cranston, ‘$1,000m
bill for Defence Force housing’, Canberra Times, 9 March 1984, p. 7,
accessed 28 September 2016.
[45]. K Beazley
(Minister for Defence),’Answer
to question without notice: Defence housing’, [Questioner: W Fatin], House
of Representatives, Debates, 16 April 1985, p. 1155, accessed 28
September 2016.
[46]. F Cranston, ‘$1,000m
bill for Defence Force housing’; Australian Government, ‘Statement no. 3:
estimates of outlays 1984–1985’ Budget papers: budget paper no. 1: 1984–85,
p. 79.
[47]. Parliamentary
Standing Committee on Public Works, Forty-eighth
general report, 16 April 1985, pp. 5–6, accessed 28 September 2016.
[48]. K Beazley
(Minister for Defence), New
deal for defence housing, media release, 30 January 1986, accessed 18
December 2015.
[49]. Ibid.
[50]. K Beazley, ‘Questions
without notice: service personnel’, [Questioner: R Tickner], House of
Representatives, Debates, 1 May 1986, p. 2874, accessed 18 December
2015.
[51]. K Beazley, ‘Defence
Housing Authority Bill: second reading speech’, House of Representatives, Debates,
18 March 1987, p. 1052, accessed 18 December 2015.
[52]. W Fife, ‘Defence
Housing Authority Bill: second reading speech’, House of Representatives, Debates,
28 April 1987, p. 2106, accessed 5 May 2016.
[53]. Ibid.
[54]. Liberal Party
of Australia, ‘Defence:
the next Liberal Government’s policy’, June, 1987, p. 5, accessed 28
September 2016.
[55]. J Newman, ‘Defence
Housing Authority Bill 1987’, Senate, Debates, 17 September 1987, p.
285, accessed 5 May 2016.
[56]. J Newman, ‘Social
security legislation amendment Bill (no. 2) 1993: In committee’, Debates,
Senate, 26 October 1993, p. 2547, accessed 10 May 2016.
[57]. JCFADT, Personnel
wastage in the Australian Defence Force, op. cit., p. 308.
[58]. Defence Housing
Australia (DHA), Annual report 1987–88, p. 47.
[59]. Commonwealth and
State Housing Agreement (Service Personnel) Act 1990 (Cth), Schedule 1,
clauses 3 and 5, accessed 14 June 2016.
[60]. DHA,
Annual report 1993–1994, p. 84.
[61]. Defence Act 1903
(Cth), paragraph 58B(1)(e), accessed 7 June 2016.
[62]. DoD, Defence
Determination 2016/19, Conditions of service, Volume 2, Chapter 7, 20
October 2016, accessed 31 October 2016.
[63]. DHA, Parliamentary
Library presentation, 25 November 2016.
[64]. DHA, 2014–15
Annual report, p. 24, accessed 8 June 2016.
[65]. DHA, 1999–2000
Annual report, p.2.
[66]. DHA, Annual
reports, various.
[67]. DoD, Annual
reports, various;
[68]. DHA, Parliamentary
Library presentation, 25 November 2016.
[69]. DHA, Annual
reports, various; ANAO, Army
presence in the North: Department of Defence performance audit, Audit
report, 27, 1996–97, ANAO, Barton, ACT, 5 March 1997, accessed 8 June 2016;
DHA, Parliamentary Library presentation, 25 November 2016.
[70]. DHA, Annual
reports, various; DHA, Parliamentary Library presentation, 25 November
2016.
[71]. DHA, Annual
reports, various; Royal Australian Air Force (RAAF), ‘RAAF
Base Amberley’, website, accessed 8 June 2016; DHA, Parliamentary
Library presentation, 25 November 2016.
[72]. K Rudd (Prime
Minister), 20,000
social and defence homes—nation building investment, media
release, 3 February 2009, accessed 17 June 2016.
[73]. DHA, Annual
report 2010–11, p. 6.
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