Homeless numbers will keep rising until governments change course on housing


Gavin Wood, RMIT University; Guy Johnson, RMIT University; Juliet Watson, RMIT University, and Rosanna Scutella, RMIT University

Ten years ago the Australian government launched a National Partnership Agreement on Homelessness (NPAH). It injected A$800 million into homelessness services and A$300 million to build 600 new homes for people experiencing homelessness. It was later announced that another A$400 million would be available under the National Affordable Housing Agreement (NAHA) to build new housing and supported accommodation for the homeless. Total recurrent expenditure (at 2016-17 prices) on homelessness services has increased by 28.8%, from A$634.2 million in 2012-13 to A$817.4 million in 2016-17.

But despite this, the number of people experiencing homelessness and the rate of homelessness have both increased. Our research points to problems in the public housing system as one of the more important causes of these increases.

According to census figures released on Wednesday by the Australian Bureau of Statistics (ABS), the number of homeless people in Australia has risen by 14% to 116,427. The rate of homelessness has increased from 47.6 people per 10,000 of the population in 2011, to 49.8 per 10,000 now. (The ABS defines homelessness here.)

There is some good news: the numbers of Indigenous homeless and homeless children and youth (aged 12-18) have declined by 26%, 11% and 7% respectively since 2011. But on the downside, increases are particularly pronounced in New South Wales (where the homelessness rate rose by 27% and among people aged over 65 (by just over 30%) and overseas-born migrants (by 40%).




Read more:
More and more older Australians will be homeless unless we act now


Why are we still going backwards?

Changes in Australian housing and welfare systems and wider social and economic developments appear to have more than offset any benefits from the NPAH and NAHA. Our research sheds some light on the role played by Australia’s housing system. Using the internationally recognised and unique Journeys Home longitudinal survey, we find that public housing is the most important factor in preventing homelessness among vulnerable people.

Public housing is particularly effective because it is affordable. It has also traditionally offered a long-term refuge for precariously housed people. This is because public housing leases provide the benefits of security of tenure commonly associated with home ownership.

It is perhaps no accident that NSW was one of the first states to introduce fixed-term tenancies in public housing. This eroded one of the major attributes of tenure, in a state that has seen relatively large increases in homelessness numbers.

The empirical evidence also suggests that community housing fails to provide the same protection for people at risk of homelessness. While community housing is affordable, the security of tenure is weaker, which may explain these findings.

Despite such evidence, the stock of public housing continued to decline between the 2011 and 2016 censuses. State government-initiated transfers of stock to the community housing sector accelerated this trend. In 2013 Australia had a public housing stock of 325,226 dwellings. This declined by 3.2% to 314,864 usable dwellings in 2017.




Read more:
Australia needs to reboot affordable housing funding, not scrap it


Where are the additional homeless coming from?

One of the more alarming changes is a sharp increase in the number of homeless people over 65. This partly reflects Australia’s ageing population. However, the increase is such that the elderly’s share of the total homelessness count has also risen.

Furthermore, our research suggests that this trend could become protracted. This is because the homeless elderly have much less chance of escaping into formal housing than younger people experiencing homelessness. We have little understanding of the reasons for this, but gaps in service provision to the aged could be partly responsible.

The other group who feature prominently among the homeless are overseas migrants. They now make up 46% of the homeless, despite representing just 28% of the Australian population. The number of homeless overseas-born migrants has soared by 40% since the 2011 Census, from 38,085 to 53,606 people.

It turns out that homeless overseas-born migrants are concentrated among those living in severely overcrowded dwellings – a little over half of those living in these conditions were born overseas. We know little about these homeless people. Discrimination could be a factor, though some characterise this group as students living in group households who should not be considered homeless. But this is speculation and further study is certainly required.




Read more:
Ghost-hunting: will the census reveal the true scale of homelessness in Australia?


In view of the latest census results, it is clear to us that governments need to reassess their approach to what is turning into an intractable social problem.

We do not deny that situational factors, such as drug abuse, domestic violence and so forth, are important here. But equally, there is strong evidence that structural problems in our housing market are a significant cause of growth in the numbers of homeless people.

The ConversationUntil these problems are resolved, service provision and support will remain a band-aid masking deeper social and housing system issues.

Gavin Wood, Emeritus Professor of Housing and Housing Studies, RMIT University; Guy Johnson, Professor, Urban Housing and Homelessness, RMIT University; Juliet Watson, Lecturer, Urban Housing and Homelessness, RMIT University, and Rosanna Scutella, Senior Research Fellow, Centre for Applied Social Research, RMIT University

This article was originally published on The Conversation. Read the original article.

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Governments have no excuse for keeping public in the dark on public housing deals



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Prime inner-city land, such as the Flemington estate, is being sold to developers to build new housing, but the public lacks basic details about these deals.
Artist’s impression, Victorian government

Matthew Palm, University of Melbourne; Carolyn Whitzman, University of Melbourne, and Katrina Raynor, University of Melbourne

The Transforming Housing research network recently held a workshop on how the Victorian government can maximise the social benefits of its Public Housing Renewal Program. The workshop attracted more than 100 participants – local government, non-profit housing providers, public housing residents and researchers. Despite being invited, the state government was notable for its absence.

This apparent reluctance to engage with stakeholders adds to a serious concern over government secrecy about social housing projects involving private developers. There are many basic pieces of information interested members of the public might want to find out but cannot.




Read more:
Why should the state wriggle out of providing public housing?


The number of private units versus new public units, and the size of the units, is just one example. Another example involves the government target of an increase of “at least 10%” in social housing units on former public housing land sold to developers. There has been no discussion of the rationale behind that figure.

The development potential of sites such as the old Northcote housing estate is clear, but the public has no way of knowing if the deals are good value.
Victorian government

Similarly, what prices will be charged for land currently occupied by public housing? The government forecasts Melbourne’s population will grow to 8 million by mid-century. This means any underutilised land in the inner city will become much more valuable.

By selling off public housing land in well-located inner suburbs, the government is forfeiting the future benefits of that land, including the opportunity to add to desperately needed public housing stock in these areas. How is the public supposed to evaluate the trade-offs between costs and benefits if critical information like the repair cost versus the costs of demolition and sale is kept secret?

More social housing is badly needed

What we do know is that the need for social housing is acute. The percentage of Australian families living in government and non-profit-owned housing (collectively called “social” housing) has declined from over 7% in 1991 to a little over 4.2% in 2016. This is the lowest proportion in 35 years. Victoria would require almost 70,000 more social housing homes over the next 20 years to meet the needs of lower-income households now facing severe housing stress in the private rental market.

As public housing represents such a small proportion of total housing stock, only the most vulnerable households that are least able to pay rent are eligible to live in this housing. At the same time, federal government subsidy shortfalls have created a maintenance backlog for an ageing public housing stock.

Successive reports by the Victorian Auditor-General’s Office in 2010, 2012 and 2017 have identified the absence of a sound and sustainable mechanism for maintaining, let alone expanding, non-profit housing stock. A year ago, the independent state government advisory body Infrastructure Victoria recommended as one of three infrastructure priorities that the government repair existing stock and create new social housing.

Many questions about public housing renewal

In the context of low government funding and high repair bills, it is understandable that the Victorian government is seeking partners to renew estates. New South Wales is taking a similar approach with its Communities Plus program and it’s central to the US Choice Neighbourhoods program.

What is less understandable is why the state government is selling public housing land in nine central Melbourne estates to private developers in return for very low increases in social housing. The requirement of “at least” 10% of 1,110 units – the quantum being “renewed” – amounts to just 110 units.

That’s a drop in the ocean of need in exchange for selling off irreplaceable, well-located land. Moreover, there is a push towards demolishing four-bedroom homes and replacing them with one- and two-bedroom units. The result could be fewer beds for those in most need.

Our comparative research, covering Australia and overseas, shows that renewal with much higher social housing returns is possible in partnership with non-profit housing providers.




Read more:
Community sector offers a solid platform for fair social housing


The secure private garden on the redeveloped Carlton estate.
Kate Shaw

Evaluations of previous public housing renewal in Kensington, Carlton and Prahran estates also suggest the government undervalued the land and was not able to increase the amount of public housing as promised. The private developers created effectively “gated” private community features that did not benefit public housing residents.

Many submissions to a parliamentary inquiry by residents and neighbours of the nine affected estates express frustration and fear over the government’s secretive approach. One frustrated neighbour noted that he had to dig through the appendices of a traffic analysis to find out how many new market-rate units would be built near his home. As housing academics, we share residents’ frustrations at the unnecessary level of secrecy.

Concerns over the absence of a transparent cost-benefit approach to
infrastructure planning are evident as well in the debates over the West Gate Tunnel and the recent re-emergence of the East-West Link in the appendix of a budget report. The current government spent A$1 billion to bury the latter project three years ago. The Victorian Auditor-General’s Office also expressed concerns about misreporting costs, benefits and risks under the previous state government.




Read more:
Transurban’s West Gate tollway is a road into uncharted territory


Other countries show the way on transparency

In many American states, such as California, housing developers receiving government funds have their development cost details published before subsidies are awarded. Details include the cost of the land, numbers of subsidised and market units, and the costs of development. The evaluation of Choice Neighbourhoods is thorough and transparent.

Over the border in Canada, the funding and planning behind the large-scale Regent Park Public Housing renewal in Toronto is publicly available.

Developers and other providers interested in lucrative government contracts complain that transparency jeopardises their hard-earned trade secrets, and thus their businesses. We disagree. The transparency we see elsewhere isn’t stopping developers from doing business.

More importantly, should private firms that keep information about public benefit “commercial in confidence” be in the business of serving taxpayers at all? Shouldn’t those whose “business” is assured by the tax-levying powers of the state be able to be held publicly to account?

The ConversationGovernment officials assure us these deals go through complex layers of intergovernmental review to safeguard the public interest. We doubt that any amount of bureaucratic review can replace the accountability of simply revealing these deals to the public, and we suspect the public agrees with us.

Matthew Palm, Postdoctoral Research Fellow, Transforming Housing Research Network, University of Melbourne; Carolyn Whitzman, Professor of Urban Planning, University of Melbourne, and Katrina Raynor, Postdoctoral Research Fellow, Transforming Housing Project, University of Melbourne

This article was originally published on The Conversation. Read the original article.

What Australia can learn from overseas about the future of rental housing



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Over the past year, there has been a surge of enthusiasm in Australia for developing a sector of large-scale institutional landlords.
AAP/David Crosling

Chris Martin, UNSW

When we talk about rental housing in Australia, we often make comparisons with renting overseas. Faced with insecure tenancies and unaffordable home ownership, we sometimes try to envisage European-style tenancies being imported here.

And, over the past year, there has been a surge of enthusiasm for developing a sector of large-scale institutional landlords, modelled on the UK’s build-to-rent sector or “multi-family” housing in the US.

Our review of the private rental sectors of ten countries in Australasia, Europe and North America identified innovations in rental housing policies and markets Australia might try to emulate – and avoid. International comparisons also give a different perspective on aspects of Australia’s own rental housing institutions that might otherwise be taken for granted.


Further reading: ‘Build to rent’ could be the missing piece of the affordable housing puzzle


Not everyone in Europe rents

In nine of the ten countries we reviewed, private rental is the second-largest tenure after owner-occupation. Only in Germany do more households rent privately than own their housing. Most of the European countries we reviewed have higher rates of home ownership than Australia.

In most of the European and North American countries in our study, single people and lower-income households and apartments are heavily represented in the private rental sector. Higher-income households, families with kids, and detached houses are represented much more in owner-occupation. It’s less uneven in Australia: more houses, kids and higher-income households are in private rental.

Two key potential implications follow from this.

First, it suggests a high degree of integration between the Australian private rental and owner-occupier sectors, and that policy settings and market conditions applying to one will be transmitted readily to the other.

So, policies that give preferential treatment to owner-occupied housing will also induce purchase of housing for rental, and rental housing investor activity will directly affect prices and accessibility in the owner-occupied sector.

It also heightens the prospect of investment in both sectors falling simultaneously, with little established institutional capacity for countercyclical investment that makes necessary increases in ongoing supply.

A second implication relates to equality. Australian households of similar composition and similar incomes differ in their housing tenure – and, considering the traditional value placed on owner-occupation, this may not be by choice.

This suggests housing tenure may figure strongly in the subjective experience of inequality. It raises the question of whether housing is a primary driver of inequality, and not the outcome of difference or inequality in other aspects of life.

The rise of large corporate landlords

In almost all of the countries we reviewed, the ownership of private rental housing is dominated by individuals with relatively small holdings. Only in Sweden are housing companies the dominant type of landlord.

However, most countries also have a sector of large corporate landlords. In some countries, these landlords are very large. For example, America’s five largest corporate landlords own about 420,000 properties in total. Germany’s largest landlord, Vonovia, has more than 330,000 properties alone.

These landlords’ origins vary. Germany’s arose from massive sell-offs of municipal housing and industry-related housing in the early 2000s.

In the US, multi-family (apartment) landlords have been around for decades. And in the aftermath of the global financial crisis, they have been joined by a new sector of single-family (detached house) landlords that have rapidly acquired large portfolios from bulk purchases of foreclosed, formerly owner-occupied homes.

In these countries and elsewhere, the rise of largest corporate landlords has been controversial. Germany’s have a poor record of relations with tenants – to the extent of being the subject of popular protests in the 2000s – and their practice of characterising repairs as improvements to justify rent increases.

American housing advocates have voiced concern about “the rise of the corporate landlord” – especially in the single-family sector, where there’s some evidence that they more readily terminate tenancies.

These landlords also don’t build much housing. They are most active in renovating (for higher rents), merging with one another, and – especially in the US – developing innovative financial instruments such as “rental-backed securities”.

“Institutional landlords” are now a standing item on the Australian housing policy agenda. Considering the activities of large corporate landlords internationally, we should get specific about the sort of institutional landlords we really want, how we will get them, and how we will ensure they deliver desired housing outcomes.

Policymakers and housing advocates have, for years, looked to the community housing sector as the prime candidate for this role. They envisage its transformation into an affordable housing industry that works across the sector toward a wide range of policy outcomes in housing supply, affordability, security, social housing renewal and community development.

With interest in the prospect of build-to-rent and multifamily housing rising in the property development and finance sectors, there is a risk that affordable housing policy may be colonised by for-profit interests.

The development of a for-profit large corporate landlord sector may be desirable for greater professionalisation and efficiencies in the management of tenancies and properties. However, this should not come at the expense of a mission-oriented affordable housing industry that makes a distinctive contribution to housing outcomes.

Bringing it home

Looking at the policy settings in the ten countries, we found some surprising results and strange bedfellows.

For example, Germany – which has had a remarkably long period of stable house prices – has negative gearing provisions and tax exemptions for capital gains, much like Australia. But, in Australia, these policies are blamed for driving speculation and booming prices.


Further reading: Three myths on negative gearing the housing industry wants you to believe


And while the UK taxes landlords more heavily than most other countries, it has the fastest-growing private rental sector of the countries we reviewed.

However, these challenging findings should not be taken to diminish the explanatory power or effectiveness of these settings in each country’s housing policy. Rather, they show the necessity of considering taxation and other policy settings in interaction with each other and in wider systemic contexts.

So, for example, Germany’s conservative housing finance practices, and regulation of rents, may mean the speculative potential of negative gearing and tax-free capital gains isn’t activated there.

The ConversationStrategy in Australia for its private rental sector should join consideration of finance, taxation, supply and demand-side subsidies and regulation with the objective of making private rental housing outcomes competitive with other sectors.

Chris Martin, Research Fellow, City Housing, UNSW

This article was originally published on The Conversation. Read the original article.

Affordable housing shortfall leaves 1.3m households in need and rising – study



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Around one in seven Australia households either cannot get into housing at market rates or are struggling to pay the rent.
shutterstock

Steven Rowley, Curtin University and Chris Leishman, University of Adelaide

A new report by the Australian Housing and Urban Research Institute (AHURI) reveals, for the first time, the extent of housing need in Australia. An estimated 1.3 million households are in a state of housing need, whether unable to access market housing or in a position of rental stress. This figure is predicted to rise to 1.7 million by 2025.

To put it in perspective, 1.3 million is around 14% of Australian households. This national total includes 373,000 households in New South Wales, where the number is expected to increase by 80% to more than 670,000 by 2025 under the baseline economic assumptions of the modelling.

The first graph below shows the average annual level of housing need to 2025. The second, showing the percentages of households, permits a direct comparison by state. NSW and Queensland are in the worst position. The ACT is calculated to have the lowest proportional level of need.

https://datawrapper.dwcdn.net/3xWkX/1/

https://datawrapper.dwcdn.net/efNLj/1/

What does this mean for households in need?

Housing need is defined as:

… the aggregate of households unable to access market-provided housing or requiring some form of housing assistance in the private rental market to avoid a position of rental stress.

This includes potential households that are unable to form because their income is too low to afford to rent in the private rental market. These households would traditionally rely on public housing and community housing to meet their needs. However, more and more are being forced into the private rental market, paying housing costs they are unable to afford without making significant sacrifices.

To 2025, on average 190,000 potential households in NSW will be unable to access market housing in a given year. The graph below is the most revealing as it illustrates the gap between affordable housing demand and supply.

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The lack of social housing and subsidised rental housing prevents such households forming under affordable conditions. Many will manage to form but will have to spend well over 30% of their income on housing costs to do so, putting them in a position of financial stress.

The results also reveal the increasing pressure the affordable housing shortfall places on the housing assistance budget, notably Commonwealth Rent Assistance.

The absence of a significant new supply of affordable housing – there has been no large-scale program since the National Rental Affordability Scheme (NRAS) began in 2008 – has left state governments trying to find ways to plug the affordability gap.

Responses have been largely on the demand side, such as first home buyer concessions recently announced in NSW. But such incentives are no use for low-income households. To help them, intervention needs to be on the supply side.

How does Australia compare?

The AHURI research built on ideas emerging from research into housing need in the UK. It revealed interesting differences between the two countries.

UK government policy prior to 2010 emphasised the role of the planning system in helping to substantially increase affordable housing supply. This reflected evidence from England and Scotland that found a link between low levels of new housing supply and higher and rising house prices.

In this project, we found plenty of evidence of deteriorating housing affordability in Australia. But we did not find a particularly strong relationship between housing supply and price growth. This might reflect how other drivers of deteriorating housing affordability are more important in Australia – such as tax incentives for investors.

These findings suggest we need to look more closely at how new supply and investment demand interact, and in what circumstances boosting new supply is likely to improve affordability.

From our analysis of individuals’ labour market circumstances and incomes, it was also clear that the Australian workforce has not escaped the erosion of secure, full-time employment opportunities seen in other countries.

The combination of widespread insecure, part-time employment opportunities, high housing costs and low supply of rented social housing means the housing of many working Australians is extremely precarious.

How was the research done?

The research modelled housing need at the state and territory level to 2025 using an underlying set of economic assumptions and interrelated models on household formation, housing markets, labour markets and tenure choice.

The models were underpinned by data from the Housing, Income and Labour Dynamics in Australia (HILDA) Survey, the Australian Bureau of Statistics (ABS) and house price and rent data.

This research delivers, for the first time in Australia, a consistent and replicable methodology for assessing housing need. It can be used to inform resource allocation and simulate the impact of policy decisions on housing outcomes.

The intention is to further develop the model to assess housing need at the level of local government areas.

So, what are the policy implications?

The scale of the affordable housing shortfall requires major action from federal and state governments.

NRAS had its problems but at least delivered a supply of below-market housing. Australia cannot rely on the private sector to deliver housing for low-income households without some form of government subsidy as it is simply not profitable to do so.

The ConversationThe question is what government is going to be prepared, or even able, to spend big to close the affordable housing supply gap?

Steven Rowley, Director, Australian Housing and Urban Research Institute, Curtin Research Centre, Curtin University and Chris Leishman, Professor of Housing Economics, University of Adelaide

This article was originally published on The Conversation. Read the original article.

Social mix in housing? One size doesn’t fit all, as new projects show


Kate Shaw, University of Melbourne

A recent suggestion that new housing on inner-city public land should start from a presumption of 100% social housing prompted indignation in government circles. “We can’t condemn another generation of Victorians to live in housing poverty,” huffed the housing minister, Martin Foley.

It’s curious, then, that we heard barely a peep about the latest government announcement that the height of an apartment tower associated with the Queen Victoria Market makeover will be reduced by removing the original affordable housing component to a separate, smaller development.

It is tempting to conclude that both responses accord, naturally, with the interests of the developers of private housing. But that would be to over-simplify the complex issue of social mix. It is increasingly clear there is no one-size-fits-all.

The principle of social mix now routinely drives public housing estate renewals and new housing builds on surplus public land. This is usually expressed in a 50:50 mix of social (public and community) and private housing, though the social component is often much smaller. As the stock of public land is ever diminishing, and affordable housing is in such short supply, this is problematic.

I have argued before that government commitments to social mix are often disingenuous. They are more likely to be driven by an ideological imperative to privatise public assets, or at best to secure upgrades to public housing without having to fund them directly.

What does the evidence tell us?

Soon-to-be-published research by Abdullahi Jama and I on the Carlton public housing estate redevelopment supports these conclusions.

Our findings show that public and private residents on the new estate are not mixed. They are divided into separate buildings with separate gardens, explicitly with a view to increasing the value of the private apartments.

The case that normally follows from such a finding is that public and private households should be “salt and peppered” through new apartment buildings to encourage social mixing. While Abdullahi and I agree this is a necessary precondition for social mixing, this is not the entirety of our argument. We question the very basics of the policy orthodoxy on social mix.

The rationale for building upmarket private housing in low-income areas draws on the neighbourhood effects thesis, which says that concentrations of poverty exacerbate its effects.

This might be the case in large areas of disadvantage, such as the US Rust Belt cities, parts of the UK and even some outer suburbs of Sydney and Melbourne. But it doesn’t stand up in highly resourced, gentrified inner cities where community facilities and opportunities for interaction are plentiful.

Paul Watt talks about neighbourhood effects, the disputed idea that poor communities benefit from social mix in urban renewal projects.

Even where poverty is widespread, studies from Toronto, Vancouver, Amsterdam and London show that imposed social mix disrupts support networks and social structures. Involuntary displacement from a neighbourhood often has serious effects on physical and mental health.

Ranjan Balakumaran and Kam Sandhu discuss the displacement of poorer communities by ‘redevelopment’.

Minority communities may benefit from concentration in terms of safety and maintaining their cultural heritage. A substantial body of research shows that social mix policies do not replace the social capital they displace.

So, are there good reasons to introduce social mix?

The strongest argument is the reduction of stigma that for some people comes with public housing. If the public housing is indistinguishable from private housing, the public tenants’ wellbeing is considered to be improved.

It’s not entirely clear, however, whether this is due as much to the housing being new and decent as to having private residents as neighbours. Also unresolved is the question of whether stigma is felt as keenly on estates in gentrified cities, which are islands of public housing in seas of inner-city privilege, as it may be in widely disadvantaged neighbourhoods.

There is certainly evidence that, for some people, being thrust among others from different class and socio-economic groups can increase feelings of inadequacy, discomfort and sometimes hostility.

So how do we provide affordable housing?

These issues vary across place, time and individuals. What is clear is that different responses are needed accordingly.

It is also clear that, with dire shortages of affordable housing in so many cities, all opportunities should be seized to build as much affordable housing as possible. That’s not just public and community housing, but “key worker” housing, “below market rent” housing, co-op housing and community land trusts. Models for all these exist and should be encouraged and explored.

A diversity of housing types must include diverse sources of funding, with a range of support programs. Involving future residents in design and ensuring they know what they’re moving into, and enabling people to organise their own housing, are far more effective ways of building social harmony than enforcing a rigid notion of mix.

The ConversationSeparate buildings for social tenants and private residents next to the Vic Market might be a perfectly reasonable response. But it should come from nuanced public policy and optimal use of public resources, rather than the developers and their sales people.

Kate Shaw, Future Fellow, University of Melbourne

This article was originally published on The Conversation. Read the original article.

Taxing empty homes: a step towards affordable housing, but much more can be done



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Vacant and unlit ‘ghost’ apartments are a source of public outrage in major cities around the world.
leniners/flickr, CC BY-NC

Hal Pawson, UNSW

Vacant housing rates are rising in our major cities. Across Australia on census night, 11.2% of housing was recorded as unoccupied – a total of 1,089,165 dwellings. With housing affordability stress also intensifying, the moment for a push on empty property taxes looks to have arrived.

The 2016 Census showed empty property numbers up by 19% in Melbourne and 15% in Sydney over the past five years alone. Considering that thousands of people sleep rough – almost 7,000 on census night in 2011, more than 400 per night in Sydney in 2017 – and that hundreds of thousands face overcrowded homes or unaffordable rents, these seem like cruel and immoral revelations.

Public awareness of unused homes has been growing in Australia and globally. In London, Vancouver and elsewhere – just as in Sydney and Melbourne – the night-time spectacle of dark spaces in newly built “luxury towers” has triggered outrage.

This has struck a chord with the public not only because of its connotations of obscene wealth inequality and waste, but also because of the contended link to foreign ownership.

Early movers on vacancy tax

Against this backdrop, the Victorian state government has felt sufficiently emboldened to legislate an empty homes tax. Federally, the shadow treasurer, Chris Bowen, recently backed a standard vacant dwelling tax across all the nation’s major cities.

Similar measures have come into force in Vancouver and Paris. And Ontario’s provincial government recently granted Toronto new powers to tax empty properties
.

Both Vancouver (above) and Melbourne now have a 1% capital value charge on homes left vacant.
Tim Welbourn/flickr, CC BY-NC

Emulating Vancouver, Victoria’s tax is a 1% capital value charge on homes vacant for at least six months in a year. Curiously, though, it applies only in Melbourne’s inner and middle suburbs. And there are exceptions – if the property is a grossly under-used second home you pay only if you’re a foreigner.

Also, as in Vancouver, tax liability relies on self-reporting, which is seemingly a loophole. This might be less problematic if all owners were required to confirm their properties were occupied for at least six months of the past year. But that would be administratively cumbersome.

This highlights a broader “practicability challenge” for empty property taxes. For example, how do you define acceptable reasons for a property being empty?

In principle, such a tax should probably be limited to habitable dwellings. So, if you own a speculative vacancy, what do you do? Remove the kitchen sink to declare it unliveable?

How can we be sure a home is empty?

Lack of reliable data on empty homes is a major problem in Australia. Census figures are useful mainly because they indicate trends over time, but they substantially overstate the true number of long-term vacant habitable properties because they include temporarily empty dwellings (including second homes).

Using Victorian water records, Prosper Australia estimates about half of Melbourne’s census-recorded vacant properties are long-term “speculative vacancies”. That’s 82,000 homes.

Applying a similar “conversion factor” to Sydney’s census numbers would indicate around 68,000 speculative vacancies. Australia-wide, the Prosper Australia findings imply around 300,000 speculative vacancies – 3% of all housing. That’s equivalent to two years’ house building at current rates.

According to University of Queensland real estate economics expert Cameron Murray, a national tax that entirely eliminated this glut might moderate the price of housing by 1-2%. Therefore, although worthwhile, dealing with this element of our inefficient use of land and property would provide only a small easing of Australia’s broader affordability problem.

Making better use of a scarce resource

Taxing long-term empty properties is consistent with making more efficient use of our housing stock – a scarce resource. A big-picture implication is that tackling Australia’s housing stress shouldn’t be seen as purely about boosting new housing supply – as commonly portrayed by governments.

It should also be about making more efficient and equitable use of existing housing and housing-designated land.

Penalising empty dwellings is fine if it can be practicably achieved. That’s especially if the revenue is used to enhance the trivial amount of public funding going into building affordable rental housing in most of our states and territories.

But empty homes represent just a small element of our increasingly inefficient and wasteful use of housing and the increasingly unequal distribution of our national wealth.

One aspect of this is the under-utilisation of occupied housing. Australian Bureau of Statistics survey data show that, across Australia, more than a million homes (mainly owner-occupied) have three or more spare bedrooms. A comparison of the latest statistics (for 2013-14) with those for 2007-08 suggests this body of “grossly under-utilised” properties grew by more than 250,000 in the last six years.

Our tax system does nothing to discourage this increasingly wasteful use of housing. It’s arguably encouraged by the “tax on mobility” constituted by stamp duty and the exemption of the family home from the pension assets test.

A parallel issue is the speculative land banks owned by developers. The volume of development approvals far exceeds the amount of actual building. In the past year in Sydney, for example, 56,000 development approvals were granted – but only 38,000 homes were built.

In many cases, getting an approval is just part of land speculation. The owner then hoards the site until “market conditions are right” for on-selling as approved for development at a fat profit.

Properly addressing these issues calls for something much more ambitious than an empty property tax. The federal government should be encouraging all states and territories to follow the ACT’s lead by phasing in a broad-based land tax to replace stamp duty.

Such a tax will provide a stronger financial incentive to make effective use of land and property. The Grattan Institute estimates this switch would also “add up to A$9 billion annually to gross domestic product”. How much longer can we afford to ignore this obvious policy innovation?


The ConversationAcknowledgements: Thanks to Laurence Troy for statistics and Julie Street for background research.

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

This article was originally published on The Conversation. Read the original article.

Is this the budget that forgot renters?



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The budget brought no increase in rent assistance to help low-income renters in the private rental market.
AAP/Tracey Nearmy

Emma Power, Western Sydney University

The measures in the 2017-18 federal budget targeting the supply of lower-cost rental housing are limited. There are no significant funding increases to social housing and homelessness services. There is no increase in rent assistance to help low-income renters in the private rental market. The Conversation

Capital gains tax and negative gearing settings remain largely untouched, and the proposed bond aggregator will support expansion of housing aimed at very specific groups.

For the majority of Australia’s renters, housing will remain unaffordable, insecure and out of reach.

Community housing

If private investors get on board, the bond aggregator may help boost the supply of affordable and community housing by providing cheaper financing to community housing providers.

These two forms of housing are extremely important. However, they do little to help most renters.

Eligibility requirements for community housing mean many who require low-cost housing, where rent is calculated at between 25% and 30% of household income, are not able to gain access.

Single older women are among the fastest-growing group of homeless people in Australia. However, most are unable to access community housing because the only eligibility benchmark they meet is their low-income status.

Women not leaving situations of domestic violence or who do not have a recognised disability will find it difficult to qualify for housing before they reach homelessness.

The private rental market these women face is obscene. There is extremely low housing security with the risk of eviction when the standard lease agreement (of six and 12 months) runs out. High rents place sufficient, nutritious food out of reach of their budget, and they face difficulties paying power bills.

Time spent bringing up children, the gendered pay gap and – for some – relationship breakdown are among the factors that lead to this housing experience.

Long waiting lists for social housing and eligibility restrictions mean this year’s budget proposals are likely to fail this group.

Affordable housing

The second target of the bond aggregator is affordable housing. This is housing that is rented at between 75% and 80% of market rent. It is often described as “key worker” housing, where teachers, ambulance drivers and police officers can live.

Affordable housing has an important place in the housing system. However, below-market rents in central, work-rich regions are still extremely high and out of reach for many.

Of more concern, it is unlikely that many of these lower-income workers would be able to maintain their high rents at retirement. This generates two risks:

  • that the renter is evicted and forced to find housing on the private market, which puts them at high risk of homelessness

  • that the housing provider continues their commitment to house the tenant securely once their income drops, so the risk here is to the housing provider’s bottom line. They will face a loss of income, as they drop rents from 80% of market value to around 30% of the retired person’s pension.

First home buyers

The budget tips its hat to first home buyers; prospective buyers will now be allowed to save up to A$30,000 at a reduced tax rate. But this is barely one-quarter of a standard 20% deposit for most apartments in Sydney.

Renters who aspire to home ownership and have sufficient income to service a mortgage may benefit from this measure. However, it will do little for the large number of low- and moderate-income households. For this group, spiralling housing costs put home ownership well out of reach.

It is also possible that this measure will add to inflationary pressure on housing prices by boosting demand for entry-level homes. Existing owners who are selling their homes would be the primary beneficiaries.

What’s missing?

There remains a need for courageous government action to tackle the structural inequities in the housing market.

Removing tax incentives that keep investor heat in the market will be essential – and so will increases to social housing budgets.

Investment in a large stock of secure low-cost social housing should be prioritised. Failing this, there will be a need to increase rent assistance payments, particularly in high-cost regions.

But this is far from ideal. More rent assistance will help renters in the short term, but amounts to a subsidy for private landlords in the long term.

Does the government care?

Underpinning much budget analysis is a sense that government should be concerned with the needs of the disadvantaged. Sociologist Keith Jacobs argues we should disavow ourselves of that view, describing housing policy in Australia as a “form of reverse welfarism that exacerbates social inequality”.

Jacobs argues:

… the state should be understood as an agency that sustains the conditions necessary for the finance industry, developers and real estate agents, along with well-off householders and landlords, to reap profits.

The failure of the 2017 budget to tackle tax measures that support individual private investment, and its emphasis on funding social and affordable housing through market investment mechanisms while providing little direct support at the bottom end of the market, does little to challenge this argument.

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

This article was originally published on The Conversation. Read the original article.

Budget 2017 charts new social and affordable housing agenda


Chris Martin, UNSW and Hal Pawson, UNSW

Under pressure to tackle deepening housing affordability problems, Treasurer Scott Morrison has included various housing policy measures in his budget, some relating to Australia’s small sector of social and affordable housing. The Conversation

One headline-grabber is the creation of a new entity, the National Housing Finance and Investment Corporation (NHFIC). This will source private funds for on-lending to affordable housing providers to finance rental housing development. However, the bigger issue for the sector remains federal and state funding.

This public funding is the money that, along with tenants’ rents, co-funds state and territory housing and homelessness services. Here too Morrison is proposing reform, particularly to the primary federal-state funding arrangement for social and affordable housing, the National Affordable Housing Agreement (NAHA).

A couple of months ago we suggested the NAHA needed a reboot. Recognising the seriously run-down state of the system, we argued for an increase in funding from its present starvation level. Morrison now proposes a new federal-state funding agreement, the National Housing and Homelessness Agreement (NHHA).

The level of federal funding will be the same as under the old NAHA. But the Commonwealth will press states and territories for action in defined “priority areas”. In effect, this looks like a return to a Canberra-led reform agenda for social and affordable housing unseen since the early Rudd government.

Setting aggregate supply targets

In what appears a significant passage, the budget papers reveal the government’s “priority areas” for the NHHA. We’ll consider these in turn, and then the recurring issue of inadequate funding.

Lack of transparency on the costs incurred by state and territory housing authorities in operating their social housing portfolios has been a particular problem under the NAHA. This is an area where federal engagement is welcome.

All levels of government should be pressed to quantify the level and type of need for housing in the community. And they should be made to set clear “new supply” targets for meeting that need.

That said, the federal government should stop pretending to be shocked at the lack of new social housing delivered by those authorities under the NAHA. The shortfall in NAHA funding has been obvious for years. It simply is too low to bridge the gap between the rents low-income public housing tenants can afford to pay and the costs of properly maintaining the system, let alone growing it to keep pace with rising need.

Residential land development

The stress laid on this issue within the budget policy statement reflects the federal government’s stated concern about “the supply side” of the housing affordability problem. It has framed state government planning controls as an impediment to new housing development.

However, merely loosening requirements and offering existing land owners the prospect of greater development does not ensure it will actually happen.

To ensure land owners don’t just sit on development opportunities speculatively, the federal government should use its NHHA leverage. This could include pushing the states and territories to make greater use of land tax, which would spur development and bring under-utilised land and housing to market.

Inclusionary zoning

Inclusionary zoning is a specific type of planning mechanism. It requires housing developments (above a certain size) to include some proportion of dedicated affordable housing. Ideally, this should be rental housing preserved as “affordable” in perpetuity.

Inclusionary zoning is long established in other countries and has long been demanded by housing advocates in Australia. It is now the subject of increasing interest from planning authorities – for example, the Greater Sydney Commission.

The co-financing arrangements for the NHFIC could incorporate active use of land-use planning powers for inclusionary zoning. Development sites – or developer levy proceeds – could be part of state and territory contributions to funding affordable housing development.

A commitment to build into the NHHA incentives for stepped-up use of inclusionary zoning by state governments is, therefore, very welcome.

However, the budget papers indicate that state compliance with this NHHA expectation might involve not only housing dedicated to affordable rental housing, but also “dedicated first home buyer stock”. This seems to raise the prospect of developers meeting inclusionary zoning requirements simply by reserving some newly built units for first home buyers rather than investors.

The best way to enhance first home buyer prospects vis a vis investor landlords would be to level the playing field by winding back investor negative gearing and capital gains tax concessions, not through this kind of tinkering. And to cast such “FHB reservation” initiatives as in any way equivalent to inclusionary zoning for affordable rental housing would be a highly retrograde step.

Renewing affordable housing stock

An interesting inclusion in the proposed terms of the NHHA is a clause about renewing affordable housing stock.

First, it appears positive in acknowledging the need for a public housing overhaul and indicating a new level of federal government interest in making this happen.

At a minimum, states and territories should be required to undertake a comprehensive audit of their existing portfolios. The level of outstanding disrepair has to be costed. They also should identify where renewal can best take place, balancing need for expanded and upgraded housing with sensitive treatment of existing communities.

Second, it indicates federal backing for further transfers of public housing as a growth path for the affordable housing industry. However, as our recent research for AHURI shows, this is feasible only if the operating cost gap is funded.

Past community housing growth through transfers, particularly following the 2009 housing ministers’ commitment to expand community housing to 35% of all social housing, involved an understanding that Commonwealth Rent Assistance, paid through Centrelink to transferred tenants, would help cover that gap.

Without additional funding in the NHHA, a new phase of growth through transfers requires a recommitment by governments to use rent assistance as an effective operational subsidy to community housing providers. A new target and timeframe to replace the 35% benchmark also need to be considered.

Homelessness services

Previously the subject of a separate funding agreement (the National Partnership Agreement on Homelessness), homelessness services have struggled for years in the face of that agreement’s pending expiry and short-term extensions.

The NHHA will fund homelessness services on an ongoing basis, which the sector has welcomed.

Funding shortfall remains

As we’ve indicated throughout, the objectives of the NHHA – and of the social and affordable housing system generally – will continue to run up against the reality that decent housing of this kind costs more than low-income households can afford to pay.

This applies especially to people living on the miserable level of benefits such as Newstart. A subsidy is required, both to build up the stock and to keep it in good order.

Clearer targets, more transparent cost accounting, and innovations like NHFIC finance won’t bridge the gap. On the contrary, to successfully use those initiatives to build more stock, both state and territory housing authorities and non-government affordable housing providers need a larger subsidy than present funding provides.

The budget has indexed NHHA funding to wages. It would be nice to think that land and housing prices will increase only in line with wages.

In reality, properly funding the growth and maintenance of our social and affordable housing stock will require more than what the federal government is offering.

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

This article was originally published on The Conversation. Read the original article.

Budget needs a sharper policy scalpel to help first home buyers


Rachel Ong, Curtin University

In its 2017 budget, the federal government repeatedly stated its preference for a “scalpel” rather than a “chainsaw” or “sledgehammer” approach to demand management in the housing market. The Conversation

The number of housing measures in the budget are more wide-ranging than in previous budgets of recent times. Policy levers on both the supply and demand side have been incorporated within a raft of housing measures. The government claims this is a “comprehensive package that can make a difference”.

However, do the demand measures go far enough to make much-needed inroads into the housing affordability crisis now facing an entire generation of would-be first home buyers? Or is the so-called scalpel too blunt to make a meaningful difference for them?

First Home Super Savers Scheme

The budget’s key housing measure for helping young people gain a foothold on the home-ownership ladder is to allow first home buyers to use up to A$30,000 of voluntary superannuation contributions for a deposit on their first home.

Clearly, the scheme will attract the tax advantages of superannuation. Therefore, in principle, it will help first home savers accelerate their savings to buy a home, thus bridging the deposit gap, while protecting superannuation savings accumulated through compulsory employer contributions.

However, at least two key questions are pertinent.

The first relates to how many first home buyers will likely be well positioned to make voluntary contributions to their super saving account. There appears to be a general reluctance among Australians to make voluntary contributions.

Existing research has found household budget constraints are a major barrier that make it unaffordable for many to make voluntary superannuation contributions. Poor financial literacy and lack of knowledge of the superannuation system are other factors.

The second key question relates to the scheme’s impact on property prices. The scheme does not aim to ease demand pressures in the housing market. It is likely that high house prices will not be curbed, so the prospects of home ownership will continue to fade for many first home buyers.

Existing demand-side levers, including the First Home Owners Grant and stamp duty concessions for first home buyers, have not succeeded in improving the affordability of houses for most young people. Hence, it is difficult to see how an additional demand lever such as the First Home Super Savers scheme is going to have a substantial impact on affordability.

This is not to say that the budget has completely ignored the need to temper demand tensions in the property market.

Demand pressures can be eased via measures that target two other types of property owners – older home owners and property investors. The budget does contain measures that target both groups. Yet again, the question remains as to whether the levers are long enough to produce meaningful impacts.

Targeting older owners and property investors

Older downsizers aged over 65 years will be allowed to channel up to $300,000 from the sale proceeds of the family home into their super fund.

Many older home owners are living in larger dwellings than they need after their children leave home. Helping elderly home owners – sometimes coined “last home buyers” – to downsize into smaller dwellings can free up larger homes for first home buyers in earlier stages of life who are forming families.

However, the impediments to downsizing are many. These include financial barriers but also non-financial barriers. Importantly, most elderly home owners have strong emotional attachments to their family home and local community.

However, a lack of appropriate and affordable dwellings in neighbourhoods where older owners would like to stay also poses barriers to downsizing. For downsizing reforms to be effective, financial incentives will need to be accompanied by supply-side solutions that broaden the diversity of the housing stock so older home owners’ housing preferences and needs can be met.

The government has not made any significant changes to tighten negative gearing or capital gains tax concessions to reduce competition from property investors. Concern has focused on the potential contraction of private rental housing supply should investors withdraw en masse from the private rental market. However, a longer-term perspective would take into account second-round effects.

As investors sell off their rental properties, more properties will become available in the market to meet demand from first home buyers. This will not only have the impact of easing tensions in the rental market as more renters become home buyers, but it will also encourage subsequent second property investment as young career-builders seek to accumulate more wealth in their property portfolios after securing their first home.

Such second- and third-round effects need to be incorporated more into policy thinking so that policy design rests on not just short-term, but medium-to-long-term, considerations.

Is the scalpel sharp enough?

The budget contains myriad demand and supply levers that directly or indirectly aim to assist young people with their first home purchase. It represents an overdue but welcome acknowledgement on the government’s part that much needs to be done to improve home-ownership prospects for first home buyers.

A package of measures that seeks to influence both supply and demand simultaneously in the housing market is, in principle, a sensible approach to an entrenched policy concern such as housing affordability. However, in practice, policy design matters.

In the case of the 2017 budget, it would appear that the scalpel will need a whole lot more sharpening if it is to make an effective incision into the housing affordability crisis that’s plaguing an entire generation of aspiring home owners.

Rachel Ong, Deputy Director, Bankwest Curtin Economics Centre, Curtin University

This article was originally published on The Conversation. Read the original article.

Budget 2017: government still tinkering with housing affordability


Richard Holden, UNSW

It’s unsurprising that in the lead-up to this year’s federal budget there was a lot of discussion about housing affordability as its centrepiece. Over the past 20 years price-to-income and price-to-rent ratios have doubled. Sydney’s price-to-income ratio is over 12, making it the second-least-affordable city in the world. Melbourne is in fourth place. The Conversation

And in a budget tableau as bland as this one, it wouldn’t have taken much to really play up the housing affordability policies.

Yet the measures in this budget involve not much more than tinkering.

On the minus side, the biggest announcement was a “first home super saver scheme”, which would allow voluntary contributions of A$15,000 per annum and A$30,000 in total (per person if in a couple) to superannuation for prospective first home buyers from July 2017. These could be withdrawn and taxed at 30 percentage points below the normal marginal rate and used for a deposit.

This will cost the government A$250 million over four years and do absolutely nothing to help first home owners. We have seen this movie before, with 50 years of first home owner grants in one form or another. All that happens is that this subsidy goes into the price of existing housing. Sellers benefit, buyers get no joy.

It’s bad economics, somewhat costly, and a cruel hoax on prospective home buyers who are struggling with an out-of-control housing market.

But the biggest minus of all was the absence of any measure whatsoever to address negative gearing and CGT exemptions for rental properties. Sorry, there is one: you now won’t able to deduct an airfare to the Gold Coast to “inspect” your rental property. The government has boxed itself in on this, with Labor having taken a plan to the last election to tackle both of these issues (full disclosure, the Labor plan bears a good deal of resemblance to my McKell Institute plan).

Nonetheless, it is reflective of the state of our politics that the one thing that could really help the most (and which the PM has agreed with very publicly in the past) is off the table.

But the measures aren’t all bad. On the plus side, there were incentives for people over 65 to downsize by allowing A$300,000 of the proceeds of a sale of their main residence to go into their superannuation, above the controversial A$1.6 million cap announced in last year’s budget.

Will the budget encourage older Australians to downsize? Maybe. One measure of how powerful an incentive it will be is that it costs only A$30 million over the four-year forward estimates period. This is not a big government spend.

It’s also unclear whether it will be a large enough financial incentive to overcome the emotional and psychological barriers to moving from the family home after many years in it. There was also a conspicuous absence of reforms to stamp duty, which is a major impediment to downsizing.

There was also good news on affordable housing with the establishment of the National Housing Finance and Investment Corporation (NHFIC). It will provide A$63.1 million over four years to operate a so-called “bond aggregator” that aims to provide cheaper financing for community housing providers. This is a good idea that should have a positive effect, and help address the high cost of funds that often plagues financing of housing for low-income earners.

Consistent with the recent populist policy announcements by this government, foreign purchasers of Australian properties were targeted in this budget. There will no longer be a capital gains tax (CGT) exemption for primary residences of foreign and temporary tax residents, and the grandfathering will only last until June 30 2019. There will also be a lower threshold for CGT withholding (A$750,000, down from A$2 million) on foreign tax residents, and the rate will be increased from 10% to 12.5%.

There were some wishy-washy words about the crucial issue of housing supply. The government has definitely identified the key role that supply plays. They are proposing a variety of “city deals” to provide incentives for zoning reform — especially in western Sydney. That’s all good, but whether it is anything more than the budget-summary feel-good headline – “Working with the states to deliver planning and zoning reform” – remains to be seen.

There was also the announcement of a tax on foreign owners who leave their properties vacant. This is supposed to raise A$16.3 million over four years — which is a rounding error in the scheme of things.

We had a housing affordability crisis before this budget, and we will have one after it. If the first step to recovery is acknowledging that one has a problem, then the government is still on step one.

Richard Holden, Professor of Economics and PLuS Alliance Fellow, UNSW

This article was originally published on The Conversation. Read the original article.