Public policy history and overview of affordable housing issues

Adam Farrar

Housing affordability

• Hard to exaggerate the challenge of rental affordability • We are seeing a steady decline in home-purchasers with a related growth in renting • We need over 539,000 more rental homes that are available & affordable to lower income renters (bottom 40%) • This would take over $150 billion in investment • A key observation is the linkages in housing effects

The numbers affected

• 60% of lower-income rental households in Australia were in rental stress in 2009–10 • 224,876 applicants waiting for social housing in 2012 • 105,237 homeless people on census night in 2011

Polarisation

• Unaffordable housing plays a major role in driving locational choices - access to employment, travel costs • In the 40 localities with the highest number of entry level/low skilled jobs the average rents in all 40 were unaffordable to people on those wages • On the other side of the coin, this affects the supply of workers in low paid jobs that are significant to local economies – service workers, care workers

Life cycle effects

• Frequent moves in private rental impacts on children’s schooling • At the other end of the life cycle, the older people in the rental market are at increased risk of poverty – and their numbers are growing • 30% of long-term renters are aged 45-64

Post-war public policy

• Home ownership has been a plank of our social policy for 60 years • Implications for national savings, retirement income, tax policy • The other plank post-war was public housing • A stepping stone to home ownership for working families & housing (re)construction

New directions

• By the mid 70s groups missing from the public housing target were being ‘discovered’ (Henderson) – singles, disability, older renters, unemployed • Non-government housing providers began responding – and the refuge movement emerged • In the 1990s the fragmented funding for ‘community housing’ (LGCHP) was replaced with a larger program to grow a realistic, more flexible, alternative to public housing

The collapse of public housing

• Since the 90s public housing has been in critical decline •     A vicious cycle driven by: deinstitutionalisation, under-investment, a rationed system – ever tighter targeting internal subsidies through income-related rents led to collapsing revenue • We now have an unviable system with declining stock

A better social response

• The growth of NFP housing providers • Aprox 56,000 social housing households - 15% of the social housing system • A COAG agreement to grow to 35% • Almost 10,000 new affordable housing dwellings through NRAS (9,656 delivered by charities at June 2013) • A rigorous new regulatory environment that stands behind performance and credit worthiness

NFP housing system

• Crucially, this system has taken a different path to public housing – to achieve sustainability and respond to the yawning supply gap:  Mixed income – combining very specific needs and lower income working households  Different rent models – including discount to market  External subsidies – Commonwealth Rent Assistance for social tenants & NRAS for ‘affordable housing’ stock  Debt finance for new construction  Charitable tax benefits and concessions

Policy importance

• Reversal of the affordability trends essential – social, economic and fiscal reasons • Greatest need for rental housing since the first part of last century – and increasing in the post-peak home owner era • Current investment settings (CGT exemptions etc) miss low cost end • Current rental market squeezes out low income renters • Scale of the investment/ supply needs far too big for direct government investment alone • Essential not to replicate the unviable public housing model

Some lessons

• The response to the housing crisis for very low income households cannot be quarantined from other lower income households • The policy goal must include the creation of a part of the market that does not yet operate at scale – NFP housing • Rental housing is a marginal business – it can only work for the lower end of the market by marshalling all efficiencies. Charitable benefits are crucial • Housing management and development is a long term business, and requires strong balance sheets – without undercutting its charitable character