Extract from ABC News
Australia's housing crisis for low-income families has become acute, but it could be partly fixed with a unique solution, a think tank says.
Key points:
- Australia's stock of social housing has barely grown in 20 years
- A $20 billion future fund could support the construction of 3,000 to 6,000 dwellings a year
- With state government involvement, there could be over 100,000 extra social houses by 2040
The federal government should establish a "social housing future fund" to generate the income needed to construct thousands of social housing dwellings every year, the Grattan Institute said.
If the fund was created with an endowment of $20 billion, it could soon be funding the construction of 3,000 social housing units every year, or double that number if its payments were matched by state government funding.
Why is it necessary?
Australia has failed to build enough social housing in recent decades.
Brendan Coates, the Grattan Institute's director of economic policy, said the facts were alarming.
He said social housing — where rent was typically capped at 25 per cent of a tenant's income —could make a huge difference to the lives of vulnerable Australians.
But Australia's stock of social housing, which is currently about 430,000 dwellings, had barely grown in 20 years, even though the country's population had increased dramatically over the same period (by 33 per cent), he said.
In 1991, about 6 per cent of housing in Australia was social housing, but now it is less than 4 per cent.
According to Mr Coates, most tenants stay in social housing for more than five years.
That means there is little "flow" of available social housing stock for people whose lives take a turn for the worse, and more vulnerable Australians are being forced into the private rental market where they have to pay more of their weekly income on housing.
"With fewer low-income Australians owning their home or living in social housing, their housing costs are rising," Mr Coates said.
Low-income is defined as the poorest 40 per cent by equivalised household disposable income.
"The median low-income social renter pays 24 per cent of their income on rent, compared with 37 per cent for the typical low-income private renter," he said.
"The bottom 20 per cent of households by income now spend 29 per cent of their income on housing on average, up from 22 per cent in 1995."
How would the social housing future fund work?
Mr Coates said the federal government should establish a social housing future fund.
He explained the idea in a short piece called A place to call home: it's time for a Social Housing Future Fund.
He said the fund could make regular capital grants to state governments and community housing providers every year.
If the fund started with an endowment of $20 billion, and had an investment mandate to target real (after-inflation) returns of 4 to 5 per cent, it could deliver 3,000 social housing units a year.
That number assumes capital grants of $300,000 per dwelling to cover the up-front subsidy gap for social housing.
Mr Coates said such a fund would boost social housing with little or no hit to the federal government's budget bottom line.
"Since the initial endowment is an investment, it wouldn't appear on the underlying budget balance," he said.
"The federal government already manages $247.8 billion in assets across six future funds to address long-term problems ranging from covering federal public servants' superannuation entitlements to funding medical research."
He said capital grants from the fund could be allocated by the National Housing Finance and Investment Corporation.
The grants could be awarded via competitive tender, with requirements for dwelling size and location.
How many social housing dwellings could be built?
If the $20 billion fund generated after-inflation returns of 4 to 5 per cent a year, it could generate an annual dividend averaging $900 million.
If the fund was up and running by 2022-23, it could build 24,000 social housing dwellings by 2030, and 54,000 dwellings by 2040.
If future governments chose to top up the fund endowment, it could fund even more social housing.
Mr Coates said the federal government had been "clear" it regarded social housing as state governments' responsibility.
However, he said the history of Australia's federation showed large social programs, from Medicare to the post-WWII expansion of social housing, only succeeded with federal support.
He said this reflected the reality that Australia's federal government had more powerful revenue-raising abilities: For every $5 in taxes levied in Australia every year, the federal government collected four and the states only one.
Nonetheless, he said, the federal government's frustration with state inaction on social housing was partly justified.
He said in the five years leading into the pandemic, the total stock of social housing increased by just 1,600 homes.
If state governments matched the funding it would double the housing
Therefore, Mr Coates said, the federal government should require state governments to match federal contributions to new social housing as a condition of any grants being allocated by the fund.
"If matched state funding was forthcoming, the future fund could provide 6,000 social homes a year — enough to stabilise the social housing share of the total housing stock," he said.
"It would double the total social housing build to 48,000 new homes by 2030, and 108,000 by 2040."
However, Mr Coates said a social housing future fund alone would not solve the housing crisis for low-income Australians.
He said even with an extra 108,000 social housing dwellings by 2040, more than two-thirds of low-income Australians would still be in the private rental market.
For that reason, he said the federal government ought to also boost Commonwealth rent assistance by "at least" 40 per cent and index the payment to changes in rents.
That would immediately reduce financial stress for some of Australia's most vulnerable families.
"This would be a fairer and more cost-effective way to reduce financial stress and poverty among poorer renters," he said.
"It's well targeted. About 80 per cent of Rent Assistance goes to the poorest fifth of households."
On Friday, a new report from the Australian Housing and Urban Research Institute (AHURI) found between 1.5 million and 2 million Australian renters aged 15 and over were potentially one life shock away from homelessness.
The paper, Estimating the population at-risk of homelessness in small areas, said a person was considered at risk of homelessness if they experienced at least two of the following:
- Living in a tight housing market
- Low income
- Vulnerability to discrimination
- Little social resources and supports
- Needing assistance to maintain a living situation (due to chronic ill health, disability, mental illness, or drug or alcohol problems)
The AHURI said the lack of affordable rental housing for low-income households in Australia — be it private rental or social housing — was amplifying various forms of disadvantage.
"There is a need for greater provision of rental housing that is specifically targeted to those on low incomes and/or those at risk of homelessness," the paper concluded.
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