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 ,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