4.1
The Committee received detailed and compelling evidence regarding social and affordable housing in Australia. It was moved by first-hand accounts of homelessness and livelihoods affected by the lack of adequate and affordable housing, demonstrating the necessity of appropriate, accessible and affordable housing for healthy and prosperous individuals, families, communities and societies.
4.2
The Committee heard evidence regarding social and affordable housing from individuals, charities, housing and industry groups, local community groups, governments and politicians. The evidence spoke of a challenge, perhaps a crisis, in social and affordable housing.
4.3
The Committee notes that more extensive and targeted evidence on issues relating to the affordability and supply of social and affordable housing from many of the same submitters to this inquiry was also received by the House of Representatives Standing Committee on Social Policy and Legal Affairs in its recent inquiry into homelessness in Australia. A summary of the relevant recommendations is provided later in this chapter.
4.4
To avoid duplicating content this chapter will consider social and affordable housing to the extent of three specific issues: ‘rent-to-own’ housing models, shared equity schemes, the role of private investment, and crisis housing.
Setting the scene: social and affordable housing
4.5
The Committee received evidence from across Australia regarding issues relating to social and affordable housing. From the Pilbara in Western Australia the Committee heard of an ‘…escalation of rental charges and house prices…’ and a housing shortage that:
… is seriously constraining the ability of NGOs [Non-Government Organisations] to attract, retain and house qualified staff, which in turn is impacting on the level, quality and accessibility of healthcare, education, childcare and social services.
Across to Griffith in New South Wales (NSW), which is ‘…in the depths of a severe housing crisis, caused by a lack of supply – especially of affordable housing.’
4.6
The Committee heard that while the problem is acute, there are solutions within reach if political will is brought to bear. The NSW Member for Murray, Mrs Helen Dalton MP, implored:
Housing – because it is essential – cannot be treated like a simple commodity. Insecure housing leads to terrible social outcomes – for children, for families, for workers, for neighbourhoods, and for local economies. It entrenches inequality and fuels cycles of poverty and neglect.
4.7
The Community Housing Industry Association (CHIA) submitted that:
Social and affordable rental housing is a fundamental part of a well-functioning housing system not simply a safety net service for the most disadvantaged. For some households its long-term provision provides the stability and security that enables them to participate in society, by for example, taking a chance on what can often be casual low waged employment. For others it acts as springboard into home ownership. In yet other cases it provides a platform on which to set up the scaffolding - supports – to enable individuals to resolve other issues in their lives. Last but not least it can enable a dignified old age after a lifetime working in less well renumerated employment.
4.8
Ms Wendy Hayhurst, Chief Executive Officer of CHIA, explained the difference between social housing and affordable housing and the different type of landlord arrangements that can exist in this space:
Social housing is housing that is usually targeted at the lowest incomes, and rents are set as a proportion of someone's income … Affordable housing will look very much like social housing—all of these things look very much the same—but it's targeted usually at people who are on a lower wage. I'm simplifying it a little bit. But there, essentially, the rent is set as a discount to market. Because it's aiming at, I suppose, a slightly higher income group, it needs less subsidy. Build-to-rent—well, it's all build-to-rent but, as that term's used in Australia, that's market housing but which has institutional investors as the funders. Therefore, people are investing in it because they want to get the return; it's not really so much the capital gain there. That more requires tax settings to change than an actual subsidy. Those are the three types of rental housing. When you come to community housing and public housing, we’re simply the provider of the housing. Community housing does social and affordable, and we can do a bit of market rent as well, and public housing does social and affordable housing. It’s a different type of landlord; that’s the best way of seeing it. So you’re seeing public and community housing and private landlords as a provider of housing, with social and affordable and build-to-rent as the type of housing, if you like.
4.9
The House of Representatives Standing Committee on Social Policy and Legal Affairs made several recommendations relating to social and affordable housing in its Final Report – Inquiry into Homelessness (Homelessness Inquiry) tabled in Parliament on 4 August 2021. Relevant recommendations include that the Australian Government:
…and state and territory governments, in consultation with community housing providers, improve the availability, quality and consistency of data on community housing and Indigenous community housing
…including through the introduction of mandatory requirements on state and territory governments, improve data collection and reporting on housing stock and overcrowding…
…[undertake] specific measures to improve data relating to housing outcomes for Indigenous Australians to inform all governments’ efforts to meet the National Agreement on Closing the Gap target on housing
…in consultation with state and territory governments, develop a needs-based funding methodology to be applied to future inter-governmental housing and homelessness funding agreements…
…undertake an evaluation of Australian Government sponsored social and affordable housing projects, including those delivered by state and territory governments…
…commission an independent review of Commonwealth Rent Assistance, which should consider the maximum rates and method of indexation of the payment and its interaction with other relevant payments
…waive or refinance at a concessional rate the historical housing-related debts of state and territory governments, in exchange for:
an amount equal to the savings to each jurisdiction being reinvested into affordable housing, with 50 per cent of new housing stock to be leased to community housing providers; and
agreement on appropriate planning and zoning reforms in each jurisdiction
…work with state and territory governments to ensure the availability of an appropriate proportion of social housing and transitional, crisis and emergency accommodation which is accessible and appropriate for people with diverse needs…
…lead the development of a national integrated approach to housing and homelessness services for Indigenous Australians, co-designed with Indigenous community-controlled organisations and grounded in the principle of self-determination.
…in consultation with state, territory and local governments, seek to increase affordable housing supply when land is rezoned for residential development, through the introduction and harmonisation of inclusionary planning approaches across Australia
…through the National Housing and Finance Investment Corporation, investigate opportunities for attracting greater private-sector investment in social and affordable housing, including from superannuation funds
…work with state, territory and local governments to:
ensure the appropriate allocation of social and affordable housing stock to meet the needs of individuals and families at different life stages and accommodate different household family structures…
…in consultation with state, territory and local governments, develop and implement a ten-year national strategy on homelessness…
4.10
The evidence submitted to the Homelessness Inquiry and the resulting recommendations made in the report cover key ground on social and affordable housing. The Committee endorses the recommendations in that report and will focus for the purpose of this report on the following specific social and affordable housing issues.
Specific social and affordable housing issues
4.11
The Committee heard evidence about multiple models and initiatives, such as ‘rent-to-own’ housing models, shared equity schemes and private investment, that may present opportunities for certain sections of the Australian community to enter into home ownership where they may otherwise not be able to and may support the expansion of social and affordable housing.
Rent-to-own housing models
4.12
The rent-to-own housing model (also known as rent-to-buy) was raised several times in written and oral submissions to the inquiry. This model involves creating a pathway for a renter to eventually own the home they live in after a series of agreed payments over a specified period time. The idea is that this model incentivises rent payment and assists people on lower incomes who would otherwise be locked out of market housing for reasons of economic disadvantage.
4.13
The Victorian Planning Authority described the emerging rent-to-own model in Australia as homes being offered:
… at a reduced rent for a minimum of five years and let on assured short-hold tenancies for a fixed term. The model being adapted in Australia is that, after five years of renting, the tenant has [the] first option to purchase the dwelling at a price agreed at the commencement of the five years. If the tenants do not want to buy, the landlord can retain the property as rented housing or sell it on the open market.
4.14
The Committee heard strong evidence in support of such models, including from Dr Nick Dyrenfurth, Executive Director of the John Curtin Research Centre, who said that:
We should look at creative ways of providing working-class and middle-class Australians with affordable, decent housing, in proximity to their workplaces and communities, by looking at things like build to rent—which is taking off in places like New South Wales and, to a lesser extent, Victoria—and other, more recent initiatives, such as build to rent to own. A key element of both of those proposals is incorporating essential workers and lower-income families as a proportion of those developments.
4.15
Mr Scott Langford, Group Chief Executive Officer of St George Community Housing (SGCH) told the Committee that he thought that models that support home ownership are ‘…incredibly important’, and stated:
Homeownership is so central to our way of being in Australia and a sense of investment in the social and economic fabric of the community. Ensuring there are pathways that mean that it can be a continued aspiration is important... Affordable rental is often a gateway that allows people to build some economic capacity to move into ownership. When added to other initiatives that support homeownership, it's a really important way that we can move people through the housing continuum, and it may also relieve some of the pressure on social and affordable housing.
4.16
Mrs Alexandra Waldren, National Director of Industry Policy at Master Builders Australia (MBA) told the Committee that MBA recommends that ‘…all of government, in terms of social housing needs and affordable housing needs, should commit to a long-term pipeline of social and affordable housing and community and crisis housing.’ By extension MBA stated that it is supportive of ways to create pathways to home ownership, and to ensure there is government investment to establish those pathways.
4.17
The Municipal Association of Victoria (MAV) emphasised that, apart from the social benefits, investment in social housing makes economic sense, and pointed to research that shows that the cost of access to health services can exceed the cost of housing for those who are experiencing homelessness or at risk homelessness. MAV also stated that rent-to-own solutions are an effective tool to increase house ownership:
In addition to addressing immediate needs, social housing can act as a bridge to stable housing in the private sector. Reduced housing costs can allow people to improve their personal circumstances and save. Rent to own style schemes can provide a more direct pathway to ownership.
4.18
Brida Pty Ltd (Brida) is an Aboriginal enterprise operating in the remote mining Pilbara region of northwest Western Australia. It told the Committee that ‘…our staff and our business have been brutally impacted by poor housing supply’, and that ‘[t]he “boom and bust” cycle of mining has deterred significant private investment.’ Brida proposed to the Committee that:
Allowing commercial enterprises and not-for-profit organisations to co-invest in housing solutions that benefit their people, locally, will enable ‘lazy’ land across the country to be developed (quickly) into tenanted space, and in our case, with ‘rent to own’ employment benefits – cementing the intergenerational value. Many, many Aboriginal Corporations and social enterprises own land they would desperately like to translate into housing – and a fungible asset. The barrier is access to co-investment capital.
4.19
While Ms Nicky Sloan, Chief Executive Officer at Community Industry Group agreed that we ‘should be looking at ways to encourage people into homeownership’, she also cautioned that consideration should be given to ensure that those mechanisms don’t increase the costs of housing, making it even more unaffordable:
We've seen some really great initiatives and subsidies that have been designed to increase a person's ability either to pay rent or to purchase a home, but some of them, like the First Home Owner Grant and the First Home Loan Deposit Scheme, the impact has been—and I know it was unforeseen—is that they've driven the cost of houses, and things at the state government level, like the New South Wales stamp duty exemption, all aimed to get people into homeownership do nothing to enable the cost of housing for people on very low incomes to purchase a home.
Shared equity schemes
4.20
Shared equity is another model that can be used for social and affordable housing which attracted the interest of the Committee. The Victorian Planning Authority explained how shared equity works:
… the buyer shares the capital cost of purchasing a home with an equity partner, thereby permitting households to buy a home with lower income levels than would otherwise be required.
4.21
Commenting on shared equity home ownership, PowerHousing Australia stated that ‘in some countries [it] is considered a viable and affordable alternative to full home ownership.’
4.22
In their joint submission, Mr Geoffrey Hodgkinson and Mr Richard Gay stated that the fastest growing group who are suffering most acutely from the housing affordability situation in Australia are those people sitting ‘around and below median household incomes’. By extension of that, those most affected are those employed in essential and frontline services:
… health services; police, fire & other first responders; hospitality & tourism; transport workers among many others. Many can’t find accommodation close to where they work and are forced to travel long distances.
4.23
Mr Hodgkinson and Mr Gay stated that the United Kingdom offers a range of affordable housing options for buyers, with some schemes being specifically reserved for essential workers and some developers specialising only in these models of housing development. The affordable housing options can include:
… pure reduction in price to 80% of market or lower; shared equity where the buyer pays as low as 60% of market value and rents the remainder from a Housing Association with a right to buy 100% over time.
4.24
PowerHousing Australia identified different models that could be taken up in Australia. One suggestion was that a government structured entity, such as NHFIC, could invest 20 per cent equity into a property to support people to maintain their home ownership and assist to reduce accumulated debt. It suggested that such an equity investment allows for ‘an investment vehicle to hold an asset that can be realised up to, at or after 10 years when the majority of homeowners refinance or sell their property.’
4.25
Alternatively, PowerHousing Australia suggested that community housing providers (CHPs) sell properties to their current or prospective tenants on a shared equity basis, where the current (or future) tenant raises the finance needed to acquire 80 per cent of the property, but the CHP retains the 20 per cent equity. It suggested that this approach allows an affordable transition from tenants to home ownership and:
… enables the CHP to leverage four properties constructed for every five properties sold. After a 10-year period the CHP would recover its equity position from the five properties, enabling it to build another property to meet the ongoing demand for social and affordable housing.
4.26
Ms Nicola Lemon, Chair of PowerHousing Australia told the Committee that they are considering what more can be done to encourage such models:
… there are some enablers that we've considered: removal of the five-year GST [Goods and Services Tax] payment for CHP developed homes, where we can put some shared equity opportunities into community housing spaces and for our customers, and shoring up charity status.
4.27
MGS Architects and Andy Fergus Design Strategy jointly submitted that ‘a balanced housing market has a diverse range of models’, and that ‘emerging alternative housing models are gaining support in a number of jurisdictions as a viable method to diversify housing supply.’
4.28
In support of community housing models, MGS Architects and Andy Fergus Design Strategy pointed out that ‘[t]here are already several established collaborative housing models in Australia… [a]dditional collaborative housing models continue to emerge, innovating in response to the high prices and poor quality in market-driven developments.’ They further stated:
Beyond their exemplar social and environmental design, these principally middle class, moderate to high income developments have demonstrated a greater willingness to voluntarily incorporate social and affordable housing contributions in partnership with registered Community Housing Providers. … both Nightingale Housing and Assemble Communities have committed to a figure of 20% tenure-blind social and affordable housing within their developments, while Property Collectives has similarly partnered with a number of Community Housing Providers to achieve shared equity, social and private rental housing outcomes. These leaders of market-based innovation provide helpful prototypes to embolden government in enacting policies that establish these expectations across the broader development industry.
4.29
Additional support for shared equity schemes came from other submitters, including state and local government. In its submission, the NSW Government called on the Australian Government to demonstrate long-term commitment and support for shared equity arrangements. It identified the problem as lying in a ‘fragmented’ policy landscape:
For some jurisdictions, governments provide shared equity schemes and finance debt… directly. In jurisdictions without these organisations, initiatives have been smaller in scale with governments partnering with private sector lenders. To date, these schemes have received little to no support from the Federal Government.
4.30
The NSW Government suggested that the Australian Government can support shared equity schemes by:
Providing supportive frameworks between Federal and State Treasuries in the establishment phase of new Federal agencies until they reach scale and establish their own momentum
Fostering transparency and sharing of information among all parties involved…
Adopting a national framework in support of financing arrangements to help provide scale, spread location risk, and enhance the cost effectiveness
Identifying the contributory role of shared equity in helping deliver the aims and objectives of the NHHA [National Housing and Homelessness Agreement].
4.31
The NSW Government added that expected benefits and outcomes of Australian Government support for shared equity schemes would include:
Improve affordability by reducing deposit and ongoing housing costs
Reduced demand for other government subsidies (e.g. CRA [Commonwealth Rent Assistance])
Potential to be a counter-cyclical product.
4.32
From a local government perspective, the Shoalhaven City Council recommended the Australian Government ‘investigate tax and policy settings that encourage innovative housing models that will deliver affordable housing, including but not limited to, means tested shared equity schemes...’ It further called for:
… reforms and government (and community housing sector) funding and partnerships which enable innovative housing types that increase housing supply and diversity in well-located areas and which demonstrably improve affordability. These innovative housing types include, but are not necessarily limited to, shared equity homebuyer schemes (appropriately targeted/means tested for low-moderate income groups).
4.33
Professor Nicole Gurran and Emeritus Professor Peter Phibbs proposed that Australia should have a national housing strategy, which would include the development of shared equity program expansion and recognise:
… complementary roles for both market and non market sectors, but provide adequate support for the social housing system. In addition to an expansion of the social housing stock, new models of housing provision such as shared equity and low cost home ownership should be expanded. These can be supported by consistent use of inclusionary planning models and the use of government land to deliver sites for affordable homes and genuinely mixed communities. The [NHFIC] could play a role in developing equity share products to support low cost home ownership opportunities, provided these are closely linked to new supply that is well located and designed.
4.34
Mr Saul Eslake, economist and Principal of Corinna Economic Advisory, suggested that one policy that governments could undertake to boost the supply of housing is:
…expanding or replicating programs like Western Australia’s ‘Key start’ scheme which assist[s] eligible people to become home owners on a ‘shared equity’ basis, with eligibility being subject to a means test, and which creates a revolving fund’ as the ‘shared equity’ is returned to the State Government upon sale.
Private investment
4.35
The role of private investment in social and affordable housing was also raised during the inquiry. Among others, Housing All Australians Limited (HAA) supported this form of value sharing, stating that:
…a strategic and coordinated response across the public, not-for-profit and private sectors is required to make a real ‘at scale’ difference in the affordable housing space.
4.36
HAA provided evidence to the Committee about an initiative that it has developed to create a national, at scale, affordable housing model:
It is based on a robust governance structure imbedded in the constitution of an affordable housing fund and allows the private sector to achieve both a development outcome and the investors a market commercial rental return. It is a value sharing model where the developer and the local government work together to create additional value in the land which is then used as the required subsidy for the affordable dwelling. This is then locked in, on title, for the economic life of the home. A national working group, led by Minter Ellison, has been established and is working to finalise the required legal structure by the end of 2021 and create HAA’s affordable housing fund.’
4.37
Mr Robert Pradolin, Founder and Director of HAA explained that HAA has now established significant interest amongst ‘…like-minded private sector individuals and organisations wanting to help vulnerable Australians’:
Everybody is talking about the homelessness we see in the streets of our towns and cities, and we must do something. Doing nothing is not an option. One of the initiatives we are implementing across Australia is using existing buildings that are sitting empty as a short-term solution to provide a roof over someone's head. It just makes common sense. We've also developed an affordable housing rental model and a shared equity model around the private sector driving this segment of housing need. We need innovative models that start thinking outside the square because, if you don't think outside the square, you will get the same answers.
4.38
SGCH also spoke highly of the effect of private investment in social and affordable housing, telling the Committee that since 2017, it has:
…successfully mobilised private investment of $475 million that leverages government contributions and has supported a pipeline of over 1,000 new social and affordable homes.
Increasingly, affordable housing operated by community housing providers is recognised as an investment class offering the benefits of low-volatility, long-term demand and the assurance of being highly regulated. Investors are increasingly understanding the stable economic return and incredibly high social return available from this emerging global asset class.
…
With the right policy settings and certainty of regulatory settings that support investment through community housing providers, this appetite can be unleashed to deliver more and better social and affordable housing that complements rather than competes with or challenges the viability of the private market.
4.40
Some submitters to the inquiry suggested specific models to encourage more private investment into social and affordable housing. For example, the Constellation Project (founded in part by Mission Australia) outlined to the Committee how CHPs are faced with a funding gap that impedes new developments which has ‘…consistently presented a barrier to scaling up the industry to produce affordable rental housing’. To address this the Constellation Project and Mission Australia recommended that Australia implement a tax incentive scheme, referred to as the ‘Housing Boost Aggregator’, which ‘promotes private sector investment in innovation’:
The Housing Boost Aggregator (HBA) is a way to close this funding gap through the creation of a new Commonwealth tax-subsidy alongside pooling portfolios of affordable housing projects to attract ongoing institutional investment.
4.41
Regional Development South Australia also suggested the ‘potential establishment of regional housing cooperatives’:
Cooperatives may attract private investment to either purchase or build new homes and may assist in unlocking potential land for development where (for example) private landowners are reluctant to develop housing due to associated costs (e.g. of sub-division).
4.42
The Committee also received evidence advising against relying exclusively upon private investment in social and affordable housing. MGS Architects and Andy Fergus Design Strategy provided that:
There is no effective way for private investment to deliver housing for the most vulnerable members of society, due to what is described as the ‘rental gap’ between the cost of supplying new housing and the rent-paying capability of these residents. This form of housing will always depend on stable government investment…
Crisis housing
4.43
The Committee understands the housing uncertainty that people experiencing domestic violence face and the difficulties associated with securing safe and long-term housing solutions. Further, the Committee is aware that many people fleeing domestically unsafe places have experienced other forms of abuse, including but not limited to financial abuse. As a result of this, it is difficult to secure even short-term housing. This is where crisis housing and shelters become important.
4.44
Crisis housing are accommodation solutions which aim to provide crisis ‘time-out’ accommodation. This allows time to alleviate a crisis situation such as a potential domestic conflict situation or an immediate housing crisis.
4.45
One of the most important types of crisis accommodation are women’s shelters. These are places of temporary protection and support for women escaping domestic violence and intimate partner violence of all forms. The Committee has heard from key stakeholders about how these shelters are key to preventing domestic violence and their importance.
4.46
Therefore, the Committee recommends that the Australian Government increases funding for crisis housing, through either subsidies and grants, as well as look into ways that state and local governments can be incentivised to subsidise these facilities. In particular, the Committee believes that women’s shelters should be subsidised to a greater extent. Not only is this important to decreasing the amount of lives lost to domestic violence, but it is the low-cost solution in the end, due to the amount of money saved on the cost of counselling and other social services.
Committee comment
4.47
The Committee is aware of the importance of social and affordable housing in creating a well-functioning and healthy society, both now and into the future.
4.48
The Committee received evidence and testimony regarding social and affordable housing innovations that are occurring across the public and private sector and what more can be done. Housing was presented not only as a human right, but as an important investment.
4.49
The Committee is of the view that the government should avoid being one’s landlord, but should provide people with the tools and the support to purchase their own home. Therefore, the Committee believes that the rent-to-own model, shared equity schemes and the role of private investment, present key opportunities for sections of the Australian community including some of Australia’s essential workers, to have greater access to affordable rental housing and/or enter into home ownership where they may otherwise not be able to.
4.50
The Committee sees that the rent-to-own model has the potential to be an effective tool in the social and affordability housing toolkit, particularly in areas of high need like regional areas with low-income earners, whereby renters of a particular property are incentivised to pay rent as that payment is in turn creating a direct pathway to ownership of that property.
4.51
Similarly, the Committee views shared equity schemes as another viable alternative housing offering. This model would allow Australians to buy a home with lower income levels than would otherwise be required – improving affordability by reducing the deposit required up front, and some of the ongoing housing costs. The Committee believes this is of particular assistance to Australia’s essential workers and lower-income families, many of whom are unable to live and work in the same location.
4.52
The Committee was also very interested to hear about the momentum being built with CHPs and cross-sector partnerships in respect of shared equity innovations and private investment, making way for social and affordable housing to be viewed as investment, which will inevitably attract more interest.
4.53
The Committee applauds the work already being done in these areas, and believes more can be done to improve and enhance these types of programs around Australia.
4.54
The Committee recommends that the Australian Government should adopt the recommendations of the House of Representatives Standing Committee on Social Policy and Legal Affairs’ Final Report – Inquiry into homelessness.
4.55
The Committee endorses the recommendations of this separate inquiry.
4.56
The Committee recommends that the Australian Government should work with state governments through grants and subsidies to increase the supply of critical housing such as crisis housing.
4.57
In addition to the recommendations in the House of Representatives Standing Committee on Social Policy and Legal Affairs’ Final Report – Inquiry into homelessness, the Committee recommends that the Australian Government work alongside the states to prioritise an increase in the supply pipeline through grants and subsidies of critical housing, particularly targeted for single income families who are fleeing domestic violence situations and are needing to secure long-term housing solutions.
4.58
The Committee recommends that the Australian Government should implement schemes to facilitate private sector partnerships to deliver discount-to-market rent-to-own affordable housing.
4.59
The Committee recommends that the Australian Government, led by the Department of the Treasury, implement schemes to facilitate partnership with the private sector to deliver discount-to-market rent-to-own affordable housing. This will diversify the housing market as well as provide affordable housing options for low to medium income earners, people experiencing homelessness, women escaping domestic violence, parents and children.