Something more than a scalpel, but less than a chainsaw is going to be required to address housing affordability, writes Michael Perusco, CEO of Unison Community Housing, and Guy Johnson, Professor of Urban Housing and Homelessness.
After years of neglect by both political parties housing affordability has finally become a major public policy issue.
Addressing housing affordability is a serious policy challenge. Australians store a great deal of their wealth in housing. As such any policy responses that seek to address housing affordability must avoid creating a housing market shock which could ripple out into other areas of the economy. To avoid such a shock the federal government describes its policy approach as akin to using a scalpel rather than a chainsaw.
The budget contains a number of measures to address housing affordability and combined, they provide a good platform for future growth. The establishment of the National Housing Finance and Investment Corporation (the Corporation) is a welcome move. The Corporation will establish a bond aggregator from 1 July 2018 which will issue bonds to investors and use the funds raised to lend to community housing providers to increase the supply of affordable housing.
The benefits of this approach are twofold. Firstly, it enables institutional investors, including superannuation funds, to invest in social housing at scale. Secondly, it provides community housing providers with cheaper finance for longer periods.
The bond aggregator will only make a real difference if it is accompanied by a subsidy from government that makes the overall investment in social and affordable housing viable. Given the under investment in social and affordable housing over the past decade, an additional 10,000 to 15,000 dwellings per year nationally is an appropriate target. The funding required would be in the order of $2.5 billion per year, which would need to be shared across jurisdictions. While this sounds like a large amount, it pales in comparison to funding in other areas of government and represents the minimum required.
The budget includes tax incentives to increase private investment in affordable housing. Managed Investment Trusts will now receive concessional tax treatment if they invest in affordable housing and make it available for at least 10 years. Individuals will get concessional capital gains concessions if they invest in a affordable housing property for at least three years. These are also welcome steps that will result in some innovative investment options that increase supply of affordable housing.
The Commonwealth has also committed to establishing an online land registry to encourage proposals to use the land for affordable housing and other infrastructure purposes. Combined with other initiatives in the budget and opportunities that already exist at the state level, this could lead to increased supply of affordable housing in well located areas.
These are good ideas, but in and of themselves they are insufficient to address the current housing crisis in any meaningful way. The budget did not set out a national affordable housing strategy, nor did it increase rent assistance to those struggling in the housing market or increase government funding for new social housing. There were also missed opportunities in relation to reforming negative gearing and capital gains concessions which play a key role in fuelling the current housing crisis. Something more than a scalpel, but less than a chainsaw is going to be required to address housing affordability.
With respect to homelessness, the budget commits to ongoing funding for homelessness services.
For homelessness services funding uncertainty creates unnecessary pressure and threatens service continuity, a key element in securing good outcomes for people experiencing homelessness. While this is good news for homelessness services other measures in the budget are likely to exacerbate housing instability among disadvantaged Australians. First, despite making some effort to address housing affordability, as we note, the approaches identified in the budget do not go far enough. This means that housing affordability will continue to be a problem for many disadvantaged Australians, some of whom will tip over into the homeless population. Further, for those who become homeless, the lack of affordable housing will continue to make exiting homelessness difficult.
Second, the budget contains a number punitive welfare reform measures that are likely to contribute to homelessness. More specifically, the budget penalises welfare recipients who have substance misuse issues. There are high rates of illicit drug use among the homeless, but among homeless drug users, drug use is often not the reason they become homeless. Rather drug use is most commonly an adaptive response to the brutal, stigmatising condition of homelessness itself.