Housing affordability and homelessness – Monthly Digest Sept/Oct 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.

Pension Giants Chase Yield into Australia’s Build-to-Rent Market [Bloomberg, 24 Sept] Australian pension funds are showing an increasing propensity to invest in build-to-rent (BTR) housing, despite rental rates having been dented in the economic fallout from Covid-19, including due to dramatically reduced immigration. BTR is currently much more common in the UK, Europe and the US than in Australia. Pervasive housing unaffordability in parts of Australia has created an imperative for an increasing proportion of the population to rent long-term, a trend that pension funds are in part responding to. For example, Aware Super recently announced a 102-unit development in Sydney’s south, where half will be rented as affordable housing. Pension funds predict solid returns from BTR, particularly in the context of the low-yield climate in which they currently operate. From a tenant’s perspective, BTR offers better security of tenure, because institutional landlords tend to take a more long-term (less speculative) view of their investment than, say, “mom and pop” landlords. Tax incentives in NSW, equivalent to at least a 50% reduction in land tax, are helping to attract BTR investment by pension funds. See also Build-to-Rent developers locked in to boost affordable housing options [Qld Govt media release, 3 Oct]

What would it really take to supercharge social housing? [Inside Story, 29 Sept] In a wide-ranging discussion about how to tackle Australia’s chronic undersupply of social and affordable housing, Peter Mares looks at a range of options, including suggestions by Stephen Anthony, chief economist of Industry Super Australia. Mares supports the view of many that the most efficient way to build homes for low-income renters is “direct public investment”. While not disparaging initiatives by Cbus and other industry pension funds to invest in rental housing, he believes investment on a significant scale will remain unlikely while Australia’s tax and financial arrangements (eg. negative gearing and the 50% CGT discount) encourage landlords to focus on rising property prices rather than a steady flow of long-term rental income. Citing (in part) Stephen Anthony’s views, Mares mentions two ideas, the first being adoption of an Australian version of America’s Low-Income Housing Tax Credit (LIHTC) scheme, started during the Reagan era, which allows companies that build social and affordable housing to generate tax credits that can then be sold to investors looking to reduce their tax liabilities. LIHTC helps develop about 110,000 units of housing per year, worth about US$8b. The second is a substantial housing investment fund, modelled along the lines of the Clean Energy Finance Corporation, and offering equity investment as well as discounted debt funding. He also supports reinstating an agency similar to the Rudd-era National Housing Supply Council, abolished by Abbott in 2013.

Push for more Aboriginal housing in inner Sydney [SMH, 5 Oct] As the NSW government presses ahead with the redevelopment of large tracts of publicly-owned land in Redfern and Waterloo – traditionally Sydney’s epicentre of Aboriginal politics and culture – the government is facing calls to commit to a greater proportion of homes for Indigenous residents. The campaign, led by the Redfern Waterloo Alliance of Aboriginal Community Controlled Organisations and Allies, and backed by local MPs and the City of Sydney, argues that 10% of homes in new developments on public land in these areas should be affordable housing to ease a shortage of homes for Indigenous Australians. Since 1968, Redfern area’s Aboriginal population has fallen from an estimated 35,000 residents to roughly 300 in 2011, remaining steady since then. Metropolitan Local Aboriginal Land Council chief executive Nathan Moran said it was “impossible” for many to live in Redfern, where the median weekly rent jumped from $255 to $500 in the decade to 2016.

Inquiry into integrated housing support for vulnerable families [AHURI final report, 7 Oct] The overarching research question addressed by this study is: How can housing support for vulnerable families be best integrated with other types of support, to enhance safety and wellbeing? The primary vulnerability addressed is that faced by women and children as a result of domestic and family violence (DFV). While crisis and emergency responses are reported to be effective in meeting the short-term needs of (particularly non-Indigenous) women and children in major urban areas, Indigenous women and children living in remote and regional areas face acute shortages in housing support and culturally safe service. Moving from short-term or transitional accommodation into permanent, independent housing is very difficult, and sometimes unachievable, for women and children affected by DFV – mainly due to capacity and resource constraints within housing support systems and deficiencies in income support systems. The report identifies opportunities for social landlords to improve their management of crime and anti-social behaviour on the part of their tenants. The report notes that overcoming undersupply in social housing could help address pathways to permanent housing for those affected by DFV.

Social housing was one hell of a missed budget opportunity, but there’s time [The Conversation, 8 Oct] On a per capita basis, social housing supply has halved since the Howard government effectively ended the routine building of public housing in 1996. During that same period, private rental housing has become less and less affordable to those on modest incomes. Hal Pawson, Professor of Housing Research and Policy at UNSW, notes that the recent (out-of-cycle) October federal Budget offered nothing extra for social housing, even though a pre-Budget poll of Australia’s leading economists recommended investment in social housing more than any other stimulus measure. Pawson cites the Rudd government’s social housing initiative – part of its GFC stimulus measures – as evidence of how building more social housing can simultaneously deliver social benefits and be a good economic and jobs stimulus. Further opportunities for the Federal Government to do more in addressing the shortage in supply of social housing will occur in December’s mid-year budget update and in May’s (normally timed) Budget. One option would be to support CHIA’s proposed $7.7 billion Social Housing Acceleration and Renovation Program (SHARP). See also What’s in the Federal Budget for housing, homelessness and cities? [AHURI Brief, 14 Oct] and Concerns about lack of social housing spark homelessness warning [The Age, 8 Oct]

$500m on social housing repairs: Albanese’s alternative budget [The Conversation, 7 Oct] In her review of Anthony Albanese’s recent Budget reply speech, Michelle Grattan focuses on the issue of social housing, noting Albanese’s comment that if Labor were in government now it would be investing $500m to fast-track repairs to social housing, and urging state governments to match the funding. Labor claims that some 25% of Australia’s social housing – 100,000 homes – need urgent maintenance. Grattan notes that in a recent survey of leading economists, the great majority supported the case for investment in social housing as a high Budget priority, which disappointingly did not eventuate.

JP Morgan puts US$30b toward fixing banking’s “systemic racism” in US [SMH, 9 Oct] JP Morgan Chase is committing US$30b (A$41.8b) over 5 years towards programs that include getting black and Latino families into home ownership and providing additional financing to build affordable rental housing units. JP Morgan CEO, Jamie Dimon, is quoted as saying that the New York bank can “do more and do better to break down systems that have propagated racism and widespread economic inequality”. One example of systemic disadvantage faced by black families is the risk-based mortgage pricing system, which charges higher mortgage rates for lower down payments and credit scores. Ed Golding, executive director of the MIT Golub Center for Finance Policy, applauds JP Morgan’s initiative but notes that there’s a 30% gap between black and white home ownership, amounting to about 4.5m households, and that “it’s going to take massive government policy changes to really move the needle and make up for hundreds of years of systemic racism”. The various measures proposed under JP Morgan’s initiative include help to construct 100,000 affordable rental units.

Report shows 40% of LGBTQI Victorian elders experience homelessness [Star Observer, 10 Oct] This article references a report showing that LGBTQI older people have experienced homelessness and housing stress at higher rates than the general population. Some 40% of participants said they had experienced homelessness and 16% said they were currently at risk of doing so. Less than half of those surveyed indicated that they own their own home, and of this group only 27% owned their home outright. This compares to the general population age 55 and older, where 85% own their own home with 65% of these owning their home outright. Older LGBTQI people are seven times more likely to live alone than the general older population. This, along with factors like ostracization from family, discrimination in the workplace and higher than average rates of mental illness and depression, compounds the difficulties faced by LGBTQI elders.

Renting in the time of Covid-19: understanding the impacts [AHURI final report, 15 Oct] While acknowledging that we are yet to see the full effect of Covid-19 and the resulting economic crisis, the initial findings presented in this report, based on a survey of 15,000 renters in July and August 2020, suggest “a policy-important cohort of tenants in Australia are lined up on the brink of a financial precipice”, particularly after buffers such as savings and superannuation are exhausted, and temporary supports currently offered through JobKeeper and enhanced JobSeeker, rent reductions, rent and mortgage payment deferrals and eviction moratoriums, are scaled back or stopped. Key findings include: a third of tenants saying that they struggled to make ends meet or had skipped meals; one in three tenants asking or planning to ask for a rent reduction or deferral; generalised concern about what will happen when temporary government support is scaled back or stopped; and renters self-reporting significant decline in their mental health. The AHURI report acknowledges that housing is at the frontline of Covid-19 interventions and, as such, a potential weakness to other interventions. For example, a workforce obliged to continue working when feeling unwell because of high housing costs presents a risk to the effective control of Covid-19. It is clearly fundamental to the recovery of the economy that access to housing is secure, uncrowded and able to be maintained with high levels of hygiene and thermal comfort. Well recognised also is the need for a coordinated, universal framework for landlord-tenant negotiations.

Covid spurred action on rough sleepers but greater homelessness challenges lie ahead [The Conversation, 19 Oct] This article, by UNSW Professor Hal Pawson and UQ Associate Professor Cameron Parsell, is timed to coincide with release of the Australian Homelessness Monitor 2020, based on research by Pawson, Parsell and others, and funded by Launch Housing. The research reveals that at least 33,000 rough sleepers and other homeless people have been booked into hotels and other temporary accommodation during the Covid-19 crisis, with some states pledging funds and other support to move beyond this short-term fix. The authors welcome the stepping-up, in recent years, of state government action to tackle rough sleeping, but remind us that rough sleeping accounts for only some 7% of the 116,000 homeless reflected in the 2016 Census. The remaining 93% include couch surfers and those living in badly overcrowded accommodation or short-term dwellings like rooming houses. The authors highlight the danger of an imminent surge in homelessness as Federal Government supports like JobKeeper and augmented JobSeeker are scaled back and bans on evictions lifted. Noting that the shortfall of private rental properties affordable for low-income tenants grew by 54% in the decade to 2016, Pawson and Parsell call for the Commonwealth to build at least 15,000 social housing units a year, compared to the 2,000 to 3,000 per year built since 1996.

Why more housing stimulus will be needed to sustain recovery [The Conversation, 21 Oct] This article by the authors of a recent AHURI research report (Responding to the pandemic, can building homes rebuild Australia?) reinforces the point that further housing stimulus measures will be essential to help drive Australia’s economic recovery, and that the various stimulus measures to date are too small – both by international standards and by comparison to what was done in response to the GFC. The authors call for a large investment in social housing, comparing the federal government’s relatively modest recent $680m HomeBuilder initiative with the corresponding federal government stimulus during the GFC, which included a $5.6b Social Housing Initiative that delivered almost 20,000 social housing units, and $5.8b for the First Home Owner Boost and the Energy Efficient Homes packages. In advance of the recent federal Budget, CHIA called for a $7.7b federal stimulus package which would include expanding social housing supply by 30,000 homes, an initiative which would provide economic as well as long-term social benefits. The authors say large-scale funding of social housing infrastructure is “essential from a range of economic and social perspectives”, not least because “outcomes are more predictable” and such building activity is “not reliant on private sector demand”.

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Oliver Frankel is a former corporate finance and M&A lawyer, who has spent the second half of his career in finance, investment and management. Most recently, he has taken a strong interest in how to address the affordable housing crisis.

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