Social Housing: the social need and the economic opportunity

Oct 2, 2020

The unfairness of Joe Hockey’s first budget in 2014  presaged the end of his political career.  If Josh Frydenberg fails to address the need and opportunity for action on social housing will it start his political decline?

The Productivity Commission in 2019 told us that the size of the low-income population renting privately has doubled since 2000 to about one million households.  The total population renting privately has also doubled to about 2.1 million households, the highest level since the 1940s.

The Australian Housing and Urban Research Institute has found that the supply of affordable private housing rental has steadily declined across the board and particularly in urban areas.  Essential workers such as nurses  as well as low income workers are having to locate to the fringe of urban areas with loss of amenity and higher transport costs.

Homelessness is also increasingly significantly.  It rose by 30% in the decade to 2016.  Older single women are in particular housing peril.

This rental-housing stress is being made more acute because of Covid 19, both in terms of need and the decline in the residential construction industry.

This decline in residential construction will intensify as the dramatic reduction in immigration becomes more apparent.  Construction employs 9% of all workers, but the sector has contracted at twice the rate of the economy as a whole as a result of Covid 19.

Building to rent is an opportunity to stimulate work and employment in the building sector,  It can be ramped up much more quickly than many of the major infrastructure projects which are of doubtful value in any case.

Social housing to rent presents opportunities to build new houses and apartments, renovate existing stock and improve housing density.  It would improve standards of accommodation and provide more secure accommodation for private renters.

In a recent survey of 49 of Australia’s leading economists, they were asked to nominate programs that could be announced in next week’s budget that would be most effective in supporting economic recovery.  Over half of those economists said that social housing should be the top priority.   Is Josh Frydenberg listening or has he closed his mind?

Several superannuation funds have expressed interest in social housing, including IFM Investors headed by Greg Combet. Developers and the States are also very interested in social housing.

What is lacking is Australian government leadership.  Without it, social housing for rental will languish.

The states must be involved as the provision of State  land is essential.  They could provide leasehold land which would revert to the government in several decades.  The States could also back housing development on private land.  Planning approvals by State governments are also necessary.

One example of the recent interest of the States has been the announcement last month that in NSW the National Housing Finance and Investment Corporation, together with the leading industry fund, Cbus Super, is supporting the NSW Land and Housing Corporation in a pilot program to deliver new social and affordable housing in NSW.

Other States are showing similar interest in promoting social housing for rental.

Low cost finance is available with interest rates at exceptionally low historic levels.

Australian government leadership is essential to bring these various players together – the States and Territories, local governments, funders (including the superannuation funds) and developers.

Unfortunately in the Covid 19 recovery, the Morrison government  is reportedly planning to benefit its political friends with support for tax concessions for high income groups. And the fossil fuel rent-seekers are pressing their case through the National Covid Coordination Commission for gas as a substitute for coal.

So social housing for rental may be palmed off as a State responsibility.

The lack of interest and leadership by the Australian government is obvious in the division of responsibilities in housing. The Australian government’s ‘housing minister’, Michael Sukkar, is not even in the Cabinet.  He is in the outer ministry.  The confusion and lack of leadership at the Australian government level is compounded with Anne Ruston  the Minister for Social services and Families.  She shows little interest in social housing for families.  To add to the confusion on housing, Karen Andrews the Minister for Industry, Science and Technology heads the Building Ministers’ Forum.  Minister Alan Tudge heads the Planning Ministers’ Forum.

To add to the failure of leadership, Jane Hume the Assistant Minister for Superannuation says that it is not the job of superannuation funds to create jobs and help rebuild the economy. So the large amount of investible funds in superannuation should not be used in social housing for example.

It is no surprise then that  there is no Australian Government leadership on housing issues.

In the post-war years, there was always a senior minister as  minister for housing,  That is no longer the case.  We need to reassert the appointment of a senior minister as minister for housing along with key ministers for education and health.  Housing, like health and education, are key community needs.

There are reasons why the Australian Government shirks responsibility in housing.  The first is that many of its supporters have successfully exploited the financial incentives to invest in private housing through negative gearing and capital gains benefits.  Priority is given to private investors rather than people needing rental accommodation.  Housing has become a commodity .  Second the Australian Government is opposed to rental on ideological grounds.

Perhaps I may be wrong about the Australian government shirking responsibility in social housing.  Hopefully I am wrong and in the budget next week Josh Frydenberg will make social housing a key feature of our post-Covid recovery.

But I am not holding my breath.

What a tragedy it would be  see the government turn its back on the glaring shortage of  social housing and miss an economic opportunity to support increased activity in an increasingly fragile construction sector.

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