Graph supplied by the Grattan Institute
I suppose you have been waiting for me to wax eloquent about the Federal Government’s $10 billion housing plan and why don’t they get on with it?
Don’t blame me. I didn’t vote for The Greens, who seem to think their role in government is to block legislation just because they can. The Greens MPs in Parliament want the Federal Government to freeze rentals for two years. This seems to be predicated on some naïve proposition that the Labor Premiers buddy up with the Feds and persuade the others to fall in line.
What part of States Rights do they not understand? As Prime Minister Anthony Albanese rightly says, the Federal Government could not impose a nation-wide freeze on rentals even if it wanted to. The mechanism for such a move lies with the respective State and Territory governments. I can’t imagine that telling the landlords (and developers) in their constituencies that they can’t raise rents for two years would help State or Territory government re-election chances next time round. Having said that, the Australian Capital Territory has implemented a rent ‘cap’ so anything’s possible.
The Bill, which stalled through lack of support in June, has been tabled again this week although not much has changed. There is talk (at chat show level) of a double dissolution – that is, Mr Albanese will go early to the people and let them decide. Unlikely.
There are a few things to note about the Housing Australia Future Fund. For one thing it’s not a new idea. The $10 billion fund was an election promise, which means its formation goes back well before 2020. We already had a Future Fund (which primarily invests in the share market and in commercial property). The Labor Government’s plan to co-opt this fund into investing in the volatile housing market has made it a target for the Coalition and dissident independents.
One of the issues as I see it is the Bill has been designed as an economic/financial policy instrument. Given the size and severity of the housing problem in this country (affordability, rental housing shortages and homelessness), it should have been designed foremost as social policy, letting the numbers take care of themselves, as numbers do.
The Greens are not alone in their critique of the Albanese government’s housing policy. Numerous housing advocates say that despite the size of the Housing Australia Future Fund, it will scarcely touch the sides of the problem. The legislation promises 30,000 new social and affordable houses in the first five years. Once the fund starts generating returns, more social and affordable projects can be started. And as Housing (and Homelessness) Minister Julie Collins added, this will include 4,000 homes for women and children affected by family and domestic violence, or older women at risk of homelessness.
That’s all very well, but numerous reports concur that the current social housing need is for more than 100,000 dwellings. A report by the National Housing Finance and Investment Corporation (NHFIC) showed that Australia is facing a shortfall of 104,000 houses in the next five years. This is brought about primarily because the construction industry can’t keep up with demand. Then there are mitigating factors like rising interest rates and the ever-increasing cost of raw materials.
This glum forecast came at a time (April) when rental vacancy rates in every capital city in Australia were at or below 1% (Ed: and likewise in regional cities and towns). Bad weather in 2022 added to the woes of builders; some of whom closed their doors, leaving home buyers with half-finished dwellings and cost over-runs.
The NHFIC is forecasting 1.8 million new households over the next decade, with just 148,500 new dwellings added this financial year. The total will drop to 127,500 in 2024-25, with the biggest drop in apartments and multi-density dwellings (40% down on levels experienced in late 2010).
In 2021, the Grattan Institute took a futuristic look at how we could build 100,000 social housing dwellings by 2040. As you can see by the table above, this would depend entirely on State and Territory government assigning matching contributions.
Grattan Institute economic policy director Brendan Coates wrote:
“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. It would double the total social housing build to 48,000 new homes by 2030, and 108,000 by 2040.”
Four Corners should do an investigation on what exactly is meant by the terms ‘social, affordable and community housing’ and who benefits. Once upon a time there was just public housing. It was owned by the government and traditionally leased to people who were on government pensions and unlikely or unable to find paid work. The rental for people in these circumstances was traditionally struck at 25% of income. The Department of Human Services also calculates rent assistance for people in this category. Now, however, we have public/private partnerships which develop ‘affordable’ or ‘community housing’ properties. While the rents charged to these properties still look attractive (to those in the private market), it can represent up to 40% of disability or aged pension income. The properties are typically built new by private developers on land bought or provided by the relevant Government (or Council). These projects are financed by investors, so even though the housing provider may be a ‘not for profit’, the profit motive is inherent, whereas with public housing it is not.
Whatever the Federal Government and its State and Territory counterparts are going to do about social housing, they’d best get on with it. The Australian Housing and Urban Research Institute (AHURI) has estimated that the need for future social housing will be 1.1 million dwellings by 2037.
The 2021 Census recorded there were almost 350,000 social housing dwellings across Australia (just under 4% of the number of all households), at the end of June 2021.
AHURI recently reported there were 165,000 applicants on the waiting lists for public housing, more than 40,000 applicants for community housing and just over 12,000 applicants for State owned and managed Indigenous housing.
“If we add together all the households on the waiting list and those already in social housing, we find that over half a million (close to 565,000, or just over 6%), Australian households were living in, or had requested to live in, a form of social housing.”
All that aside, there is the ever-growing cohort of ‘working poor’ – Australian families where one or both parents have jobs. But their household income can’t keep up with high private market rentals and the cost of living in general. Not to mention the 1.8 million Australian households Roy Morgan Research says are at risk of mortgage stress.
No quick fixes in sight although the CFMEU (one of the country’s last robust unions), wants the government to impose a Super Profits tax on the top echelon of companies.
The Guardian reported that CFMEU says a super profits tax of 40% of excess profits would ‘comfortably’ cover the cost of building more than 750,000 new social and affordable homes.
The CFMEU revealed this bold plan last week at the National Press Club, tabling a commissioned report by Oxford Economics. The report assumed that a permanent 40% tax on excess profits on companies with over $100m annual turnover, would raise an average $29bn a year, enough to fund the construction of 53,000 new homes each year.
Yep, that’ll happen.