Monthly digest on housing stress, affordability and homelessness

May 5, 2022
Affordable housing
Government action on housing affordability has been insufficient. Image: Flickr / Woodley Wonderworks

This is the latest monthly digest of articles, research reports, policy announcements and other material about housing stress/affordability and homelessness.

Leaked documents show public housing plan for Waterloo South has been halved Rick Morton, senior reporter for The Saturday Paper, reveals that the NSW government’s plan to sell Sydney’s massive Waterloo South public housing estate to developers will deliver less than half the volume of public housing initially deemed possible. Morton’s article is partly based on a leaked confidential briefing paper to the Perrottet government’s expenditure review committee. The NSW government’s planned $1 billion sale of the Waterloo South site – part of the government’s $22 billion “Communities Plus” program – is expected to deliver only 100 additional units of social housing over the next 5 years, barely moving the dial in alleviating pressure on the current 50,000 household long NSW waiting list for social housing. Morton cites Shelter NSW as saying the NSW government’s current approach to selling off land is “cannibalising” public housing stock, and that NSW needs 5,000 additional social housing dwellings per year for a decade just to address current backlogs and help meet future demand.

Private sector re-development of the high-value inner city land (made more valuable by the new metro train service, currently under construction, that includes a stop at Waterloo) will produce 3,050 new homes, 28% of which will be social housing, 8% affordable housing and the remaining 64% market rate private housing. An independent report commissioned by Shelter NSW suggests that with some restructuring of the proposal the government could have almost doubled the number of public homes on the Waterloo South site, while holding onto some of the risk of the asset and therefore the long-term returns. A major and arguably unnecessary hurdle to the creation of significantly more social housing stock is the self-funding strategy imposed by the government on its Land and Housing Corporation, under which public housing is effectively recycled into mixed communities (ie. public and market rate housing) with the new market rate housing subsidising the renewal of the existing public housing stock, but with very little net increase in the volume of the latter. See also this podcast: The end of public housing in Australia.

Housing affordability could be a major election focus, and differentiator  In a wide-ranging blog, UNSW City Futures Professor Hal Pawson canvasses some of the main options for addressing the problem of housing affordability. Pawson notes that Australia’s housing is now 30% more expensive than in 2019, and the recent spike in the cost of renting is greater than at any time since 2008. He cites new polling evidence suggesting that roughly two-thirds of respondents believe that Federal Government action on housing affordability has been insufficient and up to three-quarters think that social housing provision in their locality is inadequate. Pawson runs through several worthy reform ideas that have been promoted by leading experts, including the Grattan Institute – many of which will not break the bank.

These include ideas for boosting the supply of social housing (for example, using the surplus return from so-called “future funds”, or through targeted subsidies that leverage tax incentivised funding from the private sector) and a national shared equity scheme. As we near the half-way point in the current Federal election campaign, sentiments akin to those in Pawson’s blog should help sharpen the focus of both major parties on the question of housing affordability. It is hoped that the major parties appreciate what a burning issue it is for the increasing proportion of the population who are not yet “set” in the residential property market, and who can see the dream of home ownership disappearing into the distance, either for themselves or their children. This cohort could just swing the outcome of the election in marginal seats if they rate policies on housing affordability a critical differentiator.

Federal inquiry into housing supply – report released AFR senior reporter Michael Bleby discusses some of the recommendations of the recently released report of the House of Representatives Standing Committee on Tax and Revenue following its enquiry into housing affordability and supply in Australia. Bleby cites Jason Falinski MP, chair of the Enquiry, as blaming “oppressive regulation, muddle-headed central planning, officious big state regulation” for a fall in home ownership among Australians under 40 to the lowest level since 1947. Falinski acknowledges that supply is not solely to blame but is nevertheless convinced that over the medium to long term (say 10 years) a redressing of supply shortages would see house prices coming back to what their long-term average should be.

The three Labor representatives on the eight-person Committee have issued a dissenting report, claiming that the majority report fails to define for whom housing affordability is being considered, fails to set out what would constitute success and fails to acknowledge complexities of the market. The majority report includes a wide range of recommendations, including gradual replacement of stamp duty with land tax, eliminating the 30% withholding tax on foreign investment in build-to-rent property developments, retention of negative gearing tax deductions, allowing people to tap into their superannuation to access home ownership (and allowing first home buyers to use their super balance as security for a home loan), and a call to do more to meet the housing needs of the homeless.

How to make housing more affordable – Grattan Institute view In this Grattan Institute submission to the Productivity Commission review of the National Housing and Homelessness Agreement (NHHA), Grattan’s Economic Policy Program Director, Brendan Coates, and colleague Joey Maloney, review the depressing state of Australia’s housing affordability (and home ownership), as well as the growing problem of homelessness, and propose a new strategic approach for the NHHA to address these massive socio-economic problems. Just a few key statistics give a feel for the extent of the problems. Median house prices have increased from about 4 times median incomes in the 1980s and early 1990s to more than 8 times today (and around 10 times in Sydney). It now takes more than 12 years to save for a standard 20% deposit, compared to 6 years in the early 1990s. Between 1981 and 2016, home-ownership rates in the 25-34 age bracket fell from more than 60% to 45%, with significant falls also experienced in the case of those aged 35-44, and even those aged 45-54.

The hardest hit in terms of home ownership are the poor (of all ages) and the young. More than half of low-income Australians in the private rental market suffer ‘rental stress’, especially those in the capital cities. What can and should be done to help alleviate these problems? The Grattan authors call for the new NHHA to (a) focus on protecting the most vulnerable by boosting the stock of social housing, and increasing Commonwealth Rent Assistance, with additional funding commitments from both federal and state governments, and (b) contain incentives for state and territory governments to reform land-use planning rules in ways that will boost supply, as well as commitments from the federal government to reform tax and welfare policies that distort demand for housing. Specific preferred options for achieving each of these strategic objectives are laid out in the Grattan submission, which also debunks some existing government policies directed towards first-home buyers and seniors, which Grattan considers counter-productive and/or wasteful and unnecessary.

 Budget expands deposit scheme for first home buyers: a second-best option, with risks down the road Nigel Stapledon, Research Fellow in Real Estate at the Centre for Applied Economic Research at UNSW, writes in The Conversation about the federal Coalition’s recent expansion of the First-Home Loan Deposit Scheme, designed to help those unable to put together the 20% deposit normally required by mortgage lenders. The Scheme enables eligible first-home buyers to secure a home loan with as little as a 5% deposit (or 2% for single parents), as the remaining 15% (or 18%) of the normal deposit is guaranteed by the Scheme.

The recent federal Budget has expanded the Scheme to cater for up to 35,000 applicants a year (up from 10,000), plus an extra 10,000 places for first-home buyers in regional areas and an extra 5,000 places for single parents. Stapledon notes that schemes such as this are routinely criticised for simply putting upward pressure on prices, thereby providing only a limited benefit to first-home buyers and even then only to those who qualify and come within the cap of places available on the scheme.  He warns that one major concern with the Scheme is the increased risk of default when a first-home buyer borrows 95% (or 98% if they are a single parent) of the cost of their home, particularly in a rising interest rate environment, as we are now witnessing.  See also ‘Pure electioneering’: First-home buyer help will increase property prices, experts warn.

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