Monthly digest on housing affordability and homelessness – July/Aug 2020Aug 27, 2020
The following is the latest instalment of a monthly digest of interesting articles, research reports, policy announcements and other material relevant to housing stress/affordability and homelessness – with hypertext links to the relevant source.
Why NSW is skewing its tax system toward build-to-rent apartments and away from mum and pop landlords [The Conversation, 31 July] The NSW government has halved land tax for developers of build-to-rent (BTR) housing which offers long-term tenancies. The initiative signals an intent to place greater reliance on land tax in lieu of stamp duty, a move that will be welcomed by many stakeholders. BTR housing is typically owned by large institutional landlords. Already a well-established part of the residential rental market in the US and in parts of Europe, it could play a valuable role in improving the lot of long-term renters, as it offers security of tenure (with long-term leases), less restrictions on the minutiae of what tenants can and cannot do, and more professionalised property maintenance and management. With appropriate incentives, it could also greatly increase the supply of rental housing for the roughly one third of Australians who rent. See also Build-to-rent: Sydney can get off the property roller coaster [SMH, 23 August] in which Rob Stokes, NSW Minister for Planning and Public Spaces, lends his support for the concept of BTR.
400,000 women over 45 are at risk of homelessness in Australia [The Conversation, 4 Aug] It has long been recognised that older women are one of the fastest growing groups of homeless people. The research referenced here sheds new light on the extent of the problem, and on some of the causes. It indicates that Australia has about 240,000 women aged 55 or older, and another 165,000 aged 45-54, at risk of homelessness. The risk factors are multiple and compound, including the need to rely on private rental, the lack of full-time employment, lone parent status, and prior experience of being homeless or at risk of it. ABS estimates indicate that female lone-person households are projected to increase substantially in coming years. Severe shortages of social housing, and an ongoing lack of housing affordability in the private market, exacerbate the problem. See also “Uprooting, no matter how small a plant you are, is a trauma”: older women renters are struggling [The Conversation, 4 Aug], which details the lived experience of housing insecurity and rental stress faced by single older women living on low incomes and forced to rely on the private rental market.
Housing affordability a key plank of federal budget [AFR, 6 Aug] AFR Political Editor, Phillip Coorey, writes that the federal government has rejected growing calls to fund large-scale social housing projects, saying it is more of a state responsibility. It is ironic that this apparent decision coincided with the start of National Homelessness Week, a time when we are regularly confronted with data showing the depressing extent of homelessness and housing shortfalls around Australia. Coorey reports that the feds are apparently still planning some housing initiatives for the October 6 federal budget, including possibly extending the First Home Loan Deposit Scheme for First Home Buyers (enabling FHBs to save just a 5% deposit, rather than the usual 20%) and “repurposing” the $1 billion National Housing Infrastructure Facility, of which $800m remains unspent. See also Federal government kills social housing hopes [The New Daily, 7 Aug], in which Michael Pascoe lays out the sobering reality of how vital adequate social housing is for people who need it, and how woefully inadequate is our current supply, at the same time lamenting the political reality that a Coalition government might have concluded that there are few votes for them from investing substantially more in social and affordable housing.
Why public housing is stigmatised and how we can fix it [The Conversation, 7 Aug] Public housing (sometimes called “Social housing”) is intensely stigmatised in Australia, with such housing estates often labelled “ghettos” and regarded as places of danger, drugs and vice. This can lead to discrimination against tenants. This article makes the point that stigma is the product of government policies, serving objectives like privatisation and redevelopment. The authors note that since the 1970s public housing has gone through a process of “residualisation” due to the declining number of dwellings and the tightening of eligibility criteria. They criticise the break-up and/or redevelopment of public housing estates, such as in Sydney’s Waterloo and Melbourne’s Carlton, on the basis that this masks government’s real economic and financial objectives – cannibalisation of a dwindling supply of public housing through redevelopment and privatisation – and obscures government’s culpability in not ensuring an adequate supply of social and affordable housing. The authors call for an end to the preferential treatment of home ownership, arguing that different tenures (including rental) should be treated equally through housing and tax policy.
Tenants’ Union of NSW submission to NSW Government Housing Strategy [Tenants Union NSW, 10 Aug] Renters comprise around a third of all NSW households, for many of whom rental comprises not just a transitional phase in their lives, but a long-term or permanent form of tenure. In the 5 years leading up to the 2016 Census, the proportion of households who rent increased from 30.1% to 31.8%, a trend that appears to be continuing. This submission from the NSW Tenants’ Union advances a number of specific recommendations designed to protect tenants, including safeguarding their stability and security of tenure (eg. by outlawing “no grounds” evictions), protecting tenants from discrimination (either in the tenancy application process or otherwise), ensuring an adequate supply of social and affordable rental housing, improving the energy efficiency of rental housing, providing reasonable autonomy for renters (eg. regarding the keeping of pets), involving and empowering renters in decisions affecting their accommodation and adequately resourcing advocacy, legal and other support for renters.
Fixing affordable housing in NSW and beyond [Industry Super Australia Report, 11 Aug] Industry Super Australia, in this paper prepared for the NSW Community Housing Industry Council, identifies key failures of existing approaches to government housing subsidies, and how they contribute to the widening of the housing gap. These include negative gearing and the 50% CGT discount, which mostly benefit high net-wealth older investors and don’t increase housing supply, and also monetary and prudential policy, which has fuelled a debt-driven growth model for decades. Supply-side policies are too fragmented and aren’t keeping pace with demand. Quoting a figure of $3.5 billion annually as the estimated cost of building enough social and affordable housing in NSW to meet the shortfall (316,700 units by 2036), they note this is only around half the annual spend of $7 billion by federal and state government on housing in NSW. Most of that $7 billion is currently targeted at mum and dad investors rather than the disadvantaged. The authors advocate for government subsidies to be better targeted towards greenfield developments undertaken mainly by large scale not-for-profit entities such as some Community Housing Providers. They examine four proposals for closing the housing gap, including two they consider highly promising – one an affordable housing tax credit model, and the other an independent but government funded entity that could invest in affordable housing developments guided by a concrete rate of return benchmark. They also call for a range of foundational “structural” reforms to macro and microeconomic policy to help improve market efficiency in Australian real estate.
Affordable housing in innovation-led employment strategies [AHURI final report, 12 Aug] Cities (including in Australia) are steadily moving from manufacturing to knowledge and innovation economies, and “smart city” strategies are evolving to deal with this trend. What is sometimes overlooked or not given due weight is the critical role that affordable rental housing can and should play in this process. This AHURI Report focuses in part on how such housing can support innovation-led employment growth, particularly in innovation districts or precincts. The underlying research draws on international experience in the US, UK and Europe, identifying cases where affordable housing was incorporated in relevant policies and also on the specific mechanisms used. It is clear that affordable housing has an essential role in maximising productivity in innovation districts.
3 reasons why the coronavirus crisis might fix housing affordability [livewire markets, 13 Aug] AMP Chief Economist, Shane Oliver, lays out the ugly facts about housing unaffordability in Australia, and how that has not always been so. His main purpose is to explain what he sees as the main causes. He claims that none of the usual suspects – tax concessions, foreign buying, government-related housing infrastructure charges and stamp duty – really explain the problem. He claims that the coronavirus shock has the potential to re-set the dial, and not just in a cyclical manner, and gives 3 reasons: First, the hit to the economy from coronavirus is bigger than anything seen in the post-war period, and will likely result in more forced property sales and act as a drag on home prices, particularly as income support measures and the bank payment holiday wind down. Second, immigration has been a big driver of property prices and has taken a huge hit from the pandemic, with the likelihood of a long recovery period. Third, a mass shift to working from home potentially has huge implications for residential property prices, including less demand for property close to the CBD and greater demand for property in the less central suburbs and in regional centres.
Public housing renewal and social mix [AHURI policy brief, updated 17 Aug] This AHURI Policy Brief provides a useful quantified summary of the extent of the shortage in the supply of social and affordable housing in Australia, the growing mismatch between the existing stock of such housing and the demographic profile of those in need today, opportunities for renewal of public housing that are sensitive and consultative (including changes to density and design), the phenomenon of “concentrated disadvantage” and the various policy and practice considerations around social mix .
When houses earn more than jobs: how we lost control of Australian house prices and how to get it back [The Conversation, 18 Aug] Home ownership levels in Australia have fallen from 80% to 65% in the last 20 years, and home equity levels have fallen in that time from 80% to 75%. The authors point to a growing divergence between rents and the price of housing, driven primarily by rises in the cost of land rather than construction costs. The culprit is demand-driven home price inflation resulting from Australians increasingly buying housing for the purpose of securing financial returns – both capital gains and rental income – a process described as the “financialisation” or “rentierization” of housing. They say the return to land in the form of capital growth has climbed from around 3.5% of GDP before 1960 to 16.7% of GDP since 2000, and that in 16 of the 29 quarters leading up to June 2019 the median Sydney home earned more than the median full-time worker earned from wages. The investor share of new mortgage lending has grown from 10% in the early 1990s to 40%, giving owner occupiers and first home buyers price competition they didn’t previously have to face. The authors attribute much of the demand-driven inflation to unusually generous tax concessions for investors, including the 50% CGT discount and negative gearing. They advocate scrapping such tax concessions, broadening annual land taxes to primary residences and establishing a government funded central housing bank, which could use its ability to supply and sell new housing to set a “home price corridor” to ensure home prices do not rise rapidly, and to dampen falls in prices.
Fix housing affordability first [Weekend Australian, 20 August] Eva Scheerlinck, CEO of the Australian Institute of Superannuation Trustees, criticises recent government moves allowing Australians to raid their super savings to buy their first home, saying it does nothing to address the root cause of Australia’s housing affordability problem. Indeed, the initiative may operate counter-productively. Pointing out that Australians should not have to choose between financial security in retirement and a roof over their heads, she says we could for instance be harnessing the collective power of Australia’s $3 trillion pool of super capital to make large-scale investment in affordable housing. Turning rental housing into an investment asset class for institutional investors requires the removal of various barriers, including restricted land supply and unfavourable tax settings.