Senator David Pocock Dissenting Report

Housing Australia Future Fund Senate Committee Inquiry 2023

1.1Adequate housing is a fundamental human right recognised under article 25 of the 1948 Universal Declaration of Human Rights and in article 11.1 of the 1966 International Covenant on Economic, Social and Cultural Rights to which Australia is a party.[1]

1.2It is also an enabler of other fundamental human rights. The lack of access to adequate housing imperils other human rights, such as the right to health, education and the right to work.

1.3Expert testimony to this committee inquiry made it crystal clear that the right to adequate housing is increasingly imperilled in Australia. For example, ProfessorHal Pawson of the UNSW City Futures Research Centre notes the pressing nature of Australia’s housing policy challenges including:

…falling home ownership, high and rising rates of rental stress, and rising homelessness that has continued to outpace population growth.[2]

1.4Professor Pawson points to failures in both the private and public housing sectors, stating:

The past two decades have seen a steady increase in the national deficit of private tenancies affordable to Australians in the lowest income quintile. Since 1996 this deficit has grown from 48,000 to 212,000. In these circumstances, the near stagnation in the provision of social housing over the past 10 years has proved especially detrimental.[3]

1.5Master Builders Australia’s submitted:

… the 2018 review of the National Finance Investment Corporation (NHFIC) identified that $290 billion in investment will be required over the next two decades to meet the current and projected shortfall in the stock of social and affordable housing.3 This translates to around 800,000 net additional dwellings by 2035 which will require both taxpayer and private investment.[4]

1.6While submissions and public testimony to the inquiry have welcomed, almost universally, the proposal to establish the Housing Australia Future Fund (HAFF), all have also noted that the size and scope of the current proposal is insufficient to meet need or to adequately confront the scale of Australia’s worsening housing crisis.

1.7National Shelter, for example, acknowledged that:

…the delivery of 30,000 social and affordable homes in five years through the Housing Australia Future Fund does not adequately address the housing need that exists in our communities. National Shelter advocates for the annual delivery of 25,000 social dwellings or for 10% of all dwellings to be social housing to meet unmet demand.[5]

1.8This call to build a minimum of 25,000 new social dwellings per annum is echoed in Anglicare Australia’s submission which also notes that:

Given the scale of Australia’s social housing shortfall, it is critical that the Housing Australia Future Fund be designed in a way that treats the Government’s modest off-budget plan as a floor, rather than a ceiling.[6]

1.9Anglicare Australia goes on to say that:

Put simply, it is not possible to end Australia’s housing crisis off-budget. It will require a major capital investment, and a plan to sustainably fund and maintain social housing.[7]

1.10The National Affordable Housing Alliance, which includes Master Builders Australia, the Housing Industry Association, CHIA and the Property Council of Australia among others in its membership, recommends ‘expanding the size of the Housing Future Fund capital investment from $10 billion to $20 billion’.[8]

1.11This recommendation was echoed in testimony from the Grattan Institute with Mr Brendan Coates telling the Committee that:

…if we saw the fund increase by that size, over the next five years we would see 60,000 dwellings being constructed. That would be enough to reverse the decline in social housing, as a share of the total housing stock.[9]

1.12Attracting institutional investment is identified as the key factor to the success of the HAFF and superannuation funds are considered a prime target for providing such capital. In its submission Industry Super Australia (ISA) notes that:

Using estimated construction costs of around $550,000 per dwelling and underlying net rental cashflows available to support servicing commitments there is an identifiable project financing gap. Under conservative assumptions it is likely more than $10 billion in additional capital will need to be found to construct 40,000 social and affordable dwelling units.[10]

1.13ISA has gone on subsequently to further clarify this point saying the HAFF income streams will need to attract an estimated $10 billion in capital from private investors in order to construct 40,000 social and affordable dwellings[11], and that it believes ‘indexation of the annual expenditure cap will be required to support the capital which needs to be raised’.[12]

1.14The HAFF needs to be able to continue operating and adding to supply over the long term. Stakeholders in their feedback emphasised the importance of embedding a mechanism in the bill to ensure the HAFF is scalable and that investors have certainty going forward. The need to index availability payments and index or remove the annual cap on disbursements from the fund was identified by multiple stakeholders as needed to ensure its success.

1.15ISA notes that:

Even assuming a small premium on the projected long-term Government Bond rate, it will require approximately $570m per annum in HAFF supported cashflows / availability payments to be preserved in real terms (i.e escalating nominal cashflows at 2.5% per annum) to meet principal and interest repayments from the conclusion of the 5 year construction phase. The indexation of availability payments / subsidies is not controversial and a common feature of such arrangements in public private partnerships (PPP’s) where they are utilised.[13]

1.16The Community Housing Industry Association (CHIA) echoed this point stating that:

While the initial $500M cap on disbursements from the HAFF will be able to accommodate payments in respect of approved projects, this will not be the case beyond year five.[14]

1.17CHIA echoes ISA’s call for indexation of the proposed cap on disbursements from the fund stating:

The annual limit for amounts debited from the HAFF Special Account as proposed in S36 Part 5 of the HAFF Bill should be indexed annually on 1July by the housing group of the consumer price index for each year subsequent to the financial year beginning 1 July 2028.[15]

1.18National Shelter provides support for the CHIA and ISA submissions specifically around ‘the need to provide certainty for institutional investors to provide capital for financing projects, and underwrite returns to meet contractual payment commitments and future obligations’.[16]

1.19PowerHousing Australia raises concerns about the adequacy of the fund to meet the government’s commitment saying, in ‘absence of further detail including the Investment Mandate, our financial modelling suggests that this approach will likely only deliver somewhere closer to 25,000 social and affordable homes’[17] as opposed to the 30,000 promised. PowerHousing recommends that the $500m annual cap on disbursements:

…outlined in section 36 of Housing Australia Future Fund Bill 2023 be removed to ensure as much flexibility as possible is retained and not place a constraint on the consideration of different funding approaches.[18]

1.20The Housing Australia Future Fund (HAFF) Bill 2023 currently provides for the first review of the HAFF’s operation to be completed by 31 December 2028. The review provides the only current trigger in the draft legislation for a reconsideration of the adequacy of the quantum of capital investment in the HAFF.

1.21The Property Council among other witnesses ‘recommends the first review occur at the same time as the review for the Council which is to be undertaken as soon as possible after 1 July 2026’.[19] This will enable any issues in the operation of the HAFF to be reviewed and addressed ahead of all funds being committed.

1.22While being a universally welcomed initiative, some stakeholders raised concerns with the composition of the new National Housing Affordability and Supply Council. In particular, the National Aboriginal and Torres Strait Islander Housing Association (NATSIHA) notes the absence of any First Nations representatives on the Council. CHIA raises concerns that the Council membership and expertise does not recognise people living with disability and Anglicare Australia recommends that the‘Council’s membership include representatives of the homelessness sector, housing sector, and tenants’.[20]

1.23In addition, while the HAFF sets aside $200 million for the repair, maintenance, and improvements of housing in remote Indigenous communities, it does not specifically quarantine any of the 30,000 new homes for First Nations peoples in the way that it does for women fleeing domestic violence or veterans. Given that reducing the incidence of housing overcrowding in First Nations communities is one key Closing the Gap target, the lack of any carve out for First Nations should be revisited.

1.24Concerns were also raised by multiple stakeholders about the proposal to remove NHFIC’s existing research function.

1.25The Housing Industry Association stated it:

…supports the Council being an independent advisory body. However the provision of administrative support by Treasury, and membership of the Council, in lieu of Housing Australia, may been seen as a limitation on this independence. It is critical that the operating relationship between the Council and Housing Australia is transparent, open and not duplicative.[21]

1.26Anglicare Australia recommends:

…that the secretariat for the Council be removed from Treasury, as proposed in the Exposure Draft, and placed within Housing Australia. It is critical that both the Council and Housing Australia are independent of Government in order to focus on boosting the supply of social and affordable housing for those who need it, and provide frank advice on the role of Government and the scale of investment required to meet these goals.[22]

1.27Both Anglicare Australia and National Shelter advocate for the Council to be given a specific function under Section 9 of the bill to advise the Minister on the National Housing and Homelessness Plan, as well as the annual report for the Council reporting achievements relating to the national plan.

1.28CHIA has recommended that the following is inserted into the bill:

…an additional function under section 9 to ‘advise the Minister on the development, implementation and delivery of a National Housing and Homelessness Plan or Strategy’. Similarly, the Council’s Annual Report should include reflection on achievements of all relevant national housing plans or strategies.

An adjustment to Division 3, section 31 that would enable the Council’s secretariat or other supporting functions to be carried out by Housing Australia. This would be facilitated by removing the restriction that the ‘staff assisting’ the Council be ‘APS employees in the Department’.[23]

1.29The City Futures Research Centre stated that ‘Housing Australia should be accorded a wider analytical and research role to inform policymaking’.[24]

1.30Stakeholders including CHIA and National Shelter have also raised concerns about the broad discretion with which the Minister can award grants. National Shelter:

…would also like to see a clear, consistent process for application to the fund by all parties, including community housing organisations, state and territory governments and local government.

Funding should be allocated through a competitive tender process for all parties based on both need and the ability to leverage outcomes.[25]

1.31CHIA argues that the HAFF would be optimised by:

Ensuring that if a decision is made to make payments direct to States and Territories, these are subject to the same treatment as those for other parties —i.e. that they are subject to a robust tendering and assessment process.[26]

1.32Three tangential issues have also been raised during the inquiry that require consideration as follows.

1.33The first is the dire need for a 12-month extension of the $65 million Equal Remuneration Order (ERO) funding for homelessness organisations. Without this, up to 650 frontline staff risk losing their jobs on 1 July 2023. The ERO extension was left out of the Commonwealth’s offer to states and territories to extend the current National Housing and Homelessness Agreement by 12months while the new National Housing Plan is developed.

1.34The second is ensuring ongoing access from community housing providers to the long-term low interest finance available through the National Housing Finance and Investment Corporation (NHFIC) Affordable Housing Bond Aggregator. Access to this finance substantially improves the scale and viability of new social housing developments. Since being established in 2018, NHFIC has approved some $3.4 billion work of loans. Ongoing access to this finance— by continuing to increase the quantum available under the bond aggregator, is necessary to ensure the success of the HAFF.

1.35The Third is the future of National Rental Affordability Scheme properties. With a further 6,600 properties exiting the Scheme (capped at 38,000 homes) this year, the number of social and affordable homes available to tenants is quickly decreasing well ahead of any eventual new HAFF supply coming online. There is a strong argument for the Commonwealth to focus on spot purchases of NRAS properties under the HAFF or consider and extension of NRAS to help manage the gap between one scheme ending and the other commencing.

1.36The initial capital investment in the HAFF be increased to $20 billion to arrest the net decline in social housing supply and ensure a more adequate policy response to Australia’s worsening housing crisis.

1.37An explicit provision be included in the Housing Australia Future Fund (HAFF) Bill 2023 enabling the federal government to scale up the fund as required.

1.38A provision is introduced into the Housing Australia Future Fund (HAFF) Bill 2023 that commits the federal government to maintaining the real capital value of the fund over time and underwrites availability payments to give investors the certainty they need to participate fully in the HAFF.

1.39The $500m annual disbursement cap from the fund be removed, or, failing that, that the cap is indexed annually on 1 July by the housing group of the consumer price index for each year subsequent to the financial year beginning 1 July 2028.

1.40The initial review period for the HAFF be brought forward to align with the first review of the Housing Supply and Affordability Council to be undertaken as soon as possible after 1 July 2026.

1.41At least one member of the National Housing Supply and Affordability Council be Aboriginal or Torres Strait Islander and, at least one member has expertise in specialist disability accommodation, social housing and homelessness.

1.42A portion of the new social and affordable housing supply is quarantined for Aboriginal or Torres Strait Islander people.

1.43Division 3, section 31 of the bill is amended to remove the restriction that the ‘staff assisting’ the Council be ‘APS employees in the Department’.

1.44Section 9 of the National Housing Supply and Affordability Council Bill 2023 be revised to require the Housing Supply and Affordability Council to advise the Minister on the National Housing and Homelessness Plan, as well as the annual report for the Council reporting achievements relating to the national plan.

1.45The approval process for payments by the Minister from the HAFF in section33 Part4 of the HAFF Bill should occur on the explicit advice of Housing Australia after it assesses its requirements and commitments under its legislated functions and investment mandates for current and future years.

1.46The National Housing Finance Investment Corporation’s (NHFIC) research function is reinstated under section 8 by inserting section 1(d): ‘Housing Australia’s research support function is to undertake research to assist it in the performance of its functions and in response to requests from the National Housing Supply and Affordability Council’.

1.47The matters identified by the Scrutiny of Bills Committee in sections 1.18 to 1.20 in Chapter 1 of this report are addressed.

Senator David Pocock

Participating Member

Independent Senator for the Australian Capital Territory

Footnotes

[1]United Nations, International Covenant on Economic, Social and Cultural Rights, 16 December 1966, International Covenant on Economic, Social and Cultural Rights | OHCHR (accessed 22March 2023).

[2]City Futures Research Centre University of New South Wales (UNSW), Submission 4, p. 3.

[3]City Futures Research Centre UNSW, Submission 4, p. 3.

[4]Master Builders Australia, Submission 11, p. 2.

[5]National Shelter, Submission 21, [p. 1].

[6]Anglicare Australia, Submission 8, p. 4.

[7]Anglicare Australia, Submission 8, p. 4.

[8]Master Builders Australia, Submission 11, [p. 3]

[9]Mr Brendan Coats, Director, Economic Policy Program, Grattan Institute, Committee Hansard, 15March 2023, p. 27.

[10]Industry Super Australia (ISA), Submission 17, p. 4.

[11]ISA, Submission 17, p. 4.

[12]ISA, ISA urges Senate to support the Housing Australia Future Fund Bill, 21 March 2023, ISA urges Senate to support the Housing Australia Future Fund Bill » Industry Super (accessed 22March2023).

[13]ISA, Submission 17, p. 4.

[14]Community Housing Industry Association (CHIA), Submission 16, [p. 1].

[15]CHIA, Submission 16, [p. 2].

[16]National Shelter, Submission 21, [p. 1].

[17]PowerHousing Australia, Submission 6, p. 4.

[18]PowerHousing Australia, Submission 6, p. 5.

[19]Property Council of Australia, Submission 7, [p. 2].

[20]Anglicare Australia, Submission 8, p.

[21]Housing Industry Association Ltd, Submission 9, p. 4.

[22]Anglicare Australia, Submission 8, p. 3.

[23]CHIA, Submission 16, [p. 2].

[24]City Futures Research Centre UNSW, Submission 4, p. 7.

[25]National Shelter, Submission 21, p.

[26]CHIA, Submission 16, [p. 2].