Australia’s housing crisis for low-income families has become acute, but it could be partly resolved with a one-size-fits-all solution, according to a think tank.
- Australia’s social housing stock has barely increased in 20 years
- A future fund of 20 billion dollars could support the construction of 3,000 to 6,000 homes per year
- With the participation of the state government, there could be over 100,000 additional social housing units by 2040
The federal government should establish a “fund for the future of social housing” to generate the revenue needed to build thousands of social housing units each year, the Grattan Institute said.
If the fund were created with an endowment of $ 20 billion, it could soon finance the construction of 3,000 social housing units each year, or double it if its payments were matched by state government funding.
Why is this needed?
Australia has failed to build enough social housing over the past decades.
Brendan Coates, director of economic policy at the Grattan Institute, said the facts were alarming.
He said social housing – where rent was typically capped at 25% of a tenant’s income – could make a huge difference in the lives of vulnerable Australians.
But Australia’s social housing stock, which currently has around 430,000 units, had hardly increased in 20 years, even though the country’s population had grown significantly over the same period (by 33%), he said. -he declares.
In 1991, about 6% of housing in Australia was social housing, but today it is less than 4%.
According to Mr. Coates, most tenants stay in social housing for more than five years.
This means that there is little “flow” of social housing stock available for people whose lives are deteriorating, and that the most vulnerable Australians are forced to turn to the private rental market where they have to pay more. much of their weekly income for housing.
“With fewer low-income Australians owning their homes or living in social housing, their housing costs are rising,” Coates said.
Low incomes are defined as the poorest 40 percent by the equivalised disposable income of households.
“The median low-income social tenant pays 24 percent of their income in rent, compared to 37 percent for the typical low-income private tenant,” he said.
“The poorest 20 percent of households in terms of income now spend 29 percent of their income on shelter on average, up from 22 percent in 1995.”
How would the future social housing fund work?
Mr. Coates said the federal government should establish a future fund for social housing.
He explained the idea in a short article called A place to call home: it’s time for a Social Housing Future Fund.
He said the fund could provide regular capital grants to state governments and community housing providers each year.
If the fund started with an endowment of $ 20 billion and had an investment mandate to aim for real (after inflation) returns of 4 to 5%, it could deliver 3,000 social housing units per year.
This number assumes capital grants of $ 300,000 per unit to cover the gap in the initial subsidy for social housing.
Mr. Coates said such a fund would boost social housing with little or no impact on the federal government’s budget outcome.
“Since the initial endowment is an investment, it would not appear on the underlying budget balance,” he said.
“The federal government already manages $ 247.8 billion in assets in six future funds to address long-term issues ranging from covering federal civil servants’ pension rights to funding medical research.
He said the fund’s capital grants could be allocated by the National Housing Finance and Investment Corporation.
Grants could be awarded through competitive bidding, with requirements for the size and location of housing.
How many social housing could be built?
If the $ 20 billion fund generated post-inflation returns of 4-5% per year, it could generate an annual dividend of $ 900 million on average.
If the fund were operational by 2022-2023, it could build 24,000 social housing units by 2030 and 54,000 housing units by 2040.
If future governments choose to supplement the endowment of the fund, it could finance even more social housing.
Mr Coates said the federal government had been “clear” that it viewed social housing as the responsibility of state governments.
However, he said the history of the Australian federation showed that large social programs, from medicare to the expansion of social housing after World War II, had only succeeded with federal support.
He said this reflects the reality that the Australian federal government has more powerful revenue-raising capabilities: for every $ 5 in taxes collected in Australia each year, the federal government collects four and states only one.
Nonetheless, he said, the federal government’s frustration with the state’s inaction on social housing was partly justified.
He said that in the five years leading up to the pandemic, the total social housing stock only increased by 1,600 units.
If state governments matched funding, it would double housing
Therefore, Coates said, the federal government should require state governments to match federal contributions to new social housing as a condition of any subsidy from the fund.
“If matching public funding were granted, the future fund could provide 6,000 social housing units per year, enough to stabilize the share of social housing in the total housing stock,” he said.
“This would double the total of social housing built to reach 48,000 new housing units by 2030 and 108,000 by 2040.”
However, Mr Coates said a future social housing fund alone would not solve the housing crisis for low-income Australians.
He said that even with 108,000 more social housing units by 2040, more than two-thirds of Australians in low income always be in the private rental market.
For this reason, he said the federal government should also increase Commonwealth rent assistance to “at least” 40% and index the payment to changes in rents.
This would immediately reduce financial stress for some of Australia’s most vulnerable families.
“It would be a fairer and more cost effective way to reduce financial stress and poverty among the poorest tenants,” he said.
“It’s well targeted. About 80 percent of rent assistance goes to the poorest fifth of households.”
A new report from the Australian Housing and Urban Research Institute (AHURI) on Friday found that between 1.5 million and 2 million Australian renters aged 15 and over were potentially life shocked by homelessness .
The document, Estimating the Population at Risk of Homelessness in Small Areas, stated that a person was considered at risk of becoming homeless if they experienced at least two of the following:
- Living in a tight real estate market
- Low income
- Vulnerability to discrimination
- Few resources and social supports
- Need help maintaining a living situation (due to chronic illness, disability, mental illness, or drug or alcohol problems)
AHURI said the lack of affordable rental housing for low-income households in Australia – whether private or social rental housing – amplifies various forms of disadvantage.
“There is a need to provide more rental housing specifically for low-income people and / or people at risk of homelessness,” the document concludes.