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Michael Pascoe: Government’s multibillion-dollar splurge on private landlords hurts public housing

Public housing residents in Victoria have launched a class action against redevelopment plans.

Public housing residents in Victoria have launched a class action against redevelopment plans. Photo: Getty

The federal government spent more money directly subsidising private landlords over the past two financial years than it is putting aside to fund social housing indefinitely into the future.

I don’t mean the scores of billions of “tax expenditures” effectively subsidising both owner-occupiers and landlords, but the $10.4 billion in Commonwealth Rent Assistance (CRA) paid to private landlords over the past two years.

Last week’s Productivity Commission’s report on government housing and homelessness services showed a surprise tightening of CRA spending despite the worsening rental affordability and availability crisis. From $5.5 billion in 2020-21, $4.9 billion was spent on CRA in 2021-22.

One of the results was an increase in the percentage (as well as absolute number) of people not having their needs met when they approach specialist housing services – 33.9 per cent, up from 32.3 per cent.

The frontline agencies dealing with the housing crisis have called for the CRA to be increased – a request the government has refused despite the mounting horror statistics and stories emerging from multi-decade bipartisan, public housing policy failure.

Band-Aid policy

If the government had a credible alternative policy (it doesn’t), the refusal might make sense as the $10.4 billion over two years didn’t solve anything.

It was merely a temporary Band-Aid stuck on the edges of a gaping policy wound, a Band-Aid that still left 44 per cent of all CRA tenants in “rental stress”, paying more than 30 per cent of their income in rent.

Of CRA tenants with a family member aged under 24, 60 per cent were in rental stress.

For low-income households, rent that takes more than 30 per cent of not much leaves very little to live on. Last year’s Productivity Commission report showed 20 per cent of CRA recipients in New South Wales were still paying more than half their income in rent – leaving extremely little indeed.

CRA obviously helps the individuals fortunate to be granted it when not having it means homelessness. From the bigger-picture perspective though, it underwrites the bottom end of the landlord business, helps push up rents and doesn’t increase supply.

Like first-home buyer grants effectively helping boost housing prices, CRA effectively helps boost rental prices by allowing landlords to get what they are asking the market.

 

Yet the CRA cash compares with $10 billion for the Housing Australia Future Fund – the poor excuse for a housing policy Labor took to last year’s election.

The $10 billion fund is one of those political exercises in finding a big number that might sound impressive if nobody thinks about it – like the M. Mouse “record” federal transport infrastructure pledges by every Liberal treasurer since Joe Hockey.

The fund is supposed to work by the government investing the money for a higher return than the cost of borrowing and then spending the annual profit on subsidising community housing providers.

If the fund managers are successful in buying shares and bonds and such and earn a 4.5 per cent “profit”, there would be $450 million a year towards plugging our social and affordable housing gap.

In other words, stuff-all given the size of the problem and less than a tenth of what is being spent annually on subsidising private landlords through Commonwealth Rent Assistance.

Future fund farce

Economist Cameron Murray skewered the Housing Australia Future Fund for the distraction that it is. It makes more sense for the Commonwealth to directly spend the money investing in housing rather than going through a fund to raise money to invest in housing.

Taken to its logical conclusion, why not establish a fund to fund the fund?

I have reservations about the NSW Land and Housing Corporation (LAHC) model, but Dr Murray cites it as a better example.

“In 2012 (the LAHC’s) stock of dwellings was worth $32 billion. After selling many of its assets, by 2019 it owned $54 billion worth of public housing assets. That’s a 7.8 per cent annualised return while at the same time providing cheap homes to tens of thousands of people. An accurate way to describe this organisation would be a high-return fund that provides social housing – a social housing fund.

“So why not simply give money to the existing agencies that build new public housing?

“In short, a social housing fund solves nothing about the housing situation. A simpler and much better alternative is to just spend on building new public housing assets rather than buy a portfolio of existing non-housing assets.”

In fairness to the federal government, public and social housing has primarily been a state responsibility – a responsibility demonstrably shirked around the nation.

The state governments’ public housing story of the past decade has been running it down, selling it off and outsourcing it over to community housing organisations.

The number of permanent government public housing units has fallen from 328,340 in 2013 to 297,600 last year. At the same time, the number of community housing units rose from 67,385 to 111,681.

Thus we’ve had a total increase in permanent social housing of only 13,556 units – 3.4 per cent – in the past decade while Australia’s population grew by 12.3 per cent and the price of housing exploded.

Long-term consequences

Governments haven’t wanted to know – public housing is hard and it’s not an issue that changes the way people vote. No wonder we have a crisis.

And this crisis goes further than inflicting misery on the people without shelter or stuck in abusive relationships because of no alternative housing.

(The Productivity Commission reported just over half of the people seeking specialist homelessness services last financial year were doing so for “interpersonal and relationship issues”, of which 74 per cent “identified domestic and family violence”.)

In dispassionate Productivity Commission economic terms: “Housing instability and homelessness can in turn increase vulnerability to adverse social and economic circumstances through, for example, poorer outcomes in education, employment and health, and increased risk of involvement with the justice system.”

In other words, society – all of us – end up paying for the lack of safe, stable housing for those not rich enough to pay the wildly inflated market price for it.

And no government and neither major political party is treating this as the crisis it has become.

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