Growing numbers of renters are trapped for years in homes they can’t afford



Rental stress leaves hundreds of thousands of Australians struggling for years to cover all the other costs of living.
Tero Vesalainen/Shutterstock

Hal Pawson, UNSW

Low-income tenants in Australia are increasingly likely to be trapped in rental stress for years. New evidence from the Productivity Commission shows almost half of such “rent-burdened” private tenants are likely to remain stuck in this situation for at least half a decade.

Rental stress is where a low-income tenant faces housing costs that leave them without enough income for food, clothing and other essentials. The scale of the problem – commonly defined as when rent eats up more than 30% of income – is usually presented as a “point in time” or snapshot statistic.




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As the Productivity Commission report reveals, the snapshot number in this situation has increased from 48% of low-income renters in 1995 to 54% in 2018. That’s around 1.5 million people pushed into poverty by high housing costs.

For some, of course, this will be only a temporary problem. On this basis, it is sometimes argued that concerns over Australia’s high rate of rental stress are overstated.

However, the Productivity Commission report, Vulnerable Private Renters: Evidence and Options, highlights longitudinal survey evidence showing that a low-income tenant’s experience of rental stress is increasingly likely to be long-term – not a passing problem. As the commission notes:

[…] a growing number of households find themselves stuck in rental stress.

What is the evidence for this?

This conclusion stems from a comparison of two different tenant cohorts experiencing rental stress as revealed by survey data for 2001 and 2013. Less than a third (31%) of the 2001 cohort remained in stress five years later. But almost half (46%) of the 2013 cohort were.

While many people exit rental stress quickly, the proportion of private.
low-income renters in long-term rental stress has increased significantly.

Vulnerable Private Renters: Evidence and Options, Productivity Commission, CC BY

So, it’s not just that more low-income earners are paying unaffordable rents at a particular point in time. This is increasingly a situation that affected private tenants cannot escape.

Beyond the obvious welfare impacts, recent work argues that excessive rent burdens may also damage human capital and, as a result, reduce economic productivity.

The commission’s findings seem to suggest the ongoing restructuring of Australia’s labour market and housing system is eroding socioeconomic and/or housing mobility. The report notes the significant fall in the numbers who manage to move from renting to owning – from 13.6% of renters in the period 2001-04 to 10.0% from 2013-16.

Perhaps slightly more surprising is the commission’s explanation for the rising rate of (point in time) rental stress for all low-income tenants. According to the report, this results not from increasing unaffordability for the private renter cohort specifically, but from the growing dominance of private rental housing as the tenure in which low-income households live.

The number of private renters has grown as the proportions of owner occupiers and public housing tenants have fallen.
Vulnerable Private Renters: Evidence and Options, Productivity Commission, CC BY



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This, of course, results from the post-1990s failure of Australian governments to expand the supply of social housing to match population growth. By 2018, well over two-thirds (71%) of low-income tenants were renting in the (relatively expensive) private market – rather than from a (rent-limiting) social landlord. Back in 1996, barely half (52%) of them were renting privately.

What does this mean for policy?

The report presents some useful discussion of possible policy directions.

For example, while dismissing rent control as liable to advantage existing tenants at the expense of potential tenants, the report is implicitly critical of residential tenancy laws in most states and territories.

The report advances the broad case that tenancy law reforms, “if well designed”, can enhance tenant welfare “without substantially increasing the cost of renting”. Longer notice periods are particularly favoured because these will “provid[e] vulnerable families more time to find new accommodation and prepare for the move”.

Slightly more controversially, the commission strongly hints at support for outlawing no grounds evictions. The landlord power to end a tenancy without any need to justify the move persists across most states and territories. Discussing this power the report states:

It increases the bargaining power of landlords […] and decreases that of tenants. Landlords’ incentives to carry out obligations, such as repairs and maintenance, decrease when no grounds evictions are available, since this provides them with an avenue to terminate leases in the event of a dispute.




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However, having highlighted a private rental affordability problem that is both growing in scale and becoming demonstrably more entrenched, the report is timid on solutions beyond modestly improving tenancy conditions.

It argues in general terms for an increase in Commonwealth Rent Assistance but – beyond tentatively floating a 10% rise in maximum payments – advances no specific proposal.

Expanding the social housing stock as part of the broad-ranging housing strategy Australia badly needs is scorned as “an expensive option”. This is a reference to the narrowly scoped analysis in the commission’s 2017 Human Services report. It favoured market solutions to provide low-income housing – on efficiency grounds.

The “expensive option” assertion is out of line with the more broadly framed analysis of the Productivity Commission’s predecessor, the Industry Commission. The latter concluded:

Public housing and headleasing [when social housing providers sublease private rental properties] are assessed to be more cost-effective than cash payments and housing allowances.

While the Industry Commission report admittedly dates from 1993, the subsequent failure of overwhelmingly private provision for low-income renters surely presents compelling reasons to revisit the investment case for social housing.




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The Conversation


Hal Pawson, Associate Director – City Futures – Urban Policy and Strategy, City Futures Research Centre, Housing Policy and Practice, UNSW

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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Houses for a warmer future are currently restricted by Australia’s building code



Australians need better solutions for coping with the warmer climate of the future (and present).
TRACEY NEARMY/AAP

Anir Kumar Upadhyay, UNSW; Chris Lockhart Smith, UNSW, and Krishna Munsami, UNSW

Australian houses use significantly more electricity to stay warm or cool than estimated during the design stage.

To design a new house in Australia, the building needs to meet the national construction code. One way to do this is by using software to simulate the building’s thermal efficiency, to see if it meets the minimum requirements of the national house energy scheme. The scheme divides Australia geographically into 69 different climate zones and requires new houses to be thermally appropriate for their environment.




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Unfortunately, this software does not properly take into account our warming weather. Our recent report found the climate assumptions used by the government drastically underestimate the length and heat of summers in the near future.

In fact, buildings that perform best for heat waves predicted by 2030 are actually banned by the government’s building code. We urgently need to update our building codes to cope with our changing climate.

Understand the future local climate

We took Richmond in New South Wales as an example to understand the effect a changing climate might have on building performance. By taking predictions from CSIRO’s medium greenhouse gas emissions scenario, we analysed Richmond’s likely weather for every week of 2030.

The future outlook, shown below, is strikingly different from the weather files used to determine whether houses meet the minimum thermal performance requirement of the National Construction Code. In 2030, Richmond will experience a warm period almost four times longer than predicted by the official weather file.


Author provided

Design for the future

Based on the future climate scenario, the design strategy for buildings in Richmond should focus on well shaded and insulated buildings to avoid any heat gain in the warm period, but should also harness sunlight to warm up the indoors in the cool period.

The warm period will last from December to March, when keeping the house cool is the priority. Passive solar heating, such as northern windows and well-insulated walls, floor and ceilings, are important during the May to September cool months, while direct ventilation is largely all that’s needed during the mostly comfortable April and October to November.

To test how houses will perform in a hotter future, we modelled a house in Richmond using AccuRate software. We found a design and construction solution that performed well (achieving 7.6 stars out of 10) for the 2030 scenario failed to meet a heating threshold that is legally required in NSW. In effect, the house that makes the most sense for the immediate future, could not be built.

These thresholds for heating and cooling are based on assumptions that are out of step with current conditions, let alone the future. Between 2016 and 2018 Richmond’s annual average temperature was 17.8℃, whereas the NatHERS weather file assumes it to be 16.7℃. This difference is set to increase.

In a 2019 amendment, the National Construction Code adopted NSW’s approach to heating and cooling thresholds to other climate zones in other states. The heating threshold puts a restraint on designing buildings that are optimised to mitigate extreme heat events.

This highlights the limitation of out-of-date climate files, and the current regulation that acts as a barrier to developing energy efficient designs for a future warmer climate.

Build to perform

A 2013 CSIRO study found that houses with higher star ratings using more energy in summer.

One of the reasons is the trade-offs on the thermal performance of one building component against another in the Nationwide House Energy Rating Scheme (NatHERS) software. For example, a window without shading on the western façade is acceptable in a NatHERS simulation, whereas the same window would not be allowed if a glazing calculator developed by the National Construction Code were used to demonstrate the thermal performance of a house.

Other issues are trade workmanship, such whether a building is airtight. Airtightness in residential buildings is ignored in the national construction code. However, considerable energy savings can be achieved if a house can be made airtight.


Author provided

Similarly, missing or displaced insulation in the ceiling, as shown above, can cause significant discomfort and additional heating and cooling costs. We all, from builders to homeowners, need to understand insulation must be carefully installed and cannot be moved later, or even well designed buildings will become inefficient.

Windows are the main option for ventilating most houses. However, if you live in a high-pollution or noisy area, or in a place with very little wind, open windows might not be desirable or practical. Consequently, households may not be getting enough fresh air to maintain a healthy indoor environment. A mechanical ventilation system, which uses little energy, is an ideal alternative.




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The current weather files and heating thresholds used to develop minimum building standards are inadequate for our warming climate. Our report presents a framework for designing and building houses that consider climate change. We hope to see further research on other Australian population centres, so we can develop a comprehensive overview to help us build energy efficient and healthy houses for the future.The Conversation

Anir Kumar Upadhyay, Lecturer in Built Environment, UNSW; Chris Lockhart Smith, Director – ecodweller, UNSW, and Krishna Munsami, PhD student, UNSW

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Build to rent could shake up real estate but won’t take off without major tax changes


Hal Pawson, UNSW

In the wake of slumping demand for apartment building, it’s little wonder the multi-unit housing industry has been eagerly eyeing a possible new residential product: “build-to-rent”.

In fact, the latest figures show that apartment-building construction starts were down 36% in 2018 from 2016. But how much will this little-known type of housing solve our housing problems?




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Build-to-rent won’t be a silver bullet solution for Australia’s housing affordability stress, but it does have potential to tick the box on several important public policy objectives. These include widened housing diversity, enhanced build standards, and a better-managed, more secure form of private rental housing.

But for this to happen, Australia’s tax settings need adjustment.

What is ‘build-to-rent’?

This refers to apartment blocks built specifically to be rented, usually at market rates, and held in single ownership as long-term income-generating assets.

The enduring owner might be, for instance, an insurance company, an Australian super fund, a foreign sovereign wealth fund, a private equity firm, or the building’s developer.

Although new in Australia, build-to-rent is quite common in many other countries. Under its North American name, “multi-family housing”, the format has generated more than 6.3 million new apartments since 1992 in the US alone. And in the UK, a build-to-rent sector has led to 68,000 units built or under construction since 2012.




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A scattering of build-to-rent schemes are already underway or completed, mainly in inner Sydney and Melbourne. And they may prove to be the forerunners of a new Australian residential property sector – but that is far from guaranteed.

In Australia, our private rental market is almost entirely owned by small-scale mum-and-dad investors, so this kind of housing would be a largely new departure from typical Australian real estate.

Potential benefits

The build-to-rent development model, involving a long-term owner commissioning an entire building, creates an incentive for higher, more enduring quality than the standard “build-to-sell” apartment development approach.

Importantly, build-to-rent is a long-run investment that caters for rental demand, which tends to grow steadily.

This means the model is largely immune to the fickle changes in housing demand resulting from typically short time horizons and primarily speculative instincts of individual buyers traditionally dominant in our market.




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So at its full potential, this new housing product could introduce a valuable counter-cyclical component into the notoriously volatile residential construction industry, helping to offset damaging booms and busts. In other words, build-to-rent can create stability in the Australian property market.

How build-to-rent can incorporate affordable housing

Optimistically, some have claimed build-to-rent could also provide an “affordable housing” fix for many earners who are doing it tough in our existing private rental market.

But this could be possible only with the aid of major government funding or planning concessions.

Ideally, housing at rents affordable to low or moderate income earners would be included in predominantly market-rate build-to-rent schemes. Indeed, one major construction industry player recently advocated this as a standard expectation.

So how should affordable housing be provided in this case?

To find out, our analysis compares the cost of developing affordable housing by a for-profit company with development under a not-for-profit community housing provider.

Thanks to that non-profit format, and the tax advantages that go along with it, community housing providers can, in fact, construct affordable rental housing at significantly lower cost than their for-profit counterparts. Less subsidy is therefore needed.

Nonetheless, government help in some form will be essential to enable an affordable housing element. The most painless way for this to happen, from the government perspective, is through allocating sections of federal or state-owned redevelopment sites to community housing providers at discounted rates.




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Encouragingly, this strategy was recently advocated by newly designated federal housing minister Michael Sukkar.

Such designation of government-owned sites could, for instance, be factored into large-scale urban renewal projects like Sydney’s Central-to-Eveleigh and Rozelle Bays. When complete, it could fulfil the widely voiced demand that 30% of these developments should be affordable housing.

Levelling the playing field

Our modelling shows that under current conditions, even market-rate build-to-rent projects are barely viable – at least in Sydney.

The inflated price of developable land in Australia’s urban housing markets is an important contributing constraint. But our research also identifies a range of government tax settings that disadvantage build-to-rent, compared with both mum-and-dad-investors and traditional build to sell developers.

Removing less favourable land tax and GST treatment could markedly improve build-to-rent feasibility.




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From a housing policy perspective, there’s also a case for the federal government to reconsider its recent “withholding tax” decision that treats overseas-based institutional investment in rental property less favourably than investment in commercial property.

Since such global funds would likely lead the establishment of a new Australian build-to-rent asset class, revisiting the withholding tax changes could be a significant step in making build-to-rent a reality in Australia.

In any case, build-to-rent is no simple solution for Australia’s affordable housing shortage.

But even as a market-rate product, it could fulfil several important public policy objectives. How far it might do so in practice is something that governments rightly need to weigh up when considering industry-proposed tax and regulatory reforms.The Conversation

Hal Pawson, Associate Director – City Futures – Urban Policy and Strategy, City Futures Research Centre, Housing Policy and Practice, UNSW

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Chilly house? Mouldy rooms? Here’s how to improve low-income renters’ access to decent housing



Too many Australians struggle to get their housing maintained and problems fixed.
Trevor Charles Graham/Shutterstock

Edgar Liu, UNSW; Chris Martin, UNSW, and Hazel Easthope, UNSW

People’s quality of life, their health and their comfort can suffer when living in poor-quality housing. It can also impose high ongoing costs of maintenance, repairs, heating and cooling. And these problems are more likely to affect low-income households, as our report for Shelter NSW shows. In it, we review the evidence on housing quality problems and consider ways to resolve these, especially for low-income households.

There is extensive evidence of the impacts of poor-quality housing on physical health, mental wellbeing and comfort. For example, poor design and maintenance can lead to the build-up of mould.




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These negative impacts vary by income groups and tenure. From the recently completed Australian Housing Conditions Dataset we know, for example, that renters on very low incomes (the bottom fifth of households for gross income, about $20,000 a year) are most likely to have unmet repair needs. They also have a harder time staying comfortable during winter and summer, as the table below shows.


Source: Australian Housing Conditions Dataset, Author provided

What are the reasons for poor-quality housing?

There are several underlying reasons for substandard housing.

Properties may enter the rental market after years in owner-occupation with no formal checks on their state of repair.

Another problem is some private renters do not assert – or feel unable to assert – their legal right to habitable premises in a reasonable state of repair and upkeep. This is often because of the insecurity of their leases and lack of affordable alternative housing.




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Another issue is “split incentives” – landlords decline to upgrade properties because they would not receive any benefit themselves.

There are also problems in public housing. Disinvestment by governments has both reduced the supply of housing and caused a backlog of maintenance for much of the remaining stock of dwellings.




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Housing quality is covered by myriad regulatory regimes. Lately, governments have been focused on questions of how best to regulate construction of new buildings. Less attention is given to the ongoing use of existing buildings.

Recent state and national reviews have highlighted problems in the certification of building design and construction, and in the public agencies that oversee the certifiers. Some state governments have begun to respond. The New South Wales government, for instance, is moving to consolidate the regulation of construction practitioners under a new building commissioner.

We spoke to a range of housing sector stakeholders and the theme from the recent reviews that most struck a chord was inadequate policy governance. There was no comprehensive overview or oversight of the issues of housing quality. As a result, some important issues escape policymakers’ attention.

Many stakeholders indicated that the current focus on problems in new buildings is an example of this. Although that’s plainly an issue in need of attention, other problems in existing buildings and more fundamental solutions are being overlooked – such as increasing social and affordable housing supply.




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So what are the solutions?

Empowering tenants and regulators

One way in which the quality of existing housing is regulated is through tenancy laws. This will become more important as rental housing becomes an increasingly common option, particularly for the long term.

Recently, some state governments have amended tenancy laws to specify “minimum standards” for rental housing. Our research participants supported these moves, but said security of tenure also had to be improved to protect renters when they assert their rights. The onus of legal enforcement could also be shifted from tenants to regulators.

Mandating improvements to overcome the split incentive problem

The split incentive problem for housing quality means some landlords are reluctant to pay for upgrades – such as insulation or other energy-efficient features – where tenants are the beneficiaries. As a result, renters, especially those on low incomes, are likely to be living in housing of lower standards or quality.

A potential solution is for governments to take the minimum standards approach and legislate energy efficiency and other improvements as mandatory. This is already commonplace overseas.

One of our workshop participants observed that “energy poverty” was another way of framing the policy issue that had proved compelling in overseas jurisdictions. While this framing had not had the same impact in Australia, this may be changing.

Improving transparency of housing standards

Social housing providers have a role in leading by example. Increased investment in social housing could contribute to improved quality across the housing system.

To this end, social housing landlords – particularly state and territory public housing authorities – need to be more accountable to tenants and the general public. Transparent reporting on property conditions, maintenance and tenant satisfaction, led by the social housing sector, can and should be rolled out as standard practice across the sector.

To do this, however, enough funding must be provided to reverse decades-long underfunding in the sector.

Collectively, these options can deliver more equitable housing outcomes, not only to low-income households but to all. The challenge lies in having the political and industry will to act on them.




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The Conversation


Edgar Liu, Senior Research Fellow at City Futures Research Centre, UNSW; Chris Martin, Research Fellow, City Futures Research Centre, UNSW, and Hazel Easthope, Associate Professor, City Futures Research Centre, UNSW

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Shorten’s subsidy plan to boost affordable housing



File 20181215 185249 1xa2lk8.jpg?ixlib=rb 1.1
Labor would work with community housing providers, the residential construction sector and institutional investors.
Flickr, CC BY

Michelle Grattan, University of Canberra

Institutional investors would receive long-term subsidies to build new dwellings – on condition they rented them out below market rates – under an affordable housing program Bill Shorten is announcing on the first day of Labor’s national conference in Adelaide.

A Labor government would offer 15-year subsidies – $8,500 a year – for investors building new homes provided they charged rent at 20% under the market rate.

The program would cost A$102 million over the forward estimates to 2021-22 and A$6.6 billion over the decade to 2028-29. The costing was done by the Parliamentary Budget Office.

In his Sunday announcement, Shorten says that the ALP’s ten-year plan to build 250,000 houses and units would be Australia’s “biggest ever investment in affordable housing”. The plan includes 20,000 dwellings in the first term of a Labor government.

“This is a cost-of-living plan, a jobs plan and a housing plan. It will give working families a fair go to put a roof over their head now – and save for their own home in the future.”

He says these dwellings would be available to renters on “low and moderate incomes”. A family paying the average national rent of $462 a week could save $92 a week.

Labor would work with community housing providers, the residential construction sector and institutional investors.

“Labor’s plan will provide investors with certainty to build – knowing that they will have long-term government support and guarantees beyond the decade.”

Shorten says access to housing is one of the biggest challenges to dealing with intergenerational inequality, as an increasing “wealth gap” locks people out of the housing market.

“Increasing the supply of affordable housing is critical to addressing pressures on disposable income and, in turn, addressing inequality.

“Labor’s plan will deliver affordable, environmentally sustainable housing that helps to reduce energy consumption and cost-of-living pressures on Australian families.”

Shorten says the existing rental scheme – the National Rental Affordability Scheme – has attracted private investment of about A$12.9 billion, delivering 37,000 dwellings in a decade.

“Despite this success, the Liberals have abandoned affordable housing and axed the subsidies that encourage affordable housing. There is a severe shortage of affordable rental housing in Australia and many families are struggling to find and keep a roof over their heads. The number of Australians experiencing rental and mortgage stress is at record levels.”

The Australian Housing and Urban Research Institute estimates a shortfall of more than 525,000 affordable rental properties, Shorten says.

Overseas students, temporary foreign workers and other non-residents would not be eligible to rent under the Labor scheme.

Shorten says the plan would support the ALP’s reforms to negative gearing, “which direct concessions to newly built premises and encourage housing construction”.

Labor hopes that the three-day conference will end the year on a high note for the opposition, after its strong two-party performance in polling during 2018. Maximum effort has been made to ensure that internal policy differences are managed to avoid damaging public divisions.

Shorten told a press conference on Saturday that he hoped to see “energetic, enthusiastic debate” at the conference.

He said “perhaps the most valuable proposition that Labor presents the Australian people at the federal election within the next five months – it’s a united team, it’s energetic and it’s a team with vision”.

Shorten defended his undertaking that Newstart would be reviewed ahead of an ALP government considering an increase.

“I think Newstart is too low. I don’t think anyone who says that it needs to increase is wrong.

“But what we’ll need to do from government is review the level and understand the implications of increasing Newstart, along with the impact on all of our other taxes and payment systems.

“We have to look at what we can afford as a nation. But we’re not reviewing Newstart to decrease it.”

On the sensitive issue of asylum-seeker policy, Shorten told his press conference a Labor government would put whatever resources were needed into stopping boats.

It would also support regional and offshore processing. It would take refugees into Australia – “properly, not via people smugglers”.

“We want to be a good international citizen – we also recognise, however, that we’ve got to make sure that whatever policy we adopt we can afford, and that it meets our combined goals of not keeping people in indefinite detention on Manus and Nauru but also keeping our borders strong, so we never again see the people-smuggling trade start up.”The Conversation

Michelle Grattan, Professorial Fellow, University of Canberra

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Labor’s housing pledge is welcome, but direct investment in social housing would improve it


Julie Lawson, RMIT University and Laurence Troy, UNSW

Despite recent falls in the housing market, housing costs and indebtedness bite deeply into household budgets, especially at Christmas time. Just over 433,000 households confront housing stress and homelessness every day across Australia. They represent the current shortfall of social housing.

If Christmas offers a moment for reflection, ask yourself what should our resolutions be for the housing market? What should we expect our governments to do about it?

In this article, we look at this week’s major statement on housing policy from a key contender to lead Australia’s next government – made by Bill Shorten at the ALP national conference.

We applaud the principle of fairness and the ambition of the ALP policy. We are less supportive of the reliance on for-profit investors, market rent mechanisms and land grabs. Our research shows direct government investment in social housing is ultimately far more efficient and effective than subsidising investors in the long term.




Read more:
Australia needs to triple its social housing by 2036. This is the best way to do it


So what is Labor’s policy?

Shorten’s announcement also pledges reform of tax concessions that are driving inequality between households and investors. However, Labor recognises that this might not be enough to tilt the balance in favour of low-income households, and directing the savings from these changes into housing programs is a welcome move.

Labor proposes to subsidise investors in affordable rental housing, much like the Rudd government’s National Rental Affordability Scheme (NRAS). Labor would offer an $8,500-a-year subsidy over 15 years to investors who build new homes for low-income and middle-income households to rent at an “affordable” rate – 20% below market rent.

Starting modestly, the program aims to produce 20,000 affordable units over three years, building to a much larger target of 250,000 dwellings over ten years.




Read more:
Shorten’s subsidy plan to boost affordable housing


State governments would also be required to get on board through partnership agreements, as they have done in the past, providing land and other forms of co-investment. Hefty stamp duty revenues in recent years should make this easier for the states.

While Labor’s targets appear high by recent standards, Commonwealth and state governments directly funded the building of 9,000 public housing dwellings each year for the better half of the 20th century – until 1996. Annual production is now down to 3,000 dwellings. That’s not even enough to maintain the existing public share of housing.

Since the mid-1990s, a preference for outsourcing social responsibility through private rental providers and indirect rental support payments has dominated public policy. The ALP’s subsidy-based policy continues this trend.

The proposal centres on maintaining returns to investors at levels that encourage investment. As our previous research has shown, over the longer term this increases cost per dwelling. The question remains, as it did under the NRAS: who are we trying to subsidise here, the investors or the tenants, and is it really equitable and effective?

What are the alternatives?

Previous work has shown that NRAS-type schemes offer most benefit to new affordable housing developments when the funds are directed to not for profit organisations, rather than “leaking” out to the for-profit private sector. The advantages of this approach include:

  • subsidies are retained within the affordable housing system
  • benefits are directed to regulated not-for-profit developers with a social purpose
  • the benefit is stretched out over a longer time, meaning government investment does not expire after a set time.

In the UK, a lack of direct conditional investment and weak definitions of affordability led to an 80% decline in social housing production. Without public equity, recurrent operating subsidies have no influence on design quality or ongoing impact after the expiry of providers’ obligations – or their cancellation. Yes, they can be switched on and off like a tap – as happened in 2014 with the NRAS.

With good design, a new scheme could overcome some of these deficiencies. Labor promises to provide lower annual subsidies than NRAS but for longer – 15 rather than 10 years – adding up to at least $127,500 from the Commonwealth for a tenancy to be offered at below market rents. It’s a substantial commitment.

Yet if this level of support was invested up front to build dwellings, rather than provided as an annual operating subsidy, it would make a substantial and enduring contribution to Australia’s housing needs. This is not only socially responsible, it can drive green innovation and is also more financially responsible too.

The only thing that stands in the way is the narrow public accounting doctrine that privileges day-to-day expenditure over long-term investments. This is something that, in the UK, even the Treasury and the National Audit Office are learning to overcome after the painful experience of the Private Finance Initiative.




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Homeless numbers will keep rising until governments change course on housing


How much more cost-effective is direct investment?

If equity and fairness are to be the yardsticks of policy, age pensioners, people with disabilities and low-paid workers should be the focus of our deepest support. Our AHURI research has established the level, type and location of investment required to meet the needs of 433,000 low-income households in housing stress or homeless across Australia. The current market offers no affordable or secure options for them.

Our research also compared the cost of subsidising investors versus direct investment by government. Our modelling of costs and review of international experience provide evidence that direct investment is far more efficient and effective in the medium and long term.

Capital funding model.
Lawson et al, 2018, Author provided
Operating subsidy funding model.
Lawson et al, 2018, Author provided

Thus, we argue for more direct investment in social housing, strategic use of efficient mission-driven financing and retained investment via public equity and public land leases.

Recognition of the need for national leadership and policy reform is growing. After backpedalling, the Coalition government moved forward in 2018 to establish, with cross-party support, the National Housing Finance Corporation. This mission focused public corporation will soon channel lower-cost financing towards regulated not-for-profit housing. Of course, financing is debt and not quite the same as funding.




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Government guarantee opens investment highway to affordable housing


The Australian Greens have yet to announce their policy but an outline suggests a commitment to invest in social housing and establish a federal housing trust.

The ALP’s proposals are framed in line with the laudable principle of fairness and are a work in progress – rather than mission accomplished. Overcoming the shortfall of affordable and secure housing will require purposeful Commonwealth and state government funding, mission driven financing as well as land policies to make housing markets fairer for all.The Conversation

Julie Lawson, Honorary Associate Professor, Centre for Urban Research, RMIT University and Laurence Troy, Research Fellow, City Futures Research Centre, UNSW

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Australia needs to triple its social housing by 2036. This is the best way to do it


Julie Lawson, RMIT University; Hal Pawson, UNSW; Laurence Troy, UNSW, and Ryan van den Nouwelant, Western Sydney University

Australia needs to triple its small stock of social housing over the next 20 years to cover both the existing backlog and newly emerging need.

That is the central finding of our new research report on the housing infrastructure needs of low-income earners, published by the Australian Housing and Urban Research Institute (AHURI). By our reckoning, 25 years of inadequate investment has left Australia facing a shortfall of 433,000 social housing dwellings. The current construction rate – little more than 3,000 dwellings a year – does not even keep pace with rising need, let alone make inroads into today’s backlog.

The report also shows that Australia needs to avoid overly complex private financing “innovations”. These have proven ineffective elsewhere and were recently abolished by the UK Treasury.

Our modelling of household need and procurement costs shows that direct public investment, coupled with more efficient financing through the National Housing Finance Investment Corporation, is the best way to tackle this policy challenge. Compared with subsidising the operating income of a commercially financed program, the lifetime cost of the first year of house building is A$1.6 billion less. That’s a 24% saving to the public purse.




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Lack of investment takes its toll

From 1945, state and territory governments, financially supported by Canberra, maintained public programs that built 8,000-14,000 dwellings a year for half a century.

From 1996, however, social housing largely slipped from the Australian government agenda. Dedicated ongoing funding to states and territories was at “starvation levels”. Public house building plunged to today’s residual output, except for a short-lived GFC-stimulus-funded recovery from 2008-11.




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How do we estimate the level of need?

Our analysis quantifies both Australia’s housing need “backlog” and the “newly emerging” need from population growth over the next 20 years. It conservatively calculates backlog need as comprising two elements.

First, it considers those who are homeless now. The 2016 census counted 116,000 homeless people across Australia. Recognising that some would choose not to live alone, we estimate that our homeless population implies a need for about 47,000 extra dwellings.




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Homelessness: Australia’s shameful story of policy complacency and failure continues


Second, our analysis considers the group whose housing needs are not being met by the market. These households are on very low incomes (excluding student households), in private rental housing, and in rental stress – where rent is more than 30% of their earnings. If you are on a very low income, housing costs of this order mean going without other essentials.

Collectively, these components imply a current backlog of 433,000 social housing dwellings.

Newly emerging need will expand the shortfall to 727,000 dwellings by 2036. This factors in expected population growth and the current share of social housing. It assumes no improvement in private rental housing affordability.

How achievable is a building program of this scale?

Fixing this problem – both the backlog and newly emerging need – calls for a major program of social housing construction. This is needed to expand the national social housing stock to nearly three times its 2016 size by 2036.

Simply preventing the existing problem from getting worse calls for nearly 15,000 extra dwellings a year to be built. That’s a little over 290,000 homes over the next 20 years.

To eliminate the backlog as well would require an annual program averaging 36,000 units. This would need to begin gradually to build capacity and avoid inflating costs.

This would represent around a tenfold increase in current social housing construction rates. The output would be similar to the 14% public housing share of Australia’s total house building in the decade to 1955.

For comparison, housing providers with a social purpose today account for 20-31% of all house building in the UK, Finland, France and Austria, and much more in some Asian countries such as Singapore. England’s not-for-profit housing associations, for example, completed some 42,000 homes in 2017-18, out of 161,000 homes built in total.

What will this cost the government?

What would be the price tag for such a program? And what’s the best way for government to provide the necessary support?

To answer the first question, we identified both the social housing need, described above, and the land and construction costs across 88 regions of Australia. Different regions have different land costs and building forms, such as detached, medium and high-rise dwellings. Not surprisingly, the modelled unit procurement costs vary substantially, from A$146,000 in remote South Australia to A$614,000 in parts of Sydney. We then calculated the price tag across the country.

To work out the cost to government, and answer the second question, a couple of important assumptions are made.

The first is that social housing need should be met in (or near) the places where it arises. While skewing the building program towards less well-located places could accommodate the need more cheaply, it is in our view essential to avoid such a “ghettoisation” model.

Second, while tenants can help cover the costs through their rent, to be affordable that rent will service only a modest amount of debt. As the federal Treasurer’s own advisory committee acknowledges, therefore, the public purse must bear most of the development cost.

No amount of “innovative” procurement or financing will yield a government “free lunch” as the UK’s National Audit Office evaluation of private infrastructure financing experiments demonstrates.

The five investment scenarios

We examined five contrasting “investment pathways” for delivering a program that builds social housing on the required scale. The basic choice is between a capital grant model (subsidy paid up front) and a revenue subsidy model (annual payments underpin debt repayments and operating costs).

We calculate that the cost of the first year of the program would total A$5 billion under a capital grant approach. A private debt-financed approach, with government support through revenue subsidies, would cost A$6.6 billion. This is after discounting costs incurred in later years.

Thus, direct investment would save Australian governments 24% on average.

So while governments tend to favour “financial innovation” options that push costs into the future, capital grant funding is the rational investment pathway.

Providing enough housing for low-income earners is a growing policy challenge. With rising homelessness and housing stress in recent years, this research quantifies the scale of that challenge and identifies the most cost-effective investment pathway to its resolution.The Conversation

Julie Lawson, Honorary Associate Professor, Centre for Urban Research, RMIT University; Hal Pawson, Associate Director – City Futures – Urban Policy and Strategy, City Futures Research Centre, Housing Policy and Practice, UNSW; Laurence Troy, Research Fellow, City Futures Research Centre, UNSW, and Ryan van den Nouwelant, Lecturer in Urban Management and Planning, Western Sydney University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Ideas of home and ownership in Australia might explain the neglect of renters’ rights



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People should be able to feel at home regardless of whether they own the place they live in.
Halfpoint/Shutterstock

Bronwyn Bate, Western Sydney University

In Australia, when we think of home, we think of ownership. This normalisation of home ownership is reflected in the “Great Australian Dream”, the belief that it’s the best way to achieve financial security. This “dream” is based on the premise that if you work hard you will one day be able to buy a home. Home ownership is an important goal for many Australians. Home ownership implies success.

Linked to the importance of home ownership are our conceptions of home – what home means and the ways home can and should be made. Popular understandings of home suggest that feelings of home are most easily created between a house and the person who owns it.




Read more:
‘Just like home’. New survey finds most renters enjoy renting, although for many it’s expensive


What is home?

So ingrained is this relationship between home and ownership that in my recently published paper I argue that research rarely considers the ways non-owners make and think about home. This is problematic, given recent housing trends.

Recent changes in housing, particularly the increased cost of home ownership and curbing of public housing, have created a greater demand for rental housing. As a result, there is an undersupply of privately rented housing in Australia.

Australian tenancy laws add to the insecurity of the private rental sector. Tenancy laws and policy reflect cultural norms in Australia, where private renting is seen as a form of short-term, transitional housing.

Recently, significant media and public attention has been directed at the impact of state-based tenancy legislation. It is argued that tenancy laws need to be changed to reflect current housing trends and the needs of many tenants to have long-term, secure housing.




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Rental insecurity is a persistent source of stress for many tenants. It’s a key reason that many tenants struggle to feel at home in their rental property. A person’s ability to identify feelings of home with their dwelling has been shown to impact psychological health and overall well-being.

My research findings suggest that while tenancy law affects the ways we understand and make home, likewise, our meanings of home affect how we shape and understand tenure and policy. Australian tenancy law reflects broader cultural values that associate the meaning and making of home with home ownership.

While researchers and policymakers focus on how tenancy law can negatively affect or restrict renters within their homes, the actual practices of home-making by renters are often overlooked. Current understandings of home typically reference what home means to home owners. My research points to the importance of understanding the ways private renters make home – and make home meaningful – so that any changes to tenancy law reflect the needs of tenants.




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Is having a home a right or a privilege?

While there is no doubt that small changes are being made, perhaps the lack of consideration for tenants in tenancy laws and policy is indicative of our larger beliefs about what it is to “feel” at home and make a home. The “Great Australian Dream” is based on the belief that hard work will eventually lead to home ownership. Yet owning a home is becoming impossible for many people, irrespective of how hard they work.

If we understand home to be a basic right, then we will have policies that reflect this. If we understand home to be a privilege, reserved only for those who manage to achieve home ownership, then we will forever live in a country where tenure security and a feeling of being “home” are reserved for those who are able to buy a house. Consequently, our policies will continue to support the idea that, ultimately, a rental property cannot be “home” to a tenant.

The question then remains: do we consider home a right or a privilege? This issue is at the very heart of Australia’s housing crisis. Until we change our meaning of home by separating it from ownership, we will never be able to “fix” Australia’s housing crisis.




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The Conversation


Bronwyn Bate, PhD Candidate, Urban Research Program, Western Sydney University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

‘Just like home’. New survey finds most renters enjoy renting, although for many it’s expensive



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Fewer than than 5% of renters are unhappy with their landlord, but rent can be expensive.
Shutterstock

Steven Rowley, Curtin University and Amity James, Curtin University

One in every four Australian households rents, and it’s not just those on low incomes.

A new nationally representative survey of 3,182 renters, funded by the Bankwest Curtin Economics Centre, finds that while 60% of renting households have a household incomes below A$78,000, 30% are on incomes of more than A$100,000.

Although many households on low incomes and those headed by single parents are undoubtedly struggling to meet rental costs, those on moderate or higher incomes are generally positive about the experience.

Many of us rent

Despite its reputation as a nation of homeowners, Australia has the 10th largest private rental sector in the 37 nations that make up the Organisation for Economic Cooperation and Development.


Comparison of international private rental sectors.
OECD Housing tenure distribution 2014 or later. ABS Census data 2016

Six in ten renters do it because they can’t afford to do anything else. The rest rent by choice.

Most are happy with what they rent

Perceptions of dwelling quality are positive with only 6% reporting that their dwelling is in a poor or terrible condition. 81% report a good or excellent relationship with their landlord.

Add a property manager into the mix and this falls to a still respectable 69%. Fewer than than 5% of respondents reported a poor or terrible relationship.

Around half of respondents claim to have a good to full understanding of their rights as tenants.


Relationship with property manager or landlord.
Bankwest Curtin Economics Centre 2018 Private Rental Sector Survey., Author provided

Overall, when asked whether their rental property felt like home, just over 60% reported it did, with less than 20% being negative about their experience.

The longer a tenant lives in a rental dwelling, the more it feels like home, highlighting the importance of security of tenure.

Generally, levels of satisfaction with the sector are high given the proportion of tenants who would rather be owners.


Satisfaction with the private rental sector by age group.
Bankwest Curtin Economics Centre Private Rental Sector Survey

Security of tenure matters

Security of tenure is a major concern of private renters.

Two thirds of renters have been in their current property for less than three years. Almost 40% have rented four or more properties during their time as renters.

While two thirds of moves are by choice, around one third are forced with the primary reason being the owner selling the property.




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Moves are stressful, expensive and disruptive, particularly for households with children. Around half of all renters say they would gladly choose to sign a lease longer than 12 months if given the option because it would offer greater security and a stronger sense of home.

As does discrimination

One in five renters report some form of discrimination when applying for rental properties.

Those households most likely to suffer from discrimination are single parents with children.

In September Victoria passed landmark leglislation intended to improve the rights of renters.




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Some important issues addressed in the legislation are highlighted in the BankWest Curtin Economics Centre report which found the vast majority of respondents are on short-term leases (12 months or less).

NSW is following suit, although, disappointingly, it does not plan to outlaw no-grounds evictions.

And rent can be expensive

The typical proportion of gross income spent on rent is 28%, with almost half of all renters paying more than 30%, a figure that rises to 63% for renters over 55.

One in seven renters are paying more than 60% of their income in rent.

When asked the reasons for such high rental payments, almost six in ten report being forced to pay that much through a lack of available alternatives.

Commonwealth rent assistance was regarded as important or very important by nine out of ten of those receiving it.

What we could do to help

One of the best ways to make rent more affordable would be to reintroduce a subsidised rental scheme that offered a financial incentive for developers to invest in housing that would be leased to low-income households at below-market rents along the lines of the National Rental Affordability Scheme by Prime Minister Kevin Rudd in 2008.

It was wound up by his successor tony Abbott in 2014.

Workable build to rent schemes could also help boost supply and security of tenure, and the negative gearing and capital gains tax concessions tax available to mum and dad investors could be tied to the delivery of long–term, below market rental dwellings.

Our survey finds the private rental market is performing quite well for those on moderate to high incomes. But not for those on low incomes who will never access home ownership and need secure long term tenure.The Conversation

Steven Rowley, Director, Australian Housing and Urban Research Institute, Curtin Research Centre, Curtin University and Amity James, Lecturer, School of Economic, Finance and Property, Curtin University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Life as an older renter, and what it tells us about the urgent need for tenancy reform



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Uncapped rent increases and ‘no grounds’ evictions leave older women particularly at risk of substandard housing conditions or even homelessness.
Shutterstock

Emma Power, Western Sydney University

The New South Wales government has introduced a bill to reform the Residential Tenancies Act. This act sets out the rights and responsibilities of landlords and tenants in private rental accommodation in NSW.

The bill’s proposed limit on rent increases to one in every 12 months is essential, as are the proposed minimum standards for rental accommodation. However, my ongoing research with single older women renting in Sydney points to an urgent need for a cap on the value of rent increases and for an end to “no grounds” eviction. Victoria adopted these measures earlier this month.

Reform is essential. Growing numbers of Australians rent their housing and increasing proportions are expected to rent long-term. This makes it essential that private rental housing meets the need that every person has for a secure and affordable home.




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It’s getting harder for older renters

It is getting harder for older renters to find adequate, appropriate and secure housing. Older women – the focus of my work – are at particular risk. This is due to longer life expectancy, lower incomes across the life course, and less access to benefits like superannuation. Women also experience a greater loss of income and housing standard than men do after relationship breakdown, and are at greater risk of domestic violence.

Their stories point to the role of flaws in the Residential Tenancies Act in compounding housing insecurity.

Rising rents add to hardship

Rising rents were a problem for nearly all women I spoke with. They depleted women’s budgets, leaving little money to buy food or pay for utilities. Many relied on local charities for food and help to pay energy bills.

One woman described how she would add protein to her meal by buying a single chicken breast, slicing it thinly and freezing each piece separately to be defrosted over the next week or so. Another relied on vegetables the local greengrocer bundled and discounted before throwing out.

In winter, when heating bills mounted, she relied on a local church with a weekly food pantry. This food, donated by local supermarkets and community members, was frequently past its “best before” date. As a low-paid community worker living in an area with a significant number of disadvantaged families, she collected food alongside her clients.

Two women coped by moving into their cars. They subsisted on tins of food that they could hide in the car. At night they kept themselves safe by parking in familiar locations.




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Living with substandard conditions

Rent rises also made it difficult to find appropriate housing. Affordable housing was often substandard. Many had difficulties getting landlords to agree to repairs.

One woman described how her rented unit began leaking. The leak was severe and lasted for nearly two years. In this time she lived with increasing mould and lost access to nearly 40% of her home. She sought repairs from the landlord, but only cautiously, because she was afraid of eviction.

When the leak was eventually fixed her rent went up 20%. That left her with only A$30 a week after rent, essential bills and transport. She couldn’t afford food and relied on local charities until she found cheaper housing in a distant, transport-poor suburb.

Another described a similar leak:

When it rained the water would come straight down into the doorway. And that was the only way you could get into the house […] it was in the house and even in the bedroom.

Despite this the owner increased the rent. The real estate agent notified her of the increase by letter, but distanced herself from repair requests when confronted in person stating: “Well, we can’t do anything [to fix the property] until the owner says we can.”

The agent helped the landlord to make more money from their investment, while illegally blocking this woman’s entitlements to secure and usable property. The impact on her capacity to take care of herself was significant. Living with the leak risked her health. However, challenging the landlord – pushing them to repair the leak – risked eviction.




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Rental insecurity: why fixed long-term leases aren’t the answer


Rethink the value of rental housing

These stories show the need to rethink how we value and regulate private rental housing. It is time that we recognise the fundamental role that housing plays in our ability to meet basic needs – for shelter, warmth, food and above all a sense of security and home.

When housing is too expensive, unsafe or inadequate, our capacity to meet our care needs deteriorates and our health suffers. For women in my research their capacity to age in place – and even to remain housed – was challenged.

This is not good for tenants or landlords. Although popular wisdom suggests tenants and landlords have different interests, they in fact have very similar concerns: both benefit from secure tenancies and rental properties that are well maintained and cared for.

The proposed amendments to the act are a good starting point.

Restrictions on the number of rent increases in a year are essential. However, the women in my research struggle not just because of the number of rent increases they face. They find themselves in precarious situations because of the size of the increases, which in some cases left them unable to afford necessities like food.

Minimum housing standards are also essential. The women in my research cannot begin to maintain their health or age well at home if their home leaks or does not meet other basic standards.




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Dickensian approach to residential tenants lingers in Australian law


But perhaps more pressing is the need to end no grounds evictions. For women in my research, repair requests carried the risk of eviction. This left many afraid to ask for repairs. They lived in unhealthy and unsafe housing rather than risk eviction in a market with few affordable options.

Landlords in many areas can readily replace tenants. And an evicted older woman can easily end up living in her car.

Ending no grounds evictions will have no impact on landlords who do the right thing. They will still be able to terminate a lease on reasonable grounds such as renovating or moving into the property. It would, however, help put an end to retaliatory evictions, which in turn would support efforts to maintain minimum housing standards.


This article is based on research findings presented in a talk by the author at an event, Fair for Everybody: Reforming Renting in NSW, hosted at Parliament House on Wednesday.The Conversation

Emma Power, Senior Research Fellow, Geography and Urban Studies, Western Sydney University

This article is republished from The Conversation under a Creative Commons license. Read the original article.