For all the talk, public and social housing just got worse

Jan 27, 2024
Public housing apartment tower block against a blue sky. Image:iStock

The Productivity Commission has released a damning report on Australia’s worsening public and community housing disaster.

Needs have increased, supply has not and the various announced policies stretching out in the distance aren’t enough to make a significant difference.

However bad you think the Australian public and community housing crisis is, it worsened over the past financial year and will continuing to go backwards this year.

The Productivity Commission’s annual report on government services released on Monday night shows the number of permanent public and community housing dwellings increased by just 0.5 per cent in 2022-23, the percentage of households in greatest need of housing grew 4 per cent and nearly 35 per cent of people seeking help from specialist homelessness services could not have their housing needs met.

The commission counted 224,326 households on waiting lists for social housing with nearly half of them identified as being of greatest need, yet the number of public and community permanent dwellings grew by only 2111 last year to 412,554.

By comparison, our population grew by 2.4 per cent and some 172,000 private dwellings were completed.

$146 billion cost for tax breaks

The PC report comes hot on the heels of the Everybody’s Home study showing the federal budget will lose $146 billion over the next decade in tax breaks for private housing and even International Monetary Fund staff are recommending Australia reduce its housing capital gains tax concession.

(That $146 billion Everybody’s Home figure should be comfortably rounded up to more than $200 billion as it doesn’t include Commonwealth Rent Assistance, which ends up effectively being a subsidy for private landlords. The CRA will cost the better part of $6 billion this year alone.)

Making the whole thing worse again is the realisation that the only means of significantly increasing the supply of housing is for much greater direct government building of public housing, which the states and federal government are not doing.

The much-announced 50,000 extra public and community (mainly community) dwellings over the next five years – even if achieved – will not do much more than maintain the status quo, given population growth.

NSW hits new low

And as bad as the national figures are, New South Wales is a quantum worse.

The number of public and community housing dwellings in NSW fell from 151,004 to 149,678 last year while nearly half of people with an identified need for housing services “did not have this need met”, as the PC report euphemistically puts it.

At least NSW has had some measurable growth in dwellings over the past decade. Victoria’s public and social housing has been virtually stagnant – a 3.6 per cent increase since 2014 is hard to consider as “growth”, particularly when all of it has been in the past two years.

Worse than Victoria, the number of Indigenous public and community housing dwellings has shrunk by 2 per cent since 2017 to 30,330.

Led by NSW, the national trend of recent decades to outsource public housing to community housing groups continues – effectively relying on charity groups to shoulder what used to be governments’ responsibility to ensure basic shelter for people with all the social dividends that secure housing provides.

And by design, that trend is set to continue under the Albanese government’s initiatives headlined by the Housing Australia Future Fund aspiring to eventually subsidise 30,000 community housing dwellings.

The Everybody’s Home report author, Maiy Azize, concluded that the Commonwealth propping up private housing over recent decades means we are spending record amounts on things that make the problem worse.

Losing combination

The money shot for Alan Kohler in his Quarterly Essay on the housing was the combination of negative gearing and the Howard/Costello government halving capital gains tax in 1999.

“The 50 per cent CGT discount supercharged the impact of negative gearing and led to investment property becoming everyone’s tax dodge,” he wrote.

I’d add another layer to Alan’s point: The tax-incentivised explosion in residential property investment went hand in hand, chicken or the egg, with governments withdrawing from public housing, helping increase the proportionate and absolute demand for private rentals.

As the current government wrestles with how to balance the stage-three tax cuts’ inequality (no, Virginia, they are not going to abandon them – don’t believe everything you hear on 2GB), good policy would be to at least reduce the CGT discount and limit negative gearing.

That has been considered electoral poison by Labor since the loss of the 2019 election, some blaming those Shorten/Bowen policies for the loss. Others, including Alan and the Motley Fool’s Scott Phillips, don’t think so, suggesting it was more because of the franked dividend policy and successful attack ads against Bill Shorten.

I’d be pleasantly but very surprised if Labor has the ticker to divert tax subsidies for private landlords into public housing, where it can be better used for the common wealth.

IMF targets capital gains

Yet Treasurer Chalmers has the opportunity to quote no better authority for restraining our CGT housing generosity that the International Monetary Fund.

While it was buried in the IMF directors’ final report – probably after some pleading by Treasury – the IMF economists who visited last year to report on the Australian economy included what my former colleague Glenn Dyer called “kryptonite” recommendations to change capital gains perks on property and other investments.

Glenn pointed out the IMF staff report recommended that the federal government: “Reduce tax breaks to strengthen the fairness and sustainability of the tax system. The 2023-24 budget introduced measures to improve targeting of superannuation concessions. The policy is in the right direction although its scope is limited relative to the size of the forgone revenues. The government should implement additional measures to minimise the tax breaks for the high-income earners, including through limiting concessions to capital gains tax.”

The final IMF executive board summary – after massaging by Treasury and the RBA – was not nearly as robust.

“Not a whiff of changing capital gains taxes, or the estimate in the Staff Report that they cost the Australian budget around 2.5 per cent of GDP, which in the year to last June would have been $55 billion in a nominal GDP of $2.25 trillion,” wrote Glenn.

Business as usual

Oh well, never mind. We’ll just continue to bumble along with housing Band-Aids and lots of announcements that don’t fundamentally change anything and too bad about the hundreds of thousands on waiting lists and the fortunes spent on private landlords.

As long as middle Australia is kept in the dark about the impact of the public housing failure on our broader housing crisis, there’s little political danger – everyone knows the Coalition’s policies have been and continue to be much worse.

There’s plenty of blame to go round on housing, but most of it can be sheeted home to the Liberal Party’s periods in government over the past three decades. They haven’t changed.


First published in The NEWDAILY January 23, 2024

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