INDUSTRY COMMISSION
PUBLIC HOUSING
VOLUME 1: REPORT
REPORT NO. 34
11 NOVEMBER 1993
Australian Government Publishing Service Canberra © Commonwealth of Australia 1993 ISBN 0 644 32913 0 (Volume 1) ISBN 0 644 32949 1 (set)
This work is copyright. part from any use as permitted under the Copyright Act 1968, no part may be reproduced by any process without prior written permission from the Australian Government Publishing Service. Requests and inquiries concerning reproduction and rights should be addressed to the Manager, Commonwealth Information Services, Australian Government Publishing Service, GPO BOX 84, Canberra ACT 2601.
Printed in Australia by A. J. LAW, Commonwealth Government Printer, Canberra 11 November 1993
The Honourable George Gear MP Assistant Treasurer Parliament House CANBERRA ACT 2600
Dear Assistant Treasurer
In accordance with section 7 of the Industry Commission Act 1989, we submit to you the report on Public Housing.
Yours sincerely
M L Parker J W Nevile Presiding Commissioner Associate Commissioner TABLE OF CONTENTS
VOLUME 1 Page
ABBREVIATIONS xi
OVERVIEW xv
TERMS OF REFERENCE xlii
1 THE INQUIRY 1 1.1 The Commission’s approach 2 1.2 Issues raised by participants 3
2 HOUSING ASSISTANCE IN CONTEXT 7 2.1 Housing concerns 7 2.2 Housing assistance in Australia 12 2.3 Government programs 13 2.4 Taxation and regulatory arrangements 16 2.5 Recipients of housing assistance 17 2.6 Distribution of housing assistance 19 2.7 International comparisons 21
3 FUNDING UNDER THE COMMONWEALTH–STATE HOUSING AGREEMENT 25 3.1 Funding sources 26 3.2 Disbursement of funds 28 3.3 Financial management 30
INDUSTRY COMMISSION v PUBLIC HOUSING
4 HOUSING-RELATED OBJECTIVES 37 4.1 Government objectives 37 4.2 Operational objectives 39 4.3 Multiple functions 43
5 AVENUES OF ASSISTANCE 49 5.1 Low-cost private rental market 50 5.2 Addressing tenants’ needs 52 5.3 Addressing the economic criteria 59 5.4 Appropriate mix of assistance measures 63
6 PROVISION OF PUBLIC HOUSING 67 6.1 Current approach 67 6.2 Organisational reform of housing authorities 72 6.3 Security of tenure 79 6.4 Rents 80 6.5 Access to public housing 89 6.6 Benefits from the new approach 92
7 RENT ASSISTANCE PROGRAMS 95 7.1 DSS and DVA rent assistance 95 7.2 Rent assistance component of MRAP 100
8 A BETTER COMMONWEALTH–STATE HOUSING AGREEMENT 101 8.1 Commonwealth–State Housing Agreement 101 8.2 Commonwealth–State relations 102 8.3 Should current arrangements be changed? 103 8.4 Which level of government should deliver housing assistance? 104 8.5 Commonwealth housing interests 105 vi INDUSTRY COMMISSION TABLE OF CONTENTS
8.6 Separating responsibilities 105 8.7 Ongoing Commonwealth support for public housing 107 8.8 The strategy for reform 112
9 COMMUNITY HOUSING 115 9.1 Government programs 115 9.2 Aims and achievements 116 9.3 Assisting people through community housing 121 9.4 Benefits of the proposed reform 125
10 SUPPORT ASSISTANCE PROGRAMS 127 10.1 People who need housing and support assistance 127 10.2 Available programs 129 10.3 Reform of supported accommodation assistance programs 134 10.4 Linking public housing with support services and facilities 135
11 ABORIGINAL AND TORRES STRAIT ISLANDER HOUSING 139 11.1 Current situation 139 11.2 Program objectives and administration 144 11.3 Reform 147
12 ARRIVING AT MORE EFFICIENT OUTCOMES 155 12.1 Reform of the CSHA 155 12.2 Reforming the delivery of housing assistance 157 12.3 Improving access and affordability generally 162 12.4 Improving the delivery of allied community services 166 12.5 Effective advocacy 167
REFERENCES FOR VOLUME 1 169
INDUSTRY COMMISSION vii PUBLIC HOUSING
BOXES 2.1 The CSHA and the nature of public housing assistance 9 4.1 Making ideals and objectives operational? 41 5.1 Mobility and public housing 56 6.1 An illustration of the proposed rent setting approach 82
FIGURES 2.1 Government expenditures on housing for selected OECD countries 21 3.1 Source of CSHA funding, constant prices, 1974–75 to 1991–92 27 6.1 Proposed rent setting model 83 6.2 Comparison of current and proposed subsidy for single public renters in Queensland 87 7.1 DSS and DVA rent assistance outlays, 1984–85 to 1991–92 97 8.1 Commonwealth and State housing assistance payments 109 8.2 Housing assistance and rent contributions when proposed arrangements are fully implemented 111 11.1 Commonwealth Government funding of Aboriginal and Torres Strait Islander housing, 1992–93 142 11.2 Commonwealth expenditure on ARHP and grants to Aboriginal housing organisations, 1984 to 1993 in 1992–93 dollars 151
TABLES 2.1 Annual service flow subsidies by tenure by household income quintiles, 1990–91 23 2.2 Housing tenure in selected developed countries by household 24 3.1 State housing authority public housing assets and debt, 30 June 1993 28 3.2 Indicative financial analysis of public housing rental operations of State housing authorities, 1991–92 32
viii INDUSTRY COMMISSION TABLE OF CONTENTS
3.3 Estimates of funds available to housing authorities for new dwellings under indicative financial analysis, 1991–92 34 3.4 Estimates of opportunity cost of capital, 1991–92 35 5.1 A social audit of housing assistance approaches 64
VOLUME 2
APPENDICES
A Participants’ views B Overview of housing for low-income people C Rental market D CSHA funding arrangements E Evaluation of housing assistance approaches F Effectiveness and efficiency of public housing authorities G Organisational reform of State housing authorities H Asset valuation and management I Pricing policies J Public housing allocation K Other housing programs L Community housing M Support assistance programs N Aboriginal and Torres Strait Islander housing O Inquiry process
References For Volume 2 Glossary
INDUSTRY COMMISSION ix ABBREVIATIONS
Main abbreviations used in this report are listed below: ABS Australian Bureau of Statistics ACOSS Australian Council of Social Services ADC Aboriginal Development Commission AGPS Australian Government Publishing Service AHB Aboriginal Housing Board AHL Aboriginal Hostels Limited AHOP Aboriginal Home Ownership Program AHRC Australian Housing Research Council ALGA Australian Local Government Association ANU Australian National University ARCH Association to Resource Co-operative Housing ARHP Aboriginal Rental Housing Program ATSIC Aboriginal and Torres Strait Islander Commission AWE Average Weekly Earnings CAP Crisis Accommodation Program CEO Chief Executive Officer CERC Common Equity Rental Co-operative CEHL Common Equity Housing Ltd CFAF Community Facilities Accommodation Program CGC Commonwealth Grants Commission CHA Community Housing Association CHAPAC Community Housing Associations Program Advisory Committee CHASSA Co-operative Housing Assistance Service of South Australia CHEP Community Housing Expansion Program CHIP Community Housing and Infrastructure Program CHP Community Housing Program CHPP Community Housing Partnership Program CLRC Community Law Reform Committee CORHAP Community Organisations Rental Housing Assistance Program CPI Consumer Price Index
INDUSTRY COMMISSION xi PUBLIC HOUSING
CRS Community Rent Scheme CRTP Community Residential Tenancies Program CSDA Commonwealth–State Disability Agreement CSHA Commonwealth–State Housing Agreement CSO Community Service Obligation DAA Department of Aboriginal Affairs DCSH Department of Community Services and Health DEET Department of Employment, Education and Training DHA Defence Housing Authority DIEA Department of Immigration and Ethnic Affairs DHC Department of Housing and Construction DHHCS Department of Health, Housing and Community Services DHHLGCS Department of Health, Housing, Local Government and Community Services DSHS Defence Service Homes Scheme DSP Disability Services Program DSS Department of Social Security DSW Department of Social Welfare DVA Department of Veterans’ Affairs EMTR Effective marginal tax rate FAS Family Allowance Supplement FHOS First Home Owners Scheme GHP Group Housing Program GTE Government Trading Enterprise HAAS Home Accommodation Assistance Scheme HACC Home and Community Care HALCS Housing and Locational Choice Survey HNZ Housing New Zealand HPA Home Purchase Assistance HPAA Home Purchase Assistance Account HREOC Human Rights and Equal Opportunity Commission IC Industry Commission ILHS Independent Living House Scheme JSA Job Search Allowance LGACHP Local Government and Community Housing Program
xii INDUSTRY COMMISSION ABBREVIATIONS
LGDP Local Government Development Program LGHP Local Government Housing Program MRAP Mortgage and Rent Assistance Program MRRS Mortgage and Rent Relief Scheme NAHS National Aboriginal Health Strategy NESB Non-English Speaking Background NHMRC National Health and Medical Research Council NHS National Housing Strategy NSA Newstart Allowance NYCH National Youth Coalition for Housing OECD Organisation for Economic Co-operation and Development PRHP Pensioner Rental Housing Program PSBR Public Sector Borrowing Requirement RCA Rental Capital Account REIA Real Estate Institute of Australia RHC Rental Housing Co-operatives RHP Rooming House Program SAAP Supported Accommodation Assistance Program SAC State Advisory Committee SACHA South Australian Co-operative Housing Authority SAHT South Australian Housing Trust SAULT South Australian Urban Land Trust SHA State Housing Authority TRA Temporary Rental Assistance YSJS Youth Social Justice Strategy
INDUSTRY COMMISSION xiii OVERVIEW
Housing is a basic human need. Governments in Australia assist home ownership, and in turn accept that people who are not in home ownership should enjoy some of its benefits — through public housing and rental assistance. Since 1945, public housing has been funded through the Commonwealth–State Housing Agreement (CSHA). Annual expenditures on public housing are in the order of $2.5 billion and public housing assets are worth at least $31 billion. The bulk of assistance to low-income people in private rental has been through the Commonwealth Government’s social security rent assistance system. Annual outlays exceed $1 billion. The task of this inquiry is to report on ways in which governments can deliver public housing and rental assistance more efficiently and effectively. It is not an inquiry into home ownership assistance. The findings confirm that provision of public housing is a cost effective way to meet government housing objectives. But people have a variety of housing needs. In addition to public housing the appropriate mix of assistance measures is likely to include rent assistance, community (including co-operative) housing, and headleasing — that is, the leasing of a property by a housing authority or community group for on-leasing to a tenant. The need at this stage is for funding and institutional arrangements and incentives that will allow the right mix of assistance measures to emerge.
Scope for reform It is not easy to trace the use of housing assistance funds or to evaluate how well the funds are spent. Indeed, the full costs of housing assistance are not recorded and governments do not know whether assistance is well targeted or delivered efficiently. Commonwealth funding for public housing is allocated to States on a per capita basis with no requirement for the States to report on how effectively the assistance is provided. Some low-income groups are poorly represented in public housing; many people in need are not being assisted; and there are inequities in the levels of assistance provided to people in public housing. The Commission’s proposals for reform assume that funding constraints are inevitable and that housing assistance should therefore go first to those in
INDUSTRY COMMISSION xv PUBLIC HOUSING
greatest need. This leads to concern for better targeting of public housing and rent assistance, and more equitable outcomes. If housing assistance can be delivered more efficiently or effectively, more people can be assisted. The Commission has not come to a view on the level of funding — it is for governments to set welfare priorities when there are so many competing demands. However, the findings point to many areas of unmet need — areas which warrant additional funding. Governments have a long way to go in assisting Australians who are in housing stress and in urgent need of assistance. Public housing today reflects the response of the States, through their housing authorities, to the ideals set out in the CSHA. In the Commission’s view, the reform process should encompass the CSHA and the State housing authorities. The housing authorities are amongst Australia’s largest trading enterprises. In some States they are amongst the largest land developers, builders, property managers, tenancy managers and financiers. Their operations frequently support State development and ‘better cities’ initiatives, and at times they have pursued policies aimed at maintaining activity in the building industry. The ways in which the housing authorities make use of their resources have a bearing on both the achievement of social objectives and Australia’s broader economic performance.
A better Commonwealth–State Housing Agreement A prime objective of the CSHA is to ensure that people on low incomes have access to secure, adequate and appropriate housing which is affordable. The ideals of affordability, appropriateness, equity, choice and security of tenure are also embodied in the National Housing Strategy. But they are just that — ideals. They are not linked to the performance of the housing authorities in any measurable way. In the Commission’s view, the community is unlikely to reap the gains from improved performance until governments clarify their housing objectives and housing assistance is provided under arrangements which improve accountability and transparency on the part of the State housing authorities. There is also a need for better delineation of the roles of each level of government. At present, shared responsibilities under the CSHA, together with funding through capital grants, provide opportunities for each level of government to escape scrutiny. In Chapter 8, the Commission argues that capital funding under the CSHA should be replaced largely by recurrent funding and that governments should make changes to their respective roles such that: xvi INDUSTRY COMMISSION OVERVIEW
• the Commonwealth Government would administer income support policy; • States would have responsibility for public housing; and • from 1995, the CSHA would include bilateral agreements on public housing. An important outcome of these arrangements would be to make clear that it is the responsibility of the States to meet the housing needs of all eligible people. Should low-income people generally, or groups such as Aboriginal and Torres Strait Islander people, continue to be in housing need, this would become very apparent. It would be clear who is to be held responsible. Consistent with the responsibility of the Commonwealth Government for income support, the proposals also call for the Commonwealth to provide rent assistance to all eligible people on low incomes, including tenants in public housing (although in this case the payment would go to the housing authority). The Commonwealth would retain its present interest in housing and would provide incentives to the States to meet specific objectives in providing housing assistance. It would contribute to the cost of public housing in two ways: through the rent assistance that would be paid for public housing tenants; and through a further payment to support an appropriate level of public housing provision.
Recommendation 1
The Commonwealth Government’s income support role should extend to rent assistance for all households on low incomes in both public and private rental. In the case of public tenants, the assistance should be paid to the States. In addition to rent assistance, the Commonwealth should make payments to the States in support of public and community housing.
Recommendation 2
State governments should acknowledge responsibility for the housing and infrastructure needs of all of their people on low incomes, and should provide low-cost public rental housing in accordance with that responsibility.
INDUSTRY COMMISSION xvii PUBLIC HOUSING
Public provision of housing is cost-effective The options for delivering housing assistance to people on low incomes include cash payments, effective housing allowance schemes (that induce supply of appropriate rental housing), public housing and headleasing. In Chapter 5, these options are assessed against social justice criteria — accessibility, affordability, appropriateness, security of tenure and equity. They are also assessed against economic criteria such as efficiency and cost-effectiveness. Public housing and headleasing are assessed to be more cost-effective than cash payments and housing allowances. Discrimination and security of tenure problems of low-income people are overcome and better targeting is achieved. They avoid the monitoring and administration costs of ensuring that recipients receive appropriate housing (see Section 5.3). Public provision of rental housing is shown to be more cost-effective than headleasing over the longer term — that is, there are benefits in terms of financial savings. This finding is subject to the condition that housing administration in the public sector is efficient, or at least not so inefficient as to negate these savings. There are often inefficiencies in public sector provision, but with public housing there is also the potential for efficiency gains through economies of scale, scope and density. In addition to financial savings, public housing offers secure tenure, non- discriminatory access and other benefits which are denied to many low-income and disadvantaged people in the private rental market. Indeed, public housing or sympathetically managed community housing is the only option for some. Given these benefits, it is tempting to conclude that where governments seek to improve welfare through the provision of housing assistance they can best do so by means of public housing. However, the issue is more complex than this. First, people who cannot or do not aspire to home ownership do not necessarily look to public housing. They may prefer private rental for mobility and other reasons. Others may prefer community housing. By subsidising low-income tenants in private rental or community housing, governments can add to the choice of tenure and improve after-housing income. Second, there are reforms which could shift the balance a little more towards private rental. Anti-discrimination legislation may be of limited value (see Chapter 5), but reforms in tenancy legislation would benefit both tenants and landlords. In some areas (notably manufactured and mobile homes) these reforms are urgent (see Chapter 12). The headleasing of properties in the private sector can also reduce the likelihood of discrimination and (if on an xviii INDUSTRY COMMISSION OVERVIEW
adequate scale) can encourage institutional investors to view low-cost accommodation as an attractive investment. Third, governments differ in their housing objectives and in their views as to the appropriate mix of housing assistance. Governments may well agree that all Australians have a right to housing that brings at least some of the benefits of home ownership, but governments are unlikely to agree on ways in which to bring this about. Their policies in areas as diverse as taxation, home ownership and social welfare will influence the blend of housing assistance adopted from time to time in each jurisdiction. By exploring a mix of public housing, community housing, headleasing and rent assistance arrangements, governments will be better informed as to the cost and effectiveness of different tenures. The proviso is that governments also push ahead with reforms (including improved accountability). At present, it is unclear how efficient the housing authorities are in the delivery of housing assistance. There is inadequate data on which to assess the performance of the individual authorities, let alone compare one authority with another (see Section 6.1).
Public housing The State housing authorities own and manage about 370 000 dwelling units, accounting for almost 6 per cent of the housing stock in Australia. The range is from 22 per cent in the Northern Territory to about 12 per cent in South Australia and 3 per cent in Queensland. Much of the public housing stock is in medium density housing estates located in what were outer suburbs in the 1950s, 60s and 70s. Their uniform design and appearance help to stigmatise public housing, but it would be wrong to focus too heavily upon past mistakes. In all States, the housing authorities are responding to the need for change. The improvements are far from uniform, but by comparison with the recent past the housing stock is better managed; the authorities are more client-oriented; and greater attention is paid to the environs and community facilities generally. An increasing proportion of public housing is dispersed; the older housing estates are being renewed; and more attention is being given to spot purchases to improve the geographic mix of public and private housing. There is growing recognition that the location of public housing must have regard to employment and training opportunities, and the community amenities and support services without which there is danger of social dislocation and alienation. That said, much of the public housing stock is inappropriate in design or location.
INDUSTRY COMMISSION xix PUBLIC HOUSING
The views of a range of inquiry participants are set out in Appendix A and summarised in Chapter 1. The majority expressed strong support for public housing. Some said that it should be an alternative tenure, open to all.
Attributes of public housing Well designed and managed public housing has many attractive features which the low-cost end of the private rental market cannot or does not provide at rents affordable to low-income people. Public housing can provide affordable housing of reasonable quality with security of tenure. It can avoid most of the discrimination which low-income people generally, and young people, those with disabilities and Aboriginal and Torres Strait Islander people in particular, face in private rental. However, the choice of property is usually limited by what is available and deemed by the housing authority to be ‘appropriate’. Once allocated a house, tenants do not have much opportunity to move between houses. There are sound arguments for access to public housing to be on a broad front. But with scarce public resources, trade-offs have to be made since the provision of ‘appropriate’ housing for some may be at the expense of deferring even basic shelter for others. The length of tenure offered in public housing is an area in which trade-offs exist and must be recognised. Guarantees of secure tenure once a tenant’s financial and social circumstances have improved can be at a cost to others. Premature withdrawal of housing assistance from public housing tenants would be counter-productive, but if tenants in public housing continue to receive rental subsidies when there is a substantial improvement in their circumstances they are likely to exclude more needy tenants. Likewise the provision of public housing in high-priced locations can reduce the resources available to meet total housing needs. The Commission’s proposals call for significant changes in the funding and allocation of public housing, and in rent setting policies — yet current tenants would not be greatly affected. The proposals recognise that the vast majority of people in public housing are pensioners or beneficiaries of social security payments, but the proposals would also apply if the tenure were open to all.
xx INDUSTRY COMMISSION OVERVIEW
Eligibility and waiting lists Eligibility for public housing is based on household composition, income and the time spent on a waiting list (see Chapter 6). Priority allocations are given in cases of special need, but as pointed out by Shelter Victoria: ... priority procedures have become ineffective simply because of the sheer volume of housing need, demonstrated by the waiting list. Approved applicants for priority housing may now wait up to 18 months before being housed (sub. 172, p. 18). In June 1992 there were 216 300 applicants for public housing and waiting lists have lengthened to as long as five years in some States. Where houses are available, prospective tenants usually have some choice, but they may have to trade-off choice of location with length of wait. Waiting lists can be a poor measure of housing stress since their size is conditioned by eligibility criteria and the frequency with which the authorities review the lists. Many young people, people with disabilities, and people in areas where there is no public housing, do not apply since they do not expect to be housed. Under the Commission’s proposals, the time spent on a waiting list for public housing would reflect the cost (both socially and financially), to the individual or household, of remaining outside public housing — the greater the cost the shorter the wait. To achieve this, all applicants need to be assessed against common criteria. Thus the reforms call for a single segmented waiting list within each State, and a common set of eligibility criteria. People who are in similar need of housing assistance would be placed in the same segment of the list in order of their application. The rate of progression in each segment of the list would depend on relative need, thus people in the greatest housing need would be favoured. Households with similar needs would generally wait the same length of time regardless of where they prefer to live within a State. An applicant’s relative need should be assessed against criteria such as household income and composition, potential for discrimination in the private rental market, and current living conditions. The assessment could have regard to whether the need is likely to be short-term or long-term. It is impractical to determine a housing assistance priority for each and every applicant. Some categorisation of need is required, but this does not imply a ‘point-score’ arrangement of the type used in Tasmania. What is important is that public housing allocation should recognise different degrees of need (see Section 6.5).
INDUSTRY COMMISSION xxi PUBLIC HOUSING
Recommendation 3
All applicants for public housing should be assessed by the same criteria and, if eligible, placed on a single segmented waiting list within each State.
In the Commission’s view, categories of need should go beyond the use of ‘priority’ and ‘wait turn’ lists — 4 or 5 segments are suggested. However, it is important that eventually people from each segment are offered a house, albeit after different waiting times. Those wishing to transfer to another State’s waiting list should have the time they have been waiting credited to the new list. Without such a provision, public housing can unduly constrain people’s mobility. Reform along these lines would have a profound impact on eligibility. It would favour low-income people generally, young people, people in crisis, people with disabilities and (as a group) Aboriginal and Torres Strait Islander people. Public housing would be provided more equitably and would be more effective because of better targeting.
Tenure Asset management is not helped where housing authorities are constrained by the unlimited tenure granted to existing tenants. Tenure arrangements should acknowledge the need for the public housing authorities, in very limited circumstances, to relocate some tenants — to the benefit of all. This is already the situation in those States where the housing authorities reserve the right allowed under the CSHA to require tenants to move for asset management purposes.
Recommendation 4
Security of tenure in public housing should be in a local area, not a particular dwelling.
Tenure arrangements should be more flexible whilst guaranteeing high levels of security for tenants. Housing authorities should have the option of offering a range of tenures. It may be appropriate in some circumstances to offer leases under limited tenure arrangements, renewable subject to review, perhaps to
xxii INDUSTRY COMMISSION OVERVIEW
people whose circumstances are expected to improve (such as people waiting property settlements and some young people).
Recommendation 5
Housing authorities should be free to determine a tenure period shorter than ‘life’ when this is appropriate.
If appropriate and affordable accommodation can be provided on limited term leases (see Section 6.3), the opportunities for headleasing from the private sector will be enhanced. Such opportunities should not be forgone, since the need for housing assistance is large and increasing.
Rent setting in public housing The State housing authorities set rental payments for tenants in public housing so that in general they fall between 20 and 25 per cent of gross income. Consequently, about 85 per cent of tenants do not pay the nominal rent but on average receive a subsidy of about $67 per week. This is not the full extent of the subsidy since nominal rents are often below market rents. While most tenants in public housing are subsidised, the 70 per cent of households in owner-occupied dwellings and many low-income tenants in private rental are also assisted. In Chapter 2 the average annual assistance is estimated to be about $3450 for low-income public housing tenants, $1470 for households of similar income receiving rent assistance in the private market and $3180 for high-income home owners (though less for home purchasers). Rent setting practices in public housing are not efficient. Since most tenants pay a rent related to their income, the rent does not reflect the value of the service they receive. As nominal rents rise, so does the rebate. Consequently, tenants are not given the incentives to change their housing circumstances as their income or family composition change. Tenants are given very limited choice of dwellings or opportunity to move and the housing authorities receive little information on the type of dwellings tenants most value (see Chapter 6). The criteria which determine whether (and how) assistance is varied or withdrawn contribute to poverty traps, particularly where they interact with criteria that underpin social security payments. At present, public housing of variable quality is allocated to tenants although there is usually the option of waiting for better quality or better located housing.
INDUSTRY COMMISSION xxiii PUBLIC HOUSING
Housing authorities try to ensure that public housing tenants in similar circumstances pay similar rents. As a consequence, the rent rebates received by tenants are inequitable whenever tenants with similar incomes and family circumstances are allocated houses of different amenity (see Section 6.1). In the rent setting model proposed by the Commission, the emphasis is upon benefits rather than rents. Housing stock would be valued at market values, but eligible tenants would be subsidised. The amount of subsidy would be set for each income level so that households can afford a public house appropriate for their needs. The subsidy would also vary according to household composition to improve equity. Thus tenants in similar circumstances would receive similar benefits (level of subsidy). Tenants in better housing (as reflected in the market price) would pay a little extra, but tenants eligible for rebates would continue to pay less than market rents. Under the Commission’s proposals, the time applicants wait would not be affected by the availability of housing in the area of their choice to the extent that it is under the current arrangements. Tenants would be able to choose between appropriate properties by paying the difference in market rents applying to those properties. If given a choice of properties, some tenants may trade-off their housing costs against other costs related to location, particularly transport costs.
xxiv INDUSTRY COMMISSION OVERVIEW
Recommendation 6
Public housing rents should be set at market values. As long as tenants are offered a choice between appropriate dwellings, rent rebates should be structured to ensure that, within affordability limits, tenants in similar circumstances receive similar levels of assistance. Assistance should decline as income increases.
Other elements of the rent setting model in Chapter 6 recognise the need for assistance to be targeted to those below a certain income, and to withdraw assistance at a rate and in ways which are more equitable but avoid discouraging those targeted from improving their situation. The Commission’s rent setting model has been tested on a representative sample of Queensland public housing tenants. The findings indicate that people on lower incomes would pay less rent, while those on higher incomes would pay more. People in houses that offer above average amenity, in terms of size or location, would pay more in rent. Those in houses offering below average amenity would pay less. At present, tenants’ needs are not well matched to the mix and location of public housing. This mismatch becomes very clear when the Commission’s rent setting model is applied to existing tenancies. When applying the model in a particular jurisdiction, care is needed to protect the interests of existing tenants. Under the Commission’s proposals, the small and decreasing number of people in public housing who can afford to rent in the private sector would be required to pay the full market rent, or they could negotiate to purchase the property.
Recommendation 7
Tenants who can afford to rent in the private sector, but who choose to remain in public housing, should pay market rents that include a premium of 2 or 3 per cent to reflect the security of tenure provided.
Separation of roles within public housing authorities Perhaps because of their multiple functions, the objectives of the housing authorities are poorly specified, making it difficult to monitor performance. The effectiveness of particular programs becomes difficult to measure and the
INDUSTRY COMMISSION xxv PUBLIC HOUSING
community has no way of knowing whether welfare goals are being achieved and services are being provided at least cost. Transparency is further obscured where revenues generated through land banking or land development are retained by the housing authorities. The retained earnings bring benefits to public housing, but open and accountable government loses out. As the transfers are not made explicit the community has no say in how and for what purpose public moneys are used. These are matters examined in Chapter 4. Under the Commission’s reform proposals, cross-subsidisation between public housing provision and activities such as land development would be eliminated. If a State requires activity not in the interest of or at a cost to public housing, the objective would be clearly identified and separately funded. The subsidies received by public and community housing tenants would be explicit. In Chapter 6 the Commission argues that commercial functions such as land banking, land development and property management should be separated from activities associated with tenancy management. Some separation of roles is already emerging — as where the housing authorities establish business units responsible for producing and maintaining the public housing required by another unit responsible for tenancy management. If each unit charges the full cost of the services provided, these arrangements can enhance transparency, accountability, effectiveness and efficiency. However, the Commission’s proposals go beyond the creation of business units within the one agency. Full separation of property and tenancy management is necessary to protect the interests of public tenants. The property management side of public housing should be a commercial activity. This is the best way to ensure that the community gets best value for its very large investment. The property manager would receive a market price for the services provided, and would be required to earn a rate of return on the investment and pay a dividend to government. This provides an incentive for improved performance. But without full separation of functions it also creates an incentive and opportunity for the property manager to meet commercial objectives at the expense of tenants in public housing. The need for full separation will become more important as governments implement reforms requiring their trading enterprises to pay dividends.
xxvi INDUSTRY COMMISSION OVERVIEW
Recommendation 8
Within each State, responsibility for management of the public housing stock should rest with a separate body — the property manager — operating on a fee-for-service or contractual basis. The property manager: • should operate through regional offices responsible for acquiring and maintaining a mix of housing assets reflecting the public housing needs of the region; • should be free to buy and lease properties and sell surplus properties; and • should pay dividends to government reflecting a normal rate of return on comparable assets valued at their current market value. The main client of the property manager should be the tenancy manager — located in a separate agency.
Under the Commission’s proposals, the property manager would acquire, manage and maintain the public housing stock on a fee-for-service or contractual basis for the tenancy manager located in another agency. The tenancy manager would be responsible for allocating and managing dwellings headleased from the property manager or from the private rental market. Public housing tenants would nevertheless continue to pay subsidised (or market) rent, according to their individual circumstances. The separation of functions makes possible a more commercial approach on the part of the property manager and, on the part of the tenancy manager, a more holistic approach to the needs of people. The majority of people in need of housing require just that — housing assistance. Nevertheless the tenancy manager would be expected to co-operate with other arms of government in meeting the needs of clients, whether in public or private rental, community housing or supported accommodation. Where tenants have special housing needs, the tenancy manager would work closely with agencies responsible for supported accommodation assistance programs.
INDUSTRY COMMISSION xxvii PUBLIC HOUSING
Recommendation 9
Within each State, responsibility for managing the sub-letting to tenants who are eligible for public housing should rest with a tenancy manager. The tenancy manager: • should lease properties on a contractual basis from the property manager and from the private sector; and • in responding to the housing and welfare needs of clients, should have regard to all available assistance options whether in public housing, community housing or private rental.
The separation of functions would not lessen the security of tenure within public housing as the tenancy manager would determine which dwellings were required and which were surplus. Nor would it constrain consultation and the involvement of tenants’ associations. The contact would be primarily between tenants and the tenancy manager at a regional level (see Section 6.2).
Community housing The Community Housing Program (CHP) introduced in 1992–93 by the Commonwealth Government builds on the small but growing community and local government housing assistance programs begun in the early 1980s. The funds support housing co-operatives, housing associations or joint housing ventures between governments and sponsoring organisations. In addition to funding under the CHP, community groups in some States are funded to headlease houses from the public and private sectors for sub-letting to households on the public housing waiting list. Community housing adds to choice, offers opportunities for tenants to benefit from their own efforts and has the potential to attract additional resources into housing. There is scope for shared equity, and for those who are able to participate in self-help arrangements there are also opportunities to develop social and work-related skills. In Chapter 9 the Commission explores the financial viability of community housing, and whether it is an effective alternative to public housing. The conclusion reached is that community housing should be part of the armoury of housing assistance, and that people eligible for public housing should have the option of joining a community housing scheme. xxviii INDUSTRY COMMISSION OVERVIEW
There is nevertheless doubt as to the viability of some community housing schemes, and the advantages of community housing relative to public housing are as yet unproven in Australia. The issue cannot be resolved until there is proper accounting of all benefits and costs, and until the costs of promoting and facilitating community housing are separated from housing assistance.
Recommendation 10
Government expenditure to promote and facilitate community housing should be funded separately from housing assistance for low-income people housed in that tenure.
The reforms proposed by the Commission in Chapter 9 would ensure that properly administered schemes are viable. This is because people who are eligible for public housing, but who choose to be housed in a community scheme would be assisted at levels similar to those in public housing. That is, public housing and community housing tenants would be treated equitably. This is a marked departure from the present arrangements whereby it is assumed that rents collected from tenants in community housing will cover the cost of maintenance, insurance, administration and municipal rates. This can be an unrealistic assumption. In circumstances such as the Aboriginal Housing Company at Redfern (Sydney) it means that maintenance is forgone and there is a steady decline in the number of habitable houses.
Recommendation 11
The level of housing assistance available to people in community housing who are eligible for public housing should be similar to the subsidies they would receive as public housing tenants.
Housing people with support needs Many Australians are homeless or live in conditions that the wider community would consider unacceptable. People on low incomes are at greatest risk, the most vulnerable being those with psychiatric illnesses, the elderly, people with disabilities, women and children
INDUSTRY COMMISSION xxix PUBLIC HOUSING
escaping domestic violence or experiencing family breakdown, young people, sole parents and migrants. Many individuals in these groups are in need of support or special housing. The involvement of numerous government departments and community groups in the provision of support and accommodation means that there has been little pressure on the public housing authorities to house people with special needs. In many respects the current arrangements for housing assistance are at odds with policies which encourage the movement of patients out of institutions. People with physical or intellectual disabilities, psychiatric or other mental health illnesses are often denied access to public housing until they can guarantee accompanying support. The housing authorities are reluctant to provide support-related services, or consider that the provision of these services is not part of their role. The problem is not always avoided where support services are available through the Supported Accommodation Assistance Program (SAAP) which is intended to assist people who are homeless or in crisis. As pointed out by the Queensland Mental Health Branch: People with psychiatric disabilities, particularly young women, seem to be excluded from receiving emergency and crisis accommodation through SAAP because of their support/treatment needs (sub. 290, p. 2). The current arrangements do not adequately address the needs of people who, because of their disabilities, rely upon (often ageing) parents. Even where adequate accommodation can be found, there may be little choice of location or quality. Young people make up another group who are not well represented in public housing. Yet high unemployment, family breakdown, physical, sexual and emotional abuse, lack of appropriate living skills, low incomes and discrimination in private rental contribute to a growing pool of homeless youth. Many rely on hostels or other shelter provided by community groups and charitable organisations — which in turn draw on SAAP services. The demand for emergency accommodation has outstripped the capacity of current programs to provide it. The benefits which were initially achieved have been eroded by the dearth of medium- to long-term housing (including public housing) to allow clients to move out of emergency accommodation. As pointed out by The Salvation Army: ... there is decreased capacity of emergency housing to respond to families in crisis. A shift is occurring so that short-term accommodation is effectively becoming medium- term; or clients are moving from one emergency accommodation provision to another;
xxx INDUSTRY COMMISSION OVERVIEW
or clients are being accommodated temporarily in private rental housing, with substantial cost to community agencies (sub. 200, p. 2). Many people remain in crisis until they are provided with adequate housing. Public housing does not currently meet this need because insufficient weight is placed on ‘priority’ relative to ‘wait-turn’ allocation. In turn, this adds to the log-jam in crisis accommodation. This is an area requiring urgent support — too many people are falling through safety nets and too much of the burden has been passed to inadequately resourced charitable and welfare organisations. They are well placed to provide immediate accommodation for people in crisis, but the assistance should be for respite only. Greater use should be made of public housing for medium-term accommodation (where it is needed), but without the presumption of tenure for life. Reforms in eligibility criteria within public housing can help, but other changes are needed to ensure better co-ordination between agencies and between levels of government. As pointed out by the Aged Services Association of NSW and ACT: One of the most grating elements about achieving diversity of housing options in the community is the incredibly convoluted and complex process of achieving the blessing of the various Commonwealth, State and Local Government authorities to turn housing ideas into realities (sub. 75, p. 8). In Chapter 10 the Commission argues that there are benefits in separating the accommodation and support components of assistance. People in crisis who do not require support services would be identified at an earlier stage and would be able to apply immediately for public housing. There would be greater scope for properties to be headleased from both private landlords and the public housing property manager. Where crisis accommodation is provided from the public housing stock, the transition from crisis to medium-term accommodation could be eased.
INDUSTRY COMMISSION xxxi PUBLIC HOUSING
Recommendation 12
Housing assistance for people in crisis should be available irrespective of the need for other support services; and should be subject to the rental policies applied to public housing tenants once the income and situation of those in crisis has stabilised.
Notwithstanding the value of separating accommodation from support assistance programs, a high level of co-ordination is needed between the tenancy manager and the SAAP program manager. To improve accountability and promote the right balance between subsidies and capital, SAAP funds and Crisis Accommodation Program funds should come under the control of one manager.
Recommendation 13
The Supported Accommodation Assistance Program and the Crisis Accommodation Program should be combined and come under the control of the SAAP Program Manager. The Manager should have the discretion to allocate funds for capital or recurrent purposes.
The contribution of public housing in assisting people with special housing needs would be enhanced by separate funding of the cost of modifying accommodation (for example, for wheelchair access). Registers of modified accommodation would also help.
Recommendation 14
Separate funds should be available to modify public and community housing to meet the special needs of people with disabilities.
Housing for Aboriginal and Torres Strait Islander people In the view of the Northern Territory Department of Lands and Housing and Local Government, a two-fold increase in capital expenditure is required to bring living conditions in Aboriginal communities up to an acceptable standard. xxxii INDUSTRY COMMISSION OVERVIEW
Some Aboriginal and Torres Strait Islander people are tenants in general public housing, but many depend upon special programs administered by State and Territory housing authorities, and a community housing and infrastructure program administered through the Aboriginal and Torres Strait Islander Commission (ATSIC). Overcrowding caused by insufficient housing for Aboriginal and Torres Strait Islander people contributes to high levels of wear and tear. The houses are often old, poorly maintained and do not meet cultural needs. They are prone to high repair costs (particularly the wet areas) because of poor construction and inadequate inspection during construction. Overcrowding and problems of upkeep are not helped by the concern to distribute the limited funds across all communities.
Problems in housing delivery In recent years, governments have been concerned to devolve much of the responsibility for housing to Aboriginal and Torres Strait Islander communities. In this way, community members are helped to acquire management and financial skills. But devolution comes at considerable cost where housing is provided ahead of satisfactory arrangements for its allocation and upkeep. In town camps, remote communities and some urban settings, housing has often been provided with little regard to maintenance and eventual replacement. Where housing assistance is provided under arrangements akin to community housing, there is evidence that the model is not financially viable. The cost of repairing (or replacing where necessary) the current housing stock in rural and remote areas is estimated to be in the vicinity of $286 million. Even in public housing, rent collections barely meet the cost of maintenance, insurance, administration and municipal rates. In rural and remote Aboriginal communities there is little prospect that rent collections will cover these outgoings, let alone provide for replacement of the dwelling. When the available funds do not allow for repairs and maintenance, communities become locked into a cycle that sees them perpetually in need of capital grants to replace houses or carry out substantial renovations. This cannot encourage self-determination and empowerment.
Reforms There has been targeted assistance for Aboriginal and Torres Strait Islander people for almost 30 years. ATSIC argued for retention of a targeted approach on grounds that it:
INDUSTRY COMMISSION xxxiii PUBLIC HOUSING
...recognises the special effort over and above mainstream activity necessary to address the most disadvantaged group in terms of housing. It ensures transparency and accountability and a mechanism by which the Federal Minister can, if he chooses, decide to increase the priority by allocating increased funds. This has happened over the last five years. Notwithstanding the significant effort made through the mainstream program the specific program is a way of ensuring recognition of additional effort (sub. 333, pp. 3-4). In the Commission’s view, the targeted approach has served to isolate the housing needs of Aboriginal communities in ways which have not been to their advantage. It has not resulted in improved transparency and accountability, nor has it produced levels of funding to appreciably close the housing gap. Funding of the Aboriginal Rental Housing Program (ARHP) has remained at $91 million per year since 1989–90. The funding of the housing component of the Community Housing and Infrastructure Program (CHIP) has fallen from $54 million in 1990–91 to $40 million in 1992–93 (excluding $10.5 million for housing from the National Aboriginal Health Strategy). Funding for the infrastructure component has also fallen. The reforms currently being negotiated between Commonwealth and State governments seek to define administrative responsibilities and to enter into bilateral agreements that may see ARHP funding channelled through ATSIC to the States and Territories. In the Commission’s view these changes will not address the underlying funding tensions, partly because responsibility for providing funds and accountability will continue to be shared. The need remains for housing arrangements that bring clear demarcation of responsibilities. In Chapter 11, the Commission sets out how the reforms proposed for public and community housing, when supplemented with additional assistance to meet the cultural needs of Aboriginal and Torres Strait Islander people, will: • lead to improved accountability by making it clear that the States are responsible for the provision of housing and infrastructure for all people in need of assistance, including Aboriginal and Torres Strait Islander people; • ensure equitable treatment for Aboriginal and Torres Strait Islander people in the distribution of housing assistance, especially for those in rural and remote communities; • promote self-determination by providing for the expansion of community housing; and • promote self-sufficiency by ensuring that community housing schemes are financially viable in urban, rural and remote settings.
xxxiv INDUSTRY COMMISSION OVERVIEW
The changes proposed for public housing (in Chapter 6) would also be to the advantage of Aboriginal and Torres Strait Islander communities since the emphasis is upon assisting people most in need. The reforms call for a single, segmented waiting list within each State, and a common set of eligibility criteria. People in the greatest housing need would be favoured, since the rate of progression in each segment of the waiting list would depend on relative need. Should communities continue to be poorly served by housing authorities, this would become very apparent. Arrangements for consultation, and for the involvement of regional councils and Aboriginal housing organisations, would continue.
Recommendation 15
Aboriginal and Torres Strait Islander people should receive at least the level of housing assistance available to other public and community housing tenants, where they are eligible, and should be subject to similar obligations.
Other benefits would flow to Aboriginal communities from the changes proposed for community housing. As set out in Chapter 9, people eligible for public housing would have the option of joining a community housing scheme, where they would be assisted to the same degree as public tenants in similar circumstances. With the changes proposed by the Commission, the community housing model would offer a viable basis for Aboriginal communities to develop housing options while maintaining control over their land and housing.
INDUSTRY COMMISSION xxxv PUBLIC HOUSING
Recommendation 16
The Commonwealth Government should reach agreement with the States on funding responsibility for housing and infrastructure costs (with respect to Aboriginal and Torres Strait Islander communities) which exceed those normally incurred in State housing programs.
A program such as the CHIP would continue to operate in urban, rural and remote areas. It would provide the additional funds required to ensure that housing and infrastructure meet cultural needs. ATSIC would, as now, have a major role in co-ordination and consultation, and in ensuring that needs specifically related to Aboriginal and Torres Strait Islander culture are met. The provision of a financially viable housing model would contribute to self- determination and empowerment, but the primary aim should be to speed up the delivery of housing and ensure that communities receive the health and social benefits that flow from efficient and effective housing provision.
Private rental About 20 per cent of Australians live in private rental. It is a market which serves the needs of the majority of people in that tenure, but for others private rental does not offer affordable and appropriate housing with security of tenure. Where housing is available and affordable, there may be little choice of quality or location and in all likelihood no guarantee of tenure. The problems in private rental are very real for people on low incomes, yet for some (especially those with short-term housing problems) the provision of a rental allowance is a flexible way in which to deliver assistance.
Rent assistance Rent assistance in the private sector is available to most people on low incomes through the Commonwealth Government’s social security rent assistance system. Commonwealth outlays on rent assistance in 1992–93 are expected to be in the order of $1.2 billion and assist over 900 000 tenants, boarders, lodgers and nursing home residents. The assistance goes to eligible people who pay above minimum threshold rent levels. It is provided at the rate of 75 cents per dollar of rent paid above a threshold rent up to a specified maximum rate of assistance. The rates of xxxvi INDUSTRY COMMISSION OVERVIEW
assistance have been increasing, but the March 1993 changes are expected to leave about 320 000 (or about 36 per cent) of rent assistance recipients still paying more than 30 per cent of income in rent. The levels of assistance paid to private renters is much less than the rental rebate to public renters on similar incomes. Whilst rent assistance is largely determined by the level of rent paid by the household, public housing rebates are calculated on the level of income a household receives. The Commonwealth Government has foreshadowed changes to achieve greater parity with public housing subsidies, and the reforms proposed by the Commission in Chapter 7 accept the need for some increase in rent assistance. Some States have used untied funds under the CSHA to add to the Commonwealth payments, usually to people on public housing waiting lists. In Tasmania, for example, the additional payments are intended to ensure that eligible tenants in private rental pay no more than 45 per cent of their income as rent. Rent assistance to people in private rental is presently inequitable because households with different incomes receive the same level of assistance, and people not receiving pensions or allowances are not eligible for rent assistance (see Section 7.1). The reforms proposed by the Commission would extend the assistance to low-income people not presently on government benefits, and ensure that assistance declines as income increases. Indeed, the proposals call for the Commonwealth to provide rent assistance to all eligible people on low incomes, including tenants in public housing. The Commission has proposed new arrangements to ensure better targeting of rent assistance and to bring into better alignment the assistance accorded to people in public and private rental. The new arrangements would rely on rent assistance varying with the tenant’s income.
INDUSTRY COMMISSION xxxvii PUBLIC HOUSING
Recommendation 17
The Commonwealth Government should change rent assistance to tenants in the private rental market so that it: • declines as income increases; • is available to all low-income tenants in the private rental market; and • is brought closer to rent rebates in the public housing sector.
Rent assistance increases the incentives for some households without children to remain social security recipients. The Commission recognises that its proposals could worsen poverty traps in current general welfare payments. Accordingly, the proposal to withdraw rent assistance as income rises should be borne in mind for future implementation following a review of the rate of withdrawal of Commonwealth welfare measures. ‘Poverty traps’ are discussed in Chapter 7 and Chapter 12.
Inducing supply The high levels of assistance given to public housing tenants and home owners, along with other factors, have tended to reduce the size of the private rental market. Added to this, the market for rental housing that is affordable to low- income people is a residual one and supply responses are therefore restricted. It is not generally an attractive area for investors (see Chapter 5). Governments wishing to attract more properties into private rental have to overcome this by outlaying additional amounts of rent assistance. When this happens existing landlords are unavoidably paid more, even though the additional payment is not needed to hold them in the rental market. This is one of the reasons for concluding (in Chapter 5) that provision of public housing is a cost-effective form of meeting government housing assistance objectives. That said, the benefits of public housing are diminished when there is inappropriate and inefficient delivery of assistance through that tenure. The reforms proposed in this report are intended among other things to bring to light the full costs and benefits of various tenures so that governments, in time, will be in a position to arrive at the best level and mix of assistance measures.
xxxviii INDUSTRY COMMISSION OVERVIEW
The Commission draws attention to its suggestions that: • State housing authorities adopt accrual cost accounting (Section 3.3); • governments clarify their housing objectives to make them operational by linking them to intended outcomes (Section 4.2); • where governments pursue objectives that impact directly on the cost of housing assistance, these objectives be identified clearly and funded from appropriate budgets (Section 4.3); • a mix of housing assistance measures is required to respond effectively to the needs of people (Section 5.4); • public tenants wishing to buy the property they are renting be able to negotiate its purchase (Section 6.2); • capital injections in the form of grants may be required as well as borrowings to expand the public housing stock (Section 6.2); • market benchmarks be used wherever possible to value housing assets (Section 6.2); • housing policy advice be provided by an organisation separate from both the tenancy manager and property manager (Section 6.2); • land banking and land development functions be located separately from both the tenancy manager and property manager (Section 6.2); • tenancy dispute tribunals be independent of housing authorities and located in a department such as consumer affairs (Section 6.2); • the tenancy manager take an holistic approach to meeting the housing needs of people (Section 6.2 and 10.4); • public housing tenants pay rent in advance, even if this means an initial rent holiday (Section 6.4); • public housing tenants with disabilities requiring support infrastructure not pay a higher rent because of the additional cost (Section 6.4); • applicants wishing to transfer from one State’s waiting list to another have their wait time credited to the new list (Section 6.5); • equivalence scales (that adjust incomes for differences in household composition) be used when assessing incomes for eligibility for public housing and when calculating rent rebates (Section 6.4 and 6.5); • ‘tied’ programs be consolidated into untied programs to improve equity (Section 6.6);
INDUSTRY COMMISSION xxxix PUBLIC HOUSING
• the rate of withdrawal of Commonwealth income support payments and rent rebates for public housing tenants be reviewed and harmonised to minimise poverty traps (Section 7.1 and 12.1); • government sponsorship of community housing provides an appropriate means of assisting South Sea Islander descendants of the indentured labourers brought to Australia last century (Section 9.3); • rent assistance be extended to young people in receipt of AUSTUDY or ABSTUDY who need to rent (Section 10.1); • a register be maintained of dwellings modified to meet the requirements of people with disabilities (Section 10.4); • current proposals for channelling ATSIC and CSHA housing funds will not address the major causes of inadequate housing for Aboriginal and Torres Strait Islander people (Section 11.1); • a full assessment of housing assistance needs of Aboriginal and Torres Strait Islander people is required (Section 11.2); • a rolling cycle is needed when funding housing for Aboriginal and Torres Strait Islander people (Section 11.2); • Aboriginal and Torres Strait Islander communities make more use of local government building regulations (Section 11.2); • the property manager be adequately capitalised (Section 12.2); • housing authorities improve their auditing, accounting standards, reporting and performance monitoring (Section 12.2); • some States need to strengthen their tenancy legislation and extend its coverage to tenants in caravan and mobile home parks and in boarding houses (Section 12.3); and • governments fund and support effective advocacy and advisory services (Section 12.5).
xl INDUSTRY COMMISSION PUBLIC HOUSING
xlii INDUSTRY COMMISSION PUBLIC HOUSING
TERMS OF REFERENCE
I, JOHN SYDNEY DAWKINS, under Section 7 of the Industry Commission Act 1989 hereby: 1. refer the provision of public housing in Australia to the Industry Commission for inquiry and report within twelve months of receiving this reference; 2. specify that the Commission report on ways in which Commonwealth, State, Territory and Local Governments can achieve their social, economic and housing objectives more efficiently and effectively and how those changes can be implemented; 3. specify that the Commission, in dealing with this reference, have regard to the broad framework of the Government’s housing policies as set out in ‘Housing — Choices for a Changing Nation’ (released in the 1992–93 Budget context); 4. specify that the Commission pay particular attention to: (a) the acquisition, maintenance, construction and management practices adopted by providers (including providers of community managed housing); (b) the administrative and other mechanisms used to allocate housing; (c) rental policies; (d) funding, financing and ownership arrangements; and (e) associated Commonwealth, State and Local programs and policies; and 5. specify that the Commission take account of any recent substantive studies undertaken elsewhere, including by the National Housing Strategy.
John Dawkins 5 November 1992
xlii INDUSTRY COMMISSION 1 THE INQUIRY
This inquiry is about improving the effectiveness and efficiency of government housing assistance programs so that those most in need benefit and the number assisted is as large as possible, given the level of funding. The terms of reference are reproduced on the facing page. Housing underpins the quality of life of all Australians. Yet our ever-increasing standards of accommodation (reinforced by planning, building and health regulations) and certain taxation arrangements can put housing out of reach for some. The housing assistance programs covered by the inquiry are: • public rental housing; • community housing; • crisis accommodation and emergency relief; • housing for Aboriginal and Torres Strait Islander people; and • rent assistance. The rent assistance programs are those administered by the Departments of Social Security and Veterans’ Affairs, for tenants renting in the private sector. Home ownership assistance programs are not directly under inquiry. The inquiry is preceded by many reviews concerned with Commonwealth–State relations and housing policy. Recent reviews include: • The National Housing Policy Review, 1988; • The Housing Summit, 1989; • The National Housing Strategy, which commenced in 1990 and finished in 1992; • The Victorian Housing and Residential Development Plan, which commenced in 1991; • The Functional Review of Housing in 1991; and • The Mant inquiry into the NSW Department of Housing, completed in 1992. The inquiry was conducted over twelve months. Completion was delayed for one week to allow participants at the Indigenous Australian Shelter Conference to give consideration to the Commission’s proposals for Aboriginal and Torres Strait Islander housing.
INDUSTRY COMMISSION 1 PUBLIC HOUSING
1.1 The Commission’s approach The central task is to report on ways in which governments in Australia can achieve their social and economic objectives as they relate to public housing more efficiently and effectively through organisational and operational reforms. The government’s housing policies as set out in ‘Housing — Choices for a Changing Nation’ and the work of the National Housing Strategy have been taken into account. The social objectives outlined in these documents, in which housing is seen as a means of achieving a fairer and more just society, have guided the Commission’s assessment of the effectiveness of the programs. Our approach was to: (1) identify the objectives of housing policies and programs; (2) evaluate the extent to which these objectives are met; and (3) examine the effectiveness and efficiency of programs. Program effectiveness is assessed in terms of whether programs are meeting their stated goals and whether current outcomes are being achieved at the lowest possible cost to the taxpayer. Program efficiency, which is concerned with making best use of available resources, is assessed in the broader context of government housing and social justice objectives. In keeping with the Commission’s charter, an economy-wide view is taken when assessing housing assistance programs. Some of the issues of wider concern investigated are: • the nature of housing assistance and its relationship with income support; • inter-governmental relations and responsibilities; • housing assistance, and the promotion of self-management, self- determination and self-sufficiency on the part of Aboriginal and Torres Strait Islander people; and • the impact of public housing policies upon the wider community. The Commission consulted extensively on housing issues. All States and Territories were visited for three purposes — to discuss issues and set an agenda for the inquiry; for an initial round of hearings to discuss submissions on reform; and for a final round of hearings, which focused mainly on the Commission’s reform proposals. The visits and hearings were held in all capital cities. In addition, hearings were held in two regional centres, Kununurra and Mackay. The Commission visited Aboriginal communities in Alice Springs, Cowra, Kalumburu, Kununurra, Redfern and Toomelah and met with Murrumbidgee–Lachlan Regional Councillors at Balranald.
2 INDUSTRY COMMISSION 1 THE INQUIRY
Following the release of the draft report, Commission staff conducted a seminar for State and Territory officials and advocacy groups to explain the rationale for the draft recommendations and discuss implementation issues. The report commences with a review of government objectives, funding, the nature of housing assistance and government involvement. Summaries of findings and proposed reforms for the main areas of assistance are presented in the subsequent chapters. The appendices to this report include assessments of matters specifically mentioned in the terms of reference asset management, allocation mechanisms, rental policies, funding, financing and ownership arrangements. The principles used to formulate findings and recommend reforms presented in the report are also described. Wherever the report refers to the States it should be read as the States and Territories. The inquiry process is outlined in Appendix O.
1.2 Issues raised by participants There was a very high level of participation and interest in the inquiry. There were 370 submissions to the inquiry and some 1000 individuals and organisations expressed an interest in being kept informed on progress. A selection of views and issues drawn from submissions is presented in Appendix A and summarised below. Equity and the distribution of housing assistance was of concern to many participants. Most were critical of tax advantages to home owners (the capital gains tax exemption of the family home and, notionally, the non-taxation of imputed rent), advocating the re-distribution of this assistance to public and private renters. The majority of participants said that the need of low-income people for secure, affordable and appropriate accommodation is not being met in the private rental market. Those most affected were said to be people in wheelchairs, people with disabilities, those with large or extended families and others with special housing needs. Discrimination on the part of landlords was seen as restricting access to the private rental market. Security of tenure was seen as a major objective of public housing by a majority of participants. This was closely linked to the concept of public housing as social, rather than welfare housing and the concern to provide the benefits of home ownership to low-income people.
INDUSTRY COMMISSION 3 PUBLIC HOUSING
Many opposed or had reservations about any effort to move single public housing tenants presently living in family accommodation. Others were critical of constraints upon tenants modifying public housing as this can diminish their perception of the dwelling as ‘home’. Affordability was also a major concern. Participants cited inadequate security of tenure and deficiencies in the legislative protection for tenants in private rental. Many inquiry participants claimed that only public housing can meet the government’s objectives of affordability, appropriateness, equity, choice and security of tenure. They were critical of the size of the waiting lists and often argued that public housing should be an alternative tenure that is open to all and not seen as ‘welfare’ housing. Although supporting open access to public housing, participants generally conceded that public tenants who can afford to pay full cost or market rent should be required to do so. A minority argued that public housing should be available only to those on low incomes or who are otherwise disadvantaged. Several participants criticised the joint responsibility for housing under the Commonwealth–State Housing Agreement (CSHA) where housing programs are funded by the Commonwealth and implemented by the States. They argued that the joint arrangement is not efficient or effective in delivering housing assistance. The integration of housing and other assistance was raised by a number of participants. Some expressed support for a single authority being responsible for housing and care services. Inquiry participants were critical of the performance of the housing authorities, although many noted improvements in recent years. Of particular concern was the inappropriate housing stock, inadequate maintenance, the poor standard and condition of older stock, and a lack of appeal mechanisms. Many argued that the housing authorities are not sufficiently responsive to the needs of tenants. Some argued that a proper assessment of the performance of housing authorities is not possible on the basis of the information in their annual reports. Inquiry participants stressed the need for greater community consultation with respect to housing and support programs. Some said the role of local government is overlooked by the Commonwealth and State governments. There was strong support for community housing but also concern that it might be supported at the expense of public housing. A few participants advocated community housing as an alternative to public housing but most saw it as adding to choice. There were many requests for increased funding of community housing and funding to develop tenant skills and management career paths.
4 INDUSTRY COMMISSION 1 THE INQUIRY
Many participants were concerned that the demand for crisis accommodation has outstripped the resources available to charitable organisations. Of particular concern were the lack of medium-term housing options; the constraints this puts on people leaving crisis accommodation; and the consequent loss of capacity to respond to crisis housing needs. Many participants cited poor co-ordination of housing and services programs. Areas identified as requiring greater co-ordination are housing and support services for the aged, youth, and physically and intellectually disabled. An area of special concern was the failure to co-ordinate assistance for disabled people who have moved out of institutions and people with disabilities who are presently living with aged parents. Housing for Aboriginal and Torres Strait Islander people was an issue in urban, rural and remote settings. The Commission found considerable evidence of the inappropriateness of existing housing, lack of funding, inadequate infrastructure and low maintenance (particularly in remote areas). Participants pointed to many ways in which the traditional life and culture of Aboriginal and Torres Strait Islander people add to the difficulty of delivering housing assistance. Problems include overcrowding, culturally inappropriate housing size and layout, inadequate arrangements for rent collection and the up- keep of both housing and infrastructure. Most participants said that housing assistance should be increased, particularly public housing. Some were concerned that any increase in rent assistance may be at the expense of public housing, or that more rent assistance would raise rents and not assist people in housing need. A minority advocated more rent assistance and less public housing. The Commission’s reform proposals incorporated in its draft report helped to distil further the important issues. The public hearings on the draft report assisted the Commission to refine its recommendations and to recast parts of the report to remove misunderstandings.
INDUSTRY COMMISSION 5 2 HOUSING ASSISTANCEõ IN CONTEXT
The first Commonwealth–State Housing Agreement (CSHA) was signed in 1945 in response to a housing shortage after World War II.1, 2 It formalised the joint responsibility for providing public housing based on Commonwealth funding and State delivery. Public housing was conceived to be self-funding once the housing had been constructed, with rents set on a cost recovery basis. However, this Agreement recognised that low-income people may not be able to afford cost-based rents and the Commonwealth agreed to meet 60 per cent of losses from housing authority rental operations. Since 1945 the CSHA has undergone many changes. Assistance is now provided to home purchasers as well as to public housing tenants; most assistance is now targeted to housing need, specifically people on low incomes and those with distinct housing needs (such as Aboriginal and Torres Strait Islanders and people with disabilities); and the Commonwealth has withdrawn from directly sharing the cost of public housing rent rebates. The major development outside the CSHA was the introduction in 1958 of Commonwealth assistance to private renters in the form of cash payments provided by the Department of Social Security (DSS) and Department of Veterans’ Affairs (DVA). Initially restricted to single pensioners, it was extended in the 1980s to increase the level of assistance and target it to particular household types. Housing authority tenants ceased to be eligible for rent assistance in 1982.
2.1 Housing concerns In the 1992 Budget document ‘Housing — Choices for a Changing Nation’, the Commonwealth Government affirmed that: • An internationally competitive, efficient and flexible housing industry will contribute to growth, raise Australian living standards and increase employment opportunities. The Micro-economic Reform Imperative.
1 Tasmania joined the CSHA in 1956, the Northern Territory in 1981 and the Australian Capital Territory in 1990. 2 More details on the development of the CSHA can be found in a study undertaken for the Commission by (R. J. Egan and Associates 1993). See Appendix O for the terms of reference for this study.
INDUSTRY COMMISSION 7 PUBLIC HOUSING
• Concerted action is required because of growing environmental concern if the opportunity to create environmentally sustainable cities is to be retained. The Environmental Imperative. • On average household size is becoming smaller because people are living longer, having children later and separating in larger numbers, thereby increasing the demand for smaller dwellings. The Demographic Imperative. • Home ownership provides a way for people to feel part of mainstream society. Consequently, all should have the opportunity of benefits similar to those arising from home ownership. The Social Justice Imperative (DHHCS 1992a, pp. 7–8). The social justice imperative in particular acknowledges that, to participate fully in society, people must have adequate housing. However, adequate housing is often not affordable for those on low incomes who must rent. The private rental market serves the needs of many renters reasonably well, but there are perceived ‘failures’ in the operation of the market, particularly at the low-cost end.3
Concerns expressed in the CSHA Governments in Australia have sought under the CSHA to: Ensure that every person in Australia has access to secure, adequate and appropriate housing at a price within his or her capacity to pay by seeking to: • alleviate housing related poverty; and • ensure that housing assistance is, as far as possible, delivered equitably to persons resident in different forms of housing (Recital D, 1989 CSHA). This statement identifies five key housing assistance concepts: accessibility, affordability, appropriateness, security and equity (see Box 2.1).4 The first four deal with specific attributes of housing that governments often seek to provide to individuals, while the fifth — equity — is about the fairness of the distribution of housing assistance between individuals.
3 See Appendix C for more details on the private rental market. 4 All of these concepts were examined in some detail by the National Housing Strategy (NHS). See in particular NHS Issues Paper 2 (1991b) and NHS Issues Paper 6 (1992a).
8 INDUSTRY COMMISSION 2 HOUSING ASSISTANCE IN CONTEXT
Box 2.1: The CSHA and the nature of public housing assistance In Recital D of the CSHA, accessibility of public housing is implied in the primary principle that is to: Ensure that every person in Australia has access to secure, adequate and appropriate housing. as well as in: Assistance provided shall be available to all sections of the community irrespective of age, sex, marital status, race, religion, disability or life situation. Affordability of public housing is implied in that housing should be ‘at a price within his or her capacity to pay ... to alleviate housing-related poverty’. Appropriateness of public housing is covered by the following: A physical and locational environment appropriate to the tenant’s needs; Recognition accorded to the rights of ... tenants; Rental housing should reflect general community housing standards and be accessible to community and other services; Rental housing stock should, as far as possible, be designed to cater for the needs and preferences of current and likely future applicants; The design, style and siting of rental housing will, to the maximum extent practicable: - Reflect the need for access to employment opportunities and services; - Reflect the needs for accessibility and suitability for habitation by people with disabilities, Aboriginal, youth, the elderly or other identified groups; and - Support the energy conservation policies of the governments. Security of tenure is defined as follows: Tenants are not to be forced to leave their home because of actions inconsistent with the agreement by a State. Where a tenant is forced to move from one dwelling to another by a State, a choice of dwellings and locations appropriate to the tenant’s needs is to be provided. Equity is implied in the following: Housing assistance is, as far as possible, to be delivered equitably to persons resident in different forms of housing tenure; Priority in granting assistance shall be determined by the need for assistance; and Public housing tenants with similar capacity to pay, pay similar rents.
INDUSTRY COMMISSION 9 PUBLIC HOUSING
Accessibility Accessibility is about the relative ease with which households can change dwellings within the same tenure or between tenures. This would include barriers such as search, transaction and relocation costs as well as discrimination and other practices which limit housing options for certain groups. The degree of choice available at the time of moving or seeking to move is also considered an aspect of access. For instance, for a private renter there are search costs in finding a new dwelling. For people on low incomes in particular, the costs may make access difficult and these costs will increase if the rental market is tight. There are financial costs to take up a tenancy such as a bond, rent paid in advance, removal costs and connection fees for utilities.
Affordability Affordability is about the relative ease, once in a dwelling, in meeting housing costs out of income. The National Housing Strategy (NHS) considered housing to be ‘affordable’ if it did not take up too large a proportion of the household budget. That is, after paying for housing costs, there should be enough income to pay for other necessities such as food, clothing and medical care. The NHS (1992b) recommended that eligible renters should pay (after housing assistance) no more than 25 per cent of their income on rent for adequate and appropriate accommodation (see Appendix B for details about housing for low- income people). The Commonwealth Government in the 1992 Budget introduced the concept of a ‘benchmark of affordability’ for private renters. It set a long-term goal of assisting low-income renters paying more than 20 per cent of their income on rent.
Appropriateness Appropriateness is a multi-faceted concept. It relates mainly to the physical qualities of housing, including its location, and whether these meet the needs of the occupants. Appropriateness is defined here in terms of: • Qualitative life-cycle aspects: Housing must be appropriate to the life- cycle stage, household composition and cultural background of residents. This includes ensuring sufficient size and space for the household’s needs. • Design, siting and condition aspects: The physical nature of the dwelling, both internally and externally, must be appropriate. This includes privacy, physical security and access, and the condition of the dwelling as well as the availability of utilities. For rented dwellings, the responsiveness of the
10 INDUSTRY COMMISSION 2 HOUSING ASSISTANCE IN CONTEXT
owner or manager when there is a need to rectify a problem with the dwelling is also relevant.5 • Geographic location: Employment, services and social contacts for the residents should be accessible.
Security of tenure Security of tenure is usually defined as the extent to which the occupants of a dwelling have a right to continue to occupy that dwelling. Security of tenure for private renters is usually determined by the terms of the lease and relevant State legislation covering tenancies. Even if tenants meet their obligations under the lease, such as paying rent on time, they can be required to vacate the dwelling. Most leases are for a fixed initial period of six months or a year and then continue on a monthly basis.
Equity Equity is another multi-faceted concept and relates to the fairness of the treatment of individuals and groups of individuals by governments. Fair treatment is necessary to safeguard the cohesion of society. It is therefore an important social justice issue. Three categories of equity are: • Horizontal equity: Those in similar circumstances should be treated similarly. Although this may appear a straightforward concept, what is accepted as ‘similar treatment’ and ‘similar circumstances’ is conditional upon social, moral and cultural norms. • Vertical equity: Those in the worst circumstances should be assisted more than, and in some cases before, those not as badly off. This is a simple guide to the direction that redistribution of income ought to take. It is more difficult to assess because the role of governments is not simply one of redistribution. Governments also provide services to those who have paid to receive them with their taxes. These latter services need to be distinguished from redistribution of income through pensions, benefits and government services, though they can also contribute to the redistribution of income if those on low incomes pay little in taxes for the services they receive. • Intergenerational equity: Later generations should be treated fairly. Decisions about the use of resources by the present generation ought to include consideration of effects on future generations. Broadly, there is an
5 This definition largely follows the approach used by the NHS in Issues Paper 6 (NHS 1992a, pp. 7–9) and includes ‘adequacy’ as part of ‘appropriateness’. However, unlike the NHS, security of tenure has been defined separately.
INDUSTRY COMMISSION 11 PUBLIC HOUSING
obligation on the present generation to pass on to further generations at least as much ‘wealth’ as is presently enjoyed. Horizontal and vertical equity should be examined not just in terms of assistance for one good, such as housing, but ideally in terms of the bundle of assistance available to households.
2.2 Housing assistance in Australia Australia is predominantly a nation of home owners and home purchasers. A growing number of people — around 200 000 households in the private rental market — are unlikely to ever enter home ownership (DHHCS 1992a, p. 7). However, the private rental market has a number of imperfections that can limit low-income people’s access to appropriate, affordable and secure accommodation (see Chapter 5). All levels of government provide housing assistance. Governments provide funding for public and community housing, to increase the access to and the affordability of private rental, and to encourage home ownership. Important indicators of the level of government assistance include: • One in five rental households are government tenants. • Housing assistance accounts for about 2 per cent of the Commonwealth’s total budget outlays. • Commonwealth outlays on private rent assistance in 1992–93 totalled around $1.2 billion to about 900 000 households.6 • Housing authorities estimate that rent rebates in 1991–92 totalled $883 million to about 251 500 households.7 • About 85 per cent of all housing authority tenants received rent rebates in 1991–92.8 • Over 90 per cent of new tenants have insufficient income to meet the cost or market rents charged by housing authorities and receive rebated rents.
6 About 35 per cent of all people receiving rent assistance are people in nursing homes, boarders or lodgers. The total includes payments by both the DSS and DVA. The DSS figures for married pensioners have been adjusted to a household basis. 7 Unpublished data provided by DHHLGCS. Excludes Queensland and Tasmania as these two States do not calculate rebates. The estimate must be treated with caution as some authorities use cost rather than market rents. 8 Commission estimate based on unpublished data from DHHLGCS, Queensland and Tasmanian Government submissions. The actual proportion subsidised is higher as some States do not set market rents.
12 INDUSTRY COMMISSION 2 HOUSING ASSISTANCE IN CONTEXT
• The proportion of public tenants receiving rent rebates in 1991–92 ranged from 74 per cent in South Australia to virtually 100 per cent in Tasmania. • The average rent rebate per public housing household receiving rent rebates (excluding Queensland and Tasmania) was $67.50 per week in 1991–92.9 • The average DSS and DVA rent assistance payment to private rental households receiving rent assistance was about $21 per week in 1991–92. • Public housing stocks number about 370 000 dwellings and are valued conservatively at more than $31 billion.10 • Housing authorities held 5.6 per cent of the housing stock in 1991 (ABS 1993). • There are currently around 15 000 community (including co-operative) houses, excluding community houses provided to Aboriginal and Torres Strait Islander communities under the Aboriginal Rental Housing Program and the Community Housing and Infrastructure Program. • In 1990–91, 30 781 households received home purchase assistance loans under the CSHA. These loans had a total value of $2200.7 million.
2.3 Government programs Funding for the CSHA represents about half of Commonwealth outlays on housing assistance. Commonwealth funding under the CSHA is largely in the form of capital grants, mostly for public housing. At the State level there are hundreds of housing and housing related schemes that are funded under the CSHA. These include public housing, numerous forms of community housing, special needs housing, rent assistance, loans for bonds and home ownership assistance (see Appendix F).
Major CSHA programs The major CSHA programs involving rental housing are: Public housing: Public rental housing is delivered by State housing authorities and is funded by capital grants of about $1 billion annually. In addition there are two sub-schemes, the Aboriginal Rental Housing Program (budget
9 Calculated from Appendix D, Table D.6. This figure should be taken as a guide only. The actual subsidy cannot be determined as housing authorities use different methods to approximate nominal rents. 10 Estimated value of housing authority dwellings as at June 1992 (Appendix H, Table H.2).
INDUSTRY COMMISSION 13 PUBLIC HOUSING
allocation $91 million in 1992–93) and the Pensioner Rental Housing Program (budget allocation $49.3 million in 1992–93). Community Housing Program (CHP): Provides funding primarily for capital purposes to encourage participation by community groups and local government in the provision and management of housing for low- to moderate-income people. (The CHP received funding of $24.4 million in 1992–93 which is additional to $12.5 million under the former Local Government and Community Housing Program (LGACHP)).11 Mortgage and Rent Assistance Program (MRAP): Private renters receive short- term assistance under this program in the form of loans and grants for rental bonds and relocation costs. Rent subsidies are also available in some States to individuals or community groups that headlease dwellings to provide short-term accommodation to low-income people. Total assistance was $80 million in 1991–92 (includes $48.7 million of State funding) excluding mortgage assistance. Crisis Accommodation Program (CAP): Under this program capital grant funding is allocated to State housing authorities for the purchase, construction, renovation or lease of accommodation for the use of supported accommodation assistance services (expenditure of $5.4 million in 1992–93).12
Other programs The Commonwealth also provides funding for a range of other housing and housing related support services outside the CSHA. The housing related programs are: Rent Assistance: Rent assistance is provided by both the DSS and the DVA to clients (pensioners, allowees, special beneficiaries and recipients of the Additional Family Payment) who rent privately and pay above a minimum amount in rent (for 1992–93, DSS expenditure was about $1.2 billion and the actual DVA outlay was $25.2 million).13, 14
11 The Community Housing Program was announced in the 1992–93 Budget and superseded the Local Government and Community Housing Program from 1 January 1993. 12 Crisis Accommodation Program funding was reduced from $39.7 million to $12.5 million due to State under-spending. Only $5.4 million was spent and the remainder withheld due to changes in cash management practices (total 1993–94 funding $76.6 million; $43.3 million from Commonwealth, $33.3 million in unspent funds held by States) (DHHLGCS 1993). 13 Pensioners include the aged, people with a disability, wives (usually a carer), sole parents and widows (class B). Allowees include people receiving Job Search and New Start
14 INDUSTRY COMMISSION 2 HOUSING ASSISTANCE IN CONTEXT
Community Housing and Infrastructure Program (CHIP): This program is administered by the Aboriginal and Torres Strait Islander Commission (ATSIC) and provides funding for housing and infrastructure for Aboriginal and Torres Strait Islander people (expenditure of $40.1 million in 1991–92). An additional $10.5 million, allocated from the National Aboriginal Health Strategy, was also expended for housing under the CHIP program in 1991–92. Aboriginal Hostels Limited (AHL): This program is administered by ATSIC and provides funding for low-cost rehabilitative, aged, student, homeless and transient accommodation services through the AHL and Community Support hostels (expenditure of $29.1 million in 1992–93).15 Other Commonwealth programs are intended to provide the help necessary for people to move towards independent living or, where this is not possible, meet their on-going support needs. They include the Supported Accommodation Assistance Program (SAAP) (funding of $167 million in 1992–93); Housing and Community Care program (Commonwealth funding of $341.8 million in 1992–93) and the Commonwealth–State Disability Agreement16 (CSDA) (outlays under the former Disabilities Services Program were $94.2 million in 1992–93). The Commonwealth also funds organisations to provide suitable residential care (nursing homes and hostels) for older people. Assistance is also available under the CSHA to increase the access of low- income renters to home ownership. Under previous Agreements, most assistance was provided through concessional loans. In most cases the States now act principally as guarantors. Any direct assistance is subsequently recovered over the period of the loan. A list of State programs funded under the CSHA is in Appendix F. Some States have chosen to provide additional funding outside the CSHA for a number of these programs.
Allowances (these allowances replaced unemployment benefits in 1991). The Additional Family Payment replaced the Family Allowance Supplement (FAS) on 1 January 1993. 14 In March 1993 the rent threshold for private rent assistance was changed to $30 per week for singles, $40 per week for sole parents, $50 per week for couples without children, and $60 per week for couples with children. 15 AHL also operates a subsidy scheme that assists students undertaking education away from their local area. 16 In July 1993, administrative responsibility for the provision of accommodation services to the disabled was transferred to State governments under the Commonwealth–State Disability Agreement.
INDUSTRY COMMISSION 15 PUBLIC HOUSING
2.4 Taxation and regulatory arrangements In addition to providing financial assistance, governments intervene in many other ways in the housing market. Commonwealth responsibilities include tax expenditures (non-taxation of imputed rent and capital gains tax exemptions), tax-based investment incentives for residential rental property (negative gearing and depreciation). State governments are responsible for stamp duties, land taxes and landlord- tenant legislation, while local governments are involved in local planning and building regulation, the levying of rates and, to some extent, community housing. The main housing-related taxation and regulatory arrangements are: Capital gains tax exemptions: Unlike other forms of investment, the family home is exempt from the capital gains tax introduced from September 1985. The value of the exemption for housing acquired since the introduction of the tax is estimated to have been $409 million in 1990–91 (Flood 1993). Non-taxation of imputed rent: Imputed rent is the value of the housing services consumed by the owner-occupier. The net tax forgone (after building depreciation and mortgage interest deductions) is estimated to have been $4.3 billion in 1990–91 (Flood 1993). Land tax: This takes the form of an annual tax on the unimproved value of land. Widespread exemptions and rate variations make the net impact difficult to determine, although rental housing is adversely affected (see Appendix C). The principal place of residence is exempt, except for Victoria and Tasmania. In addition, all land valued below a general threshold is exempt from the tax. Exemptions are estimated to have cost $483 million in 1990–91 (Flood 1993). Stamp duties: States levy stamp duties on property transfers occurring through sale or lease. Most States provide reduced duties for first home buyers.17 In addition, Queensland and Western Australia have lower rates of stamp duty for home purchasers compared to landlords (Wood 1992). Pensioner rebates: State and local government provide pensioners with rebates on some taxes, duties and charges (principally water and sewage rates, municipal rates, stamp duties and land taxes). These cost an estimated
17 New South Wales and Tasmania give first home buyers an interest-free instalment payment option for houses up to a maximum value.
16 INDUSTRY COMMISSION 2 HOUSING ASSISTANCE IN CONTEXT
$267 million in 1990–91 (Flood 1993). Unlike other tax expenditures, pensioner rebates are generally recognised on-budget.18 Residential tenancy legislation: All States have some form of residential tenancy legislation.19 However there are wide variations in the coverage and provisions. Legislation generally excludes boarding houses, caravan parks and mobile homes (exceptions to the latter are New South Wales and the Northern Territory). Some States have specific legislation for caravan parks (Victoria) and mobile homes (Queensland). Anti-discrimination legislation: All States, other than Tasmania and the Northern Territory, have their own legislation (although Commonwealth legislation applies it is limited in its application to the States). This legislation generally outlaws discrimination, although there are some exceptions with respect to people with disabilities (see Appendix C). Regulation of building and planning: Regulations can impact on the construction and maintenance of dwellings. Estimates of the annual cost of delays range from $650 to $850 million (see Appendix C). The Commonwealth also allows investors in rental property to use negative gearing and depreciation allowances (see Appendix C). While these provide assistance to the owners of rental property, they are available to investors and companies generally and so are not specifically related to housing.
2.5 Recipients of housing assistance The Commission relied mainly on ABS data, DSS and other submissions in determining that:20 • Public tenants (compared with the general population) comprise: couples with children 27.5 per cent (41 per cent); couples without children 13.5 per cent (about 24 per cent); one parent families 27.5 per cent (about 9 per cent); and singles 27 per cent (about 19.5 per cent). • About 73 per cent of families in public housing receive pensions or allowances from the DSS or DVA.
18 Flood (1993) considered pensioner rebates to be a direct expenditure when estimating the distribution of subsidies to different tenure forms (Section 2.6). 19 Queensland and Tasmania are considering new legislation. 20 Information was sought from the housing authorities in relation to people waiting for, and accommodated in, public housing. Detailed data were provided by the Victorian and Queensland housing authorities. Both States are atypical of housing authorities generally. Hence it cannot be assumed that the data apply to public tenants in all States.
INDUSTRY COMMISSION 17 PUBLIC HOUSING
• About 1 in 4 pensioners and allowees are public tenants. • About 1 in 3 pensioners are public housing tenants compared to about 1 in 8 allowees. • 3 out of 4 public tenants are in the bottom 40 per cent of income distribution. Little is known about long-term public housing tenants, as opposed to those newly accommodated. Data for Victoria and Queensland suggests that the two groups differ mainly in incomes. The recipients of private rent assistance are DSS pensioners, allowees, special beneficiaries and Additional Family Payment21 recipients and DVA pensioners. To be eligible they must pay above a threshold amount in rent.22 Public housing tenants are currently not eligible to receive rent assistance. It is known that: • About 1 in 3 people receiving DSS and DVA pensions were also receiving rent assistance in 1990–91; • The average payment by DSS to pensioners receiving rent assistance was $23 a week in 1991–92; • The average payment by DVA to pensioners receiving rent assistance was $16.50 per week in 1991–92; • About 1 in 5 families receiving the Additional Family Payment also received DSS rent assistance in 1990–91; • The average DSS rent assistance payment to families receiving Additional Family Payment and rent assistance was about $27 per week in 1991–92; and • The average DSS rent assistance payment to allowees receiving rent assistance was about $16.70 per week in 1991–92. Despite government housing assistance, a large but unknown number of people are homeless.23 People on low incomes are at greatest risk, the most vulnerable being those with psychiatric illnesses, the elderly, people with disabilities, women and children escaping domestic violence or experiencing family breakdown, young people, sole parents and migrants. Many of these groups have support or special housing needs.
21 Formerly known as Family Allowance and Family Allowance Supplement. 22 Rent thresholds vary according to household types. See Footnote 14. 23 MacKenzie and Chamberlain (1993) estimate that the number of homeless young people is 15 000 to 19 000 per night (based on the use of SAAP services). Fopp’s 1989 estimate of 50 000 to 70 000 homeless was for young people aged between 12 and 24 years that were homeless or at risk of homelessness (Fopp 1993). Fopp (1993) states that Burdekin’s 1989 estimate of between 20 000 and 25 000 appears to have been for those aged under 18.
18 INDUSTRY COMMISSION 2 HOUSING ASSISTANCE IN CONTEXT
2.6 Distribution of housing assistance 24 Housing assistance takes the form of direct government expenditures (including grants to public housing and rent assistance for private renters) and service flows (including tax expenditures and interest rate regulation).25, 26 Although government expenditures are normally subject to explicit definition and consideration through the annual budget process, service flow subsidies are not subject to the same level of scrutiny. All forms of tenure — home ownership, rental housing and public housing — are assisted. Home owners receive the majority of assistance through the taxation system, specifically the non-taxation of imputed rental income and the capital gains exemption of the family home. Access to home ownership is also assisted through housing loans and shared equity schemes for low-income people, stamp duty exemptions and low-cost land for first home buyers (new applicants do not normally receive a subsidy from low-start loan schemes as these now operate on a cost-recovery basis). Public housing tenants are assisted primarily through income-based rents. The nominal level of assistance is measured as a rent rebate which is the difference between a CSHA-defined cost or a ‘market’ rent and the actual rent tenants pay. The bulk of assistance to private renters is received as cash payments paid to welfare recipients (in the form of rent assistance). Some assistance is provided for removal costs and as loans for bonds. Flood (1993) estimated government-provided, housing-related assistance for 1990–91 by two different methods — net expenditure27 and service flow28: • Net expenditure of about $3.2 billion of which 79 per cent went to households below the median income.
24 This section is based on Flood (1993). See Appendix O for details of the consultancy. 25 A tax expenditure is revenue forgone relative to an ideal or benchmark tax base. The major tax expenditures include non-taxation of imputed rent and the capital gains exemption on the family home. 26 Flood’s estimates of assistance include the benefits of the interest rate subsidy to home purchasers, calculated as the difference between the market rate of interest and the ‘capped’ interest rate. Flood’s estimates do not include the costs or benefits of anti- discrimination or landlord-tenant legislation, or of planning and building regulation. 27 The net expenditure method includes all government funding for a particular purpose to a group net of any money received from that group. It may include certain service flows. 28 The service flow method is the actual benefit received by a group. It includes direct transfers (for example rent assistance), net tax expenditures and other housing-related assistance such as public housing subsidies (relative to market rents) and concessional home loans (relative to market interest rates).
INDUSTRY COMMISSION 19 PUBLIC HOUSING
• Service flows of about $8.6 billion (comprising tax expenditures of about $5.4 billion, direct expenditure29 and other service flows of about $3.2 billion). About 38 per cent of tax expenditures and 73 per cent of other service flows went to households below the median income. The net expenditure method measures the subsidy in terms of consumption. It assumes that all outlays (recurrent and capital) are consumed in the period of allocation. The service flow method measures the subsidy assuming housing is an investment good. It takes subsidies to be any reduction in normal recurrent costs relative to some benchmark or ‘usual’ tax system. Flood uses market rents and taxes in the private rental market, and appropriate market interest rates as benchmarks for calculating tax expenditures and other service flows. Levels of assistance (as measured by the service flow method) vary significantly between tenures (see Table 2.1). Overall, public tenants ($2880) and home- owners ($1890) received the largest average service flows per household. The average service flow to home purchasers ($890) was lower than that received by private renters ($970). To the extent that the future benefits of imputed rent are capitalised into current house prices, the total service flow to home-owners derived by Flood will be reduced (because it raises house prices it also reduces the accessibility of home ownership). Another qualification is that home purchasers would not receive all of the benefit from the non-taxation of imputed rent. Levels of housing assistance also vary across income levels (see Table 2.1). Public renters in the lowest quintile receive the most assistance ($3450) — two and a half times that received by households with incomes in the top two income quintiles ($1340). Assistance declines as income rises until the fourth quintile. The level of assistance to private renters also declines with income. Assistance to the bottom two income quintiles ($1440 and $1340) is over twice that received by households in the top quintile ($550). Flood notes that, with rent assistance targeted to low-income individuals and families, it is difficult to determine the assistance received by households, as significant amounts of rent assistance is paid to individuals living in multi-person households.
29 Excluding direct expenditure on public housing, but including direct expenditure on private rental, home ownership and purchase. Flood uses estimates of market rents to calculate the service flow subsidy to public housing tenants.
20 INDUSTRY COMMISSION 2 HOUSING ASSISTANCE IN CONTEXT
Table 2.1: Annual service flow subsidies by tenure by household income quintiles, 1990–91 $ per household
Bottom 2nd 3rd 4th Top All 20 per cent 20 per cent
Home owners 1570 1770 1520 1310 3180 1890 Home purchasers 1060 1300 930 360 1210 890 Private renters 1440 1340 820 640 550 970 Public rentersa 3450 2990 2100 1340 1340 2890
All 2010 1750 1210 820 1980 1510 a Government employees (including Defence employees) are included with private renters. Source: Flood (1993).
Home-owners in the highest quintile receive about twice the assistance of home- owners in the lowest quintile. This is attributable to the higher tax rates and imputed rents received by this group. The high level of assistance to purchasers in the highest quintile (relative to other purchasers) may also be explained by higher tax expenditures and the higher equity in their houses. Purchasers in the second quintile receive more assistance than most other purchasers, reflecting the targeting of home purchase schemes to this group. Flood notes that direct expenditure is increasingly better targeted to low-income households. In particular, assistance to public tenants appears to be well targeted with 93 per cent going to households with income below the median. However, indirect assistance to home owners and purchasers through tax expenditures increasingly benefits households in the highest income groups. Flood concluded that the distribution of assistance in 1990–91 was more even than in 1985–86.
2.7 International comparisons Most developed countries provide assistance to both consumers and producers of housing. The assistance can be supply-based (that is, subsidising production) or demand-based (subsidising consumption). Some countries place emphasis on subsidising home ownership (for example the United States, United Kingdom,
INDUSTRY COMMISSION 21 PUBLIC HOUSING
Australia and New Zealand). Others have placed greater emphasis on non- profit or co-operative housing (for example, Germany and Denmark).30 OECD comparisons (see Figure 2.1) of government housing expenditures indicate that: • Australian government expenditure on housing and community amenities as a proportion of GDP is relatively low by comparison with many OECD countries; • Australian government expenditure on housing and community amenities is weighted towards current expenditure (as a proportion of current to total expenditure) with a significant amount taking the form of subsidies; • Current outlays are favoured by governments devoting a small proportion of GDP to housing and community amenities; • Capital outlays are generally favoured as housing and community amenity outlays increase (as a proportion of GDP); and • France stands out in spending a relatively high proportion of GDP on housing and community amenities (both capital and current outlays) (OECD 1993). However, this comparison does not allow for differences in the level of tax expenditures on housing between countries. There are many other differences between countries in Figure 2.1, for example, government housing policies, the relative strength of the non-profit and public housing sector, the relative maturity of housing markets and the level of population growth. Government policy can significantly influence housing preferences. Affordability for example is influenced by policies that affect the availability and cost of land. The growth of the co-operative sector in Germany, Denmark, Sweden and the Netherlands was largely based on land being made available at less than market rates. In Australia, the United States and New Zealand the relatively low cost of land has encouraged low density cities with detached housing. As a consequence of this and taxation policies favouring home ownership these countries have relatively high rates of home ownership.
30 This section is based in part on a study undertaken for the Commission by Swinburne University of Technology (see Appendix O for the terms of reference of the study).
22 INDUSTRY COMMISSION 2 HOUSING ASSISTANCE IN CONTEXT
Figure 2.1: Government expenditures on housing for selected OECD countries
Per cent of GDP 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0 Denmark Norway Australia Germany Italy Portugal Spain United France 1990 1991 1991 1990 1991 1986 1988 Kingdom 1989 1991 Current Capital
Note: Expenditure includes all current and capital expenditure by government on housing and community amenities. Source: Derived from OECD (1993).
The structure of housing industries in each country influence housing costs and therefore affordability. Australia, Canada, New Zealand and the United States have fragmented, mostly small-scale housing construction firms, although significant multi-unit development has occurred in the United States and Canada in the last decade. By contrast, Germany and Denmark have large-scale producers with an emphasis on low-rise multi-unit housing. Apart from lower land, maintenance and management costs, production and infrastructure costs are reduced by standardisation and the scale of the development. Australia is the only country studied by Swinburne where public housing authorities cover the rent deficit from internal sources (see Table 2.2). All others have some form of rent supplement or allowance that is externally funded. Apart from the United States, all the countries listed in Table 2.2 have integrated housing assistance and income security programs. Australia and New Zealand alone do not have significant rent controls in the private rental market.31
31 Australian landlords in most States are unable to increase rents within the fixed term of a lease. However, it is also difficult for a tenant to terminate a lease. These limits on the private rental market are not significant compared to controls implemented elsewhere.
INDUSTRY COMMISSION 23 PUBLIC HOUSING
Table 2.2: Housing tenure in selected developed countries by household (per cent of all tenures)
Country Year Owner Private Public housing, Other occupier rental non-profit and co-operatives
Australiaa 1991 72.0 20.4 7.6 b na Canada 1986 62.0 32.0 6.0 na United Statesc 1988 64.0 34.5 1.5 na Denmark 1988 55.0 18.0 21.0 6.0 England 1990 68.0 8.0 24.0 na New Zealand 1986 73.0 14.0 9.0 5.0 Germany (FRG) 1987 38.0 42.0 16.0 4.0 na Not applicable. a In the case of Australia the ‘other, not stated and inadequately defined’ category has been excluded and the ‘not stated’ rental category has been allocated proportionally across rental categories. b Includes both housing authority tenants and government employees. c The basis (households or dwellings) for the United States is not known. Sources: Swinburne University of Technology (1993); ABS (1993).
24 INDUSTRY COMMISSION 2 HOUSING ASSISTANCE IN CONTEXT
New references Department of Health, Housing, Local Government and Community Services 1993 Program performance statements 1993–94: Health, Housing, Local Government and Community Services portfolio, Budget Related Paper No.7.8A, AGPS. Fopp R. 1993 ‘Is it a case of chalk and cheese, apples and oranges?’ in Shelter — National Housing Action, Vol. 9, No. 2, p. 33–37. Human Rights and Equal Opportunity Commission 1989, Our homeless children, AGPS, Canberra. MacKenzie D. and Chamberlain C. 1993 ‘The number of homeless young people in Australia’ in Shelter — National Housing Action, Vol. 9, No. 2, p. 28– 32.
INDUSTRY COMMISSION 25 3 FUNDING UNDER THE COMMONWEALTH– STATE HOUSING AGREEMENT
There have been many changes in funding procedures since the initial Commonwealth–State Housing Agreement (CSHA) in 1945. Under the current (1989) Agreement Commonwealth funds are provided mostly as ‘untied’ grants albeit for housing. States must contribute $1 for every $2 received in an untied grant.1 Over 80 per cent of the $1.03 billion of Commonwealth funds for the CSHA were in the form of ‘untied’ grants in 1992–93. However, some Commonwealth funds are provided as special purpose payments. Since the 1989 CSHA, these apply to: • pensioner rental housing; • Aboriginal rental housing; • mortgage and rent assistance; • local government and community housing; and • crisis accommodation. Grants for pensioner housing are allocated between the States according to the number of pensioners and sole parent beneficiaries who receive Department of Social Security or Department of Veterans’ Affairs rent assistance. Grants for Aboriginal and Torres Strait Islander housing are on the basis of assessed housing needs, with individual States having a guaranteed minimum level of funding. The remainder are allocated on a per capita basis with a guaranteed minimum level of funding. States match Commonwealth tied grants for the Mortgage and Rent Assistance Program (MRAP) on a $1 for $1 basis. States were expected to provide about $440 million in matching grants in 1992– 93. They may provide loan funding rather than grants for up to 50 per cent of matching funds if the loans are for approved home purchase assistance programs. States may also provide loan funding to both public housing and
1 States match funding on a $1 for every $2 basis from 1992–93, having moved gradually towards this from $1 for every $4 in 1989–90. At least 50 per cent of State matching funds must be grants for public housing; the remainder can be as loans for approved home purchase assistance programs. Some State matching grants which are in excess in a particular year may, by agreement, be carried over.
INDUSTRY COMMISSION 25 PUBLIC HOUSING
home purchase assistance over and above those matching funds. Funding arrangements and trends are detailed in Appendix D.
3.1 Funding sources Over the period 1975–76 to 1991–92, the means of funding the CSHA changed significantly. These funding changes, in constant prices, are illustrated by Figure 3.1. Between 1975–76 and 1985–86 funding was entirely from Commonwealth, State and Northern Territory loans and grants. The last year that the Commonwealth made loans to the States and the Northern Territory was in 1983–84 (apart from nominated Loan Council Funds to which the States and the Northern Territory were given access over 1982–83 to 1988–89).2 State governments continued to favour loan funding until the 1989 CSHA. They borrowed from the Commonwealth at favourable rates, on behalf of their State housing authority. At the same time they borrowed commercially to meet their matching requirements. This led to a build-up of debt and agreement from 1989–90 that States would provide at least 50 per cent of the State matching requirement as grants. Over recent years private sector borrowings have been used to substantially expand home purchase assistance programs. The 1989 CSHA actively encourages the use of private funds for this purpose. It allows the States to provide up to 50 per cent of their matching requirement as borrowings and allows funds for schemes that operate on a commercial basis to be treated as outside State Loan Council borrowing limits (DHHCS 1991b, p. 23).3 A significant proportion of the Commonwealth funds has always been used by the States to repay loans. Declining net Commonwealth payments to housing was one of the reasons why the Commonwealth ceased funding through loans. The funding trends, illustrated in Figure 3.1, resulted in a major build-up of debt. Egan in referring to the 1988 National Housing Policy Review of the 1984 Agreement, noted that the build-up of debt in the public housing system can be traced to two interrelated trends: • The use by the States of expensive commercial borrowings to match non- repayable, interest-free grants provided by the Commonwealth. Since 1983 the
2 These borrowed funds cannot be compared in simple dollar terms with grants. 3 Further to this, the 1992 Loan Council meeting agreed that State home finance schemes that operate on a commercial basis would be treated as outside the global limits, but that any concessionary elements of such schemes be included within the global approach (Budget Paper No. 4 of 1992–93, p. 62). See Appendix D Figure D.5 for more detail.
26 INDUSTRY COMMISSION 3 FUNDING UNDER THE CSHA
States had put in less than $200 million in grant funds. This compares with $2500 million from the Commonwealth; and • An increasing number and proportion of very low-income tenants being housed. These tenants could afford only very low rents which, while they cover out-goings to rates, administration and maintenance, are insufficient to meet the costs of repayments of principal and interest. Because households on these incomes could not afford repayments of loans for home purchase or market rents, they comprise the bulk of the client group of public housing (1993, p. 17).
Figure 3.1: Source of CSHA funding, constant prices, 1974–75 to 1991–92 $m 4500 Private sector 4000 Loan Council 3500 State 3000 C’wealth 2500
2000
1500
1000
500
0 74- 75- 76- 77- 78- 79- 80- 81- 82- 83- 84- 85- 86- 87- 88- 89- 90- 91- 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92
Note: Constant prices are derived from the weighted average of 8 capital cities Consumer Price Index for housing in 1990–91 dollars. Source: DHHCS (1992c); and unpublished data provided by DHHLGCS.
Public housing debt ranges between 8 per cent (for Queensland) and 386 per cent (for the Northern Territory) of the equity in housing authority assets, with the average being 26 per cent. Other housing authorities with below average debt levels with respect to equity are those of the Australian Capital Territory and New South Wales. The housing authorities of South Australia and Tasmania have relatively high levels of debt with debt 48 per cent and 73 per cent, respectively, of equity in housing authority assets (see Table 3.1).
INDUSTRY COMMISSION 27 PUBLIC HOUSING
Table 3.1: State housing authority public housing assets and debt, 30 June 1993 ($m)
NSW Vica Qld WA SA Tas ACT NTb Aust
SHA assetsc 13 489 5 291 3 586 2 299 3 997 753 1 483 786 31 683 Public housing debt: – to C’wealth 1 485 1 533 233 453 291 304 162 342 4 804 – to State 575 132 40 121 996 25 3 282 2 173 – to Private 13 27 0 9 0 0 0 0 49 total 2 072 1 692 273 583 1 287 329 165 624 6 603
Debt to equity 0.18 0.32 0.08 0.34 0.48 0.78 0.13 3.86 0.26 ratio a Victoria does not maintain separate accounts for home purchase assistance and public housing borrowings. Interest repayments are allocated on the weighted average interest cost of the funds employed in public rental and home purchase activities. About 75 per cent of interest payments were attributed to public housing debt in 1990–91. Total borrowings from the Commonwealth for public housing and home purchase assistance are in the table. In estimating the Victorian debt to equity ratio, 25 per cent of housing debt was deducted before the calculation was made. b Northern Territory purchased Commonwealth staff housing after self-government which accounts for a large part of their debt. c Commission estimates. See Appendix H, Table H.2. Note: Derived from information provided by housing authorities. Source: Industry Commission.
3.2 Disbursement of funds
The CSHA accounting structure There are three main ‘accounts’ underpinning the CSHA. They are the: • Rental Capital Account which is used to manage funds for public housing construction, major maintenance and renewal. All Commonwealth ‘untied’ grants are paid to this account and 100 per cent of Commonwealth interest and principal repayments may come from the account, but only up to any loss on rental operation for that year; • Home Purchase Assistance Account which manages funds for home purchase programs. Most new funds are private sector funds;4 and the
4 In South Australia, new funds are mostly from the South Australian Financing Authority, rather than from private sector institutions.
28 INDUSTRY COMMISSION 3 FUNDING UNDER THE CSHA
• Current Account which caters for recurrent expenditure for public rental housing activities. Most new funds are rental income. There is also a mechanism to allow for flexible movement of funds from the Rental Capital Account — the General Allowance. Up to 25 per cent of Commonwealth untied grants and State matching grants paid into the Rental Capital Account each year may be transferred under this mechanism (the flow of funds through these accounts is illustrated in Appendix D). The tied programs have separate accounts.
Allocation of funds for public housing It is desirable for funds to be allocated on a basis which reflects their purpose. Under the current arrangements, Commonwealth grants are allocated on a per capita basis. While this is an administratively simple distribution, it may not be well targeted because: • A per capita allocation ignores cost differences within and between States. Land acquisition and housing construction costs differ across the nation, between inner and outer urban areas of cities, and between cities and country towns. The purchase prices of established homes also reflects the cost of construction which varies with locality. • A per capita allocation also has no regard for the relative number or different housing circumstances of low-income people. That is, the allocation is not influenced by the relative number of low-income people in need of public housing. If a major purpose of these funds is to be income support for existing public tenants, the allocation should have regard to the relative size of public housing in each State. A per capita funding allocation ignores this. From 1993, recurrent housing transactions are to be included by the Commonwealth Grants Commission (1993, vol. 1, p. 24) in the standard budget used in the allocation of financial assistance grants to the States.5
5 This might offset some of the distribution effects of direct per capita funding because the Commonwealth Grants Commission formula incorporates an adjustment to reflect unavoidable differences between the States in revenue raising capacity and the cost of provision of public services to a similar standard.
INDUSTRY COMMISSION 29 PUBLIC HOUSING
Allocation of funds for home purchase assistance Home ownership assistance programs do not fall within the scope of this inquiry. Nevertheless, funding of these programs impinges on funding for public housing. The Commonwealth Government does not directly fund home purchase assistance under the 1989 CSHA (except for MRAP). However, it may do so indirectly by permitting Commonwealth interest and principal repayments for the program to be made from funds in the Rental Capital Account (which contains mainly funds for public housing construction, purchase and renovation, and Commonwealth interest and principal repayments). State governments are able to direct matching grant funds to Home Purchase Assistance Accounts of the State housing authorities under the CSHA, but grant funds were not used for this over the period 1989 to 1992. Permitting home purchase assistance program interest and principal repayments to be made from the Rental Capital Account adds to the uncertainty about how much is spent on public housing. Advice from the States revealed that home purchase assistance debt was not met from the Rental Capital Account over 1989–90 to 1991–92, except in Victoria. Victoria, which does not formally maintain separate borrowings records, allocates interest on the weighted average interest cost and the funds employed in public rental and home purchase activities.
Allocation of funds for tied programs There is no way in which to ascertain whether funds are distributed equitably between the untied and tied programs. The basis for the level of funding of tied programs is unclear. As discussed in Chapter 5, tied programs may lead to inequitable outcomes, since persons assessed under a specific tied program as most in need may be less in need than others targeted by other CSHA programs. These matters are considered in Chapter 8.
3.3 Financial management
Constraints on performance The current arrangements emphasise capital expenditure. That is, they encourage expansion of public housing, major maintenance and renewal. This is an outcome of forcing most new Commonwealth grants to the Rental Capital
30 INDUSTRY COMMISSION 3 FUNDING UNDER THE CSHA
Account along with a proportion of the State matching grants. Funds from the sale of land and dwellings must also pass to the Rental Capital Account. In the Commission’s view, the accounting arrangements unduly constrain the housing authorities in their ability to co-ordinate minor and major maintenance.6 Minor maintenance is paid from the current account and major maintenance and renewal from the capital account. There is some evidence that minor maintenance is the residual element in the current account and that when funds are tight it is reduced or put off. The 1993 amendment to the Agreement further limited funding discretion by changing the timing of Commonwealth grant payments from monthly payments to funding based on State forward expenditure projections. Without increased accountability and transparency through use of appropriate performance indicators, these procedures may give rise to perverse incentives to spend funds unwisely. Performance indicators are considered in Chapter 12 and Appendix G.
An indicative financial analysis of rental operations An indicative financial analysis of public housing rental operations using consistent assumptions is presented in Table 3.2. The purpose is to indicate the total annual cost of public housing and to assess whether the State housing authorities have sufficient funds to allow for the current expansion of stock. The Table details annual outgoings and inflows from rents and government grants at 30 June 1992. It treats Commonwealth and State grants as payments to meet recurrent subsidies with any surplus available for stock expansion. Funds for refurbishment would be met from funds set aside as depreciation. For the purpose of Table 3.2, management costs were assumed to be 10 per cent of nominal rental income (taken as 6.5 per cent of asset value). Maintenance and depreciation were assumed to be 1.5 per cent and 2 per cent of the value of the dwelling, respectively.7
6 See Appendix D, sections D.2 and D.3 for further information on this. 7 Data in National Public Works Council Inc. (1993, p. 30) suggest ‘that the long-term average maintenance costs of a dwelling needed to keep it in an ideal condition is between 2.5 per cent and 3 per cent of capital replacement value’. In the long-term the ‘ideal conditions’ which are determined by the individual States lead to rates ranging from 2.09 in New South Wales to 3.76 in Victoria. These maintenance costs are set so that, effectively, the dwelling does not depreciate.
INDUSTRY COMMISSION 31 PUBLIC HOUSING
Table 3.2: Indicative financial analysis of public housing rental operations of State housing authorities, 1991–92 ($m)
Item NSW Vic Qld WA SA Tas ACT NT Total
Outgoings Managementa 87.7 34.4 23.3 14.9 26.0 4.9 9.6 5.1 205.9 Debt repaymentsb 154.9 78.9 21.8 20.5 77.4 17.6 10.0 31.7 412.8 Maintenancec 121.4 47.6 32.3 20.7 36.0 6.8 13.3 7.1 285.2 Depreciationd 161.9 63.5 43.0 27.6 48.0 9.0 17.8 9.4 380.2 Rates and chargese 101.7 42.7 28.5 25.9 42.2 12.8 10.3 9.2 273.3 Total 627.5 267.1 148.9 109.6 229.5 51.1 61.1 62.5 1 557.4 Inflows Rent receiptsf 381.5 174.1 110.7 94.8 185.9 36.7 42.5 38.8 1 065.0 Subsidies: – C’wealth grantsg 254.0 191.6 156.9 88.1 63.7 32.0 15.0 44.5 845.8 – State grants 107.9 82.0 50.7 30.2 29.2 12.2 6.5 6.6 325.3 – All subsidies 361.8 273.6 207.6 118.3 92.9 44.2 21.5 51.1 1 171.1 Total 743.4 447.7 318.3 213.1 278.8 80.9 64.0 89.9 2 236.1
Surplus 115.9 180.6 169.4 103.5 49.3 29.8 2.9 27.4 678.7 a Management fees are assumed to be 10 per cent of a rental income based on 6.5 per cent of asset value. b Interest and capital repayments are taken from unpublished data provided by DHHLGCS. c Maintenance is assumed to be 1.5 per cent of the value of the dwellings. The value of the dwellings is estimated at 60 per cent of the value of the assets. The value of assets is taken from Table H.2 in Appendix H. Ideal maintenance and depreciation figures depend on various factors such as the age, type and location of the housing stock and the maintenance philosophy of the housing authority. This maintenance rate, when combined with the depreciation rate, approximates to the long-term average maintenance costs of a dwelling needed to keep it in an ideal condition (National Public Works Council Inc. 1993). d Depreciation is taken as 2 per cent of the value of the dwellings. This will overstate the situation with new stock and understate it with old stock. e Rates and charges are taken from preliminary data prepared for the Housing Assistance Act 1989 Annual Report 1991–92. f Rent receipts are taken from preliminary data prepared for the Housing Assistance Act 1989 Annual Report 1991–92. g Commonwealth and State grants were taken as those for 1991–92. Commonwealth grants includes untied grants, Pensioner Rental Housing Program, Aboriginal Rental Housing Program and State Grants (Housing) Act 1971 monies less the General Allowance used for purposes other than public housing. General Allowance figure is an average use over 1989–90 to 1991–92. Source: Industry Commission.
The surplus after outgoings are deducted from inflows represents funds available for stock expansion. Under the Commission’s assumptions, the surplus is approximately $679 million. If management costs are reduced by 1 percentage point then a further $20 million is added to the surplus. If maintenance costs are reduced by 1 percentage point then another $185 million
32 INDUSTRY COMMISSION 3 FUNDING UNDER THE CSHA
is added to the surplus. If the nominal rental income as a proportion of asset value is increased by 1 percentage point then the surplus is reduced by $40 million because of the impact of rental income on estimated management costs. Not all States offer rent rebates or set rents according to market value. If rents were set at 6.5 per cent of the Commission’s estimate of asset value then $2002 million would be required to cover the rent bill. The analysis shows that government grants would have been sufficient to subsidise the rebate of $937 million required to meet market rents. In addition to the rental operations’ surplus estimated in Table 3.2, other funds have been available to housing authorities to expand stock. These include sales of land and dwellings, transfers from the Home Purchase Assistance Account, additional State capital (and any run down in the Rental Capital Account). Indeed, an average of $325 million per year over 1989–90 to 1991–92 has been available from these sources. These funds when added to the surplus on rental operations along with the depreciation allowance suggest that approximately $1527 million was available in 1991–92 for capital acquisitions (see Table 3.3). These analyses indicate that the level of funds available provides for recurrent costs and most capital expansion overall, but this may not be the case in some States. In 1991–92, 11 827 dwellings were acquired. When the other available funds are added to the surplus on rental operations the average funds available for each dwelling would have been $129 100. Individual State dwelling costs differ substantially from this average. Possibly Queensland may not have had sufficient funds to undertake adequate maintenance as well as construct or purchase stock at the 1991–92 level. Clearly the current rate of expansion can only continue if funds continue to be available from sources other than direct funding under the CSHA or by running down the capital stock. It might be possible to finance current levels of expansion in some States by borrowing. The concern would be whether the current level of funding would be sufficient to cover debt servicing costs in the longer term. The housing authorities are not able to substantially alter their long-term cash flows without lowering costs such as maintenance. Should debt charges increase substantially, as was the case in the 1980s, then authorities may have difficulty in covering debt repayments.
INDUSTRY COMMISSION 33 PUBLIC HOUSING
Table 3.3: Estimates of funds available to housing authorities for new dwellings under indicative financial analysis, 1991–92
Item NSW Vic Qld WA SA Tas ACT NT Total
Surplusa ($m) 115.9 180.6 169.4 103.5 49.3 29.8 2.9 27.4 678.7 Other fundsb ($m) 251.9 73.3 54.4 17.5 27.8 5.8 16.9 20.2 467.8 Depreciationc ($m) 161.9 63.5 43.0 27.6 48.0 9.0 17.8 9.4 380.2 Total available ($m) 529.6 317.4 266.8 148.5 125.0 44.6 37.6 57.0 1 526.7
New dwellingsd (No.) 3 945 1 980 3 305 604 1 161 331 213 288 11 827
Implicit cost per dwelling – using surplus 29.4 91.2 51.3 171.3 42.4 90.0 13.7 95.1 57.4 funds only ($’000) – using total funds 134.3 160.3 80.7 245.9 107.7 134.8 176.6 198.0 129.1 available ($’000) a Calculated indicative surplus as estimated in Table 3.2. b Other funds for new dwellings is an average use over 1989–90 to 1991–92 of funds put to the Rental Capital Account plus any run down in the Rental Capital Account over 1991–92. The averaged funds include other new State capital, sales of land and dwellings, Home Purchase Assistance Account transfers and other unspecified funds. c As estimated for Table 3.2. d Number of new dwellings are taken from preliminary data prepared for the Housing Assistance Act 1989 Annual Report 1991–92. Source: Industry Commission.
The total cost of public housing is understated in Table 3.2 as the opportunity cost of capital is not taken into account. The opportunity cost of capital to government can be approximated by the real long-term bond rate, assumed to be 5 per cent. The required return on rental operations is less than this because of expected real capital gains. In Table 3.4 the expected capital gain is assessed at 1.4 per cent and the return on rental operations at 3.6 per cent of the value of the housing stock.
Transparency and accountability Under the current arrangements, the full costs of public housing provision are not recorded. Indeed, the funding and financial practices encouraged by the CSHA cloud transparency and accountability. It is not easy to trace the use of funds or to evaluate how well the funds are spent. The difficulties arise because: • Funding of public housing and home purchase assistance activities are not readily separated, despite separate accounts.
34 INDUSTRY COMMISSION 3 FUNDING UNDER THE CSHA
• Subsidies to tenants are not adequately recorded in the financial accounts. For example, rent rebates are not factored into the accounts published in the Housing Assistance Act 1989 Annual Report (although sometimes State housing authorities do this of their own accord). • Tenants are differentially treated in receiving rebates, but neither the total nor the distribution of subsidies to tenants is sufficiently apparent. Tenants are required to pay a proportion of their income as rent, so their rent bears no relationship to the market rent attainable from the property. Tenants in houses which are better placed or in better condition receive higher levels of assistance than others. This issue is taken up in Chapter 6. • The CSHA allows for 75 per cent of Commonwealth debt repayment for public housing and home purchase assistance to be made from the Rental Capital Account. This clouds accountability because debt repayments for the two activities are not separable. • In the CSHA accounts, depreciation is not treated as a cost to public housing.
Table 3.4: Estimates of opportunity cost of capital, 1991–92 ($m)
Item NSW Vic Qld WA SA Tas ACT NT Total
Return on rental 485.6 179.3 110.3 83.3 143.9 28.0 53.8 24.6 1 108.9 operationsa Expected capital gain 188.8 69.7 42.9 32.4 55.9 10.9 20.9 9.6 431.2 on stockb Opportunity cost of 674.5 249.1 153.3 115.7 199.8 38.9 74.8 34.2 1 540.1 capitalc a Estimated at 3.6 per cent of asset value. b Estimated at 1.4 per cent of asset value. c Assumed to be equivalent to the real long-term bond rate of 5 per cent. Repayment of interest must be subtracted to get net return. Source: Industry Commission.
In a recent preliminary study of the CSHA, the Australian National Audit Office noted that some States consistently did not provide certain data to the Commonwealth for the Housing Assistance Act Annual Report. The Office observed that: ... the types of data sought had changed little in recent years and the compilation of that data occurred without much Departmental analysis. ... The true levels of subsidies and other Community Service Obligations were not readily determinable from the data currently supplied to the Commonwealth by the States (1993, p. 12).
INDUSTRY COMMISSION 35 PUBLIC HOUSING
There is no commonly agreed basis for valuing the housing and other State housing authority assets. Their worth may bear little relationship to their construction or purchase costs. Current cost asset valuation would be needed for proper asset valuation and provision for depreciation. In the Annual Reports of the Housing Assistance Act, houses are reported by number of dwellings only — no value is given. In the Commission’s view, the use of accrual cost accounting by all State housing authorities is desirable. It would signal to the community that the authorities are accountable for both the resources they control and their performance in using those resources. This is not to say that the focus should be on the ‘bottom line’ profit figure. The accounts of the housing authorities should nevertheless identify the cost of the service provided, cost recoveries and details of asset management. They should disclose relevant information about cash flows (for example, details of proposed expenditure plans and reasons for any failures to meet those objectives; details of any borrowings) and how well their operating objectives are being achieved. Beside financial accounting there is also service quality. No analysis of accountability would be complete without some assessment of how well the housing authorities achieve non-financial objectives such as the quality of services they provide to their tenants. Some authorities provide some information in their Annual Reports but there appears to be no reporting obligation under the Housing Assistance Act 1989. The Commission’s recommendations to improve the CSHA are contained in Chapter 8.
36 INDUSTRY COMMISSION 3 FUNDING UNDER THE CSHA
BIBLIOGRAPHY
DHHCS (Department of Health, Housing and Community Services) 1992, Housing Assistance Act 1989 Annual Report 1990–91, AGPS, Canberra. Commonwealth Grants Commission (1993), Report on General Revenue Grant Relativities 1993, 3 vols., AGPS, March. National Public Works Council Inc 1993, Predicting Housing Maintenance Costs, Asset Management Series no. AM-1-93, May.
INDUSTRY COMMISSION 37 4 HOUSING-RELATED OBJECTIVES
Governments intervene in many ways to assist in the provision of housing. The objectives can differ between levels of government, but there are also shared objectives expressed through the Commonwealth–State Housing Agreement (CSHA).
4.1 Government objectives Clear objectives are critical not only for the efficient delivery of housing services but for reasons of accountability and transparency.
Commonwealth Objectives underpinning the Commonwealth’s national housing policy found in the 1992 Budget statement include: • to provide maximum opportunities for Australians to own their own home or to benefit from the attributes of home ownership (eg. security of tenure, control over one’s own home); • to ensure that housing remains affordable by reforms in the regulatory environment and in industry, and by providing adequate assistance to private renters; • to provide for more housing choice so as to ensure appropriate options for people at different stages of their lives; • to develop viable, innovative, efficient and responsive forms of public and community housing; • to provide for better location of housing in relation to jobs, transport and other services to ensure more efficient functioning cities as a contribution to micro economic reform as well as more equitable and ecologically sustainable cities; and • to encourage a competitive, efficient and more innovative housing construction industry and more efficient land supply processes (DHHCS 1992a, p. 9). These goals are being pursued by means such as public housing, home purchase assistance programs, the Community Housing Program and a Social Housing Subsidy Program for shared equity schemes. Broader concerns about urban development and infrastructure are addressed by schemes such as the National Urban Development Program and the Building Better Cities Program.
INDUSTRY COMMISSION 37 PUBLIC HOUSING
The Commonwealth Government provides rent assistance as part of its income maintenance role. It is received by more than 930 000 tenants. Moreover, the Commonwealth remains committed to providing housing and infrastructure for the ‘worst housed’ people in Australia, the Aboriginal and Torres Strait Islander peoples (DHHCS 1992a).
States and Territories Although each State has its own objectives, many are common. Some are shared with the Commonwealth through the CSHA. The primary principal within the 1989 CSHA is to provide public housing and other forms of housing assistance: ... to ensure that every person ... has access to secure adequate and affordable housing ... [priced] within his or her capacity to pay. ... to alleviate housing-related poverty; and ensure that housing assistance is, as far as possible, delivered equitably to persons resident in different forms of housing tenure. ... [Providing rental housing] is a key element of this agreement (Recital D of the CHSA). As a result of the 1992 renegotiation of the funding for the CSHA, the following shared objectives were proposed by the Commonwealth–State Standing Committee of Housing Officials: • Ensure that the supply of affordable housing is commensurate with the need for it in the community. • Ensure that housing assistance matches the housing and location needs of low and moderate income earners and that it is planned and allocated equitably and on the basis of need. • Maximise choice for housing consumers across tenures. • Ensure that appropriate housing assistance is available to households with special needs, including people with disabilities, Aboriginals and Torres Strait Islanders, youth, the elderly or other identified groups. • Ensure the management of housing assistance is cost-effective, efficient and responsive to people’s needs. • Ensure that housing assistance is allocated on an equitable basis and delivers security of tenure and good quality, affordable housing which is accessible to community and other services. • Ensure that all forms of housing assistance are effectively integrated and contribute to national strategies that create efficient, safe, ecologically sustainable and quality environments in which people can live (sub. 217, att. 7, pp. 7–8).
38 INDUSTRY COMMISSION 4 HOUSING-RELATED OBJECTIVES
Recital D of the CSHA provides that States will be able to exercise maximum autonomy and flexibility in developing the administrative arrangements necessary to achieve the agreed principles. In the past, different emphasis placed on shared objectives and the freedom to exercise autonomy have led to significant differences in the way States have used public rental housing to meet their communities’ housing needs. In the Northern Territory, for example, public housing now accounts for 22 per cent of the housing stock. In South Australia the proportion is 12 per cent and in Queensland the proportion is 3 per cent. There are no income criteria on applications for public housing in South Australia although entry tests exist. In contrast, the Queensland Housing Commission focused very much on home ownership. Other objectives pursued (by different States) have included land banking, urban consolidation, support for the building industry and employment, and facilitating ‘innovation’. Subsidiary aims of the South Australian Housing Trust, for example, are ‘to contribute as far as possible to the social well-being and economic development of the State’ and ‘to facilitate industrial development and support the growth of employment in the State’ (SAHT 1991, p. 4). A corporate aim of Homeswest is to be a ‘market leader and innovator’ by developing ‘innovative housing finance schemes’ and increasing ‘innovation in products and services’ (sub. 51).
4.2 Operational objectives The objectives of State housing authorities (as described in their annual reports and other publicly available documents) are not, on the whole, specific enough to determine whether their activities in fact achieve the objectives. How, for example, should the housing authorities be seen to ensure that: the supply of affordable housing is commensurate with need in the community; housing assistance matches housing and location needs of those on low and moderate incomes; and planning and allocation are equitable and based on need? Many objectives have little operational content. One consequence is that they are open to a variety of different interpretations (Box 4.1 illustrates the problem). Objectives may be stated in language so broad that the intent is capable of widely differing interpretations. In contrast an operational objective or an objective that has been given operational content is one where the intention is clear. Operational objectives are capable of being put into effect without ambiguity.
INDUSTRY COMMISSION 39 PUBLIC HOUSING
Broad objectives have their place, but at some point objectives must be operationalised — either implicitly or explicitly.
40 INDUSTRY COMMISSION 4 HOUSING-RELATED OBJECTIVES
Participants supported the Commission’s concern about unclear objectives. The Good Shepherd Youth and Family Service, for example, submitted: The Commission has identified the fact that the “stated goals” of state housing authorities (SHAs) usually comprise a long list of what might be called “motherhood statements” or ideals. These “goals” are rarely prioritised in such a way so as to identify easily the trade-offs that often have to be made in practice, due to financial constraints. This fact makes it very difficult to asses the “effectiveness” and “efficiency” of SHA programs (sub. 330, p. 3). The North Queensland Regional Housing Forum noted difficulties in clarifying housing assistance objectives, but endorsed clarification as a goal: ... Clear objectives always require a clear definition of target groups, their needs and the programs to meet their needs. Our concern is that housing assistance is not always able to be defined clearly thereby making the operationalisation of objectives difficult (sub. 322, p. 3). If the initial broad objectives are not operational, then who should make them so? What is better — for elected representatives to set objectives that are operational or to leave the task to be accomplished in a defacto manner by public administrators? Hundreds of specific housing assistance schemes are operated by different levels of government, each with its own objectives (see Appendix F). They range from general public housing, through numerous forms of community housing, special needs housing, rent assistance and bond assistance to home ownership assistance.1 The main reason for specific schemes is to improve targeting. However, improved targeting is achieved with an increase in administrative costs. A point must be reached at which the extra benefit from better targeting is less than the extra cost. Equity is also an issue — particularly where one group is assisted more than another. If there are too many schemes, accountability is clouded where different levels of government pursue similar schemes. Concepts of ‘need’ and ‘equity’ are used widely, but since they have no clear and consistent meaning for all who use them, they give rise to different expectations. They can be implemented efficiently, but there has to be agreement on meaning at a more specific level — this requires explicit consideration of trade-offs.
1 The Commonwealth and some State governments have indicated their intention and desire to rationalise the current number of programs.
INDUSTRY COMMISSION 41 PUBLIC HOUSING
Box 4.1: Making ideals and objectives operational? The CSHA lists a fine set of ideals. However, (possibly of necessity) its level of generality fails to provide unambiguous direction. Based on the CSHA, one of the shared objectives proposed during the 1992 funding renegotiation by the Commonwealth–State Standing Committee of Housing Officials was to: Ensure that the supply of affordable housing is commensurate with the need for it in the community (QDHLGP, 1993, p. 5). Circumstances often mean that the goal of ‘commensurate’ supply is not achievable. Nevertheless, operationalising this goal requires a clear understanding of what is meant by ‘affordable’ and ‘need’, at least at a State level. The Queensland Housing Assistance Plan 1993–1996 gives as its strategy to implement this goal: • Increase the supply of public and community managed rental housing commensurate with need (p. 24). What this means in practice is left unresolved. The performance indicators by which the outcomes of this strategy are to be measured are: • The extent to which additional public and community housing is provided is measured by: - additions to stock on an annual and three years basis. • The extent to which people who are unable to access appropriate housing in the private sector have access to the Department’s products is measured by: - the distribution of public and community housing relative to need as measured by waiting lists and recipients of Department of Social Security rent assistance. - the number of households assisted annually by region by: public housing; community housing; home ownership products; and private rental assistance products. - public housing as a percentage of residential dwellings by region (pp. 24–25). At the end of the three year period how will the community know if objectives have been met cost-effectively. Who were regarded to be in need? How many of them were there? How many were housed, affordably? What was regarded to be commensurate supply? Was the target met? If questions such as these cannot be satisfactorily answered, then accountability is impaired and the potential for continuous improvement is compromised.
42 INDUSTRY COMMISSION 4 HOUSING-RELATED OBJECTIVES
There is broad support for the principle that assistance ought to go more quickly to those in greatest need. But there may never be agreement about whose need is greatest. Limitations on the resources available to government to meet needs require trade-offs. Decisions have to be taken on how much assistance ought to be given to different groups with different levels and types of need. Security of tenure and good quality come at a price. That price may involve higher subsidies for tenants, reducing the numbers who can be assisted. These trade-offs call for answers to questions of the type: How good the quality? How affordable? If security of tenure is not possible for all (for example, to those renting privately) then on what specific basis is security to be accorded? And how widely is it to be extended, if not to all? The need for trade-offs extends to the broader objectives that housing authorities may be instructed to pursue — land banking, urban consolidation, support for the building industry and increased employment, and an ecologically sustainable and quality environment. What weight should be given to each objective? Should monies provided for public housing be used to pursue all of these goals? The (shared) objectives proposed by the Commonwealth–State Standing Committee of Housing Officials (see sub. 217, attachment 7) — namely that the supply of affordable housing is commensurate with the need for it; that housing assistance matches the housing and location needs, is provided in a cost- effective, efficient and equitable way; that choice is maximised; and that all forms of assistance are effectively integrated — are not immediately operational. This is because they call for trade-offs and because the objectives are not always compatible. Separation of commercial and non-commercial aspects of the activities of housing authorities would assist policy-makers in the formulation of clear workable objectives. For commercial functions, detailed objectives do not need to be specified by government. The authority can be left to get on with the job. Greater freedom may be given to commercial units in setting their operational objectives when they know how their performance will be assessed and the broad area within which they must operate. An ‘arms-length’ approach would involve a commercial unit being accountable to government principally for financial performance. For non-commercial functions more operational guidelines are needed. The functions of the housing authorities extend well into the area of social services. It is an area where government can be expected to detail non-commercial objectives and follow them up with a high degree of scrutiny. With detailed
INDUSTRY COMMISSION 43 PUBLIC HOUSING
financial and non-financial objectives specified, performance may be assessed and improved. Some housing authorities publish more detailed objectives than others. All can improve by publishing clear operational objectives to assist them and the community to monitor their performance. It is likely that the State housing authorities have more detailed (and one hopes more operational) objectives and indicators of performance to assist day-to-day management than they publish in their annual reports. However, public accountability depends on what is publicly available. The community has no other basis on which to make assessments of the performance of housing authorities. Where standards higher than the norm are imposed (say, environmental or building standards) the difference in cost ought to be funded separately. The extra cost should not be borne by clients or to the detriment of those on waiting lists.
4.3 Multiple functions Multiple functions can contribute to conflicting objectives. If trade-offs are not clearly recognised this can lead to poor performance. It is also easier for governments to interfere in the day-to-day operations of the authority. The history of the CSHA itself contributes to conflicting objectives. Its principles were devised originally in support of public housing as a generally available alternative tenure. In South Australia the operations of the Housing Trust come closest to meeting the perception of a generally available housing scheme. With the possible exception of the two Territories, the reality elsewhere is that access to public housing is limited to people on pensions and beneficiaries of social security payments, the vast majority of whom enjoy rebated rentals. As pointed out by Mant when reviewing the Department of Housing in NSW: Most of its capital funds have come through the CSHA which is based on principles supporting public rental housing as an alternative to home ownership (the principles of cost rent, security of tenure and quality of housing) notwithstanding the reality that public housing has become purely a welfare function (1992, p. 5). The effects of the CSHA are further discussed in Chapters 5 and 8.
44 INDUSTRY COMMISSION 4 HOUSING-RELATED OBJECTIVES
Accountability is also jeopardised by the additional roles taken on by, or required of, the housing authorities. As pointed out by Tapper: Homeswest is a large operation. It is ... Western Australia’s largest land developer, builder and property manager. Its house and land assets are estimated to be around $3 billion. It operates about 35 000 rental properties, or roughly five per cent of Western Australia’s housing stock. Its annual expenditure from all sources exceeds $600 million a year. ... In 1989-90, government agencies, of which Homeswest was the largest, developed half of all serviced residential lots in the Perth metropolitan area. In 1991, it had 10 000 subsidised home loans on its books, making it a significant player in the home finance market (sub. 40, pp. 1– 2). The Commission recognises that there will always be a multiplicity of objectives. They are often complementary and do not have cost consequences for the principle objectives. Concerns only arise when the objectives are not complementary and the achievement of one imposes additional costs on another. When this occurs transparency and accountability are compromised if the additional cost is not recognised and counted against the relevant objective. When a State requires activity not in the interest of the housing authority, the objective ought to be clearly identified and funded from the appropriate budget. Only then can the merits of this separate objective be assessed.
Better cities and urban consolidation The Commonwealth Government has included ‘Better housing and better cities’ amongst its broad social objectives. Many States also have urban consolidation objectives. Support for these objectives has arisen from concern about urban sprawl, especially around large cities, and the extent to which the environs will continue to support increasing demands that urban growth places on them. It is not clear that using public housing to pursue these objectives is the best method if there are additional costs. Both the approach and the additional cost need to be assessed against explicit objectives and any cross-subsidies identified. They are objectives that might be funded separately — not by money targeted for welfare provision.
Land banking Land banking and land development were examined in the Industry Commission’s recent inquiry into Taxation and Financial Impacts on Urban Settlement (IC 1993). There are sizeable land banking operations linked to the functions of housing authorities in most States. They seem to have been involved in these activities to ensure the orderly acquisition, management and release of affordable land (SAULT 1992).
INDUSTRY COMMISSION 45 PUBLIC HOUSING
In some cases (for example, South Australia), the housing and land development activities are kept at arms length. In Western Australia activities seem to be linked in ways which allow for little public accountability yet ensure cross subsidies from the land development arm to public housing. Regardless of whether land banking is worth pursuing (in the sense of benefits gained being greater than costs incurred) there is the potential to cloud transparency. Problems in pursuing one goal may be masked by using resources intended for another goal. The extent of cross-subsidisation between public housing provision and other activities is difficult to detect because costs, benefits and trade-offs are not at present explicit. Land banking and land development goals ought to be explicit and outcomes should be monitored against them. Retained earnings could well be to the benefit of public housing, but if the transfers are not made explicit, accountability is lost.
Counter-cyclical intervention and industry support The State housing authorities have variously supported their local building industry, especially in periods of economic downturn. It is not clear that such counter-cyclical support has always been of value. Due to the lags between decisions and construction, the support can add to rather than diminish cyclical movements. A State housing authority with a forward construction program may, during periods of economic downturn, commence early construction for purely commercial reasons. This is costless and does not need to be prescribed. However, at times, support for the building industry has gone beyond this form of ‘pump-priming’. As pointed out by Mant, when reviewing the Department of Housing in NSW: ... it has long been held by successive governments, housing departments and the building industry that funds for public housing construction are there to benefit the industry as well as those who may eventually live in the houses. The maintenance of a viable building industry and assistance to the industry have been and still are corporate goals of the organisation. There has been a cost, however, when houses have been built in locations and to designs based on the perceived and actual needs of the building industry rather than the long-term needs of the people (1992, p. 4).
Tenure for all? Is public housing solely welfare housing or should it be a tenure available to all? Historically it has had both roles.
46 INDUSTRY COMMISSION 4 HOUSING-RELATED OBJECTIVES
The reality is that public housing is no longer a tenure for all. By targeting assistance to those most in need and ensuring that those on high incomes receive little subsidy, the emphasis has shifted to a welfare housing role (see Chapter 2). This is the case in all jurisdictions. As pointed out by the then South Australian Housing Trust General Manager: ... the Trust is in many respects now carrying out a welfare role. This is because the Trust has responded to the need of those coming to it for assistance and adjusted its programs so that it is responsive to those people, the overwhelming majority of whom are in housing need (quoted in Egan 1993, p. 36). The community would not be getting full value for its resources if those who can pay, and therefore not those in greatest need, pay less than market rents. There are sizeable needs-based waiting lists and most tenants in public housing are eligible for rebates. Consequently, public housing is now provided to assist people with housing to a standard that they otherwise would not be able to afford. State housing authorities were, on the whole, established with the primary focus of providing housing. Initially it was low-cost housing open to all. This has contributed to the production focus identified by Mant in relationship to the NSW Department of Housing: The Department has remained primarily a public works organisation when the efficient management of assets and sympathetic assistance for people in need are the tasks to be done (1992, p. 5). The Commission supports Mant’s view that the changed nature of public housing requires greater emphasis on outcomes and service issues.2 This position was endorsed by the Department of Finance: It [the department] supports the Commission’s view that ‘public housing is no longer tenure for all’ and that the objectives of housing assistance should be welfare objectives (sub. 353, p. 1). Implications for the tenancy management role of the housing authorities are considered in Chapter 6.
2 This is not to say that public housing as ‘an alternative tenure for all’ is an inappropriate objective. There are arguments that favour such a goal. For example, it could reduce some of the stigma attached to public housing. However, it would require a completely unrealistic increase in funding with current stock levels.
INDUSTRY COMMISSION 47 PUBLIC HOUSING
Improving choice A public housing goal supported by most inquiry participants is to increase housing choice. Improving choice is a fitting objective but consideration has to be given to the accompanying incentives. Where appropriate choices are offered (to those in similar circumstances), in principle the full difference in cost of an accommodation choice ought to be paid by those who receive the advantage when making the choice. In this way people in similar circumstances receive the same benefit from government, horizontal equity is satisfied and governments commitment to appropriateness is met. Those who receive the assistance are often in the best position to assess whether the extra value is worth the extra cost when they face appropriate choices. They may be expected to know, for example, whether in their particular circumstances being closer to some amenity is worth so much in extra rent. In turn, feedback is provided about the quality and location of housing most valued by the tenant. However, because of the affordability criteria it may be necessary to only charge a proportion of the difference in rent. This aspect is discussed further in Chapter 6 where the Commission develops a rent setting model for public housing whereby tenants in better housing (as reflected in the market price) would pay extra, but all eligible tenants would continue to pay substantially less than market rents (see Recommendation 6).
48 INDUSTRY COMMISSION 5 AVENUES OF ASSISTANCE
There has been considerable debate in Australia and overseas on the best way to deliver housing assistance to low-income renters. However, for almost all participants to this inquiry the answer is clear — public housing. They point to deficiencies in the operation of the private rental market that cannot be overcome through legislation or by financial assistance to people in the private rental market, but are overcome when governments provide rental housing. The Victorian Council of Social Service stated: ... the private rental sector does not provide appropriate housing that is affordable. The quality, location and type of housing stock does not meet the current housing needs of many households. It would seem that the private rental sector, in its current form, does not and probably cannot, meet the full range of social objectives (sub. 169, p. 11). The North Melbourne Tenants Association added: ... the argument for universal rental subsidy for private rental accommodation and little or no public housing assumes that if people have sufficient money they will be accommodated in the private rental market. However unlike public housing authorities, private landlords can pick and choose who they rent to. There is usually no way to coerce a private landlord to accommodate someone they do not want to accommodate (sub. 81, p. 1). In contrast, the Real Estate Institute of Australia supported a greater role for the private sector: ... the private sector can and is willing to provide the greater proportion of the community’s housing stock, especially in areas currently catered for by public housing. The private sector can provide housing in a more efficient and market responsive manner than that provided by the current system, or under arrangements that essentially maintain a Government monopoly on the provision of housing stock for public tenants. ... The unwieldy apparatus of government ill befits it for the role of welfare landlord. Government’s long-term role should be restricted to addressing, in the national interest, the distinctive requirements relating to: • special interest groups; • disadvantaged members of the community; • emergency and crisis accommodation; and in relation to the broader economy • micro-economic reform and appropriate fiscal incentives for the private sector to facilitate a rapid investment in housing stock (sub. 103, p. 6).
INDUSTRY COMMISSION 49 PUBLIC HOUSING
In this chapter, after examining the problems for low-income people in the private rental market, a framework is established to analyse the main forms of assistance available to help people obtain affordable and appropriate housing. The forms of assistance considered — cash payments, housing allowances, public housing and headleasing — are assessed against the criteria of accessibility, affordability, appropriateness, security of tenure and equity. They are also assessed against economic criteria such as efficiency and cost- effectiveness. The assessment is summarised in Table 5.1 located at the end of this Chapter. Payments in the form of subsidies to private sector landlords to own and manage affordable and appropriate housing for low-income renters have not been considered. In Australia this form of assistance has not been particularly successful. Amounts of $13 million in 1990–91, increasing to $65 million in 1995–96, were allocated by the Commonwealth under the Private Rental Subsidy Scheme. Under this scheme, a subsidy was to be available for approved State government financial vehicles to use private sector funds to acquire or construct private rental dwellings. The scheme has been withdrawn. None of the funds have been used, largely because of the difficulty of establishing the appropriate financing structures (sub. 213).
5.1 Low-cost private rental market The low-cost private rental market is relatively large. One estimate of its size is the number of pensioners and beneficiaries receiving rent assistance. According to the Department of Social Security (DSS), about 919 000 of its recipients were receiving rent assistance at December 1992 (sub. 214).1 This compares with about 312 000 of its clients in public rental. Estimates of the size and composition of the low-cost private rental sector are provided in Appendix B. The case for government intervention in the low-cost segment of the private rental market arises because of the existence of market failure and market imperfections. These are briefly reviewed here (see also Appendix C). The rental market tends not to provide enough affordable dwellings for those on low incomes and is slow to respond to changes in demand at the low-cost end. An overwhelming number of participants gave evidence that low-income people, some Aboriginal and Torres Strait Islander people, some people with
1 About 65 per cent of DSS rent assistance clients are tenants in private dwellings. The remainder includes people in nursing homes or who are boarding or lodging. The number of DSS clients also includes husbands and wives on pensions, living in the same dwelling and each receiving rent assistance.
66 INDUSTRY COMMISSION 5 AVENUES OF ASSISTANCE
non-English speaking backgrounds, and those with special housing needs, such as those with disabilities, are not well served in this market (see Appendix A). Low-income households, families with young children and those who are perceived to be different — perhaps because of race — often find it difficult to obtain accommodation because others are preferred. Others have difficulty in finding suitable accommodation because the market does not readily provide for them. Included in this group are people with distinctive needs, such as large families who require more than three bedrooms, the mentally handicapped, and the aged and the physically disabled who require specially modified housing. Discrimination and prejudice on the part of landlords, which in part may be due to a lack of information2 about tenants, further restricts the already limited choices of many people on low incomes. Specific cases of discrimination are difficult to prove and are unlikely to be avoided by enforcing anti- discrimination legislation. From an economic viewpoint, rental markets are far from perfect. It is impossible for leases to cover all eventualities and there are often incentives for landlords and tenants to withhold relevant information from each other. Mechanisms for monitoring and ensuring compliance with rental agreements create perverse incentives (for example, to make false claims against bonds) and lead to further costs where third parties are required to resolve disputes. Although all tenants face these potential problems, low-income and special needs groups are at greater risk as they are less able to afford the costs of moving or enforcing their rights. They lack power in the bargaining process. The low-cost rental housing market has not attracted large commercial operators. Instead it is characterised by landlords who are typically small investors with 1 or 2 properties in which they have invested for security and capital gains or which are let for a limited period. The market for rental housing that is affordable to low-income people is a residual one.3 Housing in this market typically ‘trickles down’ from other uses. Consequently, supply responses are restricted.4
2 Discrimination due to this cause is referred to as ‘statistical discrimination’. It can be motivated purely by the landlord’s pursuit of profit when faced with incomplete information — the landlord having no personal disposition for or against any group. 3 In this respect it is similar to other ‘second hand’ goods markets, with a supply response contingent on maintenance and upgrading of existing stock. 4 In Melbourne in 1990–91, for a couple on unemployment benefits with two dependent children, only 97 out of almost 40 000 advertised rental properties with two or more bedrooms were affordable at 25 per cent of income (Victorian Department of Planning and Housing 1992, p. 17).
INDUSTRY COMMISSION 51 PUBLIC HOUSING
As a result, accommodation affordable to low-income people can be inappropriate in that it is run-down or in a location isolated from employment and educational opportunities, shops and other community infrastructure. As well, low-income people are at a disadvantage when it comes to paying rent-in- advance and bond monies, removal expenses and utility connection fees. The desire by tenants for secure accommodation can be at odds with the desire of landlords for a good return and an easily relettable or resaleable dwelling. Although tenants cannot generally be evicted within a fixed period of the lease, once this period is exceeded a tenancy can usually be terminated with a month’s notice. The security of tenure problems often experienced by low-income people mean that they are less able to plan their lives. They must constantly anticipate high relocation costs. The Commission received evidence that properties in the private rental market change hands on average about once every 7 years (see transcript p. 2472). Low-income tenants are further disadvantaged where they cannot (for many reasons) make the commitment involved in a fixed-term lease. Of course this is not evidence that security of tenure is not valued by them. Notwithstanding these problems, a large number of tenants choose the private rental market. According to the Housing and Location Choice Survey, around half of private renters in Sydney and Melbourne5 believe that the advantages of the private rental market outweigh the disadvantages (Burgess and Skeltys 1992, pp. 64–7). The advantage most commonly given for private renting was the ability to choose location of the residence. The disadvantages were largely financial.
5.2 Addressing tenants’ needs In this section, four forms of housing assistance are analysed. It is assumed that only one form of housing assistance is available at one time and so comparisons are made with unassisted tenants in the private market.
General income support Under a general income support approach, cash payments would be provided to private renters (and to other low-income people who are not renters) to ensure they have an adequate standard of living. The cash payment would generally be sufficient to purchase an adequate quality and quantity of necessities — including adequate and appropriate accommodation. However, the assistance
5 This includes all private renters, not just those in the low-cost segment of the market.
66 INDUSTRY COMMISSION 5 AVENUES OF ASSISTANCE
would not be tied to any particular expenditure. Unemployment benefits are an example of this type of assistance. The head of the household could trade-off expenditure on non-housing goods with housing to obtain a mix of expenditure that gives the head of the household (and perhaps the rest of the household) the most satisfaction. However, for private renters, this would not guarantee that households had appropriate or affordable housing. The approach ensures no greater security of tenure than that available generally in the private sector. Also, cash payments do not address some aspects of accessibility — discrimination in the private rental market is not addressed and access and search costs are not reduced. Cash payments may provide lower-income people with a greater choice because they have greater disposable income. However, there is no guarantee, at least in the short- to medium-term, that the supply of low-cost dwellings in the market would increase to improve the somewhat limited choice currently available in the low-cost segment of the market. This slow response stems from the nature of supply in the low-cost end of the private rental market (see Appendix C). There is also the risk that for some individuals cash payments provide perverse incentives. For instance, they may spend their cash payments recklessly in the knowledge that if they get into difficulty, governments will look after them. Because cash payments would not be tied to expenditure on housing, there is a likelihood that this approach would be poorly targeted. For instance, home owners and renters in similar circumstances may receive the same amount. The way in which cash payments are provided would determine the equity of distribution. For instance, vertical equity would require that the amount of assistance declines as a tenant’s income increases.
Housing vouchers and allowances Housing vouchers and allowances are a form of targeted cash payments provided directly to tenants to assist with the cost of renting in the private market. Vouchers and allowances can take various forms. The amount of the cash payment would usually reflect the income and the composition of the household, but some schemes may adjust the payment according to the rent paid.6
6 Some schemes also adjust the payment according to location.
INDUSTRY COMMISSION 53 PUBLIC HOUSING
Rent assistance, paid by the Departments of Social Security (DSS) and Veterans’ Affairs (DVA), is an example of this type of housing allowance. This form of housing allowance is, for most recipients7, equivalent to general income support (Varian 1990). Thus in these cases it is a housing allowance in name only. The DSS agrees with this view (sub. 214) since it is supported by its own research. An effective housing allowance is one that targets increased expenditure towards housing better than general income support. Vouchers can be made conditional upon the dwelling meeting certain standards and the subsidy may be paid directly to the landlord rather than the tenant. Overseas experience indicates that the more effective the housing allowance scheme is in the private rental market, the more expensive it is to administer. Vouchers and allowances can normally be said to broaden recipients’ choice. But the greater choice in rental properties may not exist in practice, especially in the short-term. Housing vouchers and allowances can improve accessibility to the private rental market, but search, transaction and moving costs remain and discrimination is not addressed.8 Based on evidence of participants to this inquiry, some landlords prefer not to rent to tenants in receipt of a housing allowance (such as rent assistance) presumably because the tenant is identified as being on a low income and therefore potentially a higher risk for the landlord (see Appendix A). Vouchers and allowances can be conducive to mobility between locations to meet the changing needs of the labour market. Housing vouchers and allowances primarily address the affordability of housing for recipients. The DSS (sub. 214) advised that prior to the March 1993 changes to rent assistance, over 590 000 clients out of some 870 000 were paying more than 30 per cent of their income in rent before receiving rent assistance. After rent assistance, this number dropped to about 404 000. The March 1993 changes were expected to leave about 320 000 (or about 36 per cent) still paying more than 30 per cent of income in rent.
7 If rent assistance recipients are paying rent which is above the rent threshold, an amount of money, equivalent to what they receive in rent assistance, becomes available for them to spend as they wish. This would be the situation for most recipients. However, in some circumstances, such as where an unemployed person lives with parents and receives no rent assistance, the availability of rent assistance may allow them to move into the private rental market and thus alter their mix of goods and services. 8 If dwellings must meet certain standards for tenants to obtain assistance as with some United States schemes, then search costs are likely to increase and there may be a greater likelihood of discrimination. Experience with such schemes is that take-up can be low.
66 INDUSTRY COMMISSION 5 AVENUES OF ASSISTANCE
Housing vouchers and allowances may have an impact on appropriateness of housing for those tenants who use the additional cash payment to increase their consumption of housing services. However, unless there are conditions specifying that tenants rent houses of a particular standard, tenants may forgo any improvement in standard of accommodation in order to increase spending on non-housing goods. This may benefit some members of the household, but others such as children, may be disadvantaged. They do not directly address the issue of security of tenure in the private rental market. Security of tenure could be addressed by legislation, but this in itself involves additional costs. The equity with which assistance is provided would depend on the design of the housing allowance or voucher. Currently, rent assistance is paid to private renters according to the rent they pay and the type of pension or allowance they receive but not their income. Therefore, there is vertical inequity in the amount of assistance paid under rent assistance (see Appendix K). As rent assistance is only available to those on pensions and allowances, there is also the potential that some people on low incomes will be ineligible (see Appendix K).
Public housing Public housing is owned and managed by government. The objective is to provide equitable access to affordable, secure and appropriate rental housing for low-income renters. Because of the benefits which (rebated) tenants in public housing enjoy, demand for public housing exceeds supply. Therefore, access to public housing must be rationed and so people wait to become public tenants, often for a number of years. In some respects, the accessibility of public housing is similar to that for home ownership. Both usually require a waiting period. Moving costs are much less compared to private rental — for instance, public tenants do not usually pay bonds or spend time searching for affordable accommodation — while choice within public housing would depend upon the availability of stock and the allocation procedures of the housing authority. At present, mobility in public housing is much lower than in private rental (see Box 5.1). According to the Housing and Location Choice Survey, public tenants in Sydney and Melbourne value the affordable rents and security of tenure, but dislike the current limited choice of location (Burgess and Skeltys 1992). Access to public housing does not preclude access to the private rental market. Therefore, although problems of choice within public housing need to be addressed, the option of public housing increases choice.
INDUSTRY COMMISSION 55 PUBLIC HOUSING
Because public housing tenants are usually required to pay an ‘affordable’ proportion of their income as rent, housing is affordable. Tenants have more of their income available to purchase other goods compared to private renters in similar circumstances without any form of assistance. In this way, public housing is a form of income support but it comes with other benefits as well.
Box 5.1: Mobility and public housing Impediments to mobility may hinder microeconomic reform (sub 353). While mobility increases economic efficiency many of the things valued by individuals are impediments to mobility. These include forming relationships, providing a stable environment for children and being a member of a community. Accordingly, a high value is placed on security of tenure — where security of tenure means not having to move unless you wish to. There is a case for changes in the administration of public housing that improve mobility without compromising security of tenure. These matters are addressed in Chapter 6.
There is some confusion over what security of tenure means in public housing in Australia. Although principles are set out in the Commonwealth–State Housing Agreement (CSHA) which suggest that State housing authorities may require tenants to move from one dwelling to another, many tenant and community groups claim that security of tenure within public housing should apply to a particular dwelling. This issue is considered further in Chapter 6 (see also Recommendation 4 and 5). There are other aspects of security for public housing tenants. Ms Lovejoy, a sole parent in public housing, put it this way: Having public housing, even now I’m employed, has given me the security of accommodation for my child, knowing that even if I were to lose my job, I could still afford to pay my rent. You have to understand the great importance of this to our lives (sub. 3, p. 1). Appropriateness is addressed largely through the standards set by the housing authority. This would include, for example, the standards used to determine the dwelling to be allocated to a household of a particular size and composition and the location of the housing stock in relation to services. In choosing to live in public housing, tenants currently accept reduced choice and mobility to gain affordability, appropriateness and security of tenure.
66 INDUSTRY COMMISSION 5 AVENUES OF ASSISTANCE
The goal of appropriateness may be linked to the perception that social benefits flow from appropriate housing (see Appendix E). Carter, Milligan and Hall (1988) put forward the following explanation of why the public is willing to contribute to housing programs for low-income people:9 While theories of physical determinism cannot be pushed too far, a series of reinforcing factors of deprivation and denial of the opportunity to participate in society can clearly be shown to be associated with antisocial behaviours which can affect others in society (p. 52). Not all public housing in Australia is appropriate to the needs of tenants. In part this is a result of earlier policies which led to public housing estates and high- rise units, and emphasis on cost-minimisation in construction. The housing authorities have been improving their asset management to make public housing more appropriate but this goal cannot be achieved quickly. Equity should be considered in terms of access to public housing and the way assistance is distributed and calculated. Currently, access to public housing in Australia is not very equitable. ‘Wait-turn’ waiting lists, although administratively simple, are not equitable. From a vertical equity perspective, those in greatest need should have to wait less time to be assisted. This cannot happen with a ‘wait-turn’ list, and ‘priority’ waiting lists provide only a partial solution. Different waiting times in different areas raises equity issues inasmuch as people who can afford to wait longer, choose a wait list that gives them better housing. Rent rebates received by public tenants are not equitable either. From a horizontal equity perspective, those in similar circumstances should receive the same level of assistance, not pay the same rent. Charging rent as a percentage of income ignores differences in amenities (for instance, location, number of bedrooms, access to services, condition of property) that tenants with similar incomes can receive from different properties. Allocation and pricing issues are discussed further in Chapter 6 (see also Recommendations 3 and 6). There is also an equity issue in the way funds are allocated to tied programs under the CSHA (see Chapter 3). Examples of tied programs are the Pensioner Rental Housing Program and the Aboriginal Rental Housing Program. If State housing authorities are providing housing equitably, there should be no need for separate allocations. This issue is taken up in Chapter 6.
9 Adam Smith, an 18th century philosopher and economist expressed a similar view: ‘Society may subsist though not in the most comfortable state, without beneficence; but the prevalence of injustice must utterly destroy it’ (Raphael and Macfie 1976).
INDUSTRY COMMISSION 57 PUBLIC HOUSING
Headleasing Headleasing occurs where, for example, a community group, funded by the State housing authority, leases properties in the private market and then sub-lets the properties to people on the public housing waiting list.10 Tenants pay a rent (based on their income) to the community group which is then passed (together with a subsidy) to the landlord. The community group usually guarantees payment of the rent to the landlord and agrees to make good any damage except for normal wear and tear. Under the current schemes operating through the CSHA, tenants are offered a public house when they reach the top of the waiting list. There is no reason why State housing authorities, like community groups and the Defence Housing Authority, could not headlease directly from the private sector. For tenants in headleased properties, the nature of the assistance is similar to that for public housing tenants except possibly for security of tenure. Accessibility is improved for tenants in headleased properties. Headleasing can address discrimination by putting a third party between the landlord and the tenant. However, inquiry participants said that some landlords headleasing properties to community groups would not extend the lease if they found tenants belonged to certain ethnic groups (Liverpool Rental Housing Association and the Bankstown Community Housing Association, transcript, pp. 783–4). Choice may be limited but search costs and transaction costs would be reduced, particularly if the organisation managing the tenancy were to pay bond and rent in advance for the tenant. Appropriateness can be addressed by headleasing but this would depend largely on the range of properties that the organisation managing the tenancy is able to lease and the subsidy available to fund the lease of appropriate properties. Security of tenure within the one dwelling cannot be guaranteed under headleasing because the dwelling is owned by a private sector landlord and leases have to be renewed from time-to-time. Under current annual funding arrangements for some headleasing schemes, community groups are unable to sign leases for more than 12 months but the Defence Housing Authority headleases some properties for 10 years. Equity would depend on the method of selecting applicants as well as the amount and distribution of assistance. Similar issues to those raised under public housing would need to be considered.
10 Headleasing is funded under the Mortgage and Rent Assistance Program as the Community Tenancy Scheme in New South Wales and the Community Rent Scheme in Queensland.
66 INDUSTRY COMMISSION 5 AVENUES OF ASSISTANCE
Headleasing can improve accessibility and affordability. Both landlords and tenants are likely to favour headleasing over housing allowances and vouchers. For tenants, this is because of the reduced costs of accessing the housing, including less discrimination. For landlords, it is because of the much lower risk. Participants advised that some landlords lower their rents on headleased properties because of this reduced risk (see Appendix A).
5.3 Addressing the economic criteria From the above analysis, public housing and headleasing appear to more closely address the social objectives of governments and the needs of many tenants. In this section, the same four assistance approaches are examined in relation to economic criteria — cost-effectiveness and efficiency of resource use and allocation. The cost-effectiveness of programs is assessed in terms of whether they meet their stated goals at lowest possible cost to the taxpayer. Program efficiency, which is concerned with making best use of available resources, is assessed in the broader context of government housing and social objectives. The efficiency and cost-effectiveness of these approaches is addressed first in terms of long-term housing needs.
General income support or targeted housing assistance? The four assistance approaches can be divided into two categories: general income support and targeted housing assistance. Targeted housing assistance is any assistance which is tied to housing and so would include housing vouchers and allowances,11 and public housing and headleasing. The main argument usually put forward in favour of general income support is that recipients of the assistance are free to spend as much or as little of the cash payment on rent as they see fit. Recipients are likely to get more satisfaction if they choose how a given amount of assistance is spent rather than the government. A counter argument to this is that benefits accrue to individuals where governments increase their range of choices as well as their income.
11 In the discussion that follows, housing vouchers and allowances are assumed to be ‘effective’. That is, they have the effect of reducing at the margin the relative cost of renting appropriate accommodation, compared to the cost of other goods.
INDUSTRY COMMISSION 59 PUBLIC HOUSING
Applying the analysis of Appendix E, the Commission accepts that targeted housing assistance is better than general income support in the long-term because: • There is more certainty with targeted housing assistance that those for whom the assistance is provided — such as the spouse and children — will receive it; • There is a risk with general income support that some individuals will not exercise due care to avoid the need for income support — this is known as the moral hazard problem; • Some of the benefits from targeted assistance — fewer social problems, better health, lower crime and better cities — would be available to a lesser degree from general income support; • There are many taxpayers who prefer that assistance be provided through housing assistance to those whom they consider need looking after;12 and • Housing assistance may be more efficient in that it makes recipients better- off and is less likely to cause poverty traps while costing the government the same as income support.
Public housing versus housing vouchers and alternatives If it is assumed that private and public provision are equally efficient in providing housing services to tenants, it is cheaper in the long-run for governments to provide public housing in order to achieve their stated housing goals. This is because additional housing supply is more costly for governments to bring forth under a housing voucher or allowance approach.13 It is more costly because increases in rents necessary to increase supply under a housing voucher or allowance approach must also be paid to existing landlords.14 This will result in net financial transfers from governments to landlords (as well as tenants).15 Under a public housing approach the net transfers to landlords will
12 That preferences of ‘donors’ require consideration in regard to the disbursement and form of assistance is sometimes referred to as the donor sovereignty argument (see Fisher 1977). 13 This outcome is a result of the nature of the private rental market and in particular the characteristics of supply in the low-cost segment of the market. It also stems from the government’s commitment to ensure affordable rents for those on low incomes. This effectively means that the government is the sole buyer in this market. 14 Governments could recover some of this net transfer through taxation. There would be efficiency losses because taxation would recover less than half the transfer and additional administrative costs would be incurred. 15 These net financial transfers to landlords occur despite tenants being the sole intended recipients.
66 INDUSTRY COMMISSION 5 AVENUES OF ASSISTANCE
be smaller, but it is difficult to estimate the extent of such savings. This argument is elaborated in Appendix E. Also, it is more cost-effective for governments to provide public housing to groups likely to be discriminated against in the private rental market than to provide incentive payments to landlords under a housing voucher or allowance approach. Although the government could liquidate its investment simply by selling all (or part of) its public housing stock, there would be no net benefit from doing so.16 Such an approach would have to be weighed up against its costs. These include: • Having sold the public housing stock the governments would have lost an effective physical hedge against the welfare costs that they face during cyclical downturns. That is, during a recession governments not only need to make greater welfare payments because of the greater numbers of low- income people, but because the housing stock is sold they will have to pay more per household (because low-cost housing rents increase as a result of the increased demand). • There would be additional costs of providing general rent assistance. The demand for the lowest quality rental accommodation would increase with the addition of those who previously resided in public housing. The former public housing stock, being of an appropriate and therefore better quality, would not all be retained in this low-quality market. As a result, rents would rise because of an increased demand (without a corresponding increase in supply). Ownership of public housing stock allows government the option of increasing assistance at a lower cost. Related arguments in favour of public housing are mainly to do with allocative efficiency and include: • Public housing providers are large enough to self-insure against rent arrears and damage to property. Private landlords, may obtain insurance in the private market, but is likely to be more expensive because of administrative costs and moral hazard. In any event they will require a bond and will charge a premium in the rent to cover perceived risk or cost of insurance.
16 Assuming equal efficiency of provision in the public and private sectors implies that the investment return in alternative investments should be no greater. Still, this does not mean that housing stock should never be sold. A State housing authority should continue to buy and sell its housing stock in accordance with sound asset management principles and changing requirements.
INDUSTRY COMMISSION 61 PUBLIC HOUSING
• The administration of housing vouchers or allowances can be costly.17 Administration for vouchers and allowances involves an additional expense compared to public housing. This argument would apply more to effective housing vouchers and allowances rather than the current rent assistance available through the Departments of Social Security and Veterans’ Affairs. • There is the risk that tenants and landlords may collude about the level of rent paid, adding to the cost to governments. • Supply may not be forthcoming under a housing voucher or allowance approach because investors may be reluctant to acquire additional stock if they believe there is a risk that the level of government assistance may not be maintained in real terms — a sovereign risk problem. Private provision is often more efficient than public sector provision. However, no evidence has been provided to support this for housing. State housing authorities now contract out construction and maintenance and in other areas may be more efficient because of economies of scale and scope and density. But even if public housing providers could be shown to be inefficient compared to the private sector, the above conclusion about the cost-effectiveness of public housing would still hold provided that the inefficiencies did not negate the identified savings. There are areas of potential inefficiency in State housing authority operations. These include: • The potential for State housing authorities to run down their stock because of financial constraints imposed under the CSHA (discussed in Chapter 3); • The potential for the housing stock to be poorly managed (taken up in Chapter 6); • The lack of good performance information to indicate areas where improvements could be made (taken up in Chapter 6); • Rent setting practices and transfer policies that need to be improved and wait lists that need to be harmonised (taken up in Chapter 6); and • Mismatches between the relative numbers of public housing clients in different categories and relative numbers of different types of houses available (discussed in Appendix J). Also, multiple functions of housing authorities may lead to inefficiencies in meeting welfare objectives and costs may be incurred when States use public
17 The Experimental Housing Allowance Program in the USA is known to have had program administration costs of 23 per cent. Costs of Great Britain’s Rent Allowance Program were of the order of 12 per cent (Hendrie 1988; Carlson and Heinberg 1978).
66 INDUSTRY COMMISSION 5 AVENUES OF ASSISTANCE
housing to support the construction industry and as an instrument of counter- cyclical policy (discussed in Chapter 4). With assets valued at over $31 billion, small improvements can lead to significant savings. The Commission’s proposed reforms outlined in Chapter 6 aim for more efficient provision of public housing through improved incentives and improved institutional arrangements.
Headleasing versus public housing Headleasing falls between public housing and housing vouchers and allowances in both efficiency and cost-effectiveness in the long-term. Headleasing provides qualitative advantages approaching the ideals that governments seek to give with public housing. Also, both landlords and tenants are known to prefer headleasing to housing vouchers and allowances. However, based on the experience of the Defence Housing Authority, the provision of housing services is more expensive through headleasing than through public ownership of stock (DHA 1992, p. 3) although this may be because the market for headleased properties is relatively new and ‘thin’.
5.4 Appropriate mix of assistance measures The community’s concern to ensure that people are adequately housed dictates welfare support in the form of housing assistance. The decision to provide housing services through public housing rather than direct demand-side measures, such as housing vouchers and allowances, should be determined by which is more cost-effective and efficient. Cost-effectiveness requires a set of objectives against which to assess the delivery of assistance. Under the CSHA, governments have agreed to provide people on low incomes with ‘access to secure, adequate and appropriate housing’ which is affordable. This is clearly a commitment to more than just providing access to affordable housing. When consideration is given to these ideals, public housing is clearly the preferred form of assistance, where the housing need is long-term. Housing vouchers and allowances cannot deliver the same standard of appropriate housing as public housing or for as low a cost in the long-run. In the short- to medium-term, public housing does not provide as flexible a response as either headleasing or vouchers and allowances. This is because of the capital nature of public housing. If governments are to respond flexibly to the varying needs of people, then options in addition to public housing are required. For these reasons, headleasing and rental allowances can be an effective way to meet some of the housing need, particularly of a short- to
INDUSTRY COMMISSION 63 PUBLIC HOUSING
medium-term nature. They are also better able to accommodate the needs of more mobile sections of the population. A mix of approaches is desirable in order to respond flexibly to the varying needs of people. Headleasing is potentially more flexible than public housing. It provides many of the benefits of public housing but the capital is provided by the private sector. If introduced on a reasonable scale, it may attract investors into the low- cost segment of the private rental market if the sovereign risk problem can be overcome by long-term contracts. Rent assistance, as a form of housing allowance, is a flexible way of delivering housing assistance. It is likely to be favoured as a response to short-term problems. This would include, for example, assistance to those on public housing waiting lists and those in need of short-term assistance, perhaps because of unemployment or family separation. The relativity between the amount of assistance paid to people in the private market receiving rent assistance and those in public housing receiving rent rebates is taken up in Chapter 7. It is difficult to answer the question of what is the appropriate mix of rent assistance and public housing. The relative level of rent assistance and public housing rebates; the objectives of government in terms of ‘affordable’ and ‘appropriate’ housing; who is eligible for public housing; and the quantity of public housing provided all have a bearing on the answer.
66 INDUSTRY COMMISSION PUBLIC HOUSING
Table 5.1: A social audit of housing assistance approaches
Rating and ranking of housing assistance approaches ______Criteria Cash payment Housing voucher/allowancea Headleasing Public housing
Social justice Targetingb Poor Average Good Good Accessibility Not addressed Poorly addressedc Partly addressedd Partly addressed Appropriateness Not addressed Partly addressed Addressed Addressed Affordability Poorly addressed Addressed Addressed Addressed Security of tenure Not addressed Not addressed Partly addressede Addressed Other concernsf Poorly addressed Partly addressed Addressed Addressed
Client problems induced Poverty trap Possible Less likelyg Less likely Less likely Moral Hazard Possible Possible Less likely Less likely Fraud Possible Possible Less likely Less likely
Efficiencyh Long-term 3rd 4th 2nd 1st
Cost effectivenessi Long-term 4th 3rd 2nd 1st
Other financial characteristics Capital outlay required Very little Little Modest Large Risk performance j Poor Poor Good Very good Administrative costsk Small Large Medium Smalll
Flexibilitym Short-term Good Good Medium Small
64 INDUSTRY COMMISSION 5 AVENUES OF ASSISTANCE
Notes to Table 5.1
a The assistance is assumed to be effective. That is, it has the effect of reducing the relative cost of renting accommodation, compared to the cost of other goods. Consequently expenditure on rental accommodation becomes relatively more attractive. b Toward those in long-term need but especially toward making rental accommodation affordable for those who receive it by effectively reducing its relative cost. See note 9. c Although moving from one tenure to another may be eased, it would not be eased by much. Search costs would remain high especially to those discriminated against. d Mobility within the tenure is possible, and associated search and moving costs can be lowered with appropriate policies. Some difficulty in moving into the tenure is likely to remain. e With leases of 5 years or more. f As well as concerns about physical outcomes and commitments to equity, these concerns include preferences as to the type of assistance and mode of delivery. g As argued in Appendix E, there is empirical support for an in-kind transfer in the form of effective rent assistance or public housing having a less detrimental effect on work effort than a cash payment (Steinberg Schone 1992). h Efficiency in terms of resource usage and allocation. i Cost-effectiveness in terms of the net cost to government to meet their housing objectives for those on low incomes. If the purpose is to make rental accommodation less expensive compared to other goods, then cash payments only have the effect of increasing income. The income effect generally results in more of all goods being bought not more of one particular good, in this case rental accommodation. Otherwise vouchers and allowances, headleasing and public housing are broadly as effective as each other although the costs of each approach differ. j Headleasing and public housing provide a ‘hedge’. The rental rates for those on low incomes can be volatile. When substantial increases occur, the need for increasing levels of assistance is greatest. Often this coincides with other increased demands on government revenue. Ownership of public housing and access to headleased property (with binding contracts) mitigates these difficulties. k Assumes public and private sector provision is equally efficient, ignoring any additional cost of program administration. The Experimental Housing Allowance Program in the USA, is known to have had program administration costs of 23 per cent. Costs of Great Britain’s Rent Allowance Program were of the order of 12 per cent (Hendrie 1988; Carlson and Heinberg 1978). The Defence Housing Authority found the administrative (and general) costs of headleasing to be greater than public ownership (DHA 1992, p. 3), but this could have been due to this market for headleased properties being relatively new and ‘thin’. l In the long-run there is no reason why program administrative costs ought to differ from those for a cash payment. m Flexibility in terms of meeting changing levels of need. Source: Industry Commission.
INDUSTRY COMMISSION 65 REFERENCES
Burgess, R. and Skeltys, N. 1992, The findings of the housing and location choice survey: an overview, Background Paper No. 11, National Housing Strategy, AGPS, Canberra. Carter, R., Milligan, V. and Hall, J. 1988, The Benefits and Costs of Public Rental Housing in New South Wales, Research and Policy Papers, Department of Housing, New South Wales. Carlson, D.B. and Heinberg, J.B. 1978, How housing allowances work: Integrated findings from the Experimental Housing Allowance Program, Urban Institute, Washington. Defence Housing Authority, 1992, Corporate plan 1991–1994, The Pot Still Press, Canberra. Fisher, F. M., (1977), On Donor Sovereignty and United Charities, American Economic Review, 67 (4), September, pp. 632-38. Hendrie, D. 1988, ‘Housing Allowances — Some empirical findings’, in Campbell, R. and Walsh, C. (eds), Equity in housing support: Papers and proceedings of the Second Housing Finance Workshop, Housing Industry Association, Canberra. Steinberg Schone, B. 1992, ‘Do means tested transfers reduce labor supply?’, Economic Letters 40, pp. 353–8. Varian, H. R. 1990, Intermediate microeconomics: A modern approach, 2nd edn, Norton, New York. Victorian Department of Planning and Housing 1992, The private rental market, Victorian Housing and Residential Development Plan: Project No. 10, Victorian department of Planning and Housing, Melbourne.
INDUSTRY COMMISSION 67 6 PROVISION OF PUBLIC HOUSING
The key challenge for the Industry Commission is to make recommendations which will further the reform process so that the State housing authorities will more effectively and efficiently achieve social objectives. These social objectives cannot be reduced to economic or commercial objectives (Victorian Council of Social Services, sub. 169, p. iv).
Although there is general agreement on the principles for delivery of housing services through the Commonwealth-State Housing Agreement (CSHA), there have been significant differences in the ways in which State governments have used their public housing authorities to meet housing needs.
6.1 Current approach
State housing authorities
The public housing authorities are either statutory authorities or government departments. They report to the responsible State minister for housing through an executive, and sometimes also through a board. Their operations are principally funded through the CSHA.
Most of the housing authorities were established immediately before and after the Second World War to build low-cost housing. This naturally led to a focus on production. More recently the housing authorities have been required to meet broader welfare needs and to deliver housing services as targeted welfare assistance.
The housing authorities own and manage about 370 000 dwelling units, accounting for almost 6 per cent of the housing stock in Australia. However, their functions extend well beyond provision of public housing. In most jurisdictions the housing authorities are involved in a variety of community housing projects, crisis and emergency housing, housing for special needs groups such as disabled or Aboriginal people, equity sharing schemes, home ownership assistance, private rent assistance, mortgage assistance, bond assistance, deposit assistance, land acquisition and land development.
PROVISION OF 67 PUBLIC HOUSING The housing authorities are amongst Australia’s largest government trading enterprises, being responsible for housing stock valued at over $31 billion (see Appendix H). The way in which they make use of these resources has a bearing on both the delivery of housing assistance and Australia’s wider economic performance.
The Victorian Council of Social Service said that:
While standards, discrimination and appropriateness of the private sector have undergone little change in the past decade, State housing authorities have undergone a major transformation. It may be that they are being judged on the basis of their performance of 10 years ago rather ’than now (sub. 8, p. 15).
The Commission agrees that housing authorities have made major improvements in the operation of public rental housing over the last decade. Although improvements are far from uniform, the housing stock is better managed; the authorities are more client oriented; and greater attention is paid to the environs and location of public housing in relation to community facilities. However, there remains considerable scope for improvement.
In the Commission’s view, changes are needed to improve the institutional arrangements of State housing authorities as well as the incentives facing both the providers and recipients of housing assistance. The areas of most concern are tenancy management, housing allocation, rent setting, asset management and transparency and accountability generally.
Tenancy management
The role of public housing has changed from one of constructing houses to one of meeting the housing requirements of people in need. This change requires a cultural shift within the housing authorities to focus more upon tenancy management and the needs of the tenants.
The majority of inquiry participants expressed strong support for public housing yet had reservations about aspects of tenant-landlord relations. They were particularly concerned at the dearth of community consultation and appeal mechanisms. Community and tenant groups in particular expressed dissatisfaction with arrangements for tenant participation, airing grievances or appealing decisions (see Appendix F).
68 PUBLIC HOUSING Some people have problems accessing housing assistance.1 People in need often have to approach many agencies to obtain the correct information or to apply for a particular form of housing assistance.
Problems of co-ordination were also highlighted by organisations concerned to secure public housing for people with special housing needs. Some argued that it is difficult and costly to have to deal with poorly co-ordinated levels of government in obtaining approval and funding for housing projects. They referred to difficulties in obtaining appropriate housing in the time frame allowed by the agencies providing funds for support services. Problems stem from the need to obtain funding from one government department and housing from another, both with significant lags. Participants referred to instances where people with special needs could not move into public houses because of hold-ups in funding for support services. These are problems discussed in Chapter 10 dealing with people in crisis and those with special housing needs. They are problems which call for a more holistic approach to the welfare needs of people who need accommodation as well as support services.
Housing allocation
The CSHA (which underpins public housing) embraces the ideal that those most in need are assisted first and that assistance is provided equitably.
However, the reality is that the concern to provide public housing to all low-income people means that those most in need are not necessarily being assisted first. Moreover, the timing of housing assistance depends on a public house being available in a specific location - not the availability of a housing subsidy.
There are also inequities. The eligibility criteria for public housing differ between jurisdictions and applicants have to wait different times for different types of accommodation in the same region. A single person is likely to have to wait significantly longer to receive public housing than a household eligible for a three bedroom house, even though that person is in greater need of assistance. This is because of the mismatch between the public housing stock and the accommodation requirements of those people in greatest need of assistance.
Problems occur because separate waiting lists are kept for different locations with applicants having to wait for public housing to become available in the location they choose. People cannot join a waiting list for locations where there is no public
1 See for example Sussex Street Community Law Services (sub. 272).
PROVISION OF 69 PUBLIC HOUSING housing. Also, people in greatest need often choose less desirable locations because these locations have shorter waiting times. Once allocated a public house, transfer to a more desirable area is often difficult. In contrast applicants who are relatively well off can trade-off a longer wait for a higher level of anticipated amenity.
The equivalence scales used by Australian housing authorities tend to discriminate against larger families, when compared to widely used equivalence scales based on expenditure patterns - such as the scales used in developing the Henderson Poverty limits. This means larger families become ineligible for assistance at proportionally lower income levels than smaller families (see Appendix J).Rent setting
The vast majority of public housing tenants pay rents determined by their income - not the market value of the property which reflects its location, size, and condition. But the quality of public housing is quite variable. This means that public tenants in similar circumstances can be allocated houses of significantly different amenity, but pay the same rent.
Because the rent most public tenants pay is limited to a fixed proportion of their income, the housing authorities do not receive information from their tenants regarding preferences for location and characteristics of housing (see Appendix 1). Further, the method of setting rents can lead to a disincentive for tenants to improve their income as this will lead to an increase in their rent.
State housing authorities currently use different definitions of household income when calculating rebated rent levels (see Table 1. 1). Generally, the income of the principal earner and their partner is included, regardless of whether the source is a wage/salary or from the government. The proportion of income of other household members included as assessable income varies between States, as does the inclusion of specific government payments such as family allowance, mobility allowances and disability allowances.
The treatrnent of casual and intermittent work when determining income for rent setting purposes is inappropriate in some States where a casual job brings an immediate rent increase which is premised on the wage lasting a year (Wulff, Pidgeon and Burke 1992). To quote one tenant:
Well 1 went back nursing and I earned $144 one week and I had to let them [housing authority] know and the next week 1 didn’t do any work and they put my rent up and 1 was only on that one shift and 1 had to go to them [housing authority] and tell them 1 was on casual wages and they said ’well pay the rent or don’t work at all. We can’t be bothered doing
70 PUBLIC HOUSING this all the time’. 1 had to go right back on the pension to get my rent back down (Wulff, Pidgeon and Burke 1992, p. 16).
Asset management
Housing authorities are constrained in meeting asset management objectives by the often unlimited tenure granted to existing tenants as well as limits on current and future funding (see Appendix H). Other objectives facing housing authorities - such as assisting the building industry or meeting government urban planning requirements - can conflict with efficient asset management.
The age profile of the public housing stock, the large housing estates and highrise buildings are other constraints. Some States (for example, Victoria) have a high proportion of older stock built in the 1950s and 1960s. The older, often inappropriate, stock is in part an outcome of State home ownership policies in the 1960s and 1970s when the then newer and better quality stock was often sold to tenants.
Older houses require higher maintenance and renewal expenditure to maintain the level of housing services. A past history of poor design, low construction standards and the use of inferior materials has further increased maintenance and renewal costs. It has not been possible in this inquiry to determine whether the public housing stock is being run-down but there is anecdotal evidence to suggest this is occurring (see Chapter 3 and Appendix H). Also, incentives under CSHA funding arrangements (see Chapter 3 and Appendix D) are likely to encourage capital works and renewal at the expense of maintenance.
There is a mismatch between the current public housing stock and the accommodation requirements of both existing and potential public tenants. Current allocation and pricing arrangements do little to provide appropriate demand signals for effective asset management.
Asset management is not helped by the current practices of many housing authorities in Australia valuing their housing stock at historical cost. The usefulness (and indeed relevance) of historical cost data is dubious given the very long lives of buildings. Market values should be used as the benchmark for valuing property assets where possible, because they reflect society’s current valuation of the assets.
The reforms proposed later in this Chapter would separate the functions of property and tenancy management. This separation would clarify the objectives of the
PROVISION OF 71 PUBLIC HOUSING property manager, which are primarily commercial, and provide incentives to manage property from a long-term perspective. A similar approach already applies to Australia’s Defence Housing Authority.
Transparency and accountability
Some housing authorities are using internally generated funds from other areas of their operations, such as land banking, to cross-subsidise public housing provision. Added to this, there is often conflict between various public housing objectives, impairing transparency and making performance assessment difficult (see Chapter 4). The effect is to obscure the real cost to the community of providing public housing. Governments and the community could make more informed decisions about how much public housing to provide if the size of the subsidy were known.
The objectives of housing authorities, as described in their annual reports and other publicly available documents, are not on the whole specific enough to enable an observer to determine whether the stated objectives have been achieved or not. The Commission agrees with those inquiry participants who complained that annual reports of the housing authorities provide no basis on which to assess performance (see Appendix F).
It is very difficult to establish useful performance indicators since there is a dearth of comparable statistical data on the operations of public housing authorities. Even where comparable data appears to be available, it is difficult to make meaningful comparisons between authorities because of different definitions of items such as ’maintenance’.
Since the performance of the housing authorities cannot be properly measured, they are not fully accountable to either the government or the community. It is unclear whether housing authorities are efficient or inefficient in the delivery of public housing.
Housing authorities can control (to some extent) the level of demand for public housing through their eligibility and allocation policies. They also have control over the supply of public housing (through construction and purchase programs). Poor performance in housing provision can therefore be covered up by adjusting the size of the waiting lists. Sharing responsibility for supported accommodation arrangements with community service agencies also clouds transparency, and accountability becomes a question of justifying unmeasured outcomes.
72 PUBLIC HOUSING It is understandable that most of the progress in performance measurement by housing authorities has been in housing production. There is a greater degree of quantifiable data in these areas. There is, however, a need to balance the indicators of throughput and activity (discussed in Appendix F) with measures to cover outcomes for the people being assisted.
6.2 Organisational reform of housing authorities
Clarifying roles within housing authorities would enhance accountability, transparency and co-ordination between agencies. To this end, the Commission recommends that the roles of property management and tenancy management be separated and that some functions presently undertaken by the housing authorities be assigned to more appropriate agencies (see Appendix G). This would involve the following reforms:
• Creation of a separate body (possibly a statutory authority or corporation) with the task of managing the housing stock (see Recommendation 8). This agency (hereafter referred to as the property manager) would be charged with ensuring the supply of public houses at the behest of the tenancy manager. The property manager would also be responsible to ensure that the stock is adequately maintained.2 This agency may best be accountable through a board to a Minister for building services. The property manager would receive a market rent for managing properties and so would be expected to pay a dividend to government.
• Creation of a separate unit or body to undertake tenancy management (hereafter referred to as the tenancy manager) with a corporate culture responsive to client needs (see Recommendation 9). The tenancy manager would lease properties from the property manager or private landlords and be responsible for the selection and administration of leases with tenants. The tenancy manager should also provide a referral service for other support services to tenants. Ideally, this agency would not report to the Minister responsible for property management.
• Consolidation of housing policy functions into an organisation separate from the tenancy manager and the property manager. The principle guiding this separation is that the organisation responsible for policy and regulation should
2 The arrangement for maintenance would be determined through long-term contracts between the property and tenancy managers. Tenants would deal only with the tenancy manager. Response to maintenance needs would be an important performance indicator for the tenancy manager.
PROVISION OF 73 PUBLIC HOUSING be, independent from service provision functions. Significant links should remain to facilitate good information flows.
• Movement of consumer tribunals to an appropriate department such as consumer affairs.
• Movement of land banking and development activities to separate commercially focused corporations.
Some States have already made some structural reforms along the lines proposed by the Commission. The Queensland Department of Housing and Local Government has established a business unit called the Housing Production Service. This unit has responsibility for producing and maintaining Queensland's public housing as required by the Housing Services Group. The Housing Services Group is responsible for the day-to-day management of tenant issues. A similar arrangement, though not formalised by incorporation of a business unit, is operated in the Victorian Ministry of Planning and Development (Egan 1993).
The Mant (1992) inquiry into the NSW Department of Housing recommended similar reforms, separating out the various functions of the housing authority and establishing them as semi-autonomous units under an umbrella department. Fully independent regional housing offices would serve as property and tenancy managers and be responsible for the provision of housing. These reforms are currently being implemented in New South Wales.
The Commission supports these moves but believes the reforms should ultimately go further. Full transparency and accountability will not be achieved until the property management is operated on a commercial basis with the property manager required to return a dividend to government. Once the property manager is required to meet financial targets, full separation is necessary to ensure that commercial success is not achieved at the expense of housing assistance, that is outcomes for people. It is a logical progression of the current process of establishing property and tenancy managers as separate business units within State housing authorities.
Property should be managed commercially, but not to the detriment of people in public housing. The New Zealand approach, discussed in Appendix G, allows the commercial imperatives to dominate. The purpose of making the commercial function explicit is not to make a profit - there is no profit to be made in subsidised public housing - but to make sure that resources are used efficiently.
The suggested separation of functions would make clear to governments the prices they pay for housing services, and allow them to compare those prices with market
74 PUBLIC HOUSING prices. The trade-offs between, for example, more or better housing would be fully explicit and there would be scope to assess the likely outcomes of policy decisions.
Part of the reason for separation is to ensure that the organisations concerned have more consistent and compatible objectives - without which it can be difficult to assess performance or detect the presence of corrupt behaviour.
Property management
The role of the property manager in each State would be set out in legislation. Its prime task would be to lease housing to the tenancy manager. It would have a commercial focus. It would have no direct dealings with tenants, its client being the tenancy manager.
The quantity, type and location of housing would be specified in medium- to long-term contracts negotiated with the tenancy manager. The property manager would be free to buy properties or to lease them from the private sector to meet the contract. Public housing properties could only be sold if the tenancy manager agrees that they are surplus. The property manager would not be free to secure dwellings purely to rent in the private market.
Property management functions would be decentralised, and managed largely from regional offices. The organisation and location of the property manager are discussed in Appendix G.
The property manager would be responsible for maintenance of public housing assets. Arrangements for carrying out minor maintenance would be a matter for negotiation between the tenancy manager and property manager. The tenancy manager would be liable for the cost of all maintenance above normal wear and tear, which should be recovered from the tenant.
Many inquiry participants argued that a housing provider with a commercial charter would tend to behave like private landlords, and some of the benefits of public housing such as security of tenure and non-discriminatory access would be lost. The proposed arrangement would avoid this. A tenancy manager and not the property manager would be responsible for providing security of tenure and non-discriminatory housing. The property manager would be required to meet the needs of the tenancy manager with a clear charter setting out its role.
The tenancy manager would pay a market-based rent (less the standard management fee for tenancy management) to the property manager for each property leased. One
PROVISION OF 75 PUBLIC HOUSING benchmark for the cost of tenancy management is the amount real estate agents charge to manage tenants in private rental properties.3 However, the long-term nature of the lease contracts could result in the tenancy manager receiving some further discount in recognition of the property manager’s lower transaction costs. The contractual payment should also reflect the greater certainty of income continuity offered by the tenancy manager (relative to private tenants) and the agreement by the tenancy manager to pay for any damage above normal wear and tear (irrespective of whether payment is obtained from the tenant).
The property manager would charge the tenancy manager the full cost of the services provided. This would clearly reveal the cost of public housing to the tenancy manager, the community and government. It would promote more informed decision making by governments.
The arrangements would allow a rate of return to be made on the housing stock. In turn, the property manager would normally be expected to pay a return on the asset as dividends to the government. The property manager should face the same incentive structure (taxes and charges) as landlords in the private market (these could be paid to the State government as an additional dividend).4 In turn, it should be capitalised to an appropriate degree to enable it to operate effectively in property markets (as discussed below).
One limitation to commercial activity would be the need to obtain agreement from the tenancy manager that stock is surplus before it could be rented directly to private individuals or sold. Full rent would be paid by the tenancy manager on any properties contracted from the property manager which remain vacant. If the tenancy manager wanted the property manager to retain a particular house because of its location, for example, but has no tenant for it, the property manager could lease that property privately for an agreed period. The tenancy manager would then make up any shortfall between the private rent (and associated administrative costs) and the rent the tenancy manager had contracted to pay.
It would be appropriate for the property manager to manage other State-owned stock and headlease to government departments for employee housing, and to headlease to local councils and non-government welfare organisations for
3 The Property Owners’ Association of Victoria put this at 7 to 12 per cent of rental income (sub. 156); in some States there is also an establishment fee for new tenancies of at least one week’s rent. 4 In most States, land tax discriminates against large holdings of rental properties. Special arrangements would need to be made to exempt the property manager.
76 PUBLIC HOUSING community housing and crisis accommodation. The proviso is that headleasing to government departments for employee housing should not interfere with its primary responsibility to serve the tenancy manager.
In turn, client agencies, including the tenancy manager, should not be constrained to lease only from the property manager. They should be free to enter into agreements with private landlords. The potential for private provision would act as a cap on pricing and also provide benchmarks by which the efficiency of the public provider could be gauged. Other indicators should be established to enable effective performance monitoring.
Corporatisation of government agencies is often the forerunner to privatisation. Privatisation of a corporatised property manager would not be desirable for reasons already discussed in Chapter 5 and Appendix E. The loss of ownership of the properties would expose governments to financial risks in providing housing assistance to low-income renters.
Selling public housing to tenants
In most cases, public housing tenants have insufficient income to bridge the gap between public rental and home ownership, even with State government assistance. If public tenants are able and desire to buy the property they are renting, they should be able to negotiate with the property manager. Where it is unlikely that a property will be available for sale, prospective tenants should be informed.
Given that the property manager operates on a commercial basis, it should be indifferent between selling or renting the stock, providing it receives the full market price and all costs are covered. public tenants would be entitled to any form of home purchase assistance for which they are eligible, but would otherwise pay full market price.
Financing and funding
The property manager could borrow for expansion of the housing stock. It might borrow through the State treasury so as to obtain the best terms, or it could borrow commercially. The extent of expansion would be limited by government borrowing limits5 and debt.
5 If the property manager were established as a commercial body, it would have a greater case to be exempted from government borrowing limits.
PROVISION OF 77 PUBLIC HOUSING If the tenancy manager were to require a large increase in the number of dwellings to be supplied, the property manager may need to receive capital funding from governments.
Valuation of assets
Market benchmarks should be used to value property assets wherever possible. They give a common basis on which to assess the value of State housing authority assets, allowing identification of the size of the public rental subsidy and thereby assisting governments to assess the effectiveness of public housing assistance.
Market valuation is not possible where similar accommodation is not available in the private rental market. In such cases, the asset value should be the current replacement cost (excluding the value of the land), adjusted for depreciation.
Full valuation is needed at regular intervals - say every three years - but property values could be updated annually, using a sampling method.
Asset management
It will be in the interest of the tenancy manager to provide as much information as possible to the property manager about future housing service requirements. Acquisition and renewal can then potentially be achieved at least cost, while maximising the disposal value.
Property managers should be free to maximise returns from houses that are no longer required. They should have the discretion to decide when and how to dispose of houses deemed surplus, and to lease surplus houses to the private sector where this is an appropriate short-term strategy.
Property managers should be free to engage contractors or to provide their own service.
Tenancy management
The Commission’s proposals call for tenancy management to be separated from property management. Separation would encourage the tenancy manager to be more responsive to the needs of clients and assist them in a more holistic way. On issues related to their housing, tenants would have contact primarily with the tenancy manager at a regional level.
78 PUBLIC HOUSING There could be better integration of support crisis and general housing assistance, and better co-ordination with areas such as Supported Accommodation Assistance Program, Home and Community Care, Disability Services Program. The tenancy manager would help clients to access government and non-government programs for which they are eligible. This goal should be pursued regardless of the organisational model adopted. Some options for the organisational location of the tenancy manager are given in Appendix G.
The tenancy manager would not control access to these other programs. To do so would mean unwarranted influence over important aspects of clients’ lives. The tenancy manager should be a facilitator and an advocate for tenants.
Consistent with this role, the tenancy manager would seek the views of tenants and their associations on issues affecting tenants. The tenancy manager may facilitate this through funding of tenants’ associations and by generally encouraging tenant participation.
An allied role of the tenancy manager would be to provide feed back to policy makers on how the programs fit, or fail to fit, together.
The tenancy manager should have staff trained to deal sensitively and effectively with diverse client needs. Some would have specialist skills - for example, staff trained in dealing with psychiatrically ill people. In many locations Aboriginal and Torres Strait Islander personnel should be employed to provide expertise in meeting the special needs of this group of people. Staff would also need to have knowledge of relevant support programs.
Housing policy
The Commission considers that housing policy advice should be provided by an organisation separate from both the tenancy manager and the property manager. (possibly a ministry). Housing policy that is often associated with public housing, for example urban consolidation, environmentally sustainable designs and heritage conservation, should be integrated with housing policy generally, and with urban and regional development as appropriate.
Tribunals, boards and committees
Housing authorities are often responsible for landlord and tenant legislation and for administration in relation to public housing tenants’ complaints and appeals. There
PROVISION OF 79 PUBLIC HOUSING is an obvious conflict of interest when the arbitrator is also one of the protagonists. Organisations such as the Housing Review Committee (ACT) or the Public Tenants’ Appeal Panel (NSW) should have independent status and be located in a department such as consumer affairs.
Land banking and development
Under the Commission’s proposals, land banking and land development functions would be relocated to other agencies separate from the property and tenancy managers. Separation would ensure that costs are not distorted or hidden by subsidies, and demand signals are not lost. Any community service obligations should be separately funded. Governments would then be fully informed as to the commercial viability of these activities.
6.3 Security of tenure
Security of tenure, as it applies to public housing, has not been clearly defined by governments. Governments have agreed under the CSRA (Recital D) to provide a choice of dwelling and locations appropriate to the tenant’s need .’where a tenant is required to move from one dwelling to another by a State’. Yet there is a common perception amongst public tenants that once they have a public house, they are entitled to stay there for life - that is, they have security of tenure over a particular dwelling.6
Security of tenure over a particular dwelling is an ideal that comes at a cost. It can compromise asset management and the efficient allocation of dwellings to households. These costs need to be taken into account wherever there are funding constraints.
Public tenants, particularly elderly tenants, value existing social networks. And families benefit from continuity of schooling and access to local amenities. The Commission therefore proposes that public tenants should have security of tenure to a local area, but not necessarily to a specific house (see Recommendation 4).
This does not mean that tenants would be moved for asset management reasons without regard to their needs or desires. For a start, the tenancy manager would have to agree to any change and there would have to be clear benefits to the
6 Unless the tenant fails to meet conditions of the lease.
80 PUBLIC HOUSING community from the move. It would occur under arrangements similar to those currently operating in a number of States - contact with the tenant would have to be handled sensitively and the tenant would be offered a choice of appropriate dwellings in the same local area.
The Commission’s proposed that security of tenure be to a local area is intended to cover circumstances where a dwelling has reached the end of its useful life and the maintenance costs are excessive, or where there are sound reasons for dwellings to be demolished and replaced by more modern dwellings with better amenities. In such cases relocation costs should be borne by the housing authority.
Limitations on security of tenure are particularly relevant where properties are headleased. If security of tenure for public tenants is ’for life’, the opportunity to headlease properties from the private sector would be greatly diminished. Yet headleasing has advantages in that authorities can be more responsive to the immediate needs of people.
There is a case for the tenancy manager to offer some leases under limited tenure arrangements, renewable subject to review, where the circumstances of tenants are expected to improve (see Recommendation 5). The offer of security of tenure ’for life’ to all people entering public housing would be inappropriate. By offering limited tenure arrangements, more options (including headleasing), are opened and housing assistance may be offered sooner.
6.4 Rents
The housing authorities presently try to ensure that tenants with similar incomes pay similar rents. Public housing of variable quality is allocated to tenants largely at the discretion of the housing authorities. This is inequitable where tenants on the same income and in similar circumstances pay similar rents for dwellings of different amenity.
The commission’s rent setting proposals offer a more equitable outcome for tenants (see Recommendation 6). The level of assistance (or the subsidy) would not depend as at present on the household income, and the market rent for the property they choose to rent. The subsidy would depend on household composition and income, and the market rent for an appropriate dwelling. This approach is illustrated in Figure 6. 1. An example of how rent setting could work is given in Box 6. 1.
PROVISION OF 81 PUBLIC HOUSING In the Commissions view, rents should be paid in advance, even if this means an initial rent holiday.
Outline of the proposed rent setting model
Families and individuals would be classified into broad categories on the basis of household composition - such as singles, singles with one child, singles with two children, couples, couples with one child and so on. A subsidy payment would be calculated for each income level within each household category.
Income, adjusted for assets, should be used to determine the level of subsidy paid within these categories. Ideally the relevant income would be total after-tax income including (most) social security payments. Since after-tax income would be administratively difficult to use, the ’generally’ equivalent gross income could be used instead. The definition of income should be consistent between States and have regard for the additional costs (including transport) incurred by people with disabilities.7,8
The Commission proposes that for each household category, a standard market rent would be set reflecting the cost of appropriate housing. The standard rent could be the average of market rents of all public houses that meet the appropriateness standard for public housing. Alternatively, it could be set at the market rent of housing within a specific location9 that meets the appropriateness standard. Each household category would have assigned a different standard rent because the size of appropriate housing would be different.
7 Consideration of additional costs faced by people with disabilities should be on a. case-by-case basis. 8 Where tenants income vanes, time lags in the adjustment of rents by housing authorities not only discourages tenants taking casual work but pushes tenants into arrears. Rents could be set on the basis of income over a number of previous weeks, so that the lags in adjusting rents upwards act the same as those when the adjustment is downwards. 9 The location could be chosen, for instance, because of its accessibility to services.
82 PUBLIC HOUSING Box 6.1: An illustration of the proposed rent setting approach
For an unemployed couple with two children whose only source of income is government benefits, household income is $332 per week.
If in public housing, they would pay rent under the current arrangements equal to approximately 25 per cent of their household income. This amounts to $83 per week - no matter what the market value of the property they are renting.
Under the Commission’s proposals, the tenancy manager would determine a standard market rent for a 3 bedroom house in the region - that is, the market rent for properties in the region that met appropriateness standards - say $170 (see A in Figure 6.1). The household would receive a subsidy that would ensure that the standard market rent was affordable given the household’s income and composition (see BC in Figure 6.1).10 Their subsidy would be the standard market rent of a three bedroom public house in their region ($170) less 25 per cent of their household income ($83), which is $87 per week. The household would receive this subsidy regardless of the rent that the tenancy manager has set for the particular public house they choose.
If the market rent for that house is below the standard market rent, say $160 per week, they would receive assistance of $87 per week and contribute $73 per week in rent (see DE in Figure 6.1).10 In this way they would be compensated for the lesser amenity of the house.
If, however, they choose a public house with a market rent above the standard market rent, say $180 per week, they would still receive assistance of $87 per week, but contribute $93 per week in rent (see FG in Figure 6.1). They would pay additional rent because of the higher amenity of the particular house.
Rents for existing tenants would not be affected, at least initially.
10 For simplicity, this example assumes that in the current and proposed systems, an affordable rent is set at 25 per cent of household income. In the Commission’s proposed system, there would be some adjustment for household composition through equivalence scales and changes in the rate of withdrawal of assistance to make assistance more equitable.
PROVISION OF 83 PUBLIC HOUSING Figure 6.1: Proposed rent setting model
Source: Industry Commission
Public housing tenants should increase their contribution to rent as e income increases. However, their contribution should be set so that at each level of income the rent paid is -affordable (see affordability benchmark in Figure 6. 1). in a dwelling for which the market rent is equal to the standard market rent, the tenant’s contribution to rent would be the affordable benchmark rent.
Households of different size and composition require different levels of income to be equally well off. For instance, a couple will require greater income than a single person to have the same standard of living. Allowance needs to be made for this when determining affordable benchmark rents for household categories.
Tenants in the same household category with identical incomes but renting dwellings with different market rents should receive the same level of subsidy - not pay the same rent. This is an application of the principle of horizontal equity - those in equivalent circumstances should be treated similarly. Those in better housing, as reflected by its particular market price, should pay more and those who choose to live in less valued public housing should pay less -that is, the tenant’s contribution to rent should be related to the market rent of the particular property. Under the Commission’s proposal, the subsidy would also be related to the market rent of appropriate housing – that is, to the standard market rate.11
11 The subsidy for a tenant in a particular dwelling can be calculated as the affordable benchmark rent (based on the tenant’s income and household category) plus the difference between the market rent (of the dwelling) and the standard market rent (for that household category).
84 PUBLIC HOUSING If tenants add significant value to their dwelling, such as through the addition of a carport, they would not pay a higher market rent for the greater amenity. Also, people with disabilities requiring support infrastructure would not have to pay a higher rent because of the cost of providing the infrastructure. The standard market rent would be for housing appropriate to their needs.
As governments are not able to assist everyone, they need to target those below a certain income, and withdraw this assistance as income rises.12 This would improve vertical equity because those on a lower income should pay a smaller proportion of their net disposable income on rent. Those most in need would benefit the most, given that their difficulty in allocating a portion of their income on rent is greatest.
The rate of withdrawal of assistance would be non-linear (see Figure 6. 1). Two conflicting objectives need to be reconciled in order to determine an appropriate rate at which to withdraw assistance. First, governments must maximise the cost-effectiveness of public housing by targeting assistance to those most in need. Second, they must minimise any effect the rate of withdrawal has on disposable income that would discourage those targeted from improving their situation.
Within each household category, a point will be reached as income increases, where the tenant’s contribution will be the full market rent. The precise level at which the payment of market rent comes into effect again depends on an appropriate rate of withdrawal of assistance. This market rent should reflect the higher security of tenure that public rental provides over private rental. The premium paid by public tenants for the extra security of tenure should be small, perhaps 2 or 3 per cent higher than comparable private rents (see Recommendation 7).
Under the Commission’s proposals, tenants would not be forced to leave public housing should their incomes improve and their subsidy be withdrawn. For some tenants it would be inappropriate to force them to leave because the improvement in their income may be expected to be short lived. The decision to leave public housing should be left to the tenants. If they choose to remain in public housing, then, provided they pay market rent, they are not being subsidised for their housing. It would be possible for the tenancy manager to lease a replacement dwelling for someone requiring assistance.
12 Implementation should occur only after a review of the impact of the withdrawal rates of housing assistance for low income renters, marginal tax rates and the withdrawal rate for additional income earned by Department of Social Security and Department of Veterans’ Affairs recipients.
PROVISION OF 85 PUBLIC HOUSING For the proposals to function effectively public tenants must have a reasonable choice of stock at the time of allocation and must be able to transfer between properties. When they come to the top of the waiting list potential tenants should have the choice of not one or two but at least four appropriate different dwellings with a range of rents within their area of interest. The household can then choose, for example, whether to trade-off the higher cost of an inner-city property with lower transport costs associated with housing in that location.
As the housing needs of tenants change, they should be able to relocate to a more appropriate house and be allowed to again exercise some choice over the dwelling. Tenants should bear some or all of the cost of relocation when it is at their initiative.
Where tenants cannot be given a ’reasonable’ choice of properties they should not be disadvantaged financially. For instance, if a tenant is offered only one dwelling and the market rent of this dwelling is larger than the standard market rent it would be unfair for them to pay for the additional amenity above the standard market rent. In this case, they should be asked to pay the affordable benchmark rent.
Implementation of the Commission’s rent setting model need not affect the rents paid by tenants already in public housing. It could apply for new tenants, with existing tenants either benefiting from a ’grandfather clause’13 or by having their rents change gradually (to those proposed). It is important that the level of subsidy households receive is explicit whichever option housing authorities adopt.
Further details of the proposal for setting rents are given in Appendix I.
Allowing for regional differences in rents
The Commission’s proposals recognise that the cost of appropriate accommodation varies by location and the level of assistance would need to change accordingly. States would be divided into a number of regions. Within each region, the amount of subsidy would be set so that at each income level, households can afford to rent a public house that is of an appropriate size and standard.
The principles contained in the CSHA and developed by the National Housing Strategy suggest that all accommodation offered should be at least of a minimum quality and reflect community standards.
13 A grandfather clause would mean that public housing tenants at the time of the change would receive dispensations under the new arrangements.
86 PUBLIC HOUSING An ‘appropriate standard’ would need to take into account amenity and access to services. The State would need to choose regional boundaries and the rent for appropriate housing in each region for the different household categories.
As the Queensland Council of Social Service noted, the key to the Commission's proposals on rent setting lies in the definition of 'region' (sub. 24 1).
In rural and remote areas a region may include only a particular town and dwellings in the surrounding community. This would avoid any disparities 'm housing costs between 'regions' with large differences in prices.
Testing the proposed rent setting approach
The proposal was tested on a representative sample of Queensland public housing tenants by the Centre for Urban and Social Research, Swinburne University of Technology.14
The indicative results (comparing proposed benefit with current benefit for the sample of tenants) were:
• Households on the lowest incomes in the sample would be slightly better off, most others would be as well-off or better-off except those in the sample on the highest incomes, and some singles and couples (without dependants) in detached houses;
• Couples (without dependants) would be better-off except those in two or three bedroom detached houses;
• Singles (without dependants) would be slightly better-off except those in detached houses with two or more bedrooms (see Figure 6.2);
• Those with dependants, whether couples or singles, would be at least as well-off except those on the highest incomes; and
• Except for inner-Brisbane the results reported above did not vary according to region, however, tenants in inner-Brisbane were generally worse-off.
Figure 6.2 plots for single public tenants m detached houses and pensioner units an estimate of the current rent rebate against the subsidy under the approach proposed
14 More detailed results on the testing of the Commission’s rent setting model are available in Pidgeon (1993) and Industry Commission (1993).
PROVISION OF 87 PUBLIC HOUSING by the Commission. For each dwelling type, dwellings are ordered by number of bedrooms and within number of bedrooms, by income of the tenant.
Figure 6.2: Comparison of current and proposed subsidy for single public renters in Queensland
(a) in two and three bedroom detached dwellings
Note: For each dwelling type, dwellings have been ordered by number of bedrooms and within number of bedrooms, by income of tenants.
(b) in one bedroom pensioner units.
Source: Pidgeon (1993).
88 PUBLIC HOUSING The inequity of the current arrangement can be seen - those on lower incomes in pensioner units, for example, receive about the same subsidy as many of those on higher incomes. Currently most singles in detached houses are receiving a rebate estimated to be over $100 per week whereas most singles living in pensioner units (and on similar incomes to the singles in detached houses) receive a rebate of less that $65 per week. The cost to the community of singles living in detached houses under the current arrangement is also clear.
The Commission’s model appears to work in this illustrative trial. The outcomes are more equitable - people on lower incomes receive a higher subsidy than those on higher incomes. People on the same incomes in dwellings of different amenity, in terms of size and type of dwelling, receive the same subsidy.15
Modification of the model
Market rents for public housing in large urban areas, such as Sydney, may vary widely due to differences in amenity. In Appendix 1 it is shown that the proposed rent setting model could, under certain assumptions, provide public housing tenants in Sydney with access to rental properties comparable in amenity (as reflected in market rent) to around two thirds of the private rental market.
However, some of the existing public housing stock in Sydney is poorly matched to tenant housing requirements (in terms of numbers of bedrooms) or is located in higher-priced suburbs. Under the proposed rent setting model, tenants wanting to move into these properties would pay high rents relative to their incomes and so their housing would not be affordable.16
If State governments consider it appropriate for public tenants to reside in higher priced locations then adjustments to the underlying rent setting model would be required so that the housing remains affordable. One approach would be to divide, for example, Sydney into a number of regions with each region having different standard market rents. People would be eligible for higher (lower) subsidies in regions with higher (lower) rents. This could provide incentives for people to choose housing in regions that maximise the subsidy they receive and so demand for these areas may be high. If this was considered inappropriate these incentives
15 Note that in this example no attempt is made to make the outcome revenue neutral. 16 Conversely, for other tenants, the market rents of some less desirable properties may be so low that they would pay little or perhaps no rent.
PROVISION OF 89 PUBLIC HOUSING could be lessened by adjusting standard market rents for each region but this is unlikely to be entirely satisfactory. However, any difference in the subsidy received within an urban area may lead to inequities, especially between tenants living either side of regional boundaries. Consequently, this approach is not recommended.
An approach favoured by the Commission would be to set an upper limit (and perhaps lower bound) on the proportion of income public housing tenants spend on housing. For instance, the limit could be set so tenants pay no more than 30 per cent of their income on rent (and perhaps a lower bound of 15 per cent). An upper limit of 30 per cent of income is higher than in current practice. But the tenant concerned could have chosen a dwelling with an affordable rent (for example, a dwelling carrying the standard market rent). Tenants who chose to pay up to 30 per cent of income are likely to be making trade-offs between rent and other costs, perhaps transport costs, or choosing to pay more to rent houses with extra amenities such as an additional bedroom.
One way of ensuring payments remain affordable (if necessary) would be to discount the additional cost (or saving) to tenants renting houses with market rent different from the standard market rent.17 An initial analysis of data for the Sydney market suggests that a discount of 50 to 75 cents in the dollar of the additional cost in some locations may be required to ensure that public housing remains affordable in Sydney (see Appendix 1).
This modification of the Commission’s rent setting model may be required in other cities with wide variations in rents to ensure rents remain within an affordable bound.
17 Consider the example in Box 6. 1. If the market rent for the property were $190 per week, the standard rent $170 per week, and the subsidy $87 per week, a tenant would pay rent of ($170 - $87) + ($190 - $170) or $103 per week under the basic model. Assuming a discount of say 75 per cent of the extra cost of the market rent over standard rent, the tenant would pay rent of ($170 ~ $87) + 0.25 x ($190 - $170) or $88 per week. With a discount of 100 per cent, the model reverts to the current rent setting system used by housing authorities. From a horizontal equity perspective, the outcome becomes more inequitable the larger the discount.
90 PUBLIC HOUSING 6.5 Access to public housing
Waiting lists
There would be advantages in a single segmented waiting list for each State, with a common set of eligibility criteria (see Recommendation 3).
This proposal has two important parts. First, there would be one waiting list for the whole State. The time it takes to receive assistance would not vary by location because of differences in the availability of public housing as is the current practice. With a single waiting list households with similar needs would generally wait the same length of time regardless of where they prefer to live within the State.
Second, the waiting list would be divided into a number of segments. People who are in similar need of housing assistance would be placed in the same segment of the list in order of their application. Most States currently have a two segment waiting list - a wait-turn and a priority list - for each region. The Commission believes it would be better to have more than two segments. However, the appropriate number of segments would depend on trade-off between equity and administrative simplicity, recognising that the assessment of people’s needs is subjective to some degree. These constraints are expected to limit the number of segments to four or five.
Currently the proportion of people accessing public housing by way of a priority list varies widely between States - from 1 per cent in Queensland to 50 per cent in the ACT. Also, people can wait up to 18 months for priority housing with the average wait being 6 months. Although these wait times appear excessive (for those assessed as needing priority access) it appears that different criteria are being used by State housing authorities. Some authorities have very tight eligibility criteria whereas others are less strict. This suggests that more than two segments for a waiting list is possible and worthy of investigation.
The size of the waiting list is not the important factor, but rather the length of time people have to wait. Those most in need have most to benefit from public housing and consequently it is appropriate and equitable that they wait the least time.
The role of the tenancy manager is to provide housing assistance to people - as a subsidy for use in public housing, or headleased private rental accommodation - when they reach the top of a segment of the waiting list. It would be up to the
PROVISION OF 91 PUBLIC HOUSING tenancy manager to respond to the specific needs of tenants and to offer the housing assistance that best meet their housing needs. As far as possible, prospective tenants should be able to choose between public and community housing. Similar levels of assistance would therefore be provided if people chose to enter community housing (see Chapter 10).
The rate at which people from a particular segment of the waiting list are allocated a dwelling would be determined by their need for housing assistance relative to people in other segments. This would mean that the average waiting time for a public house would be shortest for people in greatest need, and grow longer for each successive segment. It is important that eventually people from each segment are offered a house, albeit after different waiting times.
Assessment of eligibility and relative need
Eligibility criteria for entry to waiting lists should take into account the housing needs of the different sizes and compositions of households. At the very least, all households on low incomes who qualify for rent assistance should be eligible. Eligibility criteria should ensure that those who are eligible will be assisted in a reasonable period of time.
The Commission believes that applicants should be assessed at the time of application and again just prior to reaching the top of the list.
An applicant’s relative need should be assessed against a set of criteria - such as household income and composition, potential for discrimination in the private rental market, and current living conditions. The assessment could have regard to whether the need is likely to be short-term or long-term.
Each applicant’s circumstances should be considered within flexible guidelines. Clearly the guidelines should be interpreted broadly given the specific nature of individual cases. The relative housing need of applicants would be determined and they would be listed in the appropriate segment. Those in special circumstances, for example those currently in crisis accommodation, would require a greater degree of subjective assessment of the gravity of their needs. Applicants should be able to apply for re-assessment should their circumstances change.
The initial assessment could be undertaken by either a panel or a case officer from the tenancy manager’s office working within the eligibility criteria. There should be a right to appeal against decisions.
92 PUBLIC HOUSING A single segmented waiting list would lead to better targeting of assistance and more equitable outcomes. People in crisis, people with disabilities, Aboriginal and Torres Strait Islander people, and South Sea Islander People18 are most likely to benefit (see Chapters 10 and 11).
Those wishing to transfer from one State’s waiting list should have the time they have been waiting credited to the new list. Mobility ought to be treated neutrally, hence those who are on a waiting list should not be unduly discouraged or penalised from transferring (but neither should they necessarily be encouraged).
In relation to interstate transfers, the Queensland Government said:
Over recent years, Queensland’s relatively strong economy and generally attractive climate have combined to make it a major recipient of interstate migrants. ... Queensland would be therefore likely to receive a disproportionately large share of interstate applicants, who have earned waiting time in their home State and who then move when they judge an allocation in Queensland would be made quickly (sub. 345, p. 17).
These problems are likely to be reduced over time if the Commission’s proposals for allocation (detailed above) and the funding arrangements proposed in Chapter 8 are implemented. Waiting times for people in similar need but in different States would be expected to equalise over time.
6.6 Benefits from the new approach
By separating the major functions of tenancy and property management the Commission’s proposals would clarify objectives and separate welfare from commercial objectives.
With the separation of functions, measures of performance become meaningful, transparency is enhanced and conflicting objectives are avoided. It should be clear whether objectives are being achieved or not. This means greater accountability to both governments and the community, and incentives to encourage greater efficiency and effectiveness.
18 South Sea Islander people raised concerns about their sub-standard housing, low level of home ownership and non-recognition of their cultural needs. Some can access Aboriginal and Torres Strait Islander programs. The needs of the South Sea Islander people would be partially addressed with this approach. They would be able to apply for public or community housing by joining the waiting list and have their housing needs ranked against the needs of all other applicants.
PROVISION OF 93 PUBLIC HOUSING The restructuring of responsibilities would ensure that clients are looked after by organisations concerned about the delivery of housing services and dedicated to equitable distribution of assistance. An holistic approach to the delivery of welfare services would be possible.
The proposed housing allocation and rent setting systems are efficient and more equitable. They would allow for greater choice and flexibility for public tenants. Tenants could choose to pay less on rent and live in a public house of relatively lower amenity (perhaps an older house or one further from the centre of town) or pay more in rent and enjoy lower transport costs to the city, for example.
The cost of unrelated objectives could no longer be hidden, and therefore borne, by the public housing sector. The cost of government urban planning requirements or support to the local building industry, for example, would be clearly identified and funded separately from public housing.
Treating public tenants more equitably
Those people in greatest need of housing assistance who are still on waiting lists would have their needs better taken into account and would be likely to receive assistance sooner.
All public tenants would have greater choice over where they live. Those in properties of high market value could choose to move to a property of lower niarket value and pay less rent, freeing some of their income to save or spend on other goods. The tenancy manager would be more responsive to their needs and there would be greater flexibility under the new arrangements.
Those people currently in public housing whose income exceeds the eligibility criteria stand to lose since they may no longer receive subsidised accommodation. If they were not eligible for subsidy they would face the full market rent for the properties they occupy. This would improve equity within public housing, and it is a reform which most housing authorities are already moving to implement.
Rents for existing public tenants would be protected by a ’grandfather clause’ or their rents would be adjusted after a phase-in period. Public tenants who are fortunate enough to have been allocated above-average accommodation may face higher rents in the medium term. Alternatively, they could move to properties of lower market value and pay the same rent as before, or even less rent, if they so choose.
94 PUBLIC HOUSING Because people’s needs would be better taken into account in allocating assistance, there would be no need for the Commonwealth Government to tie funding to specific programs under the CSHA. The current arrangements can be inequitable (see Chapter 5). They can also isolate the housing needs of particular groups in ways that are not to their advantage (see Chapter 11).
Improved choice in public housing
An applicant whose name comes to the top of the list should be able to choose from a number of public dwellings. The dwellings offered should be appropriate to the applicant’s needs. Applicants who reject the offers should be placed back on the list, but not at the bottom. There is a trade-off between the benefits of wider choice for tenants and the administrative costs in providing it.
Knowing their subsidy, tenants would be able to choose to live in properties offering more, or less, amenity and pay slightly more or less rent than they are currently paying. Tenants would have greater freedom to choose the location and type of public housing, making the appropriate trade-off between cost and amenity.
Clear demand signals would be sent by tenants through the tenancy manager to the property manager. This would result in more appropriate stock being provided, in terms of location, size and cost.
There should be opportunities to transfer within public housing but unless this is also in the interest of the tenancy manager, the tenant should bear the cost.
Under the current arrangements, a public tenant who wishes to move interstate must join the new State’s waiting list at the bottom. This is inequitable and creates artificial barriers to movement.
The mismatch between current stock holdings and the requirements of tenants and new applicants means that it will take time for housing authorities to effectively increase the choice available to tenants.
***
The need for housing assistance is large and increasing. The sooner these reforms can be implemented, the sooner the benefits of a more flexible, efficient and effective public housing sector can be passed on to people most in need.
PROVISION OF 95 PUBLIC HOUSING 7 RENT ASSISTANCE PROGRAMS
Rent assistance is available to private renters receiving pensions and allowances from the Commonwealth Government. Some States have used untied funds from the Mortgage and Rent Assistance Program (MRAP) under the Commonwealth–State Housing Agreement (CSHA) to top-up these payments, often to people on public housing waiting lists. MRAP also provides bond and re-location assistance for private renters.
7.1 DSS and DVA rent assistance Rent assistance is provided by the Department of Social Security (DSS) and the Department of Veterans’ Affairs (DVA), to eligible tenants in private rental accommodation who pay above minimum threshold rent levels.1 Since March 1993 rent assistance is provided at the rate of 75 cents per dollar of rent paid above a threshold rent and up to a specified maximum rate of assistance. Threshold and maximum levels of assistance vary with family composition but not location. The amount of rent assistance paid to private renters is much less than the rental rebate to public renters on similar incomes. Further, public housing rebates are calculated on the level of income a household receives whilst rent assistance is determined by the level of rent paid by the household. Commonwealth outlays on rent assistance have grown from $234 million in 1984–85 to about $1.2 billion in 1992–93 (see Figure 7.1). This is a consequence of a widening of the eligibility criteria and consequent increase in the number of recipients — from approximately 500 000 in 1984–85 to just over 930 000 in 1991–92 — and an increase in the assistance per household — from a flat rate of $15 per week in 1984–85 to a number of differentiated rates in 1992–93 with a maximum assistance of $42.60 per week (see Appendix K). There are a number of problems with the current structure of rent assistance. The cap on rent assistance payments can result in people facing high rents in some locations receiving the same level of assistance as those where rental costs are lower. An inequity exists in rent assistance because the same level of assistance is available to households with different incomes. It arises because up to
1 See Appendix K for more details.
INDUSTRY COMMISSION 95 PUBLIC HOUSING relatively high levels of income, rent assistance is based only on the level of rent paid by the household. For private renters there is also an inequity between those who are DSS and DVA clients and those on low incomes who are not eligible to receive rent assistance. Those excluded include singles and married couples without children who obtain their income from sources other than a government benefit, and AUSTUDY recipients. The effect of withdrawal rates of DSS rent assistance, other benefits and allowances and concomitant taxation rates have the potential to cause poverty traps. All these combine to produce effective marginal rates of taxation in excess of 100 per cent for some recipients (Wulff, Pidgeon and Burke 1992). Given the identified inequities and anomalies, the Commission considers that the DSS and DVA rent assistance programs are in need of reform. The following considerations are relevant.
Improving DSS and DVA rent assistance
Commonwealth role It is a Commonwealth responsibility to provide income support to those people whose income is insufficient to achieve a minimum standard of welfare. In keeping with this income support role, the Commonwealth should continue to provide rent assistance to households on low incomes facing housing affordability problems in the private rental market. Renters on low incomes are unable to access public rental accommodation immediately (they are usually required to join a waiting list). These people require income support in the short-term to reduce their housing costs while they are waiting for public rental accommodation. Others on low incomes may choose to rent in the private market. In these situations it is desirable that the Commonwealth provides income support, such as rent assistance, to raise their standard of living to a socially accepted minimum. However, it would be costly to attempt to provide cash assistance to change people’s relative housing consumption. DSS states that rent assistance is not an attempt to change the housing consumption patterns of low-income people, but rather to provide an income supplement (see Appendix E and K). The Commission believes that rent assistance primarily acts as income support but there will be some households for whom the assistance will induce a relative consumption change.
96 INDUSTRY COMMISSION 7 RENT ASSISTANCE PROGRAMS
Figure 7.1: DSS and DVAa rent assistance outlays, 1984–85 to 1991– 92 $m 1400
1200
DVA 1000 DSS 800
600
400
200
0 84-85 85-86 86-87 87-88 88-89 89-90 90-91 91-92 92-93
Note: Expenditure by DVA on rent assistance from 1984–85 to 1990–91 are estimates. Estimates derived from information supplied by DSS and DVA. Source: Industry Commission.
Greater equity Currently rent assistance is only available to DSS and DVA clients. To provide for greater equity between people on low incomes, regardless of the source of income, rent assistance should be extended to all those on low incomes renting privately, including low-income households without children and AUSTUDY recipients (see Recommendation 17). The level of assistance should be withdrawn as income rises. In this way, people in similar circumstances (that is, facing the same opportunities) would receive comparable levels of assistance. Those receiving higher incomes should receive lower levels of assistance (see Recommendation 17). The benefits gained from increased income should not be gauged solely in monetary terms but should embrace broader measures of well-being. This involves, for example, the use of equivalence scales to compensate for family size and composition. There is a strong case for rent assistance to vary with clients’ circumstances, whereas currently clients with different incomes typically receive the same rent assistance payments.
INDUSTRY COMMISSION 97 PUBLIC HOUSING
The Commission’s proposal to link rent assistance to levels of income will exacerbate the poverty traps already inherent in social security payments, but it is not a problem which can be solved by DSS rent assistance policy alone (see Chapter 12). Before the above proposals are implemented there needs to be a review of the withdrawal rates of social security payments and rent rebates with the aim of harmonising them to minimise poverty traps, given marginal income tax rates.
Improved incentives The National Housing Strategy recommended that in pursuing a housing affordability benchmark the government should be guided by a number of principles, one being greater equality of subsidy across tenures. The Commonwealth Government in the 1992–93 budget foreshadowed that it would look into the feasibility of equalising assistance to low-income tenants in public and private rental accommodation by the year 2000. In the Commission’s view there should be some increase in the assistance available to people in private rental, though there is a case for less than complete parity of assistance with public rental rebates (see Recommendation 17). As argued in Chapter 5, ideals for housing set by governments are not achievable through rent assistance alone. Rent assistance does not necessarily guarantee people are appropriately housed and pay affordable rents.2 Therefore, governments are faced with providing higher levels of assistance — through public housing as the most cost-effective long-term means. Equalising rent assistance and rent rebates in public and community housing does not ensure equity in a social justice sense. Furthermore, it is not necessary for the achievement of equal treatment of public and private renters because private renters who are eligible can apply and receive public housing after some wait. A decision on the additional assistance provided to public tenants — relative to tenants in private rental — requires an appreciation of the net benefits gained through public housing relative to rent assistance. That is, the difference in assistance between public rebates and rent assistance should reflect the greater effectiveness and benefits of public housing.
2 Increasing rent assistance could have the effect of increasing government expenditure without the desired improvement to affordability or appropriateness. This would occur even if the recipients do not fully spend on housing the additional amounts received, or if the supply of low-cost housing did not significantly respond. In the latter case the government would be unintentionally increasing private landlord profit.
98 INDUSTRY COMMISSION 7 RENT ASSISTANCE PROGRAMS
The gap between rent assistance to private renters and public rebates should provide an incentive to choose public housing, but not be so great as to be perceived as unjust. The gap should be subject to regular review. Trade-offs between efficiency, effectiveness and equity will be required to determine the appropriate gap between rent rebates for public renters and rental assistance for people who are waiting to enter public housing. The extent of the gap and its justification should be explicit.
Regional variations The cap on rent assistance creates inequities between people who pay higher rents in some regions but receive the same level of assistance as those renting in low-cost regions. One way of providing greater equity in assistance would be to directly target extra rent assistance to those living in high rent regions. In a joint submission, the Department of Health, Housing, Local Government and Community Services (DHHLGCS) and DSS stated that there are a number of reasons for not varying rent assistance on a regional basis (sub. 331). First, discriminatory treatment of DSS clients across the States may offend s.117 of the Constitution. Second, the approach may create ‘zones of discontent’ as people in regions neighbouring high assistance regions would not be eligible for the higher level of assistance, even though there may be some high rent stock in the region. Third, rents in inner metropolitan regions may be higher because of better access to support services such as transport, thus providing offsetting benefits to the tenant. Finally, the Departments argued that there may be administrative difficulties associated with people living near regional boundaries. In their joint submission DHHLGCS and DSS stated that: ... the impact of high rent areas on the adequacy of rent assistance would be better addressed through further measures to target assistance to those with high housing costs relative to income within the current structure of assistance, such as through further increases to maximum rates (sub. 331, p. 32). Public housing provides a means of giving additional assistance to house low- income renters in high-cost areas. This overcomes the Constitutional issues raised if DSS rent assistance was provided at rates that reflect regional differences. The other issues raised in the joint submission and listed above are operational in nature and would need to be resolved at implementation.
INDUSTRY COMMISSION 99 PUBLIC HOUSING
7.2 Rent assistance component of MRAP MRAP is an untied CSHA funded program.3 States have to match most of the Commonwealth’s funding. In 1991–92, funds available for the program totalled $129 million — the Commonwealth and State contribution being $53.5 million and $36.5 million respectively.4 MRAP provides assistance to people experiencing difficulties in mortgage repayments, or people on low incomes facing difficulties in meeting rents in the private market and people requiring deposit assistance in purchasing a home. Relocation and bond assistance to low-income private renters on public housing waiting lists are all part of the States’ responsibilities under the rent relief component of the MRAP. This is appropriate because the States are responsible for regulating tenancy legislation. The Commission considers that States should continue to provide relocation and bond assistance to people facing financial difficulties in the private rental market. The argument for the Commonwealth to continue to fund these programs rests on whether it considers ‘ensuring that all Australians have access to more affordable and appropriate housing choices’ to be its responsibility (DHHCS 1992a, p. 5). States spent $65 million (50 per cent) of total funds available under the MRAP on the rent relief (cash subsidy) component in 1991–92. Even if the Commonwealth increases its rent assistance role there may be a role for the States to provide some cash assistance to people who have unavoidably high housing costs.
3 See Appendix K for more detail. 4 The remaining $38.5 million comprised funds carried forward, internally generated funds and funds transferred from the general allowance.
100 INDUSTRY COMMISSION 7 RENT ASSISTANCE PROGRAMS
REFERENCES
DHHCS (Department of Health Housing and Community Services) 1992, Housing: Choices for a Changing Nation, Budget 1992–93. Wulff, M., Pidgeon, J. and Burke, T. 1992, Public Housing and Poverty Traps: The Impact of Rent–Setting Systems, Centre for Urban and Social Research, Swinburne University of Technology paper presented at the Sixth National Conference, Australian Population Association, Sydney, 28–30 September.
INDUSTRY COMMISSION 101 8 A BETTER COMMONWEALTH–STATE HOUSING AGREEMENT
Inter-governmental financial arrangements influence accountability at the broadest level. They also have a bearing on the incentives facing housing authorities, and in turn the performance of government agencies. If the inter- governmental arrangements do not provide the right incentives, programs are unlikely to be fully effective and economic efficiency and accountability will be diminished. Governments are most accountable to the electorate when: • There is a direct relationship between the monies they collect through taxation, and expenditures on programs for which they are responsible; • There is a clear demarcation of responsibilities; • Policies have clearly defined objectives; • The cost and other consequences of decisions are transparent; and • Their agencies are fully accountable.
8.1 Commonwealth–State Housing Agreement The first Commonwealth–State Housing Agreement (CSHA) was signed in 1945 in response to a housing shortage after World War II. This Agreement formalised the joint responsibility for public housing. Public housing was conceived to be self-funding once the housing had been constructed, with rents set on a cost recovery formula. Provision was made for rent rebates with the Commonwealth agreeing to pick up 60 per cent of overall rental losses. However, the Commonwealth withdrew from this shared arrangement for rent rebates in 1965. Later agreements saw a shift in housing policy towards home ownership. This led to the sale of about 40 per cent of rental dwellings built between 1945 and 1971 and an increase in the proportion of remaining tenants requiring rebates. The Commonwealth Government introduced rent assistance in 1958 — at first just for pensioners. Initially, public housing authority tenants were eligible to receive the assistance. Following the 1981 CSHA, rent assistance eligibility criteria were changed to reduce the inequities in assistance between public and private renters. Rent assistance was withdrawn from public tenants in 1982.
INDUSTRY COMMISSION 101 PUBLIC HOUSING
From 1981, the Commonwealth increased the proportion of CSHA funds ‘tied’ to specific programs. For example, the 1981 CSHA allocated $200 million to Aboriginal and Torres Strait Islander people, pensioners and other special needs groups. Restrictions placed on public housing eligibility in the 1970s and 1980s further increased the proportion of public tenants receiving rent rebates and reduced rental incomes. Declining rental incomes and higher interest payments (due to States borrowing to meet matching requirements) and the rising maintenance costs of ageing housing stocks placed considerable pressure on the finances of housing authorities. The National Housing Policy Review (1988) of the 1984 CSHA found that the number of houses acquired would decline rapidly with Commonwealth grants increasingly being used to cover interest on State loans. The main outcome of the review was an all-grant system of funding for public housing. Housing authority costs, other than interest, were to be recovered mainly from rental incomes. The Commonwealth Government, through the CSHA, has provided the bulk of funds for public housing in Australia. Its interest has been largely one of ensuring expansion of public housing through capital investment. Although the States’ interests have varied widely and changed over time, there have been and continue to be financial and reporting tensions between the States and the Commonwealth.
8.2 Commonwealth–State relations Commonwealth grants to the States lead to a substantial blurring of responsibility and accountability. In the case of the CSHA, responsibility is particularly ambiguous because it is formally shared. Consequently, the collective decisions on policy matters provide opportunities for each level of government to escape scrutiny and avoid accountability. State agencies are left in a position where they have a great deal of latitude in how they formulate and manage their programs. The Commonwealth is a partner with joint responsibility but little real control over the effectiveness and the efficiency of the programs. It is currently trying to inject greater accountability into CSHA programs through performance monitoring. Shared responsibility also affects incentives facing governments. The CSHA funding arrangements reduce the incentive to provide services at least cost. State governments do not receive any financial benefit from cost savings
102 INDUSTRY COMMISSION 8 A BETTER COMMONWEALTH-STATE HOUSING AGREEMENT
because they must match Commonwealth payments.1 Indeed, funding on the condition that the monies must be spent may provide a perverse incentive. The CSHA schedules contain general statements of intended rather than measurable outcomes.2 Although CSHA expenditure can be attributed notionally, say as the number of houses built, it is not possible to judge how well the money is being spent or how well the needs of people are being met. For example, as discussed in Chapter 6, present rent-setting policies do not ensure that those most in need receive the greatest benefit. The lack of clearly defined objectives under the CSHA weakens the incentive to make decisions transparent. Even if there is a will to promote performance monitoring, the absence of outcome orientated objectives would constrain its effectiveness. The reforms which the Commission has proposed in Chapter 6 are aimed, in part, at improving transparency.
8.3 Should current arrangements be changed? Even small improvements in performance could bring significant gains since expenditures on public housing are in the order of $2.5 billion annually and public housing assets are estimated by the Commission to be worth at least $31 billion. In the Commission’s view the difficulty in quantifying these gains does not justify preservation of the status quo. Options for change should be identified and debated. Many participants objected to any change in the CSHA that lessened the Commonwealth’s role. A common view of the Commonwealth’s role is to ‘keep the States honest’ because without a strong Commonwealth involvement the States would reduce their funding support for public housing. Joint responsibility is also seen as insurance against ‘aberrant’ decisions by governments that, as a matter of ideology, might reduce the level of housing support. These arguments can be questioned on several grounds. First, the States are already in a position to reduce their level of support by running down the public housing asset, irrespective of the matching payments required by the CSHA. Second the States, with their responsibility for housing and development policies, are well placed to make housing policy judgements. Indeed, with housing costs varying widely across the country, States may be in a better
1 They benefit by being able to provide higher levels of service. 2 For true accountability, outcomes should be expressed in terms of the number of people to be assisted, the standard of housing considered to be appropriate and where it is to be located, and so on.
INDUSTRY COMMISSION 103 PUBLIC HOUSING
position than the Commonwealth to balance housing with other social priorities such as infrastructure to support economic growth, education and health. Finally, historical outcomes lend support to the view that the States are not always committed to public housing, but this may be the effect of objectives or inappropriate incentives created by the CSHA. If this is the case, governments should review their objectives and the CSHA arrangements should be changed. Another argument is that change would destabilise arrangements that are mutually acceptable. This ignores the possibility of better outcomes. Indeed the NSW Government supports the Commission’s concern that the focus of the CSHA be changed from building housing stock to providing appropriate shelter for the maximum number of people in need (sub. 354).
8.4 Which level of government should deliver housing assistance? One of the considerations of the functional review of housing programs conducted for the 1990 special Premiers' Conference was the level of government that should have responsibility for housing assistance. At the time of the review, there was already agreement by all levels of government that there should be a reduction in tied grants as a proportion of total Commonwealth payments to the States. The four options for change were (DHHCS 1991a): • States solely responsible through absorption of Commonwealth funding into general purpose payments; • Shared responsibility through an enhanced CSHA; • Shared responsibility through broad banding that eliminated the specific purpose funding; and • Allocation of sole responsibility to the Commonwealth. The review concluded that State and local governments are the appropriate level of government for the delivery of housing services, but it was not resolved which of the first three options was most appropriate. Housing Ministers agreed that a basis for co-operation between the States and the Commonwealth in housing policy will have to be developed, and that the role of the States in delivery of housing services should be strengthened. State government ownership of the public housing stock is reason alone to support this finding. Another compelling reason is State and local government responsibility for the regulation of building, land use and regional development, all of which have a significant bearing on housing costs.
104 INDUSTRY COMMISSION 8 A BETTER COMMONWEALTH-STATE HOUSING AGREEMENT
8.5 Commonwealth housing interests Given that States should deliver housing assistance, what is the Commonwealth’s role? Is it possible to clearly separate responsibilities? Should the Commonwealth continue to be a party to inter-governmental arrangements on housing and, if so, in what capacity? The Commonwealth Government does not have a constitutional role in housing provision, except to fulfil its responsibilities under international treaties through the indirect route of the external affairs power. However, one area of Commonwealth interest in public housing flows from its responsibility for income support. Other Commonwealth interests stem from concern to: • Safeguard against an increase in the level of welfare support required if housing is not provided efficiently and effectively; • Ensure that public housing assets, to which the Commonwealth has made a considerable contribution, are used for the intended purpose of providing rental accommodation for people with low incomes; and • Ensure equitable access to low-cost housing that is appropriate to the needs of households across the country.
8.6 Separating responsibilities Where different levels of government are involved in the provision of housing there should be a clear delineation of their respective roles. A Commonwealth role recognised in the Commonwealth Constitution is social welfare benefits and pensions. The States have legislative responsibility for land, housing and urban development. The Commonwealth’s interest in housing would be clearer and transparency increased if it were confined to income support and the provision of incentives to the States to meet specific objectives in providing housing assistance. Under this scenario: • The Commonwealth would administer income support policy; • States would have responsibility for public housing; and • From 1995, the CSHA could be replaced in part by bilateral agreements consistent with the new regime of responsibility. A number of participants argued that the demarcation of responsibilities is clouded by the link between affordability and appropriateness. Despite this
INDUSTRY COMMISSION 105 PUBLIC HOUSING
linkage, the proposed division of responsibility provides a basis from which objectives can be operationalised. The Commonwealth would have to justify its actions in terms of its income support and other housing responsibilities. The States would be responsible for ensuring that all their citizens are appropriately and affordably housed. Where it is in the interest of each level of government to jointly support public housing, outcomes for each flowing from negotiated bilateral arrangements can still be assessed against their separate objectives. What has to be determined is the extent to which governments utilise opportunities for mutually advantageous collaboration. In keeping with its income support role, it is proposed that the Commonwealth make payments to the States equivalent to the sum of the rent assistance that each public tenant would receive if in private rental. This would presently amount to approximately $550 million. State governments would assume full responsibility for housing allocation, rent setting, security of tenure and appropriateness policies. Consequently, the level of overall support for public housing would be determined independently by each State but subject to bilateral agreements with the Commonwealth with respect to support payments. This should encourage more efficient service delivery because any savings would reduce the State funding requirement. It should also promote better integration of housing assistance with land use and regional development policies. There would be no need for national agreement on the matters for which States are responsible. However, this would not preclude agreement on matters where there is mutual benefit to be gained. For example, States may wish to adopt a similar level of support to prevent people ‘shopping around’ for assistance. The payment equivalent to rent assistance would be the sum of the payments for each public tenant. It would be provided for each eligible household, although an appropriate sampling method could be used to determine the overall payment. It should be assumed that the tenant pays the market rent for the purpose of calculating the level of assistance. For administrative ease, rather than paying rent assistance directly to tenants, an amount equivalent to the rent assistance payment could be passed to the relevant tenancy manager (see Chapter 6 for the role of the tenancy manager). This would be a payment distinct from Department of Social Security (DSS) rent assistance paid to recipients to avoid conflict with the Social Security Act, which presently only allows for voluntary transfers from clients. The States would be free to adjust the level of their housing stock. Although some States may face financial pressures to reduce the level of their support for public housing, they would also be subject to pressures from welfare groups
106 INDUSTRY COMMISSION 8 A BETTER COMMONWEALTH-STATE HOUSING AGREEMENT
that, with improved transparency, could readily identify the real level of support. More importantly the Commonwealth could provide incentives to maintain or expand public housing as set out in Section 8.7. Fiscal neutrality for the Commonwealth could be preserved by reducing current Commonwealth CSHA payments by the amount needed to fund the rent assistance payment. This would be a notional adjustment and have no net effect on the current flow of funds for public housing. States would continue to be responsible for principal and interest payments on debt to the Commonwealth. The overall flow of funds to the States would only be preserved if the balance of current CSHA payments continue to be transferred, either as specific purpose payment for housing or general purpose financial assistance grants. States indicated that they could not support the proposed changes if they were to be worse off financially.
8.7 Ongoing Commonwealth support for public housing There are financial gains to the Commonwealth from State public housing provision. Consequently, it is in the Commonwealth’s interest to provide support payments to the States in addition to the proposed rent assistance payment for subsidising public housing tenants. The continuing involvement of the Commonwealth in the support of public and community housing is consistent with its responsibility for income support. Public housing can be used to provide support in addition to capped rent assistance where housing costs are high. The Commonwealth would need to take into account the circumstances of the people in public housing in each State when determining the size and distribution of the support payment. Factors influencing the decision about the degree of support for public housing that fulfils the Commonwealth’s responsibilities are: • public housing is the most cost-effective way of ensuring housing is appropriate and affordable; • rent assistance is an important means of targeting short-term income support to those renting in the private rental market; • rent assistance is a blunt instrument because the constitutional restrictions militate against it being varied across the country to take account of differences in housing costs;
INDUSTRY COMMISSION 107 PUBLIC HOUSING
• rent assistance does not guarantee that people, including children and members of groups discriminated against in the private rental market, are appropriately and affordably housed; • public housing, as a supply response, can be targeted to those who are in long-term need of assistance; and, • the provision of public housing assists both public and private tenants where there is inadequate supply of low-cost rental properties. In deciding on the degree of support it should provide for public housing, the Commonwealth has to pay particular attention to the overall supply of low-cost rental accommodation. Without adequate public supply, rents could be expected to rise because private supply is unlikely to be responsive to price, especially in the short-term (see Appendix C for a discussion of the residual nature of the private rental market and its supply responsiveness). Low-income people would bear the cost. After-housing poverty would rise. Overcrowding would increase to the detriment of health. Social problems could arise at a cost to the community generally where, for example, children are unable to fully realise their potential. Without an adequate supply of public housing, the Commonwealth would be faced with increasing outlays on income support. The additional assistance would not be targeted as effectively, resulting in higher overall program cost — and people would not necessarily be appropriately housed. Any attempt to ensure that people are housed appropriately, say through an effective voucher system, would increase costs further (see Appendix E). The benefits flowing from public housing provision are: • the increase in affordability attained both in private and public rental; • the incremental improvement in housing standards in both public and private rental (up to the level that the Commonwealth regarded as appropriate); and, • any other social justice objectives achieved (in addition to those flowing from the Commonwealth’s income support role). The support payments to the States in addition to the proposed rent assistance payment would be in support of both existing public and community housing tenants and those to be housed by an expansion of the stock. The payment could be conditional on appropriately housing an agreed number of households. If appropriate, capital could be provided for expansion of the stock on condition of matching support and retention of stock numbers. The payment would not discriminate against those who rent in the private market because those tenants are able to apply for State public housing if eligible.
108 INDUSTRY COMMISSION 8 A BETTER COMMONWEALTH-STATE HOUSING AGREEMENT
The support payment should be paid only if people were housed. It would provide effective leverage because State governments would be under pressure to house all the people for whom a support payment was available. The flow of Commonwealth and State funds under the proposed arrangements is shown in Figure 8.1. Initially, the sum of the equivalent rent assistance and support payments could be notionally set at an amount equal to the current Commonwealth funding. This would allow the separation of government responsibilities to be recognised before the current CSHA funding agreement expires.
Figure 8.1: Commonwealth and State housing assistance payments
Commonwealth
State treasury Commonwealth support payment Return on capital State subsidy Rent and dividends assistance
Market rent Housing assistance Property manager provider Rent assistance (Tenancy manager)
Affordable rent payment
Public tenant Private tenant
Source: Industry Commission
The essence of the current inter-governmental accord formalised in the CSHA would be unaffected. Financial flows to the States would be unaltered for the life of the present funding agreement. Outcomes consistent with the present operation of the CSHA could be maintained without any change to the level of services received by public and community housing tenants. The size of the support payment for individual households could be pegged to some proportion of the subsidy that each State accords to them. This is likely to be compatible with the Commonwealth’s interest as the subsidy reflects need.
INDUSTRY COMMISSION 109 PUBLIC HOUSING
States may be reluctant to house tenants that require larger State contributions to rent rebates. Therefore, the support payment should be arranged so that as far as possible the residual State subsidy is the same for all tenants irrespective of their income. The size of the support payment for those housed by an expansion of the public housing stock should reflect any increase in housing cost. It would be a sharing of the additional cost burden of expansion. However, there should be allowance for the capital gain on existing stock, realised by the State each time a house is sold. The Commonwealth would negotiate with each State to determine the size of the support payments. Because the payments would be determined by need, funding relativities could differ significantly from the current per capita Commonwealth funding under the CSHA. Negotiations would have regard to differences in housing costs, the additional costs in housing people with disabilities and the number of people in various categories in need. As a safeguard against sovereign risk and to ensure gradual and planned adjustment to any changes in funding, the resulting agreement would need to extend over a number of years. The three year period applying to the current CSHA is an appropriate benchmark. The Commonwealth and State payments, by income level, under the proposed arrangements after the change of responsibility had been fully implemented are illustrated in Figure 8.2. The proposed support payment would be in the nature of a contractual transaction, not inter-governmental finance. It should be seen as a payment for a service, where the States are acting as agents. Nevertheless, it could be treated as a specific purpose payment from the Commonwealth. The Commonwealth Grants Commission (CGC) has advised that it is unable to make a firm decision on the treatment that would be accorded the proposed payments. Its preliminary view is that the rent assistance equivalent payment would not be taken into account (treated by the deduction approach) in determining general revenue grant relativities. The CGC tentative view is that it is unlikely that the support payment would be regarded as a reimbursement to the States for service. Therefore, it could potentially affect general revenue grant relativities (being treated by the inclusion method). If the payments were taken into account they may have little impact on relativities because they would be determined on a needs basis that reflected cost disabilities, amongst other things.
110 INDUSTRY COMMISSION 8 A BETTER COMMONWEALTH-STATE HOUSING AGREEMENT
Figure 8.2: Housing assistance and rent contributions when proposed arrangements are fully implemented Dollars
Benchmark market rent Public tenant contribution
State housing assistance
Commonwealth support payment
Commonwealth rent assistance
Household income Source: Industry Commission.
The Western Australian Treasury submitted that: In the case of housing, the Grants Commission should assess, against its standard policy benchmark, the expenditure required in each State (whether financed by the State or the Commonwealth) for both public housing and rental assistance for private tenants. The difference between these “standardised expenditures” and the Commonwealth’s actual payments to each State (ie comprising CSHA payments and direct payments by the Departments of Social Security and Veterans’ Affairs) would be compared with the corresponding national per capita average difference to determine the contribution of the housing function to each State’s general revenue grant. This method of including Commonwealth outlays in the Grants Commission’s assessments is termed the “inclusion approach” by the Grants Commission, and is described in the Commission’s 1993 Report on General Revenue Grant Relativities (Vol. 11, p. 202). By including Commonwealth outlays in the Grants Commission’s housing assessments, incentives for States to shift costs onto the Commonwealth are eliminated without the need for the Commonwealth to provide specific purpose housing payments to the States. States which opt for a small public housing sector will receive a lower general revenue grant (because the general revenue grant will be reduced by the large Commonwealth subsidy for private tenants), and similarly, States which opt for a large public housing sector will receive a larger general revenue grant (sub. 369, p. 2).
INDUSTRY COMMISSION 111 PUBLIC HOUSING
The Commission could not assess the efficiency of the suggested approach. However, the CGC would have to be directed by the Commonwealth Government to include the specific purpose payments provided to meet a Commonwealth responsibility — DSS and DVA rent assistance — as these are normally excluded from the determination of financial assistance to the States.
8.8 The strategy for reform The right mix of assistance measures depends on their cost-effectiveness and how well they can be targeted, their equity in delivery and their affect on efficiency through the incentives they create. Having decided to assist people with housing, or a combination of assistance measures including housing, governments must resolve whether to intervene on the supply-side or on the demand-side through housing vouchers or rent rebates. The right mix of measures depends on market responses and the cost-effective achievement of objectives such as ensuring that people can access appropriate housing both in the short- and the long-term and are not subject to discrimination. People can be assisted through a number of tenures in a supply-side response. The options are public housing, community housing and headleasing from the private sector. The right tenure depends on people’s particular needs and the most cost-effective way of providing a house having regard to supply conditions. Governments are currently taking decisions with only limited information as to the cost of housing assistance. The capital grants used to fund public and community housing are a poor indication of the cost of assistance. The cost of capital is better measured by the opportunity cost of the stock rather than the size of annual injections. States also have latitude to use funds in support of programs other than public housing. Commonwealth funding for public housing is currently disbursed on a per capita basis with no requirement for the States to report on how effectively the assistance is provided. It is unlikely that the number of people in need and level of assistance required is directly related to population. The inequities in the levels of assistance provided to those in public housing and the many Australians who remain in housing stress indicate that the assistance is not well targeted. If housing assistance is to be delivered efficiently, governments must be better informed as to who is benefiting, the level of benefit and the cost to those in need of assistance but not presently targeted. The NSW Government supported
112 INDUSTRY COMMISSION 8 A BETTER COMMONWEALTH-STATE HOUSING AGREEMENT
this view. However, such an assessment in itself will not reveal the appropriate mix of assistance measures because the effectiveness of each form of assistance is currently unknown. The need is for policies that will allow the right level and mix of assistance measures to emerge. It is a matter of first getting the framework right. The reforms proposed for public housing (see Chapters 6) would help provide the necessary information, but they will take time to implement. Stock adjustments will have to be made in the face of limited opportunities to buy and sell property. Precipitous action could disadvantage people or increase the cost to government of assistance. A long-term strategy is therefore required. Greater emphasis on recurrent funding is central to the proposed strategy. It would assist transparency and provide a direct basis for measuring the cost of the assistance. Furthermore, given that most people now entering public and community housing will receive rent rebates, funding recurrent subsidies is more directly linked to the achievement of outcomes than providing infrastructure. It enables the funding effort to be measured against the need for assistance by people whose housing options are constrained by their circumstances. This strategy assumes that governments have a long-term commitment to assisting people. If this is so, a change in emphasis from capital to recurrent funding is unlikely to reduce support. Indeed it is likely to lead to increased support if the current level of assistance is being sustained by an erosion of the asset because funding is too low to sustain the current level of capital investment. Moreover, reform necessitates an ongoing commitment by governments and agreement on financial arrangements that extend over a number of years, just as they do now under the CSHA.
INDUSTRY COMMISSION 113 PUBLIC HOUSING
BIBLIOGRAPHY
Department of Health, Housing and Community Services 1991, Report on Functional Review of Housing, mimeo, Canberra. National Housing Strategy 1991, Framework for Reform, AGPS, Canberra.
114 INDUSTRY COMMISSION 9 COMMUNITY HOUSING
Recent years have seen the introduction of a range of new housing models managed by tenants, community and religious bodies, local governments and the housing authorities. Much of the impetus has come from community and local government housing assistance programs, begun in the early 1980s, which provided financial assistance for the purchase, construction and upgrading of dwellings for low-cost rental housing, including boarding houses and hostels. The reforms described in this chapter are part of an overall package aimed at improving the effectiveness, efficiency and equity of housing assistance. In order to understand what is proposed, readers should first read Chapter 6.
9.1 Government programs The Community Housing Program (CHP), introduced in 1992–93 by the Commonwealth Government, builds on the small but growing community housing movement. The new program is funded by tied grants under the Commonwealth–State Housing Agreement (CSHA). Community housing can be an important part of the armoury of housing assistance. It adds to housing choice, and for those who are able to participate in self-help arrangements, there are opportunities to develop social and work- related skills. It provides opportunities to harness resources, such as capital provided by others, through shared equity arrangements and to reduce the cost of housing assistance to governments. Commonwealth CHP funds are allocated on a per capita basis with a minimum of $400 000 for each State.1 Funding is guaranteed to 1995–96 — $52 million in 1993–94, $57 million in 1994–95 and $64 million in 1995–96. Not all funding is through the CHP under the CSHA. For example, the Victorian Rental Housing Program uses untied funds. Some housing is provided under the Aboriginal Rental Housing Program which is a tied program. The New South Wales Community Tenancy Scheme is funded under the Mortgage and Rent Assistance Program (MRAP).2 Also, much of the housing
1 CHP does not require matching funds from the States (unlike, for instance, the Mortgage and Rent Assistance Program). 2 That program provides interim, affordable community managed rental housing for low- income households usually through headleasing arrangements with private sector landlords. More details are presented in Chapter 7 and Appendix K.
INDUSTRY COMMISSION 115 PUBLIC HOUSING
provided under the Crisis Accommodation and the Supported Accommodation Assistance Programs could be regarded as community housing which is being directed to people with particular housing needs (see Chapter 10). Some States support community housing projects funded outside the ambit of the CSHA. For example, Queensland’s Community Housing Partnership, which requires applicant organisations to provide land plus 10 per cent of purchase or construction costs, is funded from the Auctioneers and Agents Fund. Appendix L gives greater detail on community housing programs. Community housing usually involves sponsorship. The sponsor(s) can be another government agency, a local government, a charity or other non-profit organisation. The sponsor may provide capital, services (including support services), materials, labour, tenancy management or take responsibility for maintenance. The scheme must be legally incorporated with sound accounting procedures and management structures. The contributions which tenants and the sponsor make in the management, ownership and operation of community housing vary greatly. Schemes range from those with little participation from the tenants and with little contributed in the form of equity or services from the sponsor, to schemes with a high level of involvement by either or both. There are currently about 15 000 community (including co-operative) houses, excluding community houses provided to Aboriginal and Torres Strait Islander communities under the Aboriginal Rental Housing Program and the Community Housing and Infrastructure Program. Inquiry participants sought increased government support in this area, but there was also concern that the support might come at the expense of public housing.
9.2 Aims and achievements The over-riding objective of the CHP is to develop a viable community housing sector whilst also providing legal, technical and management infrastructure to support its expansion. Funds are therefore used mostly for capital purposes, but they can also be used to promote community housing. They cannot be used to meet the administrative costs of the program. Housing assistance under the program is available to low- and moderate-income people. The sponsoring organisation has the right to choose all the tenants so long as the proportion of tenants who are eligible for public housing is commensurate with the CHP contribution.
116 INDUSTRY COMMISSION 9 COMMUNITY HOUSING
One intention is to promote linkages with support services and encourage the integration of community housing with public housing programs. This accords well with the thrust of the Commission’s proposals aimed at developing a more holistic approach to the delivery of housing assistance to people in crisis and those with special housing needs (see Chapters 6 and 10).
Advantages Community housing potentially offers benefits not usually obtained from public housing.
Benefits to tenants Community housing increases the range of housing choices available to those on low incomes or with special housing needs. However, under some forms of community housing, selectivity is practiced which raises questions of equity. Other benefits suggested by participants relate to the scope for individuals to improve their lives and life prospects, through their involvement in management. Involvement was said to bring feelings of security, provide opportunities to develop self-reliance, and lead to the acquisition of social and work-related skills. In the longer-term, those assisted may enjoy better prospects and need less assistance (than they would otherwise require). Compared with public housing the tenure offers similar levels of affordability. Security of tenure can be similar, although this depends on the scheme. Appropriateness may not be addressed to the same extent. For example, because fewer dwellings are available in a scheme there may be fewer options for tenants when their circumstances change. Another potential difference is accessibility.
Benefits to governments Community housing brings savings to government by harnessing additional resources from the wider community. For example, contributions to capital and in-kind resources, such as donations of land and materials, can assist governments to expand housing assistance. In supported and other accommodation, economies of scope may lower the cost of providing services.3 In assessing the benefits to government, ownership of the asset can be important. Public housing is owned by the State whereas in many forms of
3 Certain services can be produced or distributed together more economically. Economies of scope arise whenever average costs are lowered by producing (or distributing) more than one good or service together.
INDUSTRY COMMISSION 117 PUBLIC HOUSING
community housing, a sponsor may own the property or share ownership with the government. As argued in Chapter 5 and Appendix E, the government gains extra benefit from ownership. This benefit takes the form of profits that arise when governments intervene in the market and the higher than normal returns that sometimes flow to land and property owners. Where there is no government ownership of community housing stock, or ownership is shared, the government benefit is smaller.
Problems raised by participants Many inquiry participants were concerned with the effectiveness of community housing, citing numerous contributing problems (see Appendices A and L).
Funding and support The Australian Local Government Association complained of unnecessary delays in receiving project approvals, funding agreements and other critical documents from State departments (sub. 102). The Western Australian Municipal Association (sub. 38) was critical of unwieldy administrative overheads and bureaucratic handling procedures requiring approvals from all three spheres of government.4 Other changes introduced under CHP are in response to difficulties in promoting the tenure. Partridge pointed to the need for governments to increase their commitment in this area, particularly in the light of the limited experience of the voluntary sector (sub. 143, p. 1): ... transfer to the community of significant management responsibilities and expectations of accountability can not be achieved without a very dramatic rise in commitment by government to a systematic program of community management training and management support services. Current levels of funding mean that schemes in Australia are generally small compared to those overseas. The average size of co-operatives is about 17 dwellings compared to 34 in Canada. In Denmark the average size of community housing projects is about 700 houses. It seems that within Australia most programs have yet to reach an efficient scale. However, sometimes a number of schemes come together to obtain the benefits of bulk purchasing, for example, insurance.
4 The NSW Ombudsman (1993, Summary, pp. I–II) recently reported to the NSW Parliament that the Department of Housing had failed to establish efficient management procedures. The Ombudsman reported that ‘a mystifying bureaucratic maze has obstructed the approval and funding of projects, in some cases for years’.
118 INDUSTRY COMMISSION 9 COMMUNITY HOUSING
On the other hand, concern was expressed about the capacity of current schemes to take advantage of any economies of scale. The Sunshine Coast Regional Housing Council (sub. 107, p. 7) claimed ‘the numbers of houses to be managed in order for economies of scale to operate can be beyond the capacity of community groups’. Some participants regarded the income mix of tenants to be important. In the Commission’s view this is not important for economic viability because it is unlikely that tenants with higher incomes will contribute more than a market rate of rent to subsidise tenants on lower incomes. That said, the level of government and sponsor support must be higher where a scheme has a large number of people with low incomes.
Accountability The Australian Local Government Association (sub. 102), the Federation of Housing Collectives Resource (sub. 43) and other participants referred to the need for improved accountability and monitoring. Despite being incorporated, not all of the 2200 fund recipients under the earlier Local Government and Community Housing Program (LGACHP) were audited. Greater accountability is proposed under the CHP. The Victorian Government submitted (sub. 159) that accountability, monitoring and co-ordination are preconditions to improved efficiency and effectiveness in the provision and management of community housing. It proposed regular evaluation of community housing performance. Partridge (sub. 143, p. 3) attributed past frustration and diminishing support for the tenure to circumstances where ‘the State housing authority manager has very minimal control over the selection or dismissal of community housing staff or management committees’. Where community-based housing managers set goals in conflict with those of the State housing authority, a mechanism to resolve the dispute is required. Difficulties also arise for the State housing authority executive where goals are agreed to but not met. Partridge suggested that ‘a genuine partnership of trust and mutual respect between State housing authority and community expressed through negotiation of strategic plans’ is required. He also noted the need to avoid housing authorities responding ‘to signs of conflict and poor management with structural controls which incorporate community housing organisations more tightly into the authority system of the bureaucracy’ (sub. 143, p. 3). This control would be contrary to the empowerment goal of community housing.
INDUSTRY COMMISSION 119 PUBLIC HOUSING
Legal instruments The need for enabling legislation was raised by many participants. They are concerned about tenancy arrangements and an appropriate means of securing community housing title. Title to CHP properties is to be normally held by the sponsoring organisation(s) with the State housing authority acquiring security commensurate with the level of its equity. Title is secured by means of an appropriate legal instrument, legally binding and enforceable. Associated with the issue of title is resolution of how ‘sweat equity’ contributions to management and maintenance are to be recognised. A number of participants considered that dispute resolution procedures are deficient (some communities have difficulty in coping with or evicting violent people). The handling of rent arrears is also an issue. Continuing disputes may lead to dysfunction and possible break-down of a community. An important goal of community housing is tenant participation. This means that a considerable level of co-operation and compatibility between tenants is required. To assist in this, there is a need for mediation and dispute resolution training and support.
Performance One of the objectives of LGACHP was to attract supplementary resources from the States and the rest of the community. However, these resources have not always been forthcoming. Capital funding has been provided in some cases without State and community sponsorship. Frequently, sponsors’ resources have been put to recurrent costs. Randolph (sub. 216, p. 33) submitted that ‘stimulating diversity, militates against cohesion and the development of common approaches to best practice’. He argued that: • Australian community housing is highly fragmented both within and between States; • The sector is supported by multiple funding programs (with relatively little co-ordination of activity between programs); • There is a lack of standardisation in procedures and a poorly developed legal and legislative framework; and • There is limited professional expertise (sub. 216, pp. 32–33). The performance of States in successfully promoting community housing is partly illustrated by the extent to which funds have been carried over from one financial year to the next (see Appendix L, Table L.3). The figures seem to confirm participants’ comments that Victoria and Queensland have been
120 INDUSTRY COMMISSION 9 COMMUNITY HOUSING
successful in providing community housing, while New South Wales and Western Australia have not. The new CHP is intended to redress many of these problems — but it will be some time before the effectiveness of program improvements can be assessed.
9.3 Assisting people through community housing People eligible for public housing should have the option of joining a community housing scheme. This would increase the housing options and thereby increase the effectiveness of housing assistance. It would enhance the satisfaction of people receiving the assistance. Governments should invest in community housing on the basis of its merits as a low-cost tenure and an alternative to public housing. Support for the tenure (that is, investment in and promotion of the tenure) should be clearly distinguished from housing assistance for low-income people (see Recommendation 10). The assistance provided to people who are eligible for public housing but choose to be housed in a community scheme should be similar to that provided in public housing. Public and community housing tenants should be assisted equitably; they should meet the same eligibility criteria, generally wait for the same time and pay similar rents (see Recommendation 11).
State housing assistance for people Under the Commission’s proposals, State housing assistance (incorporating equivalent Commonwealth rent assistance and support payments as proposed in Chapter 8) would be made available to eligible people in community housing as a recurrent subsidy and not through capital grants. People would become eligible for housing assistance by joining the public housing waiting list. On joining they would be asked to give an indication of the general area in which they wish to live and whether they would be prepared to join a community housing scheme. If a suitable scheme is available and attractive to the household seeking assistance, they could approach the scheme managers and join if mutually acceptable.5 Failure to enter the scheme would not jeopardise the recipient’s right to be assisted in public housing.
5 This is not to say that all community housing tenants must be eligible for public housing — only those who receive assistance.
INDUSTRY COMMISSION 121 PUBLIC HOUSING
The level of assistance for those choosing to join a community housing scheme would be the same or similar to that received in public housing, depending on the extent of government ownership of the community housing: • Where ownership is entirely with the government, the tenant would receive the same overall level of assistance as public tenants in comparable circumstances in the region; • Where a sponsor holds all the equity in the housing stock, the tenant would receive State housing assistance equal to that of public tenants in comparable circumstances in the region less an amount equivalent to the loss of benefit (to the government) from not owning the stock;6 and • Where government has some intermediate level of equity, the level of State housing assistance would be determined by negotiation between the tenancy manager and the community housing group. The negotiations would have regard to the level of risk borne by government and the agreement on how many people eligible for public housing are to be housed.7 People on low incomes not eligible for housing assistance and people who join a community housing scheme, without reaching the top of a housing authority waiting list would receive Commonwealth rent assistance if eligible. In determining their eligibility any subsidy funded by the sponsoring body should be counted as part of the rent paid by the tenant. This should give the opportunity for differing levels of subsidies or rebates and a wider mix of tenants. The community housing organisations should be entitled to have a proportion of tenants who receive no subsidy at all. The tenant’s contribution would be determined by the community housing group. Any difference in the level of rent paid by assisted members of a community housing scheme relative to public housing tenants in similar circumstances, would reflect the savings derived from capital and ‘in-kind’ contributions by the sponsor and tenants. For example, if tenants or sponsors are able to reduce housing costs by their own efforts, they would be compensated directly by reduced rent contributions.
6 By this means, the effective housing assistance (market rent subsidy less the average amount of any dividends accruing to the government because of above normal rates of return on property) would be held the same. 7 The amount of State assistance would fall between that provided where the government fully owns and has no equity in the housing stock. It is unlikely that governments would find it worthwhile to enter into joint ownership unless some minimum level of equity were forthcoming to off-set the transaction costs involved.
122 INDUSTRY COMMISSION 9 COMMUNITY HOUSING
The relationship between assisted community housing tenants and the sponsor would not be of direct concern to the tenancy manager. The community group would be responsible for tenancy management and making good any damage for which its tenants would normally be responsible. The owner with the major equity share would normally be responsible for maintenance, however this would not preclude tenants contributing on an agreed basis. The agreement should be between the owners of the asset and the tenants — not the public tenancy manager. With housing assistance provided only to people who are eligible for public housing, community housing would not be expanded at the expense of general public housing. Indeed, the community at large would benefit to the extent of tenancy management and other savings.
Promotion of community housing Governments contribute in a number of ways to promote community housing. Two forms of ‘facilitation’ should be distinguished.
Training and community group formation The purpose of facilitation should be primarily to assist the members of community housing schemes to develop skills so that they may be able to take a greater role in management and maintenance of the property. It is likely that the relatively small cost can be justified on the skills obtained, particularly if it can be shown that they reduce the time people need housing assistance.
Capital support The advantages of community housing relative to public housing are unproven in the Australian context. However, the tenure adds to choice, offers opportunities for tenants to benefit from their own efforts and has the potential to attract additional resources into housing. Under the proposed arrangements there is no need to invest in the tenure as an indirect means of assisting certain groups — people will be assisted through direct subsidies. Under these circumstances any capital investment would be a specific payment for the purpose of expanding the tenure. Accordingly, the housing assistance component of the CHP capital funds that is provided to house low-income people should be converted into funds for that purpose. Consistent with the general principle of broad-banding, the monies would be transferred to the pool available to fund public and community housing.
INDUSTRY COMMISSION 123 PUBLIC HOUSING
Some of the Commonwealth funding for community housing would be incorporated into the public housing support payment. These funds could be used for capital or recurrent purposes, but both the Commonwealth and the State housing policy unit would be entitled to impose conditions specifying the minimum amount to be spent for capital purposes in community housing. State funding would be incorporated into the State housing assistance payment. Where governments sponsor the tenure through capital investment, they should set out to achieve a normal rate of return, as for public housing. This is feasible under the proposed arrangements. The reason is that the tenant rent contribution and the housing assistance payment (which together equal the market rent for appropriate housing in the area) should cover all costs. However, some government support may be required for privately sponsored schemes, particularly if they are small and do not have the pooling and hedging advantages (economies of massed resources) of a large owner of stock, such as the property manager. An agency other than the public housing tenancy manager should have responsibility for managing the sponsorship of the tenure with capital support. This would avoid any potential for conflict of interest, particularly if governments wish to sponsor the tenure to provide housing for people not eligible for public housing. The agency responsible for housing assistance (tenancy manager) would be in the best position to monitor demand and assess the advantages of the tenure for people who are eligible for public housing. Therefore there should be close co-operation between the public housing tenancy manager and the agency sponsoring community housing. Where private sponsors bring capital and other resources to the scheme without requiring a full return on them, they could assist governments to house more people. The most direct way for a sponsor, such as a charitable organisation, to do this is to accept lower levels of assistance for the people they house. The level of assistance provided for tenants would be determined by negotiation. By requiring less assistance for people who are eligible for public housing, sponsors would reduce public housing waiting times and extend housing assistance to people who might have to wait longer because they have special housing needs. This would encourage governments to invest in community housing as a lower-cost alternative to public housing. Aboriginal housing corporations are prominent in the provision of community housing. The reforms proposed in this chapter are therefore relevant to the housing needs of indigenous people. The adaptation of community housing to meet the particular needs of Aboriginal and Torres Strait Islander people are covered in Chapter 11.
124 INDUSTRY COMMISSION 9 COMMUNITY HOUSING
9.4 Benefits of the proposed reforms The proposal to place emphasis upon recurrent subsidies has a number of advantages. First, there is greater transparency and accountability. The effectiveness of the subsidy in terms of outcomes is readily apparent and the cost is explicit. Second, general assistance subsidies are more flexible than specific purpose capital grants for the tenure. Assistance should be applied at any time in the way that achieves the maximum benefit for the recipients and ensures that those most in need are assisted first — capital grants do not readily provide for changes in assistance needs. Third, the subsidisation of tenants up to a market rent would cover variations in housing costs. By equating the level of assistance to that in public housing, the tenancy manager will be indifferent about where people are placed. Under these circumstances, sponsorship of community housing as an alternative tenure for people who are eligible for public housing will be influenced by any advantages over public housing. The funding arrangements mean that eligible tenants will find it easier to find places in privately sponsored community housing schemes. This is because they will carry with them the housing assistance needed to meet all their community housing costs. People will have greater choice and this will improve the effectiveness of assistance. The Commission’s proposed reforms would see housing assistance provided for people who currently have difficulty accessing public housing. One such group is South Sea Islanders. The Human Rights and Equal Opportunity Commission (HREOC) (1993, p. 3) noted that the 15 000 to 20 000 descendants of the indentured labourers brought to Australia last century: ...are a discrete ethnic and cultural group. ... Their culture was shaped by their treatment during the indentured labour period and the difficult early years of this century. The rate of home ownership of South Sea Islanders is less than that of any other significant migrant group. The HREOC (1993, p. 40) said ‘even the newly arrived Vietnamese, Pacific Islander and Chilean communities had higher home ownership levels’. Hitherto many South Sea Islanders have been housed under the AHRP but they have been told they can no longer access this housing as a South Sea Islander. Existing South Sea Islander tenants have been advised informally that they will not be evicted from their AHRP homes. However, this makes their security of tenure very uncertain (sub. 289, p. 3). South Sea Islanders said ‘more control of housing by our people is a very important way in which our people can achieve self-management; self-determination and empowerment’ (sub. 289, p. 2).
INDUSTRY COMMISSION 125 PUBLIC HOUSING
Community housing sponsored by the Commonwealth or Queensland Governments is probably the best way to achieve this. The sponsors would have to supply funds (grants or low-interest loans) for the acquisition of dwellings, as well as training in management. Separate funding for the promotion of community housing would address the problems described in Section 9.2. It would help to clarify objectives and simplify decision making on support for community housing. The benefits offered by the tenure as an alternative to public housing (largely financial cost savings) would be easier to identify and the level of support would be independent of the incomes of the people to be housed under the scheme. Scale economies within community housing seem unlikely in Australia in the near future. Nevertheless the proposed reforms would broaden rather than narrow community housing. Levels of support, although funded differently should be maintained and if the tenure has merit as an alternative to public housing, it would attract additional support. The Commission’s proposals would provide greater flexibility in terms of who is housed. People would receive housing assistance according to their circumstances and so those who are eligible for public housing could be included in a community housing scheme along with people with moderate incomes who do not receive assistance. There would be scope to vary the mix of tenants over time without affecting the viability of the scheme. Greater flexibility would make it possible to attract greater numbers of people and perhaps reap any scale economies. The proposals would provide scope for better asset management. Under the current arrangements there is often an assumption that the cost of maintenance can be met by the contributions which community housing tenants make through their rent payments. The reality is that even the State housing authorities have difficulty in meeting recurrent costs with rent revenues (see Chapter 3). This problem would be addressed under the proposed reforms. The proposed arrangements would enhance transparency and accountability. Promotion of community housing would be funded separately from housing assistance for low-income people housed in the tenure. The reforms may overcome some of the current problems with legal instruments by simplifying the relationship between the government supporting the scheme and the sponsor (possibly another government agency). The proposals provide for community housing to be treated on an equal footing with other tenures for people receiving housing assistance. If the tenure is cheaper in the long run, as claimed by proponents, support will flow from the government. If people also prefer it, the tenure will expand.
126 INDUSTRY COMMISSION 10 SUPPORT ASSISTANCE PROGRAMS
Especially in difficult times it is important that the requirements of the most needy and the least articulate not be lost in the sea of demands arising from others better placed to capture public attention and the political agenda (Community and Institutional Parents’ Action on Intellectual Disability, sub. 164, p. 2). Many people have difficulty accessing appropriate and affordable housing. They include people with disabilities, some elderly people, young people, women and children escaping domestic violence and family breakdown, sole parents, Aboriginal and Torres Strait Islander people and migrants. The problems faced by these people in accessing support programs and public housing are discussed in Appendix M. People who have difficulty accessing private and public rental accommodation often become homeless. They may then be in need of support assistance until they are accommodated and out of crisis. This is often the situation with women waiting property settlement and young people. Others may require ongoing support assistance. People who do not require support assistance may be eligible for housing assistance through public housing. However, those who cannot live independently do not generally qualify for public housing. Others may be eligible, but cannot be accommodated until there is appropriately modified accommodation. Governments provide support assistance to people who cannot live independently, and accommodation with support assistance to people who are homeless. The reforms described in this chapter are part of an overall package aimed at improving the effectiveness, efficiency and equity of housing assistance. In order to understand what is proposed, readers should first read Chapter 6, 8 and 9.
10.1 People who need housing and support assistance People with disabilities on low incomes who do not own their own home and are unable to obtain public housing must rent privately or remain dependent upon family members. If they are not Department of Social Security (DSS) clients they may not be eligible for rent assistance. This often leads to financial hardship, especially when the extra costs arising from a disability mean that people have less disposable income for rent and other necessities. In these
INDUSTRY COMMISSION 127 PUBLIC HOUSING
circumstances, many people with disabilities must accept sub-standard or inappropriately designed accommodation which can compromise their health. Houses in the private and public rental markets, for example, normally do not have wheelchair access, ramps or handrails. The policy of closing down institutions for people with disabilities has added significantly to the need for public housing. The National Inquiry into the Human Rights of People with Mental Illness (HREOC 1993, p. 386) reported that rooms in private boarding houses have become ‘a major form of accommodation for people with a psychiatric disability’ even though the living conditions are often sub-standard. People with physical and intellectual disabilities, psychiatric or other mental health illnesses are often denied access to public housing unless they can guarantee accompanying support. The episodic nature of some disabilities and the need for periodic hospitalisation add to the problems which some people face in securing and maintaining accommodation. The stress of having to deal with numerous government departments can deter people with disabilities from joining public housing waiting lists. Yet by addressing this problem, the community may forestall people ending up in crisis. People with disabilities who live with parents frequently face housing stress when their parents can no longer care for them or are unable to provide financial support. If their accommodation needs are not properly co-ordinated and planned ahead by service providers, they can end up in hostels or crisis refuges. Singleton Equity Housing Limited made the point that these people often require accommodation because their aged parent has died and they can no longer get the necessary housing and support: The client becomes part of a crisis program and fills a bed until some long term solution is developed. As the future needs of people in this situation can be quite easily identified there seems to be no reason why better scheduling and planning cannot be undertaken (sub. 249, p. 4). Even where adequate accommodation can be found, people with disabilities may have little choice of location or quality. The Community and Institutional Parents’ Action on Intellectual Disability said (sub. 236, p. 1) ‘the Intellectually Disabled should have the right to choose what sort of housing best meets their needs’ — this may include living in institutions, with parents, in group houses, cluster houses, villages or farms (transcript, p. 2478). Not all people who become homeless gain access to crisis accommodation. Some remain homeless. The National Inquiry into Human Rights of People with Mental Illness (HREOC 1993, pp. 363–8) reported that Aboriginal people,
128 INDUSTRY COMMISSION 10 SUPPORT ASSISTANCE PROGRAMS
young people, and women with children who have a mental illness and those with dual or multiple disabilities are particularly disadvantaged in accessing crisis accommodation. Some elderly people face similar problems and have the same support and accommodation needs. They have difficulties in accessing appropriately designed and located private or public rental and once in crisis, they too may have difficulty in accessing programs. Women escaping domestic violence can have difficulty finding refuges and shelters that accommodate children, in particular teenage boys. Homeless women interviewed by the Commission expressed concern not only about access to refuges and shelters, but also their ability to pay the rents demanded in private rental for appropriate accommodation, and the difficulties in accessing public housing. Other issues of concern included discrimination, the lack of information on housing for people in crisis, and the stigma attached to being a homeless woman with children. Similar concerns were expressed by participants at public hearings and in submissions to the inquiry. Homelessness amongst young people is exacerbated where young people, particularly young girls, are afraid to seek assistance at mixed refuges and shelters because their safety may be in jeopardy. Changes to State legislation pertaining to State wards mean that young people who in the past may have been considered wards of the State, have a need to access housing and support programs. There is some confusion as to who is responsible for the care of homeless young people under 16 years of age. This needs to be determined. Young people in receipt of AUSTUDY and ABSTUDY who need to rent are not eligible for rent assistance. The provision of rent assistance would help alleviate homelessness amongst students and strengthen their prospects of continuing studies.
10.2 Available programs
Supported accommodation assistance programs The main programs aimed at assisting those in crisis and in particular the homeless are: • Emergency Relief; • Youth Social Justice Strategy;
INDUSTRY COMMISSION 129 PUBLIC HOUSING
• Supported Accommodation Assistance Program; and • Crisis Accommodation Program.1 The Emergency Relief Program provides cash for food, electricity, gas or rental bills for individuals and families in times of financial crisis. Funds are provided directly by the Commonwealth to about 1000 non-government agencies which deliver the service through 1200 outlets Australia-wide. Over $30 million was provided for the program in 1992–93. The amount available for emergency relief in 1993–94 is $17.6 million. In response to the 1989 Burdekin Report on youth homelessness the Commonwealth Government provided a $100 million package of initiatives to assist disadvantaged young people, including the homeless, under the Youth Social Justice Strategy (YSJS). Funding and administrative arrangements for the accommodation and support components of the YSJS are the same as those for the Supported Accommodation Assistance Program (SAAP) and Crisis Accommodation Program (CAP). During 1991–92, and again in 1992–93, the Commonwealth contributed $5.2 million towards innovative projects for homeless youth. State governments match this contribution on a $1 for $1 basis. In 1993–94, $5.4 million will be provided for YSJS. The SAAP funds supported accommodation for people who are homeless or in crisis. The aim of the program is to assist people in crisis return to independent living through the provision of short- to medium-term housing and support.2 SAAP is a joint Commonwealth–State program administered by State governments through community service departments. Funding for the SAAP was $167 million in 1992–93. In 1993–94, $183 million has been made available for SAAP . The organisations delivering SAAP services are principally charitable organisations and community groups. The support services include counselling, advocacy, help in developing independent living skills, financial management training, and help in locating employment. The CAP established under the Commonwealth–State Housing Agreement (CSHA) provides capital funding for crisis and supported accommodation housing. Funds are provided to purchase, construct, renovate or lease dwellings primarily used for accommodation for SAAP services. Organisations which do not provide support services are eligible to apply for CAP funds for crisis
1 The Mortgage and Rent Assistance Program (MRAP) provides rent and bond assistance to people renting in the private market who are not in crisis but face the possibility of homelessness. See Chapter 7 for details on MRAP. 2 In some instances long-term support is provided to individuals who live in independent accommodation but require support assistance.
130 INDUSTRY COMMISSION 10 SUPPORT ASSISTANCE PROGRAMS
accommodation so long as the funds are directed to the homeless. The CAP is administered by State housing authorities in much the same way as the funding and administrative arrangements for SAAP. Funding for 1992–93 totalled $5.4 million. In 1993–94, $76.6 million (comprising $43.3 million from the Commonwealth, and $33.3 million in unspent funds held by the States) is available for CAP. Submissions for SAAP and CAP funding are forwarded to the relevant State department for assessment. The assessments are discussed with the Joint Officers Group which then develops a funding package for approval by the State and Commonwealth Ministers. The requirement for both levels of government to be involved in assessing and approving applications for funding can cause delays and add to the cost of assistance. A number of participants said that opportunities to obtain appropriate housing can be lost, and costs can rise, while waiting for funding approval. When this occurs, organisations must either put in a new application or apply for additional funding — taking up more of the organisation’s resources. Although SAAP and CAP funding submissions are generally assessed together, a number of participants expressed concern that funding is not adequately co-ordinated (see Appendix M). They referred to poor communication between the community services departments and public housing authorities that administer the programs. Some SAAP projects were said to be in inappropriate temporary accommodation because of delays in funding under the CAP. Inquiry participants were also critical of the inflexible interpretation of guidelines by State departments administering the programs. It was claimed that options which may be cheaper in the long-run are not considered. The slow pace of government funding approval, and the inflexibility of government departments, can add to the distress of people in crisis. CAP funds are tied to specific housing in most cases. People must use the housing offered if they wish to receive assistance. In some instances, needs may be better met if people are housed at a different location. Organisations providing SAAP services would be better able to meet needs if they had funds available to headlease in areas that suit the people receiving assistance. In some States, housing authorities will not give medium- or long-term leases to organisations even when houses are custom built. Generally, CAP and SAAP funds are provided for linked accommodation and support. This means that people whose primary need is shelter may be denied assistance, unless they access support services in order to obtain
INDUSTRY COMMISSION 131 PUBLIC HOUSING
accommodation. Funds would be better spent if assistance were directed to the source of need. The delivery of supported accommodation assistance is compromised by the lack of low-cost, long-term accommodation for people who wish to leave the shelters and refuges. For many, the only alternative is public housing. However, the long waiting times for public housing has meant that people trying to exit crisis programs cannot do so. The practice of some State housing authorities of giving lower priority to those on the priority waiting list once they have entered a shelter or refuge exacerbates the problem. Many organisations find they are being called upon to house people for longer periods. The Salvation Army said: A shift is occurring so that short-term accommodation is effectively becoming medium- term; or clients are moving from one emergency accommodation provision to another; or clients are being accommodated temporarily in private rental housing, with substantial cost to community agencies (sub. 200, p. 2). The National Committee on Violence Against Women said: A major problem contributing to the heavy demand for crisis accommodation places is that short-term services find it necessary to extend clients’ length of stay because of the unavailability of other accommodation. Alternatively, women and children are forced, in the absence of adequate medium-term and long-term options, to go from one service to another in a series of insecure stays (sub. 98, p. 2). This means others are unable to access supported accommodation and some are likely to remain homeless. The log-jam in crisis centres could be eased if people had better access to information on the services available to them. For example, people from non- English speaking backgrounds face special difficulties in accessing housing because they lack information. Access to information may enable people to get the right assistance as quickly as possible, and early assistance may avoid the need for people to enter shelters and refuges.
Support programs There is a range of programs aimed at helping people with disabilities and the elderly to live independently within the community. Programs that provide this support include: • Home and Community Care; • Aged Care Program (Financial Support sub-program); and • Disability Services Program.
132 INDUSTRY COMMISSION 10 SUPPORT ASSISTANCE PROGRAMS
Home and Community Care (HACC) provides a range of services that include home help, personal care, home maintenance and modifications (changing light globes, provision of ramps, handrails and some minor renovation work), community respite care, and transport for people with functional disabilities to enable them to remain in the community and avoid premature or inappropriate admission to institutional care. Public housing tenants are eligible to receive HACC services. HACC is not provided where a person’s living circumstances are such that they are receiving similar support under another government program. For example, people receiving assistance under the SAAP are ineligible to receive similar services under the HACC program. State governments are responsible for the day-to-day administration of the program. The amount provided for HACC in 1992–93 by the Commonwealth Government was $341.8 million. In 1993–94, $370.6 million is available for HACC. The Financial Support sub-program of the Aged Care Program funds capital grants to non-profit organisations to build, buy, extend or upgrade nursing homes and hostels. It also funds a range of care services to aged people living in the community and the development and support of innovative services for special needs groups. Prior to the signing of the Commonwealth–State Disability Agreement (CSDA) in July 1991, both the Commonwealth and State governments were involved in providing accommodation support services for people with disabilities under the Disability Services Program (DSP). In July 1993, administrative responsibility for the provision of accommodation services to the disabled was transferred to State governments under the CSDA. The Commonwealth Government has administrative responsibility for employment services for people with disabilities. Approximately 900 accommodation support services providing support for almost 15 000 people with a disability were transferred to the States under the CSDA. The Commonwealth Government is providing $245 million in additional funding to State governments over the 5 year term of the Agreement. Of this amount, $145 million is to improve services and $100 million for growth in disability services. People with disabilities are also able to access the Domiciliary Nursing Care Benefit (DNCB) sub-program of HACC. The DNCB is payable to carers who provide, at home, continuing nursing care to a chronically ill or disabled person (aged 16 and over) who has been assessed as requiring the level of care provided in a nursing home. The DNCB is a tax-free payment of $52 per fortnight and is not means tested. The benefit will be indexed in January each year. Since January 1993, beneficiaries have been able to receive the benefit
INDUSTRY COMMISSION 133 PUBLIC HOUSING
while the person being cared for is in respite care for up to 42 days per year (data provided by DHHLGCS). Aboriginal Hostels Limited (see Chapter 11) and the Department of Veterans’ Affairs provide crisis and other community-based health and welfare services.
10.3 Reform of supported accommodation assistance programs In the Commission’s view the effectiveness of the SAAP program would be enhanced if the assistance for accommodation and support were separated. It would then be possible to provide assistance for shelter without support, thus breaking the link between the two and extending the scope to meet the housing requirements of those in crisis (see Recommendation 12). The increased flexibility would allow the available funds to be spread further to the benefit of more people in housing crisis. People who only require accommodation would be identified at an earlier stage and would be able to apply immediately for public housing. SAAP program managers would be able to plan with greater regard to need — if more people were homeless, resources could be directed to accommodation rather than support services. They would be in a position to make better use of headleasing. Properties could be headleased from the private rental market, but also the public housing property manager (see Chapter 6) or community housing schemes (see Chapter 9). Headleasing from the public housing property manager offers the potential for people to make the transition between crisis accommodation and public housing without changing accommodation. They may have to make higher contributions to rent in the transition period (as they would only be eligible for DSS rent assistance) but the payment of rents above public housing ‘affordability levels’ may be preferable to moving, possibly several times, before gaining access to public housing. Where properties are leased, responsibility for defining what is appropriate accommodation for people in crisis would rest with the SAAP program manager. People benefiting from housing assistance should be required to make contributions similar to those of tenants in public housing once their incomes and support needs have stabilised (see Recommendation 12). Providers of supported accommodation would receive the housing assistance payments discussed in Chapter 6. Where the landlord is a charity, the payments should be negotiated. The housing assistance payments, like those proposed for general
134 INDUSTRY COMMISSION 10 SUPPORT ASSISTANCE PROGRAMS
public housing, should be sufficient to meet a market rate of rent (if the charity charges a market rate of rent) when added to the tenant’s contribution. The support assistance payments would meet the cost of all the services provided apart from accommodation. Under these arrangements the total subsidy would be explicit. Although they may not have much choice over where they are housed, the Commission’s rent setting proposals should generally apply (see Chapter 6). The level of subsidy would reflect the cost of appropriate crisis accommodation, rather than appropriate public housing. CAP funds should be combined with SAAP funds and become the responsibility of the SAAP program manager who should have the discretion to allocate funds for capital or recurrent purposes (see Recommendation 13). There would be a need to fund some non-government facilities from CAP funds to allay any sovereign risk concerns held by non-government SAAP service providers. The control of SAAP and CAP funds by one manager should improve accountability and assist in achieving the right balance between subsidies and capital. Where CAP funds are used to provide accommodation, lower levels of rent assistance would have to be negotiated because in this case the government has met the cost of capital and major maintenance.
10.4 Linking public housing with support services and facilities With the emphasis on short-term accommodation, little consideration has been given to the longer term needs of those in crisis. Many people find they have nowhere to go once they have accessed supported accommodation assistance programs. There is a shortage of low-cost, medium- to long-term housing. Access to public housing may be gained by joining the wait-turn or priority housing waiting lists, but the waiting period may be several years. Those on the priority waiting lists can expect to wait six months or more before a house becomes available. In some States people not only lose their place on the waiting list once they have accessed a crisis shelter or refuge, but the time spent in a refuge is not considered as being in crisis. One aim of the Commission’s proposals is to bring an holistic approach to assisting people in need of housing. Those most in need would be assisted sooner and longer-term needs would be taken into consideration. There are significant social costs in leaving people in crisis accommodation for too long. Not the least of these is the denial of accommodation to others in
INDUSTRY COMMISSION 135 PUBLIC HOUSING
crisis. The extent of the log-jam in SAAP accommodation suggests that levels of funding should be reviewed. The thrust of this report is that better targeting will help those most in need, but governments must assess whether the overall objectives of housing policy can be met with the current level of funding. The holistic approach advocated by the Commission would help alleviate the problems raised in the National Inquiry into the Human Rights of People with Mental Illness (HREOC 1993). For example, where a client has an episodic disability or requires periodic hospitalisation, the tenancy manager would be responsible for ensuring that arrangements are made with the client for the collection of rent and maintenance of the tenancy. Where elderly tenants are in need of HACC, the tenancy manager would be responsible for ensuring that they are able to access these services. Community housing that provides for a live-in manager or carer, can benefit people with disabilities, as well as the elderly and some young people. It can help reduce the need for people with disabilities to live in group houses. Elderly and young people would be able to live independently while receiving support assistance from a live-in manager. The Commission’s proposals for the allocation of public housing assistance would be more responsive to the needs of people who access SAAP services. The period of tenure would be negotiated between the client and the tenancy manager. Family size, income and current housing situation would be taken into consideration when determining an applicant’s position on the waiting list. The criteria in Chapter 6 would help to differentiate between people in crisis and those who can wait longer for housing assistance. The assessment of people’s relative need should not be affected by entering a shelter or refuge. Once on the waiting list they should progress at a faster rate than they do currently towards the receipt of a public house, thus freeing up crisis accommodation. The proposed allocation system would reduce the time people wait in transition between SAAP accommodation and public housing. To ensure that the assistance is properly co-ordinated, the tenancy manager and SAAP program manager should be in the same department. Where this is not possible there is a need to forge strong links between the two programs.
Meeting the infrastructure needs of people with disabilities The Commission proposes that there be a separate budget allocation to fund the infrastructure needs of disabled people (see Recommendation 14). The cost of modification should be seen as an aspect of ‘appropriateness’, but not
136 INDUSTRY COMMISSION 10 SUPPORT ASSISTANCE PROGRAMS
necessarily come from the public housing budget. The cost could come from the health or community service budget. The tenancy manager would be in a position to draw upon these separate funds to provide the necessary infrastructure — ramps, structural modifications to make homes wheelchair accessible and other facilities. The tenancy manager would have the responsibility for ensuring that people with disabilities are provided with appropriate accommodation as soon as they are eligible. A segmented waiting list (see Chapter 6) would ease the task of the tenancy manager by providing early notification of the applicant’s needs. A register of modified houses (covering both the public and private markets) would ease the waiting time and reduce somewhat the need for new construction by assisting the tenancy manager and community groups to headlease or the property manager to purchase these dwellings from the private sector. In this way, the register could enhance the value of purpose-built accommodation.
INDUSTRY COMMISSION 137 11 ABORIGINAL AND TORRES STRAIT ISLANDER HOUSING
The challenge is to provide a form of housing assistance that will be effective in achieving housing aims while also helping the process of community development and self-determination. The reforms described in this chapter are part of an overall package. The aim is to ensure that all those eligible for public and community housing receive the same minimum level of support subsidy without discrimination. In order to understand what is proposed, readers should first read Chapters 6, 8 and 9.
11.1 Current situation Home ownership amongst indigenous Australians is low (about 28 per cent compared with 70 per cent in the wider community), and those who can afford private rental face discrimination in rental markets. Data from the 1991 Census (ABS 1992) indicates that more than 30 per cent of families are government renters (compared with the national average of around 6 per cent). An unknown number of these people are in general public housing.1 The Commonwealth Government has, since 1967, accepted that it has a special responsibility for Aboriginal and Torres Strait Islander people. The prime responsibility for provision of housing and infrastructure nevertheless remains with the States. The Commonwealth and State housing programs which presently target Aboriginal and Torres Strait Islander people are: • The Aboriginal Rental Housing Program; • The Community Housing and Infrastructure Program; • The Aboriginal Home Ownership Program; and • Aboriginal Hostels Limited (temporary accommodation only). There are also State operated Aboriginal and Torres Strait Islander home ownership programs. Accommodation is provided in some States under the Local Government and Community Housing Program.
1 A more detailed account of Aboriginal and Torres Strait Islander housing can be found at Appendix N. It is based on submissions received together with information and views obtained during visits to Aboriginal communities in Alice Springs, Cowra, Kalumburu, Kununurra, Redfern, and Toomelah and discussions held with Murrumbidgee/Lachlan Regional Councillors at Balranald.
INDUSTRY COMMISSION 139 PUBLIC HOUSING
The Aboriginal Rental Housing Program (ARHP) is funded by the Commonwealth Government under the Commonwealth–State Housing Agreement. Since 1988–89, $91 million per year has been allocated to the program. State governments also contribute. The ownership and management arrangements of housing provided under the ARHP vary. The arrangements include: • Public rental housing managed by State housing authorities in much the same way as general public housing; • Rental housing owned and managed by incorporated Aboriginal and Torres Strait Islander organisations in discrete communities in urban, rural and remote localities; and • Rental housing owned and managed by incorporated Aboriginal housing associations and co-operatives in areas of mixed settlement, generally urban. The Community Housing and Infrastructure Program (CHIP) is funded by the Commonwealth Government and administered by the Aboriginal and Torres Strait Islander Commission (ATSIC). Great emphasis is placed under this program on the desire for Aboriginal and Torres Strait Islander people to achieve self-management, self-determination and empowerment. The allocation of CHIP funds is determined by Aboriginal and Torres Strait Islander people. Communities place bids for grants with their Regional Council which then submits budget estimates to ATSIC. The ATSIC Board of Commissioners decides the amount of program monies to be allocated by Regional Councils. ATSIC then decides the allocation of this amount to each State. In turn, Regional Councils allocate the funds they receive from ATSIC to local communities. Communities own and are responsible for housing and infrastructure provided under the CHIP. ATSIC also administers an Aboriginal Home Ownership Program (AHOP) which provides home ownership loans at concessional rates to low-income earners. ATSIC considers AHOP to be its most cost-effective program. It has assisted more than 6500 families since it commenced operations in 1974. Aboriginal Hostels Limited (AHL) is also funded through ATSIC. AHL provides low-cost rehabilitative, aged, student, homeless and transient accommodation services through AHL and Community Support hostels. AHL also operates a student subsidy scheme that assists students to undertake education away from their local area.
140 INDUSTRY COMMISSION 11 ABORIGINAL AND TORRES STRAIT ISLANDER HOUSING
Hostel tariffs are determined in accordance with ability to pay — most residents receive rental subsidies because they are in receipt of government benefits. AHL generally provides short- to medium-term accommodation, but is increasingly called upon to provide long-term accommodation because residents are unable to find alternative accommodation. Some of AHL’s clients are people who are unable to gain access to public housing because they have an outstanding debt with a housing authority. Almost $324 million was provided by the Commonwealth for housing and infrastructure programs (including AHL) during 1992–93 (see Figure 11.1 for funding details). Even so, a high proportion of Aboriginal and Torres Strait Islander people continue to be housed in conditions that most Australians would consider unacceptable. They live in houses that are overcrowded, do not meet local government building standards, and do not cater for their cultural needs. Funds for repairs and maintenance fall well short of requirements, and communities often lack basic amenities such as water, sewerage and transport infrastructure. The responsibility for co-ordination and provision of services to communities in rural and remote areas and fringe locations of urban centres is unclear. Sub- standard housing and infrastructure contribute to problems of health and community welfare generally. The criticisms apply to both urban and remote settings. At government level there is no clear demarcation of responsibility. This contributes to confusion and duplication of services. The poor delivery of services is exacerbated by the on-going dispute between local governments and communities over the payment of rates. Housing organisations are required to ensure that tenants pay rent, but many communities are not meeting their obligation in this regard. That said, the cost of food and clothing in remote areas can leave little for rents. In some communities, the houses are in such a poor state of repair that tenants have refused to pay rent. Family relationships and responsibilities of elected officials may also determine their willingness to adhere to rental policies.
INDUSTRY COMMISSION 141 PUBLIC HOUSING
Figure 11.1: Commonwealth Government funding of Aboriginal and Torres Strait Islander housing, 1992–93 $m 100
90
80
70
60
50
40
30
20
10
0 ARHP CHIP AHOP AHL
Notes: CHIP funds do not include $92.7 million for infrastructure, and $32 million funding allocated under the National Aboriginal Health Strategy. In addition to the $10 million appropriated by ATSIC for the AHOP, a further $28.3 million was available from revolving funds. AHL provides temporary accommodation only. Data provided by ATSIC, AHL and DHHLGCS. Source: Industry Commission.
Rents are set in accordance with ability to pay. Consequently, the low level of rent paid by many tenants means they are not eligible for Department of Social Security (DSS) rent assistance. Aboriginal housing organisations are expected to fund all repairs and maintenance, insurance, administrative and municipal costs from the rent they do receive. This is not borne out in practice. Even if all rents were collected, it is unlikely that the revenue would be sufficient to meet recurrent outlays. In urban settings, for example Redfern, the average rent collected is $3240 per house per annum. ATSIC considers that: It would be an unusual circumstance if maintenance costs of an urban dwelling were greater than this ... However, in a general sense we believe that routine maintenance and other essential housing costs (rates where applicable and insurance) could and can be covered by rental collection where an organisation has efficient and effective management practices (sub. 370, p. 2). Even if the rent does cover minor maintenance, it is unlikely to cover insurance and tenancy management costs, renovations or make provision for the eventual replacement of the house. A participant, James (transcript, p. 2770) said estimates prepared by Australian Construction Service indicate that maintenance
142 INDUSTRY COMMISSION 11 ABORIGINAL AND TORRES STRAIT ISLANDER HOUSING
and renovation work required at Redfern would cost in the vicinity of $2 million. In public housing generally, rent collections do little more than meet these costs, even though State housing authorities provide a lower average rent rebate than is common in Aboriginal and Torres Strait Islander communities, and the majority of their dwellings are in urban areas where maintenance is cheaper than in remote areas. The lack of on-going funds for repairs and maintenance and the inability of communities to raise sufficient revenue through rents to meet the cost of maintaining houses means that Aboriginal communities become locked into a cycle that sees them perpetually in need of capital grants to replace houses or carry out substantial renovations. Community Development Employment Projects help offset the funding shortfall, but without built-in financial viability it cannot be said that the current arrangements enhance self-determination and empowerment. There is a further cost in terms of the health of Aboriginal communities. Healthabitat in commenting on the improvements in health through changes in housing design and maintenance in a Pipalyatajara community, South Australia, said there is: ... scientific medical evidence to show that improvements in health hardware, ... showers, toilets, waste disposal, ... leads to specific improvements particularly in children under 5 years of age (transcript, pp. 2779–80). The problems stemming from over-lapping bureaucracies and funding arrangements have been recognised and led to the National Commitment to Improve Outcomes in the Delivery of Programs and Services for Aboriginal Peoples and Torres Strait Islanders. Negotiations have begun between the Commonwealth and the States to enter into bilateral agreements with the view to implementing more efficient arrangements for the planning and delivery of Aboriginal housing and infrastructure. The aim is to integrate the current programs into a single Aboriginal housing program by channelling ARHP funds through ATSIC to the States. The program is to be administered under bilateral agreements between State governments and the Commonwealth. Some State governments and ATSIC also support an enhanced role for existing Aboriginal housing boards or the establishment of an independent Aboriginal housing authority within each State. Aboriginal specific housing funds would be channelled direct to the Aboriginal housing authority which would be jointly responsible to ATSIC and the State government. These initiatives, although helpful, are unlikely to substantially improve outcomes, in part because responsibility will still be shared by two levels of
INDUSTRY COMMISSION 143 PUBLIC HOUSING
government. The Northern Territory Department of Lands and Housing and Local Government (sub. 337, p. 2) said: It is ... the delivery of the service by the Territory as the sole service provider, which enables reform of the process [to] be undertaken and to implement measures to monitor program outcomes and achieve the accountabilities which we agree are necessary. In the Commission’s view, fundamental changes are required to improve the operation of and accountability in programs which suffer from conflicting objectives, a lack of clarity about the responsibilities of each level of government, and the unreal assumption that rents will cover recurrent costs.
11.2 Program objectives and administration The desire to see Aboriginal and Torres Strait Islanders achieve self- management, self-determination and empowerment is an overriding objective of ATSIC programs. The concern is to: ... support, through strategies which are consistent with Regional Plans, Aboriginal and Torres Strait Islander aspirations to live in a location of their choice with access to facilities and services consistent with and appropriate to their expressed needs (sub. 116, p. 5). The objectives and arrangements for delivery of housing assistance differ between programs. Housing funded under the ARHP in urban centres, is managed by State housing authorities in a similar manner to general public housing — it is rental housing incorporating welfare assistance. The arrangements are substantially different where State housing authorities and ATSIC hand over responsibility for rural and remote housing to local Aboriginal and Torres Strait Islander communities — it is a form of community housing intended to provide welfare assistance and to facilitate self-sufficiency. Where the houses are handed over, the communities are then responsible for housing allocation, tenancy management and rent collection, repairs and maintenance, and housing upgrades. The attempt to facilitate self-determination in this way comes at a cost in terms of the efficiency with which housing services are delivered to individuals. It is contributing to the slow pace of providing appropriate housing for Aboriginal and Torres Strait Islander people, and as recognised by ATSIC (sub. 116), inappropriate housing is jeopardising improvements in health, employment, education and training. This raises the question should housing assistance target the provision of appropriate housing to individuals, or should it target community development and self-determination? If both are targeted, how are the conflicts resolved? Is
144 INDUSTRY COMMISSION 11 ABORIGINAL AND TORRES STRAIT ISLANDER HOUSING
it possible to achieve both better delivery of housing services and self- determination? Responsibilities and accountability can be compromised in the pursuit of self- determination. The organisations through which the assistance is delivered are responsible for ensuring that it is used for the intended purpose, distributed equitably and any conditions attached to its provision are met. If they do not live up to their responsibilities, and assistance is not delivered effectively, people do not get the full benefit of funds provided. At present, the emphasis is upon funding as many communities as possible. This raises the question whether greater benefit would be achieved by applying available funds to fewer communities. The present incremental approach (with new housing spread thinly across communities) prolongs overcrowding and its attendant problems of maintenance. That said, if one area were funded ahead of an adjacent area, there could be a problem if too many people were to move to where the housing had been rejuvenated. There is no set amount allocated to housing in the CHIP. Regional Councils have the power to determine how much of the Regional Council budget will be allocated to housing and how much to infrastructure. Program administration and delivery is compromised by inadequate demographic, asset, and repairs and maintenance data. Without this information funding allocations cannot be made on a needs basis. Priority should be given to a more thorough needs assessment to determine the level of assistance required for Aboriginal and Torres Strait Islander people. The effectiveness of housing assistance is further reduced where the annual funding cycle does not allow for delays in expenditure caused by cultural needs and weather. A rolling cycle would allow for long-term planning and more effective funding. A further transparency issue arises from the desire of Aboriginal and Torres Strait people to live on their homelands. It costs in excess of $150 000 to provide a standard 3 bedroom home, with power and water, in remote locations. The relocation of communities to homelands will create a need for health, education, transport and communications services in later years. However, there appears to be little recognition given to the long-term resource implications of decisions to help people relocate to remote areas. The issue is not where Aboriginal and Torres Strait Islander people live, but whether the resource costs and trade-offs are known and made clear. The present practice is to provide capital funding and then leave Aboriginal and Torres Strait Islander housing organisations to manage the houses often without the financial resources and/or management skills to do so. It is not unusual for
INDUSTRY COMMISSION 145 PUBLIC HOUSING
housing to be provided ahead of satisfactory arrangements for its allocation and upkeep, or indeed any expectation on the part of tenants that they are to make regular rental payments. This leads to rapid deterioration of the housing stock. When houses cease to function it is understandable if tenants no longer take care of them and they become unusable. Healthabitat pointed out that: The minute a part of the house fails, particularly toilet, waste removal and water removal, the house is essentially shed by the community and our belief is houses fail first and are vandalised — where vandalism occurs — second (transcript, p. 2784). The cycle of capital grants neither provides housing assistance effectively nor facilitates self-determination. It can breed an attitude of dependence on government. There are other problems where communities are not given the means to administer housing. Housing stock falls into disrepair because rents are not collected, wilful damage to houses is not paid for, and little consideration is given to long-term replacement. As Ross said: At the moment [Aboriginal and Torres Strait Islander] communities have no staffing overheads provided so that somebody can take responsibility for the housing, make inspections, note the maintenance requirements before they become old and urgent, nor to organise the trades who need to come in and make those repairs. The result has been — houses are just allowed to deteriorate to such a state that tenants move out (transcript, p. 1973). A belief that housing is provided as a right, perhaps as compensation, contributes to the reluctance of many Aboriginal and Torres Strait Islander communities to pay rent. The Aboriginal Housing Board of Victoria said: There have been people who have used the land rights arguments and the Board is conscious of people being told by activists and others, ‘Don't pay your rent because when land rights come, you won’t have to pay rent’, and unfortunately people have fallen for that misinformation (transcript, p. 1752). Under the current arrangements, communities are left to meet on-going costs. Communities are more likely to be supportive of this approach if they have better information when selecting housing and infrastructure, and if they are fully informed as to the likely on-going costs. However, even where they make appropriate choices, communities may still require financial assistance in maintaining their housing and infrastructure. Ineffective supervision of construction work contributes to poor housing and possibly fraudulent practices by contractors and builders. Healthabitat attributed problems, in the past, with waste disposal systems in the Pipalyatajara community to poor construction work ‘for example, a soakage trench that was not put in the ground, ie it did not exist’ (transcript, p. 2781). Healthabitat
146 INDUSTRY COMMISSION 11 ABORIGINAL AND TORRES STRAIT ISLANDER HOUSING
recommended that no in-ground works be installed and covered without inspection. The South Australian Housing Trust commented that it has made arrangements for the supervision of in-ground construction works to be undertaken ‘by a specialist officer within the Aboriginal Housing Unit of the SAHT’ and that the procedures established ‘ensure that all in-ground works are inspected and photographed prior to covering’ (sub. 367, p. 2). Aboriginal and Torres Strait Islander communities would benefit if they implemented local government building regulations, but the regulations need to be administered with a degree of flexibility. Housing construction and maintenance are a means of promoting employment and training, and increasing community control over their affairs in rural and remote areas. However, concern for these other objectives should not overshadow the efficient and effective provision of housing.
11.3 Reform Many Aboriginal and Torres Strait Islander housing issues are the same as those for public housing, but allied objectives of self-determination, self-sufficiency and empowerment raise a host of competing priorities. One outcome is that the responsibility for co-ordination and provision of services to communities in rural and remote areas and fringe locations of urban centres is unclear. ATSIC sees its role as providing a supplementary service to clear the backlog in housing and infrastructure created by years of neglect. It considers that the States have prime responsibility for housing, but have not faced up to their responsibilities, shifting the funding burden to the Commonwealth: At present, confusion exists because of the duplication of programs and services and the number of Government Department and Agencies involved. On the one hand, high administrative costs result from these duplicated efforts while on the other hand, there are areas where the confusion as to who is responsible for the provision of services results in no services being provided at all. State and Territory Governments at present are not meeting their responsibility in providing services for their residents, necessitating ATSIC putting in greater effort (sub. 116, p. 9). The thrust of reforms currently being negotiated between Commonwealth and State governments is to define administrative responsibilities, and to enter into bilateral agreements that may see ARHP funding channelled through ATSIC to the States. In the Commission’s view the changes will not address the underlying funding tensions, partly because responsibility for providing funds and accountability will continue to be shared. Indeed, ATSIC’s enhanced
INDUSTRY COMMISSION 147 PUBLIC HOUSING
involvement may reinforce the wrong signals created by its role in rectifying the ‘backlog’ in housing and infrastructure. The need is for inter-government arrangements which bring a clear delineation of responsibility. Accordingly, the Commission proposes that the ARHP be combined with the general public housing and community housing programs. State and local governments would then be clearly responsible for the delivery of housing assistance, infrastructure and community services to all their residents (see Recommendation 15). Combining the ARHP with the public housing and community housing programs would lead to improved targeting and funding of housing assistance. This would benefit Aboriginal and Torres Strait Islander people. As outlined in Chapter 6, the Commission’s proposals call for implementation within each State of a single segmented waiting list with a common set of eligibility criteria. People with the greatest need would be favoured since the rate of progression in each segment of the waiting list would depend on relative need (see Chapter 6). People would not be discriminated against on the basis of where they wish to live. If certain groups of people continue to be poorly served by housing authorities, this would become very apparent. It would be clear who is to be held accountable. Those receiving public housing assistance would have greater choice as to where they live and how much they pay in rent, while still maintaining a level of affordability for people on low incomes. Public and community housing rents would be based on market rents, but eligible tenants would be subsidised so that the rent paid was within an affordable range.2 Details on the proposed model can be found later in this Chapter. Aboriginal and Torres Strait Islander people applying for housing assistance would join the general public housing waiting list. When their name reaches the top of the list they would become eligible for housing assistance and would have a choice as to whether they came under public housing or a community housing scheme. Applicants may have to wait a short time to receive their assistance until a house becomes available. However, they would not lose their position at the top of the waiting list while they were waiting for a house. Existing community housing scheme tenants who wish to receive housing assistance would have to join the general public housing waiting list. Their current housing circumstances would be taken into consideration when determining eligibility for assistance. It would be inappropriate to pay the full
2 The subsidy (comprising the Commonwealth and State housing subsidy (see Chapter 8)) when added to affordable rent contributions would meet all costs of a house, including a sinking fund for its eventual replacement (see Chapter 6).
148 INDUSTRY COMMISSION 11 ABORIGINAL AND TORRES STRAIT ISLANDER HOUSING
amount of assistance for those who become eligible for assistance who live in houses already provided to the community through grants. The level of assistance would be reduced to reflect the capital assistance that has already been provided. The Commission’s proposals would: • Lead to improved accountability by making it clear that the States are responsible for the provision of housing and infrastructure for all people in need, including Aboriginal and Torres Strait Islander people; • Ensure equitable treatment for Aboriginal and Torres Strait Islander people in the distribution of housing assistance, especially those located in rural and remote communities; • Promote self-determination by providing for the expansion of community housing; and • Promote self-sufficiency by ensuring that community housing schemes are financially viable in urban, rural and remote settings. The Commission’s approach would raise the level of assistance to Aboriginal and Torres Strait Islander people in need of housing. The changes would be to their advantage since they are amongst the groups with most to gain from the reforms proposed for public housing and community housing (see Chapters 6, 8 and 9). Arrangements for consultation, and for the involvement of regional councils and Aboriginal housing organisations, would continue. The on-going role of ATSIC would be to ensure that needs specifically related to Aboriginal and Torres Strait Islander culture are met. These needs include: • The provision of infrastructure and other services such as health, education, transport and communications to remote communities; • Support for home maker services; • Support for awareness programs that assist communities to design and develop appropriate housing and locational plans; • Support for the additional costs associated with providing appropriate accommodation consistent with cultural needs in urban, rural and remote areas; and • Capital grants or low interest loans for new houses. These activities would be funded through a program such as CHIP. ATSIC would reach agreement with States on funding responsibility for housing and infrastructure costs where they exceed those normally incurred in State housing programs (see Recommendation 16). Where an above average size house is needed to cater for visits from the extended family, the funds would come from
INDUSTRY COMMISSION 149 PUBLIC HOUSING
two sources. The State government would provide housing assistance at a level equivalent to that available in general public housing in the area in which the family lives. The Commonwealth Government would fund the additional costs associated with providing an appropriate house – that is, accommodation for the extended family. Funding through CHIP would meet the additional costs associated with locating a community in a remote area, such as infrastructure costs. With the additional costs that arise because of culturally specific needs clearly identified, it would then be possible to report on these needs on an annual basis. The subsuming of the ARHP within the general public housing program should be contingent upon governments adopting the allocation of housing assistance and community housing reforms proposed by the Commission. If these reforms were not adopted, Aboriginal and Torres Strait Islander people could be disadvantaged once the programs were combined. Some participants have expressed concern that the effect of combining the ARHP funds with the general public housing program would be fewer houses allocated to Aboriginal and Torres Strait Islander people. ATSIC said: A specific Aboriginal and Torres Strait Islander Housing Program recognises the special effort over and above mainstream activity necessary to address the most disadvantaged group in terms of housing. It ensures transparency and accountability and a mechanism by which the Federal Minister can, if he chooses, decide to increase the priority by allocating increased funds. This has happened over the last five years. Notwithstanding the significant effort made through the mainstream program the specific program is a way of ensuring recognition of additional effort (sub. 333, pp. 3– 4). In the Commission’s view, the creation of specific housing programs for Aboriginal and Torres Strait Islander people has not been to their advantage. It has not resulted in improved transparency and accountability, nor has it produced levels of funding to appreciably close the housing gap. Funding of the ARHP has remained at $91 million per year since 1989–90. The funding of the housing component of CHIP has fallen from $53.9 million in 1990–91 to $40.1 million (excluding NAHS funds for housing of $10.5 million) in 1992– 93. Funding for the infrastructure component has also fallen. Thus the level of funding has been relatively static in real terms, despite the growing recognition of need (see Figure 11.2 for levels of funding). In commenting on specific Aboriginal and Torres Strait Islander housing programs, the Ngunnawal Local Aboriginal Land Council and Mulanggari Aboriginal Corporation said: ... you have governmental bodies setting up housing programs and things like that, and if they have a separate little category from which they provide Aboriginal housing, they
150 INDUSTRY COMMISSION 11 ABORIGINAL AND TORRES STRAIT ISLANDER HOUSING
expect all Aboriginal people to line up just for that Aboriginal housing and they don’t provide them immediate access into the rest of the mainstream housing. ... it’s not a policy, it’s a practice that has then been transposed right across the provision of all services for Aboriginal people. ... A lot of the Aboriginal housing co-ops have sprung up around different country towns right across Australia because they could not see their needs being met under the special category for Aboriginal housing, and they have tried to address that need on that basis (transcript, pp. 3566–7).
Figure 11.2: Commonwealth expenditure on ARHP and grants to Aboriginal housing organisations, 1984 to 1993 in 1992–93 dollars $m 160
140
120
100 ARHP 80 AHO grants 60
40
20
0 83-84 84-85 85-86 86-87 87-88 88-89 89-90 90-91 91-92 92-93
Notes: The implicit deflator for private dwelling construction was used to convert nominal to real expenditures. Funding to Aboriginal housing organisations includes National Aboriginal Health Strategy funds of $0.6 million in 1991–92, and $10.5 million in 1992–93. Derived from ABS (1992, Table 3); ABS (1993, Table 22); ATSIC (1993); and data provided by ATSIC. AHO refers to Aboriginal Housing Organisations. Source: Industry Commission.
Following the release of the Public Housing draft report a request was made to the Minister by the Aboriginal Housing Company Limited, Redfern, to delay the signing of the final report until after the Indigenous Australians Shelter Conference. The Commission outlined its proposals at the conference on 1 November 1993. Subsequently, the following motion was tabled: ... the Indigenous Australians Shelter Conference recognises the inability of (most/all) Aboriginal Housing Associations to adequately maintain their housing, pay decent award wages to staff and plan properly for growth and stability. And generally support
INDUSTRY COMMISSION 151 PUBLIC HOUSING
the Industry Commission’s recommendations for parity with State/Territory Housing Authorities providing cultural differences are recognised in the arrangements. The motion went on to suggest that the arrangements be piloted and assessed before application (communication from Aboriginal Housing Company Limited, Redfern).
Community housing model The Commission’s community housing model, is intended to meet the needs of people. It has been modified to reflect the special needs of Aboriginal and Torres Strait Islander people. Under the community housing model, discrete urban, rural and remote communities would have a choice as to whether they come under a community housing scheme (managed by their Aboriginal housing corporation) or be managed by the public housing tenancy manager. Where people who are eligible for public housing elect to be housed under the community housing scheme, the tenant’s contribution together with the State housing assistance subsidy would be sufficient to allow the community to meet all costs (see Chapter 8). This would include the eventual replacement of the house (see Chapter 9).3 The community would be able to borrow capital and make sinking fund payments to replace houses when they reach the end of their useful life. The tenant’s contribution would be determined by the Aboriginal housing organisation, but would usually be set between 20 and 25 per cent of income. Aboriginal and Torres Strait Islander people who wish to live on Aboriginal land but not under a community housing scheme could elect to do so providing there is an Aboriginal housing organisation. In this case the public housing tenancy manager would headlease houses from the Aboriginal housing organisation and manage the tenancy. Sponsorship from a government agency may be required to ensure that sufficient houses are available to the Aboriginal housing organisation. Sponsorship funding could be provided to promote self-sufficiency. For
3 In general, under the Commission’s proposals the rent subsidy is the difference between the tenant’s contribution and the market rent. However, in cases where the market rent is difficult to determine a rent that covers all normal or reasonable costs is the best benchmark to use.
152 INDUSTRY COMMISSION 11 ABORIGINAL AND TORRES STRAIT ISLANDER HOUSING
example, ATSIC could fully or partially sponsor a community housing project with capital grants or low-interest loans.4 Other resources would have to be provided for management training. Community development could be encouraged if the maintenance were carried out under Community Development Employment Projects. Consistent with self-determination, Aboriginal housing organisations would be responsibility for ensuring that houses meet the needs of the tenants. That is, the houses should meet the design, size, and locational requirements of the tenants determined through consultation with tenants. Aboriginal housing organisations would also be required to ensure that houses are built properly, building inspections are carried out, maintenance and repair work is undertaken on a regular basis and provision made for the eventual replacement of houses. To lessen the possibility of fraudulent work by contractors and builders the Aboriginal housing organisation should consider implementing local government building regulations and the linking of payments to contractors and builders with inspections. Many communities may not be large enough to form a viable housing organisation. There may be a case for these communities to create umbrella organisations that can undertake tenancy management, accounting and organise contracting out. The umbrella organisations would be expected to apply general public housing tenancy management rules within communities. In Alice Springs the Tangentyere Council already assumes responsibility for town camps and outlying settlements. The Commission’s proposals would not resolve the tension between the Commonwealth and States over responsibility for the provision of infrastructure in remote communities, and the associated question of whether it is appropriate for governments to provide infrastructure on private land. These matters must be resolved by governments through negotiation. The community housing model provides a basis for Aboriginal and Torres Strait Islander people to maintain control over their land and housing. Housing services are removed from the debate, leaving the provision of water, sewerage, roads and power as the only issues. This separates matters that are truly a right of all Australians from those that must be resolved, namely the provision of infrastructure services on land not controlled by governments and their agencies.
4 Interest would be subtracted from the subsidy where governments lend to housing organisations.
INDUSTRY COMMISSION 153 PUBLIC HOUSING
With community housing in place and appropriately funded, on-going assistance need not be subject to dispute and the overall cost of housing assistance would be reduced through improved incentives and accountability. Most importantly, people would be appropriately housed, to the betterment of community health. Tenants would be subject to the obligations that normally go with assistance received through public housing. The adoption of public housing obligations would help overcome the difficulties faced by elected officials in relation to family obligations when carrying out their responsibilities. The community would be responsible for ensuring that housing assistance monies are applied for their intended purpose and that people eligible for public housing are housed affordably and appropriately under their stewardship. The proposed arrangements would not detract from self-determination. Communities would still be involved in the design, layout and construction of houses and infrastructure, as well as management. Self-sufficiency would be enhanced because communities would receive a return on their assets if the appropriate subsidy is paid and tenants pay their rents.
Public Housing Some Aboriginal and Torres Strait Islander people live in general public housing. Again the model has been modified to meet their needs. For public housing in general the Commission has proposed a number of changes which would see property and tenancy management undertaken by separate organisations (see Chapter 6). The tenancy manager would be responsible for tenancy management functions and ensuring that the housing and support needs of clients are met. The tenancy manager would have regard to the cultural morés of clients and would, for example, employ Aboriginal and Torres Strait Islander people especially in client service roles. The CHIP would fund additional costs associated with providing culturally appropriate housing. State governments would have to decide whether or not to involve Aboriginal Housing Boards and Aboriginal housing organisations. ATSIC would continue to monitor the effectiveness of programs in accordance with s.7(1)(b) of the ATSIC Act 1989.
* * * All those eligible for public and community housing would receive the same minimum level of support (subsidy) without discrimination. This would be a step forward in improving equity and redressing past neglect.
154 INDUSTRY COMMISSION 12 ARRIVING AT MORE EFFICIENT OUTCOMES
In this report, the Commission proposes far-reaching reform of government housing assistance. Many of the proposals are presented as principles that should guide governments to achieve more effective and efficient delivery of assistance. Some reforms can be implemented quickly but others will take time. Implementing many of the reforms will not be straight forward. The housing stock in some States is poorly matched to current needs. Other States have too little stock. Therefore the reform path will not be the same for each State.
12.1 Reform of the CSHA The National Housing Strategy (NHS) referred to developments in Australian housing policies over the past decades as incremental and fragmented (NHS 1991a, p. 2). The NHS concluded that it is important to assess current and future housing needs and develop an agenda of fundamental policy reform to match expected changes in the demographic, economic and social environment. The Commission concurs with the NHS assessment. The nature of public housing has changed from a low-cost tenure available to all to one in which the vast majority of tenants pay rebated rents. The level and coverage of Department of Social Security (DSS) rent assistance have also been increased and the Commonwealth Government has foreshadowed increasing assistance to people by this means. However, housing assistance is but one of many ways of achieving social justice. Income support, pensions, allowances, benefits and housing assistance, all have a role to play. The following issues need to be resolved by governments concerned to improve housing assistance and social justice: • What level of rent assistance is sufficient — keeping government costs within reasonable bounds — to allow people with low incomes to afford to rent privately while they are waiting for public housing, or to rent permanently if they prefer? • Do the benefits of providing public housing at levels of appropriateness and affordability above that in private rental justify the additional expenditure?
INDUSTRY COMMISSION 155 PUBLIC HOUSING
• What is an adequate level of public housing, recognising that some wait listing is inevitable? These issues should be addressed as part of the reforms to the Commonwealth–State Housing Agreement (CSHA) proposed by the Commission (see Chapter 8). Under the proposed demarcation of responsibility, States would ultimately decide the quantity of public housing to be provided and what is ‘appropriate’ if socially desirable outcomes are to be achieved. However, the Commonwealth would influence the level of supply by providing a payment in support of public housing (see Chapter 8). It could also influence affordability if it so desired, by applying conditions to the payments. The main task for the Commonwealth would be to determine the appropriate level of rent assistance and the degree of support that is required to ensure that there is an adequate supply of low-cost rental accommodation in each State, the latter depends on the level of public and community housing. A review of the rate of withdrawal of Commonwealth income support payments in order to minimise poverty traps is urgently required. Improvements in this area would also help harmonise rent assistance and rent setting within public housing so that equity and efficiency are improved overall. However, the Commission’s recommendation to introduce an income test for rent assistance (see Recommendation 17) so that the rate of payment decreases as income rises should not be implemented until after such a review. The main task for the States is to determine what is ‘appropriate’ housing, the best way of delivering assistance — and the level of support for public housing in particular. Another important task will be identifying institutional and organisational arrangements that produce efficient outcomes. The aim should be to complete these tasks before the current CSHA funding arrangements expire in 1995.
The future role of public housing Finally, there is the question of the role of public housing in the longer term. Is it to remain a residual tenure for those on low incomes — that is, welfare housing? The move to welfare housing rather than a tenure available to all appears to have occurred by default through progressively narrowing assistance by tighter targeting. With a growing need, the continuation of anything like the current level of funding would ensure that this situation will remain. The findings of this inquiry point to many areas of unmet need — areas which warrant additional funding. Governments have a long way to go in assisting Australians who are most in need of housing. Many Australians remain in
156 INDUSTRY COMMISSION 12 ARRIVING AT MORE EFFICIENT OUTCOMES housing stress and in urgent need of assistance. For instance, Bisset, Blaskett and Siemon (forthcoming) estimate that currently there is an additional demand for public and community housing from people in the private rental sector of over 300 000 income units. To meet this additional demand would require a major expansion of public and community housing stock which is unlikely to be achieved in the short-term. The Commission considers it important that governments assess now what role they want public and community housing to take in the future and begin reforms so that people do not suffer needlessly.
12.2 Reforming the delivery of housing assistance Reforms to the delivery of public housing are proposed in Chapter 6. Some of the changes will have to be introduced gradually over a considerable period of time. The factors influencing implementation and timing of change are discussed below.
Rent setting and allocation The proposed reforms to rent setting and housing allocation could be introduced under existing organisational structures but market rents and property values would need to be established first. Housing authorities would need to establish specific formulations of the rent setting and allocation proposals, but this could be done quickly. The present accommodation mix within public housing has developed over more than 40 years in an absence of price signals. In many States the mix falls well short of the profile of client need in terms of location, adequacy and type of accommodation available. For instance, single people and sole parents with one child are poorly catered for when compared with the stock available for couples with several children. The mismatch is partly due to inadequate signals about what people value. The mismatch is especially glaring in comparison with the private rental market where tenants’ decisions are guided by a pricing system. This is not to say that the mix of stock in the private rental market is always ideal.1 The extent of mismatch in some States is such that the benefits of the rent setting and allocation reform will take time to emerge, but a mix of public housing stock that meets the needs of clients will eventuate in the long-run (see Appendix I).
1 The stock in the private rental market accessible to those with low incomes is not necessarily of a standard that the community deems appropriate.
INDUSTRY COMMISSION 157 PUBLIC HOUSING
There are several ways that change may be effected without unduly disrupting individuals and families. Some of the options are outlined below.
Transitional adjustments to rent setting The rent setting proposals should be phased in over several years. ‘Grandfather’ arrangements for existing tenants are proposed in Chapter 6 for this reason. Those already within public housing could continue to pay rent calculated under the old regime. Another option is to gradually change the rents payable under the current scheme to those of the new scheme. This might involve tenants paying their ‘current’ rents plus an increasing percentage of the difference between the ‘current’ and the ‘new’ rents, until finally they were paying the new rents.2, 3
Transitional adjustments for allocation reform Under the proposed allocation reforms there would be one segmented waiting list for each State. Currently people in similar circumstances wait different times to be housed, depending on the availability of a house in the location they wish to live. Although State-wide waiting lists could be introduced immediately, it will be some time before there is a range of houses available in the region of choice when people reach the top of the list. Initially, people may have to wait some time until they are allocated a house, but no longer than at present — and the waiting period should be reduced as the stock is adjusted. In some areas headleasing, renovation and (as necessary) new construction will be required. In areas where there is excess public housing, properties should be either rented or sold so that funds are released. Stock that falls short of an adequate standard will need to be upgraded or sold. During the transition, it will be difficult to increase opportunities for existing tenants to transfer within public housing.
Improving choice Choice is a key component of the Commission’s proposals for public housing rent setting and allocation. To achieve this, an adequate number and range of vacant properties (in terms of type and location) will need to be available.
2 A weighted average of the old and new rent with the weighting shifting towards the new rent over time. 3 The degree to which choice is increased through stock adjustment and tenancy turnover would influence how quickly the new rent formula could be introduced.
158 INDUSTRY COMMISSION 12 ARRIVING AT MORE EFFICIENT OUTCOMES
However, it may be difficult to provide wide choice within a local area from the outset. Current housing authority waiting lists are unlikely to provide useful information on the preferences of people under the proposed rent setting arrangements. The tenancy manager in each area will have to approach people near the top of the waiting list and obtain some indication of the locations that people would prefer to be housed given market rents and the level of subsidy. Early placements will provide additional information which can be used to determine where properties should be acquired. Some flexibility will be required until preferences become known and stock adjustments can be made. The contractual arrangements between tenancy and property managers should provide for this flexibility.
Valuation of the stock Valuation of the housing stock at market values is necessary to determine the level of subsidy currently provided to tenants and the funds required to maintain the stock to an appropriate standard. The valuation will require assessments of the condition of dwellings and future maintenance and repair costs to bring dwellings to an appropriate standard. According to information provided to the Commission, the total cost of this task could amount to $25 million nationally — less than 0.1 per cent of the estimated value of the stock. This expenditure should not be regarded as a cost of reform. Housing authorities should and are carrying out this work, irrespective of the reforms proposed by the Commission. This task should be completed before the end of the current CSHA funding period.
Property management The public housing stock should be managed as a commercial undertaking. This will require new corporate plans and objectives to be established. Performance indicators should also be in place from the start to measure the gains from the proposed reforms. It is not essential that the tenancy and property managers be in separate agencies at the outset. However, corporate plans and objectives appropriate to independent business units should be established as soon as practicable. This would ease the change to an independent unit dealing exclusively with property management — perhaps operating as a statutory authority. In the Commission’s view separation of property and tenancy management will be required once the property manager is given a commercial charter. If the property manager is to be a statutory authority, enabling legislation will be
INDUSTRY COMMISSION 159 PUBLIC HOUSING required, setting out corporate objectives, reporting requirements, accounting methods, structure of the board, responsibilities, ownership and other relevant matters. Corporate objectives should be broadly defined. From these objectives, corporate plans could be negotiated between the board and the minister, as a contract — with the minister committed to support the plan and the board to achieve the outcomes specified in the plan.
Auditing, accounting standards, reporting requirements and performance monitoring A reform priority is to review and improve where necessary accounting standards, reporting requirements and performance monitoring. Authorities have started this work, but the Commission’s reforms — with property management on a commercial basis and a more holistic approach to tenancy management — will create new challenges. Accounting standards and reporting requirements should be consistent between States to allow comparisons to be made. There are no private sector equivalents to State housing authorities. Consequently, inter-agency comparisons will be important in providing performance benchmarks and some indication of relative performance. Both financial and non-financial performance should be audited. Auditors should report on the efficacy of the indicators used, as well as the measured outcomes. The auditor could be the Auditor-General or a private auditor. In choosing a private auditor, care should be taken to ensure that there are no potential conflicts of interest arising from other activities such as consultant advice. Efforts to collect consistent data and develop performance indicators across the States could be co-ordinated through the Steering Committee on National Performance Monitoring of Government Trading Enterprises. Another option would be to standardise key indicators used in the Housing Assistance Plans, the results of which could be reported in the Housing Assistance Act annual reports. However, more work needs to be done on standardising definitions. The Commission sought participant’s views on performance indicators, largely without success. A discussion of performance monitoring is in Appendix G. Under the proposed reforms, three organisations — tenancy management, property management and policy — would each require performance indicators. Those for property management would be the easiest to develop as the output would be readily quantified. Assessment of tenancy management
160 INDUSTRY COMMISSION 12 ARRIVING AT MORE EFFICIENT OUTCOMES would focus on the achievement of outcomes for tenants and their satisfaction with the services provided. Property and tenancy management would, of course, be subject to Freedom of Information legislation and review by the Ombudsman where applicable.
Adequate capitalisation of the property manager States would have to determine what debt to transfer to a fully commercial property manager. This is a key decision as it affects the financial performance of the property manager and the overall cost of providing public housing. The debt to equity ratio will depend on the anticipated rate of capital expansion required. The Defence Housing Authority, a property manager with functions similar to those advocated by the Commission, found that its inadequate capital base meant that ‘within two years, solely as a result of the interest burden, the Authority will be operating at a loss’ (Kirkby-Jones 1990, p. 17). Without adequate capitalisation it would be difficult for the property manager to foster a commercial culture. Alternatively, this could create an incentive for the property manager to run-down the housing stock to achieve the required rate of return.
Co-ordinating rates of withdrawal of housing assistance The rates of withdrawal of social security benefits and of public housing rent subsidies are at present determined independently of each other. This may create a disincentive for low-income people in public housing to increase their income. Co-ordination is required and must take into account marginal income taxation rates. Greater co-ordination of housing assistance between DSS and State housing authorities is required to minimise these disincentives. Ideally, a single body (either Commonwealth or combined Federal and State) could determine levels of assistance and rates of withdrawal using a criteria of equity, efficiency and cost-effectiveness. Such a body should aim to ensure a more complete and effective coverage of all targeted groups.
12.3 Improving access and affordability generally The NHS identified many housing related problems that if addressed would mitigate housing stress. The focus was on improving access to affordable and appropriate housing, particularly for low-income people.
INDUSTRY COMMISSION 161 PUBLIC HOUSING
Public housing addresses many of the housing problems identified by the NHS. However, some of the problems faced by low-income people can be addressed in other ways, for example, by reducing discrimination, improving consumer protection, removing impediments to efficient market operations by reducing the tax burden on property owners, ensuring that building regulations do not add unnecessarily to costs.
Anti-discrimination legislation The NHS recommended that the Commonwealth Government review anti- discrimination legislation and its effectiveness in relation to housing. It also recommended that the States introduce a legislative charter of tenants’ rights. Evidence brought before this inquiry suggests that low-income people generally — and in particular youth, those with disabilities and Aboriginal and Torres Strait Islander people — are discriminated against in the private rental market. The Commission supports the NHS recommendation, but it is not clear that housing issues should be covered specifically in anti-discrimination legislation. A charter of tenants’ rights placed in landlord and tenancy legislation would assist awareness of the problems faced by these groups. Care needs to be exercised with anti-discrimination measures. Regulation that is too restrictive could be counter-productive if it reduced the supply and level of competition in the private rental market. For example, a charter with legal effect could exacerbate the problems faced by low-income people in accessing rental housing, if compliance imposes additional costs on landlords. Enforcement would be difficult and it could encourage landlords to discriminate against the people the regulation is intended to protect if landlords’ profitability or flexibility are adversely affected. Some of the problems arising from discrimination would be ameliorated by headleasing. The Commission’s proposals in Chapter 6 would encourage greater use of this tenure.
Consumer protection for private renters The NHS recommended that: • The Commonwealth should develop consistent landlord-tenant legislation for all States; and • The States, with Commonwealth support, should have rental bond boards and residential tenancy tribunals. The Commission supports the intent of these recommendations.
162 INDUSTRY COMMISSION 12 ARRIVING AT MORE EFFICIENT OUTCOMES
The level of protection provided by legislation varies considerably between States (see Appendix C). Those States with less stringent provisions should be looking to strengthen their legislation, but this is a State responsibility and should not require Commonwealth involvement. Tenants in boarding houses and caravan parks are especially at risk. The National Inquiry into the Human Rights of People with Mental Illness reported that boarding houses are often sub-standard and ‘a national disgrace’: ... the physical conditions in many boarding houses are depersonalising, depressing and completely unconducive to any dignified normal life. Many boarding houses have no living space appropriate for any form of leisure activity. Security is poor ... Many rooms are dark, cramped, crowded, dirty, unsafe and poorly maintained (HREOC 1993, vol. 2, p. 388). The National Youth Coalition for Housing said: Residents of caravan parks have little security of tenure and few tenancy rights, and conditions are often far from adequate (sub. 131, p. 27). In most States the general residential tenancies legislation does not apply to boarders and lodgers. Nor does it apply to caravan parks or mobile homes, with the exception of New South Wales and the Northern Territory. Victoria has enacted specific legislation for caravans and mobile homes, while Queensland has specific legislation for mobile homes. Clearly the gaps in coverage should be addressed. As noted earlier, care should be exercised in regulating the rental market. Regulation can be counter-productive and an appropriate balance of incentives and sanctions must be struck.
Taxes and charges The NHS found that by OECD standards the tax burden on Australian property is relatively high. These taxes are levied by State and local governments. In 1988–89, almost one-third of State government revenue was from property taxes. During the 1980s, there was significant real growth in revenue yields from property taxes. The NHS concluded that land taxes can be potentially onerous for professional investors with multiple property holdings. This may affect the nature and level of investment in low-cost rental property. Property taxes, stamp duties and charges also affect affordability, and hence demand for appropriate housing. The taxes and charges must be reflected in private sector rents and ultimately in the level of assistance (subsidy) provided to public tenants. In 1991–92, public housing authorities paid $273 million in
INDUSTRY COMMISSION 163 PUBLIC HOUSING rates and charges. This represented 26 per cent of rental receipts and 25 per cent of government grants for public housing. Rental properties are subject to land taxes. Exemptions have reduced the land tax base and average liabilities (including those of private rental landlords) have increased. For example, in South Australia the number of taxpayers in 1979–80 equalled 319 000. With the exemption of owner occupiers, increases in the tax-free threshold and exemption of non-profit organisations, this had fallen to 20 547 taxpayers in 1987–88 (see Appendix C.3). The real revenues from stamp duties doubled in all States (and tripled in Victoria and Western Australia) over the ten years from 1979–80 to 1989–90. Transaction costs on house purchases affect all tenures, however they are not tax deductable in the case of purchases for business purposes such as renting. All States exempt residential leases from stamp duties, except Western Australia which levies duties on houses renting for more than $130 per week (see Appendix C.3). Governments can reduce the burden of these taxes and charges by improving the efficiency of their administration and thereby reducing their revenue requirements. They should also ensure that their taxation minimises economic distortions, that is, they are structured to minimise the change to consumption relative to the revenue raised. Tax expenditures — such as the non-taxation of imputed rents and capital gains on the family home — are seen by many to be inequitable. The level of assistance received through tax expenditures (apparently) increases with income. Although a particular tax may be regressive, equity comparisons between high- and low-income earners can only be made by considering taxation overall. Non-taxation of imputed rent may provide little benefit to many present owner-occupiers. Taxation of imputed rents ceased in 1923. The effect of the removal of this tax has been to raise the value of real estate by an amount equivalent to the capitalised increase in the net-of-tax return to owners. Those who presently own property are now making a normal net return on their asset. Those who rent presently suffer the legacy of this decision in the form of having to pay higher rents than they would otherwise have paid if the tax was still in existence. A further point concerns the subjective nature of the ‘tax expenditure’ concept. A tax-expenditure is considered to occur when a particular tax rate is less than that of an ideal rate suggested by some hypothesised system of taxation. It could also be expected that an increase in a particular rate would be to some extent off-set by reductions to other rates. As a consequence, the distributional effects of any change to the tax regime are by no means clear.
164 INDUSTRY COMMISSION 12 ARRIVING AT MORE EFFICIENT OUTCOMES
A re-introduction of the taxation of imputed rents would have to be done with a great deal of caution. First, other taxes would need to be adjusted. Second, the taxes would have to be introduced gradually because the imputed rents are, to some unknown degree, capitalised in land values. Third, the outcomes of a reduction in the relative price of land are uncertain, for instance, its affects on urban sprawl. Another problem is the effective taxation caused by the withdrawal of pensions should the elderly or disabled liquidate the capital in their homes in response to any change in taxation or regulation aimed at making better use of the housing stock. A change to pension regulations could encourage some people to move to more suitable accommodation and lead to greater efficiency. Although the cost savings from a better use of resources would be sustained, once the surplus housing was absorbed, housing costs would begin to rise again. The benefits gained by adjusting to a better use of the existing housing stock would be offset to some degree by high transaction costs on property exchange.
Local government regulations Local government has an impact on housing primarily through land use, building and development control processes. Most councils do not have explicit housing policies, and are often not aware of the housing related impacts of their policies and activities. Local government also has a role in the development of efficient and equitable patterns of urban development, and hence an impact on the provision of affordable and appropriate housing. The collective effect of decisions by local government authorities has significant metropolitan or regional implications. The NHS concluded that local government regulations and the provision and funding of infrastructure have a significant impact on housing costs and hence affordability. It was recommended that local government: • Introduce more flexible controls and streamline approval processes to facilitate the provision of more affordable housing; • Introduce development regulations that enable a greater range of choice of housing types; and • Implement policies to encourage the retention of rental accommodation including boarding houses. The Commission endorses changes to building regulation that allow lower cost accommodation to be built. The changes should be achieved by removing unwarranted controls where the economic benefits of doing so outweigh any costs.
INDUSTRY COMMISSION 165 PUBLIC HOUSING
Policies aimed at encouraging the retention of rental accommodation should only be implemented if they are achieved by removing distortions. Policies involving subsidisation of low-cost private sector housing provision are not likely to be effective in the less-than-fully competitive rental market and the subsidies would be difficult to confine to low-cost accommodation.
Increasing private participation in the low-cost rental market Under the Commission’s reform proposals, competition between the agency responsible for property management and private landlords can and should be fostered. The agency responsible for providing housing assistance should headlease a proportion of its housing requirements from the private sector. Greater use of headleasing may increase the supply of low-rent properties in the private rental market.
12.4 Improving the delivery of allied community services It is not possible to place a community service agency, like the proposed tenancy manager, on a commercial footing and rely on competitive disciplines to provide the incentive to be efficient. Consequently, there is a need for high levels of accountability, more so because of the impact poor service can have on people’s lives. Governments should ensure that the activities of the tenancy and Supported Accommodation Assistance Program (SAAP) managers are transparent; that adequate consultation takes place; and that the decisions they make are subject to administrative appeals. Measurement of performance is essential, because of the subjective nature of the service outcomes. Measures of performance should include consumer satisfaction, and findings should be published and audited (see above). The Commission’s reforms call for a more holistic approach on the part of the tenancy manager. To meet the needs of the small proportion of people who require more than assistance with shelter, officers may need a knowledge of the programs available to assist people and the skills to deal with people who need the additional support. Greater co-ordination of policy is required, as are links between policy and operations. A high degree of co-ordination is needed between the tenancy manager and SAAP manager. In Chapter 10 the Commission calls for SAAP funds and Crisis Assistance Program funds to come within the control of one manager.
166 INDUSTRY COMMISSION 12 ARRIVING AT MORE EFFICIENT OUTCOMES
Role of charities Charitable organisations have an important role in the provision of crisis accommodation. They house the homeless and assist many who are unable to access or are waiting to enter public housing. Many people find them more receptive than government agencies in responding to their needs. Charitable organisations are now assisting people over longer periods. In turn, governments are providing funds to help them cope with their traditional crisis role and the newer role of providing medium-term housing. Thus a partial but growing transfer of responsibility has occurred. This poses important social questions. Are governments abrogating too much of their responsibility? Are all members of the community contributing equitably to the cost of social welfare? Are government tax expenditures an appropriate incentive for people to contribute to charities? Are tax expenditures being used efficiently in this area? There is no evidence to suggest that governments have given adequate consideration to the role and funding of charities. Important issues are the extent to which charitable organisations should be used as agents to perform specific services; the extent of accountability; and ways in which to improve co-ordination of effort. Participants pointed to unacceptable delays by government departments in responding to requests for funding and fulfilling support commitments. Improved co-ordination is needed to enhance the joint effectiveness of government and non-government assistance.
12.5 Effective advocacy Effective advocacy is important: • Low-income and disadvantaged groups are in a poor bargaining position and may be without adequate knowledge of the ways in which policies and practices affect them; • Individual tenants face difficulties because of the potential for retribution if they complain; and • Many issues cannot be resolved at the individual level or one-off basis, but require broader institutional changes in personnel, policies, practices and organisational structure. The role of tenant and community advocacy groups should be to monitor outcomes for tenants against performance standards and ensure that individuals receive adequate service, their rights are respected and they have avenues of appeal.
INDUSTRY COMMISSION 167 PUBLIC HOUSING
For their part, governments and their housing authorities should listen to and discuss issues with advocacy groups. They should ensure that information is available on policies and programs and that adequate resources are provided, for example, by helping tenant groups develop management and organisational skills. Some governments recognise that advocacy groups are part of the process of good management. The NHS reported that there is a need for greater effort and recommended that: • The Commonwealth and States should enhance resourcing of present community-based advocacy and information services for renters; and • A national information program should be introduced to inform consumers and providers of rental accommodation of their rights and obligations. The Commission supports this recommendation. There is a need for State governments to promote consumer protection and support effective advocacy and advisory services for those renting from the private sector. It is also in the interest of State governments to support public housing advocacy groups as this will only improve the performance of their authorities. However, to avoid conflict of interest, governments should not support advocacy through the agency responsible for providing housing. The Commonwealth Government also has an interest in funding advocacy for public housing. Effective provision of public housing will ensure that there is less need for income support and other Commonwealth assistance measures. A difficulty faced by the State housing authorities in dealing with advocacy groups is that some of the issues (the CSHA, asset management, acquisition of housing stock, rent setting) are not understood well enough by advocacy groups. Governments should consider resourcing advocacy groups and ensuring that the workers are adequately trained. Groups experiencing difficulty renting, such as non-English speaking migrants, may not have the skills or the resources to find accommodation that suits their needs. They should be targeted specifically by advocacy groups and consumer rights programs.
168 INDUSTRY COMMISSION REFERENCES FOR VOLUME 1
ABS (Australian Bureau of Statistics) 199õ 2, Australian National Accounts: National Income and Expenditure, Cat. no. 5204.0, AGPS, Canberra, May. —— 1993a, 1991 Census: Basic Community Profiles, Australia, Cat. no. 2722.0, AGPS, Canberra. —— 1993b, Australian National Accounts: National Income and Expenditure, Cat. no. 5206.0, AGPS, Canberra, June. ANAO (Australian National Audit Office) 1993, Report on Ministerial Portfolios Budget Sittings 1993, Volume 6: Health, Housing, Local Government and Community Services Portfolio; Social Security Portfolio, Audit Report no. 1, AGPS, Canberra. ATSIC (Aboriginal and Torres Strait Islander Commission) 1993, Building a Partnership, Discussion Papers, The Indigenous Australian Shelter Conference, Brisbane, 1Ð3 November. Bisset, H., Blaskett, B. and Siemon, D. (forthcoming), Housing Affordability, Housing Poverty and Housing Assistance (working title), Brotherhood of St. Lawrence. Burdekin Report 1989. See HREOC 1989. Burgess, R. and Skeltys, N. 1992, The Findings of the Housing and Location Choice Survey: An Overview, Background Paper no. 11, National Housing Strategy, AGPS, Canberra. Campbell, R. and Walsh, C. (eds.) 1988, Equity in Housing Support: Papers and Proceedings of the Second Housing Finance Workshop, Housing Industry Association, Canberra. Carlson, D.B. and Heinberg, J.B. 1978, How Housing Allowances Work: Integrated Findings from the Experimental Housing Allowance Program, Urban Institute, Washington. Carter, R., Milligan, V. and Hall, J. 1988, The Benefits and Costs of Public Rental Housing in New South Wales, Research and Policy Papers no. 2, Department of Housing, New South Wales, February. Commonwealth Grants Commission 1993, Report on General Revenue Grant Relativities 1993, 3 vols., AGPS, March.
INDUSTRY COMMISSION 169 PUBLIC HOUSING
DHA (Defence Housing Authority) 1992, Corporate Plan 1991–1994, The Pot Still Press, Canberra. DHHCS (Department of Health, Housing and Community Services) 1991a, Report on Functional Review of Housing, mimeo, Canberra. —— 1991b, Housing Assistance Act 1989 Annual Report 1989–90, AGPS, Canberra. —— 1992a, Housing: Choices for a Changing Nation, Budget 1992Ð93, AGPS, Canberra. —— 1992b, Housing Assistance Act 1989 Annual Report 1990–91, AGPS, Canberra. DHHLGCS (Department of Health, Housing, Local Government and Community Services) 1993, Program Performance Statements 1993–94: Health, Housing, Local Government and Community Services Portfolio, Budget Related Paper no. 7.8A, AGPS, August. Egan, R.J. & Associates Pty Ltd 1993, ‘The Development of Rental Housing Policies and Programs in Australia under the CommonwealthÐState Housing Agreement’, Consultant’s Report for the Industry Commission’s Public Housing Inquiry, mimeo. Fisher, F.M. 1977, ‘On donor sovereignty and united charities’, American Economic Review, vol. 67, no. 4, pp. 632Ð8, September. Flood, J. 1993, ‘Housing Subsidies 1990–91’, Consultant’s Report for the Industry Commission and the Department of Health, Housing, Local Government and Community Services, mimeo. Fopp, R. 1993, ‘Is it a case of chalk and cheese, apples and oranges?’, in Shelter (1993), pp. 33Ð7. Hendrie, D. 1988, ‘Housing Allowances: Some Empirical Findings’, in Campbell and Walsh (1988), pp. 27Ð42. HREOC (Human Rights and Equal Opportunity Commission) 1989, Our Homeless Children, Report of the National Inquiry into Homeless Children, (B. Burdekin, Chairperson), AGPS, Canberra. —— 1993, Human Rights and Mental Illness, Report of the National Inquiry into Human Rights of People with Mental Illness, (B. Burdekin, Chairperson), 2 vols., AGPS, Canberra. IC (Industry Commission) 1993, Taxation and Financial Policy Impacts on Urban Settlement, Report no. 30, 2 vols., AGPS, Canberra, 7 April.
170 INDUSTRY COMMISSION REFERENCES - VOL. 1
Kirkby-Jones, W.J. 1990, ‘Management Accountability for Public Assets’, Royal Australian Institute of Public Administration Conference, Defence Housing Authority, 16 July. Mackenzie, D. and Chamberlain, C. 1993, ‘The number of homeless young people in Australia’, in Shelter (1993), pp. 28–32. Mant, J. 1992, Inquiry into the Department of Housing, Report of the Commissioner, Sydney. National Housing Policy Review 1988, Final Report, (D. Persson, Director), mimeo, February. National Public Works Council Inc. 1993, Predicting Housing Maintenance Costs, Asset Management Series no. AM-1-93, Canberra, May. New South Wales, Office of the NSW Ombudsman 1993, Special Report to Parliament: Ombudsman’s Report on the Local Government and Community Housing Program, Report No. 1/93. NHS (National Housing Strategy) 1991a, Framework for Reform, Background Paper no. 1, AGPS, Canberra. —— 1991b, The Affordability of Australian Housing, Issues Paper no. 2, AGPS, Canberra. —— 1992a, Housing choice: Reducing the Barriers, Issues Paper no. 6, AGPS, Canberra. —— 1992b, National Housing Strategy: Agenda for Action, Issues Paper no. 7, AGPS, Canberra. OECD (Organisation for Economic Co-operation and Development) 1993, National Accounts: Detailed Tables 1979Ð1991, 2 vols., Paris. Raphael, D.D. and Macfie, A.L. (eds.) 1976, The Theory of Moral Sentiments: Glasgow edition of the Works and Correspondence of Adam Smith. SAULT (South Australian Urban Land Trust) 1992, Annual Report 1992. Shelter 1993, National Housing Action, vol. 9, no. 2. Steinberg Schone, B. 1992, ‘Do means tested transfers reduce labor supply?’, Economic Letters, vol. 40, pp. 353Ð8. Swinburne University of Technology 1993, ‘International Housing Systems’, Centre for Urban and Social Research, Consultant’s Report to Industry Commission’s Public Housing Inquiry.
INDUSTRY COMMISSION 171 PUBLIC HOUSING
Treasury 1992, Commonwealth Financial Relations with Other Levels of Government 1992–93, Budget Paper no. 4, AGPS, Canberra, August. Varian, H. R. 1990, Intermediate Microeconomics: A Modern Approach, 2nd edn., Norton, New York. Victorian Department of Planning and Housing 1992, The Private Rental Market, Victorian Housing and Residential Development Plan: Project no. 10, Victorian Department of Planning and Housing, Melbourne. Walsh, C. and Thomson, N. 1992, ‘Federal Fiscal Arrangements in Australia: Their Potential Impact on Urban Settlement’, Report prepared for the Industry Commission Inquiry into Taxation and Financial Policy Impacts on Urban Settlement, mimeo. Wood, G.A. 1992, ‘How do Australian State and local governments tax residential housing?’, Australian Tax Forum, vol. 9, no. 4, pp. 441Ð72. Wulff, M., Pidgeon, J. and Burke, T. 1992, ‘Public Housing and Poverty Traps: The Impact of RentÐsetting Systems’, Centre for Urban and Social Research, Swinburne University of Technology paper presented at the Sixth National Conference, Australian Population Association, Sydney, 28Ð30 September.
172 INDUSTRY COMMISSION INDUSTRY COMMISSION
PUBLIC HOUSING
VOLUME 2: APPENDICES
REPORT NO. 34
11 NOVEMBER 1993
Australian Government Publishing Service Canberra © Commonwealth of Australia 1993 ISBN 0 644 32919 X (Volume 2) ISBN 0 644 32949 1 (set)
This work is copyright. part from any use as permitted under the Copyright Act 1968, no part may be reproduced by any process without prior written permission from the Australian Government Publishing Service. Requests and inquiries concerning reproduction and rights should be addressed to the Manager, Commonwealth Information Services, Australian Government Publishing Service, GPO BOX 84, Canberra ACT 2601.
Printed in Australia by A. J. LAW, Commonwealth Government Printer, Canberra TABLE OF CONTENTS
VOLUME 2 - APPENDICES Page A PARTICIPANTS’ VIEWS 1 A.1 Groups with distinctive needs 1 A.2 Aspects of assistance 11 A.3 Private rental market 29 A.4 Intergovernmental issues 34 A.5 State housing authorities 40 A.6 Administration of programs (other than public housing) 52
B OVERVIEW OF HOUSING FOR LOW-INCOME PEOPLE 59 B.1 Tenure characteristics 59 B.2 Location characteristics 62 B.3 Department of Social Security clients 64 B.4 Public housing applicants and recipients 67 B.5 High-income public housing tenants 69 B.6 Demand responses 69
C RENTAL MARKET 73 C.1 Nature of the good 73 C.2 Rental stocks 80 C.3 Government interventions 82 C.4 Market structure 88 C.5 Regulatory framework 91 C.6 Market operations 99 C.7 Supply responses 101
INDUSTRY COMMISSION iii PUBLIC HOUSING
D CSHA FUNDING ARRANGEMENTS 105 D.1 CSHA funding 107 D.2 CSHA accounting structure 117 D.3 Understanding the accounts 122 D.4 Subsidies to housing authorities 127 D.5 Accrual accounting 127
E EVALUATION OF HOUSING ASSISTANCE APPROACHES 129 E.1 Housing assistance or cash payments for general income support? 129 E.2 Cost effectiveness of public housing 134 E.3 Impacts on the private rental market 142 E.4 Resource costs of public and private provision 143 E.5 Allocative efficiency 144 E.6 Review of studies 145 E.7 Extra benefits from public provision 147 E.8 Rent assistance and headleasing 149
F EFFECTIVENESS AND EFFICIENCY OF PUBLIC HOUSING AUTHORITIES 151 F.1 Objectives of housing programs 151 F.2 Measuring performance 153 F.3 Tenancy management 157 F.4 Property management 161 F.5 Co-ordination 164 F.6 Transparency and accountability 165 Attachment F.1 Government housing assistance schemes 168
iv INDUSTRY COMMISSION TABLE OF CONTENTS
G ORGANISATIONAL REFORM OF STATE HOUSING AUTHORITIES 175 G.1 Aims of organisational reform 175 G.2 Recent reform initiatives 178 G.3 The Commission’s proposal 181 G.4 Institutional and administrative arrangements 183 G.5 Requirements for success 187
H ASSET VALUATION AND MANAGEMENT 193 H.1 Valuation 193 H.2 Asset management 198
I PRICING POLICIES 205 I.1 Current rent setting 205 I.2 Implicit subsidy 213 I.3 Efficiency and equity 217 I.4 Rent setting reform 219 I.5 Model 222 I.6 Assessment of the model 224 I.7 Implementation difficulties in large urban areas 226
J PUBLIC HOUSING ALLOCATION 231 J.1 Waiting lists 231 J.2 Choice of housing 236 J.3 Priority access 240 J.4 Equivalence scales 242 J.5 Efficient and equitable allocation 245
K OTHER HOUSING PROGRAMS 249 K.1 Rent assistance 249 K.2 Consistency in private and public rental assistance 255
INDUSTRY COMMISSION v PUBLIC HOUSING
K.3 Inconsistencies in rental assistance 259 K.4 Shared equity schemes for public housing tenants 259
L COMMUNITY HOUSING 263 L.1 Community housing programs 266 L.2 Program objectives 272 L.3 Funding processes 278 L.4 Project allocation 282 L.5 Legal framework 285 L.6 Management by community groups 287 L.7 Accountability 290
M SUPPORT ASSISTANCE PROGRAMS 291 M.1 Supported accommodation and support assistance programs 291 M.2 People who need supported accommodation assistance 302 M.3 Housing allocation and the provision of supported accommodation 308 M.4 The role of non-government organisations 310
N ABORIGINAL AND TORRES STRAIT ISLANDER HOUSING 313 N.1 Program formulation and management 313 N.2 Funding and financial arrangements 320 N.3 Co-ordination with other services 327 N.4 Housing standards 328 N.5 Stock management and allocation 331 N.6 Incentives for recipients 332 N.7 Recent initiatives 333
vi INDUSTRY COMMISSION TABLE OF CONTENTS
O INQUIRY PROCESS 335 Attachment O.1 Visits and discussions 337 Attachment O.2 Questionnaire sent to State housing authorities 340 Attachment O.3 Consultant briefs 346 Attachment O.4 Inquiry participants 350
REFERENCES FOR VOLUME 2 361
GLOSSARY 373
INDUSTRY COMMISSION vii PUBLIC HOUSING
BOXES C.1 A residual market 91 C.2 Incentive difficulties in private rental markets 94 D.1 Debt for public housing to other than the Commonwealth 115 D.2 Rental Capital Account inflows 120 D.3 Rental Capital Account outgoings 121 D.4 General Allowance outgoings 123 E.1 What are the relevant supply elasticities? 141 G.1 Principles for an independent tribunal 183 H.1 Asset management within the NSW Department of Housing 201 H.2 Asset management within the Defence Housing Authority 203
FIGURES B.1 Distribution of households by type within tenure, 1991 59 B.2 Distribution of households by tenure within household type, 1991 60 B.3 Distribution of income units by tenure within income quintiles, 1990 61 B.4 Distribution of income units in lowest two income quintiles by tenure within State, 1990 62 B.5 Distribution of income units in lowest two income quintiles by tenure within States, capital cities, 1990 63 B.6 Distribution of income units in lowest two income quintiles by tenure within States, rest of State, 1990 63 B.7 Proportion of pensioners, allowees and FAS recipients in private rental spending more than 30 per cent of income on rent, before and after rent assistance, by family type, June 1992 66 B.8 Distribution of additions to waiting list and new public tenants by family type within State, 1991–92 67 B.9 Distribution of income units by income within time spent on waiting list, 1988 68 viii INDUSTRY COMMISSION TABLE OF CONTENTS
C.1 Occupied private dwellings by nature of occupancy, 1911 to 1991 80 C.2 Tenure distribution in Sydney and Melbourne, 1991 82 D.1 Source of CSHA funding, nominal prices, 1974–75 to 1991–92 109 D.2 Source of CSHA funding, constant 1989–90 prices, 1974–75 to 1991–92 109 D.3 CSHA funding for public housing and home purchase funding, assistance by funding type, 1984–85 to 1991–92 111 D.4 CSHA funding excluding home purchase assistance 1984–85 to 1991–92 in 1989–90 prices 112 D.5 Long-term Commonwealth interest rates, 1950 to 1984 117 D.6 Financial flows for public housing 119 E.1 Relative cost of inducing additional rental accommodation 138 E.2 Additional marginal cost of inducing the supply of additional rental accommodation with private ownership of the housing stock compared to complete public ownership, high elasticities 139 E.3 Additional marginal cost of inducing the supply of additional rental accommodation with private ownership of the housing stock compared to complete public ownership, low elasticities 140 I.1 Comparison of current and proposed benefit, ordered by region and income, single households 225 I.2 Distribution of rents for one, two and three bedroom private rental accommodation in Sydney, 1991 227 N.1 Net changes to waiting lists for ARHP accommodation, 1991–92 315 N.2 Housing assistance: Institutional arrangements under the ARHP 316 N.3 Housing assistance: Institutional arrangements under ATSIC 317 N.4 CSHA ARHP funding, 1992–93 322 N.5 Aboriginal Hostels Limited, application of funds, 1992–93 326
INDUSTRY COMMISSION ix PUBLIC HOUSING
TABLES B.1 Number of public housing tenants by income source and income quintile, 1990 69 B.2 Elasticity estimates for housing services 72 C.1 Nature of occupancy by State, 1991 81 C.2 Residential tenancy legislation and coverage, 1992 93 C.3 Anti-discrimination provisions 95 C.4 Price elasticity components for supply of housing services 102 D.1 Funds for housing and support services, 1993–94 106 D.2 Net Commonwealth payments to the States for housing, 1974–75 to 1991–92 108 D.3 State debt to the Commonwealth under the CSHA by loan type, at 30 June 1993 113 D.4 State loans from the Commonwealth under the CSHA by type, at 30 June 1992 113 D.5 Commonwealth and State grant funding by State, 1984–85 to 1987–88 114 D.6 Public housing rental income, rental rebates and households on rebated rents in Australia, 1986–87 to 1991–92 118 D.7 General Allowance — funds available and purpose to which they were applied, 1991–92 122 D.8 Balance of Rental Capital Account brought forward by State, 1989–90 to 1992–93 125 D.9 Receipts from the sale of land and dwellings by State, 1989–90 to 1991–92 125 D.10 Cash outcomes of public housing rental operation by State, 1984–85 to 1987–88 126 F.1 Possible indicators of efficiency 156 H.1 State housing authority asset valuation, 30 June 1992 193 H.2 Commission estimate of public housing asset values by State, June 1992 195
x INDUSTRY COMMISSION TABLE OF CONTENTS
H.3 State borrowings related to the value of public housing assets by State, June 1992 196 I.1 Basis for determining capacity of public tenants to pay rent by State, December 1992 208 I.2 Basis for determining the full rent charged by State, 1992 211 I.3 Standard scale of weekly rentals for public housing compared to the median market rental, Northern Territory, 1992 215 I.4 Comparable private rental accommodation accessible by public tenants in Sydney, 1991 230 J.1 Eligibility criteria for wait listing by State, 1991–92 232 J.2 Details on waiting and priority lists by State, 1991–92 236 J.3 Type of public house typically offered to applicants by household size and State, June 1993 238 J.4 Priority list criteria and assessment method by State, 1991–92 241 J.5 Selected equivalence scales 243 J.6 Implicit equivalence scales in State housing authorities’ income eligibility criteria, 1991–92 244 K.1 Maximum rates of rent assistance, November 1983 to September 1993 251 K.2 DSS benefits, March 1993 252 K.3 DSS rent assistance schedule, September 1993 253 K.4 State rent relief programs, January 1993 256 L.1 Co-operative and community housing programs by State, 30 June 1993 264 L.2 Community housing organisations by State, 1993 267 L.3 LGACHP funds carried over to next year and jurisdiction population, 1989–90 to 1991–92 279 L.4 LGACHP programs by State 282 M.1 Commonwealth SAAP funding allocation to the State and local governments, 1990–91 to 1992–93 293 M.2 Commonwealth CAP funding allocation, 1990–91 to 1992–93 294
INDUSTRY COMMISSION xi PUBLIC HOUSING
M.3 Number and range of services funded under the SAAP and the Youth Social Justice Strategy by target groups, 1988–89 and 1992–93 294 M.4 Commonwealth appropriations for DHHLGCS People in Crisis Program, 1990–91 to 1992–93 296 M.5 Home and Community Care expenditure by government level, 1984–85 to 1992–93 297 M.6 Domiciliary Nursing Care Benefit, aged persons and people with disabilities by State, June 1992 and June 1993 299 M.7 Commonwealth nursing home subsidies and domiciliary care services, 1991–92 and 1992–93 300 N.1 Commonwealth expenditure on Aboriginal and Torres Strait Islander housing from 1969 to 1993 321 N.2 CHIP housing and infrastructure funding, 1988–89 to 1993–94 324 N.3 CHIP capital and recurrent expenditure, 1988–89 to 1993–94 324 N.4 Aboriginal and Torres Strait Islander family units and persons requiring housing, 30 June 1992 325 N.5 Communities and people in minor urban, rural and remote areas which do not have adequate infrastructure, 30 June 1992 327
xii INDUSTRY COMMISSION A PARTICIPANTS’ VIEWS
The Commission received 370 submissions for this inquiry and held public hearings after the release of an issues paper and the draft report. This Appendix captures a selection of the views of participants provided either in submissions or at the public hearings. These views indicate the wide range of issues brought to the Commission’s attention by participants.
A.1 Groups with distinctive needs ... any definition of “special need” should be consistent and coherent within and between Government agencies. This is to avoid the possibility of application of different criteria by Housing Authorities and Department of Social Security and other agencies in meeting the needs, for example, of women escaping domestic violence (National Women’s Consultative Council, sub. 222, p. 1). While we accept that affordability, appropriateness, equity and security are priorities as policy and program objectives, most vulnerable groups needing supportive housing require flexible interpretation so appropriateness becomes a key objective for any program (Uniting Church - Synod of Western Australia, sub. 32, p. 3). ... disadvantaged groups have the right to equitable access to stable, secure housing with appropriate levels of specialist support. Hanover recommends that greater emphasis must be put on targeting stock to special needs groups in structured co- ordinated programs with appropriate health department and community agencies. At present, those in most need of secure affordable housing are not having their needs met (Hanover Welfare Services, sub. 163, p. 7).
Aboriginal and Torres Strait Islander people Regrettably, there is insufficient accommodation dedicated for Aboriginal use and consequently the descendants of the original inhabitants of this country are forced to compete on the “open market” for public housing (Australian Citizen’s Action Network, sub. 204, p. 5). According to available research, [Aboriginal and Torres Strait Islander people] have major difficulties securing mainstream housing in both public and private sectors. They experience discrimination from owners and officials; there is a lack of housing stock able to accommodate large households; they are unfamiliar with procedures and expectations; and the relevant information, advice and assistance is often not provided to them. (Society of St Vincent de Paul, State Council of NSW, sub. 341, p. 8)
INDUSTRY COMMISSION 1 PUBLIC HOUSING
At present Aboriginal families are not “subject to similar rules” [as other public housing tenants]. On numerous occasions Aboriginal families are subject to constant scrutiny by Homeswest Accommodation Managers. Often the word of a neighbour will be sufficient for Homeswest to give a warning to Aboriginal families, yet it is hard to determine if racial prejudice has played a part. Families are sometimes evicted under section 64 of the Western Australian Residential Tenancy Act, where a 60 day Notice of Termination with no reasons is given. In our experience a much greater percentage of those evictions are for Aboriginal families, as opposed to white families (Sussex Street Community Law Service Inc., sub 272, p. 9). Sole parent Aboriginal women are even further disadvantaged to their Anglo counterparts. Apparently, it is extremely rare for an Aboriginal single parent to secure accommodation in the private rental market; and even rarer for them to secure accommodation in the private rental market that meets their needs. Refuge workers reported that more Aboriginal women came in to the refuge with large families of 4 or more children than white women, and that white women tended to come in with families of 2 to 3 children. Family size can pose an additional access barrier for Aboriginal families in terms of obtaining appropriate sized accommodation in suitable locations (Tenants Advice Service, sub. 191, p. 6). Because of the absence of skilling, Aboriginal people have been disadvantaged in accessing equitable living ... (Helen MacFarlane, transcript, p. 329). ... in other words 46 houses out of 53 contain more than one [Aboriginal] family (Widjeri Co-op, transcript, p. 549). It is salutary that education, health, employment and welfare departments have long seen it as a priority to engage Aboriginal staff in liaison and management positions, yet the housing market has not (Dr Helen Ross, sub. 215, p. 3). A major issue facing all remote Aboriginal communities is the repairs and maintenance requirements of housing, in those localities. The issues of locational disadvantage have been recognised for remote and rural townships in the form of cross-subsidisation between city and country. Locational disadvantage applies to a far greater degree to remote Aboriginal communities, yet the same cross-subsidisation does not seem to apply, even though those tenants have similar repairs and maintenance requirements (Kimberley Development Commission, sub. 35, p. 4).
South Sea Islanders Our view is that [South Sea Islanders] should be recognised as a cultural and ethnic group in their own right facing special problems of their own, most of which were not of their making. The first step in correcting this problem would be for them to be included with Aboriginal and Torres Strait Islanders in all programmes covering ATSIC (L M Jubov, sub. 282, p. 3).
2 INDUSTRY COMMISSION A PARTICIPANTS’ VIEWS
Our unique history as non voluntary “immigrants” places us in a position where we have not been recognised because we do not ‘fit’ anywhere within the Government structures as either ‘migrants’, or for at least one third of our people, as indigenous Australians. It is therefore vital that special consideration be given to our people’s unique place in Australian society today (South Sea Islander Community of Mackay, sub 289, p. 1).
People with disabilities People with disabilities are one of, if not the most disadvantaged groups when seeking to access housing. Not only do they require a certain type of housing (eg with access), and often support services to enable them to live independently (eg personal care advocacy, supervision), they as a group tend to have less disposable income — either because of the undisputed extra costs of living with a disability or because as a group the option to work full-time at full wages is less likely than for any other sector within the community (ACROD, sub. 140, p. 4). It is also more difficult for people with disabilities to access housing in the private rental market: • their disability shows and despite community education, people make inaccurate assumptions and choose to rent to someone who appears normal, • wheelchairs do cause damage to premises even with the most careful use — so why risk your property, • renovations need to be accomplished for people with physical disabilities — why bother with that person, • those on a pension are unable to pay market rates, particularly if they have extra costs of living as a result of their disability, • concerns about unreliability of some persons with a psychiatric disability — the nature of the disability can in some instances result in a “poor history” of payment of rent, public utility charges etc (ACROD, sub. 140, p. 5–6). It is a sad fact that, despite Federal and State legislation on Rights, Discrimination and responsibilities of certain Departments, the Psychiatrically Disabled tend to be discriminated against in the allocation and tenure of affordable public housing (Schizophrenia Fellowship of South Queensland, sub. 113, p. 5). ... we urge a ... non-discriminatory housing policy for all disabled people, and which should be applied by all governments in their attempts to meet the housing needs of a very disadvantaged group (Community and Institutional Parents’ Action on Intellectual Disability (CIPAID), sub. 236, p. 2). There is not enough public housing and not enough choice; access to information is rarely straightforward, and often pervaded by discriminatory attitudes. However, even without all these, no housing is appropriate for people with a psychiatric disability
INDUSTRY COMMISSION 3 PUBLIC HOUSING
without access to suitable, linked support. Housing policies, therefore, should incorporate training programs for staff to understand the nature of psychiatric disabilities, and should be developed in collaboration with Government Departments providing support services (Queensland Association of Mental Health, sub. 127, p. 6). ... it is important to note that what constitutes “affordability” for the able-bodied, will not necessarily be affordable for people with disability. Due to the extra costs of disability, people have substantially less disposable income. For this reason low cost housing is essential and any affordability benchmarks must take into account the extra costs of disability (Queensland Disability Housing Coalition, sub. 121, p. 3). ... most houses offered through [the South Australian Housing Trust Community Tenancy Program] are 3 bedroom houses with just the one living area. These often prove cumbersome with regard to accommodating three unrelated persons, designed as they were, for the nuclear family. It would be desirable to have more single occupancy units in this program or larger houses with two or more living rooms (Community Accommodation Support Service of South Australia, sub. 24, p. 1). Various measures are needed to improve access to public housing including: • linking housing units with community mental health services, such as through better siting of public housing singles units and more outreach services; • increasing the number of singles units; • promoting innovative housing and housing support projects operating through the non-government sector such as ‘headleasing’ where the non-government agency can provide accommodation for a short period and then transfer the lease to the individual on a short-term basis; and • avoiding financial penalties when people go to hospital and must continue paying for both their community accommodation and their hospital expenses (quoted from National Health Strategy Issues Paper No. 5, p. 146, by Mental Health Branch, Queensland Department of Health, sub. 290, pp. 2–3). ... people are not officially allowed to apply for housing stock until they can guarantee accommodation support. If New Service funding under the Disability Services Program is necessary and approved for accommodation support because the person has high support needs, there is an expectation that it will be spent during a limited time frame. The person could well have to wait, however, for two or more years for housing stock to become available and this could jeopardise their accommodation support funding. There needs to be a recognition that both programs have lead times and applications have to be placed simultaneously to take account of this (Spastic Centre of New South Wales, sub. 11, p. 5). Historically at least in Victoria significant numbers of people with a disability live in housing ranging from large to small institutional settings funded by State or Federal Government Health and or Community Welfare budgets. This has meant that there has been little pressure on public housing authorities and the CSHA to directly address
4 INDUSTRY COMMISSION A PARTICIPANTS’ VIEWS
and provide for the housing needs of people with a disability. It also accounts for many of the issues and difficulties ... related to the co-ordination of services (Singleton Equity Housing, sub. 249, p. 1). It is worth noting that from a West Australian point of view, special purpose built housing for people with disabilities has been sympathetically addressed by Homeswest (Cerebral Palsy Association of Western Australia, sub. 16, p. 1). Generally, the experience of our unit has been that the [NSW Department of Housing] has been flexible, patient and compassionate in their dealings with people with head injuries and their families. ... we have found that the Department has processed applications and dealt with a range of other matters within a reasonable time-limit and often have been surprisingly prompt (Joint submission by: Lidcombe Hospital’s Head Injury Unit and Wareemba Community Living, sub. 97, p. 5). The high levels of support which are required for people with severe and multiple disabilities — in other words, those which typify our client base — are currently well beyond the existing funding strategies provided by DHHCS (Cerebral Palsy Association of Western Australia, sub. 16, p. 1). People with intellectual disability [should] have the right to the full range of housing options as do the rest of the community. The rest of the community do not choose to live in institutions and it is therefore not acceptable that people with intellectual disability should have to either (Star Victorian Action on Intellectual Disability, sub. 166, p. 1). ... a person with a disability may receive either the rental allowance or the mobility allowance but not both. This arrangement places people with a disability at a real disadvantage. If rental assistance arrangements are to be relied on to assist people with a disability to access affordable housing then this should not be at the expense of some other form of assistance that is required (Singleton Equity Housing, sub. 249, p. 1). People with intellectual disabilities (more so than other tenants) find it difficult, exhausting, expensive and intimidating having to perhaps frequently and/or unexpectedly hunt for new lodgings when a lease expires. Public housing ensures permanency of tenure as long as the guidelines are adhered to (St. John of God CLASS, sub. 286, p. 1). Some SAAP agencies report fear of losing their funding if they provide accommodation to people [with psychiatric disabilities] in treatment. This is another form of discrimination. The remedy is a housing policy resulting in more short to medium term housing options rather than long term and crisis accommodation only (Mental Health Branch, Queensland Department of Health, sub. 290, p. 2). People with disabilities are specifically excluded from receiving emergency and crisis accommodation provided through the Supported Accommodation Assistance Program (SAAP) because of their support needs. Most crisis accommodation is provided through respite care programs which may not be appropriate or the choice of the
INDUSTRY COMMISSION 5 PUBLIC HOUSING
individual or their family. Such accommodation may then become the only long term option for the individual (ACROD, sub. 140, p. 1). Currently, people with disability who require physical modification to housing they rent or buy, must pay substantial amounts of money for these structural changes. A program specifically targeted at assisting people to modify housing (both private and public, owned or rented) would significantly increase the access of people with disability to housing. Such a program would also assist people who acquire disabilities through ageing and require modification to their housing (Queensland Disability Housing Coalition, sub. 121, p. 3). With limited modified housing stock available, every attempt should be made to use what is available to the most benefit. An integrated disability housing and accommodation support database could well assist this purpose (Spastic Centre of New South Wales, sub. 11, p. 4). Mechanisms ... need to be implemented to ensure that Boarding Houses remain an affordable option [for people with disabilities]. ... The unregulated boarding house market is full of less than scrupulous practices by some proprietors (Community Accommodation Support Service of South Australia, sub. 24, p. 2).
Aged Older Australians, particularly men and women aged 70 years plus, who have very low income and assets, have had a very limited range of housing choices available to them (Abbeyfield Society (Australia), sub. 154, p. 2). [Frail aged] housing should not be in the form of large estates, but should be allocated to charitable, non-profit, public benevolent organisations in a manner which enables the co-location of subsidised self-care accommodation with resident funded accommodation. Such an approach would maintain and enhance the diversity of options available and the social mix in aged care provision (Aged Services Association of NSW and ACT, sub. 75, p. 5). Importantly, housing for older women needs to be flexible and suitable to meet their needs throughout the course of their older lives. Support systems which can assist older women be maintained in housing options of their choice are considered preferable to moving to centres of increasing support (Office of the Status of Women, sub. 96, p. 6). There has been a concentrated move to enable older people to stay in their own homes for longer periods but this does not necessarily address all housing needs. Many older women have reduced income in old age and housing affordability is a major issue. They may become trapped in inappropriate housing due to declining income and mobility and the lack of other options (Older Women’s Network, sub. 78, p. 2). Older people who are in need of support and community services are moving to inner city areas where supply of services is the best. The response of the public and private
6 INDUSTRY COMMISSION A PARTICIPANTS’ VIEWS
housing sectors to this trend has been slow. Inner city housing that is appropriate to the needs of older people has primarily focused on owner occupier one bedroom single storey home units (Consumer Forum for the Aged, sub. 87, p. 2). ... we believe that attention also needs to be placed on the needs of older people not yet needing support but looking for the opportunity to share their living arrangements (Older Women’s Network, sub. 78, p. 2). ... older people [prefer] to remain in their own homes, or a lower maintenance home, within their familiar neighbourhood. It is often the case that homes with the required design features are not available, or the cost is too high, necessitating a move away from familiar surroundings and supports. ... older people [need information] to assist in decision making in housing choice, given the range of housing products and tenures now available (Queensland Department of Family Services and Aboriginal and Islander Affairs, sub. 14, p. 2). Abbeyfield has increased the housing options available to older people with low incomes and limited assets by providing a socially attractive and cost effective housing model (Abbeyfield Society (Australia), sub. 154, p. 1). Victorian figures show that there is a higher percentage per capita of older renters still renting in private rental arrangements compared to the national average. In recent years the State housing authority has adopted a “catch up” policy to redress this anomaly (Housing for the Aged Action Group, sub. 181, p. 5). If an older person is not already a public housing tenant, he or she may have great difficulty in getting access to an independent living unit, particularly in a familiar area where they have friends or other supports. Long waiting lists can compel older people to continue in the private rental market where they can pay as much as 50 per cent of their income as rent (Abbeyfield Society (Australia), sub. 154, p. 4). In the UK experience, the presence of an Abbeyfield house in an area can encourage older people living alone to give up their home — owned or rented — thereby making available family housing stock which is needed by other generations (Abbeyfield Society (Australia), sub. 154, p. 9). There is little crisis accommodation available across Australia for the frail aged (Aged Services Association of NSW and ACT, sub. 75, p. 8).
Youth Young people, whether dependent or independent, have a right to be housed. However, given existing structural arrangements, especially the socio-economic position of many, young people’s housing options are limited. In the marketplace, limited accommodation options are closely linked to the very limited income potential of young people, the high investment expectations of landlords in what is a favourable taxation regime, and the unwillingness of financial institutions to lend to young people. In conjunction with these factors, young people have little access to limited
INDUSTRY COMMISSION 7 PUBLIC HOUSING
public housing (South East Queensland Youth Accommodation Coalition, sub. 132, p. 3). Shared living arrangements often expose vulnerable young people to situations of abuse and exploitation, similar to the experiences which initially led them to leave home, hence the cycle continues (South Australian Youth Housing Network, sub. 195, p. 14). Responses by States to youth housing are becoming increasingly reliant on such joint venture programs where SAAP agencies or other community/church agencies manage the housing. This means young people must meet the auspicing agencies’ eligibility criteria, may have to meet conditions over and above tenancy legislation requirements to get housed, or may have restricted time limits on their stay in the housing (National Youth Coalition for Housing, sub. 131, p. 22). This Association recommends young people aged fifteen years and over should be allowed to directly access the Department of Housing waiting list without any special conditions attached (Wollongong Youth Refuge Association, sub. 4, p. 6). Public housing in Queensland under the previous administration was closed to single people aged under 40. The guidelines have been changed under Labor, to give access to single people over 18 for the first time. Those under 18 are still excluded from being housed by the Department of Housing, Local Government and Planning, unless they have children (Youth Housing Project, sub. 5, p. 5). The lack of longer term housing options creates bottlenecks and results in crisis accommodation often not being available for those in crisis. Due to the lack of options, crisis accommodation becomes more than transitional accommodation; there are no affordable options for young people to access. The need to develop longer term accessible and affordable housing options for young people is crucial (South East Queensland Youth Accommodation Coalition, sub. 132, pp. 2–3). Despite the legal basis by which minors are bound by contracts, including leases, there is great resistance and lack of knowledge that this is possible, causing further discrimination in the private rental market for young people (National Youth Coalition for Housing, sub. 131, p. 26). If a young person does choose or needs to leave home, they receive an income which does not reflect the real costs of living. Young people living independently have similar expenses to older members of the community. Costs of rent, food, transport, etc are not determined by age or income. Age has no relevance to the level of income required to live above the poverty line (South East Queensland Youth Accommodation Coalition, sub. 132, p. 10). The low level of income of young people and the resultant relative low level of rental payment currently create concern as to the financial viability for the providers of both public and community housing. The issues which must be addressed here are those of the income of young people and the cost of supply of such housing (South East Queensland Youth Accommodation Coalition, sub. 132, p. 14).
8 INDUSTRY COMMISSION A PARTICIPANTS’ VIEWS
Those young people who choose to study and receive Austudy payments have no access to DSS rental assistance, and students who continue with their studies till they reach 21 years of age fall behind the normal DSS allowance rate for their age group. Students do not access a higher income on turning 21 and are further disadvantaged (South Australian Youth Housing Network, sub. 195, p. 14).
Homeless people Three significant factors are identified as contributing to trends in youth homelessness: changes to the family unit; family violence; and economic recession. Therefore, it is suggested that for young homeless women, a holistic and co-ordinated approach to housing, income, social support and employment, education and training is required if women’s vulnerability to further risk is to be reduced (Office of the Status of Women, sub. 96, p. 4). While most young people who leave home do not become homeless, far too many do. For those that do not, homelessness may be an ever present possibility, due to insecure and low incomes, an extremely depressed youth labour market, and lack of affordable appropriate youth housing (South Australian Youth Housing Network, sub. 195, p. 6). Young people in real need are notorious for non-use of government or other resources because of authoritarian, patronising or other culturally inappropriate practices (Uniting Church Youth Services, Western Australia, sub. 193, p. 1). A number of homeless people that this agency is in contact with have previously had public housing accommodation. They have found themselves with mounting arrears, that lead to eviction. The requirement that a lump sum payment must be made prior to rehousing means that future access to public housing is virtually impossible. ... We recommend the provision of immediate supports to those having difficulty making rental payments so that there is a real attempt to prevent eviction and possibly homelessness (The Salvation Army Crossroads Network, sub. 165, p. 3). The private rental market offers little security of tenure for homeless youth. If they find somewhere they can afford, and maintain it successfully, and don’t lose their job or benefit, the likelihood of their rent rising to an unmanageable level is great. Inevitably, they are forced to move on (Youth Accommodation Coalition of Victoria, sub. 176, p. 9). Once young people are homeless it is necessary to break the cycle of homelessness — to provide the young person with a place in our society. Support measures only affect the personal side of homelessness — there are the structural changes which need to happen such as equal youth incomes, job creation programs, legislative measures such as anti-discrimination, construction of appropriate public housing, and putting value on young people as Australia’s future (South Australian Youth Housing Network, sub. 195, p. 6).
INDUSTRY COMMISSION 9 PUBLIC HOUSING
People in crisis ... caravan parks are continually being used by community services as emergency housing for families or mothers and children who leave the family home for varied reasons, eg domestic violence. This practice is convenient for the service but completely unsuitable for the family in stress, as many caravan parks are isolated and have inappropriate amenity arrangements (National Dissemination Program of the Hunter Caravan Projects, sub. 209, p. 1). The provision of adequate and easily accessible refuge accommodation is clearly one very important component in the development of a comprehensive crisis response to women escaping violence, and the positive benefits of SAAP in funding crisis accommodation and related support services for women escaping violence is acknowledged (National Committee on Violence Against Women, sub. 98, p. 2).
Recently arrived migrants Lack of information on housing options and services is one of the major obstacles for recently arrived immigrants in accessing accommodation and related housing services and in exercising choice. ... The Multicultural unit established in the NSW State housing authority is a sound model for other State/Territory housing authorities to follow (Department of Immigration, Local Government and Ethnic Affairs, sub. 158, p. 2). A migrant welfare worker cited a real estate agent who would not rent properties to refugees because he assumed that they could not use electricity and would start a fire. She reported that, when private rental properties are in short supply, it is almost impossible to secure accommodation for refugees, even with her advocacy support (Shelter WA, sub. 205, p. 1). A Vietnamese community leader noted discrimination by real estate agents against Vietnamese people in general, particularly large families with children, unemployed people and people with Homeswest bond assistance (Shelter WA, sub. 205, p. 2). Community housing initiatives ... have shown that community-based housing is a viable housing option for recently arrived immigrants (Department of Immigration, Local Government and Ethnic Affairs, sub. 158, pp. 4–5).
People from non-English speaking backgrounds Alienation is common when people who lack English skills are housed in locations which are inaccessible to culturally relevant facilities, such as English classes, places of worship, members of one’s community of origin, welfare services and specialist shops, in addition to employment, transport and child care (Shelter WA, Migrant Access Project, sub. 28, p. 1).
10 INDUSTRY COMMISSION A PARTICIPANTS’ VIEWS
People in rural and remote areas In rural and remote communities some Councils, whilst reluctant to become involved in the provision of housing, have done so through the need to maintain their communities (Local Government Association of Queensland, sub. 206, p. 1). In several rural and remote communities there was limited or no private rental accommodation available. The construction cost of housing in these areas can be very high due to high transport and labour costs. Also the lack of capital growth in property values means that landlords must charge higher rents in order to achieve an adequate return on their investment. The lack of capital growth is a major disincentive for investors (Local Government Association of Queensland, sub. 206, p. 7).
A.2 Aspects of assistance Shelter, after food, is the next most fundamental human requirement. It is essential for the preservation of individual health and dignity, the stability of domestic and community life and for access to the services and culture of a humane society. Adequate shelter is therefore a basic right (Adelaide Central Mission, sub. 69, p. 3).
Housing assistance concepts
Need It is clearly difficult to develop an objective, equitable and quantifiable measure of a characteristic such as ‘need’ which is inherently subjective and unquantifiable. Efforts have focussed on a definition and measure of need which incorporates aspects of appropriateness and adequacy as well as affordability (Tasmanian Government, sub. 217, pp. 6–7).
Affordability benchmarks Queensland Shelter’s view has consistently been that affordable housing cannot be measured purely by a benchmark such as that proposed by the National Housing Strategy, although there are some merits in ascribing a proportion of income that should be spent on housing (Queensland Shelter, sub. 138, p. 4). One of the most obvious problems that arises for governments in using an affordability benchmark is how it will be paid for. To provide income support for the 200,000 households in housing stress is an enormous budget commitment. As discussed in the National Shelter submission, if this demand is met now at the expense of public housing, there will be a significant opportunity cost for future generations (Queensland Shelter, sub. 138, p. 9).
INDUSTRY COMMISSION 11 PUBLIC HOUSING
National Shelter supports the principle of affordability benchmarks but believes that an appropriate level is 20 per cent with a sliding scale decreasing this proportion for very low income earners (National Shelter, sub. 115, p. 1).
Welfare housing It remains our view that welfare housing is likely to house less people in need than the current policy, with all its contradictions. The connotations of the word “welfare” are negative and not widely supported by the community (Western Australian Council of Social Service, sub. 220, p. 2). The view of public housing as a purely welfare measure tends to stigmatise the tenants of public housing, which in turn weakens public support for public housing and decreases its effectiveness as a response to housing need (Queensland Council of Social Service, sub. 241, p. 3).
Public housing Public Housing is a lifestyle, you have to live it to know it! (B Trethowan, sub. 142, p. 2). ... if we don’t have public housing, where are people who have no parents, the unemployed, single parents and low wage earners going to live? (T E Troon, sub. 145, p. 2). Subsidies from tax payers to public tenants by way of rental rebates for low income public tenants are not a cost to society. The loss to the taxpayer is balanced by the gain to the tenant (National Shelter, sub. 221, p. 5). Public housing should be regarded only as a safety net for that section of the community which for various reasons is subject to hardship on account of physical or economic factors. It should definitely not be regarded as a way of life for a substantial section of the population or something which people have a right to expect, as seems to be suggested by so many social planners (Property Owners’ Association of NSW, sub. 30, p. 1, Summary). The provision of public housing in Australia has a measurable benefit to the Australian community and is also economically efficient in the long run as there are very real costs associated with increased social dislocation and benefits associated with increased social cohesion (Welfare Rights and Legal Centre, sub. 101, p. 5). Public Housing is the cornerstone of an effective and equitable government housing policy. It provides governments with an appreciating asset and ensures stock remains available for successive generations of those on modest incomes rather than providing for the private accumulation of wealth. It can also work as a major competitor to the private rental market ensuring that the rents are depressed rather than artificially inflated (Adelaide Central Mission, sub. 69, p. 28).
12 INDUSTRY COMMISSION A PARTICIPANTS’ VIEWS
The demand for public housing is not going to decrease. In fact, as a result of the structural changes in our economy, it is likely that many more families will find themselves in worsening circumstances, and that they will seek to alleviate that suffering via public housing. (Good Shepherd Youth and Family Service, sub. 330, p. 14). ... the state should not see public housing as a stepping stone to home ownership, but a viable tenure in itself. Some of the working class don’t want to aspire to home ownership regardless of state subsidies and public housing can and should fill that gap (Stan Jamce Cooke, sub. 185, p. 5).
Access The Association would like to raise the inherent conflict that exists in the stated objectives for public housing assistance. The conflict arises from the objectives that seek to provide low income households with access to adequate and affordable housing. Access should not be equated with affordability. There appears to be a view that the two are synonymous, but in many cases we believe this to be purely illusionary (Master Builders’ Construction and Housing Association Australia, sub. 94, p. 2). Rental housing assistance should be needs tested so that public housing programs are not seen as an alternative to renting or owning in the private sector (Housing Industry Association National Office, sub. 92, p. i, Executive Summary). Rearranging eligibility criteria that increases targeting to those ‘most in need’ is not addressing the real issue of the lack of affordable and appropriate housing (Women in Supportive Housing, sub. 146, p. 3). One of the major reforms needed to public housing is a change in the way it is perceived. ... We need to broaden the mix of tenants by opening it up to a proportion of middle income earners. An added benefit would be the increased rent these tenants would pay (Council of Single Mothers and their Children, sub. 160, p. 1). Tenants evicted because of debt to the Commission will not be permitted to reapply for housing until their debt is repaid. Tenants evicted because of nuisance or anti-social behaviour will not be permitted to reapply until six months has elapsed. After this six months, applications may be accepted, providing that a satisfactory reference can be provided from a private landlord (NT Department of Lands, Housing and Local Government, sub. 208, p. 4). Eligibility for public housing is generally based on income. It is important that if two unrelated people are sharing public housing their individual incomes are considered separately when determining eligibility. People requiring support services and personal care will often need to share accommodation to enable them to pool hours of care to enable their needs to be adequately met (ACROD, sub. 140, p. 5). ... all the people who are applying to be housed are in housing need and the difficulty is then assessing how that housing should be rationed and whose need is absolutely greatest. The reality is that there will never be enough low cost housing to go around
INDUSTRY COMMISSION 13 PUBLIC HOUSING
under present systems — hence there will always be a need to maintain waiting lists (Queensland Shelter, sub. 138, p. 16). The eligibility criteria, questions of security and location outlined in the report fail to take sufficient account of the factors influencing housing needs. People’s access to power, support and resources at various stages in their life cycle must also be considered [when assessing housing need]. For example, women with children, newly arrived migrants, elderly people on the ‘eligibility margin’ in terms of assets, all experience vulnerability which is not reflected in income alone. Clearly, flexibility and acceptance of social diversity are basic criteria for the delivery of effective public housing services (SA Council of Social Service Inc, sub. 291, p. 2). Many people eligible for public housing do not apply for one or a number of the following reasons: lack of information; the stigma associated with the old ‘Housing Commission’; lack of access; waiting lists are too long; no public housing available in the area (North Western Regional Housing Council, sub. 183, p. 12). Waiting lists should be seen as a highly inaccurate indicator of housing need. Many people do not apply when told how long the waiting time is and there is potentially a huge latent demand according to other income data. Waiting lists are able to be manipulated by governments who are able to restrict or expand access. For instance, by making young people eligible for public housing when previously they were ineligible will have the effect of extending the waiting list as young people apply. Waiting lists are also a poor indication of housing need in areas where there is no public housing such as Emerald. If there is no housing, you can’t apply to get into it (Queensland Shelter, sub. 138, p. 12). ... the existence of waiting lists for public housing plays an important, though probably, unintended role of sifting out the longer term clientele from those who may be requiring temporary assistance (Housing Industry Association National Office, sub. 92, p. 6). Long waiting lists reflect more the inadequacy of the home ownership and private rental tenures than a failing of public housing per se (Springvale Community Aid and Advice Bureau, sub. 31, p. 2). We believe eligibility criteria should include ability to secure/maintain private rental (on a cost basis, and on a “proven discrimination”), income level, family make-up, previous housing history, potential housing options, health or safety reasons, overcrowding, or family violence (Fitzroy, Richmond and Collingwood Accommodation Service, sub. 251, p. 6). With around 24 months waiting period for a 2–3 bedroom flat in a high-rise or walkup, 4 years waiting period for a 3–4 bedroom house and up to 6 years wait for a 2 bedroom house or unit in the Melbourne metropolitan area, it is clear that the Department of Planning and Housing have inadequate stock to meet demand (The Salvation Army Crossroads Network, sub. 165, p. 4).
14 INDUSTRY COMMISSION A PARTICIPANTS’ VIEWS
Women escaping violence often need to move interstate because of ongoing harassment from perpetrators and would lose places on housing waiting lists without any transferability provisions (Office of the Status of Women, sub. 349, p. 2-3). It must be noted that an unnecessarily inflated waiting list not only distorts demand but also can delay existing Trust tenants of the opportunity to move to alternative, perhaps more appropriate, accommodation (Greg Cornwell, Member for the ACT Legislative Assembly, sub. 99, p. 5). ... we believe there needs to be clear priority housing guidelines ... (North Sydney Housing Interagency, sub. 177, p. 2). A number of community groups have expressed dissatisfaction with the existing process in considering requests for Priority Housing. Concerns focussed on methods of assessment of applications, the lack of guidelines against which priority applications are assessed and the nature of appeal processes (Shelter Darwin, sub. 20, p. 4). Priority housing is considered by women to be extremely difficult to attain. There was the perception that you could be subjected to a harrowing process of having to prove how desperate you may be. This is exemplified in the situation of domestic violence priority allocation. Women felt that the housing officers expected women to show physical signs of the abuse before they would be given a priority interview (Women in Supportive Housing, sub. 146, p. 3). The establishment of panels to determine the relative priority of people on waiting lists for public housing is generally supported. However, these panels must operate at the local and/or regional level, and within the policy and eligibility criteria established by the Tenant Manager Organisation. It is considered impractical and inefficient for these panels to be centrally located, particularly in a vast and decentralised state such as Queensland (Queensland Health - Central Office, sub. 335, p. 2). Public housing also plays an important role in compensating for the private market’s discrimination against a range of groups including Aboriginals, Torres Strait Islanders and people with large families (Queensland Department of Housing, Local Government and Planning, sub. 135, p. 19). Discrimination by real estate agents and landlord is a very real situation faced by people on low incomes, single parents, and Kooris. Public housing is the only form of housing tenure in East Gippsland which does not discriminate against these people, who make up a significant proportion of the East Gippsland Community (East Gippsland Regional Housing Council, sub. 173, p. 2). The applicant is often in rental accommodation and therefore is required to give 3 weeks notice to their current landlord. Therefore having to pay two lots of rent one to the Department of Housing and one to their current landlord is impossible for most applicants (North Sydney Housing Interagency, sub. 177, p. 1).
INDUSTRY COMMISSION 15 PUBLIC HOUSING
Affordability In order to achieve a higher standard of living and an end to public housing eviction for Victorian public tenants, it is our policy and our demand of government that the following steps be taken: 1. That the amount of rent charged in public housing be reduced from 20–25 per cent of income to a flat 10 per cent. 2. That take home pay (net) rather than before-tax (gross), be used for the purposes of assessing rent. 3. That all income of children, regardless of age be excluded from rent calculations. This includes Benefits, Child Maintenance, including in kind payments, allowances like Child Endowment and Wages. 4. That rents be adjusted no more than once per year. 5. That the government place a moratorium on all legal and harassing actions against tenants in arrears, while it enters a process of genuine negotiation with the Public Tenants Union and other appropriate organisations to develop a more socially acceptable policy (Public Tenants Union of Victoria, sub. 180, p. 10). My rent is assessed twice yearly and is based on my weekly wages and any other declarable income I have. This assessment does not include the cost of my disability eg special transport, medical treatment, etc. I have written to the Minister of Housing in NSW to ask whether the cost of disability can be taken into account when assessing rental of the department’s accommodation. He advised that this would be investigated (Rosemund Johns, sub. 79, p. 1). The current rent setting practices of public housing authorities ensures that renting an appropriate sized dwelling is affordable. If this practice were to be changed mechanisms need to be put into place to ensure that tenants were not being housed in a more preferred location and then facing the difficulty of being unable to afford other necessities, because of the increase in rent payments (Carlton Estate Residents Association, sub. 247, p. 1). Many people who qualify for public housing due to low income have relatively normal needs that do not require the intercession of welfare. Many people experiencing multiple needs now, in the private rental market, may find their lives are vastly improved by affordable housing, so they are able to cope with the other difficulties life provides, without support (Whittlesea Family Services, sub. 237, p. 3).
Appropriateness Queensland Shelter has defined appropriate housing as being housing which meets the needs of the household. That is, it should be well located, physically accessible, of the right size for the number and relationships of the people in the household, be sound and well maintained, be constructed in such a way that heating and cooling costs are
16 INDUSTRY COMMISSION A PARTICIPANTS’ VIEWS
minimised and not distinguishable in a way that stigmatises the occupants (Queensland Shelter, sub. 138, p. 4). Public housing is not designed for family living, eg living areas, bathrooms and kitchens are too small in a majority of homes (Wilsonton and Rockville Tenants Group, sub. 111, p. 2). Design type can skew population mix ie if the majority of “units” in a building or group of buildings are, say, three-bedroom, this will influence social mix since only large families will be housed there. Immigrant families and lower socio-economic families are more likely to be larger. Welfare recipients and unemployed members are similarly likely to be greater in such communities, and high child and teen to adult ratios has long been recognised as a precipitating factor in delinquency and vandalism in public housing. All these factors working together tend to create problem communities (School of Architecture, sub. 90, p. 4). No consideration is given to the fact that placements in public housing away from support groups (family, friends or work contacts) have negative and costly consequences (Nadia Kaspar, sub. 18, p. 1). In South Australia, outer suburban public housing estates can leave welfare-dependent families with severe problems of access to jobs, services and facilities, particularly if they do not own a car. Moreover, the higher turnover rates and the resulting shorter waiting periods for outer suburban public housing tend to concentrate families in most need in those areas rather than in the more popular inner and middle suburban developments. The spatial distribution of public housing stock and the current welfare role of public housing in south Australia make a significant contribution to shaping distinct patterns of variation in well-being within the metropolitan area (South Australian Health Commission, sub. 366, p. 2). In the past Lake Macquarie has experienced the development of whole suburbs by the Department of Housing for public housing. This has concentrated those of a low socio-economic status and produced automatic prejudice against those who live in those particular suburbs. ... The key to improving on the past is not to construct huge pockets of public housing where prejudice and problems are allowed to concentrate (City of Lake Macquarie, sub. 15, p. 1–2). ... I feel that integrated public housing in the suburbs is functional and advantageous. It takes away the stereotyping that occurs in housing estates, and it allows people with different values and cultures to fit into their chosen area (Nadia Kaspar, sub. 18, p. 3). With regard to the value of different locations and the efficiency of locating/retaining public housing in these areas, it is essential to include all costs and benefits in any assessment and not only those that relate to the SHA. These external costs would include those borne by other agencies in locating public tenants in areas of lower access to services and employment as well as the costs to the individual household of different locations (Royal Australian Planning Institute - ACT Division, sub. 139, p. iii).
INDUSTRY COMMISSION 17 PUBLIC HOUSING
A cluster of Ministry houses in a group of private owned houses when not properly maintained and when they do not blend in, degrades the property value of the private owned houses. The type of tenants placed in Ministry houses in areas of prestige housing, causes concern to others who privately own houses as the attitudes of the tenants are not the same as those purchasing their homes (Diamond Valley Ratepayers Association, sub. 150, p. 1).
Security of tenure The primary objective of the Commonwealth–State Housing Agreement is to provide secure housing to all Australians. Apart from home ownership, the only sector that can provide this secure housing is the public sector. The primary aim of investment in the private sector is commercial gain or profit, not security of their tenants (Goulburn Regional Housing Council, sub. 82, p. 6). It is most important that State housing authorities make a legal reality of the widespread perception held by their tenants that they enjoy long-term security of tenure. (Softlaw Community Projects, sub. 130, p. 3). ... tenure in private rental is extremely insecure in Australia, without public housing low income people are condemned to insecurity of tenure (North Melbourne Tenants Association, sub. 81, p. 1). Security of tenure bears a tremendous impact on the state of our mental health. For those with a mental illness, the situation becomes critical, because they know that they can become ill and need hospitalisation without due warning, and there is the concern about ongoing rent payments (Queensland Association of Mental Health, sub. 127, p. 3). In Victoria in particular, it has been felt that if a family’s financial circumstances improve, they should no longer be eligible for public housing. This is a complex issue. Why should a family who has worked hard to improve their situation be faced with eviction? It goes against the provision of “secure” housing. The payment by this family of “extra” rent through their increased income helps the government by the decrease in rental rebates (Goulburn Regional Housing Council, sub. 82, p. 6). The system as it stands encourages applicants and recipients of public housing to stay on welfare and stay in these homes. Because of this there is not enough suitable public housing for those who urgently need it (Nadia Kaspar, sub. 18, p. 1). One of the most important aspects of public housing provisions lies in the security of tenure provided to tenants. Those in housing stress generally are more mobile and have weakened support networks. To put in place measures that effectively evict tenants if their incomes rise above arbitrary set levels would jeopardise the gains made in creating a safe, secure home environment (Hanover Welfare Services, sub. 163, p. 10). The Department of Housing includes a condition in its Tenancy Agreement which reserves the right to require a tenant to move to alternative accommodation if that
18 INDUSTRY COMMISSION A PARTICIPANTS’ VIEWS
accommodation is required for asset management purposes. This is used, for instance, to relocate tenants from a dwelling which is about to be redeveloped, or if the dwelling is substantially underoccupied (NSW Government, sub. 354, p. 10). Tenants should be required to move from dwellings where there is an obvious over consumption of housing. Procedures should be developed as a matter of urgency so that the existing public housing stock can be used in the most efficient way (Housing Industry Association National Office, sub. 92, p. ii, Executive Summary). Tenants whose circumstances change resulting in under-occupancy of the dwelling may be transferred to more suitable housing if they have resided at that particular dwelling for less than twelve months. Tenants with more than twelve months residence are permitted to continue to occupy the same dwelling; if on a rebated rental they will be required to pay “superior” rental, the difference between their rebated entitlement and the level applicable to the dwelling (Northern Territory Department of Land, Housing and Local Government, sub. 17, p. 14). Until recently the Department guaranteed tenants not only tenure in the sector but also in the house they occupied. This is no longer the case. Tenants whose personal circumstances change and find themselves alone are to be moved to accommodation deemed appropriate to their need. Tenure for this Council means the right of tenant to their home as well as a house (Central Gippsland Regional Housing Council, sub. 149, p. 2). Proposed limited tenure for young people fails to acknowledge the impact of unemployment and changes within labour force participation. Opportunities for young people to obtain a reliable income and move into home ownership as has been the norm in previous generations are diminishing with moves towards contract and part- time work (SA Council of Social Service, sub. 291, p. 2). If people are given suitable public housing close to support groups and work opportunities when they need it, and know that they have five years to become independent of the system, they will plan towards it (Nadia Kaspar, sub. 18, p. 3).
Equity ... equity, not equality should be the goal of government in delivering housing assistance (Victorian Council of Social Services, sub. 169, p. 9). Equity is about much more than “treating people in similar circumstances in similar ways”. Queensland Shelter believes that housing is more than a basic necessity — it is a human right. Equity considerations then demand that all people should have access to housing regardless of their ability to pay for that housing (Queensland Shelter, sub. 138, p. 5). In Queensland, which is very much decentralised, there is lack of public rental housing in country areas, far above that of metropolitan areas. This escalates inequity. Often this lack of public housing means people have to leave the area because of the dearth of affordable, secure rentals (Coalition of Generalist Services, sub. 125, p. 2).
INDUSTRY COMMISSION 19 PUBLIC HOUSING
While Master Builders’ - CHAA does not necessarily oppose the provision of public housing in inner-city areas it does question the equity and cost-effectiveness of such a policy (Master Builders’ Construction and Housing Association Australia, sub. 94, p. 5). In would be particularly useful, both to increase equity between states and to inform policy, if agreement could be reached on a standard measure of household income and eligibility for rent rebate (Australian Council of Social Service, sub. 85, p. 12). In Victoria, public tenants have all received a notice of a rent increase which will take cost rents to market value rents. Within the Wimmera Region some rents will be increasing by $25 per week. Within the region there are public tenants with below average incomes who will receive less rebate than a private tenant will receive in rent assistance paying the same rent (Wimmera Community Care and Wimmera Regional Housing Council, sub. 83, p. 4). We get a feeling that living in the bush one does not need [security, privacy, screens, more space and regular maintenance], but we do as we pay the same rents (Iris Bolter, sub. 13, p. 1). It is agreed that “housing assistance given to the better-off, ultimately reduces what is available to those who are less well off”. This is because the resources available to house people are limited and there must be trade-offs (Queensland Shelter, sub. 138, p. 5).
Environmental issues Through public and community housing the Government can set the agenda for energy efficient constructions which display an environmental conscience yet provide cost efficient, safe, secure, affordable housing (North Western Regional Housing Council, sub. 183, p. 8). Our primary concern is that most public housing is not energy or environmentally efficient. A number of public housing policies focus on exclusively providing rent assistance rather than housing assistance. Consequently there has been a focus on obtaining the most amount of public housing space for limited budgets available. (AcrossTech, sub. 2, p. 1). ... energy consumption in housing construction and operation, and energy consumption servicing urban and suburban populations, cannot be overlooked when considering social issues of housing. A serious and often unrecognised drawback to Housing Department building or purchasing [solar efficient design] houses, is that buildings are only potentially energy efficient. Whether this potential is realised in reality depends very largely on the energy literacy and environmental consciousness of the users of those houses. Education and information programs are thus vital to the realisation of an efficiently managed/operated housing sector (School of Architecture, sub. 90, pp. 1, 2).
20 INDUSTRY COMMISSION A PARTICIPANTS’ VIEWS
Community housing Community housing can be seen as an extension of public housing that provides additional choice and control for those who wish to be involved in the management of their own housing (Queensland Shelter, sub. 138, p. 6). The Community Housing Program is the flexible arm of government policy, where the community is able to bid for the control and management of houses. Various groups and communities have been able to establish cooperative housing ventures as a result. Many Rooming Houses have community committees of management also. This is not to say that community management is always the preferred method management. Advocacy groups have reported anecdotally that often the community managed groups are more likely to have to respond to issues such as rent arrears with eviction (Shelter Victoria, sub. 172, p. 21). Specific groups which we feel would benefit from the more flexible management arrangements [of community housing] would include; young people, people with psychiatric, physical or intellectual disabilities, people with special health needs and those with personality disorders (Prahran Community Housing, sub. 179, p. 4). ... careful consideration must be given to equity issues in devolving responsibility for housing provision to community groups. Some of these equity considerations include: - large, more established groups and those with greater influence may attract funding, at the expense of smaller less vocal groups - discrimination in favour of those of a particular ethnic or religious background - community housing earmarked for immigrants or specific ethnic groups could lead to queue jumping on the public housing waiting lists (Department of Immigration, Local Government and Ethnic Affairs, sub. 158, p. 5). People like to be involved at a very local level. Tenant participation is only possible at a localised level and on a small scale. The Common Equity Rental Housing Co- operatives (CERC’s) have proved that tenant participation can be very effective when the groups are small enough for people to feel comfortable and small enough to be able to participate (Goulburn Regional Housing Council, sub. 82, p. 7). ... [community] housing provision relies on community members who usually end up being on every committee, sacrificing their personal lives and health because their social conscience is so strong that they feel they have to pick up every task that no-one else volunteers for. The government has been able to get away with using these people up for the last 10 years, but they can’t go on forever (East Gippsland Regional Housing Council, sub. 173, p. 3). Many tenants in community housing with the assistance they receive during their tenancy go back into mainstream living and may never then require the assistance of public housing, and surely if we can accomplish this, the cost to the country is far less (Sapphire Coast Tenancy Scheme, sub. 114, p. 4).
INDUSTRY COMMISSION 21 PUBLIC HOUSING
Community based management seems to work well in small rural communities with a strong self-help ethic, but it would be a far better use of funds to build on existing structures and improve management from that end (East Gippsland Regional Housing Council, sub. 173, p. 3). Co-ordination difficulties have not been improved with the trend towards community managed housing projects. Generally community based housing programs are not readily accessible by people with a disability. Tenant management criteria are not appropriate when dealing with people with low intellectual capacity, poor speech and lack of mobility (Singleton Equity Housing, sub. 175, p. 2). Housing co-operatives have provided a means of allowing low and middle income earners to choose where they live, share in the management of their housing and enjoy security of tenure in rental accommodation. ... It would take a quite extraordinary leap of faith to believe that housing co-operatives were likely to make anything other than a marginal contribution to solving the national housing crisis in the next ten years (Inner Urban Regional Housing Council, sub. 106, p. 16). Where community-managed housing is appropriate, it should be backed up with significant resources to ensure it is not exploiting local communities and creating an even more excessive drain on those already over-stretched people who tend to give their voluntary time (Western Regional Housing Council, sub. 174, p. 8).
SAAP/CAP There are clearly not enough options to assist people who need time and resources in order to get back on their feet after experiencing a crisis (Fitzroy Richmond and Collingwood Accommodation Service, sub. 157, p. 4). Persons requiring assistance through SAAP/CAP generally take considerable time in resolving their problems, where the provision of transitional accommodation and post crisis care is critical to the success of the programs. To subject these people to normal rental policies as applied to public housing tenants once income (only) has stabilised ... is to not take account of the long term support needs of this group (WA Government, sub. 276, p. 15). Although we have expressed some criticism of public housing it is often the only option for people to exit from SAAP accommodation (Coalition of Generalist Services, sub. 125, p. 7). It is considered to be inappropriate that eligibility for emergency accommodation be established through a panel process. In all cases of crisis, and more particularly in situations involving the criminal assault of women in the home, service provision must be provided in a quick, efficient and timely manner. There simply would not be time for a panel to consider these situations. However after placement on a waiting list the individual’s need for medium to long term accommodation should be assessed (Queensland Health - Central Office, sub. 335. p. 2).
22 INDUSTRY COMMISSION A PARTICIPANTS’ VIEWS
In particular cases, for instance domestic violence, it is imperative that people be placed in safe, secure accommodation which allows a degree of anonymity. If the only provision available to them is a house which is known locally to be crisis accommodation then their safety is compromised (Westernport Regional Housing Council, sub. 153, p. 4). The situation on the Sunshine Coast is chronic with insufficient accommodation available, large areas of the Coast that have the heaviest population demands have little or no emergency housing and housing that is available is not targeted to many groups in the population (Sunshine Coast Regional Housing Council, sub. 107, p. 9).
Mortgage and Rent Assistance Program
Bond Assistance Departmental processes [for bond and rent assistance] can be unsympathetic to the demands of the private sector. For example, consumers have found that the length of time to process applications is so long that real estate agents are reluctant to hold properties for them (Shelter Darwin, sub. 20, p. 6). Bond assistance for private rental is not closely enough monitored. It is too easy for a landlord to keep Bonds which disadvantages the tenant from re-using the system (Prahran Community Housing, sub. 179, p. 3). Under the Rental Assistance Scheme, bond assistance is given to private renters who pass a means test. The Department’s new policy is to no longer contest bonds that are claimed by landlords/agents. All a landlord/agent has to do is fill out a claim form for all or part of the bond and that money is paid to them. The Department requires no itemisation of claim or proof (Blue Mountains Community Legal Centre, sub. 162, p. 1). It is our experience that many landlords/agents will put in claims that are later shown to be grossly inflated or unjustified. If money is wrongfully paid out to landlords/agents then this is less money for bond assistance in NSW (Blue Mountains Community Legal Centre, sub. 162, p. 1). Bond Assistance is not available to people that have a debt to Homeswest. However as they are unable to obtain Homeswest housing due to this debt, unless they are priority listed, it effectively excludes them from both public and private rental markets. Alternatives are relatives and possible overcrowding, refuges, cars, but little else (Sussex Street Community Law Service, sub. 34, p. 6).
Headleasing Schemes such as the [Community Rent Scheme] can provide greater security of tenure — although only in the short term as schemes are not allowed to take out leases of longer than one year at present. Discrimination can be side stepped through the sub-
INDUSTRY COMMISSION 23 PUBLIC HOUSING
leasing process. CRS does provide affordable housing and may also be able to house those with special needs under some circumstances. This an appropriate short term response to housing need (Queensland Shelter, sub. 138, p. 2). The Community Rent Scheme (CRS) is also appropriate in that it addresses the issue of Discrimination. Groups of people such as Aboriginal and Torres Strait Islanders, people from Non-English Speaking Backgrounds (NESB), people with disabilities, single parents, large families and youth are traditionally discriminated against in the private rental market. CRS practices positive discrimination in housing these groups of people. Even with rent subsidies, these people would still encounter discrimination in the private rental market (Southern Forum, sub. 122, p. 3). The Community Rent Scheme (CRS) is also appropriate because it offers security of tenure to its tenants. The security of tenure afforded CRS tenants would not necessarily be afforded to recipients of direct rental subsidies who were accessing the private rental market for themselves (Southern Forum, sub. 122, p. 3). ... many landlords have lowered the normal rent of their properties due to the security that CRS can offer ie. guaranteed rental payments, free management, close contact with sub-tenants, and guarantee of restoring property to original condition (excepting fair wear and tear and damage not caused by tenants neglect or abuse) at the end of lease (Sunshine Coast Regional Housing Council, sub. 107, attachment B). ... the Community Rent Schemes throughout Queensland play a vital role in providing affordable housing to people on low incomes. We do not, however, believe that this form of rental assistance should ever be considered a substitute for the adequate provision of public housing (Southern Forum, sub. 122, p. 2). The local Community Tenancy Scheme has also had problems not being told when its tenants are about to be housed by the Department. This has resulted in rental arrears occurring and placing a financial strain on their funds in the past (North Sydney Housing Interagency, sub. 177, p. 2).
DSS/DVA rent assistance I think it is important for all low income tenants to be eligible for rental assistance. Otherwise we may have a situation where the tenant is ‘better off’ collecting unemployment benefits and rental assistance than working without the extra benefits gained by welfare recipients. Or we end up with a situation where the tenant simply can’t afford to rent which leads to a crisis situation (Nadia Kaspar, sub. 292, p. 1). Recipients of rental assistance always seek out the cheapest accommodation so that the remainder of their low income can be used to survive!! (Fitzroy Richmond and Collingwood Accommodation Service, sub. 157, p. 2). A very small portion of people already receiving rental assistance who are offered private rental accommodation on the basis of their capacity to receive rental assistance renege on their rental obligations by utilising this assistance for other purposes. This
24 INDUSTRY COMMISSION A PARTICIPANTS’ VIEWS
leads to future discrimination against these types of tenants, as owners, or their agents, are reluctant to accept people with this performance history (Real Estate Institute of Australia, sub. 103, p. 19).
Aboriginal housing program Koori women in particular felt that the rental structure [of public housing] — calculated on the income of all people living in the house — discriminated against Koori cultural practices that involve relatives and friends staying with the tenants of the houses (Women in Supportive Housing, sub. 146, p. 5). We have found that the location of public housing when grouped together in large quantities, has adverse effects for the people living there. This stigma attached to State Housing is still prevalent in today’s society. It is of special concern for Aboriginal families as the area often becomes labelled “Aboriginal” (Sussex Street Community Law Service, sub. 34, p. 2).
Home purchase and shared home ownership ... low income households should not be forced into home ownership when they cannot afford to do so. The recent debacle over the Homefund in NSW in recent years is a clear demonstration of the consequences (Ed Wensing, sub. 178, p. 2). Some women felt the desire so strongly to own their own homes that they entered into these mortgage arrangements without considering the implications of other housing related costs such as rates, maintenance, utilities, location etc. (Women in Supportive Housing, sub. 146, p. 7). Low-start loans with their escalating loan debt have increased potential for default. Recent reductions in property values compound this problem. Increased risk not only leads to the potential for increased capital adequacy risk weightings, but requires increased interest rate margins (Australian Council of Housing Societies, sub. 167, p 7). One of the biggest problems faced by consumers is the difficulty of comprehending the riskiness of low start and shared equity loans offered by government bodies. This reflects the glossy nature of sales brochures, the inadequate training of counter staff to deal with inquiries and the belief that government bodies ... would not offer a risky product unless it felt confident consumers were safe (Inner Eastern Regional Housing Council, sub. 147, p. 9). ... access to sufficient deposits is one of the greatest barriers for first home buyers. Additional incentives are therefore required to encourage a broader range of savings through a range of financial institutions (Australian Council of Housing Societies, sub. 167, p. 14).
INDUSTRY COMMISSION 25 PUBLIC HOUSING
Pension and benefit recipients who are renting in the private rental market receive rental assistance which arguably can be seen to be contributing to the private landlord’s bank-funded mortgage repayments. There is no equivalent assistance to those attempting to purchase their own homes and pay all associated housing costs (Victorian Mortgage Review Task Force, sub. 184, p. 6, attachment). [We do] not support the principle of subsidised home ownership to overcome the inherent housing problems we are experiencing. The trend towards assisting potential home buyers only assist those people to purchase earlier than they would otherwise have done. This form of assistance does not assist the 30 per cent of the population who are unlikely to ever be financially able to purchase their own home (Central Gippsland Regional Housing Council, sub. 149, p. 2). Funding for subsidised or unsubsidised shared ownership programs should come from funds allocated for home purchase assistance and not from funds allocated for public rental housing (Ed Wensing, sub. 178, p. 3). Other programs The Rooming House program provides single adults with a real opportunity to access affordable, adequate accommodation. Our experience at Crossroads is that this is a very successful program. ... We certainly recommend the further development of this program (The Salvation Army Crossroads Network, sub. 165, p. 4). ... there is a need to develop new housing programs. In particular there needs to be programs which accommodate the needs of those who need affordable short to medium term accommodation options (Fitzroy Richmond and Collingwood Accommodation Service, sub. 157, p. 5)
Taxation issues The lack of a Capital Gains Tax is again a hidden subsidy. Whilst it may be admirable to view the family home as a consumer good and not an investment good, this tax foregone system has been the subject of many rorts in Australia. It has also crowded out investment in more productive spheres in this country. If subsidies are to be targeted effectively for the supply of low-income housing, these hidden subsidies have to be tackled and how they impact on the housing market (ACT Council of Social Service, sub. 80, p. 2). There can be little doubt that the taxation advantage ushered in by the Hawke Government (negative gearing and exemption from capital gains of home buyers) to create opportunities for the stimulation of private investment and thereby increase supply in the private market have failed to provide additional low income housing opportunities. Projections also indicate that the market will continue to fail in delivering low rental good quality accommodation (Adelaide Central Mission, sub. 69, p. 21).
26 INDUSTRY COMMISSION A PARTICIPANTS’ VIEWS
The Commonwealth’s attitude to negative gearing should be reassessed. It should be abandoned in favour of a greater emphasis on depreciation allowances as an incentive for investment. This would lead to an overall increase in housing stock, and increase the options for first-home buyers (The Salvation Army, sub. 200, p. 6). Property taxes are the primary source of tax revenue for State/Territory Governments. The growth in these taxes, is a disincentive to investors in the private rental market and threatens the ongoing supply of affordable private rental accommodation. Land tax is charged on rental properties, while stamp duties, which bear no direct relationship to the cost of the services provided, are imposed on all property transactions (Real Estate Institute of Australia, sub. 358, p. 4).
Alternative types of assistance Supply and income support measures must be a package, recognising that supply cannot be as easily or readily provided as cash. The obvious problems are that increased funds for rental costs will increase demand and result in increased rents charged. Rent control and fair rent determination are therefore issues which must be fully considered in order to protect income assistance as a real measure for increasing housing affordability. While rent assistance of an adequate level will potentially aid young people in obtaining housing, it will not necessarily redress the major barriers they face: discrimination and lack of security of tenure. For these reasons, NYCH continues to emphasise the importance of increased supply of public housing (National Youth Coalition for Housing, sub. 131, p. 29). There will always be a section of the community unable to provide for its own shelter needs. These people need and deserve government assistance. However, capital expenditure on the construction of government housing is inefficient. In the interests of equity, funds currently used for this purpose should be allocated to deserving individuals in the form of rent subsidies through the welfare system (Real Estate Institute of Australia, sub. 103, p. 3). ... a pure demand side approach is ... unlikely to deliver a smooth supply response to meet housing need on an ongoing basis. Perhaps more important, it cannot meet the main social objectives of providing housing security, better urban form, housing in specific localities (particularly rural areas) and meeting special housing needs (Australian Council of Social Service, sub. 85, p. 17). ... the cheapest and most efficient method of providing rental accommodation is by the private sector — by the private property owners (particularly small landlords), without any capital outlays by the government. No other organisation — either government, local authorities or community schemes — is conducted on such low overheads, for such low returns (4–5 per cent before tax) (Property Owners’ Association of NSW, sub. 30, p. 1, Summary). A proposal [rental subsidies to private renters] that does not provide security of tenure to the resident and which has the potential to be an ever increasing, non-productive call
INDUSTRY COMMISSION 27 PUBLIC HOUSING
on public monies can hardly be in the interest of the tenants or the wider community (Inner Urban Regional Housing Council, sub. 106, p. 21). The private sector can provide housing in a more efficient and market responsive manner than that provided by the current system, or under arrangements that essentially maintain a Government monopoly on the provision of housing stock for public tenants. A social policy on housing which sets out to subsidise the rental payment of low income groups would serve to improve their financial position and, in addition, make the rental housing market a more attractive proposition for private sector investors (Real Estate Institute of Australia, sub. 103, p. 6). Private rental housing is a poverty trap for low income earners. Any proposals to extend rent assistance at the expense of public rental housing would have to be combined with rent control at a national level as well as substantially strengthened tenancy law provisions supported by accessible disputes processes (Rockhampton Family Emergency Accommodation Program, sub. 33, p. 10). The attempts to create equity among the poor by the introduction of a housing Benefit/Voucher system across all rental tenures will lead to a massive rent increase for most public tenants. Because of shortfalls in the funding levels of the Benefit, much of the newer and more desirable public housing stock in high market rent areas will be too expensive for low to middle income earners. This stock will become the new “hard to let” and face possible sale or transfer to other management systems (Public Tenants Union of Victoria, sub. 180, p. 4). ... the real problem with housing allowances is finding a way to limit their overall cost without creating poverty traps at the same time (Ed Wensing, sub. 178, p. 2). Rent subsidies, while providing short term gain to those on waiting lists, cannot guarantee an increase in rental properties, do not provide security of tenure, use public money to subsidise profiteering from rental and would geographically divide Australia along income lines (Port Melbourne Public Housing Tenants Association, sub. 170, p. 3). It would be much better for the Federal Government to subsidise residential private rentals instead of spending huge amounts of taxpayers’ money on building more costly Government Housing, especially when so many low cost private rental properties are empty (Property Owners’ Association of Australia, sub. 187, p. 2). For people with disability, rent subsidies achieve very little. As no accessible housing exists on the private rental market, receipt of rental subsidies will not provide access. For those who have accessed private rental housing however, rent subsidies alleviate the high cost of the private rental sector (Queensland Disability Housing Coalition, sub. 121, p. 5). Rent assistance is not always effective in reducing housing costs and ensuring accessibility. The potential for rent increases, lack of security of tenure and the reality of discrimination against particular groups leads to an erosion in the effectiveness of
28 INDUSTRY COMMISSION A PARTICIPANTS’ VIEWS
rent assistance in achieving its objectives (Brewer Street Welfare Rights and Advocacy Service, sub. 196, p. 1). Rent Assistance needs to be redirected to the provision of better targeted low income housing. Current arrangements for rental assistance need to be phased out to lessen the impact upon current recipients (Derby West Kimberley Shire, sub. 70, p. 6). Whilst targeted increased rent assistance may increase affordability of low income households in the private rental market, ultimately this assistance ends up as a subsidy to those in the community who least need it (ie rental property investors who already achieve enormous tax concessions through negative gearing provisions) (Springvale Community Aid and Advice Bureau, sub. 31, p. 1). It is of no use to increase rental assistance at the expense of public housing provision if there is an over demand for affordable private rental accommodation (Eastern Area Service of Youth, sub. 19, p. 1). ... the Council does not favour [rent assistance] because it will be subject to government’s politics. As a direct welfare expenditure it will be vulnerable to cut and could not be guaranteed as an ongoing commitment. Traditionally, the Australian community has shown little empathy to welfare recipients, at a time of economic recession this is unlikely to change (Central Gippsland Regional Housing Council, sub. 149, p. 2). Land use planning and development is not the most effective way for a Government to deliver assistance to disadvantaged groups. Other means of income distribution provide a more efficient means of targeting special sections of the community (Housing Industry Association of Western Australian, sub. 71, p. 5).
A.3 Private rental market
Accessibility We have observed too often the private rental market’s failure to meet the needs of many groups seeking accommodation; the outcome of it being driven by profit rather than social objectives. The profit orientation has many consequences for many low income and marginalised groups trying to access the private rental market; including Aboriginal people, single parents (predominantly women), people from non-English speaking backgrounds, older people, young people, single women, and people with disabilities (Tenants Advice Service, sub. 191, p. 4). There are many hidden costs involved in having to constantly re-locate; including the payment of a letting fee if the property is let through a real estate agent ... (Tenants Advice Service, sub. 191, p. 7).
INDUSTRY COMMISSION 29 PUBLIC HOUSING
Other costs include removal costs; and if the relocation is to another area, buying new school uniforms for children and paying school fees; not to mention the stress of relocating changing school and the like (Tenants Advice Service, sub. 191, p. 7). A family of eight were unable to move from SAAP accommodation for two and half years because private landlords refused to accept an application to rent from the family once family size was indicated. Finally a public housing property became available (Coalition of Generalist Services, sub. 125, p. 4). There were reports of some women being forced to lie about their family size in attempts to secure private accommodation. For these women public housing is their preferred option for reasons of affordability, security and appropriateness (Tenants Advice Service, sub. 191, p. 6). A recent instance, as referred to the Youth Housing Network, was of a 17 year old young pregnant woman and her boyfriend who were refused a lease by a Real Estate agent because they were using a Trust bond assistance cheque (South Australian Youth Housing Network, sub. 195, p. 11). Certainly, a person’s income source has considerable bearing on their perceived “suitability” as a tenant (Tenants Advice Service, sub. 191, p. 5). It could be asserted as a general rule that the desire of investors to secure a return on their property creates a propensity towards discrimination against disadvantaged groups such as sole parents, Aboriginal and Islander people and disabled people (Queensland Council of Social Service, sub. 91, p. 8). A glaring example of racial discrimination came to the Agency’s attention recently. The Vietnamese Tenancy Support Service was advised of three separate Vietnamese households in the Western suburbs who had each been advised by their respective agents (different agents in each case) within one week of signing a lease that they must vacate immediately as the properties had been re-let to other tenants. In each household minimal English was spoken or understood, real estate agents were seen as officials and through fear the tenants felt they must comply and vacate. Fear also prevented them from taking any subsequent action even with the support of a tenancy service (Good Shepherd Youth and Family Service, sub. 148, p. 4). The reason the private market will never house all those in need is simple. Housing authorities are bound to house all applicants who fit their eligibility requirements. Private real estate agents are under no obligation to house anybody. They will always house those people who they believe will best serve the interests of landlords. This leaves large sections of the population vulnerable to discrimination on the basis of gender, race, ethnicity and income (Flemington Tenants Association, sub. 141, p. 2). The overt abuse of rights which exists within the private rental market will continue regardless of the level of housing assistance component because discrimination is not linked directly to the ability to meet rent payments but based on prejudices which cannot be controlled through monetary incentives (Westernport Regional Housing Council, sub. 153, p. 3).
30 INDUSTRY COMMISSION A PARTICIPANTS’ VIEWS
At the community centre we administer emergency relief but cannot house people. Most of our inquiries from people needing help are housing based. We average five calls per week from people needing housing or who are housed inadequately (Caloundra Community Centre, sub. 25, p. 2).
Affordability Planning, zoning and building regulations cause commercial housing to be constructed to a much higher standard and size than low-income people would freely choose ... (Dr Joe Flood, sub. 171, p. 2). The shortage of public housing continues to be the most pressing problem for our clients. Lack of availability forces people into the private rental market where they are often destined to fail due to insufficient income (Windermere Child and Family Services, sub. 74, p. 1). ... public housing acts as a countervailing force to private rental. It helps keep rents down and increasingly sets high standards for rental housing stock (North Melbourne Tenants Association, sub. 81, p. 1). Between 1954 and 1986, the amount of low rental dwelling stock (ie with rentals less than 25 per cent of average earnings per employed male) decreased by 21.9 per cent. In 1954 a household on average weekly earnings could afford some 70 per cent of private rental dwelling stock. By 1986 only 30 per cent of dwellings were affordable (Victorian Council of Social Service, sub. 8, p. 27). High levels of employer subsidy in the private rental market have served to maintain high private rental charges. Darwin, for instance, has the highest cost of rent per value of dwelling in Australia (Shelter Darwin, sub. 20, p. 1). Rents should not be determined solely by market forces. Legislation must empower tribunals to disallow excessive rent increases. In particular, legislative provisions must prevent speculative rent increases resulting from major events (eg Expo ‘88, Americas Cup Fremantle 1987), large development projects or shortages in supply (National Shelter, sub. 115, p. 9).
Appropriateness The private rental market generally fails to provide appropriate housing for significant numbers of tenants. By failing to provide appropriate housing it discriminates against people in wheelchairs, those with large or extended families or those with special housing needs. This type of discrimination is not intentional. Rather it occurs because there is no mechanism within a market structure to meet the needs of groups who do not necessarily have the means to pay (Queensland Shelter, sub. 138, p. 11). Under current Queensland law, tenants have no rights to change locks on doors or make any modifications to their house that will ensure their safety. If the landlord will
INDUSTRY COMMISSION 31 PUBLIC HOUSING
not make urgent repairs, there is no way of forcing repairs under current legislation. Safety is not guaranteed in the private rental market, particularly in the lower end of the market which is frequently sub-standard. The situation worsens when the market is tight (Queensland Shelter, sub. 138, p. 9).
Security of tenure Private rental is the most insecure form of tenure. A private tenant lives with a notice to vacate like a “Sword of Damocles” over their heads for the whole of their tenancy (Wimmera Community Care and Wimmera Regional Housing Council, sub. 83, p. 3). Security of tenure, ie protected tenancy, is only sought by and for bad tenants, who do not pay rent regularly, cause damage, disturb the peace or use the property for illegal purposes or to accommodate more people than agreed to in the tenancy agreement. Only such people need laws to prolong their illegal anti-social activities (Property Owners’ Association of NSW, sub. 30, p. 4, Issues Paper on Public Housing).
Landlord tenant issues Our records show that the most frequent problems encountered by tenants in the private rental market relate to bond recovery, privacy, rent issues, problems relating to a lease and termination issues (Tenants Advice Service, sub. 191, p. 3). Tenancy legislation between states are not consistent (Consumer Forum for the Aged, sub. 87, p. 4). Tasmanian Tenancy Law is antiquated and irrelevant to the realities of the private rental market of today. The little legislation that exists is mostly in favour of the landlord, not the tenant (Housing and Young Peoples Outreach, sub. 133, p. 3). Council of the Aging ... considers it imperative that the Commonwealth take the initiative in achieving national standards for tenancy protection (Council of the Aging (Australia), sub. 168, p. 8). Governments appear to believe that any attempt to regulate private tenancies will lead to disinvestment by property owners. The disinvestment argument has been raised each time new tenancy legislation has been proposed even though there is no data to substantiate the claim (Tenants’ Union of Queensland, sub. 155, p. 3). For letting a flat or house, we as owners cannot charge our tenants, but we get charged by our agents! ... these costs fall more harshly on owners than on rental-occupants who do not have to pay huge stamp duties, legal costs, selling costs or high interest charges and set-up fees. The Bond cost is peanuts and is in most cases under the law just the last (four week’s) month’s rent unfortunately, which leads to encouragement of irresponsibility in tenants refusing to look after the premises and clean up when they leave. For welfare tenants, it is completely free under the State’s Bond Assistance
32 INDUSTRY COMMISSION A PARTICIPANTS’ VIEWS
Scheme which is funded by private owners (Property Owners Association of Victoria, sub. 156, p. 6). Single women, including female single parents, also report incidences of harassment from the owner or agent of their rented premises (Tenants Advice Service, sub. 191, p. 8).
Rental stocks The private sector chronically under supplies housing for low income earners; mainly because of planning controls but also because of risk (Dr Joe Flood, sub. 171, p. 2). It is Hanover’s belief that vacancy rates should be maintained above 5 per cent for low cost private housing, through the introduction and modification of appropriate fiscal measures to stimulate supply without making landlords maximise rental income. A thorough analysis of current measures is therefore required to develop sufficient incentives to achieve the above objectives (Hanover Welfare Services, sub. 163, p. 8). The experience of various property trusts which invested in residential housing and eventually had to sell these investment due to heavy losses demonstrates that residential rental accommodation is not suitable for institutional investment or management (Property Owners’ Association of NSW, sub. 30, p. 2, Issues Paper on Public Housing).
Other forms of accommodation Rooming house tenants are socially isolated, discriminated against, frequently verging on homeless or moving between being homeless and housed, and without financial resources that would secure them more affordable self contained accommodation, and without social skills and references which would allow them access to self contained accommodation in the private rental market (Rooming House Tenants Association, sub. 201, p. 5). More attention needs to be given to the transaction and access costs experienced by the most vulnerable groups — tenants of boarding or rooming houses and caravan parks. The high mobility of these tenants (due to the high cost of accommodation and poor security of tenure) means that they face transaction and access costs much more frequently than other sectors of the community. With no control over the length of tenancy, the costs of moving every six months or yearly are not insignificant. This contributes to a downward spiral into poverty and increasing vulnerability within the housing sector. The cost of moving a relocatable home from one site to another is also high (Council of the Aging (Australia), sub. 168, p. 3–4). ... if there is appropriate planning and design, good management and the location is not isolated, caravan park communities can be supportive and nurturing environments for children. Unfortunately most caravan park facilities reflect the holiday lifestyle and do
INDUSTRY COMMISSION 33 PUBLIC HOUSING
not meet the needs of families with young children (National Dissemination Program of the Hunter Caravan Project, sub. 209, p. 1). Until the election of the Goss Government in Queensland the needs of park residents were largely ignored. Several programs are underway now which are designed to lift the lifestyle out of the gipsy age (Caravan and Mobile Home Residents Association, sub. 219, p. 1). Caravan parks were often considered to be public housing’s poor cousin. People moved into parks whilst awaiting private or public housing availability (Caravan and Mobile Home Residents Association, sub. 219, p. 1). Energy poverty is an ongoing problem for caravan park residents (Caravan Park Residents Network, sub. 182, p. 5). Caravan park residents are often ineligible for Government assistance because their level of assets are over the allowable level. This is a ridiculous situation when one considers the relatively low income levels and lack of tenure security they face. Home ownership does not equal security of tenure in this example (Caravan Park Residents Network, sub. 182, p. 7). Once a resident buys a movable home and locates it in a park, they find themselves ‘locked into’ a system which greatly benefits (financially) the park owner. The ongoing costs of housing for caravan park residents continue to increase in many inequitable ways that are rarely explained prior to taking up residency (Caravan Park Residents Network, sub. 182, p. 4).
A.4 Intergovernmental issues
Roles of governments in housing Governments have always been involved in the provision of housing, both directly and indirectly, and with a range of motives. ... What is needed now is a clear strategy, one with a long-term perspective, to underlie Federal spending on housing assistance schemes (Brotherhood of St Laurence and the Ecumenical Housing Unit, sub. 152, p. 1). The main objective of government policy should be to develop a favourable environment for investment in rental housing eg provision of long-term, low interest loans for rental housing; accelerated depreciation allowances; abolition of land tax on residential accommodation; abolition of capital gains tax for long term investors (of, say, 5 years and over); removal of burdensome local government and development regulations (the “not in our street” syndrome) (Property Owners’ Association of NSW, sub. 30, p. 1, summary of submission). If the Commonwealth is committed to ensuring the objectives of the CSHA are met for all Australians, then we recommend that it provide a stronger financial commitment to
34 INDUSTRY COMMISSION A PARTICIPANTS’ VIEWS
housing assistance than the current 2 per cent of the total budget outlays (Prahran Community Housing, sub. 248, p. 1). I think it’s the State and Federal Government’s role and responsibility to provide affordable housing to the disadvantaged, the people on low incomes, the less fortunate, the poor. If Governments won’t defend the defenceless, who will? (B Trethowan, sub. 142, p. 2). Our research into housing costs and labour market trends and their consequent impact on the extent of housing stress and housing poverty in Australia has led us to the conclusion that the Commonwealth government should take a more active role in the provision of housing assistance (Brotherhood of St Laurence and the Ecumenical Housing Unit, sub. 198, p. 1). New South Wales maintains that the Commonwealth should take total responsibility for income support and provide a level of assistance that ensures that the costs of housing provision by the States is fully recovered (NSW Government, sub. 354, p. 6). Whilst we understand that it is the responsibility of the Commonwealth Government to provide income support, we suggest that the provision of housing should not be left entirely just to the States. It has been proven in the past that without Commonwealth money as well, the States tend not to assign sufficient money for housing provision (Goulburn Regional Housing Council, sub. 293, p. 1). Given that there are State Governments that do not share the Commonwealth’s commitment to public and community housing programs, the Commonwealth must take a more pro-active role and hold the States accountable as there are thousands of people in housing crisis that could be assisted with those unspent funds. If the answer is more tied grants then this must be more common (Prahran Community Housing, sub. 179, p. 10). The current CSHA provides a series of checks and balances that, despite the (somewhat unmeasured and possibly not completely measurable) inefficiencies, provide an opportunity to, firstly, ensure that housing programs are buffered from the often oscillating policies developed by either a vote seeking state or Commonwealth government, as the case may be (Federation of Housing Collectives, W.A., sub. 273, p. 1). Without the Commonwealth, Homeswest’s actions in late June to close the Homeswest Independent Appeals Tribunal and its replacement by a new system would have proceeded without challenge. ...A major problem for the Commonwealth is that although the Housing Assistance Act requires an independent appeals process, the Commonwealth has in the past permitted other States to implement systems which would not generally be seen to be independent. Hence the Commonwealth has not made full use of the limited power that it does have (Western Australian Council of Social Service, sub. 277, p. 7). ... post-industrial thinking sees housing policy as a set of services designed to improve clients’ welfare. It recognises that as far as possible decisions should rest with the
INDUSTRY COMMISSION 35 PUBLIC HOUSING
client rather than with the bureaucrat. In the industrial culture the bureaucrat could justify a paternalistic approach by claiming to “know what’s best” for an uninformed dependent client. In the post-industrial culture such a patronising approach is no longer justified. Society is more diversified, clients are better informed as to their own welfare needs and in general are better able to make decisions affecting their welfare than are remote, albeit well-meaning, government bureaucrats (R D M Cotgrove, sub. 128, p. 1). The CSHA should therefore, remain the lynch-pin of Federal State co-operation in delivering housing assistance to low to moderate income households. Continuation of the CSHA and Commonwealth involvement in specific purpose programs (particularly in crisis accommodation, supported accommodation, Aboriginal housing, and housing for the elderly) are vital to ensuring that all Australians can have access to secure, affordable, adequate and appropriate housing (Ed Wensing, sub. 108, p. 47). Undoubtedly the allocation and stock management practices of the public housing authorities can and should be improved, but this is within the power of the Commonwealth if it chooses to take the initiative. Value for money is not easily achieved in any context and particularly where the Commonwealth chooses not to supervise its own interests (Housing and Social Planners, sub. 199, p. 2). The 1988 CSHA amendments no longer permitted rent rebates to be paid for out of CSHA funds. This ultimately means that the burden of paying for rent rebates has fallen to the states, whilst the Commonwealth retains responsibility for private rental relief. The State housing authorities are therefore having now to act not only as suppliers of low rental housing but as providers of income assistance to its increasingly poor population of tenants. This causes unacceptable distortions in the apparent inability of State housing authorities to balance their books. Adelaide Central Mission therefore recommends that the Federal Government assume funding responsibility for all income security payments, including rent rebates for low income public tenants and rent relief for private tenants (Adelaide Central Mission, sub. 69, p. 54). Local Government has considerable, but limited, potential to assist in meeting local housing needs. It can help to ensure that a local balance exists between provision of housing by the private, public and community housing sectors by mobilising their distinctive characteristics so that community needs are met efficiently and appropriately. It can play this significant role by: • reducing impediments to the efficient operation of the private market, • providing information, • participating in planning the provision of public housing, and • supporting or directly providing local housing, such as through community housing (Commonwealth Office of Local Government, sub. 126, p. 7). Local government authorities, by virtue of their size, accessibility and knowledge of the local area, have the potential to respond more quickly and sensitively than any
36 INDUSTRY COMMISSION A PARTICIPANTS’ VIEWS
other sphere of government (Australian Local Government Association, sub. 102, p. 4). In New South Wales, Councils also have the opportunity to develop effective housing strategies for their areas and can levy developers for the provision of appropriate and affordable housing as one example of the additional resources which can be put into the system by the involvement of all spheres of government. (Local Government and Shires Association of NSW, sub. 326, p. 2). Local Government is often reluctant to become directly involved in either housing provision (eg through LGACHP) or providing services for those occupying public housing: it senses that it may be signing a blank cheque. Therefore there is need to clarify Local government’s roles and obligations (Municipal Association of Tasmania, sub. 137, p. 3).
Funding and financing of subsidised housing Most European countries have much greater housing expenditures than Australia because historically they have tended to provide that assistance as a universal right (Brotherhood of St Laurence and the Ecumenical Housing Unit, sub. 198, p. 4). [The Commonwealth] continues to provide once-off subsidy support for rental housing and to supplement tenant income with ad hoc rental assistance unrelated to the cost of providing rental housing. The States, with a lower revenue base from which to raise funds, are also not prepared to take on such responsibilities (Dr Judith Yates, sub. 186, p. 15). Just because capital is provided through Government grants does not indicate that public housing is necessarily subsidised. Housing subsidies are related to the ongoing costs of financing, managing and maintaining housing and whether the rental system reflects the long-term economic cost of providing that housing. With an appropriate rental system in place, any tenant paying full-rental is not receiving any subsidies. Moreover, if the artificial constraints on borrowings by the State housing authority were lifted, it could borrow the funds to acquire an additional dwelling (Victorian Council of Social Service, sub. 169, p. 20). It appears that grant funding, while a slow way of meeting the waiting lists which continue to grow under increasing unemployment, family breakdown, and an ageing population, is nevertheless a better way to invest socially in low-income housing assets (Dr Joe Flood, sub. 171, p. 4). Rebates to public housing tenants absorb a significant proportion of the Commonwealth–State Housing Agreement Budgets. We have affirmed for some years that housing subsidies should be directly funded from the Social Security budget and all funds earmarked for housing should be used for that purpose (Housing for the Aged Action Group, sub. 181, p. 15).
INDUSTRY COMMISSION 37 PUBLIC HOUSING
... the Commonwealth’s outlays on housing to the States and Territories since 1984–85 had been reduced by 42 per cent (excluding ACT) by late 1991. The current commitment of $1016 million each year for the four years commencing 1989-90 represents a further reduction in real terms of 18 per cent over the four year period. By 1992–93 Commonwealth funds will have declined by 50 per cent since 1986–87 (Adelaide Central Mission, sub. 69, p. 2). The efforts by successive SA Governments to invest heavily in public housing has also been penalised, with the reduction of CSHA funds to SA (caused by moving to a per capita funding formula) falling from 12.5 per cent to 8.6 per cent by the 1992–93 financial year, savagely biting into the ability of the SA Housing Trust to build new homes for the 43 520 applicants on waiting lists by late 1991 (Adelaide Central Mission, sub. 69, p. 2). The capital funding of social housing in [The Netherlands, Denmark, Sweden and Finland] is increasingly arranged through off-budget mechanisms. The bulk of capital funds are borrowed directly from institutional finance markets with guarantees provided on a shared basis by central funds and governments (Joint submission by: Henk van Leeuwen and Dennis Ingemann, sub. 67, p. 4). It would seem appropriate to set a target of 15 per cent public and community- managed housing in Australia. In order to achieve this however, governments need to establish appropriate market conditions for attracting private sector finance into community housing so that social objectives will not be compromised. It is likely that achieving this target will take twenty years; and in the interim, current levels of housing stress will continue, unless addressed through the public housing program (The Salvation Army, sub. 200, p. 8). Much of the difficulty in raising funds [for social rental housing] arises because rental yields are not adequate to attract investment at the lower end of the rental market. The creative financing approaches employed have been made financially viable through credit enhancement (through State guarantee or insurance or indemnity), through subsidies in the form of Commonwealth tax expenditures or direct outlays and/or through implicit State absorption of establishment costs and construction and operating risks (Dr Judith Yates, sub. 186, p. 6). The report from [Caversham] indicated that institutional investors have little (or no) interest in investing large sums in social rental housing unless guarantees from a State housing authority on minimum rates of return are provided (Dr Judith Yates, sub. 186, p. 11). If borrowing is required to undertake large-scale housing construction projects, this is obviously far better undertaken via lower interest public sector borrowings (Western Regional Housing Council, sub. 174, p. 10–11). ... new financing arrangements [should] be sought for the building of public housing, perhaps 50 per cent through the Commonwealth State Housing Agreement money and the other 50 per cent through off-budget finance sought and developed especially for
38 INDUSTRY COMMISSION A PARTICIPANTS’ VIEWS
this purpose. The repayment of the off-budget monies could be made possible by the increased rental income from the tenant rental from those middle income tenants who pay full cost rental or 20–25 per cent of their income up to a ceiling (Goulburn Regional Housing Council, sub. 82, p. 8). There is a capacity to build more public housing and to provide more home ownership assistance by using State and Federal Government housing funds as a “top-up” to funds raised from private sources rather than using capital funds (Master Builders’ Association of Tasmania, sub. 112, p. 3). Housing can only be provided cheaper than headleasing from private landlords if private funds can be obtained at real rates of 4 per cent to 5 per cent or less. However, capital grant funding, while slow, builds up an asset base and will eventually lead to more low-income housing than all forms of recurrent subsidy funding (Dr Joe Flood, sub. 171, p. 6). Increased use of bulk leasing could encourage institutional investors to view this area as an attractive investment opportunity — leading to the development of agencies specialising in the lease of large numbers of properties to government — and thus reducing the costs to the tenant manager. This has been the experience of the Defence Housing Authority (Department of Health, Housing, Local Government and Community Services and Department of Social Security, sub. 331, p. 56). ... we are well aware of serious budgetary constraints. We would argue that there are other revenue options such as capital gains tax on owner occupied housing; re-embargoing negative gearing provisions; taxing the imputed rent on owner occupied housing; and examining the feasibility of utilising superannuation funds. Some of these options are politically unpalatable and therefore, perhaps, unachievable, however we argue that government must more seriously examine these options if the housing crisis confronting this country is to be effectively addressed (Springvale Community Aid and Advice Bureau, sub. 31, p. 3). Any funding available to Local Government under Commonwealth programs should be paid direct to the local authority without State Government controls and administration requirements. Local Government is a responsible level of government and this should be recognised by all levels of government. Unnecessary costs are incurred with the existing funding arrangements (Shire of Wongan - Ballidu, sub. 68, p. 2).
Co-ordination issues While government departments seem to have great resources ... non-government volunteers and staff are finding their energies drained by the endless consultation which often leads to a dead end. The multiple layers of government — Commonwealth, State, Local — are not well co-ordinated (Uniting Church - Synod of Western Australia, sub. 32, p. 2).
INDUSTRY COMMISSION 39 PUBLIC HOUSING
There are major problems in the co-ordination of housing between the State and Commonwealth Governments, this is particularly noticeable in NSW. Examples of poor co-ordination include the use of SAAP in NSW to provide residential care for State wards and young people aged 12–15, which results in less available accommodation for the young people targeted by the program’s objectives (Western Sydney Housing Information and Research Network, sub. 84, p. 3). [We] strongly support the move for a single authority to be responsible for housing and care services for the frail aged in the community (Aged Services Association of NSW and ACT, sub. 75, p. 2, attachment). ... addressing areas of housing need also requires co-ordination of support services, consistency in the definition of special need and adequate consultation if housing outcomes are to be appropriate (National Women’s Consultative Council, sub. 93, p. 3).
A.5 State housing authorities
Objectives New South Wales believes that the objective underlying all policies and programs relating to the availability of Government-funded rental housing should be the provision of housing on a needs basis, not the provision of public rental housing on a universal basis (NSW Government, sub. 354, p. 3). the “vagueness” of CSHA objectives are addressed by the States’ annual Housing Assistance Plans [HAP], which are subject to community and tenant input. The HAP consultation process is often about finding the least unpopular trade-offs for the SHA (Shelter WA, Sub. 271, p. 1). Whereas prior to 1980 housing authorities attempted to provide public housing to a broad range of clients, their focus is now much narrower and seeks to provide direct housing assistance to those most in need, for example, single parents, long term unemployed, and pensioners (R J Graham, University of Tasmania, University of Tasmania, sub. 123, p. 1). ... moves to limit the role of the housing authorities to exclusively meeting the needs of those on the lowest incomes would, in the long run, be counter-productive for those people as this would lead to a weaker, more residual public housing sector (Queensland Council of Social Service, sub. 241, p. 3). While improved accountability and financial management of public housing programs are required, a focus on social and housing objectives is vital in the administration of housing assistance. Economic considerations must be cognisant of low income earners’ access to and ability to maintain their housing. Performance indicators must reflect the outcome for clients (National Youth Coalition for Housing, sub. 131, p. 39).
40 INDUSTRY COMMISSION A PARTICIPANTS’ VIEWS
Public housing policy has the opportunity to help in the establishment of other desirable urban development policies such as urban consolidation, energy efficiency, and sustainable development practices (R D M Cotgrove, sub. 128, p. 5). Public sector housing activity has also provided “leadership” to the private sector in providing demonstration sites for urban housing (Master Builders’ Association of Western Australia, sub. 6, p. 3).
Roles and functions The challenge for social housing agencies is no longer one of providing a standard product to which all housing consumers have to adapt. Rather it is to provide a range of choices for housing consumers (Victorian Council of Social Service, sub. 8, p. 8). In the past, the Department of Housing acknowledged a responsibility for providing not only the physical, but also the social infrastructure for housing estates, so that communities could develop. The Department has now changed its approach. As part of this change came the transference of the responsibility for the Housing Estate Worker Program to the Department of Community Services (DOCS) in 1992. The funds for the Program were not part of this transference. Consequently, the Program as a whole no longer exists and DOCS only picked up 4 of the 10 projects; Blacktown’s was not one of them (Blacktown City Community Services, sub. 76, p. 1). MBA sees no reason why a public housing agency should compete with the private sector in land development at the upper end of the market (Master Builders’ Association of Western Australia, sub. 6, p. 5) Homeswest should no longer be involved in the acquisition, development and retailing of residential land and all existing land supplies (apart from endowment land) should be placed under the control of Land Corp (Housing Industry Association, Western Australian Division, sub. 71, p. 5). The provision of housing is also different from the provision of other public utilities ... First, ... State housing authorities need to produce a very diverse product which is closely linked to a range of cultural and social preferences and values. Second, ... Housing is consumed over a long period of time and, for the most part, is an appreciating asset. Third, ... Social housing agencies operate in an environment where most housing is privately produced and owned (Victorian Council of Social Service, sub. 169, p. 15). It is important for State housing authorities to implement strategies that will enable them to consult with workers in the community sector. There are community based workers with years of experience and accumulated knowledge and skills who could make positive contributions to the development of housing programs (Western Sydney Housing Information and Research Network, sub. 84, p. 4).
INDUSTRY COMMISSION 41 PUBLIC HOUSING
Performance Few would deny there have been major difficulties in State housing authorities management of public housing, and there are still areas for improvement. However there has in recent years been a more concerted approach to planning and efficient work practices. On the positive side Victoria has been in the forefront of policy development, innovative schemes and stock design, winning awards for design and creativity (Housing for the Aged Action Group, sub. 181, p. 14). There have always been wastes and inefficiencies in the way public housing is provided ... A history of inefficiencies is not, however a reason for dismantling the system or changing it to the extent that it no longer achieves what it was intended for (Western Regional Housing Council, sub. 174, p. 2). Public housing authorities must, however, continue to improve their fiscal performance. However, this must be within the context of achieving social objectives. In other words, the driving force of the State housing authorities must be the achievement of social objectives. This provides the context within which State housing authorities can improve their financial efficiency and effectiveness. Financial efficiency and effectiveness must not be the driving forces of State housing authorities (Victorian Council of Social Service, sub. 8, p. 38). Housing authorities should be encouraged to improve the efficiency of program delivery. Any gains from such measures should be kept by the authority and not passed back into general revenue, otherwise there is little incentive for improvements (Housing Industry Association National Office, sub. 92, p. 10). ... the level of resources devoted to public housing should be increased. However, this does not mean that there is no room for improvement in the management of public housing. On the contrary, despite substantial recent reforms in the public housing system in Queensland there is much room for improvement in that system (Queensland Council of Social Service, sub. 91, p. 11). ... significant efficiency gains can be achieved if public housing authorities were to improve the administrative procedures and review technical standards required for the provision of public housing (Master Builders’ Construction and Housing Association Australia, sub. 94, p. 3). ... whilst recognising Homeswest innovations, a range of problems still exist including: a) many households are waiting some years for public housing to be allocated. b) many designs are not appropriate to climatic conditions. c) the needs of Aboriginal people are not well met and the view held by Aboriginal groups and the community sector is that Aboriginal people receive inferior housing and service from Homeswest. d) maintenance has been identified as a major issue for existing tenants. e) need for improved services for migrants, of non English speaking background.
42 INDUSTRY COMMISSION A PARTICIPANTS’ VIEWS
f) addressing the security needs of women and people with disabilities (Brewer Street Welfare Rights and Advocacy Service, sub. 196, p. 2). ... there is still scope for greater public scrutiny of the State housing authority, in spite of significant advances which have been made in this area in Queensland. We believe that this accountability should include measures of performance which reflect the primacy of social objectives in the role of State housing authorities. Thus, in addition to performance criteria relating to financial efficiency, it is important to design a set of performance criteria which measure their performance of their social objectives. These would include measures of tenant satisfaction, measures of success in the task of integrated planning and monitoring of success in areas such as affirmative action on behalf of disadvantaged groups (Queensland Council of Social Service, sub. 91, p. 15). The NSW Housing Department has an appalling record of consultation in this State which has worsened in the last few years. .... Short time frames, poor or total absence of resourcing, inadequate briefing, lack of recognition of structure in the community sector, basic ignorance of good consultation processes and lack of real commitment to good consultation has caused the terrible rift between the NSW Housing Department and the Community Housing Sector (Wollongong Youth Refuge Association, sub. 4, p. 9). For our organisation, on more than one occasion, housing which we have identified as suitable for modification for a particular resident group has been lost because the Department has not been able to respond quickly and spot purchase (Spastic Centre of New South Wales, sub. 11, p. 4). Targeting is obviously better with a greater range of programs available, but this does lead to greater administrative costs. There is a need for the Commonwealth to aggregate assistance, building greater flexibility into tied funding arrangements (ACT Housing and Community Services Bureau (Questionnaire Response), sub. 109, p. 6, Attachment 1). Innovation in housing support programs is obviously an important goal but the financial viability should be rock solid. Public housing authorities should not use their programs to experiment with housing design or financial arrangements without adequate prior public debate and cost benefit assessments (Housing Industry Association National Office, sub. 92, p. i, Executive Summary). The quick and effective collection of performance and quality of service data on Australia’s housing authorities provides an effective platform for the assessment of best practices, the development of innovation, co-operation and co-ordinated reform (Corporate Diagnostics, sub. 73, p. 2). However there would appear to be further opportunities for achieving increased efficiency dividends from the greater involvement of the private sector. Some of the measures that have been suggested by Association members include: • for core public rental stock, normal industry design and quality standards be used rather than specifications that exceed these
INDUSTRY COMMISSION 43 PUBLIC HOUSING
• State housing authorities to develop closer consultation with industry associations and builders in the provision of public rental stock • in the medium to longer term, governments to put in place arrangements that will facilitate private sector financing and management of ‘normal’ public housing rental stock (Master Builders’ Construction and Housing Association Australia, sub. 94, p. 4). The following principles should govern [social housing] reform: 1. Greater focus on asset management in public housing 2. Greater focus on customer service within public housing 3. Greater diversity of stock to better match the needs of a more diverse population 4. Providing diversity in the range of management options within the social housing sector 5. Sensible targeting of social housing stock 6. Restructure social housing to achieve greater horizontal/longitudinal equity (Brotherhood of St Laurence and the Ecumenical Housing Unit, sub. 198, pp. 9– 10).
Accountability ... there is almost no accountability mechanism identified in any State housing authority program which would permit an evaluation of the adequacy of stock or tenancy management. ... accountability by State housing authorities is seriously limited by the lack of transparency in their financial accounting. A serious implication of this is that it is very difficult to determine the contributions to achieving the overall objective of improving supply made by the various operations of State housing authorities (Australian Council of Social Service, sub. 85, p. 6). ... public landlords are more accountable both to the tenants and the wider community than private landlords. Because they are large and subject to community and parliamentary scrutiny their activities are more easily monitored and visible than the many small private landlords (North Melbourne Tenants Association, sub. 81, p. 2). We would consider, as desirable, a national body with specific expertise in housing, with terms of reference to focus on monitoring State housing authorities administration of CSHA funds. It would also be essential that such a body be empowered to make recommendations to State housing authorities in regard to the administration of public housing. Such a body would need to be provided with the appropriate legal authority to enforce agreement upon State housing authorities (Western Sydney Housing Information and Research Network, sub. 84, p. 5).
44 INDUSTRY COMMISSION A PARTICIPANTS’ VIEWS
Tenancy management issues Under present policy, interstate residents may list for public housing in Queensland in a limited range of circumstances, but waiting time accrued in another State is not transferable (Queensland Department of Housing, Local Government and Planning, sub. 345, p. 18). MBA believes that there is a need for the on-going assessment of public housing tenants to ensure that the rent they pay reflects their economic circumstances (Master Builders’ Association of Western Australia, sub. 6, p. 7). To avoid the so-called poverty trap creating a disincentive for people to work, we would recommend that rent assessment remain at the same level for a period of three months before re-assessment. This provides for catching up on rent arrears or other unpaid expenses (North Brisbane Regional Tenant Group, sub. 327, p. 2). A critical social cost that has been managed by the State has been rent arrears. In some cases tenants’ debt has accumulated over a number of years. The “Fair Rents Working Group” of the Public Tenants Union cites 18 000 households in arrears in November 1989. This represents over 30 per cent of the then total number of households. Many of these tenants remain on arrears agreements which demonstrates their effort to resolve arrears problems while trying to maintain lifestyles (Shelter Victoria, sub. 172, p. 10). If applicants have previously been evicted from DOH Housing we feel they should not be rehoused at a later date especially when waiting lists are excessively long. ... DOH needs to have the authority to go ahead and evict tenants who breech the Tenancy Agreement in relation to nuisance and annoyance. Depositions from 5 neighbours should be adequate to prove that there are problems and evictions are warranted (Murray Darling Riverina Public Tenants Association, sub. 189, p. 1, 2). There appears to be little flexibility in the provision of housing through the public housing system and people are often forced to accept a house in an area distant from the place of the person’s origins (Western Sydney Housing Information and Research Network, sub. 84, p. 2). Twenty four hours to view properties as required by the [NSW] Department of Housing and provide a response is difficult for applicants as there are often financial restraints for them to travel to the area of allocation. There is also only one offer of accommodation ... (North Sydney Housing Interagency, sub. 177, p. 1). Often prospective tenants are so desperate for accommodation they are forced into accepting housing which will meet their short term needs that may have long term negative consequences for their family. A system such as a house exchange program which operates in Victoria should be considered for this State department (‘LOGAN’, Logan City Tenant Group, sub. 119, p. 2). Inexplicable rules such as the refusal of the Victorian Department of Planning and Development to provide fences around detached homes renders these homes totally
INDUSTRY COMMISSION 45 PUBLIC HOUSING
inappropriate for families with young children and stigmatises the houses making them identifiable (Wimmera Community Care and Wimmera Regional Housing Council, sub. 83, p. 1). Another case is of a 72 year old woman with a history of orthopaedic problems requiring surgery. She needs to walk with a frame. Because of many steps at home, she was rendered housebound. The Department approved her rehousing. Tenants knew of an accessible and vacant unit in the same block, but the Department was unwilling to transfer her to the unit. Department responded by saying “tenants can’t pick and choose where they live”. An offer of accommodation was made, but in far west region of Sydney away from existing community contacts (South Sydney Community Aid, sub. 188, p. 1). ... effective housing management cannot be achieved without tenants being involved in the planning, development and management of their housing (Public Tenants Union of Victoria, sub. 180, p. 8). It is obviously crucial that the Homeswest Independent Appeals Tribunal remains totally independent from Homeswest (Shelter WA, Migrant Access Project, sub. 28, p. 3). ... appropriate and accessible review mechanisms for State housing authority decisions can have substantial benefits both for the public tenant and for the SHA. Potentially, the tenant gains an enhanced security of tenure under the “rule of law” while the State housing authority enjoys a predictable and effective mechanism for dealing with client dissatisfaction and the systemic benefits of competent external review (Softlaw Community Projects, sub. 130, p. 4). The Union also has some concern about the rights of tenants in public and community housing. In Queensland these tenants have no clear rights under legislation. To ensure housing equity and security for all, tenancy legislation should cover all types of tenure (Tenants’ Union of Queensland, sub. 155, p. 7). Prospective tenants and current tenants often received conflicting information on eligibility, and allocation processes. Much of this misinformation/misunderstanding contributes to great personal distress. For example, women from non-English speaking backgrounds have even greater difficulties in obtaining important information, with many having to rely on their children to act as interpreters (Women in Supportive Housing, sub. 146, p. 4).
Co-ordinating support services and other programs Many people with disabilities who are eligible for and wish to live in public housing do not even bother to apply because they know that they will not be able to locate the additional support services they require to maintain themselves in the housing if it becomes available (ACROD, sub. 140, p. 4).
46 INDUSTRY COMMISSION A PARTICIPANTS’ VIEWS
... there is a need for governments to improve coordination between departments whose responsibility includes older public tenants, ie. Health, Community Services, Housing, Planning, Development. Public housing linked with support services for older persons provides the potential for security and a feeling of well being (Housing for the Aged Action Group, sub. 181, p. 13). Generally, those in need of support either already receive it or are able to obtain it from service providers in the same way as any other members of the community. Thus, placing [public housing] tenancy management in the hands of the Department responsible for welfare provision would not necessarily improve access to services since the whole range of services required by clients is provided by more than one State agency. Furthermore, in many key areas of community service provision such as those for aged people and people with disabilities, actual services are delivered by non- government agencies (NSW Government sub. 354, p. 8). Our past experiences have indicated that Homeswest will now not approve of the allocation of funds until such time as appropriate funding for accommodation support has been guaranteed by the appropriate funding bodies, and as such there is now a considerable time delay between an application for funding for support funding; the approval of the support funding; the application to Homeswest for consideration of a development; the design and tender process for the mobility dwelling; and the actual construction and completion of that dwelling by a builder (Cerebral Palsy Association of Western Australia, sub. 278, p. 1).
Asset management During the 1960’s some of the public housing policies pursued by State Governments in the guise of urban renewal and slum clearance verged on social engineering, a most inappropriate role for an agency responsible for the provision of housing. These activities resulted in the destruction of local communities and the creation of significant social problems. Much of the stock created in this process is now in urgent need of replacement, a major impediment to the creation of additional new stock. There is significant mismatching of stock and residents, a difficult issue but one which in a climate of restricted resources must be addressed (The Salvation Army, sub. 252, p. 1). By the end of the 1970s, the results of the experimental use of concrete panels in walk- up flats and houses were becoming apparent: many houses were badly cracked, subject to mould and condensation and were sub-standard (Victorian Council of Social Service, sub. 8, p. 19). More preventative maintenance, the introduction of condition reports and the reinstatement of annual inspections would improve the condition of existing public stock (Port Melbourne Public Housing Tenants Association, sub. 170, p. 3). Much of Queensland’s public housing is in large estates on the urban fringes, isolated from services, public transport and employment (Youth Housing Project, sub. 5, p. 6).
INDUSTRY COMMISSION 47 PUBLIC HOUSING
In recent years the demand for public housing is from single parents, individuals and aged persons. This present problems for the State housing authorities in finding ways of adjusting the composition and location of the stock to meet these needs. Widened eligibility criteria for single people and people with disabilities have also expanded the range of needs that public housing is being expected to meet (Ed Wensing, sub. 108, p. 27). Homeswest has increased its construction of four, five and six bedroom houses by 37 per cent since last year. This move is to be commended, as extended families need large housing (Shelter WA, Migrant Access Project, sub. 28, p. 2). Public housing should only be sold from a stock management perspective. For example, when the dwelling and the land on which it is located are considered to be no longer suitable or appropriate for longer term use as public housing (Ed Wensing, sub. 108, p. 20–21). Whilst public sector housing providers have responsibilities to respond to demand pressures, there does not appear to be well developed mechanisms or structures which provide feedback from users to designers and/or providers. Homeswest have advised that post occupancy evaluation will be undertaken (Kimberley Development Commission, sub. 35, p. 3). The extent to which the State housing authorities can achieve urban consolidation objectives, will depend on the priority given to redevelopment of existing stock ahead of construction of new dwellings as well as to whether or not stock in inner locations is retained. The balance between redevelopment and new construction in turn relates to the balance given to upgrading stock for existing tenants and providing additional accommodation for applicants on the waiting list (Royal Australian Planning Institute - ACT Division, sub. 139, p. 12). House prices are currently at a more affordable rate than previous years, yet the spot purchase program which allows government to purchase existing private dwellings has received little or no resources. Spot purchase is particularly relevant for built up areas in the inner city belt and allows areas such as Brunswick to have public housing in a municipality which has little land available for building (North Western Regional Housing Council, sub. 183, p. 9). ... State housing authorities, at least for their core rental operations, ... [should] • implement a policy of regularly turning over stock to take advantage of the capital gain to fund new capital programs as well as minimising asset maintenance liabilities • contract out to the private sector the management and maintenance of public rental stock • contract out the project management and design work
48 INDUSTRY COMMISSION A PARTICIPANTS’ VIEWS
• review and improve the cost-effectiveness of the current tender process in the context of the total cost of providing public housing stock (Master Builders’ Construction and Housing Association Australia, sub. 94, p. 5). With greater emphasis being placed on developing business, particularly value adding in rural Australia, it is important that assistance be given to provide housing in country areas to accommodate the staff required. ... Approaches have been made to Homeswest for additional housing in the community, however in the absence of a long waiting list they are reluctant to provide more rental housing. Industry/Business is reluctant to develop without any housing to accommodate staff. Something needs to be done to overcome this dilemma (Shire of Wongan - Ballidu, sub. 68, p. 2). We believe that structures and skills for efficient property management of public residential housing is lacking outside the State housing authorities, and that to some extent State housing authorities are not the appropriate place for this management, where tenant, funding, and allocation issues sometimes take priority, and where the size of the Housing Authority makes it difficult to respond in an appropriate and timely way to property management issues. Where new community/public housing programs are being developed or considered, the efficient property management aspects should be an important consideration (Common Equity Housing, sub. 151, p. 4).
Property Maintenance Issues Current Tenancy Law does not require owners to supply window locks, deadlocks or security doors. Many of [our] users have major concerns with break-ins and violence in the inner urban area. This is particularly so in the high rise public housing estates (Fitzroy Richmond and Collingwood Accommodation Service, sub. 157, p. 3). The common and most worrying thread through reports from tenants is the evidence of extensive delays, of months and years, even where quite clear health and potentially fatal risks are involved . ... At the very least the [NSW Department of Housing] has a serious problem of not adequately informing clients of their rights, of what services are available and how to obtain them. At worst there is an ‘informal policy’ of cutting back costs by making repair and maintenance services as difficult as possible for tenants generally to obtain (Justice and Welfare Office Sydney, sub. 110, pp. 7–8). ... comments from public housing tenants indicate that maintenance is carried out in an inconsistent manner. Some tenants who have been in properties for a number of years find it difficult to obtain maintenance (such as the painting of walls and ceilings) from the Department, whereas others have been able to obtain a series of renovations in the same period (Shelter Darwin, sub. 20, p. 3). A number of tenants stated that they have given up reporting needed repairs to the [NSW Department of Housing] because of lack of response, rudeness on the part of staff, and being fed up with being given the run-around (Justice and Welfare Office Sydney, sub. 110, p. 8).
INDUSTRY COMMISSION 49 PUBLIC HOUSING
Contracting out for services ... in Victoria both maintenance and rent collection were contracted out — maintenance to Honeywells and rent collection to first National Australia Bank, then Australia Post. ... While we were not in public housing before the contracting out of maintenance, ... the stories we hear are that when the Ministry staff did maintenance, the service was efficient, effective and prompt and there were no complaints about maintenance staff not showing up (Stan Jamce Cooke, sub. 185, p. 15–16). Contracting out management to community groups is already commonplace in Victoria. Maintenance services are already contracted out to private tradespersons with the exception of inspection services, where special skills and accountability is needed. Given recent scandals in NSW within the building industry, allegations of tendering improprieties and the Victorian land scandals, there is community scepticism of greater private sector involvement in the delivery of social rental housing services. Greater use of private contractors must be accompanied by better service to rental housing consumers, savings to the social housing sector, a higher degree of regulation and more stringent auditing processes (Victorian Council of Social Service, sub. 169, p. 19).
Organisational structure In [The Netherlands, Denmark, Sweden and Finland] central government agencies such as Ministries for Planning and Housing or National Housing Boards, are responsible for the policy development, forward planning, co-ordination and accountability of finance for and the facilitation of social housing programs. It should be noted however that the central Department of Agency does not own, allocate or manage social housing (Joint submission by: Henk van Leeuwen and Dennis Ingemann, sub. 67, p. 4). New management models should be introduced into State housing authorities to increase their flexibility and their efficiency and effectiveness. These management models should be devolved so that effective housing programs are complementary and that different types of tenures exist under the umbrella of public housing (ACT Council of Social Service, sub. 80, p. 3). In Victoria the State housing authority has undergone continued reorganisation and restructuring over the past ten years. Numerous attempts have been made at devolving responsibility for the management of public housing to zonal/regional/area offices. It is unclear to us whether this ongoing restructuring has provided any clear benefits to public housing tenants or improved the efficiency and effectiveness of the State housing authority (Victorian Council of Social Service, sub. 169, p. 19). Housing management in the Kimberleys has been conducted for many decades from Perth. This has resulted in the current mix of poorly built, inappropriate and
50 INDUSTRY COMMISSION A PARTICIPANTS’ VIEWS
undesirable houses that is Derby’s housing stock. In recent years Homeswest has begun to regionalised its management, and for the first time Derby has a chance to have the necessary planning and management it needs to develop its public housing. Today’s construction program now consists of well designed and built properties (Derby West Kimberley Shire, sub. 70, p. 5). Social housing stock [in The Netherlands, Denmark, Sweden and Finland] is acquired, owned and managed by local and regional based corporate structures, which are administratively co-ordinated by local municipalities and provincial councils (Joint submission by: Henk van Leeuwen and Dennis Ingemann, sub. 67, p. 4). The Department is developing a philosophy of providing unified service delivered to its tenants through the multi-skilling of its staff. The introduction of the Tenancy Management System whereby small teams are responsible for all facets of tenancy management in small districts comprising approximately 500 tenant families is an initiative under this philosophy (Northern Territory Department of Land, Housing and Local Government, sub. 17, p. 10). ... the administration of State housing authorities should be regionalised with each regional office having management autonomy within an approved budget for management of the new and existing housing stock (Housing Industry Association National Office, sub. 92, p. ii, Executive Summary). The major challenge to public housing providers is to move from centralised public works organisations to decentralised asset management and tenancy service operations. Logical outworkings would be: • some separation of policy and service delivery functions; • the transfer of rent rebate subsidies to the Department of Social Security (subject to the caveat that rents are set on the cost basis set out below); • devolution of business units; • a new consumer focus; and • a new focus on stock quality and suitability (Brotherhood of St. Laurence and the Ecumenical Housing Unit, sub. 152, p. 3).
Corporatisation The Salvation Army rejects as totally inappropriate any attempts to privatise the public housing sector (The Salvation Army, sub. 200, p. 16). This paper does not exclude corporatisation per se but rejects some of the elements that have been associated with corporatisation — commercialisation, contracting out and privatisation — as contrary to the achievement of social objectives (Victorian Council of Social Service, sub. 8, pp. 3–4).
INDUSTRY COMMISSION 51 PUBLIC HOUSING
We can distinguish between corporatisation, commercialisation and privatisation and thus point out that there is not necessarily a connection between them. ... For most of the past 50 years, as the Housing Commission Victoria, the State housing authority has operated separately from the direct processes of Government. There are some advantages in this separation. In particular, the State housing authority has a voice of its own rather than being subject to its political masters (Victorian Council of Social Service, sub. 8, p. 39). The danger inherent in such a proposal [commercially driven property management] is that tenants may be selected for the wrong reasons, ie, financial compliance. This could result in selection of tenants who are less disadvantaged ...(Hanover Welfare Services, sub. 295, p. 4). It is essential that [commercial] goals [of a government business enterprise] are placed in a social justice context. The emphasis on access and equity, rather than profit by any means, should distinguish the government from private enterprise (Shelter WA, Migrant Access Project, sub. 28, p. 4). Increased use of bulk leasing could encourage institutional investors to view this area as an attractive investment opportunity - leading to the development of agencies specialising in the lease of large numbers of properties to government - and thus reducing the costs to the tenant manager. This has been the experience of the Defence Housing Authority (Combined: Department of Health, Housing, Local Government and Community Services and Department of Social Security, sub. 331, p. 56). Whilst we argue that corporatisation can offer efficiencies in the provision of public housing, we are of the view that privatisation of public rental housing is not necessarily efficient or effective and will place stress on the achievement of community welfare needs (Common Equity Housing, sub. 151, p. 2).
A.6 Administration of programs (other than public housing)
Community housing The current management of the LGACHP involves some State Local Government Associations in resourcing the program, and the State housing authorities in administering the program. In some States there is no resourcing through Local Government bodies. In both cases these processes are cumbersome and involve a high degree of misdirection and/or unnecessary duplication. This is not only confusing to funded projects, but is costly in terms of inefficient use of resources (Australian Local Government Association, sub. 102, p. 8). It is proposed by the ALGA that Local Government undertake full responsibility for developing and resourcing local government involvement in the Community Housing Program, including both the financial and legal administration (Australian Local Government Association, sub. 102, p. 10).
52 INDUSTRY COMMISSION A PARTICIPANTS’ VIEWS
The challenge for elected government is to take the risks of genuine community empowerment and spend more early in the program in order to attain more efficient management and greater consumer satisfaction in the longer term. The danger is that the pressure to cut costs or fear of transferring power to the community will result in frustrated community housing groups which lack the resources, skill and authority to manage efficiently (M Partridge, sub. 143, p. 6). Council of the Ageing (Australia) recommends that the introduction of the Community Housing Program is not used by State housing authorities as justification to restrict access by community groups to capital funding under mainstream housing programs (Council of the Ageing (Australia), sub. 168, p. 2). The Society’s Buildings Committee has developed a functional brief for purpose built Abbeyfield houses and encourages local societies and their architects to design for the particular micro climate of the area and choose building materials and equipment that require low maintenance. Unfortunately the Society has not always found support from the State housing authorities in these matters, particularly when innovative ideas are put forward that are slightly more expensive in capital cost but would be extremely cost effective in maintenance or running costs. One example was the wish of our Society in Orange, New South Wales, to install solar heating (Abbeyfield Society (Australia), sub. 154, p. 9). The community housing program has incredible potential; which extends way beyond housing provision. It can provide a focus for building community solidarity, creating employment and delivering a range of services sensitive to local conditions. To fulfil this potential will require a degree of risk taking and a high degree of commitment by government. Effective models and effective education, training and management support are essential prerequisites for success. But appropriate institutional arrangements and significant promotion of a program that is not currently understood by the broader community will also be required (M Partridge, sub. 143, p. 7). ... the community housing program can respond to specific needs in the community more effectively than the State housing authority. It is so because of the capacity of the community to make a direct contribution to the program not only in terms of asset but just as importantly in the planning and development (Central Gippsland Regional Housing Council, sub. 149, p. 3). Care should also be taken on how referrals are made to community housing agencies. Anecdotal evidence leaves a strong impression that rejected priority housing applicants are being referred to them on the basis of a high degree of likelihood that such housing will be provided. This cannot, in fact, be guaranteed. Often enough, community housing groups are grappling with precisely the same problems of waiting lists and priority assessment as the Department itself, and with a good deal less in the way of resources (Western Sydney Housing Information and Resource Network, sub. 274, p. 6). The cost of housing stock management is largely eliminated by community management. Cases of community housing projects actually costing more in the short
INDUSTRY COMMISSION 53 PUBLIC HOUSING
and long term when compared with comparable quality public housing are relatively rare. Whilst some projects have a high capital component, the level of innovation, level of quality and management and developments are consistently high. Overall community housing ventures funded solely under CSHA are very cost competitive (Derby West Kimberley Shire, sub. 70, p. 7). Many houses that have been approved as spot purchases for housing co-operatives by the Department of Planning and Development have proved expensive to maintain due to poor design, etc., and the Department has then refused to carry out repairs on the grounds that “you wanted it, you have to put up with it”. This is not a reasonable excuse, as it is the responsibility of the Department to inspect and approve dwellings on the basis that they will be paying for reasonable maintenance as per the residential tenancies act (East Gippsland Regional Housing Council, sub. 173, p. 4). While social housing and especially non-profit forms of tenure should be encouraged by all levels of Government, investment in social housing should not be at the expense of the construction of public housing (Bendigo Tenancy Information Service, sub. 161, p. 3). The Queensland Government administers two separate community housing programs. These are the CHP and the CHPP. Sadly, the reasons for these two programs not being brought together into one package have nothing to do with the interests of the users (The Local Government Association of Queensland, sub. 206, p. 3). Community Housing (or Tenancy) Schemes are not a viable solution. They are neither efficient nor effective. They cannot survive without constant series of massive subsidies and usually either collapse due to internal dissent and financial mismanagement or have to be taken over by a public housing authority (Property Owners’ Association of NSW, sub. 30, p. 2, Issues Paper on Public Housing).
SAAP/CAP For the SAAP, it is the responsibility of the Department of Community Service to provide current funding support. For the CAP, it is the responsibility of the Department of Housing to provide capital funding to secure housing provision for the SAAP. Nevertheless, no mechanism or guidelines exists to streamline the co- ordination (Ettinger House - Fairfield Family Resource Centre, sub. 86, p. 3). This Association recommends peppercorn rents be charged by the NSW Housing Department for CAP properties (Wollongong Youth Refuge Association, sub. 4, p. 5). A critical feature of the services provided by The Salvation Army is the large number of crisis accommodation services providing a first point of contact for many of those who are homeless. The increasing emphasis on the need for appropriate assessment and referral of those in crisis seeking assistance and the increasingly complex needs of people as a result of de-institutionalisation have placed far greater pressures on these services than ever before (The Salvation Army, sub. 200, p. 14).
54 INDUSTRY COMMISSION A PARTICIPANTS’ VIEWS
Hanover has been developing an alternative model of transitional supported housing, in which we lease private rental properties appropriate to meeting the needs of the client, once assessed as appropriate for transitional supported housing. As the client resolves his/her crisis and develops greater resources to live independently, the rent is increased to the full amount and finally the lease transferred to the client. There are significant advantages in the model: - client is housed in a supportive environment - client will take better care of property as ‘home’ - property is matched to individual household type - additional traumatic move is eliminated - support is more empowering (Hanover Welfare Services, sub. 163, p. 5). Hanover strongly believes that we could deliver the same quality facilities and services more efficiently — both in capital costs and on-line earlier, if we could take overall responsibility for these projects according to an agreed contract and schedule within an approved budget (Hanover Welfare Services, sub. 163, p. 6). In order to achieve best possible outcomes for those in short-term housing crisis which would result in homelessness, increased financial resources in the form of relief funds should be provided to community agencies such as Hanover for distribution. In this way, a greater number of those in crisis may be maintained in their existing tenancy (Hanover Welfare Services, sub. 163, pp. 6–7). Our recommendation is that supportive housing funding be better integrated with other housing funding, since it is not really possible to separate “welfare” from “accommodation” needs for those in special need (Uniting Church - Synod of Western Australia, sub. 32, p. 2). Clearly the provision of emergency accommodation should rest with housing services as any necessary welfare assistance may be accessed by the housing worker in conjunction with other agencies (Westernport Regional Housing Council, sub. 153, p 4). Costly time delays occur between approval of CAP funding for projects and funds for building or purchase. This results in massive costs in terms of worker time, administration hours, CPI increases and hardship for those who are or will be seeking assistance from these services. Lengthy delays which can amount to 3 or 4 years are unfortunately not uncommon in such joint funding arrangements (Burdekin Report Action Group, sub. 134, p. 2).
INDUSTRY COMMISSION 55 PUBLIC HOUSING
Aboriginal housing programs In fact we have got a situation in Bunbury at the moment where there is some surplus funding, and people in houses where the floorboards are sagging are going to get ceiling fans (Judy Jones, transcript, p. 308). It may be significant that badly maintained State housing stock is, in our experience, often used to house Aboriginal people (Sussex Street Community Law Service, sub. 34, p. 7). Older housing in all the communities is dilapidated and frequently beyond repair. Contrary to popular belief, the principal cause of this problem can be attributed to the quality of the houses built, mostly in great numbers and at the cheapest price, the climate, which is a great destroyer of all building materials in the tropics, and overcrowding. The present program is making little impact on the housing shortage in the communities, as one new house frequently replaces an older house, which is no longer fit for habitation (Queensland Department of Housing, Local Government and Planning, sub. 218, p. 24). The East Kimberley Housing Meeting started from Aboriginal people of the region requesting good housing to provide a much needed improvement in living conditions in their communities. Their situation has not changed for many years, poor government co-ordination and policy making prompted this need (Kununurra- Waringarri Aboriginal Corporation, sub. 7, p. 4). Government housing programs must include funds for housing support functions specifically in the areas of administration, repairs and maintenance, and family support services (Kununurra-Waringarri Aboriginal Corporation, sub. 7, p. 58, no. 5). ... the Government as a matter of priority [should] establish a single housing, services and infrastructure agencies to co-ordinate their provision on Aboriginal communities (Kununurra-Waringarri Aboriginal Corporation, sub. 7, p. 59). Aboriginal and Torres Strait Islander Communities are often in remote areas which are difficult to service through State Government agencies located in regional centres or service agencies in smaller towns. The decentralised nature of Queensland must be considered in any decision about servicing such areas. It would be inefficient to have a potentially small and varying number of tenancies managed by a relatively centralised structure (Queensland Department of Housing, Local Government and Planning, sub. 345, p. 25). The Territory has implemented a Pilot Program for Community Housing Management which aims to investigate barriers to community housing management and develop strategies to overcome them. The program will also make some assessment of the capacity of communities to pay cost rents and whether or not some recurrent funding is necessary if housing stocks are to be preserved (Northern Territory Department of Lands, Housing and Local Government, sub. 17, p. 5).
56 INDUSTRY COMMISSION A PARTICIPANTS’ VIEWS
The distance and remoteness have enormous implications on the cost of providing goods and services while the small size of the communities to be served provides little scope for economies of scale. These costs are reflected, not only in the cost of providing housing and infrastructure, but in the cost of goods and services purchased by local people at their communities. This again impacts upon housing and infrastructure as the high cost of goods and services impinges on residents’ capacity to pay rent sufficient to cover housing management costs (Northern Territory Department of Lands, Housing and Local Government, sub. 17, Attachment C, Aboriginal Housing Strategy, p. 9). There is every indication that most Aboriginal communities do not have the economic base from which to charge rents to meet all housing management costs (Northern Territory Department of Lands, Housing and Local Government, sub. 17, Attachment C, Aboriginal Housing Strategy, p. 16). The grant has remained at the same basic level for some years. However the purchasing/rebuilding costs in Victoria have increased dramatically and each year the Board has had to decrease the number/type of properties it can purchase/rebuild within each region (Aboriginal Housing Board of Victoria, sub. 21, p. 1). The ATSIC program is supplementary, to enable the catching up of the backlog caused by many years of neglect (Aboriginal and Torres Strait Islander Commission, sub. 116, p. 8). We recognise that in many areas of the service delivery, efficiency needs to be improved. The review of housing organisations is aimed at improving efficiency at the local level. The results of the review into Aboriginal and Torres Strait Islander housing organisations will enable ATSIC to act in an appropriate manner to improve the knowledge and efficiency of these organisation in the provision of services to the people. Cultural differences, in many cases, cause misunderstandings that require patience and goodwill from both parties before they can be resolved (Aboriginal and Torres Strait Islander Commission, sub. 116, p. 13). It is also assumed that maintenance can and should be undertaken entirely from rental incomes, despite the fact that rentals are low, most tenants would qualify for subsidised rentals if living in a town, and maintenance costs are high owing to the travel component involved for tradespeople. ... All of the attention to appropriate design has been devoted to relatively remote areas. Aboriginal people of the metropolitan and coastal areas of Australia also have culturally-related design needs. ... My research shows that the layout of the settlement, especially the distances and relationships between dwellings, is actually more important that the design details of the house itself. People suffer more stress from inappropriately placed houses, than from inappropriately designed ones. ...
INDUSTRY COMMISSION 57 PUBLIC HOUSING
I believe it would be useful for State housing authorities to employ a number of Aboriginal staff, trained for the purpose, to liaise between the specialist staff of the authority and Aboriginal communities (Dr Helen Ross, sub. 215, pp. 1–4).
58 INDUSTRY COMMISSION B OVERVIEW OF HOUSING FOR LOW- INCOME PEOPLE
B.1 Tenure characteristics
Household type and tenure This section deals with all Australian households, not just low-income people.
Figure B.1: Distribution of households by type within tenure, 1991 Per cent 100
80 Other households 60 Single person Sole parent
40 Couples with children 20 Couples without children
0 Owner Purchaser Govt renter Private All renter
Source: ABS 1991 Census of Population and Housing (Catalogue no. 2722.1).
Figure B.1 from the Australian Bureau of Statistics (ABS) 1991 Census reveals that: • Sole parents1 form 26 per cent of public housing tenants even though they comprise only 9.5 per cent of the population; • Couples with children make up 60 per cent of purchasers; • Couples without children make up 24 per cent of all households but only 12.8 per cent of public renters;
1 ‘Couples with children’ and ‘sole parents’ refer only to those with dependent children.
INDUSTRY COMMISSION 59 PUBLIC HOUSING
• Couples (with or without children) represent 72 per cent of owners and purchasers but only 65 per cent of all households; and • The owner category most closely resembles the profile of the population as a whole.
Figure B.2: Distribution of households by tenure within household type, 1991 Per cent 100
80 Private renter 60 Govt renter
Purchaser 40 Owner 20
0 Sole Couples Couples Other Single All parent without with households person children children
Source: ABS 1991 Census of Population and Housing (Catalogue no. 2722.1).
Figure B.2 also from the ABS 1991 Census reveals that: • 80 per cent of couples (both with and without children) are owners or purchasers; • Sole parents are evenly spread across tenures, ranging from 20 per cent in public housing to 32 per cent as owners; • 81 per cent of couples with children are owners or purchasers; and • Over half of ‘other households’2 are in private rental.
2 ‘Other households’ include group households, multiple family households, and households with boarders. Less than 7 per cent of all households and fall into this category.
60 INDUSTRY COMMISSION B OVERVIEW OF HOUSING FOR LOW-INCOME PEOPLE
Tenure across income quintiles
Figure B.3: Distribution of income units by tenure within income quintiles, 1990 Per cent 100
80 Renters - other
60 Renters - private Renters - govt
40 Purchasers
Owners 20
0 Lowest Second Third Fourth Highest Income quintiles
Source: ABS 1990 Income Distribution Survey, unpublished data.
The choice of tenure in Australia is significantly correlated to income: • Government renters make up nearly 6 per cent of all income units, three quarters of whom are in the lowest two income quintiles;3 • Private renters make up 19 per cent of all income units. They are quite evenly spread across the income range, with some concentration in the middle income; • Home purchasers make up 28 per cent of all income units. They are concentrated in the higher income quintiles; and • Home owners make up 41 per cent of all income units. They are concentrated in the two lowest income quintiles because many home owners tend to be older — 60 per cent of owners in the two lowest income quintiles are over 65 years old (ABS 1990 Income Distribution Survey, unpublished data).
3 In this survey, the ABS used income units as its base. Income units are singles and couples with or without dependent children (that is, children under 15 or under 19 if studying full-time). Several income units can join together to form a household. There are over 20 per cent more income units than there are households.
INDUSTRY COMMISSION 61 PUBLIC HOUSING
B.2 Location characteristics
State differences
Figure B.4: Distribution of income units in lowest two income quintiles by tenure within State, 1990 Per cent 100
80 Other renters
Private renters 60
Govt renters
40 Purchasers
Owners 20
0 NSW Vic Qld WA SA Tas ACT NT
Source: ABS 1990 Income Distribution Survey, unpublished data.
There are significant differences in the tenure profile for low-income people in each State. Queensland has a small public housing sector due in part to the sale of assets in the 1970s. The Territories have a large component of public housing. This is the result of past housing policies intended to attract people to these areas.
Capital city compared to the rest of State Differences between capital cities and the ‘rest of States’, on an Australia-wide basis provide a yardstick against which regional differences can be measured.
62 INDUSTRY COMMISSION B OVERVIEW OF HOUSING FOR LOW-INCOME PEOPLE
Figure B.5: Distribution of income units in lowest two income quintiles by tenure within States, capital cities, 1990 Per cent 100
80 Other renters 60 Private renters Govt renters 40 Purchasers 20 Owners 0 NSW Vic Qld WA SA Tas ACT All
Figure B.6: Distribution of income units in lowest two income quintiles by tenure within States, rest of State, 1990 Per cent 100
80 Other renters 60 Private renters Govt renters 40 Purchasers Owners 20
0 NSW Vic Qld WA SA Tas NT All
Note: ACT and NT do not have disagregated figures. ACT has been included in capital cities and NT in rest of State. Source: ABS 1990 Income Distribution Survey, unpublished data.
Figures B.5 and B.6 show, for those in the lowest two income quintiles, that: • Owners make up 49 per cent of income units in the capital cities and 53 per cent in the rest of States; • Purchasers are about 11.5 per cent of income units in both capital cities and rest of States; • Private renters make up 21 per cent of income units in capital cities and 18 per cent of rest of States; and • Government renters make up 12 per cent of income units in capital cities and 9 per cent in rest of States. Incomes tend to be higher in the capital cities. For instance, the highest quintile makes up 22 per cent of all income units in capital cities and the lowest two quintiles make up 38 per cent. The equivalent figures for the rest of State are 15.5 per cent and 44 per cent, respectively.
INDUSTRY COMMISSION 63 PUBLIC HOUSING
B.3 Department of Social Security clients
DSS clients in public housing • There were 244 800 families in receipt of government pensions, benefits or Family Allowance Supplement (FAS) in public housing at the end of 1992.4 This means just over 70 per cent of public housing households receive Department of Social Security (DSS) payments; • 32 per cent of pensioners were in public housing compared with only 12 per cent of beneficiaries; • Approximately 62 per cent of public housing tenants are pensioners; and • Approximately 134 000 family units in public housing were not pensioners. Of these ‘non-pensioners’ over 20 per cent became unemployed or began to experience financial difficulties during 1992.5 A further 11.5 per cent were long-term unemployed. Another 12.5 per cent had incomes sufficiently low to qualify for FAS.
Rent Assistance • Renters other than government renters remain the most likely group to be paying over 30 per cent of income on housing. There are over 1.5 million income units renting outside the public housing sector (ABS 1990 Income Distribution Survey, unpublished data) of which over 460 000 pay more than 30 per cent of their income on rent. Of these, 445 000 are in the lowest three income quintiles. As of June 1992 there were about 900 000 DSS pensioners, allowees and FAS recipients and Department of Veterans’ Affairs (DVA) pension recipients receiving rent assistance (sub. 214 and sub. 100). • The proportion of income paid in net rent6 by DSS recipients of allowances and FAS declines the longer they have been receiving payments. The inverse is true of recipients of government pensions. This
4 DSS clients are divided here into beneficiaries and pensioners. Pensioners include the aged, people with disability, wife (usually as a carer), sole parents and widow (class B). Benefits are paid for sickness, unemployment, FAS and Special Benefit (mainly used to assist those in need not eligible for other benefits). There were a further 10 300 recipients of Department of Veterans’ Affairs (DVA) pensions in public housing in July 1993. Data provided by DVA. 5 Significant financial difficulties here means being in receipt of the Special Benefit. This benefit accounted for approximately 7 per cent of beneficiaries in November 1992. 6 ‘Net rent’ refers to proportion of income paid in rent net of rent assistance.
64 INDUSTRY COMMISSION B OVERVIEW OF HOUSING FOR LOW-INCOME PEOPLE
pattern may help explain the greater representation of pensioners in public housing. • The State where the highest proportion of pensioners in private rental pay more than 30 per cent of their income in net rent is NSW with 49 per cent, the lowest is Tasmania with 42 per cent. However, 9 per cent of Victorian pensioners pay over 50 per cent of their income on housing compared to 3 per cent in Tasmania.7 • In NSW, 60 per cent of allowees pay more than 30 per cent of their income in net rent, compared to 42 per cent in Tasmania. Those paying over 50 per cent of their income represent 14 per cent of allowees in NSW and 7 per cent in Tasmania. • FAS recipients are less likely to be paying over 30 per cent of their income in net rent, ranging from 36 per cent in NSW to 13 per cent in Tasmania. Furthermore, the number of FAS recipients is much less (54 700 for FAS compared to 778 800 for the other two categories combined). Unlike allowees and pensioners, the proportion of FAS recipients paying over 30 per cent of income on housing actually declined between January and June 1992 (although the numbers receiving FAS increased during this time).
7 Information provided by DSS for the financial year ending June 1992.
INDUSTRY COMMISSION 65 PUBLIC HOUSING
Figure B.7: Proportion of pensioners, allowees and FAS recipients in private rental spending more than 30 per cent of income on rent, before and after rent assistance, by family type, June 1992 Per cent 90
80
70
60
50
40
30
20
10
0 Single Sole Couple Couple FAS parent without with recipients children children
Pensioners before RA Allowees with RA
Pensioners with RA FAS before RA
Allowees before RA FAS with RA
Source: DSS data provided to the Commission.
Within private rental alone (this excludes boarders, lodgers and ‘other tenancies’), it can be seen from Figure B.7 that: • Before rent assistance, nearly 90 per cent of single allowees spent over 30 per cent of their income on rent; • After receiving rent assistance, the proportion of families with children paying over 30 per cent of income on rent declines more than for those families without children; and • Over half of single allowees spent over 50 per cent of their income on rent. Rent assistance brings this figure down to 17 per cent.
66 INDUSTRY COMMISSION B OVERVIEW OF HOUSING FOR LOW-INCOME PEOPLE
B.4 Public housing applicants and recipients
Figure B.8: Distribution of additions to waiting list and new public tenants by family type within State, 1991–92 Per cent Added to waiting lists Per cent New tenants 100 100
80 80
60 60
40 40
20 20
0 0 NSW Vic WA SA Tas ACT NSW Vic Qld WA SA Tas ACT
Unspecified Couple with children
Single Couple only
Sole parent
Notes: ‘Unspecified’ includes ‘Other’. Northern Territory data not available. Queensland data not available for waiting list. Source: Department of Health, Housing, Local Government and Community Services, preliminary data.
The demographic profile of new public housing tenants and those added to the waiting list differ from one another as is shown in Figure B.8: • South Australia stands out as being quite different from the other States. ‘Singles’ and ‘couples without children’ form much higher proportions of both new tenants and those added to the waiting list than is the case in other States; • Couples with children are only 7 per cent of the lowest income quintile (ABS 1990 Income Distribution Survey, unpublished data). However they
INDUSTRY COMMISSION 67 PUBLIC HOUSING
made up 25 per cent of those accommodated in public housing in 1990– 91; • Sole parents are nearly 10 per cent of low-income earners (ABS 1990 Income Distribution Survey, unpublished data), but represent 37 per cent of those accommodated in 1990–91; and • This leaves singles and couples without children in public housing, who represent 83 per cent of low-income earners (ABS 1990 Income Distribution Survey, unpublished data) being allocated only 39 per cent of new tenancies in 1990–91. The distribution of incomes of people on public housing waiting lists by length of time on the list is shown in Figure B.9. Over 60 per cent of people on waiting lists have incomes less than $300 per week.
Figure B.9: Distribution of income units by income within time spent on waiting list, 1988 Per cent 100
80 $600+ $500-$599 60 $400-$499 $300-$399 40 $200-$299 $100-$199 <$100 20
0 <1 year 1-2 years 2-5 years >5 years
Time on waiting list
Source: ABS 1988 Housing Costs and Occupancy Survey (Catalogue no. 4130.0).
68 INDUSTRY COMMISSION B OVERVIEW OF HOUSING FOR LOW-INCOME PEOPLE
B.5 High-income public housing tenants Of the 341 4008 income units in public housing, 86 200 are in the highest three income quintiles. Of these 38 400 are in the highest two quintiles. • There are 34 500 income units in the top two income quintiles paying less than 20 per cent of their income on rent — 1800 are professionals or self- employed, 1100 are on government pensions and benefits,9 the remaining 31 600 are wage and salary earners. • 10 per cent of people in government housing are in the top two income quintiles and are paying less than 20 per cent of their income on rent. • Over 26 per cent of all public housing tenants are paying less than 25 per cent of their income on rent and are in the top three income quintiles. These people are mostly paying the maximum rent. Until rents are set at real market rates, many will be in receipt of a government subsidy.
Table B.1: Number of public housing tenants by income source and income quintile, 1990
3rd quintile 4th quintile 5th quintile Total
Government pensions and benefits 6 000 1 400 0 7 400 Self-employed 1 800 1 300 500 3 600 Wages and salary 38 900 23 600 11 600 74 100 Other private incomea 1 100 0 0 1 100 Total 47 800 26 300 12 100 86 200 a Including superannuation. Source: ABS 1990 Income Distribution Survey, unpublished data.
B.6 Demand responses The demand for housing services changes with the circumstances of owner- occupiers and renters, and with the cost of housing. There are two principle measures of these effects:
8 Government renters by income source are 17 200 less than total government renters. The difference consists mostly of people who have undeclared or unknown income source. Government renters should not include those in government employee housing. 9 This figure is unexpected and the Commission was unable to obtain further details on these income units.
INDUSTRY COMMISSION 69 PUBLIC HOUSING
• The income elasticity of demand for housing services. That is, the percentage by which the demand for housing services increases (typically) in response to a 1 per cent increase in income (other factors remaining the same); and • The price elasticity of demand for housing services. That is, the percentage by which the demand for housing services decreases (typically) in response to a 1 per cent increase in price (other factors remaining the same). In the case of housing services, researchers have found these measures of response difficult to estimate. A comprehensive survey guide to some of the problems encountered may be found in Olsen (1987). Estimates may be different for reasons other than methodology: 1. Different households have different tastes and hence different demand functions. So even if all households had a demand function of the same form, different samples from the same population would yield different estimates. 2. There is no reason to believe that the population mean values of parameters are the same in different times and places. Therefore, even highly accurate estimates of these population means could be quite different for different populations. 3. It is undoubtably the case that a household’s price and income elasticities are functions of prices and income. When demand functions that are not linear in the logarithms of the variables are estimated they are typically calculated at the sample mean of the explanatory variables. So even if the estimated demand functions were identical, the reported elasticities could be quite different (Olsen 1987, p. 990). Two methodologies are generally used to estimate the long-run demand elasticities for housing services. They are the complete demand system approach and an approach that examines the demand for housing in isolation from other demands (the single equation approach). The complete demand system approach attempts to model consumers’ demand for housing services within the framework of their demands for other broad categories of consumption goods. Recent estimates for Australia, by Rimmer and Powell (1992), using this approach are given in Table B.2. These results appear consistent with previous complete demand system estimates for Australia (see Adams et al. 1988, Bewley 1982, and Podder 1971) and within the range of estimates for other countries (see Giles and Hampton 1986, and Ogaki 1992). Estimates obtained by modelling housing demand without regard for other demands have yielded more varied but usually lower estimates of long-run or permanent income elasticities. However, this approach has been subject to criticism:10
10 Still, they have often attempted to differentiate between the demands of owner-occupiers and renters.
70 INDUSTRY COMMISSION B OVERVIEW OF HOUSING FOR LOW-INCOME PEOPLE
Filtering theories and simulation models stress the interrelationships between demand and alternative forms of supply in the housing market. Yet surprisingly few empirical studies have recognised this connection and specified their econometric models appropriately. Conventional, single-equation models are faced with a dilemma. If on the one hand they include prices, vacancies and various supply adjustments as regressors, the coefficients of these variables will be either subject to simultaneous- equations bias or, at best, difficult to interpret in a reduced-form context. If on the other hand, they exclude such variables, their model is subject to specification error from omitted-variables bias (Rothenberg et al. 1991, p. 38, italics in the original). Conclusions from surveys of single equation results (using American data) and sources are also presented in Table B.2. The dynamics of demand responses remain poorly researched. Available evidence is that adjustment may be a lengthy process. Mayo (1981, p. 112) suggests that changes in consumption patterns may only be 90 per cent complete after eight to ten years. Even though, ‘broad’ elasticity estimates of demand for ‘general’ housing services are worthy of attention, of more interest to this inquiry are separate estimates for the demands for differing qualities of housing services. Rothenberg et al. (1991) model housing sub-markets from low- to high-quality with American data and suggest that: The relevant elasticities also vary across submarkets. The responsiveness of demand with respect to own-submarket price becomes increasingly inelastic at lower quality levels until, at the lowest rental submarkets, housing behaves like a Giffen good.11 The elasticity of demand with respect to market valuation in substitute submarkets of higher quality is the greatest in the lowest-quality submarket, is insignificant in other renter submarkets, and is large across the entire array in the ownership tenure, (Rothenberg et al. 1991, p. 515). They found that housing quality is important and is valued by those on low- incomes. Lowest-quality housing is a very inferior good that households strive to move out of as their income increases. Rimmer and Powell’s broad estimates of an income elasticity for housing services of 0.9 and price elasticity of -0.8 confirm what most recognise through casual empiricism. At all levels of income, and especially where housing costs are high, housing remains a sizeable component of consumer expenditure. Consequently, when the economy improves and average incomes rise the aggregate demand for housing will increase significantly — as it has in the past. Prices will rise quickly in the short-run in response to excess demand and housing units will probably be lost from the rental market to owner occupiers.
11 A Giffen good is an inferior good that comprises a significant portion of a consumer’s expenditure. An inferior good is one that consumers purchase less of as their income increases.
INDUSTRY COMMISSION 71 PUBLIC HOUSING
As a result, those on low incomes will suffer increased housing stress. As well as facing increasing rent levels they will face increased discrimination. Discrimination will increase in a situation of excess demand in rental markets.
Table B.2: Elasticity estimates for housing services
Source and approach Income elasticity estimate Price elasticity estimate
Complete demand system (Australia)
Rimmer and Powell (1992) 0.9 -0.8
Single equation: owner-occupiers (USA)
Wheaton (1993) 0.7 to 0.8 Mayo (1981) 0.5 to 0.7 Polinsky and Elwood (1979) >0.8 -0.7 de Leeuw (1971) 1.0
Single equation: renters (USA)
Mayo (1981) 0.3 to 0.5 de Leeuw (1971) 0.8 to 1.0 -0.7 to -1.5
Source: Industry Commission.
72 INDUSTRY COMMISSION B OVERVIEW OF HOUSING FOR LOW-INCOME PEOPLE
References Adams, P. D., Chung, C-F. and Powell, A. A. (1988), Australian Estimates Of Working’s Model under Additive Preferences: Revised Estimates of a Consumer Demand System for use by CGE Modellers and other Applied Economists, Impact Project Working Paper No. O-61, Industries Assistance Commission, Melbourne, August Australian Bureau of Statistics 1992, Census of Population and Housing: Basic Community Profile, Catalogue No. 2722.1, Australia. — — 1990, Income Distribution Survey, Unpublished data. — — 1990a, 1988-89 Household Expenditure Survey: Household Characteristics, Catalogue No. 6531.0, Australia. — — 1990b, 1988-89 Household Expenditure Survey: States and Territories, Catalogue No. 6533.0, Australia. — — 1988, Housing Survey: Housing Costs and Occupancy, Catalogue No. 4130.0, Australia. Bewley, R. A., (1982), ‘On the Functional Form of Engel Curves: The Australian Household Expenditure Survey 1975-76’, Economic Record, 58, pp 82-91. de Leeuw, F., (1971) The demand for housing — a review of the cross-section evidence, Review of Economics and Statistics, Vol. 53, No. 1, pp 1-10. Giles, D. E. A., and Hampton, P., (1986), ‘An Engel Curve Analysis of Household Expenditure in New Zealand, Economic Record, Housing Assistance Act 1989: Annual Report 1990-91, 1992, Department of Health, Housing and Community Services, Canberra. Mayo, S. K., (1981), Theory and Estimation in the Economics of Housing Demand, Journal of Urban Economics, 10, pp 95-116. National Housing Strategy (The), 1991a, Australian Housing : The Demographic, Economic and Social Environment, Issues paper 1 Department of Health Housing and Community Services, Canberra. National Housing Strategy 1991b, The Affordability of Australian Housing, Issues paper 2 Department of Health Housing and Community Services, Canberra.
INDUSTRY COMMISSION 73 PUBLIC HOUSING
National Housing Strategy (the) and Australian Bureau of Statistics 1992, Housing characteristics and Decisions: A Comparative Study of Sydney, Melbourne, Adelaide and Canberra 1991, Department of Health Housing and Community Services, Canberra. Ogaki, M., (1992), Engel’s Law and Cointergration, Journal of Political Economy, Vol. 100, No. 51, pp 1027-1046. Olsen, E. O., (1987), The Demand and Supply of Housing Services: A Critical Survey of the Empirical Literature, in Mills (ed.) 1987 Podder, N. (1971), Patterns of Household Consumption Expenditures in Australia, Economic Record, 47, pp 379-98. Polinsky, A. M., and Elwood, D. M. (1979), An empirical reconciliation of micro and grouped estimates of the demand for housing, Review of Economics and Statistics, 61, pp 199-205. Rimmer, M. T. and Powell, A. A. (1992), An Implicitly Directly Additive Demand System: Estimates for Australia, Impact Project Preliminary Working Paper No. OP-73, Monash University, Clayton, Vic., Australia of Melbourne, August Rothenberg, J., Galster, G. C., Butler, R. V., and Pitkin, J., (1991), The Maze of Urban Housing Markets: Theory, Evidence, and Policy, The University of Chicago Press, Chicago. Wheaton, W. C., (1993), ‘Land Capitalization, Tiebout Mobility, and the Role of Zoning Regulations’, Journal of Urban Economics, Vol. 34, pp 102- 117.
74 INDUSTRY COMMISSION C RENTAL MARKET
Governments intervene in the private rental market because of perceived problems, particularly in the low-cost sector.1 These include: • An inadequate supply of affordable private rental housing for those with low incomes; • A lack of appropriate accommodation, including housing to meet the needs of groups such as the disabled and elderly; • The limited security of tenure within the private rental market; and • Discrimination by landlords against some prospective tenants. It is necessary to understand the market for low-cost rental accommodation before assessing how best to address these perceived problems.
C.1 Nature of the good ‘Rental housing services’ have a number of features that make analysis difficult. These include: • The high cost of supply: This affects those who consume and those who may supply the service, that is, tenants and both existing and prospective landlords. Rent payments can account for a significant share of income, especially for low-income tenants. • Durability: Housing is not costlessly modified and the service flow remains for a long period. This suggests that the preferences of the community and of later users require explicit consideration. This may be part of the justification for governments’ building restrictions and their efforts at co-ordinated planning. • Heterogeneity: Houses differ in their characteristics, construction and quality, and in the services that they offer (for example, the number of bedrooms). The cost of acquiring knowledge makes the market less competitive because of the difficulties when comparing price, quality and quantity.
1 Low-cost housing is defined as housing which, because of its rent level, is usually occupied by households on low incomes. Low-income households would include most social security beneficiaries.
INDUSTRY COMMISSION 73 PUBLIC HOUSING
• Locational fixity: Benefits flow from a house’s location. In large part the value of a location depends on the actions of others (for example, local government, employers and shop owners). When the actions of others cannot be anticipated, the ‘property bundle’ (house and land) is subject to windfall gains and losses, and a premium is necessary to cover uncertainty and anticipated risk. As the actions of others are so important, a degree of co-ordination, often facilitated by government, may improve efficiency. • Housing quality: The housing market is a series of quality sub-markets ranging from ‘high’ to ‘low’ quality. The quality of housing is a function of design, construction standards and the subsequent level of maintenance.2, 3 Housing can be added to (removed from) any sub-market through new construction (demolition) or conversion from (to) other uses.4 Houses can also shift between quality sub-markets through up-grading activity and changes in the level of maintenance. • Substitutability: Individual houses can be owner-occupied or rented. However, low-cost rental accommodation is often housing that is no longer suitable for other uses or has been converted from other uses.5 In some cases it has been purpose built, for example, boarding houses. Such accommodation is unlikely to return to the low-cost rental market once sold into owner-occupation or redeveloped.
2 Separate quality sub-markets can be proxied by price ranges, although access to amenities and location are also important in determining price. Within sub-markets individual units of housing are close substitutes. 3 While the quality of new housing can often be observed (proxied by per unit new construction cost), the effect of many individual maintenance decisions on housing quality is more difficult to measure. 4 Baer (1986) states that the ‘shadow market’ (defined as the reconstruction of the housing stock and transformation from other uses) was the source of half of all low-cost rental and one-third of low-cost owner-occupied housing in the United States from 1973 to 1980. 5 Properties initially occupied by middle- to high-income households are let to low-income households as they become older or are poorly maintained (‘filtering’ or ‘trickle down’). Baer (1986) found that filtering of housing from high- and middle-income households to low-cost households was a major source of low-cost housing in the United States.
74 INDUSTRY COMMISSION C RENTAL MARKET
Appropriateness and affordability Many inquiry participants complained that the private rental market does not provide the ‘appropriate’ level of diversity, design or access to amenities and services (see Appendix A). People wishing to rent may have to make trade-offs between housing type, location, quality and cost. Newer, more spacious houses may only be affordable in urban fringe areas. The older, often more affordable, stock in inner city areas may have easy access to transport and other amenities. However, it is often run- down and in need of major repairs. Much of the housing provided for low-income renters by the private sector was not built for this purpose. Often the owner is holding a property in order to make capital gains on the land. Capital gains can occur through redevelopment (for example, for offices) or ‘gentrification’ (where middle- or upper-income people buy old, run-down houses for renovation). Econsult notes that: Prospects for capital gain are greatest in accessible locations where land values are high and houses are run-down, but they have potential for refurbishment (upon sale to an owner-occupier) or redevelopment (Econsult 1991, p. 24). The inappropriateness of much of the affordable private rental stock creates a predicament for government seeking to ensure private rental housing is both affordable and appropriate. The Local Government Association of Queensland Inc. said that: In many areas private rental housing is generally of a low standard. There are reports from some areas that Councils are reluctant to order the removal of substandard housing in fear of exacerbating the shortage of housing (sub. 206, p. 7). People with disabilities have particular difficulty finding private rental accommodation. The Queensland Disability Housing Coalition said that the cost of modifying a normal house for a disabled person is $20 000 to $30 000 (sub. 121, p. 4). There is little prospect of the private rental market providing such housing. Some anti-discrimination legislation does not proscribe discrimination against people with disabilities in such situations (see C.5). The lack of appropriate housing is not limited to private rental. Public rental properties are not always of a standard deemed ‘appropriate’. The Victorian Department of Planning and Housing estimates that the one-third of Victoria’s public housing over 30 years old has design problems and is in poor physical condition (sub. 159, appendix 7).
Rooming and boarding houses With de-institutionalisation private boarding houses have become a major form of housing for people with psychiatric disabilities. The Report of the National
INDUSTRY COMMISSION 75 PUBLIC HOUSING
Inquiry into the Human Rights of People with Mental Illness (HREOC 1993) reported that: An expert witness giving evidence to the NSW hearings estimated that of 1,300 people in boarding houses in central Sydney, 70–80 per cent are seriously mentally ill (the majority with schizophrenia) (p. 387). The report also found that many boarding houses were sub-standard and ‘a national disgrace’: ... the physical conditions in many boarding houses are depersonalising, depressing and completely unconducive to any dignified life. Many boarding houses have no living space appropriate for any form of leisure activity. Security is poor ... Many rooms are dark, cramped, crowded, dirty, unsafe and poorly maintained (p. 388). Evidence of widespread human rights abuses and exploitation of boarding house residents include the denial of the resident’s choice of doctor and access to crisis services, sexual abuse and the ‘selling’ of residents by boarding house managers to other operators. Many residents become fully dependent on the boarding house manager: ... managers often convince [residents] to hand over control of their bank accounts. ... This ensures the rent is always paid, but forces the residents to ask the manager for money whenever they want to buy anything ... (p. 396). Boarding houses are no longer affordable accommodation for those receiving only pensions and benefits. People living in boarding houses generally pay 85 to 90 per cent of their pensions (including rent assistance) for room and board. Residents have no security of tenure and no right to exclude the landlord from the rooms they rent. This can occur because State landlord and tenant legislation does not apply to boarders or lodgers (see C.5).6 In most States, boarding houses are required to be licensed if their clients include people with disabilities. Existing regulations impose minimal standards concerned with physical criteria (such as room size, door size and windows) rather than ‘quality of life’. Where they extend beyond physical standards, as in New South Wales, they are routinely breached or ignored (HREOC 1993). Despite poor conditions and widespread abuses, there is continued demand for such relatively ‘affordable’, low-cost accommodation. For some people boarding houses have advantages, including few responsibilities and few questions being asked. However, the only alternative for many is homelessness. In this context some participants expressed concern that the amount of boarding house accommodation had declined, particularly in inner city areas (The National Youth Coalition for Housing, sub. 131). The Rooming House Tenants
6 Victoria has specific legislation (the Rooming Houses Act 1990, Victoria).
76 INDUSTRY COMMISSION C RENTAL MARKET
Association said that retaining an adequate number of boarding houses in boom- times was a problem, with many rooming houses ‘ear-marked for redevelopment for businesses of higher yield and requiring less day to day personal investment to manage’ (sub. 201, p. 8). The City of Collingwood suggested that: ... the State Government should introduce legislation requiring owners of boarding and rooming houses to obtain approval from Local Government before being able to change the nature of accommodation they offer, (e.g., change of use from boarding house to back packer hostel) and should require planning permission with specific reference to social impact considerations (sub. 197, p. 8). However, greater regulation of boarding houses will not encourage investment in new boarding houses and is likely to deter current operators. Without the provision of appropriate alternatives this will increase homelessness.
Caravan parks and transportable homes Caravan parks and mobile homes are two non-traditional forms of permanent rental accommodation that have increased substantially in recent years.7 The Caravan Park Resident Network (Victoria) said that a Victorian survey had found 16 000 caravan park residencies in 1992 (sub. 182). The growth in these alternatives is in large part due to the lack of affordable ‘traditional’ housing. According to the Western Sydney Housing Information and Resource Network, a growing group of low-income people rent on-site vans for long periods of time. They said such tenants could not afford to rent in the traditional private rental market due to high up-front costs (for example, bond and rent in advance) of about $2000. Many participants criticised caravans and mobile homes as inappropriate forms of housing. The National Youth Coalition for Housing said: [Caravans and mobile homes are] often thought to be an affordable housing option for young people. However, the costs may often be only marginally less, and are sometimes more than in other forms of private rental. Residents of caravan parks have little security of tenure and few tenancy rights, and conditions are often far from adequate. Discrimination and other negative aspects of private rental can be more pronounced (sub. 131, p. 27). However, the Caravan and Mobile Home Residents Association said that many Queensland residents, particularly elderly people, appreciate the lifestyle and community offered by ‘mobile home parks’ (sub. 219). A particular problem identified was the lack of legislative protection for tenants of boarding houses and caravan parks. In many States the general residential
7 Owners of mobile homes typically purchase their home and rent a site in a caravan park.
INDUSTRY COMMISSION 77 PUBLIC HOUSING
tenancy legislation specifically excludes boarders and lodgers, and does not apply to caravan parks or mobile homes (exceptions to the latter are New South Wales and the Northern Territory). However, Victoria has specific legislation for caravans and mobile homes and Queensland has specific legislation applying to mobile homes (see C.5, Table C.2).8
Formal and informal landlords Informal tenancies typically occur when an owner lets a room or sub-lets a house without signing a lease or lodging a bond. Although the number of formal tenancies can be gauged in some States from sources such as rental bond authorities (for example, New South Wales and the Australian Capital Territory), this is not the case with informal tenancies. Informal tenancies comprise a small but significant 10 to 15 per cent of all rental tenancies (Brian Elton & Associates 1991, pp. 51–2).
Access to private rental accommodation The private rental market serves the needs of a majority of people in private rental tenure reasonably well. Between 70 and 75 per cent of all private renters are not in housing stress.9, 10 However most participants submitted that those on low incomes and people with special housing needs, such as those with disabilities and some Aboriginal people, are not well served (see Appendix A). As noted previously, rental accommodation that is accessible to low-income people is often considered inappropriate in that it may be run-down or in a location isolated from employment opportunities, shops and other community infrastructure. Alternative forms of relatively affordable private rental accommodation, such as caravan parks and boarding houses, may be inappropriate for some as a long-term tenure (for example, see HREOC 1993). A large number of participants cited discrimination as a significant problem of private rental (see Appendix A). Youth, those with psychiatric illnesses, migrants from non-English speaking backgrounds, Department of Social Security clients and Aboriginal, Torres Strait and South Sea Islander people
8 Other States are considering enacting legislation for caravans and mobile homes. 9 Estimates derived from the ABS 1990 Income Distribution Survey (unpublished tables) indicate that 26.1 per cent of low-income private renters (defined as those in the bottom 4 income deciles) were paying 30 per cent or more of income on rent. The proportion of private renters in the lowest 6 deciles paying 30 per cent or more of income was 31.4 per cent. 10 The Victorian Department of Planning and Housing’s (1992, p. 3) estimate is 70 per cent. The 75 per cent is based on an estimate of the need for ‘social housing’ by Bisset et al. (forthcoming).
78 INDUSTRY COMMISSION C RENTAL MARKET
were all mentioned as being subject to discrimination. Discrimination further restricts their limited choice (see C.5). It was claimed to be a major problem for low-income people with special housing needs (Queensland Disabilitiy Housing Coalition, sub. 121). Security of private rental tenure is also regarded as a problem. Although tenants cannot normally be evicted within the fixed period of the lease, once the fixed term has expired a tenancy can generally be terminated with a month’s notice. The tenants’ desire for secure accommodation is often at odds with a landlords’ desire for a good return and an easily relettable or resaleable dwelling. In economic terms, rental markets are far from perfect. Leases cannot cover all eventualities and incentives often exist to withhold information from the other party. Tenants generally, and low-income tenants in particular, lack power in the bargaining process. The cost of monitoring and ensuring compliance also creates perverse incentives (for example, landlords making false claims against bonds and tenants departing with rent owing). People on low incomes are also at a disadvantage when it comes to paying rent-in-advance and bond monies, as well as moving costs and utility connection fees. Although all tenants face these problems, low-income and special needs groups are at greater risk as they are less able to afford the costs of moving or enforcing their rights.
Supply responses in the private rental market The market for rental housing that is affordable to low-income people is a residual one and supply responses are therefore restricted (see C.4, Box C.1). Characteristics of supply peculiar to the low-cost end of the market include: • A majority of landlords are small investors with 1 or 2 properties. Often, they invest for security and capital gains, or they intend to rent only for a limited period of time (see C.4). • Much of the housing has ‘trickled down’ from other uses. These suggest that the supply response to increased rents will be small. The limited empirical evidence available supports this (see C.7).
C.2 Rental stocks
Changes in the private rental stock Private rental accommodation accounted for about 40 per cent of all occupied dwellings in 1947. This proportion rapidly declined in the 1950s and 1960s,
INDUSTRY COMMISSION 79 PUBLIC HOUSING
before stabilising at about 20 per cent in the 1980s (see Figure C.1). In the 1991 Census the proportion of households renting privately was about 21 per cent (see Table C.1). The decline in the private rental market to about 20 per cent of all dwellings has coincided with a gradual rise in the level of home purchase and ownership, while the public housing stock has increased to about 6 per cent of the total housing stock.
Figure C.1: Occupied private dwellings by nature of occupancy, 1911 to 1991 Per cent 100 90 80
70 Other
60 a Other rental 50 Public renter b 40 30 Owner or purchaser 20 10 0 1911 21 33 47 54 61 66 71 76 81 86 91 Year a Other renter includes private renters. b From 1976 to 1991 the public renter category refers only to housing authorities. The ‘other government renter’ category has been included in ‘other’ for these years. Notes: Data for 1911 to 1976 refers to dwelling structures, 1981 to households, while 1986 and 1991 refer to occupied private dwellings. Because data for the 1991 is classified similarly to previous years it is not consistent with Table C.1. See notes to Table C.1. Sources: Troy (1991, pp. 10, 60); ABS (1993a).
The long-term decline in the relative size of the private rental market obscures differences between rental sub-markets. Individual city, country and local markets have performed quite differently (see Brian Elton and Associates 1991). Variations in the relative size of private rental markets (see Table C.1) can be partly attributed to public housing and home ownership policies of each State.
80 INDUSTRY COMMISSION C RENTAL MARKET
Table C.1: Nature of occupancy by State, 1991 (per cent)
Occupancy NSW Vic Qld WA SA Tas ACT NT Australia
Owned or purchasing 71.0 75.4 69.4 70.5 71.0 73.3 65.7 42.5 71.6 Private rental 21.4 19.3 25.0 21.2 15.7 16.7 20.5 29.9 20.9 Housing authority 6.3 4.3 4.0 6.5 12.0 8.7 12.5 20.0 6.2 Other government 1.3 1.0 1.5 1.8 1.3 1.4 1.3 7.6 1.4
All groups 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Notes: The ‘other’, ‘not stated’ and inadequately described category have been excluded. The sub-category ‘rental not stated’ has been allocated proportionally between rental categories. Columns may not sum due to rounding errors. Derived from ABS (1993a). Source: Industry Commission.
Stock type and location In 1991 about 80 per cent of Australian households lived in detached housing. The proportion of private renters living in non-detached housing is 45 per cent and 9 per cent for owners and buyers (ABS 1993a). This reflects the preference of Australians for detached dwellings, and the affordability of certain types of higher density housing. Private rental accommodation is distributed unevenly within cities (see Figure C.2). For example, in Sydney and Melbourne, the inner or core areas of these cities have a high proportion of private renters. The proportion of private rental accommodation declines as the distance from the city centre increases.
INDUSTRY COMMISSION 81 PUBLIC HOUSING
Figure C.2: Tenure distribution in Sydney and Melbourne, 1991
Per cent 100
80 Other 60 Public renter 40 Private renter 20
0 Owner or purchaser Total Inner or Middle Outer Fringe core
Zone Note: Data is combined for Sydney and Melbourne. Source: Burgess and Skeltys (1992, p. 81).
C.3 Government interventions Government intervention affecting the supply of private rental accommodation includes tax-based provisions (such as negative gearing and depreciation rates), taxation (such as stamp duties and land taxes), non-taxation of imputed rent, capital gains tax exemptions, and direct subsidies to providers of low-cost rental housing.
Taxation of income from housing Notional tax concessions to home owners include the non-taxation of ‘imputed rent’ and the tax exemption of capital gains on the family home. Owner- occupied housing generates returns in the form of capital gains and ‘imputed rents’. Imputed rent is the value of the housing services consumed by the owner-occupier. While the exemption of the principle residence from the capital gains tax is a readily identifiable concession, imputed rent is typically not seen as a tax concession (similar to the tax treatment of cars and whitegoods, but of much greater significance). The major effect of these incentives has been to increase the demand for owner- occupied housing and the price of housing generally.
82 INDUSTRY COMMISSION C RENTAL MARKET
Capital gains tax exemption The capital gains tax has been applied to assets acquired since 20 September 1985, including rental property. However the sole or principle residence is exempt, subject to some restrictions.11 Flood (1993) estimated that a tax on real capital gains to owner-occupiers would have raised $409 million in 1990–91. Many participants submitted that the exemption of owner-occupier housing from capital gains tax is a major distortion in the housing market, giving this form of tenure an advantage not enjoyed by private rental tenants (Victorian Council of Social Service, sub. 169). Some participants advocated an increase in subsidies to other tenure forms to achieve equity between tenures. The exemption of owner-occupied housing from capital gains tax affects the relative shares of rental and owner-occupier stock. Empirical analysis of the possible effects of the tax on owner-occupied housing in the United States suggests that the proportion of households in private rental could increase 4 to 6 per cent.12
Non-taxation of imputed rents Taxation of imputed rent was introduced by the Commonwealth in 1915. Under the scheme, 5 per cent of the capital-improved value of the taxpayer’s residence was included as taxable income. The tax was removed in 1923 to encourage home ownership. Imputed rents remain untaxed. The non-taxation of imputed rent increases the value of property because the expected savings are capitalised to some degree. This raises the return required by investors in rental property, and hence rents. Raising the general level of rents has implications for the low-cost end of the market. It increases the demand for low quality stock and reduces the demand for newer, high quality housing. This discourages new rental housing, which in the long-run reduces the supply of low-cost, ‘trickle down’ stock. Higher rent levels also raise the minimum rent required by landlords for the lowest quality housing, encouraging renewal or redevelopment of what is now low-cost, low quality rental housing.
11 Capital gains tax applies to real capital gains on a realised rather than accrual basis with some roll-over provisions. Assessed capital gains are added to an investor’s taxable income. 12 Empirical estimates by Rosen and Rosen (1980) indicate the proportion of private renters could increase by 4 per cent. Hendershott and Shilling (1982) estimate that the proportion of private renters could increase by 5 per cent with an assumed marginal tax rate of 15 per cent (6.6 per cent with a marginal tax rate of 30 per cent) (both quoted in Rosen 1985, p. 399).
INDUSTRY COMMISSION 83 PUBLIC HOUSING
Re-introduction of the tax could increase the supply of rental housing services. More intensive use would probably be made of owner-occupied housing (for example, an increase in informal tenancies). Troy (1991) doubts whether there would be a major impact on the availability of low-cost rental accommodation: Introduction of taxation of imputed rents would certainly reduce the relative attraction of owner occupation but it is not clear that it would necessarily improve the lot of renters, especially low income earners (it would more likely dramatically increase the numbers of aged persons living in poverty) (p. 49). However, Rosen and Rosen (1980) estimate that taxing imputed rents could result in a long-run shift from owner-occupation to renting of about 4 per cent in the United States (quoted in Rosen 1985). The taxation of imputed rent would be difficult to re-introduce because the discounted stream of benefits from the imputed rent exemption is partly or fully capitalised into house prices. Therefore, the tax would need to be phased in. A particular problem is the effect on asset-rich, income-poor households such as pensioners. Any narrowing of the tax base through concessions to ‘special groups’ (for example, local rate concessions to pensioners) would undermine the benefits of taxing imputed rents.
Tax based interventions in the rental market In September 1985 the Commonwealth Government quarantined negative gearing to rental property and introduced a 4 per cent depreciation rate to apply to new rental property. The depreciation rate was reduced to 2.5 per cent and negative gearing was reintroduced in September 1987. While negative gearing and depreciation are of benefit to owners of rental property, they are available to investors and companies generally and are not specifically related to housing.
Negative gearing Investors can receive a tax benefit by gearing a rental property such that interest payments and expenses exceed rental income, and off-setting the difference against income. This tax benefit only accrues where there is other income. Negative gearing is significantly more attractive to investors under inflationary conditions because nominal interest payments are deductable, and only real capital gains are taxable. According to Pender and Ross (1993), the effective tax rate facing negatively geared investors is negative under inflation rates of 3 per cent or more (p. 12, Table 5).
84 INDUSTRY COMMISSION C RENTAL MARKET
Although clearly improving the return to ‘negatively geared’ investors, some observers (for example, Leigh (1989); Badcock and Browett (1991)) express doubt as to whether negative gearing is a cost-effective method of increasing the supply of low-cost rental accommodation. Rental incomes and prospective capital gains are perceived to be greatest at the upper end of the property market, encouraging entry into the high-cost ‘quality’ end of the rental market.13 Investor activity can also affect housing prices, and hence rent levels. Leigh (1989) argues that investor activity was a major factor driving Melbourne property prices and hence rents from 1987–88 to 1988–89.14 Leigh concluded that: ... the benefits of the investor boom have largely been limited to investors, who have gained the tax advantages of negative gearing, and higher income tenants, who have enjoyed greater choice of accommodation and been able to afford rents being charged. Unfortunately there appears to be little evidence of any benefits from the activity of investors over the last two years for the 50 000 Victorian households who live in the private rental market and are below the poverty line after paying their rent (1989, p. 6). This is consistent with Badcock and Browett (1991). They argue that changes in the rate of construction of flats and units are closely related to factors such as interest rates and changes in equity markets rather than changes in taxation policy. In the long-term, some of the increased quantity of rental housing resulting from negative gearing is likely to become low-cost rental housing.15 However Leigh's (1989) findings imply that, in the short- to medium-term, negative gearing can increase the supply of high cost rentals while contributing (through higher asset prices) to a reduction in the supply of low-cost rental accommodation. There may also be a substitution of geared for ungeared rental property, without any increase in supply. This can occur because negative gearing provisions apply to existing properties as well as new construction.16
13 Leigh (1989) found evidence that much of the observed ‘boom’ in investor activity in Melbourne between 1986–87 and 1988–89 had occurred in high-priced, high-rent areas, while the availability of rental accommodation in cheaper suburbs declined over the same period. 14 Investors accounted for 60 per cent of the real increase in housing finance over the two year period. However, it is difficult to separate the effects of the stock market crash from the re–introduction of negative gearing (Leigh 1989, pp. 5–6). 15 Equally, owner-occupied houses ‘filter down’ into the rental market. 16 This possibility is consistent with Leigh (1989), who observed that much of the funding increase for rental investment after 1987 had been for the purchase of existing rental property, rather than new construction (p. 5).
INDUSTRY COMMISSION 85 PUBLIC HOUSING
The effect of negative gearing on the low-cost rental market is likely to be small relative to the size of the tax expenditure, making negative gearing a costly way of increasing the supply of low-cost rental accommodation.
Depreciation Income-producing residential buildings are not depreciable for tax purposes unless built after July 1985. Depreciation is calculated on a straight-line basis to building construction costs and does not necessarily reflect the economic rate of depreciation at any point in time. An increase in the depreciation rate would increase the immediate return to the owner, allowing an earlier write-off of the asset. For example, the reduction in the depreciation rate from 4 to 2.5 per cent increased the depreciation period for new buildings from 25 to 40 years, reducing the attractiveness of the provision. At high depreciation rates a return-maximising owner decreases maintenance and replaces buildings sooner (Flood 1990). In the very long-term, this will tend to reduce the amount of low-cost rental housing. Like negative gearing, depreciation provisions are not specifically targeted at any particular type of stock or price level. However, they apply only to buildings constructed since July 1985.
Subsidies targeted to providers of low-income rental housing The Commonwealth Government introduced the Private Rental Subsidy Scheme in 1989 for the purpose of subsidising additions to the low-income rental stock by private investors (Treasury 1992b). According to the Department of Health, Housing, Local Government and Community Services (DHHLGCS sub. 213) the scheme was intended to subsidise approved State Government financial instruments for the use of private sector funds to acquire or construct private rental dwellings. Funding of $13 million was allocated in 1990–91, increasing to $65 million in 1995–96. However, funds were never appropriated under this program. DHHLGCS stated: State housing authorities were unable to access [private rental subsidy] funds to date largely as a result of the difficulty and cost associated with establishing appropriate off- budget financial structures (sub. 213, p. 86). The Commonwealth abolished this program in the 1992–93 Budget, stating that: ... the Government guarantees necessary to attract investors have effectively made proposals ineligible for subsidy (Treasury 1992b, p. 3.128).
86 INDUSTRY COMMISSION C RENTAL MARKET
State and local government duties and taxes In order to minimise distortions in resource use, taxes should be applied equally to different land uses. Currently, State and local government taxes differentiate between private rental and owner-occupied housing.
Stamp duties Stamp duties are levied on residential property transfers occurring through sale or lease. The major stamp duties payable on residential properties are for conveyancing and dwellings purchase mortgage transactions. Stamp duties have become a major source of revenue for State governments.17 Stamp duties on transactions in the property market are likely to be a barrier to the entry of prospective landlords. Stamp duty is an up-front cost that must be met by higher rents. All States exempt residential leases from stamp duties, other than Western Australia which exempts leases of less than $125 a week (Wood 1992, p. 461).
Land taxes Land tax generally takes the form of an annual tax on the ownership of land.18 The land tax base is the unimproved value or a variant known as the ‘site’ or ‘land’ value (IC 1993, p. 272). If applied uniformly, taxes on land have no effect on land use. However, widespread exemptions and rate variations make the net impact difficult to determine.19 All States either exempt or provide concessional rates on the principle place of residence. In addition, land valued below a general threshold is exempt (Wood 1992, p. 455).20 Land tax exemptions and concessions have greatly reduced the tax base and increased the average liability to remaining taxpayers (including private landlords). For example, there were 319 000 taxpayers in South Australia in 1979–80 each with an average liability of $66. With the exemption of owner occupiers, increases in the tax-free threshold and the exemption of non-profit
17 Wood (1992, Table 6, p. 459) shows that real revenues from conveyances, leases, mortgages and loan securities at least doubled in all States (and tripled in Victoria and Western Australia) from 1979–80 to 1989–90. Stamp duties as a proportion of total revenue collections in 1990–91 ranged from 8 per cent (Tasmania) to 16 per cent in Queensland (IC 1993, p. 294, Table 1). 18 Land tax is applied to leases of land in the Australian Capital Territory. The Northern Territory does not impose land tax. 19 Land tax rates vary widely between States. Most have a general threshold and a progressive rate structure, though New South Wales has a proportional rate above a general threshold. 20 Most States exempt government land and land used for primary production from land tax.
INDUSTRY COMMISSION 87 PUBLIC HOUSING
organisations, this fell to 20 500 taxpayers in 1987–88 with an average liability of $2800 (Wood 1992, p. 456). Land tax can affect rental property values when they are above the general exemption thresholds. The Industry Commission stated: The exemptions are distorting and may unduly discourage certain land uses, for example, rental housing is disadvantaged relative to owner-occupied housing (IC 1993, p. 286). Land tax is likely to have had a disproportionate impact on low-cost rental accommodation in inner-city areas where land costs are high. High land taxes on rental accommodation discourage the construction and encourage the renewal of low-cost units in inner-city areas. Despite the apparent distortion, a high proportion of rental housing in Sydney and Melbourne is located in inner- city areas. This reflects the demand for the greater amenity offered by an inner- city location (see Figure C.2). However, Figure C.2 does not indicate what proportion of rental accommodation in inner-city areas is low-cost accommodation.
C.4 Market structure The backgrounds and motivations of landlords (and real estate agents as property managers) are important in determining government policies with respect to the private rental market.
Landlord profiles There have been few major, systematic studies into the characteristics of investors in rental properties.21 The NSW Department of Housing (1991) classified landlords as: Unintentional landlords: Landlords who have inherited property or who let their residence while working interstate or overseas. A typical holding size is one property. Informal landlords: Property owners who informally sub-let rooms or share houses.
21 Recent studies include one by the NSW Department of Housing (1991) and a study of real estate agents for DSS (Econsult Planning and Development 1991). The ABS conducted a survey of rental investors in July 1993.
88 INDUSTRY COMMISSION C RENTAL MARKET
Investor landlords: A diverse group including: • Security investors who invest directly in rental property as a form of superannuation or as an intended retirement home. They typically own a small number of properties or block of flats; • Tax reducers who reduce overall taxable income through holding a small number of highly geared properties (negative gearing). Properties are sold when equity reaches 40 to 50 per cent or rental income comes close to covering costs; • Capital accumulators who own steadily increasing, relatively large (on average) holdings of properties. Properties are re-financed as capital values increase so as to purchase further property; • Rental property operators who are typified as an incorporated company with relatively large holdings and high equity levels. Rental income is more important than capital gains; and • Renovators or traders who are characterised by short-term ownership of a small number of highly-geared properties. Individual landlords are the dominant form of investor in residential rental property. An analysis of New South Wales rental bond lodgement forms (NSW Department of Housing 1991) found that 64 per cent were sole landlords. About 29 per cent were partners and about 6 per cent were companies.22 However, companies held 19 per cent of the stock, compared to individuals’ holdings of 53 per cent. The National Housing Strategy (NHS) drew on this and other studies to find that: • Individuals holding only one or two properties account for 70 to 80 per cent of private rental landlords; • The proportion of equity-driven landlords, including a large number of small investors seeking to secure retirement income or pass property on to children, ranges from 30 to 60 per cent of investors; • Unintentional landlords appear to be a significant proportion of the market, varying from 10 to 30 per cent of investors; • Informal landlords account for about 10 to 15 per cent of the market and this appears to be increasing; • Large corporate investors appear to have withdrawn from the market;
22 ‘Informal’ landlords who let a room or share their house were not clearly identifiable and were therefore excluded from the study results.
INDUSTRY COMMISSION 89 PUBLIC HOUSING
• Small corporate investors constitute about 5 per cent of landlords nationally, but control 10 to 15 per cent of the market nationally; • Individual landlords are concentrated in the older age groups, hold their investments in the long-term and often manage their own investments; • Migrant landlords appear to be a significant proportion of owners within the informal sector, equity-driven investors and owners of boarding houses and private hotels; and • Low- to moderate-income earners are more likely to be provided with affordable accommodation by equity-driven investors and informal landlords than other classes of investors (NHS 1992c). The dominance of owner-occupied housing in Australian housing markets has resulted in unintentional landlords being an important source of rental accommodation in most local rental markets. However, the majority of this group let properties at the upper end of the market (Elton and Associates 1991). It is clear from the investor profile that the low-cost private rental market is a residual market (see Box C.1). The Victorian Council of Social Service said this meant that the private rental market is unlikely to provide an adequate supply of affordable and appropriate rental housing: There are major barriers to investment in the private rental market. Major corporate and institutional investors have largely divested themselves of private rental housing. Given the current profile of investors, it appears unlikely that future investment will provide an adequate supply of affordable and appropriate rental housing. Any concerted growth in the private rental sector will largely be the result of renewed interest by these institutional investors. However, to date large investment in the private rental sector has not been forthcoming (sub. 169, p. 11). The variety of landlord types and motivations, and the importance of unsophisticated individual and informal landlords in the low-income sector have implications for the responsiveness of supply and hence government policy.
Real estate agents Real estate agents have information functions with respect to rental property. Search costs may be reduced as agents have a superior knowledge of current market rentals for particular types and areas. Agents may also achieve economies of scale in the management of properties, and improve efficiency by managing properties for inexperienced or ‘unsophisticated’ landlords. Real estate agents act as property managers for the landlord, not the tenants. Agents act as ‘gatekeepers’ for the owner, choosing between potential tenants. They are usually better informed about the legal rights and responsibilities of the landlord and tenant, and better positioned to act (for the owner) with respect
90 INDUSTRY COMMISSION C RENTAL MARKET
to tenancy disputes. These functions are without doubt important to the unintentional or absentee landlord. According to Econsult (1991), agents with small portfolios have a significantly higher proportion of low-income tenants.
Box C.1: A residual market Most of the housing provided for low-income renters by the private sector was not built for this purpose. It has usually filtered down from previous uses for which it is no longer suited. In some cases it is provided by unintentional landlords who have inherited property or who have had to vacate their own property and do not wish to sell immediately. Others have become landlords to acquire a ‘bricks and mortar’ investment, to obtain capital gains, or to take advantage of negative gearing. That is, their primary concern is property as an investment vehicle. Their choice of low-income rental accommodation often reflects their limited capital. As this is a residual market, supply is relatively unresponsive to price. Econsult stated: ... the supply of private rental housing has increasingly become the preserve of smaller, unsophisticated investors; as a residual investment sector it does not appear that private rental housing will deliver the smooth supply responses required of it by a large scale housing allowance program (1989, p. ii). On the basis of overseas experience, Kemp concluded: ... despite this renewed confidence in markets, income-related housing allowances have apparently not, by themselves, been sufficient to induce an adequate supply of low-income rental housing (1990, p. 807).
C.5 Regulatory framework
Residential tenancy legislation All States have some form of residential tenancy legislation. However, there is wide variation in the coverage and provisions between States (see Table C.2). In some cases, bonds must be lodged with a rental bond board or authority, whereas in the Northern Territory a bond is held by the landlord. In Victoria a bond must be lodged in a trust account with a bank or approved financial institution.
INDUSTRY COMMISSION 91 PUBLIC HOUSING
In some States, legislation specifies standard leases while in others certain provisions are read into all lease contracts.23 However, standard lease agreements do not guarantee that all disputes can be eliminated. State tenancy legislation therefore specifies mechanisms, such as tribunals or the courts, to resolve disputes. In most States, landlords are prevented from increasing rents within the fixed period specified in a lease (although the parties determine the fixed period of a lease). Once a fixed lease period expires, rent increases are generally allowed with a specified period of notice (typically a minimum of a month). In some States (for example, Victoria) the frequency of rent increases is limited by legislation. Under most legislation either party may end a lease prematurely only in specific circumstances. In some cases, residential tenancy legislation specifies the responsibilities of each party with respect to maintenance or repairs to rental properties. These include provisions for prompt repairs in emergencies or dangerous situations, notification of damage, and the maximum time for carrying out repairs. Most also give the landlord access to the premises in order to carry out repairs or maintenance. Variations between States make it difficult to compare tenancy legislation although some have similar provisions. The complexity of the legislation and language used can create problems for people in understanding their rights and obligations, providing the potential for abuse. For example, the Consumer Forum for the Aged said: Information and interpretation of the tenancy legislation in a format that is easily understood is required so older people are informed and are able to ensure their rights as tenants are not breached (sub. 87, p. 4). Most States have recognised this and established tenancy advisory services.
23 Standard leases reduce transaction costs by reducing information needs (see C.6).
92 INDUSTRY COMMISSION C RENTAL MARKET
Table C.2: Residential tenancy legislation and coverage, 1992
NEW SOUTH WALES Residential Tenancies Act 1978 a Applies to landlords, tenants and people who are neither. (see also the Retirement Villages Applies to public housing and co-operative housing. Act 1987; and the Housing Co- Specifically excludes boarders and lodgers. operatives Act 1991) Excludes hotel, motel, holiday, educational, college, hospital, nursing home, aged and disabled accommodation. VICTORIA Residential Tenancies Act 1980 Applies to residential tenancies only; a lease must exist for (see also the Caravan and Movable legislation to apply. Applies to public housing. Dwellings Act 1988; the Retirement Does not apply to single rooms unless ‘self contained’; Villages Act 1986; and the excludes hotel, motel, hostel, holiday, educational, college, Rooming Houses Act 1990) hospital, nursing home, aged and disabled accommodation.
QUEENSLAND Residential Tenancies Act 1975 Applies to landlords and tenants. [subject to new legislation]; Excludes boarders and lodgers, holiday premises or Rental Bond Act 1989. premises licensed for the sale of alcohol. (see Retirement Villages Act 1988; Does not apply to public housing. and the Mobile Homes Act 1989b)
WESTERN AUSTRALIA Residential Tenancies Act 1987 Applies to landlords, tenants and people who are neither. Applies to public housing. Specifically excludes boarders and lodgers. Also excludes hotel, motel, hostel, holiday, educational, college, hospital, nursing home, aged and disabled accommodation. SOUTH AUSTRALIA Residential Tenancies Act 1978 Applies to landlords, tenants and people who are neither. (see also the Retirement Villages Applies to co-operative housing. Act 1987; and the Housing Co- Specifically excludes boarders and lodgers. Also excludes operatives Act 1991) hotel, motel, holiday, educational, college, hospital, nursing home, certain aged and disabled accommodation. Does not apply to public housing (subject to a review). NORTHERN TERRITORY Tenancy Act 1979 No lease is required for the Act to apply. Applies to landlords, tenants and people who are neither. Applies to caravans, mobile homes, retirement accommodation. Does not apply to hotels, motels, guest or holiday premises, or boarding houses. Does not apply to public housing. AUSTRALIAN CAPITAL TERRITORY Applies to private residential premises subject to a lease. Landlord and Tenant Act 1949 Some provisions apply only to ‘dwelling-houses’, including lodging or boarding houses. Generally does not apply to public housing, boarders, lodgers, hostels, caravans or mobile homes. Does not apply to Territory or Commonwealth Agencies. a Coverage of Act was extended in 1989 to include movable dwellings including caravans and mobile homes. b Queensland’s Mobile Homes Act 1989 does not apply to caravans. Source: Community Law Reform Committee of the ACT (1992).
INDUSTRY COMMISSION 93 PUBLIC HOUSING
Costs and benefits of tenancies legislation Tenancies legislation involves trade-offs between costs and benefits. A major benefit from rental tenancy legislation can be improvements in economic efficiency (see Box C.2). This could result from reduced information and transaction costs where rights and responsibilities are clearly defined and disputes are resolved relatively easily using the mechanisms provided. Other potential benefits include greater certainty (for example, increased security of tenure for tenants and clarification of legal positions). Costs include compliance and administration (for example, rental bond authorities, tribunals), as well as restrictions on the freedom for the parties to agree upon acceptable terms.
Box C.2: Incentive difficulties in private rental markets A lease requires both parties to enter into a contract where they agree to future performance. The quality and quantity of this performance cannot be known beforehand. The tenant agrees to pay the rent promptly and to use the property with due care. The landlord agrees not to interfere unreasonably with the tenant’s use of the property and to promptly carry out certain maintenance and repairs as required. In this type of market, incentives to meet the other party’s needs are somewhat diminished. The reasons include: • Incomplete contracts: The rental agreement cannot cover in detail every eventuality. Even if it is possible to write such a contract it would be too costly for both parties; • Hidden knowledge: It is of value for each party to withhold information from the other; • Opportunistic behaviour: Opportunities arise where it is profitable for one or other of the parties to renege on their agreement. For example, tenants may leave owing rent a nd landlords may make false claims against bond monies; and • Monitoring, compliance, and enforcement costs: To monitor, comply and enforce performance for either of these parties is both difficult and costly. In this process there are always net losses. Most of these problems arise because incentives are not compatible. Instead of being directed toward mutual advantage, they are often geared toward gain at the other’s expense. Legislation and dispute resolution procedures can mitigate these incentive problems.
94 INDUSTRY COMMISSION C RENTAL MARKET
Anti-discrimination legislation Although Commonwealth legislation applies generally throughout Australia, it is limited in application to the State Governments and their instrumentalities. However, all States have their own anti-discrimination legislation, other than Tasmania and the Northern Territory (Community Law Reform Committee of the ACT 1992, p. 64).24 Anti-discrimination and equal opportunity provisions vary (see Table C.3). In some circumstances it is not unlawful to discriminate against people with physical impairments. Under Western Australia’s Act it is not unlawful to discriminate against people with a physical impairment where it would impose hardship on the provider. However, it is unlawful to impose conditions separating a blind or deaf person from their guide or hearing dog in South Australia and the Australian Capital Territory. State tenancy legislation has no anti-discrimination provisions (except on the grounds of discrimination because of children).
24 Under inter-government agreements, State Commissioners for Equal Opportunity administer both State and Commonwealth legislation in Victoria, South Australia and Western Australia. The Commonwealth administers discrimination legislation in the Australian Capital Territory and Queensland. There is no such agreement in New South Wales.
INDUSTRY COMMISSION 95 PUBLIC HOUSING
Table C.3: Anti-discrimination provisions
Jurisdiction and Act titles Relevance and application to accommodation
COMMONWEALTH Racial Discrimination Act 1975 Prohibits discrimination on the grounds of race, colour, national or ethnic origin. Sex Discrimination Act 1984 Prohibits discrimination in relation to sex, marital status or pregnancy. NEW SOUTH WALES Anti-Discrimination Act 1977 Prohibits discrimination on the grounds of race, sex, marital status, physical and intellectual impairment or homosexuality.a Residential Tenancies Act 1978 No discrimination provisions.
VICTORIA Residential Tenancies Act 1980 Prohibits discrimination against people with children (with exceptions). Equal Opportunity Act 1984 Does not apply where provider or near relative lives on the premises, or to hostels for special groups. Discrimination on the basis of children possible where accommodation is not suitable. Discrimination on the basis of impairment possible if there is a significant risk of injury to them or others.
96 INDUSTRY COMMISSION C RENTAL MARKET
Table C.3: Anti-discrimination provisions (cont.)
Jurisdiction and Act titles Relevance and application to accommodation
QUEENSLAND Residential Tenancies Act 1975 Not known. Anti-Discrimination Act 1991 Similar to legislation in other States. Illegal to discriminate on the basis of age. WESTERN AUSTRALIA Equal Opportunity Act 1984 Prohibits discrimination on the grounds of race, sex, marital status, pregnancy, religious or political conviction, physical and intellectual impairment.b Sexual harassment is also unlawful. Discrimination is lawful for physical impairment where it would impose hardship on the provider. Residential Tenancies Act 1987 Prohibits discrimination against people with children except where provider lives on the property or next door, or if the agent lives next door. SOUTH AUSTRALIA Residential Tenancies Act 1978 Prohibits discrimination against people with children except where provider lives on the property or next door, or if the agent lives next door. Equal Opportunity Act 1984 Prohibits discrimination on the grounds of race, sex, sexuality, marital status, pregnancy, age, physical or intellectual impairment.c Unlawful to impose a condition separating a blind or deaf person from their guide or hearing dog. Discrimination is lawful for physical impairment if premises are not accessible to impaired person. AUSTRALIAN CAPITAL TERRITORY Discrimination Act 1991 Unlawful to discriminate on the grounds of sex, sexuality, transsexuality, marital status, status as a parent or carer, pregnancy, race, religious or political conviction, physical or intellectual impairment, illness or association with a person in one of these groups. Landlord and Tenant Act 1949. Prohibits discrimination on basis of children.
NORTHERN TERRITORY Tenancy legislation prohibits discrimination against Tenancy Act 1979 people with children. a Exceptions include accommodation for aged persons, members of a voluntary organisation, and where provider or near relative lives on the premises. b Non-profit, voluntary and religious organisations are exempt from some provisions. c Some provisions do not apply to a provider or near relative living on the premises, or to non-profit bodies offering accommodation to one sex or for one age group only. Note: Legislation may not apply in some cases. For example, to religious organisations, charitable or voluntary bodies, student accommodation (on the grounds of sex), or if modifications for impairment would cause unjustifiable hardship to a landlord (and in some other cases). See Community Law Reform Committee of the ACT (1992) for details. Source: Community Law Reform Committee of the ACT (1992).
INDUSTRY COMMISSION 97 PUBLIC HOUSING
The impact of legislation Participants emphasised the difficulties faced by low-income and disadvantaged groups in private rental markets. The Tenants Advice Service Inc. (Western Australia) said: Discriminatory practices need to be countered with stronger legislation and more rigorous enforcement and penalties for breaches of the Act. Even with stronger legislation problems will continue in proving that discrimination took place (sub. 191, p. 11). Others expressed concern that existing legislation already favours tenants. The Property Owners’ Association of Australia said: No one should deny that ownership and tenancy of property are different. The owner of an investment property must receive a commercial return with reasonable security, as well as the ability to control and realise the investment on reasonable short notice ... (sub. 187, p. 2). Paris, Randolph and Weeks (1993?) reviewed changes to tenancy and discrimination legislation that took place between 1984 and 1992, and analysed the significance of these changes on investor attitudes. They conclude that economic factors are much more likely to determine future investment decisions than recent or proposed legislative reform. The study found that: • Capital gains, and to a lesser extent rents, are crucial in the economics of private rental markets: neither the current legislation nor proposed changes have any significant impact on these factors; • Legislation impacts differentially on different types of investors. Some investors may withdraw while others may be attracted to the sector; • Professional private rental managers see many advantages in the reforms in place or proposed, and generally consider that they do not affect the economic fundamentals; and • Any ‘psychological’ impact of legislative reforms appears short-lived. Once in place legislation is generally seen as stabilising (p. 17). However, the effect of legislative changes on the low-income rental sub-market is less certain. Low-income earners are more likely to rent from small security- driven or informal landlords who manage their own properties (Elton and Associates 1991, p. 53). To the extent that these landlords perceive a disproportionate impact on their management of a property, legislative changes may result in significant dis-investment by these groups. Flood summed up the difficulties involved in tenancies legislation: ... landlord-tenant legislation is a near-irresolvable issue for low income earners. Low- income people require security of tenure at least as much as higher income people, but they cannot afford this through conventional means such as home ownership. The
98 INDUSTRY COMMISSION C RENTAL MARKET
desire of tenants for secure comfortable accommodation in an environment of their choice is often incompatible with the desire of landlords for a good profit and a fairly liquid investment through an easily relettable or resaleable dwelling (sub. 171, p. 1). While legislation may increase efficiency and reduce the scope for abuse, it cannot solve the supply problems associated with the low-cost end of the private rental market or for those with special needs.
State and local government planning and building regulation Regulation of building and planning has a major impact on the construction and maintenance of dwellings.25 While some regulations provide public benefits (for example, fire exits, public health and safety), others (such as a planning approval requirement for all developments, renewals, additions or renovations) increase delays and may unnecessarily raise costs. The Industry Commission stated that: ... Australia does not have a consistent system of development controls, but a multi- tiered, often ad hoc and uncoordinated approach with each level of government controlling different aspects. The various tiers operate independently, often applying different criteria for similar developments. The existing system of regulation has ... made the development approval task costly and time-consuming (IC 1993, p. 402). The Commonwealth Office of Local Government (sub. 126, p. 2) estimated that land development and building approval delays increase the cost of residential development by $750 million annually (see also Industry Commission 1993, pp. 404–5).26 According to Flood and Yates: Building regulations in Australia are strict, and require a high minimum standard for new dwellings. Fire and planning regulations have also played a part in the decline of inner-city low-rent housing, particularly boarding houses. Many low-income households would choose a lower standard of accommodation if given the option, leaving themselves more money for food and necessities. The increasing incidence of ‘squatting’ and the increasing number of homeless bear witness to this (1987, p. 51). This has implications for what society regards as ‘appropriate’, and the benefits and costs to individuals of regulation designed to ensure housing meets these standards.27 Flood concluded that:
25 Each State has responsibility for legislating and implementing its own controls. 26 The objective of the Local Approvals Review Program is to encourage co-operative reform of local approval processes. 27 It also has equity implications. Flood and Yates (1987, p. 1) argue that government should off-set the impact that planning controls have on low-income people. This is because such controls force people to take higher cost accommodation than they would otherwise choose.
INDUSTRY COMMISSION 99 PUBLIC HOUSING
... low income earners (including almost everyone on benefits without capital assets) cannot afford the minimum level of housing that society regards as acceptable (sub. 171, p. 1). Local government planning regulation can greatly affect the ‘shadow market’28 as a source of low-cost housing. Some possibilities are noted by Baer: Because it is a local phenomenon, the shadow market is not dependant on national housing policy and funding priorities. Instead it is most susceptible to zoning and land- use regulations — a local government function. By selectively altering these regulations local governments could significantly increase the effect of the shadow market. Existing housing could be more readily adapted to changing patterns in demand (1986, p. 27).
C.6 Market operations The efficiency and effectiveness of the private rental market depends partly on the nature of the good (see C.1), partly on the characteristics of those involved in the market (see C.4), and partly on the market structure (see C.3).
Barriers to entry and exit Both landlords and tenants face barriers to entry and exit from the private rental market. For example, prospective landlords face barriers to entry (stamp duties, search and legal costs) when considering whether or not to invest in rental property. However, barriers to entry and exit are more important in the case of tenants. The costs for a tenant to move and enter into a new rental arrangement can be high. The tenant faces search and information costs, as well as the uncertainty as to whether tenancy applications will be accepted. Once accepted, the tenant must meet the up-front costs of moving, the posting of securities (rent in advance and bonds), the connection of telephone, electricity and gas services, and, where applicable, lease stamp duties (see C.3) and letting fees.29 Most States provide some assistance with these costs (for example, rental bond loans).
28 The shadow market comprises processes which modify existing buildings to meet changing housing demands, for example, sub-dividing, merging, renewal and other modifications. 29 In Western Australia the tenant pays a real estate agent a letting fee of one week’s rent. In other States the landlord pays this fee.
100 INDUSTRY COMMISSION C RENTAL MARKET
Securities and risk For the landlord there is a degree of risk that the tenant will leave without paying rent, cause damage or leave the property in poor condition. Rent in advance and rental bonds have evolved to minimise this risk. However, relations between landlords and tenants are often difficult and there are incentives to withhold information and for opportunistic behaviour (see Box C.2). Landlords face the residual risk that the posted securities will not cover the full cost of restoring a property or losses from any termination of a lease. Where such risks are perceived to be high (for example, groups, tenants with pets), tenant(s) may be charged higher rents to off-set this risk. Alternatively, landlords may exclude tenants perceived to be in high-risk groups. For the tenant, rent in advance and bonds pose a significant barrier to entry and reduce tenant mobility. While many States require bonds to be lodged with independent authorities or financial institutions, disagreements over claims on bond monies and delays in returning bonds can cause low-income tenants serious hardship.
Pricing The nature of housing creates problems in determining what is a ‘market price’. Because price information is dependent on many factors, it is only after the inspection of many similar properties that prospective tenants may assess the true ‘market price’ of a particular property. Econsult (1991) suggests that agents play a major role in setting prices. It said that letting is an iterative process, with agents pricing according to known market rent levels. If no suitable applicants are found, the price is dropped fractionally and re-advertised. However, the high cost of vacancies (that is, rent forgone) places limits on this process. Econsult (1991) differentiates between the ‘base rent’ and ‘quality’ sectors of the rental market (see C.1).30 While ‘quality’ properties tend to follow the iterative process described above, prices of base-rent properties fluctuate in line with property prices rather than rental market conditions. Because there is always excess demand for base-rent properties, agents emphasise non-price factors when selecting tenants (for example, the tenant’s rental history and ability to pay).
30 Agents often described dwellings in the base rent category as sub-standard, but the concept of sub-standard differed widely between markets (Econsult 1991).
INDUSTRY COMMISSION 101 PUBLIC HOUSING
The DHHLGCS said that landlords (or their agents) respond to the higher perceived risk of low-income tenants by setting higher rents: Landlords charge for bearing such risks, with the charge being higher if they are unable to pool the risks or are risk averse. Landlords tend to associate being poor with being high-risk particularly in terms of rent payments (sub. 213, p. 50). Alternatively, where offered a choice of tenants, landlords or their agents may choose lower-risk tenants. Under such circumstances, landlords or their agents may discriminate against low-income tenants.
Efficiency of the low-cost private rental market The private rental market falls well short of the perfectly competitive benchmark. The low level of competition in the low-cost private rental market follows from the residual nature of the market and from the ‘unsophisticated’ nature of participants (see C.4). Low competition levels also follow from the information problems and high transaction costs. As Smith, Rosen and Fallis note: The heterogeneity of housing stock prevents the development of an organised commodity market, in the sense of a quoted price for a homogeneous unit, and means that accurate price information is not available without a costly search (1988, p. 37). The lack of a single clearly defined market for housing services is supported empirically by Rothenberg et al. (1991). They found that: ... there was not a single “price” per unit of housing quality. ... Over time the various segments of a given metropolitan area’s housing market do not change to the same degree or even in the same direction. To speak of changes in “the” housing market is thus misleading (1991, pp. 514–15).
C.7 Supply responses
Supply elasticities When the price elasticity of housing supply is low, policy changes that result in an increase in demand will result in a limited increase in the quantity of housing and large price increases. Clearly, the effectiveness of demand-side policies designed to increase the supply of housing depends on a high supply elasticity. The nature of housing (a long-term, durable asset with a significant construction time) means that new construction cannot satisfy short-run increases in demand. Although the supply of houses can be considered fixed in the short term, a short term increase in the supply of housing services (as opposed to houses) is
102 INDUSTRY COMMISSION C RENTAL MARKET
possible through filling vacant buildings or by more intensive use of existing houses. Estimates of the price elasticity of the supply of housing services range from 0.24 to 0.83, with little known about the supply response resulting from more intensive building use (see Table C.4). Table C.4: Price elasticity components for supply of housing services
Type of supply estimate Estimate
Filling of existing vacant buildings Estimates range from 0.24 to 0.83 More intensive use of existing dwellings Little known Maintenance and conversion Direct estimates, a lower limit of 0.3 Indirect methods yield higher estimates New construction United States: 3 United Kingdom: 2 Long-run supply estimates 11.5 for the United States of America of housing services 5.5 for the United Kingdom
Source: Bartlett (1989).
In the long run, increased supply can occur through maintenance and conversion activity as well as new stock. Available direct estimates put a lower limit on this supply response of 0.3, whereas indirect estimates (derived from estimates of factor substitution) are higher (see Table C.4). Elasticities vary widely across locations, being low in highly developed city locations. Although the long-run estimates of the elasticity of supply are higher than those for the short-run, they are not infinite due to limitations on factor inputs, particularly of land. Bartlett concludes that: Taking the various components of supply together, the best current available estimates of the long-run supply elasticities of housing services work out at about 11.5 for the USA and about 5.5 for the UK, where land availability constraints and hence high shares of land in construction costs, as well as important feedback effects on building costs through the labour market, impinge relatively more upon the ability of the housing market to respond to shifts in demand (1989, p. 2). In addition to these broad elasticity estimates for general housing services, supply responses for particular sub-markets have been estimated. Rothenberg, et al. (1991) found differences in supply responses between quality sub-markets as well as between owner and rental tenures. They conclude that there are ‘important systematic variations’ across sub-markets. The supply ‘mix’ varies for both owner and rental tenures. New construction predominates in the highest quintiles and conversion in the lowest. They conclude: The market-period elasticity of stock supply is less in owner than renter submarkets, but in all except one it is extremely small. The medium-run supply function in all owner submarkets appears to be perfectly elastic over a three-year time horizon, while high-
INDUSTRY COMMISSION 103 PUBLIC HOUSING
quality renter submarkets have somewhat less elastic responses. No consistent indicators of medium-run supply elasticities in the lowest-quality submarket could be observed, but that is to be expected given the evidence that these [lower quality] submarkets function as “residuals” reacting primarily to events in other submarkets (p. 515). There has been little estimation of supply elasticities of housing services in Australia. Those that have been done are incomplete and dated.
Private and public low-cost housing Some participants argued that public housing has reduced the supply of low-cost accommodation. The Property Owners Association of Australia (sub. 187) claimed that adverse economic conditions, increasing property taxes, ‘harsh’ tenancy legislation and constant real rent levels had reduced profitability in rental markets during the 1980s. This had resulted in rental property owners (with the exception of some investors seeking tax relief) selling to government or owner-occupiers.31 The Association said: The law of supply and demand will not correct this imbalance as long as the government housing assistance receives enormous subsidies and is in competition with private enterprise for the middle income client on unfair terms. In other words, too much government housing destroys private rental housing (sub. 187, p. 2). However, the market for public housing is a separate market from private rental. This is because demand for public housing is in a sense ‘quarantined’ from the private rental market. Private renters have to join a waiting list and access public housing at a uniform rate. In the absence of a large increase in public housing, the reduction in demand is fully anticipated by landlords. It is true that any unanticipated extra supply of public housing will tend to reduce excess demand in the low-cost private rental market and put downward pressure on market rents, reducing profitability in the short run. In this regard, the private rental market is no different from any other market. However, the size of the effect may be reduced for low-income housing in inner-city areas. This may occur if the government’s demand for land raises land prices, increasing the capital gains to remaining landlords. The services provided by public housing to low-income households are generally superior to, and therefore not directly comparable with, those provided by the private sector (for example, public housing offers greater security of tenure). That said, public housing has had a significant presence in the market over a long period of time without major policy changes in this area. It is only when government policy changes quickly and in an unanticipated manner that
31 But also apparently to other investors seeking tax relief from negative gearing (see C.3).
104 INDUSTRY COMMISSION C RENTAL MARKET
rational investors are disadvantaged or advantaged. Investors have not been disadvantaged and are making at least a normal return on their rental property.
INDUSTRY COMMISSION 105 PUBLIC HOUSING
New references Baer WC. 1986 ‘The shadow market in housing’ in Scientific American, Vol. 255, No. 5, pp. 27–33, November. Burdekin B. 1993 — see Report of the National Inquiry into the Human Rights of People with Mental Illness, 1993. Flood J. 1990 ‘Optimal replacement strategies and taxation’, in Building Asset Management: International Building, Vol. 3, CIB 90 Building Economics and Construction Management, 14-21 March 1990, International Council for Building Research. Report of the National Inquiry into the Human Rights of People with Mental Illness, 1993, Human rights and mental illness, Volume 2, The Human Rights and Equal Opportunity Commission, AGPS, Canberra. Rothenberg J., Galster GC., Butler RV. and Pitkin J. 1991 The maze of urban housing markets: theory, evidence and policy The University of Chicago Press, Chicago and London.
106 INDUSTRY COMMISSION D CSHA FUNDING ARRANGEMENTS
‘Housing’ in its various forms accounts for approximately 2 per cent of the Commonwealth’s total outlays of $115.1 billion budgeted for 1993–94. Funding for the Commonwealth–State Housing Agreement (CSHA) represents about half of Commonwealth outlays on housing. The CSHA provides housing for low-income people. Its two major areas are public housing and home purchase assistance. The Commonwealth provides funding in the form of grants which are mostly channelled to public housing. Under earlier agreements, the Commonwealth also lent money to the State housing authorities at concessional rates over a long period. Funding by the Commonwealth for other housing and housing support services is provided primarily through the Supported Accommodation Assistance Program (SAAP), rent assistance programs provided through the Department of Social Security (DSS) and Department of Veterans’ Affairs (DVA), and Aboriginal and Torres Strait Islander Commission (ATSIC) programs. The funds provided by the Commonwealth Government under various housing and housing support programs in 1992–93 are shown in Table D.1. At the State level most housing assistance is funded through the CSHA. Over $1.24 billion in State funds was provided under the CSHA as grants, loans and internal funds in 1991–92, mainly for public housing and home purchase assistance. Of this amount, $325 million was in grants to match Commonwealth payments of untied funds. At the local government and community level, aggregate information on funding of housing for low-income people is not readily available. Governments assist with housing in other ways — the Home and Community Care Program enables people to remain in their home outside supported care for as long as possible. There are also residential care programs for older people, disabled people and post-acute or palliative care and other housing assistance programs for people with disabilities. Some States offer pensioners rate and land tax rebates and concessions on charges and also generally offer additional housing programs outside the CSHA.
INDUSTRY COMMISSION 105 PUBLIC HOUSING
Table D.1: Funds for housing and support services, 1993–94
C’wealth Program Sub-program Funding in Department 1992–93 $m DHHLGCSa CSHA Untied rental assistance 829.6 b Rental assistance for Aborigines 91.0 Pensioner housing grants 49.3 Community Housing Program from 1992–93 or Local Government and Community Housing Program to 1992–93 24.4 Mortgage and rent assistance - Mortgage and rent relief 30.9 b - Home deposit assistance 22.6 Crisis Accommodation Program 27.1 DSSc Rent Assistance Pensions 553.2 Allowances 297.1 Family Allowance Supplement 77.3 DSSd Assistance with Home Loans for aged pensioners 0 Equity Conversion DVA Housing assistance Rent assistance 24.8 Home Acquisition Assistance 58.1 DVA Community health care services 0.6 DIEAe Accommodation For migrant and detention centres 2.5 expenses DHHLGCS Supported Accommodation Assistance Program 94.7 b DHHLGCS Emergency relief 30.2 DHHLGCS Emergency assistance To refugee status applicants 3.5 DHHLGCS First Home Owners Scheme (superseded) 14.8 DHHLGCS State Grants (Housing) Interest payments on State expenditure in 1971–72 Act 1971 and 1972–73 5.5 DHHLGCS Home and Community For people needing post-acute or palliative care 12.2 b Care Program For the aged 261.0 b For people with a disability 66.1 b DHHLGCS Aged caref Financial support 2194.3 ATSIC Land and economic Home ownership (largely self funding) 31.2 development ATSIC Social advancement Community Housing and Infrastructure Program 164.9 Aboriginal Hostels Limited 29.6 a Department of Health, Housing, Local Government and Community Services. b State matching required. c For 1991–92. d $10m allowed for 1993–94. e Department of Immigration and Ethnic Affairs. f Includes nursing homes and hostels. g Includes $10.5 million for having and $21.6 million for infrastructure funded under the National Aboriginal Health Strategy. Sources: Commonwealth Budget Papers 1993–94.
106 INDUSTRY COMMISSION D CSHA FUNDING ARRANGEMENTS
D.1 CSHA funding Under the current (1989) CSHA, Commonwealth funds are provided mostly as ‘untied’ grants. States must match ‘untied’ grants on a $1 for $2 basis.1, 2 About 74 per cent of the $1.08 billion of Commonwealth funds for the CSHA were in the form of ‘untied’ grants in 1992–93. Some Commonwealth funds are provided as special purpose payments and tied to programs.3 Since the 1989 CSHA, special purpose payments apply to: • pensioner rental housing; • Aboriginal rental housing; • mortgage and rent assistance (MRAP);4 • local government and community housing (LGACHP and CHP); and • crisis accommodation (CAP). Grants for pensioner housing are allocated between the States according to the number of aged and sole parent pensioners who receive DSS or DVA rent assistance. Since 1989–90 these grants have been regarded as an unmatched portion of untied funding. Grants for Aboriginal and Torres Strait Islander housing are on the basis of assessed housing needs5 with each State and the Northern Territory having a guaranteed minimum level of funding. The remaining special purpose payments are allocated on a per capita basis with most also having a guaranteed minimum level of funding. States match Commonwealth tied grants for the MRAP on a $1 for $1 basis.
1 Nevertheless these ‘untied’ grants must be used for CSHA activities. 2 States match funding on a $1 for $2 basis from 1992–93, having moved gradually towards this from $1 for $4 in 1989–90. At least 50 per cent of State grant matching funds must be as grants for public housing; the remainder can be as loans for home purchase assistance. Some State matching grants which are in excess in a particular year may, with agreement, be carried over. 3 Special purpose payments are made under s.96 of the Constitution whereby the Parliament may grant financial assistance to any State on such terms and conditions as it sees fit. The majority are subject to conditions which ensure that policy objectives set by the Commonwealth, or national policy objectives agreed by the Commonwealth and the States, are met. 4 Under this program short-term help is available to private renters to cover costs such as rental bonds and removal costs, and to low-income home buyers. 5 Needs are determined on the basis of the Aboriginal Development Commission and Department of Aboriginal Affairs Housing and Accommodation Needs Survey of 1986– 87.
INDUSTRY COMMISSION 107 PUBLIC HOUSING
Funding source changes Funding changes over the period 1975–76 to 1991–92 are illustrated by Figures D.1 and D.2 in nominal and constant prices.6 For 1975–76 to 1985–86 funding was entirely from Commonwealth, State and Northern Territory loans and grants. However, a significant proportion of Commonwealth funds was used for State repayments of loans (see Table D.2).
Table D.2: Net Commonwealth payments to the States for housing, 1974–75 to 1991–92 ($m)
Total State State Total State Net C’wealth C’wealth repayment of repayment of repayments to payments Year payments advances interest C’wealth
1974–75 709.6 34.7 159.5 194.2 515.4 1976–77 550.3 34.7 167.3 201.9 348.4 1978–79 411.2 37.9 181.9 219.9 191.3 1980–81 276.0 35.6 164.7 200.3 75.7 1982–83 557.6 40.0 178.9 218.9 238.7 1984–85 1 035.3 46.6 207.5 254.1 781.2 1986–87 1 284.7 54.7 243.8 278.5 1 006.2 1988–89 1 017.7 68.5 277.2 345.8 672.0 1990–91 1 040.3 74.6 296.3 370.9 669.4 1991–92 1 058.3 74.6 296.3 370.9 687.4
Notes: Derived from Australia, House of Representatives (1981, p. 2926); DHC (1987, pp. 40–1); DCSH (1988, pp. 34, 45; 1990, pp. 25, 35); DHHCS (1992c, pp. 13, 18); unpublished data provided by DHHLGCS. Source: Industry Commission.
The period 1982–83 to 1988–89 saw another funding layer in the form of nominated Loan Council Funds. These funds were borrowed at favourable rates by the States and the Northern Territory from the Commonwealth and were treated as advances (as were the earlier loans). The last year that the Commonwealth made loans to the States and the Northern Territory was in 1983–84 (apart from nominated Loan Council Funds).7
6 Constant prices derived from the weighted average of 8 capital cities Consumer Price Index for housing in 1989–90 dollars. The use of this index leads to underestimation in periods of rising interest rates and overestimation in periods when interest rates fall sharply. 7 Nominated Loan Council Funds are borrowed funds. They cannot be compared in simple dollar terms with grants.
108 INDUSTRY COMMISSION D CSHA FUNDING ARRANGEMENTS
Figure D.1: Source of CSHA funding, nominal prices, 1974–75 to 1991–92 $m 4500
4000 Private sector
3500 Loan Council
3000 State
2500 C’wealth
2000
1500
1000
500
0 74- 75- 76- 77- 78- 79- 80- 81- 82- 83- 84- 85- 86- 87- 88- 89- 90- 91- 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 Source: DHHLGCS (1992c); and unpublished data provided by DHHLGCS.
Figure D.2: Source of CSHA funding, constant 1989–90 prices, 1974– 75 to 1991–92
$m 4500 Private sector 4000 Loan Council 3500 State 3000 C’wealth 2500
2000
1500
1000
500
0 74- 75- 76- 77- 78- 79- 80- 81- 82- 83- 84- 85- 86- 87- 88- 89- 90- 91- 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92
Source: DHHLGCS (1992c); and unpublished data provided by DHHLGCS.
INDUSTRY COMMISSION 109 PUBLIC HOUSING
State governments continued to favour loan funding until the 1989 CSHA. Since the 1989 CSHA, States have been required to match Commonwealth grants with grants. State grants are mainly for public housing and were progressively increased to at least 50 per cent of the State matching requirement from 1992–93 onwards. The remaining State matching funds can be as loans for approved home purchase assistance programs. States may, if they wish, lend monies to the State housing authorities over and above their obligatory matching funds. The recent increase in funds, borrowed from the private sector, has substantially expanded loan funds available under CSHA home purchase assistance programs. The 1989 CSHA actively encourages this use of private funds. States are allowed to provide up to 50 per cent of their matching requirements as borrowings for this purpose. The Agreement also allows borrowing for schemes that operate on a commercial basis to be treated as outside the Australian Bureau of Statistic’s classification of financial activity counted towards a State’s surplus or deficit (DHHCS 1991a, p. 23).8 Since 1988, funding relationships between the Commonwealth and States have shifted significantly. Nominated housing advances, provided under States’ Loan Council programs, were transferred into CSHA grants in 1989–90 and States were required to make grants to their housing authorities. One reason for this was to improve the financial viability of public housing by reducing debt. It was agreed at the June 1990 Loan Council meeting that Commonwealth debt to the private sector acquired on behalf of the States would be replaced by State debt to the private sector. This placed full responsibility on the States for financing and managing their own debt. Debt management requirements were also partly responsible for the increasing use of private sector funds in recent years (mainly for home purchase funding) as States tried to comply with their Loan Council borrowing limits. The funding trends, illustrated in Figures D.1 and D.2, have resulted in a major build up of debt. The 1988 Review established that if the financing arrangements under the 1984 Agreement were allowed to continue, there would be a rapid and substantial decline in the number of new houses supplied under the CSHA, with Commonwealth grants increasingly being used to cover the cost of mounting interest charges on State borrowings. For example, in 1987–88, 30 per cent of the $813 million State matching funds were loans, 13 per cent were grants and 40 per cent were home purchase assistance revolving funds.
8 Further to this, the 1992 Loan Council meeting agreed that State home finance schemes, that operate on a commercial basis, would be treated as outside the global limits, but that any concessionary elements of such schemes be included within the global approach (Treasury (1992), Budget Paper No. 4, p. 62). See Figure D.5 for more detail.
110 INDUSTRY COMMISSION D CSHA FUNDING ARRANGEMENTS
The revolving funds, under the CSHA, had to be reapplied to housing assistance whether or not they were included as matching funds (National Housing Policy Review 1988, p. 117). Since 1984–85 Commonwealth and nominated Loan Council funds have mainly gone towards public housing while the private funds have predominantly been used for home purchase assistance. This is illustrated in Figure D.3.
Figure D.3: CSHA funding for public housing and home purchase assistance by funding type 1984–85 to 1991–92 $m 7000
6000
5000
4000
3000
2000
1000
0 Nominated C’wealth State funds Private Nominated C’wealth State funds Private Loan funds funds Loan funds funds Council Council funds funds ______Public housing Home purchase assistance
Note: Includes other State housing program funding Source: Unpublished data provided by DHHLGCS.
If funds for home purchase assistance are netted from the CSHA funding but not debt repayments, then funding in real terms for public housing was relatively constant between 1985–86 and 1991–92 (see Figure D.4).
Debt State debt through CSHA arrangements for public housing at June 1993 is shown in Table D.3. About 70 per cent of this debt is directly to the Commonwealth. Little of the debt to the Commonwealth has been retired. This
INDUSTRY COMMISSION 111 PUBLIC HOUSING
is understandable because the loans were at concessional rates for 53 years.9 Following negotiations with the Defence Housing Authority concerning the conversion of housing for service personnel to use as public housing, most States increased public housing and their debt to the Commonwealth above that incurred through the CSHA housing advances and Nominated housing loans as detailed in Table D.4. Also, when the Northern Territory gained self- government in the late 1970s, the housing authority purchased Commonwealth staff housing, taking on a consequent substantial increase in debt. Box D.1 describes housing authority debt for public housing to other than the Commonwealth. Table 3.1 in Chapter 3 gives overall public housing debt by State.
Figure D.4: CSHA funding excluding home purchase assistance funding, 1984–85 to 1991–92 in 1989–90 prices
$m 2500
2000
Private sector 1500 Loan Council State 1000 C’wealth
500
0 1984-85 1985-86 1986-87 1987-88 1988-89 1989-90 1990-91 1991-92
Sources: DCSH (1988, 1990); DHC (1987); DHHCS (1991a); ABS (1993b); unpublished data provided by DHHLGCS.
Details of Commonwealth and State grant funding for 1984–85 to 1987–88 in Table D.5 show the limited use of State grant funding in those years. Thus, most of the State funds in Figures D.1 and D.2 were funds borrowed from the private sector with the debts repayable by the State housing authorities.
9 Interest rates on loans taken out between 1945 and 1968 ranged from 3 to 4.4 per cent. The rates between 1969 and 1984 were between 4 and 6 per cent with Commonwealth loans for State home purchase programs fixed at 4.5 per cent from July 1973.
112 INDUSTRY COMMISSION D CSHA FUNDING ARRANGEMENTS
Table D.3: State debt to the Commonwealth under the CSHA by loan type, at 30 June 1993 ($m)
State Housing advances Nominated housing loans Total
NSW 1 292.4 521.2 1 813.6 Vic 1 024.9 507.0 1 532.0 Qld 359.7 188.2 547.9 WA 340.6 322.5 663.2 SAa 499.9 314.9 814.8 Tas 229.0 159.8 388.9 ACTb 284.2 0 284.2 NT 37.4 180.4 217.8 All 4 068.2 2 194.0 6 262.1 a Excludes $350.2 million of debt waived for South Australia. b ACT debt was negotiated when ACT gained self-government. Source: DHHLGCS communication.
Table D.4: State loans from the Commonwealth under the CSHA by type, at 30 June 1992 ($m)
Housing advances Nominated housing loans For public For home Total For public For home Total State housing purchase borrowed housing purchase borrowed
NSW 1 195.5 434.8 1 630.3 536.0 0 536.0 Vic 902.9 407.2 1 310.1 419.5 103.8 523.3 Qld 270.7 178.0 448.7 0 194.0 194.0 WA 307.6 124.1 431.7 129.2 203.7 332.9 SAa 360.5 331.7 692.3 568.4 43.6 612.0 Tas 199.1 71.1 270.2 142.6 22.0 164.6 ACT000 000 NT 0 39.7 39.7 170.1 14.6 184.7 All 3 236.4 1 586.7 4 823.0 1 965.8 581.6 2 547.4 a $276.2 million of nominated Loan Council Fund debt and $74.0 million of housing advances owed by South Australia was waived by the Commonwealth. Source: DHHLGCS communication.
INDUSTRY COMMISSION 113 PUBLIC HOUSING
Table D.5: Commonwealth and State grant funding by State, 1984–85 to 1987–88 ($m)
Grants by NSW Vic Qld WA SA Tas NT Total
1984–85 C’wealth 193.1 142.2 78.6 58.8 71.2 27.1 30.6 601.6 States 29.1 (164) 0 1.0 6.1 14.7 0 50.8 1985–86 C’wealth 204.6 149.8 88.1 61.4 71.1 27.0 29.8 631.7 States 0.6 0 0 17.4 0.9 2.9 0 21.9 1986–87 C’wealth 217.8 158.9 98.6 64.7 71.4 27.0 31.2 669.6 States 18.8 0 0.9 1.7 13.1 13.6 0 48.1 1987–88 C’wealth 220.9 160.2 104.6 65.4 68.1 25.5 30.2 675.0 States 4.2 0 1.8 13.2 17.8 13.5 na 49.9 na Not applicable. Notes: Brackets indicate losses. Grants exclude grants applied to Mortgage and Rent Relief. Estimates of State grants were based on the Coopers and Lybrand’s study of State housing authority accounts. Source: DCSH (1989a, p. 171).
Capital grants and concessional loans Since the 1989 Agreement, Commonwealth and State capital grants have been the prominent means of funding public housing. In order to provide these grants, the public sector borrowing requirement (PSBR) is increased. Thus behind grants is public sector debt with direct costs equal to management costs and the interest rate paid on the associated debt. These subsidies to the State housing authorities hide the true cost of the housing program. They contribute to the lack of transparency which shrouds public housing finances. Commonwealth debt or State Treasury Corporation debt can generally be raised at a lower cost than any other means available to governments. However, the subsidies should be made explicit in the accounting process.
114 INDUSTRY COMMISSION D CSHA FUNDING ARRANGEMENTS
Box D.1: Debt for public housing to other than the Commonwealth Most New South Wales non-Commonwealth debt for public housing is to the NSW Treasury Corporation and was issued between 1990 and 1993. The loans are due to mature in 6–8 years and have an interest rate of 11–12 per cent. The almost $13 million owed to the private sector is for State loans taken out during 1960–83 at interest rates of 3.5 to 6 per cent over 53 years. About half of Victorian non-Commonwealth debt is from long-term, low- interest State loans. Another 30 per cent of the debt is in loans from Treasury Corporation which have an interest rate of 12.5 per cent and mature in 1996. The remainder is mostly short-term debt where the interest rates of the loans range from 5.5–14 per cent. Because of the corporate treasury approach which the authority takes, some of this debt applies to home purchase assistance. In Queensland all non-Commonwealth debt for public housing is in the form of a loan from the Queensland Treasury Corporation. The loan was taken out in 1990 at an interest rate of 8 per cent and will mature in 2002. South Australian Housing Trust public housing non-Commonwealth debt comprises about two thirds to the State at interest rates of 4 to 5.7 per cent ($63 million of which matures in 20 years and the rest in 38–49 years) and about one-third as interest only Common Public Sector Interest Rate loans at an average rate of 11.75 per cent. About 95 per cent of Homeswest non-Commonwealth public housing debt is to the State and is from loans obtained through the Western Australian Treasury Corporation from State allocations of Loan Council programs. These loans which mature between 2019 and 2042 have interest rates of 4.5 to 6 per cent, apart from $43 million that has an 11.9 per cent interest rate. A further $9 million which Homeswest owes directly to the private sector also faces low interest rates (5.125 to 7.4 per cent) and a long time to discharge (14 to 20 years). In Tasmania, the debt owing to the State is repayable over 6 years at an interest rate of 11.946 per cent. There are no private sector borrowings. All non-Commonwealth Northern Territory housing authority debt is to the Northern Territory Treasury. The loans have interest rates mostly between 3.5 and 7 per cent and mature between 2021 and 2042. The ACT Housing Trust non-Commonwealth debt is an interest only loan from the ACT Treasury at 12.66 per cent which matures in 1994–95.
INDUSTRY COMMISSION 115 PUBLIC HOUSING
Most of the Commonwealth debt held by housing authorities for public housing is now repaid with Commonwealth grant money, reducing the grant funds available for public housing expansion. But most, if not all, Commonwealth debt for home purchase activities is paid directly from the Home Purchase Assistance Account. Thus Figure D.4, which includes all of the Commonwealth grant monies used to repay Commonwealth CSHA principal and interest (and not just that owing on public housing activities) may marginally overstate funds available for public housing. Figure D.4 is also deceptive in that the State funds shown for 1985–86 to 1988–89 are mostly funds borrowed from the private sector while those for 1989–90 to 1991–92 are grants to the authorities. Governments, by providing concessional loans, forgo some of the interest due on monies borrowed by them and must also increase the PSBR to provide the concession. Figure D.5 illustrates the size of the interest rate differential for concessional and non-concessional loans.
Disbursement of funds
Per capita basis Since 1992–93, Commonwealth CSHA ‘untied’ funds have been distributed to the States on a per capita basis subject to a guaranteed minimum payment. This is a substantial change from the regimes of the 1973 and 1978 Agreements where funds were allocated on the same proportional basis as Loan Council Nominations by States (Egan 1993, p. 12). The 1981 Agreement was the first to give a base level of funding and to introduce payments for specific activities. From 1982–83 onwards, State allocations were adjusted each year so that the trend was towards per capita allocation of untied funds (House of Representatives 1981, p. 2440).
Direction of fund distribution Under the current CSHA, Commonwealth and State governments provide capital grants to the housing authorities. The 1989 Agreement specifies that most of the grants be paid to an account which mainly provides funds for public housing construction, purchase or renovation. To the extent that funds are used for that purpose, assistance is for potential public housing residents. Since 1991–92, 100 per cent of repayments (to the Commonwealth) of principal and interest may be paid out of that account. From 1 July 1993, States may only pay principal and interest to the Commonwealth from that account up to an amount equal to any loss on rental operations in respect of that year. This method of financing does not enhance transparency.
116 INDUSTRY COMMISSION D CSHA FUNDING ARRANGEMENTS
Figure D.5: Long-term Commonwealth interest rates,1950 to 1984 per cent 18 16 14 12 10 8 6 4 2 0 1950 1955 1960 1965 1970 1975 1980
Interest rates on Commonwealth housing Long-term Commonwealth bond rate loan funds
Sources: DHHLGCS communication; Norton & Aylmer (1988).
Internal funds Both the public housing and home purchase assistance programs generate internal funds. In 1991–92, almost 20 per cent of funds available for home purchase assistance were from loan repayments. The main source of internal income from public housing operations is rental income. In recent years, rental income has been about $1 billion (see Table D.6). Rent rebates have been rising, as has the number of households receiving them. The number of households receiving rebates will continue to remain high as entry to public housing is targeted to low-income people. The total rent rebates bill is unlikely to continue to grow at recent rates of increase as the States have been moving towards market rents.
D.2 CSHA accounting structure There are three ‘accounts’ underpinning the CSHA. They are: • The Rental Capital Account which is used to manage funds for public housing construction, major maintenance and renewal; • The Home Purchase Assistance Account which manages funds for home purchase programs; and
INDUSTRY COMMISSION 117 PUBLIC HOUSING
• The Current Account which caters for recurrent expenditure for public rental housing activities. There is also a mechanism to allow accounting flexibility in moving funds from the Rental Capital Account — the General Allowance. Up to 25 per cent of Commonwealth untied grants and State matching grants paid into the Rental Capital Account each year may be transferred under this mechanism. The relationships between the 3 accounts and the allowance are illustrated in Figure D.6.
Table D.6: Public housing rental income, rental rebates and households on rebated rents in Australia, 1986–87 to 1991–92
Rent income Rent rebates Households on rebated Year rents
$m $m ’000 1986–87 655.4 347.0 192.6 1987–88 742.6 419.6 205.1 1988–89 824.5 578.1 212.4 1989–90 926.6 735.6 227.1 1990–91 1 019.3 794.5 236.9 1991–92 1 064.9 882.9 251.5
Note: Queensland and Tasmania do not explicitly rebate rents. Queensland and Tasmania set rents as a proportion of income. Sources: DCSH (1988; 1990c); DHC (1987); DHHCS (1991a; 1992); unpublished data provided by DHHLGCS.
Rental Capital Account The flow of funds into the Rental Capital Account are detailed in Box D.2. The purposes to which funds are applied are detailed in Box D.3. Funds in the Rental Capital Account are mainly used for public housing development. Repayments (to the Commonwealth) of principal and interest may also be made from that account. From 1991–92, 100 per cent of repayments may come from the account, rising from 75 per cent in earlier years. Since 1 July 1993, States may only pay principal and interest to the Commonwealth from that account up to any loss on rental operations for that year. In 1990–91, with the Minister’s approval, Tasmania and the Northern Territory used Rental Capital Account funds to pay all Commonwealth principal and interest payments.
118 INDUSTRY COMMISSION D CSHA FUNDING ARRANGEMENTS
Figure D.6: Financial flows for public housing
Commonwealth Cash surplus on Rental income Government rental operations grants
Land & rental housing Interest State Rental Government Current Capital Account grants & loans Account Upgrading & renewal State housing Commonwealth authority sale interest subsidy of assets Principal & interest repayments to Commonwealth Funds to General Rates & housing groups Allowance charges Joint ventures, shared Consultancies ownership schemes Maintenance & information Other principal provision & interest repayments Leasing Home Purchase Loans arrangements Assistance Account Private borrowings Repayments Management Rental subsidies State Govt Mortgage loans & grants funds
Internal Rental Capital Shared equity funds Account (above) schemes Other
Source: Industry Commission
INDUSTRY COMMISSION 119 PUBLIC HOUSING
Box D.2: Rental Capital Account inflows The Rental Capital Account contains the following funds: • All untied assistance paid by the Commonwealth to the State under the agreement during the year; • Specific housing assistance grants; • Grant matching funds; • Cash surplus of revenue over outgoings, arising from rental operations; • Net proceeds from the sale of rental housing and land acquired under previous and current housing agreements; • State monies which the State wishes to apply to CSHA rental assistance activities; and • Any other funds as agreed between the Commonwealth and State Ministers (Housing Assistance Act 1989, s.22).10
As most monies in the Rental Capital Account cannot be used for recurrent expenditure, the Rental Capital Account sets the boundaries for the rate at which public housing can expand. States can increase the rate of public housing expansion by selling off land and dwellings in areas where it would be appropriate, if replacement dwellings are cheaper. The current arrangements provide no incentives for public housing managers to do this. In allowing Commonwealth principal and interest payments to be paid largely through the Rental Capital Account, the Commonwealth is acknowledging the cash flow difficulties faced by State housing authorities. Principal and interest transferred to the Commonwealth through the Rental Capital Account in 1991– 92 was $200.1 million out of $370.9 million owed (for both public housing and home purchase assistance). Both Victoria and the Northern Territory used the full extent of their principal and interest allowance to repay the Commonwealth through the Rental Capital Account in 1991–92. However, Victoria transferred $41.4 million into the Rental Capital Account from the Home Purchase Assistance Account. The Northern Territory has substantially greater public housing debt repayments than the allowance agreed to under the 1989 CSHA.
10 In 1989–90, any unspent financial assistance and State matching funds provided under previous housing arrangements unspent at 1 July 1989 were put in the Rental Capital Account.
120 INDUSTRY COMMISSION D CSHA FUNDING ARRANGEMENTS
State debt to other sources for public housing, however, must be met from the Current Account. Income into the Current Account is largely from public housing rents.
Box D.3: Rental Capital Account outgoings The Rental Capital Account funds may be used to: • Construct rental housing, acquire, plan and develop land for rental housing development, provide open space, landscaping, community facilities and meet costs associated with land development, including contributions to headworks and reticulation of services, directly related to rental housing; • Upgrade rental housing; • Purchase housing for rental; • Engage in urban renewal activities relating to rental housing; • Allocate funds to local government bodies for the construction or purchase of rental housing; • Participate in joint ventures, co-operative enterprises or similar arrangements to provide rental housing integrated with private housing to achieve a desirable socio-economic mix; • Construct or purchase dwellings for rental to participants in shared ownership schemes; and • Pay principal and interest falling due during the year on Commonwealth loans provided to the State under previous housing agreements (Housing Assistance Act 1989, s.23(1)).
General Allowance The General Allowance identifies funds in the Rental Capital Account which may be used for public rental housing other than capital expenditure (see Box D.4). The available funds and application of the General Allowance for 1990– 91 are shown in Table D.7. About 30 per cent of untied Commonwealth grants and State matching grants available in 1991–92 as General Allowance, were used. All States except
INDUSTRY COMMISSION 121 PUBLIC HOUSING
Queensland have used the General Allowance. New South Wales, Victoria and South Australia have used it each year over 1989–90 to 1991–92.
Table D.7: General Allowance — funds available and purpose to which they were applied, 1991–92 ($m)
Item NSW Vic Qld WA SA Tas ACT NT Total
Funds to housing 9.09 12.88 5.90 27.87 groups Leasing and lease 13.84 13.84 subsidies Subsidies to private 2.79 0.35 3.13 renters Transfers to HPAA 4.99 4.99 Consultancies 0.01 0.05 0.05 Information 4.94 0.98 5.92 provision Tenant and 9.86 7.68 17.54 community support Other 0.01 0.11 0.11 Funds used 22.93 22.75 0 0 18.52 0 2.79 6.47 73.45 Funds available 91.70 55.76 34.48 20.52 19.83 8.59 4.44 6.66 241.98
Source: Unpublished data provided by DHHLGCS.
D.3 Understanding the accounts The 1989 CSHA included procedures to improve accountability. Limits were placed on funding discretion by requiring certain funds to be put into the Rental Capital Account and into the Home Purchase Assistance Account. As well, limitations were placed on the purposes to which funds in these accounts could be applied. The 1993 amendment to the Agreement further limited funding discretion by changing the timing of Commonwealth grant payments from monthly payments to funding based on a State’s forward expenditure plan. The Annual Reports of the housing authorities do not enhance transparency. They fail to identify costs of services provided, cost recoveries or resource control. The accompanying accounts fail to disclose relevant information about cash flows (for example, details of proposed expenditure plans and reasons for
122 INDUSTRY COMMISSION D CSHA FUNDING ARRANGEMENTS
any failures to meet those objectives; and details of any borrowings) and how well the operating objectives and were achieved.
Box D.4: General Allowance outgoings The General Allowance may be used by the States: • To provide funds to organisations such as non-profit, charitable bodies, rental housing co-operatives, voluntary bodies, local government bodies and other housing management bodies or groups as are approved by the State Minister; • Where agreed between the State and Commonwealth Ministers: – to lease, – to subsidise leasing, and – to subsidise other arrangements not of a capital nature in relation to, rental housing; • To provide rental subsidies for renting private housing for those who are unable to obtain or maintain affordable finance for adequate and appropriate housing purchase from the private sector or from other sources outside the Agreement; • For payment into the Home Purchase Assistance Account up to a level of 15 per cent of the Commonwealth untied grants and State matching grants paid into the Rental Capital Account; • To meet costs associated with: – consultancies related to development of Commonwealth–State plans, – the provision of information to the Commonwealth which is required under the Agreement; or • For any other purpose agreed between the State and Commonwealth Ministers (Housing Assistance Act 1989, s.23(2)).
INDUSTRY COMMISSION 123 PUBLIC HOUSING
Housing authorities control at least $31 billion of housing assets yet there is no means of determining whether those assets are well used. For example, the published accounts do not enable a rate of return on the funds used to be calculated. Mant (1992, pp. 16–18) recently attempted to estimate rates of return for activities of the NSW Department of Housing. He found it necessary to restructure the accounts into 9 activity lines11 and attribute all of the relevant costs to each of the Department’s core activities including apportioning corporate support and overhead costs. He estimated a 3 per cent return on the building asset conservatively valued at $13 billion. No analysis of accountability would be complete without some assessment of how well the State housing authorities achieve non-financial objectives. Some authorities provide some information in their Annual Reports, but it does not appear to be a State reporting obligation under the Housing Assistance Act. A number of accounting practices stemming from the CSHA could contribute to poor performance and accountability. First, public housing and home purchase assistance activities are not readily separated, despite separate accounts — the Rental Capital Account with its current account and the Home Purchase Assistance Account. Housing authorities have given the Commission details of fund transfers between the Rental Capital and the Home Purchase Assistance Accounts since 1989. Only South Australia has used the Rental Capital Account to meet home purchase assistance debt ($16.6 million). New South Wales has provided capital support to the Home Purchase Assistance Fund of $95 million from the Rental Capital Account. Victoria ($229.2 million), Western Australia ($95.1 million), the ACT ($48.8 million) and Tasmania ($5 million) have transferred funds from the Home Purchase Assistance Account to the Rental Capital Account for use in public housing activities. Queensland and the Northern Territory have made no transfers. The presence or absence of money in the Rental Capital Account does not reflect management skill in tending the resources put to that account. Other data are needed to judge the quality of spending from that account. Also, balances can be altered by changing the cash surplus on rental operations transferred or through the level of sales of land and dwellings (see Tables D.8 and D.9).
11 Estate management; procurement of dwellings; housing assistance; housing finance; land banking; land development and retailing; home purchase assistance; consumer services; and housing policy.
124 INDUSTRY COMMISSION D CSHA FUNDING ARRANGEMENTS
Table D.8: Balance of Rental Capital Account brought forward by State, 1989–90 to 1992–93 ($m)
Year NSW Vic Qld WA SA Tas ACT NT Total
1989–90 425.7 - 22.3 19.2 - - - 17.0 484.1 1990–91 233.5 - - 45.0 - - - 22.9 301.4 1991–92 134.9 - - 36.6 - 6.1 - 27.9 205.4 1992–93 -42.5 - - 65.8 9.8 9.6 0.4 14.3 57.4
Sources: DHHCS (1991a, 1992c); unpublished data provided by DHHLGCS.
A sizeable carryover of funds in the Rental Capital Account would be appropriate in the short-term if, for example, land and dwellings that give a poor return in their current use or are not well placed to meet the needs of prospective tenants are sold. The purchase of properties which give a higher return and are more appropriate for current or expected needs of the State housing authorities could be deferred to a new accounting period.
Table D.9: Receipts from the sale of land and dwellings by State, 1989–90 to 1991–92 ($m)
Year NSW Vic Qld WA SA Tas ACT NT Total
1989–90 45.3 55.9 3.1 12.1 37.2 6.3 0.6 1.2 161.7 1990–91 136.8 14.9 4.1 9.0 41.1 6.7 0.5 8.4 221.4 1991–92 33.7 20.9 8.8 9.4 34.4 5.6 8.7 10.0 131.5
Sources: DHHCS (1991a, 1992c); unpublished data provided by DHHLGCS.
Second, subsidies are not explicitly included in the financial accounts. For example, rental rebates are not factored into the accounts published in the Housing Assistance Act 1989 annual reports (although sometimes State housing authorities do this of their own accord). When rebates are not factored into the accounts, State housing authority activities are less transparent. Third, minor maintenance is paid from the current account; major maintenance and renewal from the capital account. These arrangements do not necessarily encourage a best practice combination of minor and major maintenance. Spending on maintenance, as reported by State housing authorities, declined from about $1300 per dwelling in 1985–86 to about $700 per dwelling in 1990– 91. This decline may reflect increased efficiency of delivery of maintenance,
INDUSTRY COMMISSION 125 PUBLIC HOUSING
but there is some evidence that minor maintenance is the residual element in the current account. If this is so, then minor maintenance is likely to be forgone when funds are tight. Fourth, the current arrangements do not treat depreciation as a cost to public housing and so understate the costs of providing public housing. Unless there are other arrangements to cover maintenance (for example, through renewals accounting), depreciation allowances should be explicitly included in the accounts. Funds are not put aside for housing renewal or major renovation activities. Until depreciation is recognised, a sustainable public housing sector will always need additional funds for this purpose. Accountability in the use of funds has increased, but lack of transparency remains. DHHLGCS stated: It is notable that State housing authorities typically achieve close to break-even result on their rental operations (ie operating revenue is roughly equal to operating costs — which was expected by the Commonwealth under these arrangements), so the absence of a capital charge represents a convenient way of providing the implicit subsidy level, which is approximately equal on average to the cost of funds. If governments were to charge State housing authorities for the use of grant capital provided under the CSHA, they would of course also need to provide a subsidy to State housing authorities to enable them to meet the charge (sub. 213, p. 58). Whether the funding arrangements lead to a sustainable public housing sector is open to question. But improved financial and qualitative accounting could lead to the authorities focusing more clearly on management of both the property and tenant aspects of public housing. A 1989 report on the financial operations of State housing authorities found that all States except Queensland had losses on their rental operations (see Table D.10).
Table D.10: Cash outcomes of public housing rental operation by State, 1984–85 to 1987–88 ($m)
Year NSW Vic Qld WA SA Tas NT Total
1984–85 2.4 (29.4) 19.8 (19.2) (12.8) (16.7) (16.2) (72.1) 1985–86 (22.6) (42.1) 21.3 (27.8) (21.8) (13.9) (17.4) (124.3) 1986–87 (28.7) (45.2) 20.9 (27.6) (37.6) (15.1) (25.7) (159.0) 1987–88 (49.0) (56.7) 23.5 (29.6) (19.4) (20.1) na (151.4) na Not applicable Note: Brackets indicate losses. Source: DCSH (1989a, p. 172).
126 INDUSTRY COMMISSION D CSHA FUNDING ARRANGEMENTS
D.4 Subsidies to housing authorities Part of the Commonwealth grants for public housing could be regarded as equivalent to a DSS or DVA rent assistance component. The remaining grants and earlier loans include a subsidy element stemming from zero to concessional rates of interest. It is difficult to determine the extent of the capital subsidies to the State housing authorities for public rental operations. Under the current arrangements: • The Commonwealth subsidises new funds by giving grants for public rental operations which must be put to the Rental Capital Account; and • The States subsidise new funds by giving grants for public rental operations which must be put to the Rental Capital Account (and also may subsidise loans to the Home Purchase Assistance Account). These funds may be provided from tax revenues or by borrowing. The mix is indeterminate and therefore so are the subsidies. Under previous Agreements both the Commonwealth Government and the State governments made grants and loans to the State housing authorities. Subsidies existed in the grants. Subsidies only exist in the loans to the extent that interest was at concessional rates.
D.5 Accrual accounting The current accounting arrangements do not attempt to fully cover or report the costs of public housing provision. There is no commonly agreed basis for valuing the housing and other State housing authority assets, and no provision for depreciation in the Housing Assistance Act annual reports. Houses are reported by number of dwellings only — no value is given. Public houses, the major asset of State housing authorities, have a life of say 30 to 50 years and a current value in excess of $31 billion. The worth of these assets may bear little relationship to their construction or purchase costs. As Graham and Xavier observe: It has long been recognised that, particularly where inflation is significant, accounts drawn up on historical cost conventions are misleading especially where assets are long-lived. Balance sheet figures of original cost do not represent the values of assets to the business, profits and financial trends are misrepresented. If accounts are to show resource use and economic performance they must allow for general inflation, fluctuations in specific prices and costs, and for technological progress resulting in changes to the value of capital equipment (1987, p. 19).
INDUSTRY COMMISSION 127 PUBLIC HOUSING
If the long-lived assets are measured using historical cost asset valuation, the cost of capital employed in providing the houses or holding the land is likely to be understated. Two possible methods of valuing the current cost are the discounted future income stream approach and the replacement cost approach. The discounted future income stream approach estimates the value of assets with respect to the future income that will be generated for the housing authorities. The method estimates a market price for the assets. It may not always be easy to estimate a market value in the case of public housing estates. There could also be difficulties in estimating earnings potential in the presence of uncertainty on the tenure of tenants — particularly long-term tenants with declining incomes who live in areas of potentially rapidly increasing rents. However, this approach accounts directly for poor investment decisions. Low asset values arrived at using this technique may therefore partly reflect poor asset management or pricing policies which do not fully recoup costs. The replacement cost approach of valuing assets at their (written down) replacement cost fails to directly account for ill-judged investments. It also ignores technological improvements which reduce the cost of providing services but there are techniques available to overcome this difficulty. It would be impractical to revalue all of an authority’s assets each year. Monitoring is not costless and therefore some lumpiness in changes in asset valuation may be inevitable. In the Commission’s view, the use of accrual cost accounting by all State housing authorities would signal to the managers and the community that the authorities are accountable for both the resources they control and their performance in using those resources. Accrual accounting is directed at reporting assets and liabilities and changes in them. Accrual cost accounting procedures recognise the financial effects of transactions and other events in the reporting period in which they occur, irrespective of whether cash has been received or paid. The accrual basis of accounting would ensure that the economic resources (assets) and obligations (liabilities) of the authorities, the cost of activities (expenses) and cost recoveries, and other revenues all appear in the statement of accounts. Current cost asset valuation is only one aspect of accrual accounting.
128 INDUSTRY COMMISSION D CSHA FUNDING ARRANGEMENTS
Bibliography ABS (Australian Bureau of Statistics) 1993, PC Ausstats. Australia, House of Representatives 1981, Debates, vol. 123, 26 May–10 June. Australia, Senate 1981, Debates, Coopers and Lybrand 1989, reported in DCSH (1989, pp. 170–2). DCSH (Department of Community Services and Health) 1988, Housing Assistance Act 1984 Annual Report 1986–87, AGPS, Canberra. —— 1989, Housing Assistance Act 1984 Annual Report 1987–88, AGPS, Canberra. —— 1990, Housing Assistance Act 1984 Annual Report 1988–89, AGPS, Canberra. DHC (Department of Housing and Construction) 1987, Housing Assistance Act 1984 Annual Report 1985–86, AGPS, Canberra. DHHCS (Department of Health, Housing and Community Services) 1991, Housing Assistance Act 1989 Annual Report 1989–90, AGPS, Canberra. —— 1992, Housing Assistance Act 1989 Annual Report 1990–91, AGPS, Canberra. Egan, R.J. & Associates Pty Ltd 1993, The Development of Rental Housing policies and Programs in Australia under the Commonwealth State Housing Agreement Mant, J. 1992, National Housing Policy Review 1988, Final Report, mimeo, (D. Persson, Director), February. Norton, W.E. & Aylmer, C.P. 1988, Australian Economic Statistics, 1949–50 to 1986–87, Occasional Paper No. 8A, Reserve Bank of Australia.
INDUSTRY COMMISSION 129 E EVALUATION OF HOUSING ASSISTANCE APPROACHES
In order for low-income tenants to have an adequate standard of shelter and to have sufficient income to meet other needs, after paying for their housing costs, some form of assistance is required. Whether this assistance should be provided through public housing or through rental vouchers or cash rental assistance payments to help people rent in the private market is a hotly debated question. This question is the main focus of this Appendix; but first, the more general issue of whether general income support is preferable to assistance targeted towards housing is discussed.
E.1 Housing assistance or cash payments for general income support? The argument for general income support is that it leaves recipients free to determine the proportion of their income that is spent on rent. Other things being equal, people will gain more satisfaction from a given amount of government expenditure (on assistance to them) if they, not the government, decide how the cash should be spent. However, there are counter arguments that assistance should be more closely tailored to recipient needs and that other things besides the level of recipients’ satisfaction must be taken into account. These include the following.
Targeting When income support is given to a family, the spouse and children are amongst the intended beneficiaries. With tied support such as housing assistance, either subsidised public or private provision, there is more certainty that they receive benefits. Also, there is a self-selection argument why targeting may be better. It is that everyone has an incentive to obtain cash, because cash is always of value to recipients regardless of need, while some forms of assistance are only of value
INDUSTRY COMMISSION 129 PUBLIC HOUSING
to those who are genuinely in need.1 In this context, the opportunity to rent public housing of modest amenity at a discount is unlikely to have the universal appeal that an offer of cash has.2
Moral hazard and fraud A related problem with cash payments is that perverse incentives can arise. If recipients believe the government will quickly assist them with cash if they appear to be in financial difficulty.3 If government makes a commitment to welfare provision (where necessary), some potential recipients may behave in a manner likely to increase their level of assistance. Furthermore, if given cash some may not spend adequately on necessities in the expectation that this may elicit further support.4 A further difficulty with cash is that it can be more easily and less visibly misappropriated than some forms of tied or in-kind transfer, such as public housing.
Socially desirable externalities External benefits from adequate affordable housing include fewer social problems, better public health, lower crime and better cities.5 As the Inquiry into British Housing stated: ‘The negative aspects of our lives — ill health, vandalism and crime, racial prejudice, loneliness, mental illness, family break-up — are multiplied and exaggerated by
1 The most obvious form of ‘in-kind’ support that is only of value to those in genuine need is medical care (for example a heart transplant). With most in-kind support those who are not in genuine need may also value the assistance, although their personal valuation is likely to be less than that of those targeted. Consequently, if a barrier is created a certain amount of ‘self-selection’ is likely to take place because only those with a higher (personal) valuation are likely to attempt to hurdle it. The self-selection approach, in the context of optimal taxation, is examined in Stern (1982), Stiglitz (1982) and in Nichols and Zeckhauser (1982) as well as more recently in Boadway and Keen (1993). 2 This point is noted in Nichols and Zeckhauser (1982). 3 This is referred to in economics as a ‘moral hazard’ problem. It expresses a concern that those receiving assistance may make little effort to adequately house themselves in the expectation that their plight will invoke greater levels of support. 4 With cash payments, it would be costly and intrusive to distinguish between genuine and undeserving recipients. 5 These benefits can be reduced where provision is inappropriate, for example, with poorly designed public housing.
130 INDUSTRY COMMISSION E EVALUATION OF HOUSING ASSISTANCE APPROACHES
housing shortages and bad housing conditions. The cost of curing these social ills is correspondingly increased’ (1985, p.3). The case against poorly designed, and otherwise inadequate and inappropriate accommodation is forcefully documented in Coleman (1990). She concludes: Social breakdown, like charity, begins at home. Psychologists have long stressed the importance of the home, as a family, during the child’s formative years, and we now stress its importance as a place. Shared nests, however lovingly designed by experts, can interfere with the quality of parenting and colour the attitudes of generations reared in them (p. 170). Social externalities are difficult to confirm or quantify.6 The community’s perception of their significance can nevertheless influence the ways in which it chooses to provide housing assistance.
Taxpayers’ preferences Many taxpayers prefer assistance to be given in-kind to individuals who they consider need to be looked after.7 They may prefer this approach because they are happy for money provided by taxpayers to be spent on such things as housing, but object to taxpayers providing money which may be spent, for example, on alcohol. They may also prefer the approach because they believe that their evaluation with respect to what is good for the recipient is better (than the recipient’s own view). In some cases, for example, when it comes to support for those with mental illness, almost everyone agrees that this is so. Just as some taxpayers prefer assistance to be given in-kind, others are known to prefer it to be given only in cash.8 Ignoring taxpayers’ preference for a mode of delivery is difficult to justify. To the extent that they are willing to subsidise ‘merit’ goods, to further their own wishes, there can be no cogent argument against what results in mutual advantage.
6 For detailed discussion of housing externalities see also Glazer (1967), True (1979), Appelbaum (1986), Stretton (1986), Kendig (1990) and Hills (1991). 7 Whereas other taxpayers support for in-kind assistance may simply express sentiments as to what constitutes a good society (Thurow 1974). 8 This is sometimes referred to as the consumer sovereignty argument (although not all of its proponents advance this argument in a strongly prescriptive form).
INDUSTRY COMMISSION 131 PUBLIC HOUSING
Social justice Governments’ interventions are often on grounds of social justice. With regard to housing in general and low-cost accommodation in particular, concern for social justice has been a stated imperative of the Commonwealth Government. National Shelter in its submission argues that adequate affordable shelter is a ‘right’ as a matter of social justice (sub. 115). Devereux (1992) states that, having ratified the International Convention on Economic, Social and Cultural Rights (ICESCR) in 1975, the Commonwealth Government: ... incurred an obligation to respect, protect, promote and ensure each individual’s ‘right to adequate housing’ (p. 223). Whether it is a right or is not, adequate shelter is necessary to participate fully in society and that some members of society have to live in inadequate accommodation encroaches upon notions of human dignity. As Devereux concludes: The aim is not necessarily to achieve an equal standard of living for all. It is simply to accord each individual’s right to adequate housing due respect so that “the bottom [standard of housing] is at a sufficiently high level to be consistent with human dignity” (p. 239). In Australia, housing is a necessity that many people on low incomes find unaffordable.9 Non-taxation of imputed rent and other concessions for homeowners have increased the costs of renting. Health and building regulations have also increased the costs of housing generally.10 It can be argued that people receiving general income support, in this situation, are free to choose. However, it is unclear in what sense they have freedom of choice. Housing is not affordable (to them), not because it is in short supply, but because of government interventions that affect housing costs and the desires of those with greater incomes to have a greater share of these particular resources.11 Many inquiry participants emphasised the importance of adequate and affordable housing for a stable society. Some mentioned experiences in other
9 Affordability is defined in Chapter 2. 10 Due to planning, zoning and building regulations many on low-income cannot afford the minimum level of housing society regards as appropriate (Paterson 1975, Paterson et al. 1976). For this reason, homelessness rates are higher in developed countries than developing countries (World Bank 1992). Submission by Flood (sub. 171). 11 In a ‘free’ market economy the power to express one’s preferences is approximately proportional to one’s income. Not only do those on lower incomes typically have less of everything of value but they also have relatively even less of anything that those on higher incomes have strong preferences for.
132 INDUSTRY COMMISSION E EVALUATION OF HOUSING ASSISTANCE APPROACHES
countries — such as in the USA with the 1992 Los Angeles riots — to indicate the costs borne and dangers that arise when members of a section of society consider themselves to be alienated from benefits (which can include adequate housing) accessible to the rest.12
Efficiency, poverty traps and work incentives To the extent that beneficial externalities exist, housing assistance would improve efficiency when those on low incomes increase their consumption.13 Even without the existence of externalities there can still be efficiency arguments for giving assistance in-kind (in preference to relying on cash assistance alone).14 The conventional economic wisdom15 is that combining income support with a subsidy on a commodity will usually be more efficient16 than income support alone.17 Consequently, whether there is reason to subsidise rental accommodation (for the less well off) for efficiency reasons also requires consideration. A dilemma with cash income support targeted on low-income people is that for targeting to be effective the cash assistance has to be reduced significantly as income from other sources rises. This may lead to very high effective marginal tax rates, even over 100 per cent. The consequent disincentive to work is known as a poverty trap. Giving some well targeted in-kind assistance may make it possible to reduce the disincentive to work. If a subsidy for housing has less effect in making leisure (not working) more attractive than does general income support, a mix of general income support and housing assistance will increase the supply of labour compared with spending the same amount solely on income support.
12 Alienation defined as ‘a sense of estrangement from society, a feeling of powerlessness to affect social change, or a depersonalisation of the individual’ (Bullock et al. 1988). 13 This standard result concerning externalities may be found in Tresch (1981) Chapter 6 or in Feldman (1980) Chapter 5, p. 96. 14 The argument that cash payments or general income support is the best and most efficient is based on other things being and remaining equal. The type of payment that satisfies this requirement is referred to by economists as an unconditional lump-sum transfer. In practice it is accepted that it is infeasible to achieve welfare (or taxation) objectives (effectively) by such transfers (Brennan and Buchanan 1980, p. 57). 15 Brennan and Buchanan (1980). 16 More efficient in that it makes a recipient better-off, and has a less deleterious effect on the incentive to earn income while costing the government the same. 17 The detailed argument is to be found in Corlett and Hague (1953), Layard and Walters (1978), Tresch (1981, p. 336) and Leonesio (1988a, 1988b).
INDUSTRY COMMISSION 133 PUBLIC HOUSING
Steinberg Schone (1992) shows that this is likely to be the case. However, it is not clear that the relative increase in the labour supply would be significant. This is an area that still requires research.18 These arguments suggest that using targeted housing assistance is preferable to relying on general income support alone. They do not distinguish between forms of housing assistance and can be used to support either cash rental assistance or public housing.
E.2 Cost effectiveness of public housing There are further arguments which suggest that it can be cheaper in the long-run to provide the same level of assistance through public housing rather than through rental assistance.19 Some, but not all, of these arguments stem from the nature of the private rental market for low-cost houses (see Appendix C). The arguments are as follows.
Discrimination Some renters face discrimination in the private rental market for reasons other than lack of income. Reasons and instances of this are many and varied. Those discriminated against may come from particular racial or ethnic backgrounds, have poor written or oral English language skills, be young, be old, have young children or receive pensions or benefits, or have physical or mental disabilities.
18 ‘The lack of research on the effects of in-kind transfer programs is a serious problem ... It is doubtful that a full understanding of the incentive effects ... can be understood without such studies’ Moffitt (1992, pp. 18–19). However, recent work by Diewert and Lawrence (1993) suggests that the effects may be important. For a different purpose, they estimate average compensated elasticities of demand between four consumption goods, including leisure, using New Zealand data. Their estimates for the cross-price elasticities between the demand for general consumption with respect to the price of leisure (0.38) and between the demand for housing with respect to the price of leisure (-0.79), lend empirical support to arguments favouring the efficiency of some in-kind assistance. 19 Much of the discussion in this and in the preceding section relies on long-run (static equilibrium) comparisons. Aspects not considered within this framework, concerning differing types of need for assistance and dynamic aspects (that modify these conclusions), are dealt with later.
134 INDUSTRY COMMISSION E EVALUATION OF HOUSING ASSISTANCE APPROACHES
Some may be members of groups that are perceived rightly, or wrongly to be more risky as tenants.20 Inquiry participants emphasised the extent of discrimination against many who require rental accommodation.21 Many participants referred to discrimination experienced in the private rental market (see Appendix A). The following are two typical accounts of the problem: It is in our charter to house, on a comparative basis, all classes, religions and creeds in relation to our community but, as we lease properties on the private rental market, we find it almost impossible to house Koori tenants because of perceived ideas and prejudices (Sapphire Coast Tenancy Scheme Inc., sub. 114, p. 5). Even when young people are old enough to sign a lease agreement and have the money to pay for rental/bond costs, they are often faced with reluctance or refusal by agents or landlords due to negative stereotyping. Young single parents, young Aboriginals, young people sharing, young unemployed and young people from non-English speaking backgrounds are often blatantly discriminated against. Young people with physical disabilities are often refused access for reasons of “physical constraints”, rather than attempts being pursued to accommodate any specific requirements (National Youth Coalition for Housing, sub. 131, p. 26). Discrimination might be overcome by selectively providing large enough rent assistance payments. However, this could be a very expensive solution to the problem.
Self insurance One reason why rents in the low-cost private market often appear high, given the nature and condition of the dwellings rented, is that many private landlords are risk adverse and it is difficult and costly (if only for reasons of moral
20 This situation is referred to as ‘statistical discrimination’. When it applies to situations, such as drivers who drink, where the chosen behaviour is causally linked to an increased risk of traffic accidents, almost all accept ‘statistical discrimination’ as ethically valid. In situations where there is neither a causal link nor any choice about inclusion in the more risky group the ethical validity of ‘statistical discrimination’ is no longer clear. 21 Although there are many popular economic arguments why discrimination ought not to exist or persist in apparently competitive markets, the predictions of these theories appear to be at odds with evidence. This point is discussed in Arrow (1971).
INDUSTRY COMMISSION 135 PUBLIC HOUSING
hazard) to get adequate insurance. A large organisation like a State housing authority can self-insure (Arrow and Lind 1970, Tresch 1981, p. 508).22
Administrative cost of effective rent assistance If vouchers and rent assistance do not vary with the level of rent paid, their effects are very similar to those of giving an equivalent sum of extra income.23 The benefit of having assistance targeted toward housing is largely lost (see Chapter 5). Vouchers and housing allowances can be made conditional on the level of rent paid, and thus influence relative prices. However, administrative problems arise and cost effectiveness diminishes because extra information must be gained and checked on rent paid. The Experimental Housing Allowance Program in the USA is reported to have had program administration costs (in addition to the cost of rental property administration borne by private landlords) of 20 per cent of program outlays. It was projected that the administrative cost of a nation-wide scheme would have been in the order of 23 per cent. Costs of Great Britain’s Rent Allowance Program (where targeting was less comprehensive) were of the order of 12 per cent (Hendrie 1988, Carlson and Heinberg 1978). There may also be indirect costs. Landlords and tenants may collude about the level of rent paid. Also, tenants do not have as strong an incentive to seek the best value for money in terms of accommodation (when they do not pay the full extra cost) with a result that rents may increase.
Sovereign risk There may be reluctance to invest in low-cost rental dwellings if prospective investors believe there is a risk that the level of rent assistance may not be maintained in real terms.
22 Large entities have advantages over smaller entities when it comes to risk bearing. The Arrow-Lind theorem demonstrates that under fairly broad conditions a government (or any similarly large commercial entity) has no need to include a premium for risk in any assessment of a project. 23 This point is illustrated by Varian (1990, pp. 26–31), using the US food stamp program.
136 INDUSTRY COMMISSION E EVALUATION OF HOUSING ASSISTANCE APPROACHES
The Department of Health, Housing, Local Government and Community Services argues that: One would expect rational private investors to charge a ‘sovereign risk’ premium to compensate for the risk of future governments not maintaining the real value of allowance payments. It is expected that this premium would be built into rent levels. It can be assumed that governments do not have to build into their costs, risk premiums to account for their own behaviours. Since governments are in a position to make firm commitments to provide an ongoing real level of housing assistance, they can choose in effect to prepay the subsidy outlay by purchasing dwellings to accommodate subsidised clients (sub. 213, p. 50).
Financial saving to the government when rent increases Rent assistance is only effective if it increases the supply of accommodation services. However, supply will only increase if rents (and therefore returns) increase. The higher rents are paid to owners of existing dwellings as well as those of the new dwellings. By its ownership of public housing stock the government receives part of the benefit of these rent increases.24 Increasing the supply of dwellings will still increase the average cost of a dwelling since additional resources attracted into the industry will on average cost more. But with all the housing in this sub-market owned by government, the cost to government is only that necessary to attract extra resources.25 An undesired transfer to private landlords is avoided.26 The unavoided transfer to existing landlords under an effective housing allowance has important implications for government funding.27 The size of
24 Some, but not all of the increased earnings to landlords (from higher rents) would be returned to the government in taxation. This would be less than the 100 per cent returned where government owns the housing. 25 The assumptions (used here for exposition of the principle) are in one case that the government owns all the low-cost housing (in this sub-market) and in the other case that the private sector owns all this housing. The results for these polar cases are compared. The existing situation, a mix of private and public ownership in this sub-market, corresponded to a weighted average of the differing outcomes. 26 These financial gains would instead go to the States, as the owners of public housing. Nevertheless, it ought to lower the States’ demand for Commonwealth funding indirectly. 27 It also has efficiency implications because it is not costless (in terms of resources used) for government to raise revenue. If government requires greater net expenditure to achieve the same goal, greater revenue needs to be raised. The revenue gathering process decreases efficiency (in aggregate).
INDUSTRY COMMISSION 137 PUBLIC HOUSING
this transfer depends on the extent that the quantity of housing services supplied expands as price increases (referred to as the supply elasticity).28 Figures E.1, E.2 and E.3 compare, under different supply elasticities, the marginal cost to government of effective rent assistance (with the entire housing stock effected owned privately) with government provided housing (where the government entirely owns the relevant stock).
Figure E.1: Relative cost of inducing additional rental accommodation
$ per week 250
200
150
100
50 Marginal cost to government to cost Marginal
0 024681012 Elasticity of supply assumed
Note: This figure compares the marginal costs of using induced private provision of low-cost rental accommodation (with ownership completely in the private sector) instead of public provision (with complete public ownership) under different supply elasticity assumptions. The demand elasticity is 100, the subsidy $80 per week and the rent paid by tenants is $40 per week. The government funding required to provide one extra unit of housing services is significantly different depending on the method used and approach to ownership. Public provision (and ownership) is represented by the lower horizontal line. It is considerably more cost effective than the alternative, induced private provision, represented by the curve above it. (Although the additional marginal cost, to government from private ownership, would be reduced by taxation to some extent.) Source: Industry Commission.
28 An elasticity of supply of a good is the percentage increase in the quantity of the good supplied following a 1 per cent increase in price.
138 INDUSTRY COMMISSION E EVALUATION OF HOUSING ASSISTANCE APPROACHES
Figure E.2: Additional marginal cost of inducing the supply of additional rental accommodation with private ownership of the housing stock compared to complete public ownership, high elasticities Per cent 40 35 30 25 20 15 10 5
Extra cost of induced private provision private of induced cost Extra 0 024681012 Elasticity of supply assumed
Note: This figure compares the extra cost to government from using induced private provision instead of public provision (and public ownership of the entire stock) under different supply elasticity assumptions. The demand elasticity is 100, the subsidy $80 per week and the rent paid by tenants is $40 per week. The dramatically increasing marginal cost at supply elasticities of less than 4 is continued in Figure E.3. (Although the additional marginal cost, to government from private ownership, would be reduced by taxation to some extent.) Source: Industry Commission.
To illustrate this cost difference, it is assumed that both sectors are equally efficient.29 For exposition, it is assumed that private provision is accomplished by an effective rent assistance payment.30 Likewise, public provision is assumed to be accomplished by a government agency that receives a normal rate of return by charging a market rent. In this complete government ownership example, part of the market rent is paid by
29 During the inquiry there was no evidence presented that would lead to the conclusion that the public sector is less efficient than the private sector in this area. Also, for ease of exposition, the extra administrative costs involved in an effective rental assistance scheme have been assumed to be zero. 30 Under these assumptions instead of rent assistance paid to the tenant, there are many alternative schemes that could be tried. With any regime, relying on inducing a private supply response, the effects would be similar (ignoring details such as administration costs and monitoring).
INDUSTRY COMMISSION 139 PUBLIC HOUSING
tenants, the difference being recompensed by a subsidy.31 With public ownership, economic rent from government action (in this situation) remains in the public purse. In Figures E.1, E.2 and E.3, a subsidy of $80 per week is assumed and a rent contribution from tenants of $40, giving an overall market rent of $120. A demand elasticity of 100 is assumed.32
Figure E.3: Additional marginal cost of inducing the supply of additional rental accommodation with private ownership of the housing stock compared to complete public ownership, low elasticities Per cent 1000 900 800 700 600 500 400 300 200 100 0 Extra cost of induced private provision private of induced cost Extra 00.511.522.53 Elasticity of supply assumed
Note: This figure continues the previous one for elasticities lower than 4. Note that the scale of the vertical axis has changed markedly and although the extra cost at an elasticity of 3 looks visually small it is, in fact, 50 per cent. Although the percentage extra cost at low elasticities is large the government would not necessarily recognise that its actions were resulting in this extra cost for the reasons given in the text. (Although the additional marginal cost, to government from private ownership, would be reduced by taxation to some extent.) Source: Industry Commission.
Figures E.1, E.2 and E.3 illustrate significant cost dangers, associated with low supply elasticities (that is, the quantity being supplied being unresponsive to a price increase), especially in the short-run if the government attempts to meet
31 Which would be equivalent to the effective rent assistance payment. 32 This assumption is made because the government is only willing to supply or induce the supply of extra housing services in situations where there is a need and the extra accommodation can be easily filled.
140 INDUSTRY COMMISSION E EVALUATION OF HOUSING ASSISTANCE APPROACHES
affordability targets through rent assistance alone. Even with larger elasticities (where the increase in housing services supplied is large following a price increase) and in the long-run (when there is more time for adjustment to take place), the extra cost is quite significant. See Box E.1 for a discussion of relevant supply elasticities in the low-cost rental market. These extra costs from the leakage of economic rent, especially when hidden by fluctuating prices, are not easy to identify or quantify.33 A cost blow-out may not be recognised as an outcome of this leakage.
Box E.1: What are the relevant supply elasticities? Bartlett (1989) reported that the long-run supply elasticities for housing services have been estimated as ‘about 11.5 for the USA and about 5.5 for the UK’. In a USA study by Muth (1971) they ranged from 18.5 at the edge of a city to 1.5 toward the city centre. Short-run elasticities are always lower and in the very short-run approach zero. In the low-cost rental market, long-run supply elasticities will be lower than for the general market. The principal reason is that rental stock at the lower end, is not purpose built. To attract the professional investor, returns would have to increase significantly (Kemp 1989). If the government were willing to spend sufficient money to underwrite the higher return, the long- run supply in this market may become quite elastic. The Experimental Housing Allowance Program in the USA, reported in Bradbury and Downs (1981), found no significant impact on the low-cost rental market rate. The ‘no significant impact’ was a supply elasticity of about 4, which is quite elastic but not elastic enough to invalidate this cost- effectiveness analysis. Important also were the small relative size of the program and the high vacancy rates in these experimental markets. The vacancy rates ranged from 16 per cent to 4 per cent. With many vacant houses the price response was low, not surprisingly.
33 A definition of economic rent is the difference between the return made and the return necessary to keep a factor of production (in this case a housing unit) in its current use. If some rental housing services were being supplied at a lower rental return then any extra that these particular housing units receive is part of economic rent.
INDUSTRY COMMISSION 141 PUBLIC HOUSING
A numerical example can illustrate how this net extra government expenditure arises. Say there are 100 houses receiving a rent of $100 per week. If the government wishes to provide or induce the provision of an extra house, with a supply elasticity of 1.0, it will cost it the net present value of a rental flow of $101. But the houses already in the market will now receive rent of $101 also. If the government owns the houses it pays this extra amount (100 times $1) to itself. If the private sector owns the houses then the additional cost is not netted out. Rather, it represents part of the marginal expenditure of providing the extra house. Even with a supply elasticity of 12, there would be significant extra expenditure if the government attempts to induce the supply of an extra house without the advantage of owning the stock. Assume there are 100 houses but with a full market rent of $120 per week (for ease of exposition). The government pays a subsidy of $80 and tenants a rent of $40. To induce an extra house (with a supply elasticity of 12), full market rent would rise to $120.10 (market rent has increased by 10 cents). If the government does not own the other 100 houses the net cost of providing this extra unit through rent assistance (while keeping the others at a rent of $40) is $10 per week greater (100 multiplied by $0.10), or $90.10 compared to the extra net subsidy cost of $80.10 (for the extra unit) when the other houses are owned by the government.
E.3 Impacts on the private rental market The impact of public housing provision on the private rental market requires careful consideration. For example, the provision of this form of housing by construction has an effect on the demand for and hence the rentals received for low-cost accommodation. Typically, housing units deteriorate throughout their lives to lower levels of quality. The speed of this process is influenced by landlord decisions on maintenance. Decisions on the level of maintenance they undertake are, in turn, influenced by the levels of rent they receive. Lower returns for low-cost housing can result in poor maintenance and loss of stock to urban renewal. This can increase the cost of providing income support and affordable housing for those with low incomes. Consequently, a strategy that relies on construction alone, should at least in the long-run, be supplemented by other means such as spot purchase. A spot purchase strategy ought to target properties at risk of loss to redevelopment that also are in demand by those on low incomes and are capable of being brought
142 INDUSTRY COMMISSION E EVALUATION OF HOUSING ASSISTANCE APPROACHES
up to an appropriate standard. Another part of a long-run strategy to increase the stock of lower quality housing could involve changes to lower the need for and to increase the provision of maintenance. This could be achieved by, for example, changes to building standards and moves to improve the performance of maintenance services industries — painting, plumbing, renovating, and so on. A framework developed by Sweeney (1974) allows analysis of the likely effects of policy options on price, quality and welfare. His conclusions were that removing people from the lowest quality accommodation and placing them in public housing will: ... benefit the poorest families who do not themselves live in public housing by lowering the prices that they face for privately supplied housing ... The effect of the public housing program would not be limited to those receiving subsidies (p. 313). However, he warns that if those worst off are not targeted perverse outcomes are possible. If only moderate income families are targeted then: .. while such a program will benefit moderate income families, it will adversely affect the poorest families by increasing the house prices that they face (p. 314). Hence those worst off should be assisted first.
E.4 Resource costs of public and private provision In evaluating the relative cost of public and private provision like has to be compared to like. Existing private rental accommodation that has ‘trickled down’ from other uses is likely to be less expensive than accommodation that has been constructed by State housing authorities to increase supply. The former is a naturally occurring base supply in this market whereas the latter is supply at the margin. Public provision when it increases supply will be at least as expensive as existing accommodation and must be compared with the cost of any similar marginal supply that could be induced within the private market.34 Government initiatives aimed at attracting more professional investors have been unsuccessful. The low-cost rental market is a residual market characterised by small investors (see Appendix C). State housing authorities may have advantages over small investors in this private market. Advantages could arise from economies of scale, scope and
34 Also, an aim of public housing is to provide adequate and appropriate accommodation. As this is of a higher standard than the lowest quality accommodation found in the private rental market it is more expensive. Commission estimates of the responsiveness of housing demand to changes in income (IC 1993b) indicate that substantial cash payments would be required if people on low incomes are to have affordable and appropriate accommodation in the private rental market.
INDUSTRY COMMISSION 143 PUBLIC HOUSING
density. The scale of State housing authority operations allow specialisation with the employment of skilled professionals. Economies of scope are possible because most low-income renters are clients of government in other ways. Other economies of scope include integration of asset management activities including the purchase and sale of properties, redevelopment activities, overseeing construction of new stock and financial management such as raising substantial capital. Economies of density arise from State housing authorities’ concentration in particular areas, lowering their average costs of servicing and maintenance. However, it is not clear that all potential advantages for efficiency gains have been realised. It was argued in Section E.2 that public ownership is more cost-effective for the government. It was assumed that private and public sectors are equally efficient at delivering these services. Also, the extra administration costs of an effective housing allowance were ignored. If indeed public and private provision were as efficient and the extra administration costs were zero, then the resource costs would appear to be the same — private provision would simply require more revenue to be raised. But, there is an efficiency loss when governments raise revenue through taxation. This loss has been referred to as the marginal excess burden per dollar of redistribution (EPAC 1988). As detailed in Section E.2, landlords receive extra income (in the form of economic rent), from government intervention in the low-cost housing market. If governments attempted to get this money back by taxation, further losses would be involved. This process is referred to as ‘churning’. Tax exemptions, some low interest rate concessions, and some better terms of borrowing due to government guarantee should not be included in any assessment of the resource cost and allocative efficiency advantages of State housing authorities.35
E.5 Allocative efficiency In the private rental market it is likely that few vacant bedrooms would exist in homes occupied by those receiving assistance. This could be taken to be evidence of overcrowding. However in comparison, the presence of empty bedrooms in public housing (discussed further in Appendix J) might be argued to mean that taxpayers’ money is not being spent wisely. Also, if there was
35 A concessional interest rate consistent with a credit rating conforming to the nature of the asset, government superiority in risk bearing (Arrow and Lind 1970) and the performance of the authority is appropriate.
144 INDUSTRY COMMISSION E EVALUATION OF HOUSING ASSISTANCE APPROACHES
higher occupancy (per bedroom) within public housing then the pressure on the private rental market and the rent level would be lower. Although there is an apparent sizeable mismatch in public housing and consequent allocational inefficiencies, it is important to recognise the advantages offered by public ownership of two or three bedroom homes. They are less expensive per bedroom and offer greater flexibility to public housing providers. They may be more easily sold and allow differing family sizes to be catered to. Where there is a great mismatch between the distribution of types of public housing tenants and the types of houses owned, authorities can still take measures to achieve better targeting. One approach is to lease or rent out to the private sector stock less in demand by public housing tenants. The proceeds could then be used to headlease more appropriate stock from the private sector. This way it is likely that with the same resources tenants’ needs could be better satisfied (this is further discussed in Appendix J).
E.6 Review of studies The Commission reviewed two recent studies of the costs and benefits of public provision of housing.
Econsult’s study for the National Housing Policy Review Inquiry participants frequently drew upon the 1989 National Housing Policy Review study by Econsult (1989) to demonstrate that in the longer term conventional public housing is more cost-effective than a broad-based housing allowance program. Econsult showed that if a government has a fixed annual budget in real terms, it can (after 12 to 15 years) assist more people by investing in public housing rather than providing housing allowances. The study uses a cost-effectiveness approach and applies three methods of comparing the net present value of funds outlaid for public housing with funds used as a housing allowance. In each case, public housing is shown to be more cost effective in the longer term. The study assumes that tenants obtain equivalent levels of housing and pay the same level of income on rent under both approaches. Intuitively, the cost- effectiveness of the two approaches should therefore be similar.
INDUSTRY COMMISSION 145 PUBLIC HOUSING
The likely reason for the difference is that some of the assumptions influence the results in favour of public housing. For example, the administrative costs for a housing allowance program are high. Econsult assumed a cost of $700 per household per annum in 1988 dollars. This compares with the average DSS rent assistance payment in 1987–88 of $600 per household per annum. DSS estimates current administrative costs for rent assistance as likely to be about 2.9 per cent of program outlays.36 However, the main reason that the analysis finds in favour of public housing is the low discount rate used in the analysis. The discount rate measures society’s preference for current consumption. To obtain net present values, the study uses real social discount rates of zero, 3 and 5 per cent. Of these, Econsult prefers 3 per cent. Social discount rates that are below the opportunity cost of funds introduce an implicit bias in favour of bringing forward capital investment and hence a bias towards public housing. A real discount rate of 5 per cent would be more appropriate. This would reflect the marginal costs of government borrowings given that at the margin governments are funding their expenditures from borrowings.
National Shelter benefit-cost analysis of public housing National Shelter (sub. 115) submitted a benefit-cost analysis of public housing provision. This analysis identified the benefits of public housing but in the Commission’s view failed to quantify them correctly. Moreover, future benefits and costs were not discounted. Benefit-cost analysis provides a way of assessing the net benefits and costs of using resources in a different way. It requires the definition of how resources are to be used in the activity examined and how they would be used in the absence of the activity. The alternative is usually referred to as the ‘base’ case. The net benefits and costs measured are the economic return and cost of the alternative use of resources. In the National Shelter analysis some of the claimed benefits are overstated because the cost of diverting resources or the benefits gained in alternative uses are included.
36 Although, an effective housing assistance program (similar to the Experimental Housing Allowance Program in the USA) could be expected to have high administrative costs.
146 INDUSTRY COMMISSION E EVALUATION OF HOUSING ASSISTANCE APPROACHES
For example, National Shelter attributes the benefit received by the community as equal to the government subsidy. It is true that the community may receive benefits (usually referred to as paternalistic benefit) gained at the cost of the subsidy. If the alternative was taken to be no provision of public housing the community would not have to bear the cost of the subsidy. Hence the cost is attributable to provision and must be counted. Another way of looking at this is that a rational government would provide public housing if the net benefit (that is, total benefit minus total cost) were positive. The inclusion of assumed multiplier effects is also inappropriate. These are not net benefits because they are also realised in any alternative situation that involved people consuming housing at the same rate. Moreover, the existence of ‘multiplier effects’ is itself contentious and the study gave no indication as to how they were derived. Failure to discount causes future benefits, such as capital gains, to receive too much weight.
E.7 Extra benefits from public provision As well as long-term financial savings, public provision has advantages when compared to rent assistance, vouchers or other indirect approaches.
Security of tenure Public housing provides security of tenure. Substantial changes in the private rental market would be required to provide this level of security, and it is not clear whether these changes would be advisable. The security provided by public housing comes at a cost. It may lead to an over- consumption of housing where people remain in their present accommodation when their circumstances and needs change, for example, when children leave the family home. The problem is avoided in the private rental market as people choose to move to minimise their expenditure when their needs are reduced. Presently, in public housing there are few incentives to move, but these could be introduced by an appropriate pricing policy.
Discrimination reduced Private rental is unlikely to avoid problems of discrimination, even with legislative changes. Public provision is capable of reducing discrimination.
INDUSTRY COMMISSION 147 PUBLIC HOUSING
Better maintained accommodation The view has been put that maintenance is better in public housing. In private rental the landlord may gain, at a tenant’s expense, by delaying maintenance indefinitely. With public provision the incentives can be different because of accountability to government.
Reduction of search and access costs With public provision there are reduced search and access costs. Access costs include rent in advance, connection fees and moving costs. They can be of the order of $1500. Search costs are particularly high for those subject to discrimination by landlords (see Section E.2).
Better and more diverse choices Those with low incomes, even when assisted, have less choice in the private rental market. Inquiry participants favoured the choice available in public housing. Presently choices within public housing in terms of both location and appropriateness are limited but this is being improved. It is not clear whether rent assistance could bring better outcomes without significantly greater expenditure.
Avoidance of profiteering and a hedge against sudden rent increases In the private rental market there are opportunities for profiteering. Landlords can take advantage of unforseen changes in circumstances, for example, in Fremantle during the America’s Cup and Brisbane during the 1988 Expo. Governments incur costs in having to provide for those on low incomes who are disadvantaged by this opportunistic behaviour. Public housing (and headleasing) provide an effective hedge against volatile movements in accommodation rental rates for those on low incomes. When substantial increases occur the need for increasing levels of assistance is greatest. Unfortunately, this often coincides with other increased demands on government revenue. Ownership of public housing mitigates these problems. If tenants pay only 20 to 25 per cent of a cost increase, as they would under effective rental assistance, there is less incentive for landlords to offer competitive rents and for tenants to seek them out. This moral hazard problem
148 INDUSTRY COMMISSION E EVALUATION OF HOUSING ASSISTANCE APPROACHES
for both landlord and tenant can result in collusive behaviour where both share the proceeds of ‘higher rents’.
E.8 Rent assistance and headleasing The arguments in the previous sections should not be taken to mean that there is no role at all for rent assistance or for headleasing from the private sector. Some needs for housing assistance are best met by means other than public provision.
Different needs Individual’s needs for housing assistance vary. The short-term unemployed, for example, may find their needs best catered for by rent assistance in their present accommodation. It is neither practical or desirable to assist them by public provision. Also highly mobile people are not best served by public housing. Given limitations on government expenditure and funding for capital works, it is sensible that public housing provision is targeted first to those who require long-term assistance or have special needs.
Rent assistance The comparative benefit of rental assistance is that it avoids the need for capital outlay, it is flexible and is easily implemented. Because there is no capital the immediate cost to the government is smaller than is the case with public housing, but the cost advantage is reversed in the longer run.37 As discussed in Section E.2, rent assistance relies on a residual private market that appears inadequately responsive to increased demand for low-cost housing and there may be financial risks for government if it relies heavily on it.
Headleasing Headleasing, mitigates security of tenure, maintenance and discrimination problems. It does not require capital outlays by the government, and as there is lower risk and less monitoring required, it can be attractive for private investors.
37 Ownership for a limited time incurs higher average costs because of the cost of buying and selling the property. See the discussion in Section E.2 for the long-term cost advantages of ownership.
INDUSTRY COMMISSION 149 PUBLIC HOUSING
If the scale of headleasing increases this could attract new small private investors into the low end of the rental market. Eventually a market in leased properties might develop. This would both provide more choice for consumers and an additional investment option which could be highly valued by some individuals — for example self-funding retirees. * * * The findings of this Appendix are summarised in Chapter 5 and in Table 5.1, a Social Audit Table. Four housing assistance approaches (cash payments, effective rental assistance, headleasing and public housing) are assessed against a variety of qualitative criteria.
150 INDUSTRY COMMISSION E EVALUATION OF HOUSING ASSISTANCE APPROACHES
REFERENCES
Appelbaum, R. 1986, ‘Swedish Housing in the Postwar Period: Some Lessons for American Housing Policy’, pp. 535-557 in R. Bratt, C. Hartman and A. Meyerson, (cds.) Critical Perspectives on Housing, Temple University Press, Philadelphia. Arrow, K. J. and Lind, R. C. 1970, ‘Uncertainty and the Evaluation of Public Investment Decisions’, American Economic Review, Vol. 60(3), pp 364- 78. Arrow, K. J. 1971, ‘Models of Job Discrimination’, Chapter 2 in AH Pascal (ed.), Racial Discrimination in Economic Life, Lexington. Bartlett, W. 1989, Housing Supply Elasticities - Theory and Measurement, Housing Finance Discussion Paper no 2, Joseph Rowntree Memorial Trust, University of Glasgow. Boadway, R. and Keen, M. (1993), ‘Public Goods Self-selection and Optimal Income Taxation’, International Economic Review, 34 (3), pp. 463-78. Bradbury, K. L. and Downs A. 1981, Do Housing Allowances Work? The Brookings Institution, Washington, D. C. Brennan, G. and Buchanan, J. 1980, The Power to Tax: Analytical Foundations of a Fiscal Constitution, Cambridge University Press. Bullock, A., Stallybrass, O. and Trombley, S. 1988, The Fontana Dictionary of Modern Thought, Fontana Press, London. Carlson, D. B. and Heinberg, J. B. 1978, How Housing Allowances Work: Integrated Findings from the Experimental Housing Allowance Program, Urban Institute, Washington. Corlett, W. and Hague, D. 1953, ‘Complementarity and the Excess Burden of Taxation’, Review of Economic Studies, Vol. no. 21 (1), No. 54. Coleman, A. 1990, Utopia on Trial: Vision and Reality in Planned Housing, Hilary Shipman Ltd, London. Devereux, A. (1992), ‘Australia and the Right to Adequate Housing’, The Federal Law Review, 20(2), School of Law, Australian National University, pp 223-39. Diewert, W. E. and Lawrence D. A., (1993), The Deadweight Costs of Taxation in New Zealand, Paper presented to the 1993 Conference of the Economic Society of Australia: Perth, 27 to 29 September.
INDUSTRY COMMISSION 151 PUBLIC HOUSING
Econsult (Australia) Pty Ltd 1989, Housing Allowances in The Australian Context: Market Impacts and Cost Effectiveness, National Housing Policy Review, Background paper No. 1, Canberra. EPAC (Economic Planning Advisory Council) 1988, Income Support Policies, Taxation and Incentives, Council Paper No 35, AGPS, Canberra. Feldman, A. M. 1980, Welfare Economics and Social Choice Theory, Kluwer Nijhoff Publishing, Boston. Fisher, F. M. (1977), Glazer, N. 1967, ‘Housing Policy and the Family’, Journal of Marriage and the Family, Vol. 29, No. 1 (February). Hendrie, D. 1988, ‘Housing Allowances – Some Empirical Findings’, in R. Campbell and C. Walsh (eds.), Equity in Housing Support: Papers and Proceedings of the Second Housing Finance Workshop, Housing Industry Association, Canberra. Hills, J. 1991, Unravelling Housing Finance: Subsidies, Benefits and Taxation, Clarendon Press, Oxford. Industry Commission 1993, Provision of Public Housing in Sydney: Some Empirical Evidence, Research Memorandum MR-85, Industry Commission, Canberra, November. Inquiry into British Housing (1985), Inquiry into British Housing Report, London: National Federation of Housing Associations. Kemp, P. A.1989, ‘Alternatives to Housing Benefits’ in: J. Hills, R. Berthould and P. A. Kemp, The Future of Housing Allowances, pp 56-71, London: Policy Studies Institute. Kendig, H. 1990, ‘Comparative Perspectives on Housing, Ageing and Social Structure’, p. 288-306 in R. Binstock and L. George (eds.), Handbook of Ageing and the Social Sciences, 3rd. ed., Academic Press, San Diego, pp. 288-306. Layard P. R. G. and Walters, A. A. 1978, Microeconomic Theory, McGraw- Hill, New York. Leonesio, M. V., 1988a, ‘In-kind transfers and work incentives’, Journal of Labor Economics, Vol. 6(4), pp 515-529. Leonesio, M. V., 1988b, ‘Predicting the effects of in-kind transfers on labor supply’, Southern Economic Journal, Vol. 54(4), pp 901-912. Moffitt, R., 1992, ‘Incentive Effects of the U. S. Welfare System: A Review’, Journal of Economic Literature Vol. XXX, pp. 1-61. Muth, R. F. 1971, ‘The Derived Demand for Urban Residential Land’, Urban Studies, 8, pp 243-254.
152 INDUSTRY COMMISSION E EVALUATION OF HOUSING ASSISTANCE APPROACHES
Nichols, A. L. and Zeckhauser 1982, ‘Targeting transfers through restrictions on recipients’, American Economic Review, Papers and Proceedings 72, #73- 377. Paterson, J. 1975. ‘Social and economic implications of housing and planning standards’, pp. 373-434 in Priorities Review Committee, Report on Housing, AGPS, Canberra. Paterson, J., Yencken, D. & Gunn, G. 1976. A Mansion or No House, Urban Development Institute of Australia, Melbourne. Steinberg Schone, B. 1992, ‘Do means tested transfers reduce labor supply?’, Economic Letters 40, pp 353-358 Stern, N. H. (1982), ‘Optimal Taxation with Errors in Administration’, Journal of Public Economics, 17, pp. 181-211. Stiglitz, J. E.(1982), Self-selection and Pareto Efficient Taxation’, Journal of Public Economics, 17, pp. 213-240. Stretton, H. 1986, ‘Housing - an investment for all’, pp. 259-273 in J. B. McLoughlin and M. Huxley (eds) Urban Policy in Australia: Critical Readings, Melbourne, Longman Cheshire. Sweeney, J. L. (1974), ‘A Commodity Hierarchy Model of the Rental Housing Market’, Journal of Urban Economics, 1, pp. 288-323. Thurow, L. C. (1974), ‘Cash versus in-kind transfers’, American Economic Review, 64 No. 2, pp. 190-95. Tresch, R. W. 1981, Public Finance a normative theory, Business Publications, Inc. Plano, Texas 75075 True, C, 1979, ‘The economic rationale for Government intervention in housing’, Social Policy and Administration, Vol. 13, No. 2, Summer, 1979. Varian, H. R., 1990, Intermediate Microeconomics: A Modern Approach, Second Edition, W. W. Norton & Company, New York. World Bank (1992). Housing Indicators Study. Final Report. (Washington: World bank).
INDUSTRY COMMISSION 153 F EFFECTIVENESS AND EFFICIENCY OF PUBLIC HOUSING AUTHORITIES
This Appendix examines the performance of housing authorities in a number of operational areas against the principles enunciated in the proposed national objectives — namely that the supply of affordable housing is commensurate with the need for it; that housing assistance is provided in a cost-effective, efficient and equitable way; that choice is maximised; and that all forms of assistance are effectively integrated.
F.1 Objectives of housing programs Most of the housing authorities were established immediately before and after the Second World War to build low-cost housing. This naturally led to a focus upon production issues. More recently the housing authorities have been required to meet broader welfare needs and to deliver housing services as targeted welfare assistance. Although all States have agreed to a set of basic principles in the Commonwealth–State Housing Agreement (CSHA), there have been significant differences in the way they have used public housing to meet their community’s housing needs. There have also been problems making operational the many public housing objectives (see Chapter 4).
Objectives are unclear The objectives of the housing authorities — as described in their annual reports and other publicly available documents — are not, on the whole, specific enough to enable an observer to determine whether they are being achieved or not. Some housing authorities publish more detailed objectives than others. All can improve. The Australian Council of Social Service submitted that: In general a number of these objectives have not been given clear operational meanings. As a result there has been very little ability to ensure that they have been achieved, or that SHAs have even sought to achieve them (sub. 85, p. 6). Tapper stated that: The size and importance of Homeswest is obvious enough; its success or failure is another matter. To judge this, we need both good information about its operation and some agreement about its objectives. Much has been done by its executive in the past
INDUSTRY COMMISSION 151 PUBLIC HOUSING
five years to improve the management and administration of the organisation. But at a fundamental level its goals and strategy remain unclear (sub. 40, p. 2). These comments would apply to most housing authorities.
Objectives sometimes conflict There is sometimes conflict between public housing objectives. For example, there is conflict between the objectives to provide quality public housing in areas with good access to community facilities and employment prospects, and to provide housing for all people in housing need. Housing in central locations is more costly than housing on the fringe. Given that funding is limited, there is a trade-off between providing fewer houses in central locations or more houses on the fringe. The Master Builders Construction and Housing Association of Australia submitted that: In terms of location of public housing stock, we support the need for dispersion of rental stock, but also express concern about the increasing move by state housing authorities to provide public housing in inner city areas as part of urban consolidation strategy. We argue that this could actually widen the inequity that currently exists between public and private rentals ... (transcript, p. 860). On this point, the Independent Commission to Review Public Sector Finances (1993) in Western Australia examined some near-city developments by Homeswest. It found that construction costs appeared higher than other Homeswest projects because of structural costs, union loadings, general site servicing costs and inner-city contractors’ margins. Virtually all the housing authorities have innovation in housing design and energy efficiency as objectives, and often are a market leader in these areas. Again there is conflict between spending on (risky) innovative housing and supplying affordable housing commensurate with the community’s need. The Housing Industry Association said that: Innovation in housing support programs is obviously an important goal but the financial viability should be rock solid. Public housing authorities should not use their programs to experiment with housing design or financial arrangements without adequate prior public debate and cost benefit assessments (sub. 92, p. i). Virtually all housing authorities have regard to environmental issues such as energy efficiency. Energy efficiency, if pursued as part of a least cost approach to providing services to clients, is laudable. If it is part of a broader environmental policy it ought to be clearly identified and paid for out of that budget.
152 INDUSTRY COMMISSION F EFFECTIVENESS AND EFFICIENCY OF PUBLIC HOUSING AUTHORITIES
Improving the energy efficiency of a public house will certainly reduce the costs for tenants in heating and cooling, but money spent on this is money that cannot be spent housing other people on the waiting list. Conflicts in objectives arise because housing authorities are responsible for a wide range of functions. These include selecting and managing tenants and providing the dwellings to meet the housing need. Tapper argues that: Homeswest is ... essentially a welfare agency. ... Its welfare functions are, however, being ‘managed’ by little more than guesswork. No publicly-argued criteria or standards are being applied, no evaluations conducted, no research commissioned. This failure ought to be obvious to anyone in the organisation, but it is not; mainly, it would seem, because Homeswest’s attention is fully occupied by its quasi- commercial component, and by its desire to improve its ‘image’ and its internal staff relations. The failure is also political (sub. 40, p. 19). The Combined Pensioners and Superannuants Association of NSW stated that: The public housing sector is also used by governments to: regulate the economy through the building industry; achieve urban design and regional planning aims; and achieve welfare and social aims. All of these aims have costs which should not be apportioned to the public housing sector (sub. 39, p. 2). The ACT Division of the Royal Australian Planning Institute submitted that: Public housing has been used by governments to achieve a range of objectives other than providing accommodation for low income groups. These have included support to the construction industry, economic objectives and more recently urban consolidation objectives. Apart from the limited scale of this tenure and hence its capacity to achieve these objectives, they have often been in conflict with the housing related objectives of the SHAs. One consequence of this is that the needs of consumers have not always received priority. There is a need to clearly define the role of public housing. This should be undertaken before strategies to improve its delivery are developed (sub. 139, p. iii). Conflicting objectives could occur where there is no clear separation of policy advice, tenancy management, the provision of housing and other functions.
F.2 Measuring performance Performance can only be assessed against clearly defined objectives. The objectives of housing authorities throughout Australia, as defined in the CSHA and in their own annual reports and corporate plans, are vague and difficult to put into practice. Conflicting objectives further complicate performance assessment.
INDUSTRY COMMISSION 153 PUBLIC HOUSING
Housing authorities currently control, to some extent, the level of demand for public housing (through control of the waiting lists) and the supply of public housing (through construction and purchase programs). Poor performance in housing provision can be covered up by adjusting the size of the waiting lists. Sharing responsibility for supported accommodation arrangements with community service agencies also clouds transparency. Accountability becomes a question of justifying unmeasured outcomes.
Inadequate data There is a dearth of current and comparable data by which to assess the performance of housing authorities. Annual reports of the housing authorities were found to be of little value and responses to the Commission’s questionnaire (see Appendix O) were partial. The areas covered by housing authorities in responding to the questionnaire rarely overlapped, making assessments and comparisons difficult. In a paper titled Sustainable housing policies and the role of public sector housing organisations, Williams described similar difficulties in his attempt to assess the performance of housing authorities in Australia: The annual reports are of varied quality. Relatively little information is given about their [housing authorities] performance in terms of voids, turnaround times, repair response times and standards, tenant participation and complaints, rent arrears etc indeed the whole panoply of the housing management function. Again there is little detail about staffing levels in the different areas of the organisation and the actual structure of their operations, eg, number of local offices and the usage made of them. The absence of this detailed management information in the annual reports does not mean those data do not exist nor that the systems are devoid of standards, targets and actual performance measures. Indeed it is evident from the ACT Housing Trust and other SHAs that there is a great deal of internal management information which is used within the organisation but not reported on externally. In addition the new state housing plans begin to give a clue as to forward plans, detailed objectives and performance targets. These suggest that over time the SHAs will move to a much more performance driven regime in which questions of value for money, efficiency and effectiveness are more easily asked and answered. However these apparent gaps make it very hard for any independent observer to take stock of the SHAs and all the evidence suggests the DHHCS [Commonwealth Department of Health, Housing and Community Services] have the same problem (Williams 1992, p. 7). The Housing Assistance Annual Reports which are the major source of comparable data on State housing authorities are not available in a timely fashion. This was noted by the Australian National Audit Office (1993, p. 11) in a recent preliminary study of the CSHA. The elapsed time for the tabling of the last seven reports in Federal Parliament has ranged from 49 to 75 weeks. It also recommended a range of measures to improve the content and presentation of these annual reports.
154 INDUSTRY COMMISSION F EFFECTIVENESS AND EFFICIENCY OF PUBLIC HOUSING AUTHORITIES
The Australian National Audit Office (ANAO) also questioned the role that the Federal Department of Health, Housing, Local Government and Community Services (DHHLGCS) has played in monitoring and assessing the performance of State housing authorities. It observed that: ... the types of data sought [by the Department from the States] had changed little in recent years and that compilation of that data occurred without much Departmental analysis. ... In the ANAO’s view, the absence of routine analysis of the data provided to the Department meant that opportunities to identify and promote best practices and value for money in administration of the States’ housing assistance schemes were being overlooked (ANAO 1993, p. 12). It recommended that in addition to the joint effort by DHHLGCS and the State housing authorities to develop performance indicators, the Department should set realistic targets against which performance by the States and the Department can be measured.
Indicators of performance It is very difficult to establish useful performance indicators under the current arrangements. There are no uniform statistics. For example, housing authorities value their housing stock in different ways most use historic cost (that is, what the dwelling and land cost when first built or bought); some use market value for land and historic cost for buildings; some use a net written down value; and others use an approximation of market value. Definitions also vary between housing authorities. The costs of renovation, for example, may appear in one housing authority’s reports under ‘maintenance’, but under ‘construction’ in another. In a covering letter to its questionnaire response, the Victorian Department of Planning and Development advised that: The Commission should be aware that some categories of information being provided need to be considered in light of the various definitions used by each SHA. The responses to the questionnaire are a direct product of how costs, functions or attributes are defined by each SHA for its own management and financial reporting purposes. For example the terms ‘administration’ and ‘maintenance’ are imprecise and costs assigned to each of these items in SHA budgets vary. Comparisons between SHAs are, therefore, meaningless unless supported by detailed investigation of exactly what functions or costs are covered by these terms (sub. 227).
INDUSTRY COMMISSION 155 PUBLIC HOUSING
Table F.1: Possible indicators of efficiency
State Administration as Maintenance Average length of a proportion of per dwelling vacancy between total funding tenants
per cent $ days
NSW 8.9 495 na Vic 19.6 1126 35 Qld 4.6 835 18 WA 4.9 540 12 SA 17.7a 675 na Tas 12.0 1037 16 ACT 13.0 1639 na NT 10.0 980 18 na Not available. a Based on recurrent housing program funding. Note: Based on 1991–92 data supplied by housing authorities. Source: Industry Commission.
The difficulty in measuring the performance of individual housing authorities flows over to comparisons between authorities. Three indicators that may allow performance to be compared are reported in Table F.1. There are significant variations between housing authorities in expenditure on administration per dwelling, maintenance per dwelling and in the average length of vacancy between tenants, but it is unclear whether these variations reflect degrees of operational efficiency or differences in the definitions of ‘maintenance’ and ‘administration’ used by the housing authorities. In recognition of the need for comparable statistics, the Commonwealth expanded the role of the Institute of Health and Welfare (previously the Institute of Health) in 1992. A Housing Unit was established to encourage greater comparability in the collection of data.
Outputs and outcomes It is understandable that most of the progress in performance measurement by housing authorities has been in operational areas. There is a greater degree of quantifiable data in these areas. There is, however, a need to balance these indicators of throughput and activity with measures to cover outputs and outcomes. The Australian Council of Social Service stated that: Performance must be subjected to more rigorous outcome evaluation without imposing excessive control over inputs ... Financial and other operational information
156 INDUSTRY COMMISSION F EFFECTIVENESS AND EFFICIENCY OF PUBLIC HOUSING AUTHORITIES
must be made far more transparent and comparable. This will not only make local housing operations accountable to their government clients — State and Commonwealth departments — but also to their direct clients — housing consumers and the local community. At the same time, it will provide stock and tenant managers themselves with more appropriate information on which to make the most effective and efficient use of their available resources (sub. 85, p. 19). Housing authorities currently measure performance by expenditure on programs and supply outputs (for example, stock of dwellings) rather than the achievement of specific outcomes for clients.
Too many programs There are currently hundreds of housing assistance programs and schemes (see Attachment F.1). These range from conventional public housing, through numerous forms of community housing, special needs housing, rent assistance, bond assistance and home ownership assistance. The vast array of programs makes determining the flow of funds and clarifying objectives difficult, impairing performance assessment. It is difficult to discontinue programs. Once assistance is provided to a particular group in a particular way, expectations develop that assistance will continue. Specific programs improve the targeting of assistance. There is, however, a trade-off between improved targeting and the increased costs in administering more programs. The ACT Housing and Community Services Bureau submitted that: Targeting is obviously better with a greater range of programs available, but this does lead to greater administrative costs. There is a need for the Commonwealth to aggregate assistance, building greater flexibility into tied funding arrangements (sub. 109, p. 6). It is likely that the administrative cost of the plethora of specific programs outweighs their benefits. The Commonwealth and Tasmanian Governments, amongst others, have indicated their intention and desire to rationalise the current number of programs.
F.3 Tenancy management The role of housing authorities has changed from one of building houses to meeting the housing requirements of people in need. While housing authorities have improved their performance in tenancy management over the last decade, the community generally is still far from satisfied.
INDUSTRY COMMISSION 157 PUBLIC HOUSING
A report commissioned by the Commonwealth Government on the development of independent appeal mechanisms for tenants described the relationship between the community and housing authorities in the following terms: There are widespread perceptions amongst consumers and consumer groups that administrative systems are very poor. Many examples of poor management and administration were cited, for example the fact that new tenancies can be in arrears within weeks, maintenance contracts not supervised, etc. SHAs were generally perceived as large, alienating, muddling bureaucracies which exercised significant discretion and could as easily be punitive and judgemental as benevolent and co- operative. The role, behaviour and attitudes of counter staff and field staff were very often commented upon adversely. Lack of transparency in decision making processes combined with lack of clear policy combines to create a climate of anxiety and paranoia (Kent 1990, p. 6). A number of participants submitted that the performance of housing authorities in tenancy management can be significantly improved: Shelter Darwin recommends that Department policy be more clearly articulated. There is no publicly available document covering appeal or out of turn policy. The current internal appeals is inconsistent with other states and government departments. A number of community groups have expressed dissatisfaction with the existing process in considering requests for Priority Housing. Concerns focussed on methods of assessment of applications, the lack of guidelines against which priority applications are assessed and the nature of appeal processes (sub. 20, p. 4). Inquiry participants complained about the poor response to maintenance requests by housing authorities, ranging from roofs that have leaked for months to missing flyscreens, or lack of secure entries to high rise units. They also expressed dissatisfaction and frustration with the process for raising grievances with the housing authorities. The Migrant Access Project of Shelter WA expressed concern that many non- English speaking people are unaware of Homeswest’s existence. Commenting on a survey conducted in Sydney of 700 migrants (which showed that none used the multi-lingual pamphlets provided by the Department of Housing), it was stated that: It is essential that housing agencies publicise their services through more appropriate channels than pamphlets — eg ethnic radio and newsletters; guest speakers at ethnic associations; employing bilingual workers with community contacts (sub 28, p. 3). Various community groups expressed their dissatisfaction with the current arrangements for tenant participation, airing grievances or appealing decisions: For the public housing program, there is no proper channel for potential public housing tenants to have a say in the public housing design and construction process.
158 INDUSTRY COMMISSION F EFFECTIVENESS AND EFFICIENCY OF PUBLIC HOUSING AUTHORITIES
The involvement of residents in the day-to-day management is rather minimal (Ettinger House - Fairfield Family Resource Centre, sub. 86, p. 5). Ironically one of the problems of public housing authorities is that they are well intentioned towards their tenants and because of this they have in the past believed that they will automatically know what is best for the tenants without bothering to consult with tenants. The Tenant Associations have been effective in disabusing the Victorian public housing authority of this belief, and keeps reminding the authority that this is a fallacy (North Melbourne Tenants Association, sub. 81, p. 2). Shelter SA submitted that: For the public housing system to operate at an increased level of accountability, the following minimum steps are needed to further inform tenant and community input: • An increased level of responsive consultative mechanisms to be established as an ongoing practice. • Independent tenant representation on the SA Housing Trust board. • Independent community housing organisations representation on the SA Housing Trust board. • Increased resources to tenant and community housing groups to enable them to input into the consultative process effectively. • Increase the quality and quantity of information to tenants, housing groups and the community. These measures would increase accountability and assist tenants, housing groups and the community in general to make an informed and beneficial input into the management of the public housing system in South Australia (sub. 54, pp. 11–12).
Allocation There are significant differences in the time applicants have to wait for different types of accommodation (for example, number of bedrooms) in the same region. For example, a household that qualifies for a three bedroom public house in the Blacktown–Mount Druit area waits an average of 19 months from application to receipt of a public house, while a household that qualifies for a two bedroom house in the same area waits an average of 22 months. A single person waits an average of 46 months (NSW Department of Housing 1992). This is inequitable. The income eligibility criteria used by Australian housing authorities for applicants for public housing tend to discriminate against larger families. This means larger families become ineligible for assistance at proportionally lower income levels than smaller families if incomes are adjusted for family size. There are also inequities between States on eligibility for public housing, and on eligibility for priority allocations (see Appendix J for further discussion of these and other allocation issues).
INDUSTRY COMMISSION 159 PUBLIC HOUSING
Landlord and tenant legislation Some housing authorities are specifically exempt from landlord and tenant legislation. This creates inequities in those jurisdictions between private tenants (who are covered by the Act) and public tenants (who are not). In the ACT, the Landlord and Tenant Act 1949 protects tenants against arbitrary eviction, frequent rent increases, liability to have furniture removed for rent, and prohibits the payment of money for a lease other than as rent or bond. Tenants in ACT Housing Trust public houses are specifically excluded. The ACT Housing Trust reportedly sees difficulties in applying tenancy law in the ACT as it stands to public housing: The ACT Housing Trust considered that the application of tenancy legislation to both public and private housing could present difficulties and increased costs for the Trust which could reduce the resources the Trust had to provide public housing. The Trust considered that the rules in the Landlord and Tenant Act 1949 which limited rent increases to once every 12 months for private tenants would pose considerable administrative problems for the Trust which would have to then make separate rent adjustments for its tenants who number in excess of 12,000 (The Community Law Reform Committee of the ACT 1992, p. 13). The Trust suggested that the legislation could be changed.
Rent setting practices The rents public housing tenants pay are not related to the market value of the property, which depends on factors such as location, size and condition. This results in inequity since public tenants in similar circumstances can be allocated houses of significantly different amenity, but pay the same rent. The quality of public housing is quite variable. The rental price charged for public housing often does not reflect the differences in quality or security of tenure between public and private rental. Currently, muted pricing signals provide little incentive for tenants to seek housing appropriate for their needs. Most tenants (about 85 per cent) pay a rent related to their income. For them, the rent paid does not reflect the value of the service they are receiving because they are not affected by changes in the rental price of their dwelling. As public rentals rise, so does the amount of rebate received by tenants. This ensures that they continue to pay the same proportion of their income on rent. Tenants paying these affordable rents have little incentive to change their housing circumstances as their income or family composition change. As public tenants base their decisions on distorted or non-existent price signals, housing authorities are not able to easily discern what type of dwelling
160 INDUSTRY COMMISSION F EFFECTIVENESS AND EFFICIENCY OF PUBLIC HOUSING AUTHORITIES tenants value most. Tenants may not value some properties as highly as others relative to their real cost. If tenants paid rents that reflected the difference in the real costs of different properties, both tenants and authorities should benefit. Because the rent most public tenants pay is limited to a fixed proportion of their income, the housing authorities do not receive valuable information on tenants’ preferences for housing location and characteristics (see Appendix I).
F.4 Property management
Valuation of stock For housing authorities to properly manage their stock, they need to have an inventory of each unit by location and value. Market values should be used as the benchmark for valuing property assets where possible. Market valuations reflect the opportunity cost to the housing authority of retaining that unit of stock. A housing authority can then make informed decisions as to the best way to meet the housing needs of its clients. As discussed above (see also Appendix H), housing authorities have different asset definitions and value their assets using different methodologies. These differences make it difficult to arrive at consistent estimate of the total value of public housing assets.
Poor incentive structure The current arrangements provide few incentives for long-term asset management. A major reason for this is that housing authorities do not have to value assets using market benchmarks. Rents are sometimes based on historical costs of provision rather than current property values and ‘market rents’. This has reduced rental collections from those public housing tenants who pay less than ‘market rents’, contributing to the deficits of housing authorities. As a result, discretionary spending such as maintenance is squeezed.
INDUSTRY COMMISSION 161 PUBLIC HOUSING
Regional management It is unreasonable to expect a centralised manager to effectively manage stock over a large region with a wide variety of town sizes and climates. The Derby West Kimberley Shire stated that: Housing management in the Kimberleys has been conducted for many decades from Perth. This has resulted in the current mix of poorly built, inappropriate and undesirable houses that is Derby’s housing stock. In recent years Homeswest has begun to regionalise its management, and for the first time Derby has a chance to have the necessary planning and management it needs to develop its public housing. Today’s construction program now consists of well designed and built properties (sub. 70, p. 5).
Security of tenure A problem for property management is the common perception of public tenants that once they have a public house, they are entitled to stay there for life. The National Housing Strategy (NHS 1992b) pointed out that: ... public tenants do not necessarily enjoy life-time security of tenure. Many tenants sign a lease or ‘Acknowledgment of Tenancy’ which is usually silent on the term of the lease. In effect, this means that tenants may, in the absence of legislative provisions, have security of tenure for as little as two weeks, in consideration of rent being paid fortnightly in advance (p. 45). The NHS went on to point out that one factor that may impinge on the occupancy rights of public tenants is: ... the general stance adopted by State housing authorities that public rental housing tenants have security of tenure within the sector, but not necessarily of a particular dwelling (p. 45). As the composition of the household changes, there can be benefits in encouraging a public housing tenant to move to a dwelling of more appropriate size. The CSHA does not oblige housing authorities to provide security of tenure over a particular property to a public tenant. The Housing Industry Association submitted that: The flexibility of public housing authorities to continue to manage their stock of dwellings to meet the changing need of their clients is severely hampered by policies which allow tenants to stay in a dwelling even if their family situation has changed. ... HIA is not advocating forced removal of tenants over-consuming housing without suitable tenant protection but there should be established set procedures, made known to prospective tenants, which can be put in place in such situations. Such procedures could include the offer of a more suitable dwelling in the neighbourhood and would be applicable for both expanding and contracting household situations (sub. 92, p. 9).
162 INDUSTRY COMMISSION F EFFECTIVENESS AND EFFICIENCY OF PUBLIC HOUSING AUTHORITIES
The perception of security of tenure over a particular house is impeding the efficient use of stock. Public tenants should have security of tenure to a preferred general area, but not to a specific house.
Shelter and amenity Some public housing constructed to be of an appropriate standard in itself has been less than adequate in its setting. Broad-acre public housing developments with a lack of variety in unit designs, although less expensive to build, have sometimes exacerbated social problems. These larger estates were thought to bring economies of scale in construction and administration. However, the extent of these economies or how they varied with the size of the estate do not appear to have been documented. The savings from building large estates can be illusory if on-going costs are passed on to the rest of the community. For example, broad-acre developments may contribute to increased crime and social problems. State housing authorities are adjusting to community expectations. There is increasing recognition that the objective is the welfare of clients and that the physical assets provided by housing authorities are only to be valued in terms of their contribution to this objective. In some authorities the activities of tenancy management have been organisationally separated from other functions. This change of emphasis is important because individuals value housing not just for the shelter but for the amenity it provides.
Contracting out The housing authorities now contract out the vast majority of their construction and maintenance work. However, the Master Builders Construction and Housing Association of Australia said that: We see a greater role for contracting out the project management and design work involved for the construction of public housing and certainly a number of our builders are very concerned about the cost-effectiveness and current tender processes involved with the provision of public housing stock (transcript, p. 860). and while there has been significant gains in efficiency: ... there would appear to be further opportunities for achieving increased efficiency dividends from the greater involvement of the private sector. Some of the measures that have been suggested by Association members include: • for core public rental stock, normal industry design and quality standards be used rather than specifications that exceed these;
INDUSTRY COMMISSION 163 PUBLIC HOUSING
• SHAs to develop closer consultation with industry associations and builders in the provision of public rental stock; and • in the medium to longer term, governments to put in place arrangements that will facilitate private sector financing and management of ‘normal’ public housing rental stock (sub. 94, p. 4). The Commission accepts that it may be cost- and time-effective for housing authorities to conduct some maintenance internally.
F.5 Co-ordination The efforts of the various organisations involved in providing housing assistance and support services could be better co-ordinated. The Western Sydney Housing Information and Research Network submitted that: There are major problems in the co-ordination of housing between the State and Commonwealth Governments, this is particularly noticeable in NSW. Examples of poor co-ordination include the use of SAAP in NSW to provide residential care for State wards and young people aged 12–15, which results in less available accommodation for the young people targeted by the program’s objectives (sub. 84, p. 3). There are also problems of co-ordination between housing authorities and other agencies providing housing assistance: The local Community Tenancy Scheme has also had problems not being told when its tenants are about to be housed by the Department. This has resulted in rental arrears occurring and placing a financial strain on their funds in the past (North Sydney Housing Interagency, sub. 177, p. 2). Many participants referred to the need for better co-ordination of accommodation and support services. Singleton Equity Housing Ltd, for example, stated that: There also appears to be a general lack of co-ordinating between departments responsible for the funding of support services and departments responsible for housing projects (sub. 175, p. 2). The Uniting Church Synod of Western Australia commented that: ... support funding other than SAAP funding for people with disabilities, for example needs much better integration. We have had examples of much needed programs having the necessary housing stock available, but being unable to go ahead because the support dollars are not available from the many possible avenues available (sub. 32, pp. 1–2).
164 INDUSTRY COMMISSION F EFFECTIVENESS AND EFFICIENCY OF PUBLIC HOUSING AUTHORITIES
Participants also referred to problems in obtaining housing once support services are found. The Spastic Centre of New South Wales stated that: ... people are not officially allowed to apply for housing stock until they can guarantee accommodation support. If New Service funding under the Disability Services Program is necessary and approved for accommodation support because the person has high support needs, there is an expectation that it will be spent during a limited time frame. The person could well have to wait, however, for two or more years for housing stock to become available and this could jeopardise their accommodation support funding. There needs to be a recognition that both programs have lead times and applications have to be placed simultaneously to take account of this (sub. 11, p. 5). In the ACT and Tasmania, the community service functions of government have been grouped together with the housing function in recognition of shared responsibilities and the increased efficiency in working together. The Commonwealth has also grouped these functions under the one portfolio. Co-ordination amongst all the organisations involved in providing housing assistance and related support services is a matter addressed in Chapter 10.
F.6 Transparency and accountability
Transparency Transparency should be a crucial aspect of the operations of housing authorities. Because public money is involved, the public has a right to know what the options are and where money is being spent. The subsidies provided to public housing tenants cannot be easily identified. This is especially so where housing authorities use internally generated funds from other areas of their operations, such as land banking, to cross subsidise public housing provision. This obscures the real cost to the community of providing public housing. Governments and the community could make more informed decisions about how much public housing to provide if the size of the subsidy were known (see Chapter 3). With regard to the NSW Department of Housing, Mant stated that: The financial and accounting structure of the Department has denied any proper system of accountability. There seems to have been a deliberate strategy to aggregate the accounts of Landcom, the main surplus generating operation, with the remainder of the Department. The costs and performance of the various parts of the Department lie buried under the aggregated information published in the annual financial statements. A demand by the former Premier that the Department disaggregate the accounts into separate businesses was never met (Mant 1992, p. 37).
INDUSTRY COMMISSION 165 PUBLIC HOUSING
Participants complained about incomprehensible housing authority annual reports. The Australian Council of Social Service, for example, said that: ... as an operational point of view I think that’s one of the key issues that State housing authorities generally haven’t been accountable in a variety of ways. If you try and read their financial reports, it’s — well, let's say if we use ‘opaque’ or ‘dense’ or ‘indecipherable’; I mean, you don't really know what's going on (transcript, p. 683).
Additional functions and objectives Where the Commonwealth wishes to impose planning requirements on a housing authority, the extra cost of providing public housing in that way or location should be clearly identified and separately funded. For example, Commonwealth ‘Building Better Cities’ objectives and requirements for housing authorities can cloud transparency and should be clearly identified and separately funded. The Commission believes that housing authorities should not be involved in land banking and land development functions (see Appendix G). If they are, however, transparency requires that any transactions between the two activities be explicitly identified and separately funded, so that the full cost of land for public housing is accurately revealed. Accountability is also clouded where housing authorities are required to support elements of the building industry or provide a counter-cyclical stimulus to the industry. The South Australian Treasury, in discussions with the Commission, commented that, in hindsight, attempts to use public housing construction as a counter-cyclical boost to the building industry in that State had often ended up being pro-cyclical due to the time it took to get new projects up and running. If a government wishes to assist the building industry, it should clearly identify the assistance and fund it separately from public housing. As noted by Mant in relation to the Department of Housing in NSW: The primary objective of the Department should be to get the best value for the tenants it assists now and in the future. If the Government wishes to assist the building industry from time to time, then it should find other ways of doing so. To perpetuate a primary role of assisting the industry will continue to harm tenants and will deny opportunities to obtain assets which provide the best value for money (Mant 1992, p. 8).
166 INDUSTRY COMMISSION F EFFECTIVENESS AND EFFICIENCY OF PUBLIC HOUSING AUTHORITIES
Accountability Housing authorities have recognised that a greater degree of accountability is required of them than in the past, and are slowly developing and implementing performance indicators. The Queensland Department of Housing, Local Government and Planning commented that: ... like a lot of organisations we are struggling with the whole concept of output management, of performance measurement and performance standards, and I think we have moved a fair way down the track to developing a range of efficiency and effectiveness performance indicators and in increasing the publicity — not through our annual report but through housing assistance plans and various reports on performance that are available on a regular basis (transcript, p. 1279). The YWCA of Alice Springs recommended that: Making the current system more responsive, with greater accountability, and creating more options for clients, should be of primary importance. Performance indicators for the Department of Lands and Housing in the NT are not well publicised or understood (sub. 22, p. 2). The Northern Territory Department of Land, Housing and Local Government said that for each of its programs, performance indicators are measured and reported upon regularly to the Secretary of the Department: What we have in the department is a set of corporate directions, a number of strategies and programmed business plans — for example, a home ownership plan which sets the objectives and provides performance measures against those objectives. They are used as a management tool. We are, like everybody else, in the business of developing and improving our performance measurement and indicators that we have in place and looking to identifying those that would be of interest to the public. So we are in the process, I guess, of getting our indicators in place first in our business plans and then looking to see what sort of indicators we can put in — for example, our annual report or various publications from time to time (transcript, p. 33). Accountability can be increased by greater involvement of tenants. The Mackay Housing Interest Network submitted that: We have had many experiences whereby tenant participation has increased the monitoring of events and acted as ‘watchdogs’, thereby increasing the accountability of the Government Department (sub. 26, p. 3).
INDUSTRY COMMISSION 167 ATTACHMENT F.1
GOVERNMENT HOUSING ASSISTANCE SCHEMES
New South Wales
Public rental housing Independent Living Housing Public rental housing Scheme Crisis housing Homes on Aboriginal Land Rental subsidies Program Maintenance and dwelling Home modification and improvements maintenance sub-program Housing initiatives for aged people Private rental assistance Defence Housing Authority Rental Assistance Scheme Public equity partnership scheme Rental Housing Assistance Fund Housing for people with disabilities Tenancy service Housing for Aborigines Home ownership assistance Community housing HomeFund low start affordable Crisis Accommodation Program loan Special purpose housing (disability HomeFund low start loan support) program HomeFund homeowner loans to Community Tenancy Scheme tenants Community Housing Program HomeFund aged persons home update loan Special program for homeless young people Project homes scheme Hostel and care program Rent-buy scheme Tenant participation program Loansure insurance Housing estate workers State home purchase payment scheme Home and Community Care Mortgage assistance scheme Land acquisition and development
168 INDUSTRY COMMISSION F.1 GOVERNMENT HOUSING ASSISTANCE SCHEMES
Victoria
Public rental housing Supported Crisis Accommodation Public rental housing for families, Non-supported Crisis elderly people, youth, singles and Accommodation shared housing Regional Housing Councils Defence services housing program Rooming House Program Estate Improvement Group Housing Program Estate Security Aboriginal Housing Program Home Energy Advisory Service Community Housing Program
Pensioner Rental Housing Program Private rental assistance – Independent Living Housing Scheme Bond Assistance Moveable Units Program Housing Establishment Fund Intellectual Disability Services Home ownership assistance State Plan Home Opportunity Loans Scheme Community housing Shared Home Ownership Scheme Community Resourcing Program Priority Support Loans Scheme Community Facilities Program Mortgage Relief Joint Ventures/Project Partnership Home Renovation Service Emergency Housing/Housing Disability support program Information Services Program CAPIL scheme Common Equity Rental Co- operatives Urban Homesteading Housing and Support Program Deposit Assistance Scheme Rental Housing Cooperatives Homes Now Tenant and Community Support Enforcement of housing standards Program Individual Self Build Program Group Self Build Program
Queensland
Public rental housing Disability housing strategy Public rental housing – Capital works program – Home modifications program
INDUSTRY COMMISSION 169 PUBLIC HOUSING
Community housing Community Housing Program Bond loan program Cooperative Housing Program Rent subsidy scheme
Crisis Accommodation Program Home ownership assistance Youth Headleasing Transfer Home Ownership Made Easier Scheme program Community Housing Partnership HOME (shared) scheme Program Deposit assistance Private rental assistance Mortgage assistance Housing resource services Community Rent Scheme
Western Australia
Public rental housing Private rental assistance Public rental housing Bond assistance and rent relief Aboriginal Rental Housing (Urban scheme and Remote) Rental support scheme
Rental Rebate Scheme Home ownership assistance Community housing Keystart loan scheme Crisis Accommodation Program Housing Loan Guarantee Act Emergency Housing Start-a-home scheme Lodging Houses Mortgage support Community Housing Program Deposit assistance program Youth Focus Program Cash assistance program Joint Venture Housing First mortgage Community Residential Senior citizens home purchase Accommodation Program Aboriginal home purchase Community facilities accommodation program Home buyers’ guarantee scheme Special projects Flexible deposit scheme Tenant participation Shared equity scheme Wisechoice program
170 INDUSTRY COMMISSION F.1 GOVERNMENT HOUSING ASSISTANCE SCHEMES
South Australia
Public rental housing Private rental assistance Public rental housing Rent relief scheme Aboriginal fringe dwellers program Emergency Housing Office Aboriginal Rental Housing Housing Improvement Act Program Rent control Housing for the disabled Home ownership assistance Housing for non aged single persons Homestart lowstart Youth housing Home Ownership Made Easier program Aged persons housing Homestart top-up loans Priority housing Homestart refinance loans Independent Living Scheme Purchased home program Youth housing - direct lease scheme Office of government employee housing program Housing for single parents House sales program Rental rebate scheme Progressive purchase plan Boarding houses Special home ownership plan Community housing Rental purchase scheme Joint Ventures Refinancing Co-operative Housing Program Mortgage relief scheme Community Housing Associations Homesure Program Community Tenancy Scheme Crisis Accommodation Program
Tasmania
Public rental housing Community housing Public rental assistance program Crisis accommodation program Rental rebate scheme Community Housing program Rental housing cooperatives
INDUSTRY COMMISSION 171 PUBLIC HOUSING
Aboriginal housing program Bonds and relocation assistance Neighbourhood houses program Substandard Housing Control Act
Supported Accommodation Home ownership assistance Assistance Program Home purchase scheme Youth homelessness Mortgage assistance Accommodation services program Voluntary early repayment scheme Private rental assistance Rent purchase scheme Mortgage And Rent Assistance TDA Home ownership finance Program scheme Financial support Shared equity - people with Rent relief disabilities
Australian Capital Territory
Public rental housing Singles share accommodation Rental assistance program scheme Rental rebates Community Housing Program Priority housing Private rental assistance Rental relief Rent relief Youth housing Rental accommodation facilities Home ownership assistance Property development sub-program The Commissioner for Housing Loan Scheme Jerrabomberra Boarding House First or second mortgage Community housing Refinancing loans Community Organisation Rental Mortgage relief Housing Assistance Program Income support Crisis Accommodation Program
Northern Territory
Public rental housing Pensioner rental housing Part rental rebate Rental and management program Aboriginal housing Industry housing assistance scheme
172 INDUSTRY COMMISSION F.1 GOVERNMENT HOUSING ASSISTANCE SCHEMES
Aboriginal Housing Advisory Community Housing Program Service Private rental assistance Aboriginal land servicing Mortgage And Rent Relief Scheme Serviced land availability plan Town camp housing and Home ownership assistance infrastructure program HomeNorth Easy Start First Public housing maintenance Mortgage Loan Scheme program HomeNorth Sales Scheme Public housing acquisition program HomeNorth Early Start Deposit Construction and redevelopment Assistance Scheme upgrading Loan Transfer Scheme Housing client services
Community housing Supported Accommodation Assistance Program Crisis Accommodation Program
Note: This program list was compiled from the 1990–91 annual reports of the State housing authorities. Where housing authorities have provided updated information it has been incorporated. However, the list may be incomplete or include programs no longer in existence.
Source: Industry Commission.
INDUSTRY COMMISSION 173 PUBLIC HOUSING INQUIRY
REFERENCES
Australian National Audit Office Independent Commission to Review Public Sector Finances 1993, Agenda for reform, Western Australia, August. The Community Law Reform Committee of the ACT 1992, Discussion Paper No. 1 - Residential Tenancy Law, ACT Government, Canberra, April. Egan, R. 1993, The development of rental housing policies and programs in Australia under the Commonwealth State Housing Agreement, consultant’s report to Industry Commission Inquiry into the Provision of Public Housing. Kent, C. & Associates 1990, House Rules - Decision making and appeal rights in state housing authorities, a report to the Department of Community Services and Health, AGPS, Canberra, September. Mant, J., 1992, Inquiry into the Department of Housing, Report of the Commissioner, Sydney. NHS 1992, Housing Choices: Reducing the barriers, Issues Paper 6, AGPS, Canberra NSW Department of Housing 1992, Annual Report 1991-92. Williams P., 1992, Sustainable housing policies and the role of public sector housing organisations, Seminar paper presented t the Urban Research Program, Australian National University, Canberra, August 1992.
174 G ORGANISATIONAL REFORM OF STATE HOUSING AUTHORITIES
Where transparency is lacking, performance becomes difficult to measure. Without agreed performance measures, accountability suffers. Without clear goals and appropriate performance measures, there is no way to determine the effectiveness of a housing policy. Failure to determine effectiveness means that efficiency becomes at best irrelevant, at worst unknowable.
Each State housing authority in Australia has its own historical, economic, social and political context, and each has its own unique arrangements. Therefore, the concepts discussed in this appendix — accountability, efficiency and responsibility — must be considered as a continuum along which each State housing authority may currently be arrayed.
G.1 Aims of organisational reform The performance of an organisation is very much influenced by incentives. In turn, incentives are linked to the structure of the organisation — does it promote responsibility and accountability? Responsibility must be clearly defined. Clear demarcation of responsibility is required if accountability is to be demanded. Accountability can be seen as flowing upwards (within the organisational hierarchy, and from the organisation through its board to the Minister, to the Cabinet and to parliament), whilst responsibility flows downwards. Managers should only be held accountable for those decisions for which they have responsibility. Accountability is enhanced by transparency. This in turn calls for timely, relevant and comprehensible information about the performance of the organisation. There are three main dimensions to performance relevant to public housing: • Effectiveness — the degree to which aims have been fulfilled and whether they have been fulfilled at least cost.
INDUSTRY COMMISSION 175 PUBLIC HOUSING
• Efficiency — involves both cost-efficiency (that is, internal efficiency) and allocative efficiency (that is, the best use of resources generally). • Equity — embraces elements of both efficiency and effectiveness in addition to the normal concepts of fairness and social justice. Without a clear understanding of costs it is difficult, if not impossible, to determine what is an equitable distribution of publicly owned goods. Subsidies must be explicit if equitable outcomes are to be achieved. The last important determinant of accountability and responsibility is the will of the owners (in this case governments) to demand it. Without this, structural reform is pointless.
Clarification of objectives Mant found evidence of quite unrelated objectives in the procurement process of the NSW Department of Housing. These include: • Solving the “housing shortage”. • Building specific solutions to meet specific needs of today, regardless of what may be the needs of the future; building to solve the problem of the next person on the waiting list. • Supporting the building industry directly. • Demonstrating new designs, achieving urban consolidation, urban renewal or heritage conservation. • Satisfying the long-term needs of anticipated tenants and thereby adding positively to the asset base of the rental activity (1992, pp. 31–2). Most State housing authorities have a similar range of objectives. Efficiency, effectiveness and accountability can all suffer when there is a large menu of objectives. It is more difficult to identify and assess inefficiencies, thereby reducing the likelihood that they will be corrected. If objectives are not operational and the trade-offs between objectives (for example better design versus more houses) are not explicit, the effectiveness of programs becomes difficult to measure (Forsyth 1991, p. 6). Given the difficulty in measuring performance, accountability becomes a question of justifying unmeasured outcomes.
Accountability The accountability of government agencies relies on the reporting of performance to the parliament (which represents the owners). A Minister is
176 INDUSTRY COMMISSION G ORGANISATIONAL REFORM OF STATE HOUSING AUTHORITIES
accountable for performance only insofar as it is measured, and measurement calls for performance indicators. The current structure of State housing authorities provides no clear delineation of where policy ends and administration begins. This may be acceptable in a small organisation, a department producing simple outputs, or a policy (central) agency but not to a complex service delivery agency such as a housing authority. If a Minister is held responsible for what he or she cannot control, then the incentive for the Minister is to obscure outcomes thereby reducing responsibility. The need is to hold the Minister responsible for monitoring the performance of the agency, not for the performance itself. The incentive for the Minister would then be to clarify rather than obscure performance. A Minister should be responsible for administration in general, but not day-to-day administrative matters. Accountability is enhanced where spheres of responsibility are clearly mapped out. A Minister should be responsible for setting policy, selecting board members (in the case of statutory authorities) and monitoring performance; all tasks that a Minister can properly be expected to control. The Chief Executive Officer (CEO) should be responsible, through a board if appropriate, to the Minister. All three should be responsible to parliament, the Minister directly, and the others usually through parliamentary committees. The CEO would not be directly responsible to the Minister as this undermines the authority of the board. It is also important that the board be independent of both the Minister and the CEO.
The role of commercialisation Commercialisation will increase effectiveness only in areas where some commercial focus can be fostered such as land banking and property management. Effectiveness in the provision of public housing, and in matters of heritage conservation, environmental sustainability and support to the building industry, is unlikely to be directly affected by the adoption of the commercial model per se. But there should be significant indirect gains if property management is made more effective by such means. It would lead to a better match of supply with need, and thereby contribute to cost-effectiveness. Adverse effects can arise from commercialisation if pressure to achieve financial returns distorts the outcomes of public housing. This danger would be all the greater if commercial property management and non-commercial tenancy management activities were carried out within the same organisation. Full corporatisation of property management under Corporations Law is an option,
INDUSTRY COMMISSION 177 PUBLIC HOUSING
but it needs to be demonstrated that the social objectives of governments will not be compromised.
G.2 Recent reform initiatives
The New Zealand approach New Zealand has taken a radical approach to public housing reform. It has combined the public housing subsidy, rent assistance and mortgage assistance for private tenants into a single Accommodation Supplement that can be used for public or private rental and for home ownership. The Accommodation Supplement is administered by the Department of Social Welfare (equivalent to the Australian Department of Social Security). Under this system, having lost monopoly provision of subsidised housing, small teams, responsible for about 1200 houses, compete directly (at least in theory) with private providers. As they are obliged to charge market rents, it is expected that they would compete on service. The new company set up to provide housing is Housing New Zealand Ltd (HNZ). Its objectives (as set out in the enabling legislation) are to be: • As profitable and efficient as comparable businesses that are not owned by the crown; • An organisation that exhibits a sense of social responsibility by having regard to the interests of the community in which it operates; and • A good employer (Housing Restructuring Act (1992) part. 1, s.4).
Clarification of objectives In New Zealand the commercial imperative has dominated. HNZ is required to be ‘as profitable and efficient as comparable businesses that are not owned by the Crown’. But there are no comparable businesses (in Australia or New Zealand). Private providers at the low-cost end of the rental market are either small individual investors, or charitable organisations, neither of which can be used for valid comparisons. Potentially more important is the conflict between the objectives set out in the enabling legislation for HNZ, specifically between profitability and social responsibility. There is a cost attached to social responsibility. The question is how to manage the trade-off. A paper by the New Zealand Department of Social Welfare states that HCNZ (as HNZ was then known) was put on ‘a purely commercial footing’ (NZDSW 1991, s. 3.8). The social responsibility
178 INDUSTRY COMMISSION G ORGANISATIONAL REFORM OF STATE HOUSING AUTHORITIES
criterion is not mentioned at all in the paper. It is claimed that (supported only by a means tested subsidy to low-income earners) this will lead to the best possible outcome. The requirement that HNZ be a good employer (New Zealand Housing Restructuring Act 1992, s.4) may also cut across the profitability objective. If its personnel policies are dictated by commercial objectives, there is no need to specify that it be a good employer. If the requirements go beyond this, it is likely to lose some of its competitive edge. New Zealand has greatly simplified its delivery system. It has put all responsibility for welfare into the one department.
Accountability The New Zealand model improves accountability by reducing the function to simply maximising profitability. As profitability is easy to assess, accountability becomes quite straight forward. However this is achieved by disregarding potential medium- and long-term outcomes. Mant (1992, p. 49) quotes several potential outcomes of over-emphasing financial returns: • discrimination against high risk groups; • reliance upon ever cheaper, and often marginal, alternatives; and • eventually, an end to the public provision of housing. The rather vague aim of maintaining a sense of social responsibility whilst pursuing ‘purely commercial’ objectives has the potential to blur accountability. That HNZ and the Department of Social Welfare are both responsible for the welfare of public tenants does not make the government doubly accountable, the opposite is more likely to result. By moving to a demand-side only response, the New Zealand Government has reduced its responsibility. It no longer seeks to ensure that all New Zealanders have access to affordable and appropriate housing. The New Zealand Government has pinned its hopes for increased efficiency on the competition that is expected to come from the private sector. This competition, at least in the Australian context, is unlikely to be strong enough without significant additional government inducement. As government provision in the long-term is cheaper than rental subsidy (as argued in Appendix E), the long-term outcome must be reduced effectiveness and efficiency .
INDUSTRY COMMISSION 179 PUBLIC HOUSING
Equity The gains in equity claimed by the New Zealand Government (NZDSW 1991, ss. 3.2–3.3) are questionable. If the government wants to increase private sector involvement, yet government provision is more cost-effective, then the total number of people assisted must decrease. The increased horizontal equity between private and public renters may come at a cost to the welfare of low- income people as a whole.
Tenure implications The question remains, can HNZ be competitive with the private market whilst offering any kind of tenure security over and above what is offered by private landlords?
The ’Mant’ approach The model which Mant (1992) has outlined for New South Wales goes some way to redressing the problems in public housing discussed in Appendix F. It must first be said that it is an interim model only. The structure which Mant anticipates could develop from the interim model resembles the Commission’s preferred option, with one significant difference (discussed below). Mant (1992) proposed that the (NSW) Department of Housing be split into three parts: • The first part would be made up of consumer protection agencies. He suggests they should be independent of the other activities, with many of them possibly being administered by the Department of Consumer Affairs. • The second part would be a Ministry of Housing. This would have several broad functions serving as: - a policy agency giving advice on all tenure forms; - a contractor of services from the ‘Department and other rental housing providers’; - the funding agency of assistance payments; - the manager of Commonwealth–State housing agreements; and - promoting, developing and generally supporting alternative tenure forms. • The third part, the Department of Housing, would retain most of the remaining functions. These include property and tenancy management, land banking, land development and sales, state-wide tenancy applications database, corporate and technical services and home finance. The
180 INDUSTRY COMMISSION G ORGANISATIONAL REFORM OF STATE HOUSING AUTHORITIES
relationship between these functions was seen as a ‘federation of semi- autonomous management units’ (Mant 1992, p. 71). Each of these would have separate budgets. Support services would be provided on a user-pays basis. Regional housing offices would serve as property and tenancy managers. Each office would enjoy significant independence. The main difference between the Mant approach and the Commission’s proposal is the separation of tenancy and property management. Under Mant the same body would control both supply and demand. The effect would be to mix commercial and welfare objectives. Trade-offs between these objectives, which are clearly matters of policy, would remain embedded in administrative decisions. There is a possibility that in the long-term, one perspective (welfare versus commercial) would come to dominate. An important gain arising from the restructuring required in the Commission’s model would be that clients are looked after by a tenancy manager concerned about the delivery of services and dedicated to equitable distribution of publicly owned goods. An holistic approach to the delivery of welfare services is more likely to be achieved. Furthermore, the cost of unrelated objectives could no longer be hidden, and therefore borne by, the public housing sector.
G.3 The Commission’s proposal Most of the State housing authorities have been taking steps to separate tenancy and property management as business units within the one organisation. For example, the Queensland Department of Housing and Local Government has established a business unit called the Housing Production Service responsible for producing and maintaining public housing as required by a Housing Services Group. The Housing Services Group is responsible for the day-to-day management of tenants. The Commission believes that reform should go further. Public housing property management should be commercialised and tenancy management should be institutionally separate from property management. With these further changes, improved accountability, transparency and co-ordination between agencies, as well as better incentives and enhanced client service would follow. The reforms involve the following: • Creation of a separate body (options are explored below) with the task of managing the housing stock. This property manager would be charged
INDUSTRY COMMISSION 181 PUBLIC HOUSING
with ensuring the supply of housing to the tenancy manager. The property manager would also be responsible for the maintenance of stock. • Creation of a tenancy manager which would lease properties from the property manager or private landlords and be responsible for tenancy management generally. Options for the institutional location of this tenancy manager are explored below. • Consolidation of housing policy functions into an organisation separate from the tenancy manager and the property manager. • Relocation of land banking and land development activities to other agencies. • Relocation of consumer tribunals to an appropriate department such as consumer affairs. Separation of tenancy and property management The separation of property and tenancy management is recommended: • To reduce the scope for cross-subsidisation so that the full cost of public housing becomes explicit. Only then can its merit relative to other government programs be fully assessed. • To encourage a commercial culture for the property manager and a client focus for the tenancy manager. • To prevent either commercial or welfare objectives dominating the other. This is important when property management is fully commercialised and is required to pay a dividend to government. The proposals are consistent with the thrust of micro-economic reform in other parts of the public sector.
Policy functions Strategic policy would be set by an organisation separate from property and tenancy managers, perhaps a department or ministry of housing whilst operational policy would be set by the head office of the tenancy or property manager. The strategic policy unit would control funding and also be responsible for monitoring the way funds are spent.
Tribunals State housing authorities are currently responsible for administration in relation to public housing tenants’ complaints and appeals. It is appropriate that tenants’, and applicants’ complaints about decisions should first be lodged with State housing authorities. If tenants or applicants are dissatisfied with their treatment an independent arbitrator is required. However, there is an obvious
182 INDUSTRY COMMISSION G ORGANISATIONAL REFORM OF STATE HOUSING AUTHORITIES
conflict of interests when the final arbitrator is also one of the protagonists (see Downs Active Residents and South-West Tenants Group, transcript p. 2625; Mant (1992), Sussex Street Community Law Service Inc., sub. 272). The criteria to be observed if an independent tribunal is to be effective are given in Box G.1. The tribunal should be located in a department such as consumer affairs. Consumer affairs departments are already involved in private tenancy conflict resolution in several States. The public housing tribunal could be amalgamated with private tenancy dispute tribunals. Public tenants should have at least the same rights as private tenants (The Community Law Reform Committee of the ACT, 1992). Additional rights may also apply to public tenants.
Box G.1: Principles for an independent tribunal The Community Law Reform Committee of the ACT (1992, p. 108) found that a tribunal would be effective and efficient if it: • Is able to hear and decide matters speedily; • Reaches outcomes which are just and deals fairly with those who appear before it; • Is inexpensive, efficient and accessible to all; • Facilitates agreement when the parties can fairly agree; • Provides results which are practical and lasting; • Is consistent and predictable in its decision making; and • Maintains records of reasons for decisions and statistics so the public is aware of what it does and what the law is.
G.4 Institutional and administrative arrangements There is a range of institutional and administrative arrangements that could accommodate the proposed separation of the property manager and tenancy manager. These are discussed below.
Property management The property manager would have a commercial focus. Its primary role would be to manage the public housing stock leased at a commercial rate to the
INDUSTRY COMMISSION 183 PUBLIC HOUSING
tenancy manager. It would buy, sell and lease properties to meet the needs of the tenancy manager. One limitation to commercial activity would be that it would have to obtain approval from the tenancy manager before it could sell surplus properties. Operations would be decentralised, with power devolved to regional offices. This would allow for better matching of supply with local demand. It could also allow a degree of competition between regions (even if only on the basis of performance measures). Many State housing authorities are already moving down this path. The property manager could manage other State-owned housing stock and headlease properties to other government departments, for say employee housing.1 It would be appropriate for the property manager to lease some of its stock to local councils and non-government welfare organisations for community housing. Options for the location of the property manager are considered below. Under the first two the property manager would be established as a statutory corporation. Regardless of the model adopted, the property manager would require adequate capitalisation. The options include: 1. A national government trading enterprise (GTE): Under this option States would transfer their stock of housing to a corporation that would report to a council of ministers. Ownership would be shared according to the value of the contribution of stock. This means that ownership and provision of public housing stock would no longer be linked. The stock portfolio may extend beyond public housing to some or all of government employee housing and possibly Defence Housing Authority stock.
1 This activity should be limited. Too much dependence on private market provision would lead to increased prices thereby hurting those who governments seek to help. Furthermore, as direct government provision of low-income is financially cost-effective for governments, this should be reflected in the form of housing assistance.
184 INDUSTRY COMMISSION G ORGANISATIONAL REFORM OF STATE HOUSING AUTHORITIES
2. A State agency set up solely to manage property: Under this option, the property manager would be set up in each State as a government owned corporation, possibly incorporated under Corporations Law. 3. A business unit located within a department: Under this option, the property manager would form a separate business unit in a department responsible, for example, for regional and urban development or government asset management (such as the Property Services Group in NSW).
Consideration of options Under Option 1, the potential for arbitrary interference in the day-to-day activities of the property manager would be diminished, as would the likelihood that States could saddle the property manager with untenable levels of debt. The Commonwealth may see advantages in fostering a national approach but the States may not favour Option 1 without some Commonwealth inducement. The ownership structure could be complex. The corporatised structure applying to Options 1 and 2 would favour the pursuit of commercial objectives of the property manager. The main advantage of Option 3 (cited by participants to this inquiry) is that it allows for co-ordination of housing with planning activity. However, the commercial focus of the property manager should exclude it from ‘special consideration’ in housing policy. If public housing were to be used as an instrument of government policy, the property manager would need to be fully compensated if government requirements impose additional costs. Under Option 3, the potential for cross-subsidisation between ‘commercial’ activities would remain.
Tenancy management The tenancy manager should have a client focus. Its prime responsibility is to ensure that appropriate housing assistance is available to meet the needs of people requiring housing. To do this the tenancy manager would lease properties, under long-term contracts, from the property manager or from the private sector at a commercial rate. It would then sub-let to tenants selected from waiting lists or to existing tenants transferring within public housing. The tenancy manager would negotiate with the property manager on the quantity, type, location, timing and quality of stock required. The tenancy
INDUSTRY COMMISSION 185 PUBLIC HOUSING
manager would set appropriateness standards and would ensure that the stock submitted by the property manager was of that standard. The tenancy manager would have to ensure that the stock was maintained at the appropriate standard.2 The tenancy manager would manage the waiting list and collect rents, but would also assist people to meet their housing needs. This would involve ensuring that tenants and applicants have access to programs that would best satisfy those needs. The tenancy manager would be responsive to clients’ changing needs, not just their needs upon entry to public housing. The tenancy manager would provide information to policy units on the effectiveness of both support programs and housing assistance programs. Options for the location of the tenancy manager include: 1. A housing authority with the property management function removed. 2. A ‘stand alone’ tenancy management agency. 3. A separate unit within a department providing community services.3
Consideration of options Option 1 would be least costly as it requires the least change. However, it could result in too little change in the current corporate culture. It would allow the continued co-ordination of home ownership assistance and public housing Option 2 has the advantage that it involves a break with the past. It would have relatively simpler, and therefore clearer, objectives. Options 1 and 2 would reduce the fear of increased stigmatisation that many participants voiced in regard to Option 3. Co-ordination with other service departments would have to be through higher level policy co-ordination groups. This would be unlikely to achieve the level of co-ordination sought by participants such as Queensland Health (sub. 335). The integration of the provision of welfare services with the provision of housing is laudable. ... It is the view of the Program Development Branch that the inclusion of health services and management in this process will further enhance the appropriate provision and integration of services to the community (Queensland Health, sub. 335, p. 1).
2 This may not be the same as the property manager’s responsibility for maintenance. The property manager may decide that the age or standard of a particular building makes it no longer worthwhile to spend funds on maintenance. In this case the tenancy manager may wish to take on all maintenance liability in order to keep a particular property available. 3 Programs that could be co-located with public housing tenancy management include Supported Accommodation Assistance Program, Home and Community Care, Disability Services Program, community health programs and other State support services.
186 INDUSTRY COMMISSION G ORGANISATIONAL REFORM OF STATE HOUSING AUTHORITIES
Option 3 would promote the co-ordination in ways which develop an holistic approach to people’s needs, including non-housing assistance. The majority of tenants in public housing do not require additional support services. However the need for support services is increasing as more aged and sole parent tenants enter public housing and as access is extended to homeless youth, people with intellectual, psychiatric and physical disabilities, and people arriving from crisis shelters. Indeed this already appears to be the trend (see South Australian Health Commission, sub. 366, p. 2). Option 3 would strengthen the co-ordination of support services at the policy and planning level. This would allow for trade-offs to be made between different support services based on need, and more efficient and effective delivery of services to people needing more than just accommodation. The assessment of peoples’ needs would be done once only, reducing cost to both government and clients. Single point access would also benefit people who are less able to deal with complex government structures. However, there are important objections to Option 3. First, it can be difficult to provide services that involve counselling clients when those services come from a department that is responsible, for example, for deciding whether or not to evict a tenant. Even if a department has procedures to prevent information flowing between functional areas, tenants may not perceive this to be the case. Second, it may give one department too much power over the lives of individuals. Third, the large number of support programs could diffuse focus upon assisting people in need. Other objections (voiced by participants) include: the greater potential for stigmatisation of public housing tenants as welfare recipients, and the potential loss of co-ordination with other housing related programs.
G.5 Requirements for success This section focuses mainly on the property manager, but is applicable to other corporate bodies responsible, for example, for land banking.4
Legislation The enabling legislation to establish the property management authority should set out the broad objectives and role of the authority, together with reporting
4 The Commonwealth Management Advisory Board and its Management Improvement Advisory Committee has produced a series of publications covering in more detail some of the issues discussed in this section.
INDUSTRY COMMISSION 187 PUBLIC HOUSING
requirements, accounting method and details of the structure of the board and its responsibilities. The charter for the property manager should be to meet the needs of the public and community housing sectors in an efficient and professional manner. The corporate objectives need to be: • comprehensive; • measurable (measures may be qualitative); • outcome orientated; and • complementary. The importance of corporate objectives is evidenced by the widely differing outcomes between States with similar objectives. The disparity between stated objectives and outcomes in some cases suggests that the link between objectives and performance is weak.
Corporate plans and goals With corporate objectives defined in the enabling legislation, corporate plans and goals would be negotiated between the Board and the Minister. The plan would define the responsibilities of both sides of the agreement and would be a form of contract between the Minister and the Board. Once approved, the government would be committed to support the plan and the Board committed to achieve the outcomes specified in the plan. The corporate plans of the property manager need to be complementary to those of the tenancy manager. They should set out the limits to its trading activity, that is, with whom and to what purpose it may trade.
Performance indicators Performance indicators should be in place from the start so as to assess the effectiveness of the new organisation and the gains from the proposed reforms. The effectiveness of performance measures depends on how well they measure intended and unintended outcomes. However it must be remembered that performance indicators in themselves create incentives and thereby can alter behaviour (Carter, Klein and Day 1992, pp. 166–7). Indicators are just that — they pose questions as often as they point to solutions. They are not absolute measures. This means they must be treated with some flexibility.
188 INDUSTRY COMMISSION G ORGANISATIONAL REFORM OF STATE HOUSING AUTHORITIES
Performance indicators can be divided into those that measure outcomes (effectiveness) and those that measure processes (efficiency). Both are required. To be effective, performance indicators must be linked back to corporate goals. That said, they must capture the whole output for which the organisation is responsible but only that which is within the control of the organisation. There is often a tendency to concentrate on two or three indicators such as rate of return, labour productivity and total factor productivity. Apart from the fact that these can be manipulated, they are only partial measures of performance and say very little about the effectiveness of the organisation (IC 1993, Appendix J; IC 1991, p. 92). When assessing the effectiveness of the tenancy manager, outcomes for low- income people in general, and tenants in particular should be included – economic and financial indicators only measure the process of meeting these outcomes. These social factors should be measured in order to ensure their achievement and to affirm their importance in the corporate culture. It is important that a core set of performance indicators be available that are consistent across States and over time to provide information on trends and to allow comparisons between States. This is one of the tasks of the Standing Committee of Commonwealth and State Housing Officials. In addition to a core of standard quantitative indicators, there should also be State and perhaps region specific indicators. For the property and tenancy managers, the three broad areas that need to be measured are financial performance, internal efficiency (asset and labour productivity) and outcomes for clients (such as client satisfaction, responsiveness to clients, and specifically for the tenancy manager, equity and targeting issues). Some useful indicators have already been developed by State housing authorities in their annual reports, corporate plans and Housing Assistance Plans. These require further development. A confidential Coopers and Lybrand report, commissioned by the housing authorities, identified financial performance indicators for public housing and other indicators have been proposed by the Australian National Audit Office.5 The Queensland Department of Housing, Local Government and Planning in its Housing Program Plan 1992–93 has produced some useful indicators on equity and client satisfaction.
5 Following the Auditor-General’s 1993 report into the CSHA, the Australian National Audit Office provided the Department of Health, Housing, Local Government and Community Services with some possible indicators.
INDUSTRY COMMISSION 189 PUBLIC HOUSING
Those measuring and using performance indicators need to have some ownership over them and be involved in their development. In developing indicators, management is encouraged to analyse and reassess its objectives. This is in itself valuable.
Reporting requirements Annual reports are a useful tool of accountability. They serve not just to hold the organisation accountable to Parliament, but also to interested parties and to the public. Apart from the usual financial information, they should contain a report of non-financial performance showing achievement against goals, and set out the next year’s targets. This reporting regime should give the Board and the Minister enough information for effective monitoring.
Auditing and review The audit process of government organisations often does not extend to non- financial performance. When it does (for example, in Western Australia) the audit process can enforce discipline on the selection of performance indicators. The auditor could be the government auditor. Private sector auditors are often used as consultants by government instrumentalities in which case the integrity of the auditor could be compromised. The property and tenancy management agencies should be subject to Freedom of Information legislation and open to review by the Ombudsman where applicable.
Adequate capitalisation of the property manager Adequate capitalisation is important. The Defence Housing Authority found that its capital base would mean that ‘within two years, solely as a result of the interest burden, the Authority will be operating at a loss’ (Kirkby-Jones 1990, p. 17). Without an adequate capital base, it is difficult to foster a commercial culture. Furthermore, capital deficiency will eventually lead to the stock being run down. If governments wish to reduce their involvement in public housing they should make that decision explicit. With adequate capitalisation and a pricing policy as recommended by the Commission, the authority can and should be required to provide a return on equity and to meet the full cost of borrowings whilst maintaining the value of the stock.
190 INDUSTRY COMMISSION G ORGANISATIONAL REFORM OF STATE HOUSING AUTHORITIES
It is important that a corporatised property manager not be used as simply the means of moving government debt off budget.
INDUSTRY COMMISSION 191 PUBLIC HOUSING
REFERENCES
Auditor-General, 1993, ‘Health, Housing, Local Government and Community Services Portfolio, Social Security Portfolio’, Report on Ministerial Portfolios, Budget Sittings 1993, Volume 6, Audit Report No.1 1993-94, Australian National Audit Office, AGPS, Australia. Carter N., Klein R., Day. 1992, How Organisations Measure Success: The Use of Performance Indicators in Government, Routledge, UK. Community Law Reform Committee of the Australian Capital Territory (The) 1992, Residential Tenancy Law, Discussion Paper No. 1, Australian Capital Territory Government, Canberra Craig A, Briar C, Brosnahan N, O’Brien M, 1992, Neither Freedom Nor Choice, Report of the People’s Select Committee, Massey University, NZ. DSW (Department of Social Welfare) 1991, Integrating Government Assistance for Accommodation, NZ. Family Centre and Business and Economic Research Ltd, 1991, Report to the Sunday Forum, Faiths In Action, NZ. Industry Commission 1993, Annual Report 1992/3, AGPS, Canberra Industry Commission 1991, Seminar: Measuring the Efficiency of Government Business Enterprises, Canberra, edited transcripts. Infometrics Ltd, 1991, The Impact of the Proposed Accommodation Supplement on the Housing Market, report prepared for the Housing Corporation of New Zealand, NZ. Kirkby-Jones, W.J. 1990, ‘Management Accountability for Public Assets’, Royal Australian Institute of Public Administration Conference, 16/July, Canberra. Egan, R.J. & Associates p/l 1993, ‘The Development of Rental Housing Policies and Programs in Australia under the Commonwealth-State Housing Agreement’, Consultant’s Report To Industry Commission’s Public Housing Inquiry, mimeo. Forsyth, P. 1991, ‘An Accountability Framework for Government Business Enterprises’, Annual Research Lecture in Government Accounting, 7 Nov, ANU and Australian Society of CPAs, Canberra.
192 INDUSTRY COMMISSION G ORGANISATIONAL REFORM OF STATE HOUSING AUTHORITIES
Mant, J. 1992, Inquiry into the Department of Housing, Report of the Commissioner, Sydney. New Zealand Parliament 1992, Housing Restructuring Act 1992. Queensland Department of Housing, 1993, Local Government and Planning in its Housing Program Plan 1992-93, Queensland.
INDUSTRY COMMISSION 193 H ASSET VALUATION AND MANAGEMENT
H.1 Valuation An important precursor to any assessment of State housing authority performance is to value property portfolios. Table H.1 summarises the book values of State public housing assets.
Table H.1: State housing authority asset valuation, 30 June 1992
Value per State Valuation house Valuation method used
$m $ New South Wales 12 982a nc Market value: houses and landb Victoria 4 768 77 700 Market valuec Queensland 1 213 nc Historical cost: buildings, office furniture. 483 Market Value: land Western Australia 900 25 500 Historical cost (after depreciation) South Australia 3 600 58 200 Values used for property ratingd Tasmania 575 40 500 Historical cost Australian Capital Territory 1 400 113 300 Market valuee Northern Territory 729 77 700 Market valuef np Not provided. nc Not calculable. a Value from the NSW Department of Housing Annual Report 1991–92 (1992, p. 86). It includes commercial properties. Mant (1992, p. 17) notes that the value of the NSW housing estate includes 240 office and commercial properties. b The NSW Department of Housing (1992) uses market benchmarks for residential property. These are adjusted using value movements, by location and dwelling type, from the Valuer-General. Commercial properties are ‘valued internally’. c Calculated as the capital improved market value, net of one year accumulated depreciation. d Information provided by the South Australian Government. Based on property values determined by the Valuer-General for property rating purposes. e Estimate given at the Canberra public hearings by the ACT Housing Trust (transcript, p. 1029). f Revalued every 3 years by the Australian Valuer-General. The asset value has a historical and revaluation component. Note: Based on submissions, transcripts, questionnaire responses and Annual Reports. Source: Industry Commission.
State housing authorities have different asset definitions and value their assets using different methodologies. Queensland, for example, uses market values for
INDUSTRY COMMISSION 193 PUBLIC HOUSING
land and historical cost for other assets, while the Northern Territory uses market values. Tasmania values both housing and land at historical cost. This makes it inappropriate to sum the asset values in Table H.1 across States. The national conference on Public Housing Asset Management held in May 1992 highlighted the lack of comparability of the financial and product performance between authorities. This led to the commissioning of a review of accounting and financial practices. The review has been completed and a common standard for accounting and financial reporting proposed. States have not indicated whether they will adopt the recommendations. Ensuring consistency and comparability in such practices is an important step towards bench-marking, defining performance indicators and measuring performance. The Commission conservatively estimates the market value of State housing authority rental housing assets to be in the order of $31 billion (Table H.2).
Debt levels As at 30 June 1992, State debt to the Commonwealth (comprising housing advances and nominated housing loans) for public housing and home purchase assistance totalled $6.3 billion (Appendix D, Table D.3). These borrowings are at concessional rates and are repayable over 53 years. In addition, there is debt to both the States and private sector. The total debt to Commonwealth, State and private sector related specifically to public housing is $6.6 billion, representing a debt to equity ratio of about one to four (Table H.3). This is based on the market value of assets estimated by the Commission to be in the order of $31 billion. Debt as a proportion of equity varies from 8 per cent in Queensland to 78 per cent in Tasmania (the large amount of debt for the Northern Territory reflects borrowings related to staff housing).
Valuation of assets Market values should be used as the benchmark for valuing property assets where possible, since market values reflect society’s current valuation of the assets (that is the next best use of the resources). As Mant states: The use of commercial-style accounting, which includes a balance sheet showing the present value of the assets employed in providing the services is intended to put pressure on the managers of those assets to obtain the best possible social return from them. ... At present, there are no such pressures on the managers of the rental housing operation of the [NSW Department of Housing] (1992, p. 61).
194 INDUSTRY COMMISSION H ASSET VALUATION AND MANAGEMENT
Table H.2: Commission estimate of public housing asset values by State, June 1992
NSW Vic Qld WA SA Tas ACT NT Aust
Housing authority 124 559 65 184 44 115 35 120 63 022 13 768 12 251 11 440 369 459 properties (number)a Metropolitan 70 60b 55 75b 60b 60b na 59 na (per cent of total) Country 30 40b 45 25b 40b 40b na 41 na (per cent of total) Separate houses 54 54 70 60 35 66 62 72 na (per cent of total)c Metropolitan house price ($’000) (lowest quartile) 135 110 106 80 88 71 134 100d na Country median house pricee ($’000) 68 55 53 40 44 36 na 50d na Metropolitan median flat price (lowest quartile) 115 85 85 65 70 60 100 60d na ($’000) Estimated market value ($m)f Metropolitan houses 6 341 2 341 1 988 1 255 1 179 389 1 016 398 14 909 Metropolitan flats 4 625 1 515 673 692 1 709 168 467 91 9 941 Country 2 522 1 434 924 351 1 109 196 na 297 6 834
Estimates by State ($m) 13 489 5 291 3 586 2 299 3 997 753 1 483 786 31 683 na Not applicable. a Includes Aboriginal housing provided under the Aboriginal Rental Housing Program but not housing provided by ATSIC. Excludes community housing. b Commission estimate. c ABS 1991 Census. d Price data for Darwin are for May 1992. e Median lowest quartile country price estimated at 50 per cent of the metropolitan lowest quartile median price. f Estimated market values are calculated as the number of properties times the lowest quartile price. For country areas the estimated median country house price has been used for all properties. Notes: Derived from REIA (1992a and b); Commission estimates (where indicated); housing authority submissions and questionnaire responses; NSW Department of Housing (1992). Source: Industry Commission.
The usefulness (and indeed relevance) of historical cost data is dubious given the very long lives of buildings. This is because economic conditions change over long periods of time (for example, relative input and asset prices). These changes are implicitly incorporated in market values.
INDUSTRY COMMISSION 195 PUBLIC HOUSING
Table H.3: State borrowings related to the value of public housing assets by State, June 1992
NSW Vic Qld WA SA Tas ACT NTa Aust
Public housing assets ($m) 13 489 5 291 3 586 2 299 3 997 753 1 483 786 31 683 Public housing debt ($m) 2 072 1 692 273 583 1 287 329 165 624 6 603
Debt to equity ratio 0.18 0.32 0.08 0.34 0.48 0.78 0.13 3.86 0.26 na Not available. a Northern Territory includes debt related to staff housing. Note: Derived from Table H.1; Chapter 3 Table 3.1. Source: Industry Commission.
The principle advantage of historical cost accounting is that it is easy to understand and to verify objectively. The main disadvantage is that financial targets derived using historical cost data are not a meaningful economic measure for long-lived property assets.1 Perhaps the major reason for the continued use by housing authorities of historical cost accounting in reporting is a requirement by State governments to do so (transcript pp. 353–4). Movement to a current cost accounting approach may require changes in reporting requirements. Although average property values (for example, the average or median for a suburb) can give a more accurate valuation than historical cost, they obscure the value of individual properties. Since public housing is often assumed to be of lower value than the average or median property, such a measure would tend to overvalue public housing assets.2 Market valuation is not without cost. According to information provided to the Commission, the cost of a complete market valuation of all public housing stock could amount to $25 million nationally. However, most States are already changing their valuation procedures and the costs of implementing the Commission’s proposal will therefore be minimal.
1 The under-valuation of property that results from the use of historical costs can reduce borrowing capacity — but this is of concern only where housing authorities are free to borrow against assets. 2 This may be the result of low building or design standards, minimal maintenance levels or the absence of features desirable to home-owners (for example, garages, landscaping, ensuites).
196 INDUSTRY COMMISSION H ASSET VALUATION AND MANAGEMENT
After the initial assessment, revaluations could be done annually using statistical sampling methods with a full valuation at intervals of about three years.3 In order to ensure the integrity of the valuation process it might be conducted independently (as in the Northern Territory and the Defence Housing Authority). Property can be valued on the basis of market rent — the present value of the discounted stream of rent receipts — where capital gains are assumed to result from expected changes in the future rent revenues. However, private rent levels tend to go in cycles that reflect short-run changes in the market for rental property services. These changes may not be fully reflected in property values if they are expected to be temporary or there are significant barriers to entry into the market (refer Appendix C.6). However, reliance on market property values is only possible where similar accommodation is traded in the private property market. This is not the case in some public housing estates, or for housing located in many country or remote areas. Where market property valuations are not possible, assets should be valued at the depreciated current replacement cost. There are major advantages in using market values. Market valuations can provide a basis for borrowing and dividend decisions, allow the maintenance of a prudential financial position and the assessment of overall performance against agreed benchmarks. Moreover, an objective assessment of assets (of which valuation is an important part) is necessary to determine the subsidy to public housing tenants. It is only by identifying the cost of housing assistance that rational decisions can be taken on how best to meet housing needs given scarce community funds. A better understanding of the financial position of housing authorities would allow governments to properly assess the size of the subsidies necessary to meet housing objectives. Realistic asset valuations are therefore important in assessing the ability of the housing authorities to meet public housing needs. Finally, it is in the interest of Australian taxpayers to compare the performance of housing authorities. A market basis for asset valuation would assist in setting the benchmarks needed to compare performance between housing authorities and enable the cost effectiveness of different forms of housing assistance to be determined.
3 The Defence Housing Authority uses ABS sampling methods to annually revalue houses which are not on the Department of Defence land.
INDUSTRY COMMISSION 197 PUBLIC HOUSING
H.2 Asset management Asset management is concerned with what services are to be provided, what assets need to be acquired and how they have to be maintained to meet these services, where they need to be, when to upgrade, when to dispose of — all with the objective of optimising housing services to the community (Burns 1992, p. 2). Asset management includes planning and aspects of design, as well as maintenance, acquisition, renewal, redevelopment and disposal.
Identifying the problems Many participants made reference to inadequacies in housing authority asset management practices. These views were summed up by the Royal Australian Planning Institute ACT Division which stated: Approaches by SHAs to asset management have been traditionally ad hoc, reactive to external factors or in response to tenant initiatives (sub. 139, p. 9). Until recently asset management has not had high priority. According to Burns: ... little effort was put into existing housing stocks, with the result that maintenance and location problems grew, and they grew at a faster rate than anybody expected them to. The effect on services was considerable. ... It was said that lack of maintenance and maintenance funding was responsible for increased costs and reduced revenue and for reduced services to client. But that was wrong! It was poor asset management — that is, poor forward planning and poor identification and classification of objectives (1992, pp. 1–2). Forward planning has not always been central to housing authority operations. For example, prior to the current reforms4 in New South Wales, Mant had stated: Contemporary thinking on asset management has only recently been introduced into the [New South Wales Department of Housing]. A comprehensive Country Land Strategy based on asset management principles has recently been prepared and a similar exercise in respect of the metropolitan area has begun. However, I get no sense that asset management issues have moved to the centre stage of the Department’s thinking and certainly the Regional Managers have not been asked to make the active management of assets one of their primary responsibilities (Mant 1992, p. 32). Conflicting objectives within the housing authorities have detracted from good asset management. The problem is no less real where the conflict stems from governments using public housing to achieve broader social objectives. The Commission’s proposed reforms would help to avoid conflict in the objectives facing property managers (see Appendix F).
4 See New South Wales Government (sub. 354).
198 INDUSTRY COMMISSION H ASSET VALUATION AND MANAGEMENT
Constraints on asset management Housing authorities are constrained in their stock management by the often unlimited tenure granted to existing tenants, inadequate information on the value and condition of the stock (see Section H.1), the perverse incentives provided under current funding arrangements (Appendix D) and limits on future funding. The ageing stock is also a problem in many States. Unlimited tenure has inhibited the replacement of unsuitable stock and making more effective use of under-occupied housing. Better policies are needed to free up under-occupied housing (see Appendix I). Changes in funding arrangements are desirable to provide the proper incentives for asset management. As discussed in Appendix D, there are problems relating to the separation of the capital from current funding, inadequate depreciation provisions and shortfalls in the current account used to fund maintenance. Shortfalls in funding for maintenance occur because rent receipts (net of the rent rebate) have declined and, at the same time, there has been a large increase in maintenance requirements in many States as the proportion of older stock rises. These pressures on finances create the incentive to minimise minor maintenance in the knowledge that major upgrades and renewals that eventually result can be funded from capital expenditures. Alternatively, run-down stock can be sold and the capital funds used to acquire new properties. It must be realised that State public housing stocks are of different ages, designs, compositions and conditions. In the 1950s and 1960s most housing authorities undertook major public works and building programs that resulted in the construction of large housing estates and blocks of units. These are gradually being replaced. The Victorian Government recognised that: There are still more than 15,000 public rental dwellings which are over thirty years old with problems of poor design and poor physical condition ... In particular, there are 12–13,000 mostly 3 bedroom concrete units built in the fifties and sixties with high maintenance costs ... (sub. 159, p. 14).
Maintaining the public housing stock The current arrangements provide little incentive for long-term asset management. For example, assets have been valued at historical cost rather than market benchmarks. This reduces rents collections from tenants who do not qualify for rebates and limits the funds available for maintenance. Depreciation provisions have also been inadequate thereby limiting the amount of funds available for stock replacement and renewal.
INDUSTRY COMMISSION 199 PUBLIC HOUSING
There is evidence of a general running down of the public housing stock, especially in States with older stocks. The Queensland Department of Housing, Local Government and Planning (sub. 135) said that there had been low levels of maintenance spending and a deterioration of older stock prior to 1989. Mant (1992) refers to declining standards of accommodation in NSW as the result of insufficient maintenance (Box H.1). The Westernport Regional Housing Council said: In the Westernport region there is a high incidence of older housing stock which requires major upgrade to meet current day standards. Consequently, maintenance costs are considerable and a drain on housing finance. As the housing authority struggles to meet its obligation to the tenant and maintain at least minimum standards, lack of adequate funding prevents any significant improvements from being made. The result, therefore, is deterioration of a valuable commodity — housing stock — which will ultimately be seen as too costly to continue to maintain. ... Care must be taken in future developments to avoid mistakes of the past (sub. 153, p. 1). Some of the maintenance problems of public housing were attributed to poor design or workmanship. Women in Supportive Housing said: Maintenance was seen as a continual problem because of poor design, poor materials and workmanship. This problem was perceived as perpetual (sub. 146, p. 4). An estimate of the average maintenance expenditure per house can be derived from housing authority maintenance spending and the number of houses. On this basis the real level of spending per house almost halved from $1330 in 1985–86 to $731 in 1990–91 (1991 dollars). It is impossible to say to what extent this is a result of productivity gains (for example through contracting out) rather than conscious decisions to limit maintenance expenditure.
Disposal and replacement Past disposal policies often reflected home ownership goals rather than asset management principles. Lee states: Nowhere are the divergent social attitudes to housing more evident than in the policies espoused by the various State housing authorities towards the sale of public housing stock. Thus, some State housing authorities have seen themselves in the vanguard of the national pursuit for near-universal home ownership (1986, p. 10).
200 INDUSTRY COMMISSION H ASSET VALUATION AND MANAGEMENT
Box H.1: Asset management within the NSW Department of Housing The move to an asset management approach will highlight some difficult issues. Deficiencies in maintenance will need to be confronted. Expenditure on existing stock will need to take increasing precedence over acquisition of new stock. Trading in stock to get a better balance between housing and needs will raise questions about what to do about under- occupancy. Because insufficient external painting and associated repairs have been carried out, the assets are deteriorating and, in the long-term, costs will be higher. The theoretical 7 year cycle is continually extending with over 30 000 dwellings currently outside the cycle. This category of maintenance is regarded as discretionary. Day-to-day repairs have first call on maintenance funds. Internal painting and some upgrading to current standards are done when properties become vacant. This is more convenient to tenants than a cyclical program, but there is inevitable deterioration when tenants uncomplainingly occupy a dwelling for many years. Furthermore, the cost of renovating vacant houses can be tens of thousands of dollars, but there have been instances where maintenance and redevelopment plans have not been co-ordinated. A proper asset management approach will require the resolution of outstanding policy issues and a different organisation structure and culture.
Source: Summarised from Mant (1992, pp. 33–4).
Lee notes that the public housing stock in Queensland accumulated ‘largely by default’. A central theme of the Mant report (1992) is the emphasis on housing construction rather than asset management by the NSW Department of Housing: Over the years, the Department has built many homes. At times, some of these have been sold, generally at the option of tenants, rather than as part of a comprehensive plan for adjusting the stock to meet contemporary needs. The Department’s $12 billion property portfolio is simply the net result of successive construction programs minus sales (p. 33). Good asset management requires the disposal of under-performing properties and replacement with higher yielding, more appropriate stock. Any decision to dispose of a property deemed surplus needs to have regard to the property’s market value and the opportunity cost of the resources tied up in that property. In the short-run it may be cost-effective to rent surplus stock privately.
INDUSTRY COMMISSION 201 PUBLIC HOUSING
Improvements in asset management Improvements in housing authority asset management were noted by some participants. The Royal Australian Planning Institute ACT Division said: In recent years, however, most if not all SHAs have been developing strategic approaches to management of their assets. There have been a number of factors driving the agenda for the development of more effective and efficient strategies including the quality, age and type of much of the stock, the location of the stock, increasing and changing public housing demand, the apparent inappropriateness and inflexibility of the stock, fiscal restraint, urban planning objectives and pressures for improved public sector asset management (sub. 139, p. 9). Public housing has started to become more demand orientated. The Tasmanian Government said that the objective of its public housing spot purchase and construction programs is to provide housing ‘where it is most needed’: On the demand side, applications ... clearly identify the areas in which public housing applicants wish to be accommodated, while the rental stock and vacation rate data indicate the extent to which this demand may be met through turnover of the existing stock. A comparison of the two sets of data reveals areas where demand is expected to remain unmet unless action is taken ... (sub. 217, p. 8). Some housing authorities (for example, the South Australian Housing Trust) use asset modelling to improve asset management. According to Burns (1992) the major benefit of asset modelling is to enable the property manager to make informed choices. It can also be used to provide benchmarks to measure asset manager performance and to demonstrate the benefits of better asset planning. Financial pressure has also resulted in greater use of contracting out. Homeswest and the Northern Territory Department of Lands, Housing and Local Government contract out maintenance work. Homeswest has also trialed private property managers for a year (sub. 51) but claims this had not resulted in significant savings. The McCarrey Report (1993, p. 72) considered the trial had been ‘too small to provide any real appreciation of possible financial benefit’.
Establishing the ‘property manager’ The reforms proposed by the Commission separate the functions of property and tenancy management (see Appendix F and Appendix G). The functions proposed for the property manager are very similar to those of the Defence Housing Authority (see Box H.2). To enable a property manager to plan effectively it needs to know future housing requirements well in advance (including the level, appropriate locations and stock types, modifications and required standards). The exchange of
202 INDUSTRY COMMISSION H ASSET VALUATION AND MANAGEMENT
information between the property and tenancy managers is therefore critical. As the South Australian Youth Housing Network Inc. states: The need for the property manager to know and respond to future housing requirements would be a critical factor in the long term viability of asset management, and therefore the need for information exchange with the tenant manager is essential. The methods of, and barriers to, inter-departmental, or inter-agency, communication must be clearly identified (sub. 285, p. 4).
Box H.2: Asset management within the Defence Housing Authority Many of the asset management practices of the Authority have relevance to public housing property managers: • Stock is acquired in the most cost-effective way. This can be spot purchase, construction or headleasing; • There are agreements on standards (for example, quality, types, specifications, special needs) that apply to all acquisitions; • The property manager has discretion regarding the disposal of houses deemed surplus. The tenancy manager determines which houses are surplus; • Market rents are used where possible. Market rents are determined by independent assessors. However, in remote areas there is often no private market to upon which to base rents; and • The tenancy manager covers the cost of vacancies in order to offer tenants a choice.
INDUSTRY COMMISSION 203 PUBLIC HOUSING
New references McCarrie Report 1993 — see Report of the Independent Commission to Review Public Sector Finances. Report of the Independent Commission to Review Public Sector Finances 1993, Agenda for Reform, Volume 2, August, Western Australia.
204 INDUSTRY COMMISSION I PRICING POLICIES
I.1 Current rent setting
CSHA rent principles The 1945 Commonwealth–State Housing Agreement (CSHA) set public housing rents to the cost of constructing the dwellings. The concept of market- related rents was introduced in the 1978 CSHA with rebates to be offered to those who could not afford to pay the market rent. The market rent approach was abandoned in 1984 and a system of cost rents was again implemented. The 1989 CSHA refined the definition of cost rents and introduced a system where a State could apply either market or cost rents (Egan 1993). The current CSHA sets out two rent setting principles for rent actually paid by tenants. The first is capacity to pay. Section 26(2) of the Housing Agreement states that in determining capacity to pay a State should: • Have regard to the level of income, including income from assets of the tenant and other household members; • Take into account the number of dependent children in the tenant’s household; • Ensure that tenants with similar capacity to pay, pay similar rents; • Ensure that work disincentives are minimised; and • Have regard, as agreed between the Commonwealth Minister and State Minister, to the receipt by any member of the tenant’s household of Family Allowance Supplement (FAS). The second is cost recovery. State housing authorities have agreed, under section 26(1) of the Housing Agreement, to set rents (for those with the capacity to pay) that at least recover costs (as set out in the Schedule of the CSHA) or market rents. In determining cost rents, State housing authorities pool costs across their stock. However, they take into consideration variations in housing standards and location of their stock and adjust the cost rents charged to tenancies to reflect these differences. The CSHA, while giving State housing authorities the option
INDUSTRY COMMISSION 205 PUBLIC HOUSING
of setting a market rent, does not define how they are to determine market values for their properties. The rent setting policies of State housing authorities affect the financial performance of their rental operations. Under the CSHA, the capital funding approach assumes that rental receipts cover program administration as well as maintenance costs. A 1989 Coopers and Lybrand report on the financial operations of State housing authorities, undertaken prior to the introduction of the 1989 CSHA, found that all States (other than Queensland) have had losses on their rental operations and that, apart from South Australia, their losses had been increasing. The cash surplus shown for Queensland included profits from non-public housing activities such as commercial housing which Coopers and Lybrand was unable to separate from the public housing accounts. Queensland reported small losses on public rental housing operations over that period (DCSH 1989a, p. 170). The Coopers and Lybrand findings on the cash outcomes of rental operations are reported in Table D.10.
Assessment of capacity to pay State housing authorities assess the capacity of tenants to pay rent on the basis of gross income of members of the household and the structure of the household. Few tenants have a sufficient level of income to pay the full rent set by the State housing authority. The difference between the rent for a property (cost recovery or market rent) and the rent payable by a tenant (set by the tenant’s capacity to pay) is called the rent rebate. The Commission estimates that approximately 85 per cent of public tenants currently receive rent rebates (see Chapter 2). Therefore, most tenants generally pay some pre-determined portion of their income as rent. Table I.1 provides details on how States determine the rent payable by tenants. In most States, capacity to pay is set between 20 and 25 per cent of gross income. Accordingly, rent paid by different households is a reflection of differences in income only rather than amenity of the dwelling.1 This is consistent with the CSHA approach of ‘tenants with similar capacity to pay, pay similar rents’ (Housing Assistance Act 1989, s.26(2)). The advantage of such a rebate system is its simplicity and flexibility. If a tenant’s income falls they can apply for a reduction in the rent they have to pay and therefore obtain an increase in the rental subsidy. However, in practice this cannot be done frequently (see Chapter 6).
1 Amenity includes size, location and quality of housing.
206 INDUSTRY COMMISSION I PRICING POLICIES
Moreover, there are no incentives for tenants to disclose an increase in their income until their circumstances are reviewed. This has two effects. First, tenants will be in rent arrears and will have to repay the arrears should the State housing authority find out about the increase in the tenant’s income. Second, if State housing authorities do not find out about the higher tenant income, the tenant receives a higher rent subsidy than they should with a consequential loss of program effectiveness. Milligan, Shaw and Riordan (1991) stated that: The benefits of the rent rebate system are also not readily recognised by all tenants. For example, most tenants do not perceive that they are receiving a rent subsidy (p. 26). The practice of setting rent on the basis of income creates a disincentive for tenants to improve their income as this will raise their rent. The Department of Social Security (DSS) in its submission showed that public housing rebates in Victoria and New South Wales ‘added 20 per cent to effective marginal tax rates (EMTRs) when DSS payments were not being withdrawn and added 10 per cent to EMTRs when DSS payments were withdrawn at 50 per cent’ (sub. 214, p. 18). Further, DSS estimated that in some income ranges for sole parents with two children in Victoria and New South Wales rent rebates may increase EMTRs to above 100 per cent. That is, households in these income ranges would effectively suffer a drop in income if their earnings increase.
Full rents set by State housing authorities The Australian Capital Territory, New South Wales and Victoria have adopted a form of market rents for their housing stock. The other State housing authorities — except Queensland — apply cost rent formulas in determining full rent levels. The basis of determining the full rent employed by each State is described in Table I.2.
INDUSTRY COMMISSION 207 PUBLIC HOUSING
Table I.1: Basis for determining capacity of public tenants to pay rent by State, December 1992
Rent paid by additional State Base income Above base income income earners
NSW 20 per cent of pensions/ Non-statutory income between Under 18 is nil. benefit/allowance or non- $350 and $650 per week statutory income up to $350 per assessed on a sliding scale from 18 to 20 is 12.5 per cent to a week. 21 per cent to 25 per cent. maximum contribution of $73.50 per week. 15 per cent of FAS. $650 to $800 per week in country areas assessed at 25 per 21 to 24 is 20 per cent up to a cent. maximum contribution of $79.00 per week. Savings of $5 000 or more are $650 to $1000 per week in calculated at a deemed interest Sydney metropolitan area 25 years and over 20 per cent. rate of 5 per cent (4 per cent as assessed at 25 per cent. If income is non-statutory it is from 31 May 1993). added to tenant/ spouse income. AUSTUDY paid at the living at home rate is non-assessable.
Vic 20 per cent of income under the Up to a maximum of 25 per 10 per cent of income to a threshold amount of $307 per cent for any income that is over maximum of $30.70 per week week for a single or married the threshold amount. for any other resident’s income. couple. 15 per cent of FAS to a maximum of $16 per family.
Qld Income up to the State Additional income from the FAS assessed then rent reduced Minimum Wage is assessed at State Minimum Wage and up to by $1.50 per child under 13 and 20 per cent. National Average Earnings is $3.50 for children between the assessed at 25 per cent. ages of 13–15.
Additional income above Children under 19 add 10 per National Average Earnings is cent of income to a maximum assessed at 30 per cent. of $12 per week. If under 25, 10 per cent of income up to a maximum of $24 per week. Over 25, 10 per cent of income. Other over 25, add their income to tenants’ income.
WA For existing tenants, rent is Any additional income is 21 per cent of gross income calculated at 21 per cent of calculated at 30 per cent of (100 per cent for new tenants) income up to a limit of $329.30 gross assessed income. of any other residents or all per week. New tenants’ rent is non-dependent household calculated at 22.5 per cent of members with an income, this income limit. which is added to the tenant’s assessed income.
208 INDUSTRY COMMISSION I PRICING POLICIES
Table I.1: Basis for determining capacity of public tenants to pay rent by State, December 1992 (cont.)
Rent paid by additional State Base income Above base income income earners
WA The threshold limit of $329.30 10 per cent of FAS (or (cont.) per week per household is additional family payment for indexed according to the children of pensioners) while Consumer Price Index. Family Allowance (FA) is not assessable. SA 19.5 per cent up to $100 per Additional income calculated Children under 21, $5 per week week (18.5 per cent for country on a sliding scale rising to a added to rent. Between 21–25, areas). maximum of 25 per cent at 5 per cent of gross income with $250 per week or more ($290 a minimum of $5 per week. per week or more for country Over 25, 10 per cent of gross areas). income with a minimum of $5 per week.
For other household occupants, their gross income is added to the tenant’s.
15 per cent of Additional Family Payment is added to the tenant’s rent.
Tas Income up to the State Additional income calculated 50 per cent of salary for any Minimum Wage is assessed at on a sliding scale, increasing by blood related permanent 20 per cent. 1 per cent for every $35 up to a resident and/or 100 per cent of maximum of 25 per cent of salary of others. income.
ACT 20 per cent of that part of gross 23 per cent of that part of gross 10 per cent of dependent child weekly income of the tenant weekly income of the tenant payments. which does not exceed 50 per which exceeds 50 per cent of cent of the ACT Average the ACT AWE. 10 per cent of the weekly Weekly Earnings (AWE). income of any independent From 1 July 1993 rent person in receipt of income at contributions for this category least equivalent to the single will increase to 25 per cent. adult rate for Newstart.
From 1 July 1994 rent will include 25 per cent of that part of a tenant’s income exceeding 50 per cent of the ACT AWE but less than the ACT AWE and an additional 30 per cent for that part of the income which exceeds the ACT AWE.
INDUSTRY COMMISSION 209 PUBLIC HOUSING
Table I.1: Basis for determining capacity of public tenants to pay rent by State, December 1992 (cont.)
Rent paid by additional State Base income Above base income income earners
NT For tenants other than Any income above the NTMW 10 per cent of income of pensioners, income up to the is assessed up to a maximum of household members under 25 Northern Territory minimum 28 per cent for tenants other earning in excess of the wage (NTMW) is assessed at 20 than pensioners. dependant AUSTUDY rate. per cent. For pensioners, any income 20 per cent of income of above the threshold is assessed household members 25 and at 20 per cent. over earning in excess of the dependant AUSTUDY rate. Pensioners pay 14 to 18 per Amounts are added to the rent cent of income up to the social payable assessed on the income security income threshold. of tenant and spouse, to the maximum rent (cost rent) payable on the dwelling.
Notes: Derived from State housing authorities’ responses to Industry Commission questionnaire; DHHCS (1992c), additional information provided by State housing authorities. Source: Industry Commission.
In Queensland all tenants pay a proportion of their income in rent with those on higher incomes paying up to a full rent of $200 per week.2 This full level of rent is set for all properties in Queensland, whilst in other States the rent would be limited to the market or cost rent, reflecting the amenity of the house. The Queensland Housing Trust set this full rent level to exceed market rents in most traditional public housing locations (Milligan, Shaw and Riordan 1991). This policy was adopted as a disincentive for higher income tenants remaining in public housing.3 In June 1990 only 0.6 per cent of tenants were paying more than $150 per week in rent. Milligan, Shaw and Riordan (1991) argue that the policy creates a disincentive for tenants to improve their income or reveal their full income. A study by Wulff, Pidgeon and Burke (1992) on poverty traps for public housing tenants shows that a sole parent on social security payments and in a public house faces an EMTR on disposable income ranging from 22 per cent up to 140 per cent for any additional private income earned.
2 Tenants who receive $780 per week or more pay the full rent of $200 per week regardless of the property value. 3 By ensuring that higher income tenants could obtain the same quality of housing in the private rental market at a lower rental price.
210 INDUSTRY COMMISSION I PRICING POLICIES
However, the study found that there are other factors, apart from the effects of withdrawal of income support, that discourage employment amongst Queensland public housing tenants. For instance, sole parents may have to choose between work and parenting because the cost of child care increases the EMTRs and there are risks involved with insecure job prospects. Also, State housing authorities have difficulty quickly adjusting rent levels for public housing tenants when their incomes drop and this often leads to financial difficulties.
Table I.2: Basis for determining the full rent charged by State, 1992
State Type of rent charged Basis of rents charged
NSW Rent is set comparable to that charged In calculating market rents the following factors for market rent. are taken into consideration, the size and type of dwelling and the location. The Valuer-General (VG) provides market rents for a number of benchmarks which are then spread to all Department properties. Rents are reviewed annually and benchmarks are reviewed regularly.
Vic Rent is set comparable to that charged Capital improved value, site value and market rent for market rent. are provided by the VG of Victoria every 5 years. In the interim years the VG provides indexes by Local Government Area for market rent value, which are used by the Department of Planning and Development to determine the market rent.
Qld An income determined rent with a This rent does not take into account the amenity of nominated minimum of $32 per week the dwelling. and a maximum of $200 per week.
WA Rents charged are based on the cost The cost rent covers all costs in providing, rent formula of the CSHA. maintaining and servicing the rental stock as well as operational costs such as administration, rates and insurance.
Operational costs are combined to work out a total cost pool. This is spread over the rental stock on a state-wide basis. Each category of accommodation has a cost rent relative to the standard — a 3 bedroom house. The cost rent for each category is calculated based on quality, age and location and given a high, medium and low classification level.
INDUSTRY COMMISSION 211 PUBLIC HOUSING
Table I.2: Basis for determining the full rent charged by State, 1992 (cont.)
State Type of rent charged Basis of rents charged
SA Rents charged are based on the cost Weighted averages are applied to full rents for rent formula of the CSHA. dwellings of a similar type, with similar living areas. However a rent differential of approximately 5 per cent applies between metropolitan and non-metropolitan locations.
Tas An income base rent system is used. The maximum rent charge of $132 per week is Rent charges are based on the level of based on the average private rental for a 3 gross household income, up to a bedroom dwelling within the major population maximum of $132 per week. centres.
ACT Rent is set comparable to that charged In calculating market rents a number of variables for market rent. are taken into account — size of dwelling, facilities (such as carpeting and carports), number of bedrooms and location (for example, premiums are charged for inner city dwellings).
NT Rents charged are based on the cost Maximum rents are at a fixed rate for size of rent formula of the CSHA. dwelling in Darwin and Alice Springs. A number of amenity factors (such as carports, wardrobes, heating, swimming pool) add an additional 3 per cent to the base costs for each dwelling. A series of discounts apply to public housing rentals in certain localities.
Notes: Derived from State housing authorities’ responses to Industry Commission questionnaire; and additional information provided by State housing authorities. Source: Industry Commission.
Rent payment and collection The procedures for collecting rents from public housing tenants and the sanctions for non-payment are set out in the Residential tenancies acts or State housing acts. Public housing tenants generally pay rent in advance. Tenants are generally given the option of paying rent weekly, fortnightly or monthly depending on their income cycle (except in Queensland, where tenants must pay rent every fortnight). In all States debt recovery processes are initiated when a tenant falls behind by one or two payments. However, public tenants are not required to pay a bond at the beginning of the tenancy. Eviction of tenants in rent arrears is a last resort option. Generally, the tenant is approached by the State housing authority, either by mail or a personal visit,
212 INDUSTRY COMMISSION I PRICING POLICIES
notifying the tenant of their failure to meet rent payments and to determine why this has happened. Tenants who are found to be facing financial hardship are generally referred to a welfare officer, accommodation manager or a community group for help on options to reduce the debt. State housing authorities will initiate eviction processes when a tenant continues to avoid paying rent and makes no effort to clear the debt.
I.2 Implicit subsidy
Economic and financial rates of return In a competitive market, the ‘market rents’4 for public housing should in the long-term reflect the economic cost of the land in its current use plus the economic cost of the capital involved in the house (which is reflected in the current depreciated replacement cost of the property), plus the operating costs, minus any appreciation of the property. The net return5 from a particular property in the long-term should be sufficient to provide a normal economic return on the capital invested. If it does not, then the resources could be better used elsewhere within the economy. However, land is subject to higher than normal economic returns because of tax concessions.6 Without capital market imperfections these tax concessions and other imperfections would be expected to be capitalised into the value of the land. However, this has not occurred. Given these imperfections, it would be administratively difficult for State housing authorities to calculate the true market rent for its assets. Therefore, they should aim to set market rents at a level that is at least comparable with equivalent quality private rental accommodation. The provision of public housing also provides the taxpayer with a social economic benefit (see Appendix E).
4 ‘Market rents’ in this case refer to the full rent that State housing authorities could charge for their dwellings. It does not represent the rent paid by most tenants as they would receive a rebate on this market rent, therefore reducing their rent payable. 5 Net return can be defined as the ‘market rent’ plus the increased land value minus the decrease in property value and the maintenance and administrative costs. 6 These would include the taxation of the real value of a capital gains rather than the nominal.
INDUSTRY COMMISSION 213 PUBLIC HOUSING
Market and cost rents Clause 26 of the CSHA gives the principles of the cost rent formula. It states that State housing authorities should: ... not [apply the principles] to the costs of individual dwellings but rather to the total cost pool of the rental stock. In allocating the total cost pool to individual tenancies, a State will have regard to variations in housing standards and locations within the constraints of available administrative arrangements for assessing these variations (DHHCS 1992c, p. 33). The costs that State housing authorities are required to recover under the agreement include operating costs (maintenance, rates, insurance and administration), depreciation and interest charges. Rents charged are calculated on a pooled basis. This principle applies because State housing authorities continuously acquire or construct new stock which would result in individual cost rent for these new dwellings being far greater than their equivalent market rents.7 Therefore pooling allows for the cost of older, low-cost public stock to off-set the higher costs of more recent constructions. Consequently, pooled cost rents will lead to lower rents in the public sector as compared to the private rental market. Where cost rents are used, rather than market rents, public housing tenants are likely to receive an implicit subsidy in addition to the rent rebate paid. This implicit subsidy is the difference in the pooled cost rent charged (before rebates are deducted) and the market rent. Black (1986) suggests that during the 1980s pooled cost rents in public rental were on average 75 to 90 per cent of market rents. In Western Australia, Homeswest calculated that this implicit subsidy is on average approximately $10 per week per tenancy (information supplied by Homeswest). This difference between public housing rents and market rents has been reducing. Over the last few years, public housing rents before rebates have increased faster than private rents. For example, from June 1991 to September 1993; privately owned dwelling rents rose by 0.9 per cent; and rents for government owned dwelling by 7.2 per cent. This outcome may have resulted from three factors. The first is that some States have moved to full rents based on market values, therefore raising the level of full rents. The second is the construction of new public housing and the selling of older stock, thereby raising pooled cost rents in those States. The third is the introduction of a
7 State housing authorities continue to construct new dwellings because they are increasing the supply of rental accommodation, therefore, keeping market rents lower than they would otherwise have been. Further, scale economies may exist in building new stock that lower the cost to below that of purchasing existing properties and renovating.
214 INDUSTRY COMMISSION I PRICING POLICIES
notional interest charge on grant funds invested in rental housing by State housing authorities to be included as part of cost rents from the commencement of the 1989 CSHA. Table I.3 compares the standard scale of weekly rentals for public housing in the Northern Territory compared to the median market rental for the Territory. A number of amenity factors (such as carports and wardrobes) can increase the public base rental by 3 per cent for each amenity. This would reduce the rental variation between public housing and the median market rent.
Table I.3: Standard scale of weekly rentals for public housing compared to the median market rental, Northern Territory, 1992
Type of dwelling Public base rent Median market rent Rental variation
$ per week $ per week per cent Bedsitter 65 75 +15.4 1 Bedroom flat 80 90 +12.5 2 Bedroom flat 95 120 +26.3 2 Bedroom unit 110 165 +57.9 3 Bedroom house 125 215 +72.0 4 Bedroom house 135 240 +77.0
Source: Northern Territory Department of Lands, Housing and Local Government, (sub. 17).
In some rare circumstances the public rentals may be greater than private rentals for an equivalent dwelling. For example, the North-West Youth Accommodation Group said that: There were times, especially in a housing slump, where the cost-based rent formula exceeded the market rent ... So in that regard the top end of that public housing system was possibly disadvantaged ... maybe the cost-based housing rental system would work in a boom time as opposed to a market-based rental system working in a slump, a housing slump (transcript, p. 1889).
Security of tenure Recital D of the CSHA specifies that ‘people in rental housing shall have security of tenure’. The relevant principles in the Agreement are: • Tenants are not to be forced to leave their home because of actions inconsistent with this agreement by a State. Where a tenant is required to move from one dwelling to another by a State, a choice of dwelling and locations appropriate to the tenant’s needs is to be provided;
INDUSTRY COMMISSION 215 PUBLIC HOUSING
• A physical and locational environment appropriate to the tenant’s needs should be provided; and • Recognition is accorded to the rights of applicants and tenants and other users of assistance. Security of tenure in public housing infers that a public tenant will have a permanent position in the system once they meet the eligibility criteria of the State housing authorities. This is consistent with the CSHA principle. Security of tenure offered in the private rental market is much weaker. Generally, private renters are offered security of tenure for the life of their lease with private rental leases generally running for six to twelve months. Once the fixed term has expired a tenancy can generally be terminated with a month’s notice. The Housing and Locational Choice Survey8 found that public tenants view security of tenure as the most important advantage of public rental, after affordability. Private renters quoted lack of security of tenure as the second most important (affordability being the most important) disadvantage of private rental. Clearly public housing provides a further benefit, security of tenure, over and above the implicit subsidy that tenants receive. This benefit should ideally be reflected in the rental price of public housing. That is, security of tenure should add a premium on public rental prices, at least for those who do not receive a rebate. The rental price of public housing would be greater than the comparable private rental price by the value of the additional security of tenure received by public renters. This price differential would be small, say 2 or 3 per cent, and considerably less than the differential currently applying in Queensland.
Housing quality Housing quality refers to the types and level of amenities offered by a particular house; and its location relative to support services, shops, transportation, place of employment and health facilities. The quality of public housing is quite variable. The rental price charged for public housing should reflect the differences in quality between public and private rental. Where public housing is of higher (or lower) quality, the market rent should reflect this quality difference.
8 For further information on the survey see Burgess and Skeltys (1992).
216 INDUSTRY COMMISSION I PRICING POLICIES
I.3 Efficiency and equity
Key pricing policy considerations Ideally, a pricing policy ought to ensure that public tenants pay affordable rents for adequate housing, with equity between households in terms of rents paid relative to services received. It should allow choice while encouraging efficient use of stock by both tenants and housing authorities. Targeting is an important consideration. The numbers of those the program was designed to benefit ought to be maximised, and the numbers of unintended recipients minimised. The pricing policy ought to be harmonised with other policies so that problems are not unintentionally created or exacerbated (for example, a potential poverty trap). Partially satisfying all these criteria implies trade-offs which also require explicit consideration. Finally, pricing policy should be transparent in terms of subsidies given and be relatively simple to administer. Key considerations then are efficiency, equity, targeting, harmonisation, incentive structure, transparency and administrative simplicity. An ideal pricing policy would provide the many different groups concerned with public housing the information and the right incentives to improve and co- ordinate their decision making. These groups include, at the broadest level, the Commonwealth and State governments and the general public. Those more directly concerned, whose behaviour pricing policy ought to target, are the State housing authorities, income and welfare support agencies (such as DSS), as well as existing and potential clients.
Tenants’ incentives Currently, pricing signals are muted and do not provide appropriate incentives for tenants and State housing authorities to be frugal with housing resources. About 85 per cent of tenants pay a rent related to their income. For them the rent paid does not reflect the value of the service they are receiving. This is because they are not affected by changes in the rental price of their dwelling. As public rentals rise, so does the amount of rebate received by tenants to ensure that they continue to pay the same proportion of their income on rent. There is a loss of efficiency because there are few incentives, or opportunities, for tenants to change their housing circumstances as their income or family composition change. Even for the 15 per cent of public tenants who pay the full market or cost rents, pricing signals and incentives are poor. The full rent charged by some State
INDUSTRY COMMISSION 217 PUBLIC HOUSING
housing authorities is based on an average of cost recovery rates or market value across a region. Consequently, price signals do not reflect the quality or value of the particular house they are in. Where this value is greater than that of similar accommodation in the private rental market, these unintended beneficiaries can be expected to stay.
Management incentives As public tenants base their decisions on distorted or non-existent price signals, State housing authorities are not able to easily discern what type of dwelling tenants value most. Tenants may not value some properties as highly as others relative to their real cost. If tenants paid rents that reflected the difference in the real costs of different properties, both tenants and authorities should benefit. For example, if there was little or no demand for a particular type or style of property amongst the public housing tenants (after deducting a rebate from the full market rental price of the particular property) this would be a signal to the State housing authorities that this housing is not appropriate for its current use. The property could be sold and the funds better used elsewhere. Likewise high demand for some other type of accommodation (similarly rebated down from its full market price) would indicate the need to expand holdings of that type.
Equity It is reasonable to expect that public housing tenants would be willing to pay different rents for the same quality dwelling in different locations or for different quality housing in the same location provided the rents are affordable. However, State housing authorities do not adjust the tenant contribution to reflect the cost of living incurred by different household types. Although larger households receive higher levels of service by being accommodated in larger houses, explicit account of their family structure is not made so that rent paid (compared to other household types) is inequitable in terms of its impact on their cost of living. Further, State housing authorities may allocate a higher or lower quality house within a particular region to similar tenants, but these tenants will still pay the same rental. Therefore some tenants receive a higher benefit compared to others in a random manner.9 This is clearly inequitable. However, some tenants
9 For Sydney, econometric estimates by the Commission (IC 1993b) indicate a substantial degree of horizontal inequity. However, due to data deficiencies, the size of the errors associated with estimates of market rents and the difficulty of capturing all elements of the current public housing allocation process, this study may overstate the problem.
218 INDUSTRY COMMISSION I PRICING POLICIES
who are lucky enough to be allocated a higher quality house while paying the same pooled rent may have some of this windfall benefit reduced by the fact that the waiting time for these dwellings is generally longer.
Co-ordination of benefit withdrawal rates The current rebate system exacerbates the disincentives public tenants face with regard to earning extra income. Rent setting policies of State housing authorities exacerbate the problem for social security recipients, but it is not a problem which can be solved by public housing policy alone.10 It requires harmonisation of social security, taxation and housing policies.
I.4 Rent setting reform Listed below, are principles that attempt to satisfy the criteria of efficiency, equity, targeting, harmonisation, incentive structure, transparency and administrative simplicity. They are used to develop a rent setting model. They challenge the principle in the Housing Agreement that tenants with similar capacity to pay, pay similar rents. It depends on tenants being able to choose between different properties by responding to price signals.
Principles 1. The level of assistance given should differ according to circumstances. People with different needs should be treated differently. To this end, families and individuals can be classified into broad categories — such as single, single with one child, single with two children, couple, couple with one child. Various other categories would include smaller numbers, such as those with particular disabilities. Within each of these categories, for administrative simplicity and equity, all on the same level of income would be treated the same. 2. Income should be used for determining the level of rent paid within these categories. Ideally the relevant income would be total after-tax income including (most) social security payments. As the after-tax income would be administratively difficult to use, the (generally equivalent) gross income may be used instead.
10 An earlier section of this appendix illustrated the poverty traps associated with social security, taxation and housing policies.
INDUSTRY COMMISSION 219 PUBLIC HOUSING
An appropriate rent payment would be calculated from this income level for each category. That is, it would be recognised that people in different circumstances require different levels of income to attain an adequate level of well-being.11 3. Those on a lower income ought to pay a smaller proportion of their income on rent. Generally the range 20 to 25 per cent is used in public housing. The principle is that those most in need should benefit the most. Hence they should pay the least proportion of their income on rent. Families of different composition require different levels of income to be just as well-off. Housing authorities need to determine different income equivalence scales to take account of these differences. 4. The extra rent paid per extra dollar of income should increase as income increases. As the government is not able to assist everyone, it needs to target those below a certain income, and withdraw this assistance as income rises. The proportion paid in rent for each extra dollar of income should increase as income increases. Two conflicting objectives need to be balanced in order to determine an appropriate rate at which to withdraw assistance. First government must maximise the cost-effectiveness of public housing by targeting assistance to those most in need. Second they must minimise any income effect that would discourage those targeted from improving their situation. Pursuing a rapid increase in rent discourages the targeted low-income individuals from availing themselves of income increasing opportunities. At the very least the residual income they have for other expenditure ought to increase as income increases. Similarly, pursuing the second objective by adopting ‘too gentle’ a rate of rent increase would involve too many unintended payments. The implied trade-off must not be considered in isolation but only after taking into account marginal tax rates and the rate of withdrawal of social security benefits. 5. There should be a level of income, within each category, at which the rent paid will be the full market rent. Above this level of income the rent paid ought to be either the market rent or, preferably, a higher than market rent to reflect the additional security of
11 That is, special payments, such as those for disabled children, should not be included and situations such as that of Rosemund Johns (sub. 79) require special consideration.
220 INDUSTRY COMMISSION I PRICING POLICIES
tenure public rental provides over private rental. The precise level at which the payment of market rent comes into effect again depends on an appropriate rate of withdrawal of assistance. 6. Those with identical incomes, within each broad category, should receive the same rebate. This is an application of the principle of horizontal equity, those in equivalent circumstances should be treated similarly. This means that those in better housing, as reflected by its particular market price, ought to pay the extra. That is, the rent paid should relate to the market rent of the property. The rebate should not be directly related to this rent. Rather the rebate should be related to the market rent of appropriate housing.12 Different individuals or family units have differing individual circumstances. They usually know best what these are and it is costly and intrusive for an authority to gather this private information. If a family unit decides that it does not value the benefits that a superior location bestows (as reflected in the higher market rent of such a property) as highly as others do it will not pay this higher rent. Instead it may choose to locate in a less expensive property, leaving the other property available for those who value it more. Under this scheme, those with the same income who value a particular property the most will be more likely to be located in that particular property. The ‘price signals’ provided within the occupied stock will result in an improvement in allocative efficiency. To summarise, the rebate for a particular household should depend on the market rent for appropriate housing minus the determined rent payable.
12 Appropriate housing would have to take into consideration particular needs. For example, some people with disabilities require expensive modifications.
INDUSTRY COMMISSION 221 PUBLIC HOUSING
7. Public tenants must have a reasonable choice at the time of allocation and must be able to transfer between properties. A tenant should be given a choice of at least four different dwellings with a range of rents within their area of interest when they come to the top of the waiting list. The tenant can then choose, for example, whether to trade-off the higher cost inner city property with lower transport costs associated with housing in that location. Where tenants are unable to be given a choice of properties then their rent could be set so they pay no more than the affordable benchmark rent (see below) for a household on their income. 8. Public tenants should not pay ‘too large’ a proportion of their income on rent. Generally, the proportion of income considered appropriate to be paid on rent by public tenants is 20 to 25 per cent. In the 1992 Budget the Federal Government announced as part of its long-term reform agenda the establishment of an affordability benchmark. Under the affordability benchmark, assistance would be provided in meeting the costs of people on low incomes paying more than 20 per cent of their income on rent (DHHCS 1992b). 10.Rents should be paid in advance. This is desirable to alleviate rent arrears problems for State housing authorities, even if that means a rent holiday for the initial rent pay period.
I.5 Model As a starting point the Commission’s rent setting model has a constant rebate on the full market rent of each particular property that a prospective tenant has a choice of renting within public housing.13 The size of the rebate is determined by income, family composition and the market rent of an appropriate dwelling. The rebate for a prospective tenant would be calculated as follows. An equation — one of a set of equations for different family types — would be used to calculate the affordable benchmark rent, given the tenant’s current income. The affordable rent could be set on a sliding scale starting at 20 per cent of income for those on low incomes and increasing to 25 per cent of income for those on higher incomes.
13 An example of the type of rent setting model proposed can be found in Industry Commission (1993b).
222 INDUSTRY COMMISSION I PRICING POLICIES
To calculate the rebate, a standard market rent for public houses that meet an affordable standard for the family would be determined. For instance, the standard market rent for a family of two adults and two children might be the average of the market rents for all public houses of appropriate quality with three bedrooms within a particular area. The rent rebate would be calculated as the difference between the standard market rent and the affordable benchmark rent. For the particular rental property chosen by the tenant, their rent would be the market rent for that property less the rebate. The rebate would be constant, irrespective of the property chosen. The prospective tenant would, ideally, have a range of choices of accommodation within public housing and, with a constant rebate, incentives to obtain value for money (in terms of full costs) when making that choice. Tenants whose incomes are such that they receive a negative rebate (that is, would pay above market rents) should pay at most a market rent plus a premium for security of tenure.
Examples
Single no children There would be an agreed formula for the affordable benchmark rent for a single person. With a Job Search Allowance or New Start Allowance a tenant would have an income of $141 per week (assuming that the benefit was their only income). Using this formula their affordable rent might be $28 per week. With market rent of accommodation appropriate to their needs being, say, $85 the rebate would be $57 per week. Any unit they considered renting would be priced at the full market price minus this rebate.
Single with 1 or 2 children A single person with 1 child receiving a sole parent allowance, would have an income of $170 per week (if the benefit was their only income) plus family payment. Using the appropriate formula the affordable benchmark rent could be $34 per week. If the standard rent were $120 per week, the rebate would be $86 per week.
Couple no children A couple with an age pension, Job Search Allowance or New Start Allowance would have an income of $260 per week. Using the affordable benchmark rent
INDUSTRY COMMISSION 223 PUBLIC HOUSING
formula, they should pay about $52 per week. With standard rent of $130 their rebate would be $78 per week.
A modified model The model set out above needs to be adjusted where it results in tenants paying too high a proportion of income (say more than 30 per cent) on rent. A method of limiting the rent paid by a tenant to reasonable bounds may be to discount the additional cost (or saving) to tenants of renting houses with market rent different to the standard market rent. That is, the tenant may pay in addition to the affordable benchmark rent a certain per cent for each dollar the market rent is above the standard market rent. The extra cost (or saving) is shared between the tenant and the housing authority. This would allow a tenant to rent a property with a higher rent value whilst at the same time ensuring that their rent payment remains within reasonable bounds.
I.6 Assessment of the model The Industry Commission’s proposed pricing model was tested by the Centre for Urban and Social Research, Swinburne University of Technology using a sample of 1000 public housing tenants taken from the Queensland Department of Housing, Local Government and Planning Public Client Database (augmented with Rental Bond Authority data) as at March 1992.14 This data included rents paid by public housing clients in and around Brisbane by household type, region and dwelling type. Rental Bond Authority data for private accommodation (in the same locations, of the same dwelling type and with the same number of bedrooms) was used to estimate the market rents for the public housing. For each household, a current rebate (as the difference between estimated market rent and rent currently paid) and the suggested rebate (the difference between the standard market rent for appropriate accommodation and the affordable benchmark rent) were estimated.15 As there can be differences in rent levels according to location, the Industry Commission’s proposal allows for a State to be split into a number of regions with different standard market rents set in each region. For this exercise,
14 More detailed results on the testing of the rent setting model are available in Pidgeon (1993) and Industry Commission (1993c). 15 The variation in stock quality and therefore rents in Queensland is understood to be quite small compared to other States. Therefore changes in rent payments from switching from the current rent setting arrangements to those proposed by the Commission for public tenants will not be as large in Queensland as in other States.
224 INDUSTRY COMMISSION I PRICING POLICIES
Queensland was divided into separate regions but the standard market rents were the same across regions. This means that public tenants with similar household compositions and on the same income but situated in different distances from Brisbane metropolitan receive the same level of rebate. Figure I.1 plots for the sampled households an estimate of the current rent rebate against the subsidy under the model proposed by the Commission. The households are categorised by region and within each region ordered by income of tenant. For many singles there is a large difference between the benefit they receive under the current arrangements and that under the Commission’s model. This is because they reside in 2 or 3 bedroom detached dwellings.
Figure I.1: Comparison of current and proposed benefit, ordered by region and income, single households
$/Week 160.00
140.00 Current 120.00 Proposed
100.00
80.00
60.00
40.00
20.00
0.00 0 - 10k 20 - 30k Regional centres 10 - 20k Over Other rural 30k
Note: Metropolitan Brisbane includes all observations except those for ‘Regional centres’ and ‘Other rural’. Within each region, households are ordered by income. Source: Pidgeon (1993).
INDUSTRY COMMISSION 225 PUBLIC HOUSING
Under the Commission’s proposal single tenants in inner regions are not worse- off compared to those in other regions.16 Lower-income single tenants are also better-off than those on higher incomes within approximately the same distance from Brisbane. Singles in 2 or 3 bedroom detached dwellings would be worse- off, regardless of the distance from Brisbane, under the Commission’s proposal. Implementation of the proposed model need not affect the rents paid by those who are already in public housing. It could be used for new tenants, with existing tenants either benefiting from a ‘grandfather clause’ or by having their rents change gradually (to those proposed by the model).
I.7 Implementation difficulties in large urban areas Market rents vary widely in large urban areas, such as Sydney or Melbourne. The rents paid depend on the size, location, standard of construction and level of maintenance of the accommodation. The rents reflect the amenity provided by properties, with large variations in rent indicating large variations in amenity. The policies of public housing authorities have increased the variability of amenity of public housing in comparison with the low-cost private rental market.17 The increased variability stems mainly from a mismatch of stock to tenants’ needs due in part to a lack of appropriate stock for tenants to move into when their circumstances change. Another source of variability can be the location of public housing in areas where property values are high. In the longer term, the effect of implementing the Commission’s proposals would be to reduce the variation due to mismatch between stock and clients requirements (implicit in the standard of housing that people are nominally eligible for when they enter public housing). Stock would not be provided in high-cost areas at levels of amenity above that regarded as appropriate unless governments decide this to be desirable and were prepared to meet the necessary additional subsidy and made it available to all public housing tenants. Nor would the stock be concentrated in areas of low amenity. The construction and maintenance standard of accommodation would be uniformly higher within public housing than in the low-cost private rental market. With an efficient rent setting and allocation regime and a suitable range of appropriate accommodation choices offered, some variation would remain. However, even in large urban areas, the resulting variation of market rents (for
16 For other household types, tenants in inner Brisbane were generally worse-off under the Commission’s rent setting model. 17 On average, public housing stock has a higher amenity than stock in the low-cost private rental market.
226 INDUSTRY COMMISSION I PRICING POLICIES
appropriate public rental accommodation) should not prevent the application of the proposed rent setting model. The feasibility of implementing the Industry Commission’s model was tested for new tenants using Sydney rental data (see Table I.4). It is assumed that housing stock is available in appropriately located areas and that the standard market rent is set at the median rent for properties of an appropriate size in the private rental market. Families on the lowest incomes are given rebates that would allow them to access accommodation (at least as good as 50 per cent of the accommodation offered in the private rental market) priced at the median rent (while still only having to pay at most 20 per cent of income in rent). Given choice, these families may choose accommodation more expensive than the median rent. So, for this analysis, payments up to 30 per cent of income on rent were considered affordable.
Figure I.2: Distribution of rents for one, two and three bedroom private rental accommodation in Sydney, 1991
Cumulative Proportion One bedroom 1
Two bedroom 0.8
0.6 Three bedroom
0.4
0.2
0 0 50 100 150 200 250 300
Rent $ per week
Note: This figure, of cumulative distributions of rents paid, was compiled using a sample from the Housing and Locational Choice Survey (ABS and DHHCS 1991) of one, two and three bedroom properties in the Sydney private rental market. Source: Industry Commission.
INDUSTRY COMMISSION 227 PUBLIC HOUSING
The assumption that the standard market rent is equivalent to the median rent in the private rental market is consistent with National Housing Strategy (NHS) ideals of adequacy and appropriateness. If the level of assistance were too high it would reinforce perceptions that the best housed public housing tenants are advantaged and this could create resentment in the wider community. The associated subsidy (or rebate) required is shown in Table I.4. The subsidy is consistent with the current implicit average subsidy of $92 for all rebated public housing tenants within New South Wales.18 The analysis shows that if public tenants were assisted to the degree assumed, they would be able to choose dwellings in the public sector that have better amenity (as reflected by current market rents) than most dwellings in the private rental market. The proportion of one, two and three bedroom rental properties that could be accessed in the Sydney private rental market by various client categories on lowest incomes (under these assumptions and rebates) are presented in Table I.4. For existing tenants, any variation due to a mismatch of stock and its location in high-cost areas, such as in Sydney, would be too great for the proposed model — unless it were modified. The mismatch could result in rents for some properties being not affordable to low-income people. Yet a variant of the rent setting model could be implemented immediately. In the variant (introduced in Section 6.4) tenants would pay the affordable benchmark rent plus (or minus) so many cents per dollar difference between the market rent and the standard market rent, instead of paying (or benefiting from) the full difference.19 Modifications of this type would allow the spread of rebated rents within Sydney to continue to fall within affordability limits (of say 15 to 30 per cent) for different categories of families on the lowest incomes (receiving standard benefits). The level of adjustment required to make rents affordable where there is a mismatch between stock and client need (assuming that households have one
18 Industry Commission estimate. 19 Consider a couple with one dependent child on an income of $301 per week choosing a two bedroom house with a market rent of $190 per week. Under the basic model, with the standard market rent $150 per week and the subsidy $90 per week, the tenant would pay a rent of ($150 – $90) + ($190 – $150) or $100 per week (see Table I.4). Assuming a discount of say 25 per cent of the extra cost of the market rent over standard rent, or the tenant paying 75 per cent of the difference, the tenant would pay rent of ($150 – $90) + 0.75 x ($190 – $150) or $90 per week. With a discount of 100 per cent, the model reverts to the current rent setting system used by housing authorities. From a horizontal equity perspective, the outcome becomes more inequitable the larger the discount.
228 INDUSTRY COMMISSION I PRICING POLICIES
additional bedroom) and their houses are located in high-cost areas could be a discount of the order of 75 per cent, with tenants paying 25 cents per dollar of the difference. This adjustment would allow public housing properties of amenity comparable to between 70 and 80 per cent of those found in the Sydney private rental market to be accessed affordably by those on lowest incomes (see Table I.4 last column). If the mismatch problem were overcome but the stock was still located in high- cost areas then adjustments of 50 cents per dollar difference would allow all public housing properties of amenity comparable to between 69 to 87 per cent of properties in the Sydney private rental market to be accessed affordably (see Table I.4, second last column and Figure I.2). The analysis indicates that housing authorities should place priority on determining what is ‘appropriate’, changing the overall distribution of the stock so that there is a better match between stock and the needs of tenants, and encouraging people to move. The size of the discount required for existing tenants under the ‘grandfather’ arrangements proposed by the Commission indicates the size of the benefit that would flow with better allocation and changes to the location of public housing. Rents on public housing properties as low as 15 per cent of income would be equivalent in all categories to accommodation of amenity better than 20 per cent of that found in the Sydney private rental market. Yet during the transition period, some properties may be of such low amenity that under the rent setting proposal tenants could pay less than 15 per cent of income. In extreme cases they might pay little or no rent. However, if the properties offer poor amenity it is equitable that tenants should pay less. It would provide authorities with the right incentives. The existence of such an unsatisfactory state of affairs would ensure that an authority would move rapidly to correct the situation — by reviewing what it regarded as ‘appropriate’, by ridding itself of inappropriate stock and through upgrading.
INDUSTRY COMMISSION 229 PUBLIC HOUSING
Table I.4: Comparable private rental accommodation accessible by public tenants in Sydney, 1991
Proportion of affordable properties underc
Household type Minimum Number of Median rent Rebate on No discount Discount of fifty Discount of seventy incomea bedrooms lowest incomesb cents per dollar five cents per required difference dollar differenced
$ per week $ per week $ per week per cent per cent per cent
Singles 156 One 130 99 65 81 80
Single parent with one dependant 212 Two 150 108 65 80 70
Couple with one dependant 301 Two 150 90 75 87 80
Single parent with two dependants 254 Three 180 130 63 69 na
Couple with two dependants 343 Three 180 112 65 73 na na Not available. a Income with nominal DSS pensions and allowances. b Rebate determined so that tenant contribution is 20 per cent of income based on the median rent in the private market. c This is the proportion of properties in the Sydney private rental market accessible with a tenant contribution up to 30 per cent of income at the indicated rate of discounting (the difference between the standard market rent and the market rent of the tenant’s property (see section 6.4)). d Where the dwelling has one additional bedroom to that required. Note: Estimates derived using a sample from the Housing and Locational Choice Survey (ABS and DHHCS 1991) of one, two and three bedroom properties in the Sydney private rental market. Source: Industry Commission.
230 INDUSTRY COMMISSION 16:55 18/07/02
REFERENCES
Black, G., 1986, Housing Assistance: Rental Rebates Versus a Consolidated Housing Allowance. DCSH (Department of Community Services and Health) 1989, Housing Assistance Act 1984 Annual Report 1987–88, AGPS, Canberra. DHHCS (Commonwealth Department of Health, Housing and Community Services), 1992, Housing Assistance Act 1989 Annual Report 1990–91, Commonwealth, no. 7 of 1990, Cat. no. 90 4036 2. Industry Commission 1993, Provision of Public Housing in Sydney: Some Empirical Evidence, Research Memorandum MR-85, Industry Commission, Canberra, November. Milligan, V., Shaw, A. and Riordan, T., 1991, Review of Housing Policies, Queensland Department of Housing and Local Government, Discussion Paper on Major Public Housing Policy Issues, February. Wulff, M., Pidgeon, J. and Burke, T., 1992, Public Housing and Poverty Traps: The Impact of Rent–Setting Systems, Centre for Urban and Social Research, Swinburne University of Technology paper presented at the Sixth National Conference, Australian Population Association, Sydney, 28–30 September.
New References Pidgeon, J., 1993, Testing the Industry Commission’s Public Housing rent setting model, The Centre for Urban and Social Research Swinburne University of Technology, September. Industry Commission 1993, A comparison to the Swinburne Testing of the Industry Commission’s Public Housing rent setting model: presenting additional results. Burgess, R. and Skeltys, N. 1992, The Findings of the Housing and Location Choice Survey: An Overview, Background Paper No. 11. National Housing Strategy, AGPS, Canberra.
INDUSTRY COMMISSION 231 J PUBLIC HOUSING ALLOCATION
State housing authorities need to ration their stock. Historically, they have used waiting lists as a rationing tool. The allocation of public houses to those people on a waiting list has been on a ‘wait-turn’ basis. Priority allocations are given in cases of special need.
J.1 Waiting lists To be eligible for public housing, applicants must apply, and fulfil a number of criteria. Each State housing authority has its own set of eligibility criteria (see Table J.1). Apart from Queensland and South Australia, housing authorities set income thresholds. People are eligible to apply if their income is below the threshold. State housing authorities vary income thresholds by the size of households and the number of dependent children. Generally, the income levels chosen relate to Average Weekly Earnings in the State. In addition they operate asset tests, whereby people wishing to apply for a public house may not own other property or assets exceeding a certain value. In all States, applicants must show that they have been a resident of that State for a certain period of time. They must also be above a certain age (generally between 15 to 18) before they can apply. However, public housing is not available immediately to those who apply (see Table J.2). Generally, State housing authorities allocate dwellings to eligible applicants on a ‘wait-turn’ basis. Waiting times in a particular region and for certain types of housing may be longer than others. Some applicants, considered to be in greater need, may be allocated ‘out-of-turn’ from a priority list. The waiting period also varies between States. These variations can be attributed to differences in: • Eligibility criteria; • Availability of housing stock; • The housing needs of non-home owners; and • The response time required to meet adjustments in housing needs.
INDUSTRY COMMISSION 231 PUBLIC HOUSING
Table J.1: Eligibility criteria for wait listing by State, 1991–92
Income Test State General criteria Aged pensioners Cash or asset test Residency Age
NSW Household composition $ per week No separate criteria. No maximum limit but Must be a resident of New 1 person 395 savings over $5 000 are South Wales or have 2 persons 500 assessed at a deemed interest employment in the State. 3 persons 580 rate of 5 per cent (4 per cent 4 persons 665 as from 31 May 1993) which 5 persons 720 is converted into a weekly 6 persons 775 income.
a Vic Household composition $ per week Singles $360. Maximum cash or liquid Wait-turn applications from 15 or over with an Single person 370 assets of $18 600, discretion interstate persons are independent income. Couple, no children 568 Couple, no children $602. to apply to $31 000. accepted where: applicant Couple, 1 or 2 children 640 has a job offer in Victoria; is Couple, 3 or 4 children 700 an ex-Victorian; or returning Couple, 5 or 6 children 748 for family reasons. Couple, 7 or more children 784 Singles sharingb 370
Qld Low to moderate income. No specific limit. In receipt of standard Applicants cannot own a Must be resident of Single people must be 17 or pension and supplementary dwelling. Queensland at time of over if not living at home. Over 90 per cent of households assisted in 1990– rent assistance. application. People with dependants may 91 received incomes of less than $400 per week. apply at any age. No other income in excess of $30 per week.
Table J.1: Eligibility criteria for wait listing by State, 1991–92 (cont.)
232 INDUSTRY COMMISSION J PUBLIC HOUSING ALLOCATION
Income Test State General criteria Aged pensioners Cash or asset test Residency Age
WA Household composition $ per week No separate criteria. Applicants cannot own, or Must be resident of Western Can apply from age 17. 1 personc 335 be part owner of property or Australia at time of 2 person, single income 441 land. application. 2 person, dual income 507 3 person, single income 528 3 person, dual income 607 4 person, single income 571 4 person, dual income 657
For each additional household member above 4, add $43 per week. The limit for dual income households is 15 per cent greater than the limit for single income households.
Income rates are increased for applicants in remote and North–West areas.
SA No specific income limit. During 1991–92 the No separate criteria. Applicants cannot own Must be resident of South Can apply irrespective of average household income for new tenants was residential real estate. Australia at time of age provided the applicant 38 per cent of Average Weekly Earnings (AWE), application and while can demonstrate receipt of approximately 90 per cent of all new tenants waiting. Applicants may be an independent income receive rental rebates. As at June 1992 74 per cent out of the State for up to a (from a wage, Australian of current tenants’ rents were rebated. maximum of six months pension, superannuation, without penalty. Amounts benefit, investment income, in excess of six months are or interest or DSS payment) deducted from the accrued paid directly to the waiting time. individual.
INDUSTRY COMMISSION 233 PUBLIC HOUSING
Table J.1: Eligibility criteria for wait listing by State, 1991–92 (cont.)
Income Test State General criteria Aged pensioners Cash or asset test Residency Age
Tas Household composition $ per week Applicants cannot own a Applicant should be resident Under 18 years old generally Single 270 property. of Tasmania at time of housed via community Couple no children 331 application and while group sub-leases. Singles or couples, 1 child 380 Applicants with cash and waiting. Singles or couples, 2 children 399 shares to the value of Singles or couples, 3 children 433 $20 000 or more are Singles or couples, 4 children 467 ineligible. Singles or couples, 5 children 501 In exceptional circum- For each additional child beyond 5, add $34 per stances an application may week. be accepted from a person residing interstate (for example, chronic illness of a relative).
ACT Proportion of No separate criteria. Applicants cannot have any Must be resident or Must be 16 or older. Household composition ACT AWE interest in residential employed in the Australian property in Australia. Capital Territory at time of 1 person 60 per cent application and during the 2 person 100 per cent waiting period. 3 person 110 per cent Applicants cannot have assets exceeding $20 000 in value.
234 INDUSTRY COMMISSION J PUBLIC HOUSING ALLOCATION
Table J.1: Eligibility criteria for wait listing by State, 1991–92 (cont.)
Income Test State General criteria Aged pensioners Cash or asset test Residency Age
NT Household composition $ per week No separate criteria. Applicants must not have Must be resident of the Must be over 18, or have a 1 person 481 any interest in residential Northern Territory at time of guarantor. 2 persons 577 property in Australia. application and while 3 persons 673 waiting. 4 persons 769 5 persons 865 6 persons 962 a Victorian income limits are for January 1993. b Per client, two highest incomes cannot exceed $568. Notes: Tables derived from State housing authorities’ response to Industry Commission questionnaire; DHHCS (1992c); additional information supplied by State housing authorities. Source: Industry Commission.
INDUSTRY COMMISSION 235 PUBLIC HOUSING
Table J.2: Details on waiting and priority lists by State, 1991–92
Details NSW Vic Qld WA SA Tasa ACTb NT
Waiting list 64 895 44 634 22 507 17 784 43 520 4 659 3 751 6 167 (at 30/6/91)
Applicants added 30 090 24 010c 20 777 12 456 16 807 4 538 na 4 847
Cancelled or 10 482 9 550 10 299 9 276 9 445 3 082 na 735 withdrawn
Dwellings allocated 13 045 9 704 8 487 6 270 8 095d 1 576 1 556 1 663 to those on the waiting list
Waiting list 71 458 52 522 24 448 14 694 42 787 4 539 6 615 8 061 (at 30/6/92)
Allocations of 1 962 1029 85e 652 896 800 717f 125 emergency or priority accommodation
Allocations made on 15.0 10.6 1.0e 10.4 11.1 50.8 50.0f 7.5 a priority basis (per cent)
na Not available. a Tasmanian data is an estimate only. Accurate details were only available for portion of the financial year after the introduction of the housing assessment system. b ACT moved to a new computing system and was unable to provide all figures. c Not all applicants were approved and therefore were not added to the waiting list. d Includes Aboriginal Housing Unit allocations. e Queensland Department of Local Government and Planning estimate. f ACT Housing Trust estimate. Notes: Derived from State housing authorities’ responses to Industry Commission questionnaire; unpublished information provided by DHHLGCS; and additional information supplied by State housing authorities. Source: Industry Commission.
J.2 Choice of housing In every State, applicants may nominate a general region in which they would prefer to be housed. In some circumstances they may nominate a particular suburb, for example if they need to be close to a particular support service. Applicants may nominate more than one region but each nomination is treated
236 INDUSTRY COMMISSION J PUBLIC HOUSING ALLOCATION
as equal. However, State housing authorities have discretion when deciding the size, type and location of the property which they offer to the applicant. Applicants can specify the type of housing they are interested in, given their family size and the location of support services. The size, type and location of housing allocated is based on the number of people in an applicant’s household and any special requirements of the household. For example, State housing authorities may provide a bedsitter or 1 bedroom dwelling to a single person. A single parent with 2 children may be offered a 3 bedroom dwelling (see Table J.3). Applicants are generally offered a choice of dwellings. If an applicant is not satisfied with any of the units offered, their waiting period is generally extended until the State housing authorities can find suitable accommodation. In South Australia, applicants can reject up to three housing offers before the South Australian Housing Trust extends the applicant’s waiting time. In New South Wales they have a ‘choice’ of one. If that is rejected, then the applicant goes to the bottom of the waiting list. There is an excess of around 5000 to 8200 bedrooms in the Queensland housing stock compared to the nominal requirement of households.1 But there are also a significant number of old age pensioners in small ‘bedsitters’.
1 Commission estimates based on data provided in the Queensland submission (sub. 135). Housing stock was matched with family size, for example couples with no children were allocated either a one or two bedroom apartment house or flat.
INDUSTRY COMMISSION 237 PUBLIC HOUSING
Table J.3: Type of public house typically offered to applicants by household size and State, June 1993
State Single person Couples or sharers Family or single parent Family or single parent Family or single parent Family or single 1 child 2 children 3 children parent 4 children
NSW Bedsitter/ 1 bedroom 1 bedroom apartment. 2 bedroom 3 bedroom 3 bedroom 4 bedroom apartment. accommodation. accommodation. accommodation. accommodation.
Vic 1 bedroom/ bedsitter. 1 or 2 bedroom 2 or 3 bedroom 3 bedroom 3 bedroom 3 or 4 bedroom accommodation. accommodation. accommodation. accommodation. accommodation.
Qld Bedsitter/ 1 bedroom Couples: 2 bedroom 3 bedroom 3 bedroom 3 or 4 bedroom apartment/ 2 bedroom 1 or 2 bedroom accommodation. accommodation. accommodation. accommodation. apartment (special health apartments (special needs). needs). Single shares: 2/3/4 bedroom accommodation if 2/3/4 singles.
WA 1 bedroom flat/ 1 or 2 bedroom 2 or 3 bedroom 3 bedroom 3 bedroom Bedroom allocation will townhouse/ bedsitter/ accommodation of any accommodation depending accommodation. accommodation. depend upon the gender duplex, lodging house. type, depending on the on the stock available. of children. demand and turnover.
SA Bedsitter/ 1 or 2 1, 2 or 3 bedroom 2 or 3 bedroom 3 bedroom 3 bedroom 3 or 4 bedroom bedroom accommodation. accommodation. accommodation. accommodation. accommodation. accommodation.
238 INDUSTRY COMMISSION J PUBLIC HOUSING ALLOCATION
Table J.3: Type of public house typically offered to applicants by household size and State, June 1993 (cont.)
State Single person Couples or sharers Family or single parent Family or single parent Family or single parent Family or single parent 1 child 2 children 3 children 4 children
Tasnananananana
ACT 1 bedroom flat/ garden 1 or 2 bedroom 2 or 3 bedroom 3 bedroom 3 or 4 bedroom 3 or 4 bedroom flat/ townhouse. 1 and accommodation. accommodation. Single accommodation. accommodation. accommodation depending 1½ bedroom. parents may also be on the age and gender of allocated a 2 bedroom flat. the children. Aged person units are allocated to those on the aged pension.
NT 1 bedroom apartment. 2 bedroom apartment. 2 or 3 bedroom 3 bedroom 3 or 4 bedroom na accommodation. accommodation. accommodation. na Not available. Notes: Table determined from State housing authorities’ responses to Industry Commission questionnaire; additional information supplied by State housing authorities. Source: Industry Commission.
INDUSTRY COMMISSION 239 PUBLIC HOUSING
J.3 Priority access State housing authorities supplement the ‘wait-turn’ list with a priority waiting list. The priority list ensures that applicants with greater needs (requiring more urgent assistance) are housed sooner. Offering assistance ‘out-of-turn’ extends the waiting time for ‘wait-turn’ applicants. Therefore State housing authorities apply stricter assessment requirements for priority applicants (see Table J.4). In 1991–92, most State housing authorities averaged 7 to 15 per cent of allocations from the priority list (see Table J.2). Around 50 per cent of allocations came from the priority list in Tasmania and the Australian Capital Territory and about 1 per cent in Queensland. State housing authorities adopt a case-by-case approach when determining priority listings. The criteria generally used are: homelessness; current housing costs; current housing circumstances (such as, overcrowding and unsafe housing); domestic violence; and health problems compounded by inappropriate housing. To be eligible for priority listing, applicants must generally satisfy more than one of these criteria. Usually the decision to place an applicant on a priority list is made by a panel of people representing a cross-section of the community, including social workers, State housing authorities representatives and tenancy area managers. State housing authorities give priority applicants the same housing choices as ‘wait- turn’ applicants. However, the quality of the dwelling is often of a lower standard because of the need to house the applicant quickly. The Queensland Department of Housing, Local Government and Planning stated that: Applicants for public housing who receive priority allocations are entitled to the same type of housing. However, the Department cannot guarantee that applicants will be housed in the location of the applicant’s choice. This situation will continue to apply once the new priority allocation policy is in place (sub. 135, Attachment 1, p. 29). Shelter WA (sub. 54) argue that those on a priority list tend to end up in the least appropriate housing.
240 INDUSTRY COMMISSION J PUBLIC HOUSING ALLOCATION
Table J.4: Priority list criteria and assessment method by State, 1991– 92
State Criteria and assessment methods
NSW Cases are referred to independent committees to consider priority allocation.
Vic Area-based committees consider individual cases for priority allocation. May comprise two Ministry officers and a third nominee from relevant interest groups. Priority housing is provided to clients who are homeless or facing homelessness or whose housing situation is critically inappropriate or unsafe and who are unable to access alternative accommodation such as private rental.
Qld Departmental interviewers determine priority. Priority allocations are available to people who have lost their homes through natural disaster, people whose lives are endangered because of evidence they have provided in a court case and where a child is returning to the custody of the parent after being in care and no other options exist. A broader-based priority allocation system is to be introduced in early 1994. It is expected that no more than ten per cent of allocations will be on a priority basis.
WA Applicants are assessed by regional officers. If an applicant is refused for priority assistance, the applicant can appeal to the Regional Tenancy Management Committee which comprises regional manager, accommodation manager and applicant’s officer.
SA A formal referral scheme is available to social workers in government and non- government organisations. South Australian Housing Trust decisions are reviewed by a priority committee of officers of the Trust and other agency representatives. The Trust has its own internal procedures where staff in their day-to-day activities identify households in urgent need of assistance. All decisions on priority are made after an assessment of the applicant’s medical, social, financial and accommodation circumstances.
Tas Four Regional and District Assessment Committees investigate applications and determine priorities. Each committee includes outside representation (community or welfare person) and one other departmental officer.
ACT Priority applications considered by a committee comprising three members of the ACT Housing Trust. Priority applicants must demonstrate that their needs are greater than those on the wait- turn list. Circumstances considered as special need include: ill health or disability; inadequate accommodation; severe financial difficulties; domestic violence; the applicant is facing imminent eviction or is experiencing some other similar problem.
NT A committee investigates out-of-turn requests. The committee includes a welfare officer and area manager. People with extenuating circumstances may be allocated a house out-of-turn.
Notes: Table derived from State housing authorities’ responses to Industry Commission questionnaire; DHHCS (1992c); additional information supplied by State housing authorities. Source: Industry Commission.
INDUSTRY COMMISSION 241 PUBLIC HOUSING
J.4 Equivalence scales An equivalence scale is an estimate of the total expenditure or disposable income required by households of different compositions and in specific circumstances to be equally ‘as well off’ (equivalent) in terms of their consumption. It is usually expressed as a set of numbers where the value corresponding to a single adult is set equal to one and the values for other types of households are calculated relative to this household type. Table J.5 illustrates a selection of equivalence scales developed in Australia and overseas. When determining eligibility criteria for entry onto public housing waiting lists it is important for State housing authorities to establish income thresholds for different household compositions that are ‘equivalent’. This will equate the adequacy of income for different households’ capacity to pay. That is, a household of 1 adult and 1 child would be tested against a lower income threshold than a household with 2 adults and 2 children. Most State housing authorities have adopted eligibility criteria with different equivalent income scales (except for South Australia and Queensland, which have no income limits) for different household sizes and compositions (see Table J.6). For example, in Victoria, the eligibility criteria imply that a married couple with no children would require 1.54 times a single person’s income to have an equivalent income. Most State housing authorities tend to provide unfavourable treatment to larger family structures. That is, equivalent income factors for larger families are smaller than the equivalence scales. For example, it is implicit in Victorian and Western Australian housing authority income limits for eligibility that a family with 2 adults and 2 children requires 1.73 and 1.70 times the income of a single person to have equivalent income. The OECD equivalence scale is 2.68, that is, a family with this composition needs 2.68 times the income of a single person to have equivalent income. The Kakwani expenditure scale for a family with 2 adults and 2 children is 2.25–2.30.2
2 See Whiteford (1985) for more details on the OECD equivalence scale and the Kakwani expenditure scale.
242 INDUSTRY COMMISSION J PUBLIC HOUSING ALLOCATION
Table J.5: Selected equivalence scalesa
Kakwani Implicit DSS Type of Henderson poverty line expenditure payment scales household OECD (1954) scales (1967) (1978–79)
Single adult 1.00 1.00 Income level (1967): 1.00
<$4 800 1.00 $12 000 1.00 $16 000 1.00 Married couple 1.69 <40(age) 1.33 Income level (1967): 1.79
<$4 800 1.67 $12 000 1.64 $16 000 1.64
Married wife working: Income level (1967): 2.02 couple child <6 1.81 (<40) plus 1 2.19 wife not working: <$4 800 2.02 child child <6 1.53 $12 000 1.97 $16 000 1.97
Married wife working: Income level (1967): 1.88 couple plus m 6–15; f 0–6 2 children 2.68 2.12 <$4 800 2.30 wife not working: $12 000 2.25 m 6–15; f 0–6 $16 000 2.25 1.83
Married wife working: Income level (1967): 2.23 couple plus m 15+; f 6–15; 4 children 3.66 m 6–15; f 0–6 <$4 800 2.57 2.72 $12 000 2.46 wife not working: $16 000 2.44 m 15+; f 6-15; m 6–15; f 0–6 2.44
Sole parent 1.49 male <40; 1.38 1 child <6 1.23 female <40 1 child <6 1.21 a Equivalence scales from Whiteford (1985) have been re-calculated with a single person as the base rather than a married couple with no children. Source: Whiteford (1985).
INDUSTRY COMMISSION 243 PUBLIC HOUSING
There is a need to treat any comparisons between general equivalence scales (Table J.5) and the implicit scales of State housing authorities (Table J.6) with caution. The general equivalence scales rank different family compositions on overall welfare needs, whilst the State housing authorities’ scales are looking at the housing needs of different households. Therefore variations in the two measures for a given family structure may represent differing income requirements to meet their housing needs as compared to general welfare needs. Homeswest stated that its income eligibility limits for different household types are based on the equivalence scales that were used in developing the Henderson poverty limits (sub. 228, p. 5).
Table J.6: Implicit equivalence scales in State housing authorities’ income eligibility criteria, 1991–92
Type of household NSW Vic Qld WAa SA Tas ACT NT
Single adult 1.00 1.00 na 1.00 na 1.00 1.00 1.00
Married couple 1.27 1.54 na 1.32 na 1.23 1.67 1.20
Married couple plus 1 child 1.47 1.73 na 1.58 na 1.41 1.83 1.40
Married couple plus 2 children 1.68 1.73 na 1.70 na 1.48 2.00 1.60
Married couple plus 4 children 1.82 1.89 na 1.96 na 1.73 2.17 2.00
Sole parent 1.27 1.54 na 1.32 na 1.41 1.67 1.20 (1 child) na Not applicable as these States have no income criteria limits for those wishing to enter the public housing sector. a Homeswest advised that eligibility limits have been simplified to be practical and to aid their understanding. Therefore two adults have the same implicit scale as an adult and a child. Note: Derived from State housing authorities’ responses to Industry Commission questionnaire; additional information supplied by State housing authorities. Source: Industry Commission.
244 INDUSTRY COMMISSION J PUBLIC HOUSING ALLOCATION
J.5 Efficient and equitable allocation The existence of waiting lists is not of itself cause for concern because there can be benefits as well as costs associated with using waiting lists to augment a price allocation system.
Costs and benefits of waiting lists and pricing Pricing, under many conditions, allows efficient allocation in a manner that cannot satisfactorily be achieved by any other approach. Benefits typically include: • The distribution of the good to those willing to pay the most for the good;3 • The allocation is efficient; and • The transfer of information on scarcity. This method of allocation, though, is sometimes criticised because those with higher incomes have a greater ability to express their preferences and fluctuations in price can result in rapid and inequitable changes in the distribution of wealth and purchasing power. Allocation by waiting lists has a number of costs. These include: • The cost to the client of having to spend time and resources in finding extra information on availability (as well as price); applying for a position on the waiting list; attending an interview; and facing a restriction in mobility.4 These costs may include any change in behaviour a person undertakes to fit within the eligibility criteria; and • The cost to authorities in managing the waiting list. The larger the list the greater the administrative costs and co-ordination required to ensure that the waiting list operates smoothly. They have, in certain circumstances, a number of advantages over simply using a pricing system. These include: • Facilitating the screening of clients to ensure that those in most need obtain a spot on the list; • Acting as a disincentive to those who require temporary assistance;
3 In situations where consumers’ incomes are equal, presumably those who value the good the most will make a higher bid for the good. 4 Restrictions on mobility to a large extent may be lessened by changes to the transfer criteria.
INDUSTRY COMMISSION 245 PUBLIC HOUSING
• Allowing authorities to better manage the demand for their stock; and • Allowing authorities to obtain lower vacancy rates for their stock than would otherwise occur under a pure price rationing system.5
Proposed allocation principles In an attempt to take advantage of the costs and benefits of both the rent setting and waiting list approaches, the following principles have been developed. 1. One segmented waiting list for each State. This principle has two important parts. First, there would be one waiting list for the whole State. This has the advantage of simplicity. Households with similar needs would generally wait the same length of time regardless of where they prefer to live within the State. Second, the waiting list would be divided into a number of segments. People who are in similar need of housing assistance would be placed in the same segment of the list in order of their application. The Commission believes that more than two segments for a waiting list should be possible and worthy of investigation. 2. All on low incomes who qualify for rent assistance should be eligible to apply for public housing. For simplicity and equity, all those eligible for rent assistance should also be eligible for public housing. Some in this group may value the benefits of security of tenure and lack of discrimination highly. If they are willing to wait their turn (an expression of their valuation of the benefit) they should not be excluded.6 3. Those in greater need should receive assistance sooner. Those most in need have most to benefit from public housing and consequently it is appropriate and equitable to make them wait the least time. The rate at which people from a particular segment of the waiting list are allocated housing assistance would be determined by the relative need of the people in that segment. This would mean that the average waiting time for
5 In the private rental market there are almost always vacancy rates, typically of about 3 per cent. As the price system does not clear the market, the allocative benefits usually attributed to a pricing system do not automatically follow. 6 There should be two checks on eligibility criteria. One at the time of the application for public housing. The second just prior to the applicant reaching the top of the list.
246 INDUSTRY COMMISSION J PUBLIC HOUSING ALLOCATION
assistance would be shortest for that segment of the waiting list occupied by people in greatest need, and grow longer for each successive segment. It is important that people in all segments are eventually allocated housing assistance. Eligibility limits for entry onto the list should take into account the housing needs of the different sizes and compositions of families. These limits should be set to ensure that people on the waiting list get housed within a reasonable period. 4. Each applicant’s circumstances should be considered within flexible guidelines. Applicant’s relative need should be assessed against a set of criteria — such as household income and composition, potential for discrimination in the private rental market, and current living conditions. The assessment of need could include an assessment as to whether the need is likely to be short-term or long-term. Clearly the guidelines should be interpreted broadly given the specific nature of individual cases. The relative housing need of applicants would be determined as well as the appropriate segment on the waiting list. Those in special circumstances, for example those currently in crisis accommodation, will require a greater degree of subjective assessment of the gravity of their needs. The initial assessment could be undertaken by either a panel or a case officer from the tenancy manager’s office working within the eligibility criteria. Where the initial decision is made by a case officer for applicants to receive more urgent access to housing assistance, that decision may need to be validated by a panel. A right to appeal against decisions made by case officers or the panel should also exist. When the circumstances of people on the waiting list change substantially they should have the right to be reassessed. 5. Those wishing to transfer from one State’s waiting list to another should have the time they have been waiting credited to the new list. Mobility between States should be treated neutrally, hence those who are on a waiting list should not to be unduly discouraged or penalised from transferring to the waiting list of another State (but neither should they be encouraged). Time spent on a waiting list in one State should be able to be credited elsewhere (in full).
INDUSTRY COMMISSION 247 PUBLIC HOUSING
6. Those within public housing should be given the opportunity to transfer. There are greater problems in pursuing a policy of transfer neutrality for those within public housing. Some areas are highly desirable in which case a transfer could be to a waiting list. Where someone wishes to move from a desirable area to a less desirable area (as indicated by expected waiting times) then they should be given the opportunity with a minimum penalty.
248 INDUSTRY COMMISSION J PUBLIC HOUSING ALLOCATION
REFERENCES DHHCS (Department of Health, Housing and Community Services), 1992, Housing Assistance Act 1989 Annual Report 1990–91, AGPS, Canberra. Whiteford P. 1985, A family’s needs: Equivalence scales, Poverty and Social Security, Research paper no. 27, DSS.
INDUSTRY COMMISSION 249 K OTHER HOUSING PROGRAMS
K.1 Rent assistance Pensioners, allowees, special beneficiaries and Additional Family Payment recipients renting in the private rental market are eligible for assistance with their rents under schemes operated by the Commonwealth Department of Social Security (DSS) and Department of Veterans’ Affairs (DVA). The DVA scheme is identical to that operated by the DSS. Rent relief, which includes bond and relocation assistance, is also available under the Mortgage and Rent Assistance Program (MRAP) of the Commonwealth—State Housing Agreement (CSHA).
DSS and DVA rent assistance Rent assistance was introduced in 1958 for pensioners as a supplementary allowance. It provided additional income support for the aged, invalid and widow pensioners. Since then the program has been extended to include new groups — disability support pensioners, sole parent pensioners, Jobsearch and Newstart allowees, recipients of Additional Family Payments — and the level of assistance has increased significantly. The degree of targeting has been improved over the last 10 years by eliminating a number of anomalies in eligibility and reducing assistance to those paying relatively low rents. The rate of assistance has been raised substantially over the last 5 years for those facing relatively high rents. Those eligible for rent assistance include people who pay rent other than to the Commonwealth or State housing authorities for private rental accommodation. Eligibility extends to people who pay rent as: • lodging — where board and lodging is paid and the amount for lodging cannot be identified, two-thirds of the amount paid is treated as rent; • site rent or fees for a caravan, vehicle, vessel or other accommodation in which they live; • services provided in a retirement village; or • accommodation in a nursing home where accommodation cannot be identified, two-thirds of the amount is treated as rent.
INDUSTRY COMMISSION 249 PUBLIC HOUSING
Rent assistance is not payable to people who own their own home but pay accommodation fees elsewhere, except during a period of residence in a nursing home. The amount of rent assistance varies with rent paid. If rent is below a minimum payment threshold, no assistance is paid. Where rent is above the threshold, assistance is paid at a certain rate for each dollar of rent paid above that threshold. The amount of assistance paid is capped at specified maximum rates. The amount of rent assistance paid does not vary with income until income is such that all other DSS benefits are withdrawn. At this point, rent assistance is phased out at 50 cents per dollar as a client’s income rises. The rent thresholds are indexed in line with the CPI in March and September each year. Changes to rent assistance eligibility introduced in February 1992 include: • The abolition of waiting periods for those aged 18 to 60. Only single allowees and beneficiaries under 18 years of age without children have a waiting period. However, for this group the waiting period was reduced from 26 to 18 weeks; and • The extension of eligibility for rent assistance to include 16 and 17 year olds who qualify for the homeless/independent rate. Changes to rent assistance eligibility criteria have increased the number of people receiving assistance from approximately 510 000 in June 1984 to around 930 000 in June 1993. Over this period assistance rose from $10 per week to a maximum payment of $42.60 per week (see Table K.1). Commonwealth outlays on rent assistance totalled approximately $1.2 billion in 1992–93. This represents a real growth of just under 150 per cent since 1984– 85. In contrast the Commonwealth spent $1074.9 million on the CSHA in 1992–93, which is slightly higher in real terms than 1984–85 (see Appendix D). DSS pension, benefits and allowance payments at March 1993 are listed in Table K.2.
250 INDUSTRY COMMISSION K OTHER HOUSING PROGRAMS
Table K.1: Maximum rates of rent assistance, November 1983 to September 1993 ($ per fortnight)
Nov Dec Jun Dec Jun Sept Mar Mar Mar Sept Client group ‘83 ‘88 ‘88 ‘89 ‘90 ‘90 ‘91 ‘92 ‘93 ‘93
Pensioner - without children 20 30 30 40 50 60 62.00 62.90 67.20 68.00 - with 1 or 2 children 20 30 40 50 60 70 72.40 73.50 73.80 74.80 - with 3 or more children 20 30 40 50 70 80 82.70 83.90 84.20 85.20 Beneficiary - without children nila 20 20 40 50 60 62.00 62.90 67.20 68.00 - with 1 or 2 children nil 30 40 50 60 70 72.40 73.50 73.80 74.80 - with 3 or more children nil 30 40 20 70 80 82.70 83.90 84.20 85.20 FAS recipient - with 1 or 2 children nil 30 40 50 60 70 72.40 73.50 73.80 74.80 - with 3 or more children nil 30 40 50 70 80 82.70 83.90 84.20 85.20 a Only pensioners and sickness allowees received rent assistance at this time. Sources: DSS sub. 214.
From March 1993 the rate at which assistance is paid increased from 50 to 75 cents for every dollar paid above the minimum rent threshold. To improve targeting of private renters with housing affordability problems, higher minimum rent thresholds and maximum amounts of assistance were introduced (see Table K.3). The Commonwealth Government described these changes as the first step towards achieving its affordability objective. The level of assistance was raised for many of the social security clients and veterans, and in particular sole parents, single pensioners and single allowees. The National Housing Strategy had identified these groups as facing the greatest affordability problems in the private rental market. The Commonwealth has foreshadowed further improvement to the adequacy and targeting of rent assistance. In the 1992–93 Budget it made a commitment to establish a benchmark of housing affordability for all low-income private renters: As a key outcome in its long-term agenda of reform, the Government is setting a benchmark of housing affordability where: People on low incomes paying more than 20 per cent of their income on rent will be assisted by the Government towards meeting those costs — the level of assistance would be related to both rent paid and level of income (DHHCS 1992b, pp. 14–15).
INDUSTRY COMMISSION 251 PUBLIC HOUSING
Table K.2: DSS benefits, March 1993 ($ per fortnight)
Single no Single one Couple no Couple one Benefit children child a children child a
Age pension 312.10 312.10 520.60 520.60 Pharmaceutical allowance 5.20 5.20 5.20 5.20
Sole parent pension na 312.10 na na Guardian’s allowance na 29.00 na na
Job search allowance (JSA) 282.70b 312.10 520.60c 520.60c
Newstart allowance (NSA) 282.70 312.10 520.60c 520.60c
Basic family paymentd na 20.90 na 20.90 Additional family payment na 61.90 na 61.90 Total family payment na 82.80 na 82.80
Rent assistance (maximum rate) 67.20 73.80 63.20 73.80 na Not applicable. a Child assumed to be under 13 years old. Family payments must be added to the pension or allowance to determine total fortnightly income. b Need to be 21 years and over to receive this rate. c For couples, each individual receives $260.30 per fortnight in pension or allowance and $2.60 pharmaceutical allowance. d From January 1993, this payment is paid to the principal carer, usually the mother. Family Allowance Supplement (FAS) and the guardian allowance have been replaced by the Family Payment. Sources: DSS (1993); additional information provided by DSS.
The Commonwealth is also looking to reduce the difference between the level of rent assistance for social security recipients with rent rebates for public and community housing tenants: Leading up to the year 2000, the Commonwealth, in consultation with the States and Territories, will examine the feasibility of having this benchmark of affordability used to calculate assistance not only for those social security recipients renting from private landlords, but also those in rental accommodation subsidised by governments through the CSHA and community housing (DHHCS 1992b, p. 15).
252 INDUSTRY COMMISSION K OTHER HOUSING PROGRAMS
Rent assistance is the only form of payment from DSS specifically aimed at helping people to meet their housing costs. It is provided in the form of an income supplement. DSS states that: rent assistance is designed to support [the primary objective of providing adequate income for DSS clients and their dependants] by providing supplementary assistance to meet the additional cost of private rental housing...Unlike rent rebates in public housing, rent assistance does not therefore function as a direct subsidy on the rents of private tenants. While the amount of the rent assistance is related to the level of rent and assists people to meet the costs of private rental accommodation, the payment is delivered as a component of pension or allowance. Recipients may elect to allocate the payment to rent but by the nature of the payment are not required to do so (sub. 214, p. 2). DSS clients receiving rent assistance clearly see the payment as an income supplement rather than an allowance to help pay for housing costs. A survey conducted by DSS revealed that recipients of rent assistance were more likely to spend an incremental change in the assistance on other items such as food, clothing and paying bills rather than improving their accommodation:1 Responses to questions on spending priorities and the receipt of additional rent assistance would suggest that among the sample selected recent rent assistance increases have not been a catalyst to changing accommodation and that a further increase of $20 per week would not be sufficient incentive to induce a change... Food, clothes and bills were the key items for additional expenditure for all groups, whilst children featured highly in the sole parent and married allowees with children sub- groups (DSS 1992a, p. 18).
Table K.3: DSS rent assistance schedule, September 1993 ($ per fortnight)
Rent Client group Thresholds Rent Ceiling Max. amount of assistance single no children 60 149.20 68.00 single 1 or 2 children 80 178.00 74.80 single 3 or more children 80 192.00 85.20 couple no children 100 189.20 64.00 couple 1 or 2 children 120 218.00 74.80 couple 3 or more children 120 232.00 85.20
Sources: DSS sub. 214; additional information received from DSS.
1 The question asked in the survey by DSS (1992, p. 11) was: ‘if rent assistance was increased and you received $20 more per week in your social security payment, what would be the three most important things you would spend it on?’
INDUSTRY COMMISSION 253 PUBLIC HOUSING
Mortgage and Rent Assistance Program The Mortgage and Rent Assistance Program (MRAP), an untied program under the CSHA, was introduced in January 1991 to replace the Mortgage and Rent Relief Program introduced in 1982–83 and incorporated in the 1984 CSHA. The latter program was to provide assistance to low-income households to meet their mortgage or rent costs, and to provide short-term accommodation for people facing homelessness because of marriage breakups, domestic violence or eviction. MRAP is jointly funded by the Commonwealth and State governments, but administered solely by the States. A total of $53.5 million was allocated by the Commonwealth for MRAP in 1992–93. States were required to match $30.9 million. The $22.6 million balance of Commonwealth funding was allocated to the Home Deposit Assistance without any State matching requirements. States have flexibility to allocate MRAP funds within agreed guidelines. The current program guidelines for MRAP allow for the following uses for funding: • Deposit assistance to low-income home purchasers in need of such assistance; • Short-term assistance to low-income mortgage payers experiencing genuine financial difficulty in meeting their mortgage commitments; • Short-term assistance to low-income renters experiencing genuine financial difficulty in meeting their rent commitments or who face difficulties in gaining access to rental accommodation; and • Facilitating the supply of short-term rental accommodation through payments to organisations for the purchase, construction or modification of dwellings. Most States use the rent relief portion of the funds to provide relocation assistance and bond money in the form of loans and grants. This helps low- income households overcome the high up-front cost of renting in the private rental market (see Table K.4). Some States have used MRAP funds to top-up DSS rent assistance but this has been or is being phased out. Homeswest (sub. 51) stated that in order to avoid duplication of services the rent relief component of its MRAP will cease on June 30 1993 to all DSS clients renting privately in Western Australia. Queensland Department of Housing, Local Government and Planning stated that:
254 INDUSTRY COMMISSION K OTHER HOUSING PROGRAMS
There has been a small and highly targeted rent subsidy scheme also in operation, however, this is being scaled down in recognition of the improved level of income support being provided to private renters through the Department of Social Security (sub. 135, p. 7). NSW and Queensland use MRAP funds for their Community Tenancy and Community Rent schemes respectively. Under these schemes, community groups are funded to headlease properties from the private sector and sub-let them to those in need of assistance. These properties are let to households on the public housing waiting list at the same rent as if they were public housing tenants. In 1991–92, NSW provided $12.8 million for such schemes from a total of $40.5 million MRAP funding. There are other State schemes to assist private renters which are funded outside the CSHA. For instance, funds for the Housing Resource Service scheme in Queensland are raised from interest earned on bond lodgements to the Queensland Rental Bond Authority. Community organisations are provided grants through this scheme to provide information and advocacy services to private renters.
K.2 Consistency in private and public rental assistance There are inequities arising from the treatment of those in similar circumstances in public housing compared to those renting privately and receiving rent assistance. Despite the increases to DSS rent assistance over the past 10 years the amount is less than the rent rebates received by public tenants under the CSHA. Prior to the 1993 changes to rent assistance, Wood (1990) argued that the maximum financial assistance available to eligible private renters under rent assistance was approximately 50 per cent of the average subsidy received by public renters under rent rebates. Flood (1993) found that the total housing subsidy for public tenants was $2885 per year per household as compared to $968 for private renters. DSS argues that full parity between rent assistance and public housing subsidisation will not be achieved in the short term: Limits to the capacity of the social security system to emulate both the wider range of benefits available to public housing tenants and the structure of rent rebates ... mean that full parity in assistance between public and private renters is unlikely to be achievable (sub. 214, p. 14).
INDUSTRY COMMISSION 255 PUBLIC HOUSING
Table K.4: State rent relief programs, January 1993
No. of people assisted State Type of assistance Eligibility 1991–92 expenditure 1991–92
$m NSW Primarily payment of bonds, but also rent in People satisfying normal public housing eligibility 6.1 20 869 advance, removal expenses, temporary criteria, who are homeless or at risk of homelessness. accommodation costs, electricity and gas connection fees.
Vic Loans for bond maximum $400 individuals, $600 Commonwealth Health Care Card holders with difficulty 9.3 21 217 households and group (average payment $437 per meeting initial establishment costs of renting. household).
Qld Rent subsidy of maximum $50 per week (very Bond Loan Program: must be resident in current area of 8.1 14 358a strict eligibility criteria) being phased out and Qld 6 weeks or more, with income less than $325 per replaced with grants of 2 weeks’ rent with strict week (single), or $525 per week (family), and cash assets 582b eligibility criteria in June 1993. From April 1991 less than $1000. For rent grant, must also be on waiting loans for bond, no maximum amount. list for public housing and exiting crisis centre.
SA Rent subsidy — ongoing payment. Maximum People resident in SA 3 months or more, with income 6.4 9 291 $25 per week (average payment $16.28 per $300 per week or less, paying 40 per cent or more on week). rent.
WA Rent subsidy — ongoing payment, reviewed 3 Low-income people and AUSTUDY students (not DSS 6.7c 17 676c monthly. $5 – $25 per week, depending on beneficiaries) with income less than $335 per week proportion of income spent on rent. Also loans (single), $441 per week (2 people); paying more than 25 5.6a 17 108a for bond. per cent (but less than 75 per cent) on rent.
256 INDUSTRY COMMISSION K OTHER HOUSING PROGRAMS
Table K.4: State rent relief programs, January 1993 (cont.)
No. of people assisted State Type of assistance Eligibility 1991–92 expenditure 1991–92
$m Tas Rent subsidy — on-going payment. Maximum People with dependent children, eligible for public 0.9b 750b $30 per week. Also bond loans/grants: maximum housing and Health Care Card, paying 45 per cent or $600 (repaid if leaving accommodation and not more of income on rent. Income threshold of $380 per transferring bond to next lease). Cost of removals week with 1 child, increasing for each additional child. (cheapest of 3 quotes). No cash assets allowed.
ACT Rent subsidy — on-going payment. Maximum People on public housing waiting list; income $330 per 3.8 1 784d (single or couple) $50 per week, plus $10 per week or less (single), $550 per week or less (2 people), child. plus $55 per week per additional person; paying 30 per cent or more on rent, or 10 per cent of FAS and all DSS rent assistance.
NT Rent subsidy — on-going payment. Maximum People resident in NT at least 3 months, over 18 years 1.0 1 235 $60 per week, reduced by any rent assistance from old. Income of $636 per week or less, paying more than DSS. Also bond loans, emergency arrears and 40 per cent on rent. Must be on public housing waiting relocation assistance grants. list and not own a dwelling or land. Realisable assets (excluding family vehicle) under $5000. a Bond loans. b Rent subsidy. c Rent relief. d Current as at 30 June 1992. Notes: Derived from information supplied by DSS. Source: Industry Commission.
INDUSTRY COMMISSION 257 PUBLIC HOUSING
However, DSS believes that the gap between the assistance received by its clients and public tenants can be narrowed further within the current fiscal constraints by improving the adequacy and targeting of rent assistance to those paying 20 per cent or more of their income on private rental. The three changes suggested by DSS to improve consistency in the short-term are: • Increases in the maximum rates of assistance to all categories of recipients. This would raise the average value of assistance and reduce the incidence of financial housing stress and therefore narrow the gap between public rental rebates and rent assistance; • Further gradation of maximum rates of assistance and rent thresholds to reflect not only the family composition but also the different ages of children and their lower earning entitlements under the age of 21; and • The modification of the poverty traps that currently exist within the public rebate system. DSS goes on to argue that in the longer term parity between rent assistance and rental rebates can best be achieved through an income support system: DSS considers that greater parity in financial assistance to public and private renters should be further considered in the medium to long-term through the integration of all financial assistance to renters within Commonwealth income support entitlements (sub. 214, p. 24). This is consistent with the Commonwealth Government’s objective of ‘evaluating’ the possibility of obtaining full parity of assistance between public and private renters by the year 2000. A concern expressed by many participants is that increases in the level of rent assistance do not necessarily result in greater assistance because private landlords raise the level of rent. For example, the Fitzroy, Richmond and Collingwood Accommodation Service stated that: ... rental assistance payments from the Federal Government does drive up the cost of private rental ... As more people are able to pay increased rents, the Agents then increase the rent again using affordability as the absolute benchmark, and not other criteria such as standard of accommodation, previous rental record, applicant’s links to the area etc (sub. 157, p. 1). The Derby West Kimberley Shire also submitted that: The result of Rental Assistance as a component of DSS benefits has been clearly identified as a stimulus for higher rentals, rather than a relief from high rentals (sub. 70, p. 6).
258 INDUSTRY COMMISSION K OTHER HOUSING PROGRAMS
However, not all participants held this view. The Property Owners Association of Victoria referred to evidence that: ... “Direct” Rent Assistance to the welfare recipient has no effect on the market rentals because the existing rents have not increased for the last 2 to 3 years despite large cost increases and during a period of consistent increasing welfare payment amounts. The vacancy rates are also staying consistent at 5 per cent to 10 per cent in different areas (sub. 156, p. iv). As argued in Appendix E, it is effective for governments to provide long-term housing assistance through the provision of public housing. Consequently, there is an argument for maintaining different rates of assistance to public renters as compared to private renters to capture the benefits of public housing. This is not inequitable in the long-run because everybody eligible for rent assistance is also eligible for public housing.
K.3 Inconsistencies in rental assistance DSS recipients on higher incomes receive the same level of rental assistance as those on lower incomes, if they pay the same rent. This is inequitable. Further, rent assistance does not explicitly take into account differences in the size and composition of households. Larger households are disadvantaged as their equivalent income would tend to be lower (see Appendix J) but they receive the same level of rental assistance, based on the amount of rent paid. Further, not all low-income households renting in the private rental market are eligible for rent assistance.
K.4 Shared equity schemes for public housing tenants In many cases public housing tenants will have insufficient income to bridge the gap between public rental and home ownership, even with State government assistance through Home Purchase Assistance. State housing authorities have introduced shared equity schemes which may be appropriate for this group of people. That is, those who cannot take out a loan for full ownership of the home may be able to buy a share of the house with the State and increase their ownership of the house as their income increases. They pay both mortgage repayments in respect of the loan for their share of the house and rent in respect of the share owned by the State. Most States — New South Wales, Victoria, Queensland, Western Australia and South Australia — have implemented shared ownership programs. The schemes in New South Wales and South Australia target existing public housing tenants.
INDUSTRY COMMISSION 259 PUBLIC HOUSING
The Victorian scheme targets both existing public tenants and those who have reached the top of the list for home purchase assistance. The Western Australian scheme targets those who are eligible for home purchase assistance and operates in conjunction with other home purchase assistance schemes. The Queensland scheme is aimed at all low-income households who cannot proceed with outright home purchase. The Commonwealth Government announced in the 1992–93 Budget its Social Housing Subsidy Program which will provide funding to the States to help them raise additional funds for the provision of the public equity component of shared home ownership and certain other rental accommodation for low- and moderate- income people. The Commonwealth will provide $8 million in 1993–94, $16 million in 1994–95 and $24 million in 1995–96. There are a number of advantages associated with shared ownership. Yates stated that shared ownership: ... provides both a means of bridging the deposit gap for those households for whom ownership would otherwise not be an option and a tax effective means of accumulating wealth (1989, p. 3) . The DHHLGCS submitted that: Shared ownership has the potential to make the characteristics of home ownership available to clients on such low incomes that they would otherwise have little chance of enjoying these characteristics (sub. 213, p. 33). Under shared ownership schemes, the household is generally responsible for rates, maintenance and repair costs. This releases some of the financial burden of governments. Further, it increases tenant participation in the management and control of the house. However, the Victorian Mortgage Review Task Force argued that the added financial burden on low-income borrowers can result in the run-down of the property and its value: ... low income borrowers who are repaying loans in conjunction with other associated housing costs, such as municipal and water rates and compulsory insurance as well as family living expenses, often cannot afford costly maintenance and repairs, leading eventually to a decline in the value of the property (sub. 184, p. 4, attachment). One of the main advantages with home ownership is that with inflation housing costs decline as a proportion of income over time. Yates (1989) argued that home buyers of the traditional nature only sustain a high housing cost to income ratio for approximately 5 years, while for households participating in a shared equity scheme this does not begin to decline until the 25th to 35th years when the mortgage is discharged. Implicit in this is an assumption of high inflation.
260 INDUSTRY COMMISSION K OTHER HOUSING PROGRAMS
During periods of low inflation these benefits will take even longer to be achieved. Wensing submitted that the role of shared ownership schemes in periods of low interest rates is minimal: Unsubsidised shared ownership programs have very limited role to play between eligibility for public rental housing and home purchase assistance for full purchase under CSHA programs. Their role increases in times of rising interest rates and conversely decreases under times of falling interest rates (sub. 178, p. 3).
INDUSTRY COMMISSION 261 REFERENCES Commonwealth Government 1990, Budget Related Paper, no. 8 of 1989–90. DHHCS (Department of Health Housing and Community Services), 1992, Housing: Choices for a Changing Nation, Budget 1992–93. DSS (Department of Social Security), 1992a, Behavioural Responses of DSS Assistance Recipients to Changes in the Level of the Payment, Report on Survey of DSS Rent Assistance Recipients, Draft Report. DSS (Department of Social Security), 1992b, A guide to Social Security Payment, 20 September 1992 to 31 December 1992. Flood, J., 1993, Housing Subsidies 1990–91, Draft Report for the Industry Commission and Commonwealth Department of Health, Housing, Local Government and Community Services. Flood, J. and Yates, J., 1987, Housing subsidies study, Project series no. 160, Australian Housing Research Council. Wood, G. A., 1990, ‘Housing Finance and Subsidy Systems in Australia’, Urban Studies, Vol. 27, No. 6, pp. 847–876. Yates, J., 1989, Shared Ownership, Background paper no. 6, National Housing Policy Review, Department of Community Services and Health, Canberra.
INDUSTRY COMMISSION 262 L COMMUNITY HOUSING
The community housing sector comprises about 31 000 dwellings. This compares with about 370 000 dwellings in the public sector and about 1 million private rental dwellings. The Local Government and Community Housing Program (LGACHP) had provided 2206 community housing organisations with 692 dwellings as at 30 June 1991 from an allocation of $130 million between 1984–85 and 1991–92 (NHS 1992b, p. 86). In 1991–92, about 2 per cent of Commonwealth–State Housing Agreement (CSHA) funding was allocated to community housing. State matching is not required, but some States give extra support to this sector.
Community housing defined Community housing1 can be defined as ‘non-profit rental housing owned and/or managed by community groups and organisations whose main aim is providing housing, principally for people who are inadequately housed or homeless’ (DCSH 1989b, p. 154). The housing is not always restricted to people on low to moderate incomes. Most jurisdictions specify that a certain proportion of residents must be eligible to be public housing tenants. For ease of comparison, community housing can be grouped into four types: Local Government Housing Associations provide low-cost rental housing within a particular municipality to meet locally identified housing needs. The Local Government Authority is closely involved in the provision of the housing with policy, planning, funding and/or monitoring roles but does not directly manage the housing. ... ; Non-profit and/or Community Housing Associations provide social rental housing which is generally linked to a particular locality or to meet the housing needs of a particular target group. The associations themselves are often established with the purpose of meeting a housing need which has not been met adequately through other ‘mainstream’ forms of housing. ... ; The Housing Co-operative model allows for tenant management of geographically close stock typically purchased with loans from a range of government and private rental sources. Stock may be owned by government, a central finance company or individual co-operatives. ... ; and
1 None of the housing discussed in this appendix is exclusively used for crisis accommodation or in combination with support services, for example, the Supported Accommodation Assistance Program (SAAP). Crisis housing and support services are the subject of Chapter 10 and Appendix M.
INDUSTRY COMMISSION 263 PUBLIC HOUSING
Equity Share Rental Housing. Stock usually purchased with a mixture of government and private sector funding and wholly owned by the co-operative is leased to tenants who are shareholders in the co-operative. Membership to a Shared Equity Rental Housing Co-operative gives tenants the right and responsibility of co-operative management. Holding co-operative shares entitles tenants to security of tenure provided they contribute to the management of the co-operative and pay rent to cover certain repayment costs. (Victorian Department of Planning and Housing 1991, pp. 1.1, 2.1, 3.1, 4.1.) All four types of community housing are delivered. State governments determine the mix (see Table L.1).
264 INDUSTRY COMMISSION L COMMUNITY HOUSING
Table L.1: Co-operative and community housing programs by State, 30 June 1993
(i) Co-operative housing programs
Dwellings Source of Ave. no. of dwellings State Program Co-ops Metro Other Total funding in scheme in 1992–93
NSWa CO-OPS 9 45 LGACHP/CHP 6.4 Vic RHC 21 535 196 731 CSHA untied 34.8 Vic CERC 62 181 121 302 LGACHP/CHP 9.1 CSHA untied Qld CO-OPS 29 64 45 109 LGACHP/CHP 3.8 Qld CoHP 21 68 72 140 CSHA untied 6.7 Qld CHPP 2 0 10 10 State 5.0 SA CO-OPS 61 925 21 946 LGACHP/CHP 17.7 CSHA untied Tas CO-OPS 4 45 0 45 LGACHP/CHP 11.3 ACT CO-OPS 7 32 0 32 LGACHP/CHP 3.7 CHEP CSHA untied NT CO-OPS 1 5 LGACHP/CHP
All 217 2 365 a Six of the co-operatives are in the metropolitan area.
(ii) Joint ventures
Dwelling Source of Ave. no. of dwellings government in scheme in 1992– State Program Co-ops Metro Other Total funding 93
Vic PP 16 113 46 159 State 9.9 Qld CHPP 185 148 568 716 State 3.9 WA JV 84 528 333 861 State 10.3 SA JV 165 764 912 1 676 CSHA untied 10.2 Tas JV 4 20 1 21 CHP 5.3
All 454 3 433
Notes: NSW has some joint ventures but no specific program outside CHP. See below for abbreviations.
INDUSTRY COMMISSION 265 PUBLIC HOUSING
(iii) Other community housing programs
Dwellings Source of Ave. no. of dwellings State Program Groups Metro Other Total funding in scheme in 1992–93
NSWa LGC 59 305 LGACHP/CH P NSW CTS 61 1 493 1 540 3 033 MRAP 50.9 NSW ARHP 1 1 033 2 743 3 776 ARHP 3 776.0 Vic AHB 1 150 712 862 ARHP 862.0 Vic EH 83 MRAP Vic LGHP 52 204 LGACHP/CH 3.9 P Vic RHP 81 1 121 112 1 233 CSHA untied; 15.2 State Vic YHP 109 205 84 289 CSHA untied 2.6 Vic GHP 113 130 89 219 CSHA untied 1.9 Qldb CRS 26 268 741 1 009 MRAP 38.8 Qldc LGCHP 115 76 659 735 LGACHP/CH 6.4 P Qld ARHPd 1 2 523 ARHP 2 523.0 Qld ARHPe 34 2 805 ARHP 239.6 WA CRTP 23 36 10 46 State 2.0 WA CFAP 29 28 22 50 State 1.7 WA AHBcf 1 755 1 745 2 500 ARHP 2 500.0 WA AHBdg 1 717 717 ARHP WAb LH 14 14 1.0 SA CHA 23 503 86 589 LGACHP/CH 28.0 P CSHA untied Commercial mortgages SA CTS 124 492 146 638 C’wealth 5.1 programs State Private SA AHB 1 932 596 1 528 ARHP 1 528.0 Tas CTS na 44 43 87 MRAP na Tas ARHP 1 253 253 ARHP 253.0 ACT CORHA 47 176 0 176 CSHA untied 3.7 P NT CTS 1 5 0 5 MRAP 5.0 NT ARHP 1 1 882 CSHA tied 1 882.0
All 1 003 25 478 a 14 of the groups were in the metropolitan area and 45 in the country. b CRS numbers refer to households housed at 30 June 1993, not dwellings. c Refers to non-co-operative projects. d Refers to dwellings owned and/or operated by Queensland Department of Housing, Local Government and Planning. e Refers to dwellings owned and/or managed by Community Groups. f These dwellings are Homeswest mainstream rental properties specifically allocated to Aboriginal people.
266 INDUSTRY COMMISSION L COMMUNITY HOUSING
g These are dwellings constructed since 1972 for remote Aboriginal communities who manage the properties themselves. The current condition of these properties is unknown. Note: More detail on Aboriginal Rental Housing Program (ARHP) in Appendix N.
INDUSTRY COMMISSION 267 PUBLIC HOUSING
Key to abbreviations
AHB Aboriginal Housing Board ARHP Aboriginal Rental Housing Program CERC Common Equity Rental Co- CFAP Community Facilities operatives Accommodation Program CHA Community Housing Association CHEP Community Housing Expansion Program CHPP Community Housing Partnership CoHP Co-operative Housing Program Program CO-OPS Co-operative Housing Program CORHAP Community Organisations Rental Housing Assistance Program CRS Community Rent Scheme CRTP Community Residential Tenancies Program CTS Community Tenancy Scheme EH Emergency Housing GHP Group Housing Program JV Joint Ventures LGC Local Government and Community LGHP Local Government Housing Projects Program LH Lodging Houses MRAP Mortgage and Rent Assistance Program PP Project Partnership RHC Rental Housing Co-operatives RHP Rooming House Program YHP Youth Housing Program
Sources: Randolph (sub. 216, p. 39); DHHLGCS Communication; Industry Commission estimates.
Community housing infrastructure provision by non-government and local government organisations Funding of non-government and local government organisations that support community housing is provided mainly by the States. Some of the organisations focus solely on community housing tenants, others include advice and support for community housing managers while the remainder have organisations which include functions outside the sector. The resources that are provided vary in emphasis and range of support across the States. Table L.2 lists these resourcing organisations and the sources and size of their funding.
L.1 Community housing programs Community housing is generally funded through the CSHA. LGACHP stemmed from the Australian Labor Party’s 1982 housing policy platform which provided for a Community Housing Expansion Program (CHEP) and a Local Government Housing Assistance Program (LGHAP). These two programs were combined in late 1984 to form LGACHP.
268 INDUSTRY COMMISSION L COMMUNITY HOUSING
Table L.2: Community housing organisations by State, 1993
Funding State Organisation Funding source 1992–93
$’000 NSW Association to Resource Co-Operative Housing (ARCH) LGACHP 195 a Australian Federation of Housing Associations 50
Vic Municipal Association of Victoria LGACHP 129 Common Equity Housing Ltd (CEHL) Untied CSHA 280 Resource co-operatives LGACHP and Untied CSHA Resourcing for rental housing co-ops State housing authority Joint co-operatives No funding yet b Ecumenical Housing Unit Regional Housing Councils (RHCs) 97 Qld LGACHP resource workers LGACHP 210 d Co-op housing program State Co-operative Housing Program Community Housing Partnership Program (CHPP) Auctioneers and Agents Fund Housing Resource Services Rental Bond Authority, Grants and Community Organisations and CSHA
SA South Australian Co-operative Housing Authority (SACHA) CSHA – Commonwealth 4 853 e – State 2 022 e State grants 577 e Internal sourcesf 1 564 Co-operative Housing Assistance Service of SA (CHASSA) Grants 308 Community Housing Associations Forum (CHAF) Other 37 Community Housing Associations Program Advisory Committee (CHAPAC) Youth Housing Network
INDUSTRY COMMISSION 267 PUBLIC HOUSING
Table L.2: Community housing organisations by State, 1993 (cont.)
Funding State Organisation Funding source 1992–93
$’000 WA Shelter WA Homeswest, DHHLGCS and LGACHP/CHP Federation of Housing Collectives (FOHCOL) Homeswest and LGACHP/CHP (50:50) WA Municipal Association (WAMA) LGACHP/CHP 54 e
Tas Development Officer, Department of Community & Health Services LGACHP/CHP 48 g Tasmanian Co-operative Housing Development Society LGACHP/CHP 600 Shelter Housing Action (Tas) Inc. Non-funded
ACT Co-operative Housing Resource Centre LGACHP/CHP 79 c
NT Shelter COSP 16 Local Government LGACHP/CHP a 1993–94. b 1991–92. c Each RHC employs 1 grant funded employee, at a cost of about $34 000 per annum. The co-operatives receive an operating subsidy from the State housing authority. The subsidy reduces as the number of properties acquired approaches 35. Once 35 properties have been attained workers are funded from co-operative’s own resources and the operating subsidy has to be repaid. d July–December 1992. e Also paid for costs for provision of administrative services and travel. f This represents a contribution of $1871 per annum from each co-operative household. g Over 2 years. Source: DHHCS (1993).
268 INDUSTRY COMMISSION L COMMUNITY HOUSING
The Housing Assistance Act 1984 Annual Report 1985–86 noted: LGACHP is a new and innovative program designed to achieve the following objectives: • To encourage local government bodies and community groups to provide rental housing and to facilitate greater tenant management of such dwellings. • To respond to specific housing needs which have been neglected in the past. • To attract local government and non-government funds and other resources into the program which would not otherwise be available. • To involve local government and community groups in the identification of housing needs and the formulation of local housing policies (p. 83). In 1988–89 Purdon Associates evaluated the effectiveness and efficiency of the Program. National Shelter evaluated the success of the Program in facilitating greater tenant participation in the management of their dwellings (Purdon Associates Pty Ltd and National Shelter 1989). New guidelines followed in 1989 with higher priority given to tenant participation and the aim of establishing a viable co-operative housing sector.2
CSHA tied programs The Community Housing Program (CHP) encompassed LGACHP from 1 January 1993. The CHP goes further than LGACHP in that: The prime objective of the CHP is to develop a viable Community Housing sector. The rental accommodation supplied under the CHP should be appropriate and affordable. It should provide tenants with the choice of location, physical type and management arrangement, security of tenure and an opportunity to maximise control over their housing in a responsive environment. Central to the growth of the sector is the development of effective partnerships between Government and non Government organisations, which maximise the self-management of the sector within an agreed policy and administrative framework (Interim Program Guidelines — Guidelines yet to be finalised.).
2 The 1989 Program Guidelines indicate that: The LGACHP is designed to involve local government and community groups in the provision and management of long-term housing for people on low incomes. Whilst housing is to be provided in accordance with the principles of Recital D of the CSHA, the program seeks to encourage the development of new housing models. By testing the effectiveness of such models the program will provide a vehicle for the adoption of greater diversity in mainstream public housing.
INDUSTRY COMMISSION 269 PUBLIC HOUSING
The CHP differs from LGACHP in several significant respects: • The objectives of CHP are broader, encouraging integration with State programs as well as promoting linkages with support services and maximising tenant involvement. The over-riding objectives of the CHP are to develop a viable sector whilst also providing legal, technical and management infrastructure to support its expansion; • Funding may be directed through State-based community housing programs; • The Commonwealth may nominate projects of national significance; • Strategic planning is to take a higher profile with greater involvement of community representatives in joint planning with Commonwealth and State governments; • A framework to improve accountability and streamline the implementation of the program is to be established; • Anti-discrimination conditions apply to tenant selection; and • There are broad guidelines on various administrative and legal security matters, while allowing the exact form of relationships between community organisations and State housing authorities to reflect local conditions. (Arrangements for planning, implementing and evaluating CHP are more defined than for LGACHP.) (DHHCS 1992b) To plan and implement the CHP, each State will have a Community Housing Advisory Committee or equivalent.
Use of funds for LGACHP and CHP CHP funds can be used for: • Capital purposes including residential accommodation for essential support workers, and extensions to existing structures. (LGACHP did not provide capital assistance to organisations for residential accommodation for support workers within projects); • Developing infrastructure to support long-term viable expansion of community housing, for example, training of managers, organisations and tenants, financial structure and legislation development, research and development. The ability to use funds for development purposes was applauded by a number of participants (for example, the Australian Local Government Association (sub. 102, p. 10) and the Central Gippsland Regional Housing Council (sub. 149, p. 3)). (LGACHP allowed activities of a non-capital nature associated with the development of the program to be funded but the use of funds for this was to be minimised); and
284 INDUSTRY COMMISSION L COMUNITY HOUSING
• Existing State funded initiatives, provided that State financial effort in community housing is maintained and other accountability requirements are satisfied. (This feature was not in LGACHP.) Funds cannot be used in CHP and LGACHP: • To meet administrative costs of the program; • To cover recurrent costs including subsidies to projects and/or tenants, except as agreed between Commonwealth and State Ministers; and • Except for infrastructure projects, for the payment of non-capital costs such as wages associated with the provision of support services for tenants. Bodies receiving LGACHP or CHP funds must be legally incorporated and be able to demonstrate sound accounting procedures and management structures. Generally they are non-profit organisations.
Disbursement of funds Fund allocation procedures for CHP will be detailed in State operational guidelines and a CHP Strategic Plan. Fund allocation obligations for CHP are more stringent than for LGACHP. CHP funds will be allocated to the States on a per capita basis with a guaranteed minimum per year of $400 000 for each State ($200 000 for LGACHP). CHP funding will be continuous and guaranteed to 1995–96. LGACHP only required one funding round each year. In both LGACHP and CHP, State governments bear the program administrative costs. In 1992–93, $42 million was spent on LGACHP and little on CHP as the program was being established. This will change in future years. There has been $52 million allocated for the CHP in 1993–94, $57 million in 1994–95 and $64 million in 1995–96. Funds were allocated in 1990–91 amongst local government (28 per cent), community (17 per cent), co-operative (43 per cent), and joint and other projects (12 per cent). While LGACHP funds had to be fully allocated each year, there was a high carryover from year to year, particularly in New South Wales. This is due in part to the long lead time for capital progress.
Funds from local government and community groups One of the aims of LGACHP and CHP is to attract local government and community group funds. In the first 3 years of LGACHP’s existence at least $7.6 million or 22 per cent of project funds was provided by them. However, not all non-financial contributions were costed so the figure was probably higher. The Australian Local Government Association said that:
INDUSTRY COMMISSION 285 PUBLIC HOUSING
Councils donate approximately 30 per cent of the capital costs (to LGACHP); and all of the recurrent costs are met locally, apart from very limited access to rent rebates (in some States). All municipalities provide extensive recurrent support to local housing projects, and ensure an ongoing relationship to the local management committee (sub. 102, p. 7). Published statistics do not permit an estimate of funding contributions by local government and community groups. National Shelter said: Community housing can provide significant benefits to tenants in the form of greater flexibility and more control over their housing circumstances. However this is only achieved by the tenants or community managers bearing a higher share of the costs, particularly administrative costs. But governments do not necessarily reduce their own administrative costs because they may need special administrative skills and procedures to manage the government’s involvement in community housing (sub. 115, pp. 38–9).
Other community housing programs Some State governments fund community housing programs outside CHP. For example, some are funded by CSHA untied funds. Examples are the Victorian Rental Housing Co-operatives Program, the Queensland Co-operative Housing Program and the Victorian Group Housing Program. Some are funded from CSHA tied funds such as the Victorian and Western Australian Aboriginal Housing Boards. Another is the New South Wales Community Tenancy Scheme which is funded under the Mortgage and Rent Assistance Program (MRAP).3 As well, some States run community housing projects outside the ambit of the CSHA. Queensland’s Community Housing Partnership, which requires applicant organisations to provide land plus 10 per cent of purchase or construction costs, is funded from the Auctioneers and Agents Fund. A summary of the co-operative and community housing programs as at 30 June 1993 is in Table L.1.
L.2 Program objectives There were a number of problems in achieving the objectives of LGACHP. The Western Australian Municipal Association said:
3 That program provides interim, affordable community managed rental housing for low- income households usually through headleasing arrangements with private sector landlords.
284 INDUSTRY COMMISSION L COMUNITY HOUSING
One of the problems (and possible advantages) of LGACHP has been that there is no clear prioritisation of the many objectives which produces a very wide range of understandings of what the program is “really all about” and “really trying to achieve”. • From one perspective it is about trying to reduce the costs for central governments of public housing provision by encouraging local contributions toward housing developments for low income people ... ; • From another perspective LGACHP is about the searching for, and identification of, viable organisations who have the necessary resources to undertake housing development and management responsibilities in local areas ... ; • Part of the innovation aspect of LGACHP which is receiving increased emphasis is the area of tenant participation ... ; (and) • It has been stated that many potential benefits can flow from a long term rental accommodation for low income people which is provided and managed by local organisations and involves tenants in decision making (sub. 38, pp. 1–2). Partridge referred to conflicting objectives in CHP: Success of the Community Housing Program depends on the successful reconciliation of the goals of economic efficiency and community empowerment. A balancing of these goals may only be achievable if structural action is taken early in the expansion of the program. ... Structural action to resolve goal conflicts will require clear identification of the interests, goals and cultures of potentially contending players and of the rewards, sanctions and resources that influence them (sub. 143, p. 2). It is too early to comment on how well the arrangements for CHP address conflicts in the objectives.
Achieving viability The Community Housing Program focuses on the future — developing viability. Participants gave various opinions on how to establish a viable community housing sector. The view of the Brotherhood of St Lawrence and Ecumenical Housing Unit was that: The community housing sector requires: • a sounder funding base incorporating both the Community Housing Program and state funds; • greater autonomy from public housing providers without diminished accountability to state governments; • the rationalisation of overly fragmented programs; • the establishment of a legal, technical and financial capacity upon which individual programs can rely; and
INDUSTRY COMMISSION 285 PUBLIC HOUSING
• a training program for participants in management of the properties (sub. 152, p. 3). The major limitation seen by Derby West Kimberley Shire (sub. 70) was that a dearth of capital funding available for community housing in Western Australia has resulted in the creation of only small scale projects and very limited opportunities for expansion. The Shire has begun providing community housing expertise to interested groups, giving rise to a number of community housing management groups. According to the National Housing Strategy (NHS 1992b, p. 92): It is not possible to indicate a precise level of funding that might be required to expand community housing to a level sufficient to ensure financial viability and to deliver the benefits that are associated with it. ... However, it is apparent that additional funds are required. NHS (1992b) was also undecided on the appropriate level of borrowing in the funding mix, noting that investors require a return on their investment. The NHS observed that this could come from sources other than rents, such as tax concessions. For housing projects, both LGACHP and CHP provide only capital funding. Therefore, financially viable projects are those which generate enough income to cover recurrent costs and to put aside funds for major maintenance. Aspects to viability are funding; project selection processes (to prioritise, to weed out projects which would not be viable and to determine the mix of project type); whether to construct, purchase or renovate properties; project size; infrastructure to support the managers and tenants; management; and tenants with sufficient income or a means of subsidising the projects to cover costs. Allied to this are ownership and stock issues as well as rent setting and collecting arrangements. Unless the financial or ‘sweat’ equity input by the sponsoring body is initially high, a project is likely to be financially viable without external recurrent financial input only where tenants do not have very low incomes. This of course raises the question whether government funds are being distributed to people who are not in greatest need.
Training as an aid to viability Community empowerment was regarded as important by many community bodies. CHP processes encourage this more than LGACHP did. There is also more awareness of the need for training. The NHS referred to: ... several stages in the development of community housing projects, all of which require different forms of expertise and training. These stages are:
284 INDUSTRY COMMISSION L COMUNITY HOUSING
• forming the group that is to be the community housing manager; • conceptualising the housing project; • financing the project; • constructing or acquiring; and • managing the housing. Bisset suggests that ... there are two different approaches to providing this training: • a self-development approach whereby community housing organisations, usually under an umbrella organisation, develop and provide training for those involved in providing and managing community housing. It is likely that such training will tend to focus on management issues and this is likely to be its strength. A possible problem, if this is the only form of training, is that it may not encourage a critical analysis of established procedures or innovations as the training is likely to focus on explaining how things are currently done; and • professional development whereby training is available through tertiary or post- secondary institutions (such as Technical and Further Education colleges). A significant advantage of this approach is that it should encourage a wider view of the role of the community housing manager. As Bisset points out, both forms of training have their place and therefore both are desirable (1992b, p. 89–90). Partridge said that ‘there needs to be a strategic approach to education and training and a significant increase in its quality, quantity and appropriateness’ (sub. 143, p. 4). DEET could facilitate this more effectively than housing authorities.’ He noted several dimensions to the problem: • the need to integrate housing provision with other community management needs (services and employment); and • the need to staunch the ‘brain drain’ of more experienced community managers from the community sector to the public sector. Partridge stated: There are two important challenges facing housing co-operatives if the level of internal skill and commitment and hence voluntary management effectiveness is to be raised. One challenge is to move as quickly as possible towards routine processes which ensure that new entries to co-operatives (new or existing) are genuinely able and willing to assume the responsibilities expected of them without creating a distortion towards privileged sections of the community. The second challenge is to establish routine processes which are equitable and acceptable for resolving the problems of co- operatives where a conflictual organisational culture has developed as a result of management problems or value incompatibilities (sub. 143, p. 6). Most concerned participants appear to hold the view that training for community housing is inadequate. For example, the Federation of Housing Collectives
INDUSTRY COMMISSION 285 PUBLIC HOUSING
Resource (sub. 43) supported a national resourcing centre. And the Sunshine Coast Regional Housing Council stated that: ... community programs depend upon the capability of the community to manage them. As there is generally no resourcing or training in an on-going way of the management committee, these programs may not be as beneficial to the community as they could be (sub. 107, p. 6).
Community support and viability Support for community housing by inquiry participants varied: • Randolph noted that: In part, the current interest in community housing has been prompted by a disenchantment with the performance of public housing as provided by State housing authorities. Community housing has been promoted as a way of diversifying social housing and stimulating reform in the public sector by providing ‘competition’ for State housing authority provision (sub. 216, p. 33); • Shelter SA considered that tenants benefit greatly in their personal development through belonging to a housing co-operative and that this flows on to improving their employment prospects (sub. 54, p. 14); • The Federation of Housing Collectives Resource said: The human needs of tenants for autonomy and some control over the living environment is an important factor [in endemic social problems]. For example, a tenant-control program introduced to some high rise estates in Scotland contributed to a 40 per cent increase in employment of the estate’s population (sub. 43, p. 4); • The Institute for Science and Technology Policy, Murdoch University said: Community housing strategies ... encourage self help at neighbourhood and community levels and provide individuals with opportunities to learn a wide range of useful social and work-place related skills — whilst at the same time providing housing assistance. ... The key to the gains promised by community strategies lies in their capacity to mobilise energy and resources in the community which are largely dormant and which state provision — whether in cash or kind — leaves untouched (sub. 41, p. 3); • Central Gippsland Regional Housing Council: ... support[s] the program’s guidelines regarding tenant participation in management and planning. ... [and] believes that the community housing program can respond to specific needs in the community more effectively than the State housing authority (sub. 149, p. 3); • Queensland Shelter said that public and community housing are not direct substitutes and that they meet different market needs (sub. 138, p. 14). ACOSS considered that there is an imbalance between housing choices
284 INDUSTRY COMMISSION L COMUNITY HOUSING
offered through community housing programs and mainstream public housing (sub. 85, p. 11); and • The interest of the Commonwealth Office of Local Government was in empowering local government: The development of Local Government’s role in housing would be assisted by recognition of its significant role by other players, such as by greater involvement in the CSHA planning process. Additionally, definition of Local Governments’ role in the provision of community housing and in the CSHA planning process would be strengthened by the development of negotiated partnership agreements between the Commonwealth, State and Local Government peak organisations (sub. 126, p. 6).
Achieving effective delivery The Victorian Government gave the following preconditions to improve efficiency and effectiveness in the provision and management of community housing (as identified through the Victorian Housing and Residential Development (VHARD) process): • improved management and legal infrastructure; • rationalisation of administrative arrangements with government to promote efficient and equitable treatment of community housing in policy, planning, distribution of funds and accountability; • access to affordable capital funding; • improved housing management training for both workforce and management; and • effective regular evaluation of community housing performance (sub. 159, p. 19).
Promoting community housing Opinion was divided on the best method of spreading knowledge of the community housing option. For example, the Western Australian Council of Social Service (sub. 340) supported a housing information service. The Federation of Housing Collectives Resource (sub. 43) favoured a shop-front service to recipients of housing and support services while some housing authorities informed all potential public housing tenants of their housing options including community housing. The Community Housing Associations Forum thought that community infrastructure, that is peak or federating bodies, is essential for co-ordinated and effective delivery of community housing. The Forum also said that: The relationship between Associations, Co-operatives, the South Australian Housing Trust and joint ventures must be defined. This is particularly important if tenants are
INDUSTRY COMMISSION 285 PUBLIC HOUSING
able to transfer their type of tenure or their dwelling between programs. Flexible tenure arrangements would be a benefit to tenants, but the stock available within the programs must retain equitable distribution (sub. 325, p. 4). The Forum thought that flexible tenure arrangements would enable special needs groups to move on as their independent living skills increased.
L.3 Funding processes The present system of funding for LGACHP and CHP is submission led. As noted by Randolph (sub. 216), this limits the potential for ensuring that funds are spent in the most effective way on an integrated needs-based planning approach. Some participants considered that the funding process under LGACHP is cumbersome (for example, Housing Industry Association (sub. 92); Shelter WA (sub. 47)). The Western Australian Municipal Association noted that: ... the administrative overheads ... and bureaucratic handling procedures involving approvals from all 3 spheres of government are unwieldy and there are unnecessary duplications (sub. 38, p. 4). The Australian Local Government Association (sub. 102) referred to unnecessary delays in receiving project approvals, funding agreements and other critical documentation from State Departments. The Shire of Wongan-Ballidu, reflecting the view of the Australian Local Government Association (sub. 102), stated: Any funding available to Local Government under Commonwealth programs should be paid direct to the local authority without State Government controls and administration requirements. Local Government is a responsible level of government and this should be recognised by all levels of government. Unnecessary costs are incurred with the existing funding arrangements (sub. 68, p. 2). A view of the Sunshine Coast Regional Housing Council (sub. 107, p. 6) was that ‘the land and capital component can be beyond some groups to manage.’ The Local Government Association of Queensland noted: ... the submission process is alien to many rural and remote Councils that lack the expertise of their urban counterparts. The large distances make on the ground resourcing of these Councils difficult. ... The guidelines for the new CHP deserve special mention as they are unnecessarily wordy and not readily accessible by the community at whom they are targeted (sub. 206, p. 3). The Australian Local Government Association said:
284 INDUSTRY COMMISSION L COMUNITY HOUSING
The program has suffered from a lack of ‘on-site’ and ‘off-site’ support and monitoring; lack of financial support in terms of ‘establishment grants’ or State Government ‘untied’ assistance; and limited access to rent rebates (sub. 102, p. 8). Some jurisdictions seem to be more successful in delivering the service than others. Table L.3 illustrates the extent to which jurisdictions carry over funds. A number of participants4 supported the expansion of the community housing sector provided that it was not at the expense of public housing or other programs. The Queensland Department of Housing, Local Government and Planning (sub. 345, p. 21) noted that the CSHA ‘tied programs have only accounted for a small proportion of overall effort in community housing.’ They also considered that the real effect of community organisations bringing additional resources to the sector is likely to be very small given the size of the tenure.
4 WACOSS (sub. 44, p. 7), Ethnic Communities Council of WA (sub. 53, p. 1), ACT Youth Accommodation Group (sub. 66, p. 5), Goulburn Regional Housing Council Inc. (sub. 82, p. 7), Wimmera Community Care and Wimmera Regional Housing Council (sub. 83, p. 4), Queensland Disability Housing Coalition (sub. 121, p. 4), Queensland Shelter (sub. 138, p. 14) and National Shelter (sub. 339, p. 10).
INDUSTRY COMMISSION 285 PUBLIC HOUSING
Table L.3: LGACHP funds carried over to next year and jurisdiction population, 1989–90 to 1991–92 (percentage)
State Proportion of Annual funding carried over to next year Australian ______populationa 1989–90 1990–91 1991–92
NSW36565347 Vic28141413 Qld14869 WA 8 7 12 13 SA9111011 Tas3234 ACT1122 NT1111 All 100 100 100 100 a ABS population figures for 1992. Note: Derived from NSW Ombudsman (1993, p. 7). Source: Industry Commission.
Income of tenants and meeting recurrent costs Tenants with very low incomes may be unable to pay a rent that covers their share of essential community housing costs. The dilemma of tenant selection was expressed by the Western Sydney Housing Information and Research Network: There is a need for expanded community based, co-operative housing programs which target the most disadvantaged in our community. This and similar programs must be realistic when seeking community contributions and the departments involved must allocate funding to provide resource staff for the development of these projects (sub. 84, p. 4). The Western Australian Municipal Association noted that: All projects must be self-supporting from the rents extracted from tenants. Those tenant groups that have very low incomes, (such as youth who only receive job search allowance) can only be charged 25 per cent of their income in rents. ... (These projects) are unable to obtain enough rental income to budget for all the expenses necessary to maintain the units (sub. 38, p. 3). The National Youth Coalition for Housing stated that ‘young peoples’ incomes are generally insufficient for them to realistically be included in community housing projects. ... Experiences from Housing Associations in Britain have been that very low income earners eventually become excluded (sub. 131, p. 23).’ The proposals in Chapter 9 will help overcome this problem in Australia.
284 INDUSTRY COMMISSION L COMUNITY HOUSING
Also commenting on overseas experience, the Institute for Science and Technology Policy, Murdoch University said: ... the Canadian co-operative programs, unlike their Australian counterparts, were originally pitched to assist moderate income earner caught in the affordability gap. In recent years, Canadian co-op programs have sought to accommodate higher proportions of very low income earners — but it would be worth reflecting on the degree to which Canada’s co-ops owe their success to the generally higher income profiles of their earlier primary target group (sub. 41, p. 13).
Construction and purchasing Problems arise in both spot purchasing and constructing community housing. ‘Spot purchasing of appropriate properties can be fraught with difficulty’, according to the NSW Ombudsman (1993, p. 91) who noted the inability of the Department to act swiftly when an appropriate property came on to the market. The Western Australian Municipal Association, expressing the view of several participants, said that: ... in some cases involving the spot purchase of properties under LGCHP the type of property actually obtained is inappropriate for the target group specified in submissions. ... This has resulted in a necessary and unfortunate change to the target group (sub. 38, p. 4). Shelter WA pointed out that ‘the ability of groups to develop innovations in design ... has been hampered by the requirement that construction costs are comparable to mainstream public housing’ (sub. 47, p. 4).
State-specific problems The NSW Ombudsman in a recent report to the NSW Parliament stated: The investigation reveals that the NSW Department of Housing did not establish the procedures required to efficiently manage community based housing initiatives. Instead, a mystifying bureaucratic maze has obstructed the approval and funding of projects, in some cases for years. ... Since the change in administration of the Department of Housing, there have been significant moves to improve the functioning of the program. Equally clearly, significant work is essential before the program functions effectively in NSW (1993, Summary, pp. I-II). A number of inquiry participants referred to slow progress with community housing in Western Australia: • The Federation of Housing Collectives Resource thought that the State has: ... shown a marked lack of commitment to community housing generally, and co- operative housing in particular, in previous years. For example, there was a 3 year
INDUSTRY COMMISSION 285 PUBLIC HOUSING
moratorium on the development of co-operatives prior to 1991 due to poor ministerial support and lack of a suitable funding model (sub. 43, p. 1). • The Western Australian Municipal Association said: Delays in Ministerial approvals of funding recommendations have been lengthy (in excess of 4 months). ... Funding rounds have often been poorly timed in relation to Council budget timeframes. The transition to rolling programs under CHP is welcome (sub. 38, p. 7). • Shelter WA noted that over several years there was a ‘lack of any commitment of state funds or Homeswest funds to supplement the limited tied grants available from the Commonwealth through LGACHP’ (sub. 47, p. 4). This has changed recently. • The Federation of Housing Collectives Resource noted that: ... allocation procedures have been slow, and ad-hoc and inconsistent administrative practices have been endemic. These arrangements are under review and will hopefully improve in the future (sub. 43, p. 5). The Australian Local Government Association expressed concern that: ... in the development of the national guidelines for the Community Housing Program, local government was denied representation on the Working Group established to develop new guidelines. ... The ALGA recommends that any local government involvement in the Community Housing Program, must be underpinned by the principle that local government must be considered as an equal partner, with the Commonwealth and the States. This partnership approach will be supported by a negotiated contractual agreement ... based upon an integrated local area planning approach (sub. 102, p. 9).
L.4 Project allocation While each State has a State Advisory Committee (SAC) through which LGACHP or CHP applications for funding are processed, responsibilities and duties of those SACs differ. The differences should be less marked under CHP as the new arrangements are to be more defined. Final CHP guidelines have yet to be agreed. The delivery processes of community housing programs are summarised in Table L.4.
284 INDUSTRY COMMISSION L COMUNITY HOUSING
Table L.4: LGACHP programs by State
Overseeing Any program State agency subdivision Features of program(s)
NSW Department 1 program Each applicant may nominate the type of of Housing community housing management they require from common equity rental co-operatives to community housing associations. The SAC assesses all projects after the preliminary assessments and advises the Minister.
Regional staff make preliminary assessments. Co-operative projects are assessed by ARCH. ARCH works with potential co-operative applicants for about 12 months before submissions are developed, helps prepare submissions and provides the first assessment prior to any departmental consideration. ARCH’s 2 stage assessment comprises an assessment of the viability of the co-operatives itself and the viability of the project, including technical advice provided by independent consultants.
Vic 2 sub-programs: Each gets about 50 per cent of available funding and each has a SAC. The program manager for each reports to the Minister through its SAC on funding and policy recommendations.
Department Local government and Normally the housing authority pays 80 per cent of Housing municipal program; of the project with the local council paying 20 and per cent. Half of the funds go to local government housing.
INDUSTRY COMMISSION 285 PUBLIC HOUSING
Table L.4: LGACHP programs by State (cont.)
Overseeing Any program State agency subdivision Features of program(s)
Vic Common Co-operative program The full annual allocation is administered by a non- (cont.) Equity profit, unlisted public company, Common Equity Housing Housing Finance Ltd, run by a board of 9 directors. Finance Ltd There is cross ownership between this company which owns all the properties provided to the co- operatives, and the CERCs. CERCs are small community based housing groups, legally organised as co-operatives and managing up to 20 residential properties each. Each CERC has responsibility not only to further the aims of the individual CERC, but also the program as a whole. The tenancy agreement, barring defaults, is renewable at the CERC member’s request, which means that a tenant can choose to stay in the CERC for life. Because the company must spend its allocation within 12 months, most housing is provided through purchasing houses. Thus tenant participation is generally restricted to management rather than design of projects.
Qld Department 3 programs: Funding for the Co-operative Housing and of Housing Local Government Community Housing Partnership Programs is from Local and Community State funds and separate reference groups existed for Government Housing Program; them. A State Advisory Committee (SAC) operated and Planning Co-operative Housing for LGACHP. It comprised representatives from Program; and State and Commonwealth Housing Departments, Community Housing local government, and community housing sector Partnership program representatives. The SAC recommended funding packages to both State and Federal housing Ministers. A Community Housing Advisory Committee (CHAC) was established under CHP late in 1992– 93. It replaced the SAC for LGACHP and reference groups in place for the State programs. The CHAC provides advice to the Minister on all long-term community housing programs. The CHAC has representatives from the non-government sector and all levels of government.
WA Homeswest 1 program All applications are considered by SAC, who make recommendations to the Minister directly. SAC comprises 1 Commonwealth, 1 State, 2 local government, 2 community sector and 2 co-operative sector representatives.
284 INDUSTRY COMMISSION L COMUNITY HOUSING
Table L.4: LGACHP programs, by State (cont.)
Overseeing Any program State agency subdivision Features of program(s)
SA South There are 2 programs: Funding is equally distributed between the 2 Australian Local Government; programs. The SAC advises the Minister directly on Housing and who should get funding. The SAC comprises 1 Trust; Community Housing representative from the housing trust, 1 South Commonwealth, 4 local government, and 4 Australian community sector representatives and an Co-operative independent chairperson. Housing Funding agreements are prepared by the Crown Authority Solicitor’s Office on instruction from the SAC.
Tas Housing 1 program In 1990–91 few appropriate submissions were made Services but the Tasmanian Co-operative Housing Division of Development Society was established and will use Department its funding to provide for the establishment costs of of new housing co-operatives. Since then there has Community been an increasing demand on the program. and Health Services
ACT ACT Housing 1 program Trust
NT Northern 1 program Territory Department of Lands and Housing
Source: Industry Commission.
Project size The NHS noted that the community housing sector may not be viable, in part because of the small size of projects relative to their management overheads. They said: The average size of cooperatives in Australia is about 17 dwellings compared with 34 dwellings in Canada. The average size of community housing projects in Denmark is about 700 dwellings, compared with Australia’s average of 11. In Britain, some housing associations manage over 20 000 properties. ... Questions which need to be resolved ... include: • how large can a project be to support the growth of community housing and to be economically viable;
INDUSTRY COMMISSION 285 PUBLIC HOUSING
• how small does a project need to be to meet its social objectives and to be responsive and sensitive to the needs of tenants; and • does the size of the projects or agencies matter if there is adequate sectoral infrastructure (for example, an umbrella organisation to assist and represent community organisations involved in housing) and protection of the interest of tenants and other participants in projects (1992b, p. 88)? Common Equity Housing Limited thought that between 2000 and 5000 units was ideal in terms of efficiency and effectiveness. Below this level infrastructure and administrative overheads on a per unit basis are less efficient; above this level housing becomes less responsive to people at different stages of their lives (sub. 151, p. 2). Queensland Council of Social Service (sub. 91) said that the quality of service from organisations around Queensland managing small amounts of housing was in some cases excellent while in others it was relatively poor. On the same theme, the Sunshine Coast Regional Housing Council stated that ‘the numbers of houses to be managed in order for economies of scale to operate can be beyond the capacity of community groups’ (sub. 107, p. 6).
Rural support Some participants argued that community housing had advantages over public housing in housing low-income people in country districts. The Commonwealth Office of Local Government expressed a common view that: In rural areas where the supply of private rental stock is limited and where it may not be efficient to maintain State Housing Authority administrative machinery, local councils may be able to take a greater role in housing provision (sub. 126, p. 6). Others, such as Western Australian Municipal Association (sub. 38, p. 5), argued that ‘people requiring affordable housing should not be forced to leave the community of their choice to seek accommodation in metropolitan areas.’ Some such as the Goulburn Regional Housing Council (sub. 82) and the Wimmera Community Care and Wimmera Regional Housing Council (sub. 83) sought preferential funding for rural areas.
L.5 Legal framework
Ownership and stock The States have developed various ownership models for community housing. Under some, ownership is retained by the State, for example, the Victorian
284 INDUSTRY COMMISSION L COMUNITY HOUSING
Common Equity Rental Housing Co-operatives and the Victorian Group Housing Program, while others permit community organisations to increase their proportion of equity over time, for example, under the New South Wales Rental Co-operative Housing Program. Organisations of community housing providers vary also. For example, the South Australian Co-operative Housing Authority is an incorporated autonomous body. Most States have less independent arrangements. Title to CHP properties is normally held by the sponsoring organisation(s) with the State governments ensuring the security of their proportionate funding. State housing authorities may hold the title under some circumstances. Title is to be secured by means of an appropriate legal instrument, legally binding and readily enforceable. Some jurisdictions have difficulty in finding appropriate legal instruments. Others find difficulty with the legal agreements. The Western Australian Municipal Association stated that: There are difficulties inherent in Homeswest’s legal agreements attached to LGACHP projects which do not take into consideration the fact that land is an appreciating asset whilst bricks and mortar depreciate in value. Most Councils have contributed freehold land to projects. This raises the question of shared equity and how to assess fair equity distribution between State and Council in the event that the projects terminate. Concepts of “sweat equity” and “appropriate” usage of project surpluses have not yet adequately been addressed by both SAC or Homeswest in relation to LGACHP in WA (sub. 38, p. 7). On the same theme, Shelter WA noted that while partnerships: ... have the potential to increase the viability of community housing provision, equity issues (such as the Deed of Trust in WA) must be resolved before partnership can proceed. Equity considerations must recognise the initial sponsors contribution over time, and further investigation is required of ways in which sweat equity, in-kind and direct contributions are recognised (sub. 47, p. 14). Queensland Council of Social Service referred to problems with shared equity schemes (sub. 91). It noted that some users and analysts found that the current arrangements are weighted heavily in favour of the State housing authority with the tenant/owner being required to pay for all maintenance and improvements, as well as paying rent, but having to share the financial benefits of these with the State housing authority. The Federation of Housing Collectives Resource stated that ‘private investments should be encouraged, though these sorts of shareholders should only have limited membership and no influence on the management and administration of Community Housing’ (sub. 43, p. 5).
INDUSTRY COMMISSION 285 PUBLIC HOUSING
Tenants and tenancy agreements Tenancy agreements under CHP are to be at least equivalent to those outlined in existing tenancy legislation in each jurisdiction. Selection processes must satisfy anti-discrimination legislation. The proportion of tenants who are financially eligible for public housing must correlate with the CHP contribution. Some communities have great difficulty in evicting violent people. Mediation arrangements are also an issue.
L.6 Management by community groups Partridge noted that: The State housing authority manager has very minimal control over the selection or dismissal of community housing staff or management committees. This limited ability to ensure the ability and willingness of community-based managers to pursue State housing authority goals and a greatly limited ability to induce correction of behaviour seen as inappropriate will inevitably lead to some frustration of goal attainment from the perspective of the State housing authority senior management. Indeed, if community-based managers retain scope to set goals which are in conflict with State housing authority managers then an incentive arises to limit the capability of the community managers. This is the area in which the success of community housing depends upon a genuine partnership of trust and mutual respect between State housing authority and community expressed through negotiation of strategic plans. ... In practice, housing bureaucracies have frequently responded to signs of conflict and poor management with structural controls which incorporate community housing organisations more tightly into the authority system of the bureaucracy. Rather than addressing a problem of powerlessness through a strategy of empowerment which enhances self-management capabilities they choose tighter controls — disempowerment. A variant of this approach has been to move from models with a high degree of tenant autonomy to new flavours of the month which attach housing tenants to an existing management system such as a local council (sub. 143, p. 3).
Devolution of management The Commonwealth Office of Local Government said: Strategies to meet local housing needs require a holistic approach to the overall housing market and to influences over it. ... Devolution of the delivery of public housing to Local Government are not possible within that [medium-term] timeframe because councils have neither the skills, resources nor sufficiently widespread interest to perform that task. Sydney City Council has sold its relatively extensive stock of housing to the NSW Housing Department because of the council’s difficulties in managing housing on a larger scale (sub. 126, p. 6).
284 INDUSTRY COMMISSION L COMUNITY HOUSING
While WACOSS (sub. 44) saw both benefits and costs in community housing programs, it did not support the widespread devolution of public housing to community groups to manage.
Managing flow of funds Ernst & Young (1992) in its Evaluation of CERC Sector Project 3 said that ‘an approach should be made to appropriate lenders to establish the feasibility of developing a loan facility and/or mortgage loan arrangement to better match Common Equity Housing Limited’s cash flows than existing debt funding and to lower the costs of debt funds.’ The NSW Ombudsman was less sanguine about the situation in NSW: Although the Director of Housing decided in late 1991 to delete the clause [which provided that the department would be responsible for payments of instalments due under the first mortgage where the co-operative defaulted], an apparently simple task, no pro forma deed of agreement is yet available apparently because no substitute default procedure has been developed. ... Without a deed of agreement, it would appear that there is no mechanism by which co- operatives can repay the LGACHP funding they have received. Money which should be recouped by the department is being banked by the co-operatives in expectation of one day paying back the subsidies they have received. ... While funding is tied up with existing projects which are unable to repay their loans to the department for lack of an established mechanism, LGACHP funds are being wasted (1993, p. 32–3). Shelter SA stated that: Co-operatives issue Debentures to SACHA to the value of the properties they manage. Apart from being a debt recording instrument, the Debentures enable SACHA to identify and monitor the income stream to the Program in a simple and effective fashion (sub. 54, p. 14).
Security of tenure The Western Australian Municipal Association said that ‘the security of tenure of tenants in community housing can only be as secure as the management body itself’ (sub. 38, p. 6). This was one of the problems which Common Equity Housing Limited foresaw in its Business Plan and Strategic Review. In its section on internal failures with a CERC, it saw the three major threats as: • the actual failure of a CERC through financial mismanagement (noting that it was doubtful if all existing financial control systems were adequate in all CERCs); • that participants may eventually ‘burnout’ with consequent apathy and resentment towards the program; and
INDUSTRY COMMISSION 285 PUBLIC HOUSING
• that participants may lack a purpose once they gain housing. On the other hand, the Community Housing Assistance Service of SA noted that: Community housing in many respects breaks the boundaries between public housing and private home ownership. People perceive ownership of the house that they rent from the community housing organisation (sub. 303, p. 2).
Skills of tenants Goulburn Regional Housing Council said: Tenant participation is only possible at a localised level and on a small scale. The Common Equity Rental Housing Co-operatives (CERCs) have proved that tenant participation CAN BE VERY EFFECTIVE when the groups are small enough for people to feel comfortable and small enough to be able to participate (sub. 82, p. 7). National Youth Coalition for Housing does not support proposals where security of tenure for young people is based on their ability, willingness and skills to participate in management. ... If community housing is restricted to those who are eligible for public housing, young people will be excluded from both community and public housing in those states where they are not eligible for public housing (sub. 131, p. 23).
Support issues The Youth Accommodation Association (NSW) Ltd regretted that the NSW Department of Housing had provided insufficient access to LGACHP for youth over the last few years, reducing possible housing options for them (sub. 65). The South Australian Youth Housing Network Inc. said: It is generally seen by the youth housing sector that co-operative housing must only be an option for young people, as the model demands a high skill and commitment level from people who already have independent living skills. The new Community Housing program, which replaces LGACHP, does not guarantee any increase in the possible exit options available for young people under its interim guidelines and will need to be monitored by youth housing organisations as to its applications to youth housing (sub. 195, p. 12). The Western Australian Municipal Association noted that: In some cases the most marginalised tenant target groups (and often the most needy) are perceived to be the most risky to house from the sponsor bodies perspective. This issue is sometimes exacerbated by the fact that there are no ongoing subsidies for maintenance under LGCHP. ... This raises the question of gaps in programs and that not all housing needs fall neatly into the grid of short term ‘crisis’, transitional and long term ‘independent’ [and ‘responsible’] tenancies. ... (Also) strategies need to be developed to overcome the ‘not in my backyard’ barriers and reactions arising in some communities (sub. 38, pp. 4–5).
284 INDUSTRY COMMISSION L COMUNITY HOUSING
L.7 Accountability Despite being incorporated, not all of the 2200 LGACHP fund recipients were audited. Governments hope to institute more accountable procedures with CHP. A view of Partridge was that: ... transfer to the community of significant management responsibilities and expectations of accountability can not be achieved without a very dramatic rise in commitment by government to a systematic program of community management training and support services (sub. 143, p. 1). This view was supported by the Community Housing Associations Forum (sub. 325) and the Queensland Community Housing Coalition Ltd (sub. 336). Partridge also proposed that efforts to develop the managerial potential of community housing be integrated with employment development through community enterprises and other community services. He further proposed that: ... a Community Service be established as a partner to the Public Service with direct budgetary allocations and a role in establishing management, training and accountability systems and standards as well as creating viable career paths which lead back and forth between the public and community sectors (sub. 143, p. 2). The Community Housing Associations Forum noted that ‘housing managers are becoming an essential for all associations as requirements become more complex and accountability is essential’ (sub. 325, p. 7).
INDUSTRY COMMISSION 285 PUBLIC HOUSING
BIBLIOGRAPHY
DCSH (Department of Community Services and Health) 1989, National Housing Policy Review: Final Report, AGPS, Canberra. DHHCS (Department of Health, Housing and Community Services) 1992a, Housing Assistance Act 1989, Annual Report 1990–91. —— 1992b Community Housing Program: Overview prepared for National Discussions to establish the CHP. —— 1993, Community Housing Program; Developing Community Housing Infrastructure, Appendix, Mimeo. Housing Review Group of Commonwealth and State Housing Representatives 1991, Report on Functional Review of Housing, November. McNelis, S. 1992, Rent in the Community Housing Sector: A Review of the Rental System in Common Equity Rental Co-operatives (CERCs) in Victoria, Working Paper No. 5, Centre for Housing and Planning, Swinburne University of Technology, 29 June. NHS (National Housing Strategy) 1992, Housing Choice: Reducing the Barriers, Information Paper no. 6. Purdon Associates Pty Ltd and 1989, National Evaluation: Local Government and Community Housing Program, Department of Community Services and Health, AGPS, Canberra, January. Victorian Department of Planning and Housing 1991, Directory of Social housing Models, Victorian Housing and Residential Development Plan Project 11, September.
284 INDUSTRY COMMISSION M SUPPORT ASSISTANCE PROGRAMS
This appendix primarily deals with people who are homeless or in crisis, the supported accommodation services available to them and the problems they face in accessing public housing. The problems faced by people with special housing needs are also discussed. Government departments other than State housing authorities provide publicly funded accommodation for people with disabilities. For example, Singleton Equity Housing Limited said that: Historically at least in Victoria significant numbers of people with a disability live in housing ranging from large to small institutional settings funded by State or Federal Government Health and or Community Welfare budgets (sub. 249, p. 1). This accommodation is publicly funded and therefore could be considered public housing, but in the Commission’s view it is outside the scope of this inquiry to investigate this type of accommodation. This appendix draws on information provided by inquiry participants and the findings of earlier studies, including those of the National Housing Strategy and evaluations of the Supported Accommodation Assistance Program.
M.1 Supported accommodation and support assistance programs
Supported Accommodation Assistance Program The Supported Accommodation Assistance Program (SAAP) was established in January 1985 to provide supported accommodation for people who are homeless and in crisis. The objective of the SAAP is: ... the provision by eligible organisations, with financial assistance from the Commonwealth and the State, of transitional supported accommodation services and related support services to people who are homeless and in crisis to help them move towards independent living, where appropriate, or other alternatives such as long term supported housing, as soon as possible (Supported Accommodation Assistance Act 1989, Schedule Part 3). SAAP is a joint Commonwealth–State program that is administered by State governments through community service departments. Ministerial Advisory Committees and Joint Officers Groups (comprising the Commonwealth and State departments for community services and housing) assist State
INDUSTRY COMMISSION 291 PUBLIC HOUSING
governments in administering the program. Services funded under the program are operated by non-government organisations, and in some cases local authorities. Organisations seeking funds under the SAAP forward submissions to the State community services department responsible for the day-to-day administration of the program. The preliminary assessment of funding applications is made by the State community services department. Submissions that meet the priorities set out in the State Plan are then considered by the Joint Officers Group which develops an agreed funding package for SAAP to be forwarded to the State and Commonwealth Ministers for approval. State departments are responsible for working with non-government organisations to get the services into operation. Commonwealth SAAP funding to the States is in the form of specific purpose payments for recurrent purposes. The Commonwealth and States are required to maintain their respective annual program base recurrent funding levels in real terms, with additional growth funds from the Commonwealth required to be matched on $1 for $1 basis. SAAP funding for 1991–92 was $161 million with the Commonwealth contributing $90.2 million. Funding for 1992–93 was $167 million, with a Commonwealth contribution of $95 million. Approximately $183.3 million has been made available for SAAP in 1993–94. This amount comprises $103.3 million from the Commonwealth and $80 million from the States (data provided by DHHLGCS). Some 1600 services that provide a range of supported accommodation (shelters, refuges, half-way houses and hostel accommodation) and other support services receive SAAP funding. Approximately 11 000 people (including dependent children) are accommodated in SAAP services each night. Some 31 per cent of people assisted through the SAAP stay for 2 to 6 months (data provided by DHHLGCS). Table M.1 provides details on Commonwealth SAAP funding.
Crisis Accommodation Program The Crisis Accommodation Program (CAP) was introduced in 1984–85 under the Commonwealth–State Housing Agreement (CSHA) to provide capital funding for dwellings for people who are homeless or in crisis. CAP is administered by State housing authorities in much the same way as the funding and administrative arrangements for SAAP. Funding is allocated on a per capita basis. CAP provides for the purchase, construction, renovation or leasing of dwellings primarily used as accommodation for SAAP services. Organisations that do not receive SAAP funds are eligible to apply for CAP funds for crisis accommodation so long as the funds are directed to the homeless. In 1990–91,
292 INDUSTRY COMMISSION M SUPPORT ASSISTANCE PROGRAMS
$39.6 million was used to acquire 205 new dwellings and upgrade 87 existing dwellings. Expenditure for 1992–93 was $5.4 million, which was less than the funds allocated (see Table M.2). Approximately $76.6 million (comprising $43.3 million from the Commonwealth, and $33.3 million in unspent funds held by the States) is available for 1993–94 (data provided by DHHLGCS).
Table M.1: Commonwealth SAAP funding allocation to the State and local governments, 1990–91 to 1992–93 ($’000)
State 1990–91 1991–92 1992–93
NSW 28 413 30 640 32 076 Vic 17 333 19 454 21 554 Qld 12 307 13 732 15 206 WA 7 549 8 035 8 533 SA 7 143 8 118 8 813 Tas 3 515 3 409 3 492 ACT 2 567 2 853 3 037 NT 2 056 2 314 2 415
All 80 883 88 555 95 126
Source: Unpublished data provided to the Commission by DHHLGCS.
In 1989, an additional one-off allocation of $10 million was made to CAP as under the Youth Social Justice Strategy initiative. Funding for youth accommodation was a high priority from 1989–90 to 1992–93 (DHHCS 1992a, pp. 286–94; 1992c, p. 38). See Table M.2 for CAP funding details.
Youth Social Justice Strategy The Youth Social Justice Strategy (YSJS) was introduced in 1989 by the Commonwealth Government partly in response to the Burdekin Report on youth homelessness. The Commonwealth Government has provided a $100 million package of initiatives designed to assist disadvantaged young Australians, including homeless youth (DHHCS 1992c, p. 38). Funding and administrative arrangements for the accommodation and support components of the YSJS are the same as those for SAAP and CAP.
INDUSTRY COMMISSION 293 PUBLIC HOUSING
Table M.2: Commonwealth CAP funding allocation, 1990–91 to 1992– 93 ($’000)
1990–91 1991–92 1992–93 State To or through States To or through States To or through States
NSW 13 595 13 511 0 Vic 10 182 10 156 7 344 Qld 6 678 6 772 3 882 WA 3 754 3 802 0 SA 3 358 3 337 642 Tas 1 064 1 057 389 ACT 655 655 225 NT 369 365 26
All 39 655 39 655 12 508
Sources: Australian Treasury (various years); unpublished data provided to the Commission by DHHLGCS.
During 1991–92, and again in 1992–93, $5.2 million was provided by the Commonwealth for innovative projects for homeless youth. The States matched this amount on a $1 for $1 basis. Approximately $5.4 million will be provided in 1993–94 (DHHCS 1992a, pp. 286–94; DHHLGCS 1993b, p. 384). A further $0.6 million will be provided by the Commonwealth Government over 2 years for a study of the housing needs of young people who live independently. See Table M.3 for the range and number of services funded under SAAP and the YSJS.
Table M.3: Number and range of services funded under the SAAP and the Youth Social Justice Strategy by target groups, 1988– 89 and 1992–93
Target group 1988–89 1992–93
number per cent number per cent Youth 428 33 685 40 Women 276 21 320 19 Families 299 23 317 19 Single men 186 14 161 9 Single women 57 4 62 4 General use 44 3 146 9
All 1 290 100 1 691 100
Sources: DHHLGCS (1993b, p. 380); data provided by DHHLGCS.
294 INDUSTRY COMMISSION M SUPPORT ASSISTANCE PROGRAMS
Emergency Relief Emergency relief is directed at assisting individuals and families in times of financial crisis. The assistance is usually in the form of cash for immediate needs such as food, electricity, gas or rental bills. Funds are provided as grant payment direct to community organisations from the Commonwealth. Services funded under the program are delivered through some 1000 non-government agencies with over 1200 separate outlets Australia- wide. State Advisory Committees provide advice to the delegate of the Minister on the distribution of funding to agencies within each State. Community sector representatives form part of the State Advisory Committees. The majority of Emergency Relief recipients are DSS clients. The Commonwealth Government provided over $30 million in 1992–93 for emergency relief. This amount included the original allocation of $15.3 million, $3 million allocated under the One Nation Statement, a top-up of $2 million in January 1993 and over $9 million through the Christmas Appeals Matching Grants. In 1993–94, $17.6 million will be provided for emergency relief. In 1991–92, $4.5 million was provided as emergency assistance to refugee status applicants. In 1992–93, $3.4 million was provided for this purpose. The then Department of Immigration, Local Government and Ethnic Affairs assumed responsibility for assistance to asylum seekers as of 1 January 1993. The assistance is now provided through the Australian Red Cross Society. See Table M.4 for Commonwealth appropriations for DHHLGCS People in Crisis Program.
Home and Community Care Home and Community Care (HACC) provides a range of basic support services to people living in the community who without these services would be at risk of premature or inappropriate admission to residential care services. The HACC service is delivered under the Home and Community Care Act 1985 and is administered in accordance with agreements between the Commonwealth and State governments. The services provided by HACC include home help, personal care, home maintenance and modification (changing light globes, provision of ramps, handrails and some minor renovation work), community respite care, transport, allied health services, community nursing, assessment and referral, education
INDUSTRY COMMISSION 295 PUBLIC HOUSING
and training, information, co-ordination and such other services as are agreed upon by the Commonwealth Minister and State Minister.
Table M.4: Commonwealth appropriations for DHHLGCS People in Crisis Program, 1990–91 to 1992–93 ($’000)
1990–91 1991–92 1992–93 Appropriation outcome outcome estimate
Supported Accommodation Assistance Program 80 983 90 260 94 702 Housing Assistance Act 1989 (part)a 39 655 39 655 5 352 Emergency relief 9 648 16 341 30 245 Emergency assistance to refugee status applicants na 4 500 3 461 Crisis Accommodationb - Innovative service development (ie Youth program) 4 700 5 248 5 150 - Rural and remote pilot study 240 240 - - Pilot project for unemployed homeless youth - - 2 630 Special payment to The Salvation Army 1 000 - - Payment to Aboriginal Hostels Ltd 200 200 200 SAAP national research and development 117 96 113
Total 136 543 156 540 141 853 na Not applicable. - Zero or rounded to zero. a Only expenditure for the Crisis Accommodation Program is included. b The major funding for the Crisis Accommodation Program is listed above. Sources: DHHCS (1991b, 1992a); DHHLGCS communication.
HACC services are available to public housing tenants. However, people receiving similar support services from other government programs are not eligible to receive assistance under HACC. For example, people accessing SAAP services are not eligible to receive the same services under HACC. State governments are responsible for the day-to-day administration of the Program. Commonwealth and State governments jointly approve projects and the upper limits of funding. Funds are allocated on a needs basis within each State. The Commonwealth provides matched funding in each State according to an agreed ratio. In 1990–91, the Commonwealth provided an average of 57 per cent of matched programs funds nationally. In 1991–92, this rose to 60 per cent.
296 INDUSTRY COMMISSION M SUPPORT ASSISTANCE PROGRAMS
Total Commonwealth expenditure was $315.4 million in 1991–92 and $341.8 million in 1992–93. For 1993–94, the Government made available $370.6 million for the program. In 1992–93, $40 million in unmatched funds was provided, to be used over a four year period, to extend the reach of respite services under the existing community care programs, including HACC. HACC expenditure from 1984–85 to 1992–93 is detailed in Table M.5.
Table M.5: Home and Community Care expenditure by government level, 1984–85 to 1992–93 ($m)
Year State Commonwealth Estimated total
1984–85 74.1 78.1 152.2 1985–86 91.3 100.8 192.1 1986–87 104.1 135.1 239.2 1987–88 125.7 169.2 294.9 1988–89 144.5 204.8 349.3 1989–90 165.8 241.8 407.6 1990–91 188.2 278.7 466.9 1991–92 205.7 315.4 521.1 1992–93 222.7 341.8 564.5
Notes: Table excludes Planning and Development funds. State estimate is based on expenditure required to match Commonwealth outlays. Includes unmatched money provided in the 1986–87 Budget. Sources: DHHLGCS (1993b, p. 244); data provided by DHHLGCS.
There are approximately 215 000 people receiving assistance under HACC each month. Of these people, some 20 per cent have a disability and are under 65 years of age. A further 117 000 people receive assistance under HACC as carers (DHHCS 1992a, pp. 147–57, 169–79). HACC comprised three sub-programs in the 1992–93 Budget: • Home and community care for people needing post-acute or palliative care; • Home and community care for the aged; and • Home and community care for people with disability.
INDUSTRY COMMISSION 297 PUBLIC HOUSING
Home and Community Care for people needing post-acute or palliative care The objectives of this program are: To provide high quality and cost-effective post-acute or palliative care in the community to individuals with an assessed need for such care, in a way which complements the provision of services through the acute health care system and avoids inappropriate or premature admission to residential care (DHHCS 1992a, p. 147). Post-acute and palliative care is the primary responsibility of State governments through the acute health care system. It has been designated a ‘no-growth’ service under HACC. Approximately 4 per cent of program expenditure funds ‘no-growth’ services including post-acute and palliative care.
Home and Community Care for the aged The objectives of Home and Community Care for the aged are: To enhance the quality of life of the frail aged and their carers who have an assessed need for community care services so that inappropriate or premature admission to residential care is avoided; and to provide financial support to carers to assist frail aged people who would otherwise require nursing home care to remain in the community (DHHCS 1992a, p. 169).
Home and Community Care for people with a disability The objectives of Home and Community Care for people with a disability are: To enhance the quality of life of people with a disability with an assessed need for community care services so that inappropriate forms of residential care are avoided; and to provide financial support to carers to assist people with a disability who would otherwise require nursing home care to remain in the community (DHHCS 1992a, p. 229). This program complements the accommodation support services provided by State governments under the Commonwealth–State Disability Agreement.
Domiciliary Nursing Care Benefit The Domiciliary Nursing Care Benefit (DNCB) is a sub-program of HACC. The DNCB provides financial support to carers who look after those who would otherwise require care in a nursing home. In 1992–93, $40.3 million was provided through this program and $47.9 million was allocated in 1993–94 (data provided by DHHLGCS). Table M.6 provides details on DNCB numbers and costs.
298 INDUSTRY COMMISSION M SUPPORT ASSISTANCE PROGRAMS
Table M.6: Domiciliary Nursing Care Benefit, aged persons and people with disabilities by State, June 1992 and June 1993
For the aged For the disabled Beneficiaries Cost Beneficiaries Cost State 1992 1993 1992 1993 1992 1993 1992 1993
No. No. $m $m No. No. $m $m NSW 10 465 11 118 10.34 12.98 2 548 2 494 2.52 3.09 Vic 6 264 6 433 6.79 7.64 1 462 1 451 1.58 1.81 Qld 4 270 4 877 4.48 5.43 1 159 1 271 1.22 1.29 WA 2 648 2 777 1.51 3.01 628 665 0.44 0.71 SA 1 511 1 758 2.52 1.95 438 449 0.60 0.46 Tas 761 821 0.77 1.01 252 258 0.26 0.24 ACT 334 335 0.3 0.38 79 87 0.07 0.09 NT 76 89 0.09 0.12 33 42 0.04 0.03
All 26 329 28 208 26.8 32.56 6 596 6 717 6.73 7.75
Notes: Numbers include all approved beneficiaries, including those where benefit is suspended because the patient is temporarily out of care. Minor differences in numbers are due to rounding. Source: DHHLGCS (1993b, pp. 257, 323).
Aged Care Program - Financial support (for residential care of the aged) The objectives of the Financial Support sub-program are: To ensure that appropriate, equitably distributed and cost effective forms of residential care are available at an affordable cost to frail aged people and that, where possible, an equivalent level of personal care is available to maintain them in the community (DHHCS 1992a, p. 190). Capital grants are provided to non-profit organisations to build, buy, extend or upgrade nursing homes and hostels. Recurrent funding is also available to both non-profit and profit organisations for care services: • The Commonwealth Nursing Home Benefit — a recurrent subsidy is — payable to approved nursing homes in respect of qualified nursing home residents and currently varies according to the relative care needs of residents; and • Care subsidies are provided to hostels which vary according to the relative care needs and financial status of residents. These subsidies include the Hostel Care Subsidy, Personal Care Subsidies, Hostel Care Respite Subsidy and Low Personal Care Subsidy.
INDUSTRY COMMISSION 299 PUBLIC HOUSING
Other programs provide a range of care services to aged people living in the community and for the development and support of innovative services for special needs groups. Residents in nursing homes are required to contribute to the cost of their accommodation and care. Since July 1991, residents are generally charged at a maximum rate of 87.5 per cent of the standard pension and rent assistance combined. A small proportion of nursing homes are exempt from the standard fee and benefit arrangements so as to allow them to provide for those who are prepared to pay for a higher standard of care and service. The prime target group of the new focus for Aged Care Program support are Aboriginal and Torres Strait Islander people, people from non-English speaking backgrounds and people in rural and remote areas. Funding provided for the Financial Support sub-program in 1993–94 is estimated to be $2.3 million (DHHLGCS 1993b, p. 232). A summary of nursing home subsidies and domiciliary care services is provided in Table M.7.
Table M.7: Commonwealth nursing home subsidies and domiciliary care services, 1991–92 and 1992–93 ($m)
1991–92 1992–93 Services Actual Estimate
Nursing Home Benefit 1 605.5 1 637.0 Nursing Home Capital Subsidies 46.9 42.0 Domiciliary Nursing Care Benefit 33.5 38.7 Community Nursing 79.9 89.1
All 1 765.8 1 806.8
Source: DHHLGCS communication.
Disabilities Services Program — support for individuals Prior to the signing of the Commonwealth–State Disability Agreement (CSDA) in July 1991, the Commonwealth and State governments were involved in providing accommodation support services for people with disabilities under the Disability Services Program (DSP). By July 1993, administrative responsibility for the provision of accommodation services to the disabled had been transferred to State governments under the CSDA. The Commonwealth
300 INDUSTRY COMMISSION M SUPPORT ASSISTANCE PROGRAMS
government has administrative responsibility for employment services for people with disabilities. Approximately 900 accommodation support services providing support for almost 15 000 people with a disability were transferred to the States under the CSDA. The Commonwealth Government is providing $245 million in additional funding to States governments over the 5 year term of the Agreement. Of this amount, $145 million is to improve services and $100 million for growth in disability services. People with disabilities are also able to access the Domiciliary Nursing Care Benefit sub-program of HACC under the DSP. The DNCB is payable to carers who provide, at home, continuing nursing care to a chronically ill or disabled, relative or friend (aged 16 and over) who has been assessed as requiring the level of care provided in a nursing home. The DNCB is a tax-free payment of $52 per fortnight and is not means tested. The benefit will be indexed in January each year. Since January 1993, beneficiaries have been able to receive the benefit while the person being cared for is in respite care for up to 42 days per year (data provided by DHHLGCS).
Social Housing Subsidy Program This program is to be established. It will enable State governments or other managers of social housing programs to raise additional funds to cover the cost of the public equity in shared ownership arrangements and to raise funds for other rental accommodation for low- and moderate-income people. The program is expected to cost $8 million in 1994–95, $16 million in 1995–96, and $24 million in 1996–97.
Aboriginal Hostels Limited Aboriginal Hostels Limited provides low-cost short-term accommodation to support improvements in the quality of life and living conditions of Aboriginal and Torres Strait Islander people. See Appendix N for further details.
Department of Veterans’ Affairs Programs: Community Health Care Services provide entitled veterans and war-widows with access to a range of community based health and welfare services that cannot be met by departmental services. Respite care provisions allow the frail
INDUSTRY COMMISSION 301 PUBLIC HOUSING
aged to be admitted to nursing homes for up to 63 days in a year when their carers are in need of a holiday. In-home respite is an option. In 1988, $400 000 was made available under the Department of Veterans’ Affairs (DVA) Vietnam Veterans Counselling Service and the Veterans Emergency Accommodation Grant Scheme (VEAGS) to ex-service groups to help establish emergency accommodation centres around Australia for veterans and their families. The aim of VEAGS was to: provide short-term emergency accommodation for veterans and their dependants who are (a) homeless as a result of crisis, (b) undergoing counselling and/or related treatment, and (c) in need of assistance to move towards independent living or to re- establish themselves in the community (sub. 104, p. 1). The scheme funded the setting-up and first year’s operating costs of seven emergency houses. In August 1992, local boards of management took over the control of five of the houses funded under the scheme. The two remaining houses are to be handed over to local boards of management when their two year grant period expires.
M.2 People who need supported accommodation assistance Supported accommodation is the provision of accommodation and support services to those in need. It is provided on a short-, medium- or long-term basis through various government and non-government organisations. Supported accommodation services can involve the total care of individuals in institutions, hostels or nursing homes. It can also mean assisting people to live independently or helping them to return to independent living within the community.
People with disabilities Some people with disabilities require full-time care in institutions, hostels and nursing homes, but the increasing flexibility in care and accommodation services is enabling many people to live within the community. The policy of deinstitutionalisation has encouraged patients to move out of institutions into the wider community. Although there are numerous programs to assist people with disabilities to maintain independent lifestyles, Sach and Associates et al. (1991) indicated that many people with disabilities are unable to access suitable accommodation and support services.
302 INDUSTRY COMMISSION M SUPPORT ASSISTANCE PROGRAMS
People with disabilities on low incomes who do not own their own home and are unable to obtain public housing must rent privately or remain dependent upon family members. Some low-income people (not Department of Social Security (DSS) pension or benefit recipients) who rent privately are unable to obtain rent assistance. This can lead to financial hardship. The extra cost arising from a disability can mean that people with disabilities have less disposable income for rent and other necessities. Where there are problems in obtaining affordable accommodation, people with disabilities may have to accept sub-standard accommodation. This can compromise their health. People with disabilities are often unable to access appropriately designed accommodation. Houses in the private rental market, for example, normally do not have wheelchair access, ramps or handrails. Even in public housing it is not uncommon for people with mobility problems to be allocated a house or unit that is accessed via stairs rather than a ramp. People requiring specially modified houses frequently experience delays in being allocated appropriate public housing. Singleton Equity Housing Limited suggested that appropriately modified dwellings should be listed on a register (that covered both the public and private markets) (transcript, pp. 2216–7). Such a register would enable people with disabilities to have greater choice over where they live. It would assist public housing providers to purchase houses from the private sector already modified. People with psychiatric or intellectual disabilities, mental illnesses or other behavioural problems are severely disadvantaged in accessing accommodation. The Queensland Association for Mental Health said: ... the long wait for public housing leads to other inappropriate solutions to the basic human need for shelter. Some return to their families, who may be ageing or ill- resourced to support them. Alternately they may be ‘placed’ inappropriately in accommodation designed for ageing or physically disabled people. Worst of all, many become homeless, with all the concomitant dangers of physical and drug abuse, or drift from shelter to boarding house (sub. 127, p. 4). The National Inquiry into the Human Rights of People with Mental Illness reported that: The accommodation available is often expensive, substandard or inappropriate. Crowded, dilapidated boarding houses have become the ‘new institutions’ ... Government programs frequently exclude mentally ill people, because of rigid demarcation and poor coordination between departments and agencies. Support services are inadequate for mentally ill people living in independent housing — and for those living with their families there is not enough respite care (HREOC 1993, p. 337). Some State housing authorities require that tenants must be capable of independent living before they can obtain a public house. This means that
INDUSTRY COMMISSION 303 PUBLIC HOUSING
people with psychiatric and intellectual disabilities, mental illnesses and those requiring live-in care are unable or find it difficult to obtain public housing. In discussing this requirement, the Schizophrenia Fellowship of South Queensland said ‘this is a concept that can be (and reportedly is) manipulated to the disadvantage of people who have chronic schizophrenia, but are stable’ (sub. 113, p. 5). People with an episodic disability who require periodic hospitalisation, can have difficulty retaining a public house because of prolonged absences and problems in meeting rent commitments. People with disabilities who are homeless can access crisis and supported accommodation services such as those provided under SAAP and CAP. However, there is evidence that people with disabilities are not always able to access SAAP shelters and refuges (Sach and Associates et al. 1991, p. 49; Econsult and Neil 1993, pp. 37, 49). The Mental Health Branch of the Queensland Health Department said: ... people with psychiatric disabilities, particularly young women seem to be excluded from receiving emergency and crisis accommodation through SAAP because of their support/treatment needs. Some SAAP agencies report fear of losing their funding if they provide accommodation to people in treatment (sub. 290, p. 3). Those who seek assistance under the SAAP face further difficulties when they exit the program because the shortage of low-cost long-term accommodation means they have nowhere to go. Consequently, many homeless people with disabilities become locked into a cycle that sees them permanently using SAAP shelters as their only source of accommodation (Econsult and Neil 1993, p. 128). Better planning and co-ordination between support service providers and housing providers would reduce the need for SAAP services particularly on the part of people with disabilities living with ageing parents. The responsibility for care, support and housing programs is shared between the three levels of government. This contributes to problems of co-ordination, not confined to the Commonwealth or State level. The Senate Standing Committee on Community Affairs (1990, pp. 40–1) reported that there is a need to co- ordinate services at the local level so that people with disabilities can seek assistance from one organisation. The CSDA has helped delineate responsibilities. Under the CSDA, the Commonwealth is responsible for the administration of employment services for people with disabilities; State governments are responsible for the administration of accommodation and support services.
304 INDUSTRY COMMISSION M SUPPORT ASSISTANCE PROGRAMS
Elderly people Elderly people on low incomes who do not own their own home find it difficult to obtain appropriate, affordable accommodation and support services (NHS 1992a). They face similar problems to people with disabilities. For example, many elderly people rely on family to provide accommodation and support assistance. Often elderly people with mobility problems are unable to access appropriately designed accommodation in the private and public rental markets. Those who are homeless and have accessed SAAP and CAP face problems when exiting shelters and refuges. People who require support assistance encounter difficulties when trying to access public housing.
Young people High unemployment, family breakdown, physical, sexual and emotional abuse, lack of appropriate living skills, low incomes, and a lack of low-cost, appropriate accommodation all contribute to youth homelessness. Young people have difficulty in accessing both public and private rental housing. The Housing and Young Peoples Outreach said ‘young people face serious discrimination in the private rental market because of their age, marital status, lack of income’ (sub. 133, p. 3). The South East Queensland Youth Accommodation Coalition claimed that: Equity does not exist in terms of eligibility criteria for public housing. Single young people and couples without children are ineligible for housing unless they have attained 18 years of age. Young people deemed to be homeless can apply for public housing at 17 years of age but will not be allocated until the age of 18 (sub. 132, p. 18). Young people under 18 years are often denied access to accommodation because landlords are unsure whether they are legally able to sign a lease. The NHS reported that: Minors may enter into contracts and enforce those contracts but others may not enforce contracts against them. If a minor enters into a contract for the purposes of obtaining personally, or for his or her family, the necessaries of life, then the minor is bound by the terms of the contract. There is then, no legal impediment that prohibits a minor entering into a contract for the provision of shelter. Fixed term agreements that involve an interest in property are, however, only binding until repudiated by the minor. By implication, while a minor remains in occupation of premises he or she cannot be said to have repudiated the contract. Therefore an obligation to pay any accrued rent and comply with any terms or conditions of the tenancy prior to repudiation would exist. Only future obligations beyond the repudiation date would not be enforceable (1992b, p. 32).
INDUSTRY COMMISSION 305 PUBLIC HOUSING
State governments have implemented a number of programs that specifically target the housing needs of the young. The programs generally provide short- to medium-term accommodation. They include direct leasing and headleasing schemes, community housing and emergency accommodation. Although providing short- to medium-term relief, young people are again required to seek suitable accommodation at the end of the tenancy. Young people may apply for assistance through the DSS. The DSS provides a Homeless (formerly Youth Homeless Allowance) or Independent Rate (benefit) to young unsupported people. However, those under 18 years, who also wish to receive rent assistance must be in receipt of the Homeless or Independent Rate (benefit) for at least 18 weeks before they become eligible for rent assistance. The 18 week waiting period for rent assistance is to be abolished in March 1994. Unsupported AUSTUDY and ABSTUDY students can apply for the Student Homeless or Independent rate (benefit) from the Department of Employment, Education and Training (DEET). AUSTUDY and ABSTUDY recipients are not entitled to DSS rent assistance. Despite these programs, homelessness amongst young people remains high. In addition to the assistance provided by DSS and DEET, homeless young people are able to seek assistance through services operated under the SAAP, CAP and the Youth Social Justice Strategy (YSJS). The YSJS provides accommodation for homeless young people and is administered in a similar manner to the SAAP. Although young people accounted for about 28 per cent of those receiving SAAP assistance (on the night of the May 1992 SAAP national client census), many young people often do not access these services (DHHLGCS 1993a, p. 6). Pabian (1992) and Neil et al. (1992) contend that violence forces some young homeless people out of refuges and that young girls often do not access SAAP services because they are afraid that their safety may be jeopardised at mixed population shelters and refuges. Accommodation provided through SAAP services is linked to support services. This may deter young people who only require accommodation. Concerns have also been expressed that the linking of accommodation with some services can bring together young people and those involved in substance abuse (NHS 1992b, pp. 67–8; DHHCS 1992f, pp. 3,7). Poor communications skills mean that some young people do not seek assistance. Others who suffer from mental illnesses are unable to access SAAP services. Some SAAP services exclude difficult people because their behaviour is socially unacceptable, or staff are not trained to assist people with mental illnesses. Young people who cannot gain access to SAAP programs also find
306 INDUSTRY COMMISSION M SUPPORT ASSISTANCE PROGRAMS
they cannot access mental health services until they are 18 years of age. Drug users may not access some SAAP shelters and refuges (Econsult and Neil 1993; Sach and Associates et al. 1991). With changes in child welfare legislation in some States many children under 16 years of age who were once considered State wards are now accessing SAAP services. This has led to concern that: ... reduced intervention affords governments with the opportunity to abdicate their responsibilities for young people who are not actually being abused, but who are, for various reasons, unable to live with their families but are still in need of greater supervision and support than is available to them through independent living or youth refuges. These issues are highlighted in reports that young people who are under the care and protection of the state have far greater access to accommodation, material support, and counselling and support services than those who do not fall within a statutory mandate. Therefore, a reduction in the number of wards represents a direct reduction in the number of young people able to access necessary services thereby increasing the risk of homelessness (Econsult and Neil 1993, p. 12). Accessing SAAP and YSJS programs does not guarantee that young people will find secure accommodation. There is a shortage of medium- to long-term accommodation that would enable young people to exit the program.
Women Women who are escaping domestic violence, are experiencing marriage breakdown or are sole parents are often in need of assistance with accommodation. Long public housing waiting lists prevent many women finding affordable accommodation when they are most in need of shelter. In the private rental market they often face discrimination because landlords fear they will not be able to meet their rent commitments. Women who face homelessness may receive assistance under the Emergency Relief program. This program provides cash for immediate needs such as food, electricity, gas or rental bills for people in crisis. SAAP and CAP provide assistance to women who have become homeless. Women who have substance abuse or psychiatric problems may not be able to access SAAP services. Women with children may find that the shelter or refuge does not have facilities for children, thus deterring them from seeking assistance (Econsult and Neil 1993, pp. 83, 91).
INDUSTRY COMMISSION 307 PUBLIC HOUSING
There is a shortage of low-cost, medium-, and long-term housing to enable people to exit emergency accommodation. This means that many women, particularly those escaping domestic violence, are not able to access SAAP. They either remain homeless, move to unsatisfactory arrangements, or go back to the violence they are trying to escape. As with elderly, disabled and young people, the dearth of long-term, secure, appropriate accommodation places women in a housing crisis that sees them moving frequently (Cass 1991, p. 59).
Aboriginal and Torres Strait Islander people Aboriginal and Torres Strait Islander people can seek assistance from the various organisations which offer help to people in crisis. However, in addition to receiving assistance under the SAAP, CAP, YSJS and Emergency Relief program, they are able to seek help from Aboriginal Hostels Limited (AHL). AHL operates a number of hostels for the homeless, transients, and victims of substance abuse. See Chapter 11 and Appendix N for further information on AHL.
M.3 Housing allocation and the provision of supported accommodation Public housing is the main means by which people who require supported accommodation assistance can obtain long-term, secure, affordable and appropriate accommodation. Access to public housing is gained by joining the ‘wait-turn’ waiting list. Depending upon location, it may take several years before a house becomes available. Those in crisis can apply to be included on a priority waiting list, that is an ‘out- of-turn’ list intended to ensure that applicants with greater needs are housed sooner. The decision to place an applicant on a priority list is commonly made by a committee comprising a cross-section of the community, including social workers, State housing authority representatives and tenancy area managers. A range of factors including homelessness, current housing costs, current housing circumstances, domestic violence and health problems determine whether an applicant will be placed on the priority listing. Applicants generally have to satisfy two or more of these criteria. In some States people wishing to apply for priority housing must also prove that rental housing is not available from a real estate agent, and they must have an
308 INDUSTRY COMMISSION M SUPPORT ASSISTANCE PROGRAMS
address before they can apply (Sapphire Coast Tenancy Scheme Inc., sub. 114). Women who are escaping domestic violence are required to provide legal proof that they are fleeing from domestic violence (Econsult and Neil 1993, p. 68). Some women may be afraid to seek legal or medical assistance because of fear of reprisal. People with disabilities face delays while they prove that support services will be available once they are allocated a house. ACROD Limited said: ... in NSW the requirement that availability of support services is “proved” has delayed or obstructed applications for priority housing from people with disabilities. Non- disabled applicants only have to identify housing need (sub. 304, p. 3). Inclusion on the priority waiting list does not mean that applicants will be immediately housed. Applicants may wait many months. Remaining at the top of the priority waiting list is difficult. Applicants can lose points once they are in a refuge, and the time spent in a refuge is not taken into consideration when points are allocated. The Housing Assistance Service said: The points allocation system must be reviewed with special reference to women in crisis refuges to ensure their points are not reduced when they stay at a refuge. Women in medium term accommodation need their temporary status recognized. The system must take account of the fact that if suitable long term accommodation is not available, women will be homeless (sub. 233, p. 82). The long delays mean that applicants continue to suffer because they are forced to remain at crisis shelters and refuges, move into group houses, go back to unsatisfactory relationships or go homeless until a house becomes available. Undue stress is placed on organisations providing supported accommodation assistance because of the bottle neck effect that is caused by the lack of medium- to long-term housing that would provide exit points for clients out of the programs. The Sydney City Mission suggested that there should be an increase in the proportion of money allocated each year to provide for the purchase of priority housing stock so more places are made available for those in need (sub. 226). The Mission said that people on priority housing waiting lists should be able to receive supplementary funds that would enabled them to access other accommodation options while they wait for public housing. Some participants favoured community housing as a medium-term solution, but argued that community housing should not be provided at the expense of public housing. This is further discussed in Appendix L.
INDUSTRY COMMISSION 309 PUBLIC HOUSING
M.4 The role of non-government organisations Non-government organisations assist people in crisis by providing support or accommodation services generally on a short- to medium-term basis. In addition to seeking donations from the general public, non-government organisations receive financial assistance under SAAP and CAP. State housing authorities operate a number of programs that involve headleasing properties to non-government organisations for people in crisis. A major problem faced by non-government organisations (and AHL) in providing assistance is, again, the shortage of medium- and long-term accommodation to allow people to leave refuges and shelters. Public housing waiting lists (including priority lists) are long. Consequently, some people on waiting lists are required to move from one crisis centre to another until they obtain secure accommodation. Some have little chance of accessing public housing because they have an existing debt with a State housing authority. The housing authorities will not re-house these people until they pay their debt. Non-government organisations refer to bureaucratic bungling and delays by Commonwealth and State governments in approving funding submissions. The Wollongong Youth Refuge Association Inc. (sub. 4) said that in 1989 it forwarded submissions for SAAP and CAP funding to the relevant State departments, but in 1993 the Association was still operating from temporary accommodation because it had not received CAP funding. Applications for funding under SAAP and CAP are assessed against the State Plan by the relevant State department. The assessments are discussed with the Commonwealth–State Joint Officers Group. The Joint Officers Group then prepares a funding package for approval by the State and Commonwealth Ministers. Delays in processing applications can increase the level of funding required if the projects are to proceed. Delays can also result in the loss of opportunities to obtain appropriate properties while the organisations seek funding (Hanover Welfare Services, sub. 163). The Sydney City Mission said that State governments may delay projects in order to take advantage of the interest earned on CAP funds. The interest earned on the monies granted to State governments by the Commonwealth does not appear to be allocated to CAP projects. The Mission would like governments be more open about: • the total amount of money available each year under different housing programs; • the way this money is distributed and how much is unspent each year; and
310 INDUSTRY COMMISSION M SUPPORT ASSISTANCE PROGRAMS
• how much interest is accrued on the money which is awaiting allocation and what purposes this interest is used for (sub. 226, pp. 4–5). Non-government organisations appear to receive little feedback from State departments on why their applications are unsuccessful. The lack of consultation and co-ordination by the departments responsible for the day-to- day administration of SAAP and CAP was highlighted by the Western Sydney Housing Information and Research Network: There is a failure of both departments to consult with service users and providers. One department will allocate funds without consulting the other department, this results in SAAP projects operating in temporary accommodation pending a CAP approval (sub. 84, p. 8). The NHS (1992b, pp. 69–70) attributed the lack of co-ordination by government departments to ‘the absence of clear and simple administrative arrangements and commitment to co-ordination between the government sectors’. The shortcomings in co-ordination lead to duplication and poor delivery of services. The overlapping provision of short- to medium-term accommodation provided under the CAP and other community housing programs could be overcome if governments at all levels were to integrate and co-ordinate programs (DHHCS 1992e, p. 7). Non-government organisations are critical of the inflexible interpretation of the guidelines and procedures used by departments when assessing submissions. They claimed that this inflexibility can increase costs because alternatives are not always considered. Long delays in processing submissions, unrealistic price estimates determined by government departments, and inflexible interpretation of regulations and guidelines were said to drain the limited funds available and hamper the delivery of services. The problems faced by non-government organisations do not end once funds have been received. The tying of SAAP and CAP to specific housing means that non-government organisations are less able to meet individual client needs. People who only require accommodation must accept support. Those who need support and accommodation must be accommodated specifically in CAP houses. Hanover Welfare Services said there is an: ... inherent inflexibility with CAP properties. ... Although the CAP program does fulfil the need for shelter, it is a restrictive or inflexible form of crisis/supported housing provision — not conducive to meeting individual client needs (sub. 163, p. 5). Non-government organisations expressed concern that as assistance increases under SAAP, assistance provided by government agencies is decreasing. For
INDUSTRY COMMISSION 311 PUBLIC HOUSING
example, non-government organisations are increasingly being called upon to assist young people, who in previous years have been State wards. Numerous government departments provide support and accommodation. The Singleton Equity Housing Limited commented on problems of co-ordination when referring to the funding for people with disabilities. The provision of housing by numerous government departments: ... meant that there has been little pressure on Public Housing Authorities and the CSHA to directly address and provide for the housing need of people with a disability. It also accounts for many of the issues and difficulties raised in the Industry Commission’s report related to the co-ordination of services (sub. 249, p. 1). State housing authorities are reluctant to provide support related services, or consider that the provision of these services is not part of their role. The prospect of having to co-ordinate the provision of services provided by a range of departments may deter individuals from applying for public housing assistance and other support services. The National SAAP Evaluation, Consultation Paper No. 5 reported that: The needs of homeless people could be better addressed through the development of structural links between relevant government departments. This could include planning the co-location of complementary services and joint funding of cross program initiatives (DHHCS 1992g, p. 5). Attempts have been made to improve linkages to long-term housing and related services by the inclusion of State housing representatives on both the Ministerial Advisory Committee and the Joint Officers Group in each State. The problems highlighted in submissions to the Commission suggest that considerable improvements have yet to be achieved.
312 INDUSTRY COMMISSION M SUPPORT ASSISTANCE PROGRAMS
BIBLIOGRAPHY Australian Treasury 1992b, Budget Statements 1992–93, Budget Paper No. 1, circulated by the Treasurer. Australian Government Publishing Service, GPO Box 84, Canberra, ACT, 2601. Australian Treasury (various years), Commonwealth Financial Relations with other levels of Government, Budget Paper No. 4, circulated by the Treasurer. Australian Government Publishing Service, GPO Box 84, Canberra, ACT, 2601. Australian Treasury, Budget Related Paper No. 7, circulated by the Treasurer. Australian Government Publishing Service, GPO Box 84, Canberra, ACT, 2601. (DHHCS) Department of Health, Housing and Community Services 1991b, Program Performance Statements 1991–92, Budget Related Paper No. 8.4A (1990). (DHHCS) Department of Health, Housing and Community Services 1992a, Program Performance Statements 1992–93, Budget Related Paper No. 9.8A. Australian Government Publishing Service, GPO Box 84, Canberra, ACT, 2601. (DHHCS) Department of Health, Housing and Community Services 1991b, 1991–92 Explanatory Notes. Australian Government Publishing Services, GPO Box 84, Canberra, ACT, 2601. (DHHCS) Department of Health, Housing and Community Services 1992c, Housing Assistance Act 1989 Annual Report 1990–91. Australian Government Publishing Service, GPO Box 84, Canberra, ACT, 2601. Sach & Associates with Miller T. 1991, The housing needs of people with disabilities, Discussion paper. Australian Government Publishing Service, GPO Box 84, Canberra, ACT, 2601. Cass, B. 1991, The housing needs of women and children, Discussion paper. Australian Government Publishing Service, GPO Box 84, Canberra, ACT, 2601. (NHS) National Housing Strategy. 1992a, Housing for older Australians: affordability, adjustments and care, Background Paper No. 8. Australian Government Publishing Service, GPO Box 84, Canberra, ACT, 2601. (NHS) National Housing Strategy 1992b, Housing choice: reducing the barriers. Australian Government Publishing Service, GPO Box 84, Canberra, ACT, 2601.
INDUSTRY COMMISSION 313 PUBLIC HOUSING
National Women’s Consultative Council 1992, Outcomes Report. Housing Needs of Women and Children, Occasional Paper No. 3 (DHHCS) National SAAP Evaluation 1992f, The Relationship Between Support and the Acommodation Provided in SAAP, Consultation Paper No. 4, December 1992. (DHHCS) National SAAP Evaluation 1992g, Linkages between SAAP and other support services, Consultation Paper No. 5, December 1992 (DHHCS) National SAAP Evaluation 1992e, Other Housing Options, Consultation Paper No. 6, November 1992 Neil, C. and Fopp, R. with McNamara, C. and Pelling, M. 1992, Homelessness in Australia: Cause and Consequences, CSIRO Divison of Building Construciton and Engineering, Melbourne Report of the Senate Standing Committee on Community Affairs 1990, Accommodation for People with Disabilities. Australian Government Publishing Service, GPO Box 84, Canberra, ACT, 2601 Econsult (Australia) SAAP National Evaluation Committee. 1993, Other Government Programs and SAAP, Final Report, (draft). Prepared by Econsult (Australia) Pty. Ltd, in conjunction with Dr Cecily Neil, CSIRO. (DHHLGCS) Supported Accommodation Assistance Program 1993a, national client census, home for a night, one-night census 14 May 1992. Australian Government Publishing Service, GPO Box 84, Canberra, ACT, 2601. (DHHLGCS) Program Performance Statements 1993-1994, (1993b), AGPS, Canberra. Supported Accommodation Assistance Act 1989, No. 89 of 1989.
314 INDUSTRY COMMISSION N ABORIGINAL AND TORRES STRAIT ISLANDER HOUSING
Given the expected increase in both the population and the number of [Aboriginal and Torres Strait Islander] households, it is very unlikely that the level of funds provided will ever meet all the housing needs. It is important to determine funding priorities in order to ensure that the expenditure of each dollar achieves maximum long-term efficiency and effectiveness (NHS 1991c, p. 28).
N.1 Program formulation and management Aboriginal and Torres Strait Islander people gain access to housing through: • Private rental; • General public housing; • The Aboriginal Rental Housing Program (ARHP) under the Commonwealth–State Housing Agreement (CSHA); • The Community Housing and Infrastructure Program (CHIP) administered by the Aboriginal and Torres Strait Islander Commission (ATSIC); • Commercial home loans; • State operated home ownership programs for people on low incomes; • State home ownership schemes for Aboriginal and Torres Strait Islander people; • The Aboriginal Home Ownership Program administered by ATSIC; and • Aboriginal Hostels Limited (AHL) (temporary accommodation only). Accommodation is also provided in some States under the Community Housing Program.
Private rental Few Aboriginal and Torres Strait Islander people are able to afford private rental housing. Moreover, as documented in the National Housing Strategy (NHS 1992b), they face considerable discrimination from private landlords.
INDUSTRY COMMISSION 313 PUBLIC HOUSING
General public housing Some Aboriginal and Torres Strait Islander people gain access to general public housing, having applied on the same basis as non-Aboriginal people. It is not known how many are general public housing tenants because tenants are not required to provide details of race.
Aboriginal Rental Housing Program The ARHP commenced in 1979. It was established as a separate program under the CSHA to accelerate the provision of housing for Aboriginal and Torres Strait Islander people in recognition of the acute housing disadvantage of this group. Housing under ARHP is provided in addition to general public housing services. The aim of the program is to ensure that: Housing programs [under the ARHP] are directed to the provision of accommodation of a type, design, and at locations which would enable Aboriginals and Torres Strait Islanders to enjoy accepted standards of health and social well-being and consistent with the commitment to self management (DHHCS 1992c, p. 7). The ARHP is administered by State governments. The Commonwealth, however, retains a close involvement in program planning, and the relevant Commonwealth Minister is responsible for approving the annual program plan jointly with the State Minister. Aboriginal Housing Boards and management committees assist some State housing authorities in their program administration and delivery. Each jurisdiction has an advisory structure to assist in program planning and delivery. The program is managed in ways intended to assist Aboriginal and Torres Strait Islander communities achieve self-management. ARHP funds are directed towards the provision of housing under a range of ownership and management arrangements that include: • Public rental housing managed by State housing authorities and identified for Aboriginal and Torres Strait Islander people. This housing is managed in a similar manner to general public housing, with some consideration given to the special needs of Aboriginal and Torres Strait Islander people; • Rental housing owned and managed by incorporated Aboriginal and Torres Strait Islander organisations on discrete communities in urban, rural and remote localities; and • Rental housing owned and managed by incorporated Aboriginal housing associations and co-operatives in areas of mixed settlement, generally urban.
314 INDUSTRY COMMISSION N ABORIGINAL AND TORRES STRAIT ISLANDER HOUSING
In addition to providing rental housing, ARHP funds support ancillary activities such as housing advisory services, administrative support for State Aboriginal Housing Boards and Aboriginal community associations, and community housing management pilot projects. All housing provided under the ARHP is covered by the provisions of the CSHA. Therefore, with sales, all proceeds are required to be returned to the program to provide for additional housing. During 1991–92, 677 dwellings were added to the ARHP stock giving a total at 30 June 1992 of 16 341 dwellings (unpublished data provided by DHHLGCS). Aboriginal and Torres Strait Islander people may access housing provided under the ARHP through waiting lists maintained by State housing authorities or through community housing organisations. The number of people seeking housing assistance under the program is not known because Aboriginal housing organisations are not required to provide this information. See Figure N.1 for details on waiting lists. Figure N.2 outlines institutional structures.
Figure N.1: Net changes to waiting lists for ARHP accommodation, 1991–92
2000 1800 1600 1400 Waiting List 1 July 1991 1200 Applicants Housed 1991-92 1000 800 Waiting List 30 June 1992 600 400 200 0 NSW Vic Qld WA SA Tas NT
Notes: Information is incomplete for Queensland and the Northern Territory. New South Wales figures for dwellings allocated include households allocated general housing as well as Aboriginal housing. Source: Unpublished data provided by DHHLGCS.
INDUSTRY COMMISSION 315 PUBLIC HOUSING
Figure N.2: Housing assistance: Institutional arrangements under the ARHP
Commonwealth-State Housing Agreement (CSHA) Aboriginal Rental Housing Program (ARHP) Administered by the Department of Health, Housing, Local Government and Community Services
State housing authorities
Advisory Committees Aboriginal Housing Boards
SHA managed Aboriginal & Torres Strait Support/Advisory rental housing Islander communities/Land Service/Land Councils Servicing
Source: Data provided by DHHLGCS.
ATSIC housing and infrastructure programs ATSIC was established in 1990 (see Figure N.3 for ATSIC structure details). Its functions under the Act include the requirement: (a) to formulate and implement programs for Aboriginal persons and Torres Strait Islanders; (b) to monitor the effectiveness of programs for Aboriginal persons and Torres Strait Islanders, including programs conducted by bodies other than the Commission; (c) to develop policy proposals to meet national, State, Territory and regional needs and priorities of Aboriginal persons and Torres Strait Islanders; (d) to assist, advise and co-operate with Aboriginal and Torres Strait Islander communities, organisations and individuals at national, State, Territory and regional levels; (e) to advise the Minister on: (i) matters relating to Aboriginal and Torres Strait Islander affairs, including the administration of legislation; and (ii) the co-ordination of the activities of other Commonwealth bodies that affect Aboriginal persons or Torres Strait Islanders (ATSIC Act 1989, s.7(1)).
316 INDUSTRY COMMISSION N ABORIGINAL AND TORRES STRAIT ISLANDER HOUSING
Figure N.3: Housing assistance: Institutional arrangements under ATSIC
Department of Prime Minister and Cabinet Aboriginal Affairs Portfolio Minister: The Hon. R. Tickner
Aboriginal Hostels ATSIC Limited
Board of National Office Commissioners Canberra
Aboriginal Corporations and Aboriginal State Advisory Housing Organisations State Offices Committees Resource Organisations State and Local Land Councils
Community 30 Regional Offices 36 Regional Councils representing 17 Zones
Sources: Treasury (1992a, pp. 21, 113); AHL (1992); ATSIC (1992a).
There are 36 Regional Councils representing Aboriginal and Torres Strait Islander people in 17 Zones across the nation. The Councillors who sit on the Regional Councils are elected by ballot held amongst Aboriginal and Torres Strait Islander people. The Regional Councils elect 17 Councillors to the ATSIC Board of Commissioners. The Minister appoints a further 2 Commissioners to the Board, giving a total of 19 Commissioners. The role of the Regional Councils is to: develop regional plans, assist and advise ATSIC and other government agencies in relation to the implementation of regional plans; decide on how funds will be allocated within their region; advise ATSIC on Aboriginal and Torres Strait Islander views concerning government activities; and represent Aboriginal and Torres Strait Islander people from their region. Regional Councils liaise with the local communities, Aboriginal corporations and housing organisations, ATSIC, State Advisory Committees (comprising ATSIC Commissioners and Regional Council Chairpersons or their nominees), and other government bodies.
INDUSTRY COMMISSION 317 PUBLIC HOUSING
ATSIC provides housing assistance through its CHIP and Aboriginal Home Ownership Program. It also provides funding to Aboriginal Hostels Limited. The programs are governed by the objectives in s.3 of the Aboriginal and Torres Strait Islander Act 1989. ATSIC primarily sees its role (in relation to housing and infrastructure) as one of providing a supplementary service: As stated in the CHIP objectives, the main responsibility for providing for housing and infrastructure to Aboriginal and Torres Strait Islander residents rests with the State/Territory and Local Governments. The ATSIC program is supplementary, to enable the catching up of the backlog caused by many years of neglect (sub. 116, p. 8).
Community Housing and Infrastructure Program Housing and infrastructure is provided under CHIP in urban, rural and remote areas. Priority has been given to infrastructure in remote areas. The objectives as approved by the ATSIC Board of Commissioners are: To promote a better quality of life for Aboriginal and Torres Strait Islander peoples by ensuring that they have access to secure, adequate and appropriate housing at an affordable price. To maximise, through strategies which are consistent with Regional Plans, Aboriginal and Torres Strait Islander ownership and control of housing. To support through strategies which are consistent with Regional Plans, Aboriginal and Torres Strait Islander aspirations to live in a location of their choice with access to facilities and services consistent with and appropriate to their expressed needs (sub. 116, p. 5). Funding under CHIP is intended to provide: • Grants to Aboriginal and Torres Strait Islander Housing Organisations for the construction of adequate and appropriate rental housing in urban, rural and remote areas where there is no government housing, and for the construction of shelter-type housing where preferred by the community; and • Grants to accelerate the provision of essential services and municipal services (water, sewerage, electricity, roads, etc) to severely disadvantaged rural and remote Aboriginal and Torres Strait Islander communities, including those living in town camps, outstations or excision areas on pastoral properties (Treasury 1992a, p. 112). Grants for housing and infrastructure are not made unless the organisation applying for assistance has secure tenure or a long-term lease over the land where the houses are to be constructed. Aboriginal housing organisations which obtain housing and infrastructure assistance under CHIP are responsible for the dwellings constructed. They are also responsible for tenancy
318 INDUSTRY COMMISSION N ABORIGINAL AND TORRES STRAIT ISLANDER HOUSING management. Ownership of the houses and infrastructure provided under the CHIP resides with the Aboriginal housing organisation. Since 1974–75, more than 8500 dwellings have been provided under CHIP and its predecessor programs.
Aboriginal Home Ownership Program The Aboriginal Home Ownership Program was established in 1974. Its aim is to assist low-income first home buyers. Administration, including approval and disbursement of loans, is undertaken through ATSIC Regional Offices. A Housing Loans Advisory Group meets three times per year and regular discussions are held with housing authorities and concessional lending institutions. By 1992–93, the program had assisted 6500 families at a cost of $311 million. It is considered by ATSIC to be one of its most cost-effective programs. However, only 28 per cent of Aboriginal and Torres Strait Islanders own or are purchasing their own home. This compares to 70 per cent in the general population (Treasury 1992a, p. 113).
Aboriginal Hostels Limited Aboriginal Hostels Limited is a company responsible for the provision of low- cost, temporary accommodation services to Aboriginal and Torres Strait Islander people. It provides accommodation through its 49 hostels and the funding of approximately 109 community support hostels located in urban, rural and remote areas. AHL also operates a Student Rental Subsidy scheme whereby community organisations are funded to subsidise accommodation for Aboriginal and Torres Strait Islander full-time students. Company hostels are staffed by Aboriginal and Torres Strait Islander people and provide accommodation for: • aged people; • people undergoing medical and substance abuse rehabilitation; • people undergoing rehabilitation in relation to offences against the law; • children and adults undertaking education at facilities located away from their local communities; • transient people; and • homeless people.
INDUSTRY COMMISSION 319 PUBLIC HOUSING
Hostels are required to operate at an occupancy rate of no less than 60 per cent. Over the past five years the average bed occupancy rate has been 70 per cent (sub. 211). Most tenants are in receipt of government benefits. Some 50 per cent of residents each night are women. Tenants are generally only permitted to stay at the hostels for three months. However, AHL is increasingly being called upon to provide long-term accommodation because residents cannot obtain alternative accommodation. Many of AHL’s residents are people who cannot gain access to general public housing because they have an outstanding debt with a housing authority. Over the period 1990–91 to 1992–93 the Commonwealth provided $84.2 million towards the operation of the hostels. The company estimates the value of its assets is $24.4 million using historical cost methods and $26.1 million using market value methods.
N.2 Funding and financial arrangements Funding for Aboriginal and Torres Strait Islander housing is provided by the Commonwealth Government through the CSHA, ATSIC and AHL. Table N.1 provides details on Commonwealth expediture on Aboriginal and Torres Strait Islander housing from 1969 to 1993. Commencing in 1991–92, $232 million of Commonwealth funding is to be provided over a five year period under the National Aboriginal Health Strategy (NAHS). Approximately 75 per cent of the funds will be spent on housing and infrastructure. These funds are expected to be supplemented by broadly matching effort on the part of State and Territory governments. State governments provide funds through State programs, the CSHA Rental Capital Account, and by supplementing Commonwealth funding for repairs and maintenance. They also administer Commonwealth programs. The cost to the States of administering the ARHP is unknown because housing authorities jointly fund general public housing and the ARHP. Bodies such as Aboriginal Land Councils, the Aboriginal Affairs Planning Authority, and the State Lotteries Commission of Western Australia also fund Aboriginal housing organisations.
320 INDUSTRY COMMISSION N ABORIGINAL AND TORRES STRAIT ISLANDER HOUSING
Table N.1: Commonwealth expenditure on Aboriginal and Torres Strait Islander housing from 1969 to 1993 ($m)
Application of funds Year ending Housing Dept. of Housing ARHP All 30 June grants to Aboriginal loans organisations Affairs housing grants to State and NT governments
1969 2.3 2.3 1970 3.3 3.3 1971 4.8 4.8 1972 5.2 5.2 1973 2.0 10.7 12.7 1974 8.1 14.7 22.8 1975 17.1 17.6 2.4 37.1 1976 19.3 13.2 7.6 40.1 1977 13.2 12.8 13.6 39.6 1978 13.7 10.1 4.0 27.8 1979 16.9 11.1 6.9 34.9 1980 20.5 12.9 6.7 40.1 1981 22.1 10.7 9.4 22.1 64.3 1982 23.7 8.9 34.2 66.8 1983 26.9 13.1 34.2 74.2 1984 30.6 12.4 52.0 95.0 1985 33.5 17.8 52.0 103.3 1986 35.6 19.5 54.3 109.4 1987 34.0 23.8 58.0 115.8 1988 44.1 31.5 60.0 135.6 1989 46.1 29.3 70.0 145.4 1990 43.7 15.7 91.0 150.4 1991 53.9 23.1 91.0 168.0 1992 50.0 28.3 91.0 169.3 1993 50.6 36.4 91.0 178.0
Notes: Funding to housing organisations includes National Aboriginal Health Strategy funds for housing of $0.6 million in 1991–92, and $10.5 million in 1992–93. Housing grants to organisations do not include those to Aboriginal Hostels Limited. Since 1986–87 tied funds for the Northern Territory under ARHP have been used to provide housing in rural areas. Sources: ATSIC (1993) and data provided by ATSIC.
Funding under the Commonwealth–State Housing Agreement The funds provided under the CSHA for the ARHP are allocated to State housing authorities through the Department of Health, Housing, Local Government and Community Services (DHHLGCS). The allocation is based on a housing needs assessment endorsed by the Australian Aboriginal Affairs Council. States do not have to match the funds provided under the CSHA.
INDUSTRY COMMISSION 321 PUBLIC HOUSING
Since 1980–81, $801 million has been provided by the Commonwealth for housing and infrastructure under the ARHP. Annual funding has been set at $91 million per year since 1989–90. See Figure N.4 for details on the distribution of ARHP funds.
Figure N.4: CSHA ARHP funding, 1992–93
$m 30
25
20
15
10
5
0 NSW Vic Qld WA SA Tas ACT NT
Source: Unpublished data provided by DHHLGCS.
DHHLGCS has advised that the current funding arrangements for ARHP are to be changed: ... work has commenced on the development of new and more efficient arrangements for the planning and delivery of Aboriginal housing, which will also ensure more effective coordination with related infrastructure services. ... The broad aim is to integrate the current programs delivered by the States/Territories using ARHP and State/Territory funds, with housing programs currently funded by ATSIC, into a single Aboriginal and Torres Strait Islander housing program administered by each State or Territory under a bilateral agreement with the Commonwealth (sub. 213, p. 40).
Funding under ATSIC ATSIC is required, under s.63 of the Act, to provide a draft budget for each year. The draft budget sets out the amount proposed for allocation by Regional Councils and proposed allocations to ATSIC program items. Regional Councils contribute to the draft budget in that they are required under s.97 to include program details that show the organisations to be funded.
322 INDUSTRY COMMISSION N ABORIGINAL AND TORRES STRAIT ISLANDER HOUSING
Program details are arrived at through consultation between Regional Councils and local communities. Local communities submit details on the projects they want funded. Regional Councils assess the projects and identify the programs that each project relates to. Where a project does not relate to any of the programs operated by the Regional Councils it does not receive funding. The ATSIC Board of Commissioners is responsible for determining the proportion of the total ATSIC budget to be allocated by each Regional Council. Under the current arrangements, ATSIC initially decides the amount for allocation by Regional Councils in each State. It decides on the allocation of these funds between Regional Councils in each State in light of advice from State Advisory Committees. Regional Councils allocate the funds to local community projects. This is done through ATSIC Regional Offices which administer all expenditure, including fund allocations proposed by Regional Councils. It is a requirement that funds not be granted to communities unless they are incorporated bodies under s.89 of the Act or declared by the Board under s.205. Communities must comprise 20 or more adults before they can be incorporated, and must have secure land tenure or a long-term lease before funds will be granted by Regional Councils. Aboriginal housing organisations are required: ... to provide regular financial statements as part of the grant acquittance procedures. In addition, physical performance reports are also required. Audited financial statements are required annually (sub. 116, p. 7). The level of funds allocated for housing and infrastructure in any year is the sum of allocations proposed by Regional Councils and any national program allocations (predominantly NAHS funding). Throughout the course of each year, funds may be transferred between programs in both National and Regional Council program estimates, subject to certain limitations imposed by the Act. Such transfers will generally be at the margin to accommodate emerging priorities and project slippages. Of the $165 million (including $32 million from the NAHS) allocated to CHIP in 1992–93, approximately 91 per cent was allocated by Regional Councils to projects within their region. The balance was allocated to State governments as grants. Various arrangements apply to the use of these funds. For example, in New South Wales a committee comprised of representatives of the State Government’s Office of Aboriginal Affairs, ATSIC and the NSW State Land Council decides how funds under the Tripartite Agreement will be spent. Table N.2 provides details on housing and infrastructure funding.
INDUSTRY COMMISSION 323 PUBLIC HOUSING
Table N.2: CHIP housing and infrastructure funding, 1988–89 to 1993–94 ($m)
1988–89 1989–90 1990–91 1991–92 1992–93 1993–94
Housing 46.1 43.7 53.9 49.4 40.1 50.0 Infrastructure 69.2 93.2 98.6 94.9 92.7 103.7 All 115.3 136.9 152.5 144.3 132.8 153.7
Notes: 1988–89 to 1992–93 actual expenditure. 1993–94 estimated allocation as at October 1993. 1991–92 to 1993–94 does not include funding under the NAHS. NAHS expenditure on housing for 1991–92 was $0.6 million, and $10.5 million in 1992–93. Expenditure on infrastructure in 1991–92 was $2.90 million, and $21.6 million in 1992–93. $73 million is available under the NAHS in 1993– 94, amounts to be allocated to housing and infrastructure have yet to be advised. Sources: ATSIC (1992b, Table 1) and data provided by ATSIC.
A further $58 million under the NAHS has been allocated for housing and infrastructure in 1993–94. These funds are broadly matched by State governments. Capital and recurrent expenditures under CHIP are detailed in Table N.3.
Table N.3: CHIP capital and recurrent expenditure, 1988–89 to 1993–94 ($m)
1988–89 1989–90 1990–91 1991–92 1992–93 1993–94
Capital 90.4 105.1 112.1 99.9 88.4 105.1 Recurrent 24.9 31.7 40.4 44.4 44.4 48.6 All 115.3 136.8 152.5 144.3 132.8 153.7
Notes: 1988–89 to 1992–93 actual expenditure. 1993–94 total allocation. 1991–92 to 1993–94 NAHS not included. Sources: ATSIC (1992b, Table 2) and data provided by ATSIC.
Funding for housing under CHIP declined from $53.9 million in 1990–91 to $40.1 million in 1992–93 (excluding NAHS funds for housing of $10.5 million). Allocation of funds for 1993–94 is estimated to be $50 million. The 1992 Aboriginal and Torres Strait Islander Commission Housing and Infrastructure Needs Survey — Stage 1 estimates that it will cost $1132 million to provide housing for the 9555 family units and 6584 single persons who require assistance in the areas covered by the survey (ATSIC forthcoming). The Aboriginal Housing Board of Victoria (sub. 21), described
324 INDUSTRY COMMISSION N ABORIGINAL AND TORRES STRAIT ISLANDER HOUSING the Needs Survey as ‘far too limited’. See Table N.4 for details on those requiring housing.
Table N.4: Aboriginal and Torres Strait Islander family units and persons requiring housing, 30 June 1992
State Family unitsa Single personsb Total persons
NSW 1 631 1 348 6 671 Vic 264 288 1 219 Qld 2 252 1 888 9 463 WA 1 966 1 226 8 592 SA 508 356 2 183 Tas 1 3 7 ACT 7 9 33 NT 2 926 1 466 14 245 All 9 555 6 584 42 413 a Family units include sole parents and extended families. Children defined as persons less than 21 years of age. b Single persons include single youths (under 21) and single adults. Notes: Information relates to centres surveyed to date. Metropolitan and major urban areas are not included. Source: ATSIC (forthcoming, Table 2).
Aboriginal Home Ownership Program Applicants for an Aboriginal Home Ownership Program (AHOP) loan must pass an income test, a points test, and show that they have the capacity to meet the repayments over the term of the loan. Applicants must also have a minimum deposit of 5 per cent and be able to pay the cost of legal and valuation fees as well as insurance. Repayments are set at between 20 and 30 per cent of gross income. Applicants are required to seek part of the loan from another lending institution if the main income-earner’s gross weekly income combined with half the spouse’s gross weekly income is within 50 to 150 per cent of the National Average Weekly Male Earnings. Applicants exceeding the 150 per cent income limit are not eligible for assistance under the program. Home ownership loans are at concessional rates. Commencing at 5 per cent, the rate escalates each year by half a percentage point until it is one point below the Commonwealth Bank Home Loan rate. During 1992–93, ATSIC approved 441 loans and disbursed $36.4 million (agency fees, insurance, legal costs and other incidentals are included in this amount). Loan repayments and discharges for the year totalled $28.3 million. A further $10 million was appropriated. In 1993–94, $2 million was appropriated.
INDUSTRY COMMISSION 325 PUBLIC HOUSING
In addition to the AHOP, the States provide home ownership programs specifically for Aboriginal and Torres Strait Islander people. Some assistance is also available through State managed home ownership programs.
Aboriginal Hostels Limited Funding of AHL is provided by the Commonwealth Government through ATSIC. The appropriation for 1990–91 was $26 million, $28.9 million in 1991–92, and $29.1 million in 1992–93. Figure N.5 provides details of program expenditure in that year.
Figure N.5: Aboriginal Hostels Limited, application of funds, 1992–93
22% 27% Administration Hostel operations
Capital and replacement works
5% Major maintenance
Community support 32% hostel subsidies 14%
Source: Data provided by AHL.
Company hostels are required to maintain records that provide details on expenditure, occupancy level and income. Community Support Hostels submit quarterly returns that explain how they have acquitted their grants. All hostels are subject to annual audit. Students receiving rental subsidies are required to present a rental receipt from their landlord before reimbursement is carried out by organisations that AHL funds. During 1992–93 the total number of resident beds was 3046. The cost to provide these beds was $33.81 per night per bed. With the exception of students who receive a rental subsidy, residents must pay tariffs. Tariffs are determined in accordance with a resident’s ability to pay. That is, tariffs take account of whether residents are employed, receiving government benefits and have dependants. Residents are required to pay rent one week in advance. If rent due is more than two weeks in arrears residents may be evicted.
326 INDUSTRY COMMISSION N ABORIGINAL AND TORRES STRAIT ISLANDER HOUSING
Accommodation charges and rent subsidy income was almost $3 million in 1989–90, $3.1 million in 1990– 91, $2.9 million in 1991–92, and $3 million in 1992–93.
N.3 Co-ordination with other services The responsibility for co-ordination and provision of services to communities in rural and remote areas and fringe locations of urban centres is unclear. Basic amenities, such as sewage and waste collection services and transport infrastructure, are non-existent or in poor condition in many communities. The 1992 Needs Survey has pointed out that the water available for human consumption in 302 communities does not comply with the National Health and Medical Research Council guidelines used by the communities to assess the quality of their water (see Table N.5). Homeswest indicated it has built settlements where there has been no water or electricity supply (transcript, pp. 368–9). An inquiry participant, Janz (sub. 212) claimed that the Queensland Department of Family Services and Aboriginal and Islander Affairs recently provided a ‘completed’ house for a Torres Strait Islander living at Yorke Island. At the time of occupancy there was said to be an inoperative solar hot water heater, no stove and no electricity.
Table N.5: Communities and people in minor urban, rural and remote areas which do not have adequate infrastructure, 30 June 1992
Infrastructure not available Communities People
Water 311a 14 616 Sewage disposal system 137 3 557 Fully sealed roads 256b 28 814 Electricity supply 251 8 438 a Communities in which the quality of water available for human consumption does not comply with the National Health and Medical Research Council guidelines. b Excludes outstations/homelands. Source: ATSIC (forthcoming, Tables 6, 9, 11A, 22).
The reluctance of State and local government authorities to provide adequate facilities prompted the communities of Toomelah, Boggabilla and Goondiwindi to seek assistance from the Human Rights and Equal Opportunity Commission and the NSW Ombudsman. The Toomelah Local Aboriginal Land Councils and the Toomelah Aboriginal Co-operative have been seeking since 1988 to have basic facilities provided by State and local
INDUSTRY COMMISSION 327 PUBLIC HOUSING authorities (Human Rights and Equal Opportunity Commission 1989; Office of the NSW Ombudsman 1992). The payment or non-payment of local government rates by local communities remains a contentious issue. It helps to explain why many local governments are reluctant to deliver services to Aboriginal people and Torres Strait Islanders. ... the issue of unpaid rates on the part of Aboriginal communities and the non– provision of services on the part of Local Government underlies a great deal of misunderstanding between Aboriginal communities and councils (Office of Local Government 1989, p. 4). In Alice Springs the town camp dwellers have sought waste disposal service funding from ATSIC. As the local government will no longer fund the service, the community is seeking exemption from payment of rates. The payment of rates and access to local government services were issues raised by the Royal Commission into Aboriginal Deaths in Custody (Johnston 1991), the Human Rights and Equal Opportunities Commission (1989) when investigating problems at Toomelah and the House of Representatives Standing Committee on Aboriginal and Torres Strait Islander Affairs (1992). The Industry Commission understands that the Commonwealth Government has provided funds for a report to be prepared on the issue of rate payments by Aboriginal and Torres Strait Islander communities.
N.4 Housing standards Many Aboriginal and Torres Strait Islander people live in what can only be termed sub-standard housing. Their houses are poorly designed and do not comply with local government building regulations. This contributes to poor standards of health (Gratten et al. 1993; Neilson, et al. 1993; Patel et al. 1993). The criticisms apply to both urban and remote settings. In reporting on Aboriginal and Torres Strait Islander housing in ‘mixed, usually predominantly non-Aboriginal, towns and cities’, the House of Representatives Standing Committee on Aboriginal and Torres Strait Islander Affairs said: Overcrowding, poor standards of workmanship, discrimination, poor maintenance scheduling, high maintenance costs, inadequate maintenance budgets, basis of housing allocation, lack of appropriate services and inappropriate design were all factors that contributed to the problem of rental housing accommodation conditions for urban dwelling Aboriginal and Torres Strait Islander people, who utilised the mainstream housing of the State and Territory housing authorities (1992, p. 134).
328 INDUSTRY COMMISSION N ABORIGINAL AND TORRES STRAIT ISLANDER HOUSING
In rural and remote locations it is not uncommon for community members to request and be assigned standard three bedroom, brick houses. The designs can be inappropriate because they do not cater for extended families or extreme climatic conditions. Inquiry participants argued that poor consultation with community members contributes to the choice of inappropriate housing. Consultation was said to overlook cultural practices and the importance of settlement layouts. Ross said that: ... the layout of the settlement, especially the distances and relationships between dwellings, is actually more important than the design details of the house itself. People suffer more stress from inappropriately placed houses, than from inappropriately designed ones (sub. 215, p. 3). An inquiry participant, MacFarlane, said that greater consideration should be given to community access to the environment, space, privacy, location to food source, hygiene requirements, need for permanency, finances, and customary behaviours (transcript, pp. 331–4). These factors should influence not only the type of design but also housing location. More appropriate housing might be achieved by making communities aware of their rights in relation to the use of consultants and architectural services, and by improving consultation with local community members, particularly the prospective tenants. Morel and Ross (1993, p. 137) claim that the design process could be enhanced if consultants were to give greater consideration to the potential for property damage, and assist communities in selecting appropriately designed housing by getting people to draw their own plans, inspect housing in other communities, peg out the dimensions of a house, and use models, videos and cut out shapes to represent rooms. Ross (sub. 215, p. 4) suggested that the employment by State housing authorities of Aboriginal liaison officers, trained to liaise between specialist staff and local communities, may also contribute to better housing design and layout. Overcrowding occurs because of insufficient housing. Large families requiring 5 or more bedroom houses are living in 2 and 3 bedroom houses. The Commission received evidence of 20 to 30 people residing in some houses (see for example, Tuohy, transcript, pp. 548–9). Improved stock management and additional funding would help. Compliance with local government building codes and health regulations would also improve housing conditions. Many of the houses constructed on Aboriginal and Torres Strait Islander land do not comply with local government building regulations. The Toomelah Review found that:
INDUSTRY COMMISSION 329 PUBLIC HOUSING
At present it appears that no person or organisation takes responsibility for ensuring that houses for Aborigines in Toomelah and Boggabilla meet satisfactory standards of construction. In particular, the Review was told that there is no inspection process to ensure that new houses meet the requirements, inter alia, of Ordinance 70 of the Local Government Act 1919 (NSW). This has resulted in, for example, roof drainage systems which allow rainwater to drain into houses, kitchen sinks being constructed without greasetraps and good drainage, with resultant overflow into the houses, and sewer systems which block up and force sewage back inside the houses (HREOC 1989, p. 3). It is not clear whether rural and remote Aboriginal and Torres Strait Islander communities are aware that the onus for adopting local government ordinances resides with the community. Communities can apply to have local government standards applied. The adoption of local government building regulations and the linking of contractor and builders payments to inspections would lead to an improvement in housing standards. It would reduce the opportunity for contractors and builders to undertake fraudulent construction work and reduce maintenance and repair costs. Pholeros said that in the Pipalyatajara community maintenance costs were invariably tied to poor initial construction work: It wasn’t overuse or vandalism but in almost all instances it was initial construction that was at fault, particularly initial construction of underground works. They were by far and away the greatest maintenance dollar eater throughout the year (transcript, p. 2780). Local governments could be more active in seeking to have local government building codes applied within rural and remote communities. They could do this by advising communities on the benefits of complying with local government ordinances. For their part, Aboriginal housing organisations should be more aware of their responsibilities in relation to local government regulations and the links with community health. Communities in urban areas are required to comply with local government regulations, but even here it is unclear whether Aboriginal housing organisations are aware of their responsibilities. In the inner-Sydney suburb of Redfern, for example, many tenants are housed in sub-standard conditions. The responsibility for maintaining dwellings in a habitable condition resides with the owner of the property, but if dwellings fall into a state of disrepair local government authorities may take steps to have the houses brought up to standard, or condemned. Aboriginal communities are poorly represented in local government. Greater representation would help to ensure that their voice is heard: it would also facilitate greater community understanding and more favourable attitudes towards local government regulations.
330 INDUSTRY COMMISSION N ABORIGINAL AND TORRES STRAIT ISLANDER HOUSING
N.5 Stock management and allocation Where responsibility for the housing stock is a local community function, Aboriginal housing organisations are responsible for tenancy and rent collection, housing allocation, repairs and maintenance, dwelling upgrades and construction. They are also responsible for obtaining funds and acquitting expenditure under funding programs. The aim of giving responsibility for housing to the local community is to promote self-determination. Housing organisations are required to ensure that tenants pay rent, but many communities have not implemented rent collection policies that will enable them to cover the costs of repairs and maintenance, administration, and municipal services. That said, the cost of food and clothing in remote areas can leave little for rents, and in some communities dwellings are in such a poor state of repair that tenants have refused to pay rent. Family relationships and responsibilities can also determine the willingness of elected officials to adhere to rental policies. ATSIC provides some funds for repairs and maintenance, but ARHP funds are generally intended to be spent on capital projects. The States contribute to the funding of repairs and maintenance of the ARHP stock, but information is not available on the extent of funding. The 1992 Needs Survey indicates that 58 per cent of the homes owned or administered by Aboriginal housing organisations require repair work ranging from minor maintenance to replacement. The cost of repairing (or replacing where necessary) the current housing stock in rural and remote areas is estimated to be in the vicinity of $286 million (ATSIC forthcoming). Clearly, funding for repairs and maintenance is falling well short of requirements. Aboriginal housing organisation officials and employees sometimes do not have the necessary management skills and training. Program accountability and transparency are compromised when officials lack the skills required to ensure that funds are spent in accordance with their intended purpose. Matters such as the allocation of houses and investigation of wilful damage to homes may be influenced by family relationships and responsibilities. Morel and Ross in their report Housing Design Assessment for Bush Communities, comment: The reality is that the failure to set up a system of maintenance results in little or no maintenance being carried out, and higher capital costs in the long-run as renovations and ‘upgrades’ are commissioned, and houses require more frequent replacement. None of the communities studied has a comprehensive system of housing management. This is hardly surprising, as community advisers and staff are funded mainly through ATSIC. Managing housing is not designated explicitly as part of
INDUSTRY COMMISSION 331 PUBLIC HOUSING
their duty statement (though a community and the individuals employed have considerable discretion to choose and prioritise their duties). The community’s staff and administrative budget is not increased in line with additions to the housing stock or the workload of maintaining an old stock. Collecting rent and organising maintenance is hardly a motivating task for people who already have full workloads. Only crisis management, and sometimes involvement in preparations for housing such as budget negotiations and consultation, therefore take place (1993, p. 170). Although Aboriginal housing organisations are required to provide audited financial statements to their grant provider, information is not readily accessible on ways in which Aboriginal housing organisations spend the money they receive. Consequently, it is difficult to determine whether housing organisations are using funds in an efficient and effective manner.
N.6 Incentives for recipients ATSIC does not provide repairs and maintenance funding to Aboriginal housing organisations which do not maintain rent collection policies. However, despite the incentive for communities to collect rent, ATSIC claims that ‘there is evidence that many tenants are not paying sufficient rent’. The condition of many houses indicates that tenants are either unaware of or unconcerned about the consequences of not paying their rents.1 As each community is responsible for determining its own housing policies, it is difficult to know whether Aboriginal housing organisations require their tenants to pay bonds or sign lease agreements. ATSIC has the option of providing grants or loans to Aboriginal housing organisations. The option of loans has not been pursued because ATSIC considers that most Aboriginal housing organisations are not in a position to repay a loan. The continued use of grants is not assisting Aboriginal and Torres Strait Islander communities to understand that governments do not have an endless supply of funds. If communities are to continue to determine their priorities, they need to be better informed in financial management practices so that they can take into consideration the impact for the future of the decisions they make today. The desire to relocate to outstations is an example. Relocation has implications for the future in relation to education, health, transport and communications. The provision of these services will be costly. Will governments be willing to fund these services in the future, given the high costs involved? The Commission found little evidence that recipients are aware of the cost implications, or that governments have sufficiently well
1 The Commission was unable to obtain information on rental arrears.
332 INDUSTRY COMMISSION N ABORIGINAL AND TORRES STRAIT ISLANDER HOUSING informed plans to meet the costs. Nor is it clear which level of government has responsibility for co-ordinating the provision of these services.
N.7 Recent initiatives The problems with Aboriginal housing are not new. Other reports such as the National Housing Strategy (NHS 1992b) have pointed to: • Low rates of home ownership; • Poor co-ordination and delivery of services by Commonwealth, State and local governments; • Insufficient funding for construction, upgrades, repairs and maintenance, and administration; • Poor housing standards; • Poor consultation with Aboriginal and Torres Strait Islander people; • Poor management; and • Lack of transparency and accountability. Governments are aware of these problems and have taken steps to address them. For example: • The Queensland Department of Housing, Local Government and Planning is undertaking a review of its Aboriginal Rental Housing Programs with the view to implementing a strategic housing plan (sub. 135, pp. 12–3); • The Northern Territory Department of Lands, Housing and Local Government is developing a housing and infrastructure database that will provide detailed information on dwellings, and assist in assessing program effectiveness. The Department is also investigating community housing management (sub. 17, p. 5); • ATSIC is reviewing the operations of Aboriginal housing organisations (sub. 116, Appendix 4); and • In December 1992 the Council of Australian Governments endorsed the National Commitment to Improved Outcomes in the Delivery of Programs and Services for Aboriginal Peoples and Torres Strait Islanders. This agreement gives the commitment: ... that bilateral agreements be entered into between the Commonwealth and State/Territory Governments specifying the responsibilities of each government, identifying funding arrangements and providing a framework for
INDUSTRY COMMISSION 333 PUBLIC HOUSING
the planning and delivery of services and programs in specific functional areas within the respective State/Territories; and ... that in the negotiation of bilateral agreements, Local Government will be consulted where appropriate on the planning, management and delivery of services (Australian Aboriginal Affairs Council 1992, p. 10). Work has commenced on new arrangements which will involve bilateral agreements the between the Commonwealth and each State government, and consultation with Aboriginal and Torres Strait Islander people. The aim is to integrate the current programs into a single Aboriginal and Torres Strait Islander housing program, with funds channelled through ATSIC. Each State will administer the program under a bilateral agreement with the Commonwealth (sub. 213, p. 40). Some State governments and ATSIC also support an enhanced role for existing Aboriginal housing boards or the establishment of an independent Aboriginal housing authority within the State. ARHP and CHIP funds would be channelled direct to the Aboriginal housing authority which would be jointly responsible to ATSIC and the State government (ATSIC 1993). In the Commission’s view, these initiatives, although helpful, will not bring the funding and administrative arrangements needed for rapid improvement in the provision of housing to Aboriginal and Torres Strait Islander people. The Commission’s proposals for change are set out in Chapter 11.
334 INDUSTRY COMMISSION N ABORIGINAL AND TORRES STRAIT ISLANDER HOUSING
BIBLIOGRAPHY
ABS 1992, Australian National Accounts: National Income and Expenditure 1990–91, Cat. no. 5204.0, Canberra. ABS 1993, Australian National Accounts: National Income, Expenditure and Product, Cat. no. 5206.0, Canberra. ATSIC (Aboriginal and Torres Strait Islander) Commission 1992a, Annual Report 1990–91, AGPS, Canberra. 1992b, Interim Community Housing and Infrastructure Policy of the Aboriginal and Torres Strait Islander Commission. 1993a, National Housing and Community Infrastructure Needs Survey, Draft final Report Stage 1, Canberra. (Unpublished). 1993b, ‘Channelling of The Aboriginal Rental Housing Program:Position Paper from the Aboriginal and Torres Strait Islander Commission’ and ‘Commonwealth Expenditure on Aboriginal and Torres Strait Islander Housing’ in The Indigenous Australians Shelter Conference 1-3 November 1993, “Building a Partnership”, Discussion Papers. AHL (Aboriginal Hostels Limited) 1992, Aboriginal Hostels Limited Annual Report 1990–91, Canberra. 1993, Aboriginal Hostels Limited Annual Report 1991–92, Canberra. ABS (Australian Bureau of Statistics) 1992, 1991 Census of Population and Housing. DHHCS (Department of Health, Housing and Community Services) 1992, Housing Assistance Act 1989 Annual Report 1990–91, AGPS, Canberra. DHHLGCS (Department of Health, Housing, Local Government and Community Services) 1993, Housing Assistance Act 1989 Annual Report 1991–92, AGPS, Canberra. Gratten, M., Morey, F., Dixon, J., Manning, K., Torzillo, P., Matters, R. and Erlich, J., ‘An outbreak of serotype 1 ‘Streptococcus pneumoniae infection in central Australia’, in The Medical Journal of Australia, Volume 158, 1 March 1993. HRSC (House of Representatives Standing Committee on Aboriginal and Torres Strait Islander Affairs) 1992, Mainly Urban: Report of the Inquiry into the needs of urban dwelling Aboriginal and Torres Strait Islander people. AGPS, Canberra, November.
INDUSTRY COMMISSION 335 PUBLIC HOUSING
Human Rights and Equal Opportunity Commission 1989, The Toomelah Review, March 1989. Human Rights and Equal Opportunity Commission 1992, The Call for Recognition. A Report on the Situation of Australian South Sea Islanders, Australian Government Publishing Service, GPO Box 84, Canberra. Morel, P., and Ross, H. 1993, Housing Design Assessment for Bush Communities. Tangentyere Council Inc., 4 Elder Street, Alice Springs. Australian Aboriginal Affairs Council 1992, National Commitment to Improved Outcomes in the Delivery of Programs and Services for Aboriginal Peoples and Torres Strait Islanders. Endorsed by the Council of Australian Governments, Perth, Western Australia, 7 December 1992. NHS (National Housing Strategy) 1991, Aboriginal and Torres Strait Islander Housing Key Issues, Discussion Package, AGPS, Canberra. 1992b, Issues Paper No. 6, Housing Choice: reducing the barriers. AGPS, Canberra. Neilson, G., Streatfield, R. W., West, M., Johnson, S., Glavin, W. and Baird, S. ‘Rheumatic fever and chronic rheumatic heart disease in Yarrabah Aboriginal Community, north Queensland’ in The Medical Journal of Australia, Volume 158, 1 March 1993. Office of Local Government, Department of Immigration, Local Government and Ethnic Affairs 1989, Aboriginal Communities and Local Government in New South Wales, AGPS, Canberra. Office of the NSW Ombudsman 1992, The Ombudsman’s Report on Toomelah. Patel, M., Merianos, A., Hanna, J. N., Vartto, K., Tait, P., Morey, F. and Jayathissa, S., ‘Epidemic meningococcal meningitis in central Australia, 1987–1991’, in The Medical Journal of Australia, Vol. 158, 1 March 1993. Treasury 1992, Social Justice for Indigenous Australians 1992–93, Budget Related Paper No. 7, Circulated by the Honourable Robert Tickner, M.P., Minister for Aboriginal Affairs and Minister Assisting the Prime Minister for Aboriginal Reconciliation. AGPS, Canberra.
336 INDUSTRY COMMISSION O INQUIRY PROCESS
The inquiry terms of reference were received on 5 November 1992. An Issues Paper was distributed to individuals and organisations with an interest in public housing. The paper raised likely issues and reform options. Prior to the start of the public hearings, discussions were held with individuals and organisations to help the Commission set an agenda for the inquiry. The discussions also served to establish our credentials in the reform of government trading enterprises such as the State housing authorities and to allay concerns expressed by some about the Commission’s involvement. The people and organisations visited are listed in Attachment O.1. A questionnaire was sent to State housing authorities early in the inquiry. It was developed in consultation with the authorities and the then Commonwealth Department of Health, Housing and Community Services. The questionnaire is reproduced in Attachment O.2. Information and advice was also requested from many other organisations. The Commission is grateful for the high degree of co-operation. Three consultancies were arranged:
• A review of overseas housing assistance measure (Centre for Urban and Social Research at the Swinburne University of Technology); • The estimation of the size and distribution of housing subsidies by tenure in Australia (Dr J Flood); and • The development of housing policies and programs in Australia under the Commonwealth–State Housing Agreement (R J Egan and Associates). The consultancy into the size and distribution of housing subsidies was jointly funded with the Department of Health, Housing, Local Government and Community Services. The consultant briefs are reproduced in Attachment O.3. In addition, a study was undertaken by the Centre for Urban and Social Research at the Swinburne University of Technology to empirically test the rent-setting model proposed by the Commission. The consultant brief for this study is also in Attachment O.3. The first round of public hearings was held between 12 February 1993 and 27 April 1993 with hearings in each of the capital cities and one regional centre.
INDUSTRY COMMISSION 335 PUBLIC HOUSING
The draft report was released on 2 August 1993. A further round of public hearings focusing on the proposals in the draft report was held between 27 August 1993 and 15 October 1993 with hearings in each capital city and one regional centre. The inquiry was conducted over twelve months. Completion was delayed for one week to allow participants at the Indigenous Australian Shelter Conference to give consideration to the Commission’s proposals for Aboriginal and Torres Strait Islander housing. There was wide participation in the inquiry. Over 1200 individuals and organisations registered an interest and 370 submissions were received. All relevant State and federal agencies participated. The participants are listed in Attachment O.4.
336 INDUSTRY COMMISSION O INQUIRY PROCESS
ATTACHMENT O.1 VISITS AND DISCUSSIONS
Location Individual, Company or Organisation
NSW Aboriginal Home Care Services Aboriginal Housing Company Ltd ACOSS ARCH (Association of Resource Co-operative Housing) Burnside Department of Local Government and Co-operatives Erambie Housing Corporation MacFarlane, Helen Housing Industry Association Mant, John Meriton Apartments Milligan, Vivienne Murrumbidgee/Lachlan Regional Council New South Wales Treasury Salvation Army Society of St. Vincent De Paul Sydney City Mission Toomelah Boggabilla Local Aboriginal Land Council Yates, Associate Professor Judith
Victoria Aboriginal Hostels Limited Australian Institute of Family Studies Brotherhood of St Lawrence Common Equity Rental Co-operatives Department of Planning and Development Housing Services South Melbourne Melbourne City Mission Public Tenant Union of Victoria Singleton Equity Housing Ltd
INDUSTRY COMMISSION 337 PUBLIC HOUSING
Victoria (cont.) Wulff Research and Swinburne Centre for Urban and Social Research Victorian Council of Social Service Victorian Treasury
Queensland Housing Industry Association Mental Health Branch, Queensland Health Office of Cabinet, Treasury, and Department of Housing and Local Government Queensland Council of Social Service Queensland Disability Housing Coalition
Western Australia Aboriginal Affairs Planning Authority ATSIC Kununurra Regional Office Blackburn and Company Wood, Gavin Homeswest Kalumburu Aboriginal Housing Corporation Warrangarri Aboriginal Corporation Housing Industry Association Western Australian Treasury
South Australia Aboriginal Housing Board CHASSA Co-operative Housing Authority Housing Industry Association Shelter SA South Australian Housing Trust South Australian Treasury
Tasmania Department of Health, Housing and Community Services Municipal Association of Tasmania Tasmanian Treasury
338 INDUSTRY COMMISSION O INQUIRY PROCESS
ACT Aboriginal and Torres Strait Islander Commission ACT Housing Trust Albon, Dr Robert Defence Housing Authority Department of Health, Housing, Local Government and Community Services Department of Social Security Disney, Professor Julian Dixon, Patricia Edwards, Dr Meredith Housing Industry Association L’Arche National Shelter National Youth Coalition for Housing Real Estate Institute of Australia
Northern Territory Aboriginal and Torres Strait Islander Commission Alice Springs Regional Office Department of Lands, Housing and Local Government Shelter Alice Springs Tangentyere Council
INDUSTRY COMMISSION 339 PUBLIC HOUSING
ATTACHMENT O.2
QUESTIONNAIRE SENT TO STATE HOUSING AUTHORITIES
1. Housing assistance programs 1.1 The Commission has compiled a list of State and Territory housing assistance programs from 1991 annual reports (see Attachment 2 in the Issues Paper). Please complete and update this list, providing the following information for each of the programs: (a) the program objectives; (b) funding (both amount and source, including internally generated funds); (c) the number of families/households assisted at a point in time or an average for a year and, where appropriate, the number of dwellings provided; (d) the number of families/households on the waiting list; (e) the eligibility criteria to qualify for the assistance under each program; (f) the percentage of total program funding spent on administration; and (g) how long the program has been in operation, what factors led to its introduction and when it was last reviewed. 1.2 Does the large number of programs result in better targeting of assistance? Do the gains outweigh the additional administrative costs? 1.3 On what basis are program funding requirements determined (both existing and new)? 1.4 A list of government organisations involved in the provision of housing assistance has also been compiled (see Attachment 3 of the Issues Paper). Please update this list, making any necessary corrections and additions, describing their roles and noting any inter-relationships.
2. Demographic information 2.1 Please provide the following information by program for those on waiting lists, recent public housing recipients (say, less than 3 years) and long-term public housing recipients (more than 3 years):
340 INDUSTRY COMMISSION O INQUIRY PROCESS
(a) household type; (b) age and sex of head of the household; (c) current income distribution by household type; (d) whether recipients are Aboriginal or Torres Strait Islanders, people of non- English speaking background or people with disabilities (by household type); and (e) whether recipients main source of income is government benefits by household type.
3. Management of public rental housing stock 3.1 Please itemise your housing stock by size, age, type and location. 3.2 What are the occupancy standards or rules used to allocate housing to clients? What is the current level of occupancy/utilisation? [Percentage of stock currently under-utilised (single people living in 3 bedroom houses, for example)? Percentage of public housing stock vacant? Average length of vacancies between tenancies?] 3.3 How do you determine when and where new housing is required? To what extent does access to employment, transport and community services affect the choice of location? 3.4 How is the type of new housing determined (for example, number of bedrooms, density, special features for disabled people)? 3.5 What community consultation processes are used in determining the type of housing, location and other building decisions? 3.6 How is new stock acquired? What determines decisions to spot purchase, construct by government builders, use joint ventures with the private sector, and tender out to private contractors? 3.7 What tendering system is used? How far in advance is your capital program for construction or purchase planned and committed? 3.8 How and for what reasons do you dispose of public rental stock? What is your annual rate of stock turnover as a proportion of total stock? How is the sale price determined? Under what circumstances does the sale price incorporate a discount from market value? 3.9 What percentage of total funding (both internal and external) for public rental housing is spent on administration?
INDUSTRY COMMISSION 341 PUBLIC HOUSING
3.10 What is the value of your assets, both historically and at current market values (the sum of each property’s individual market value)? How do you value your assets for accounting purposes (historical cost, replacement cost or current market value)? Are all the costs of inputs such as land and infrastructure services included in the value? 3.11 In what ways do you seek to maintain or improve the value of your assets? Is there a maintenance backlog? 3.12 Does tenancy management for public housing require greater effort than for landlords in the private rental market? If so, why and what is the additional cost? 3.13 Are public housing maintenance requirements higher than in the private rental market? What is the cost difference? 3.14 Please provide details of your maintenance standards and your policy on charging tenants for repairs beyond normal wear and tear. 3.15 What has your annual maintenance bill been in each of the last five years? 3.16 Is public housing managed on a zone or regional basis? Is there a minimum viable size for management on a regional basis? What are the advantages and disadvantages of a regional approach? 3.17 Please provide details of any equity sharing schemes you have in place. How many dwellings are involved? 3.18 What are the benefits of vesting control or management of housing with community tenancy organisations? Are management and/or maintenance costs lowered? 3.19 Please provide us with a sample contract/deed for the vesting of housing with a community organisation or co-operative. 3.20 How are State and Local Government rates and charges determined for public housing? Who pays? 3.21 Please describe any ‘land bank’ functions you perform.
4. Rental policies 4.1 How do you determine the full rent payable (before rebates are determined) for public rental houses? Are rents averaged, or determined individually for each property? What is your gross income from rent? 4.2 Where ‘market rents’ are used, how are these determined? Are there any location premiums for inner-city dwellings? Where ‘cost rents’ are used,
342 INDUSTRY COMMISSION O INQUIRY PROCESS
how are these calculated? What is the rationale for the particular rent policies you have adopted? 4.3 Please describe the method used to calculate rental rebates, defining includable and excludable income. What factors besides income influence the effective rent of people who are eligible for a rebate? Is there a sliding scale and how does it operate? 4.4 What proportion of tenants currently receive rebates? What is the current distribution of rent paid by household type for those on waiting lists, recent public housing recipients and long-term public housing recipients? 4.5 What are your rental collection policies? How often are rents reviewed for individual tenants? 4.6 What provisions are there for those who can not pay? What sanctions are there for non-payment? 4.7 In what ways do you encourage tenants to relocate to more appropriate dwellings, or move out of public housing as their circumstances change? What features of the current rental eligibility criteria encourage or discourage mobility? Are there provisions for relocation if family size exceeds or falls below house size? 4.8 What is your policy on security of tenure? What advantages or difficulties arise from this policy? 4.9 Do tenants have to meet any additional housing-related costs other than rent? 4.10 On what grounds are tenants evicted? How many evictions are there per year? Can evicted tenants later return to public housing? 4.11 The Commission is seeking information on the length of stay of public housing tenants. Could you provide a time series of how many households entered public housing for the first time in a given year; how many left public housing in that year; how many public tenants transferred to another public house in that year; and the total number of households served at the end of each period.
5. Methods used to allocate housing 5.1 Please describe the methods used to allocate the various types of housing assistance. 5.2 Are there priority allocations? On what basis? What proportion of total allocations are priority allocations?
INDUSTRY COMMISSION 343 PUBLIC HOUSING
5.3 What degree of choice do recipients have over type or location?
6. Financial management 6.1 Please describe your financial planning and budgeting processes. 6.2 What is the nature and annual value of any taxation concessions in your operations? 6.3 Please indicate your current annual rental arrears, relative to the full rental applicable and the rental rebate. 6.4 Briefly describe any areas of housing assistance (including home ownership assistance) that involve commercial funding. How are the funds raised? Does the Government guarantee the funds in any way? What are the advantages and disadvantages of using private funding? Do you see any scope for increased use of private funds in providing housing assistance? 6.5 To what extent are administrative and risk provision costs passed on to individual borrowers in home ownership programs? 6.6 Are common program costs, such as administration, allocated to individual programs and if so on what basis? 6.7 What is the nature and value of any investments you have in property outside of public rental housing? 6.8 What procedures are in place to detect fraud?
7. Program performance 7.1 What measures are used to assess whether programs have achieved their objectives? 7.2 What review processes are in place to ensure that objectives are achieved cost effectively? 7.3 What are the main performance indicators used to assess the effectiveness of programs and the authority/department generally? Are these performance indicators published or publicly available and where?
344 INDUSTRY COMMISSION O INQUIRY PROCESS
8. Future role of housing authorities 8.1 As part of the National Housing Strategy (NHS), a number of housing authorities prepared papers on their future role. If your organisation prepared such a paper, would you please provide the Commission with a copy. 8.2 We draw your attention to questions in the Issues Paper concerning commercialisation and corporatisation. You are invited to respond to the questions and comment generally on reform options.
INDUSTRY COMMISSION 345 PUBLIC HOUSING
ATTACHMENT O.3 CONSULTANT BRIEFS
Review of overseas housing assistance measures
Aims The aims of this research task are to: • Provide a statement of the housing policy objectives in a number of comparable overseas countries; • Review the current policies and assistance measures for housing in these countries. This review should examine policies and assistance measures addressing the needs of low-income renters and where appropriate the needs of indigenous people; • Identify the policy decisions that led to the current housing, rental and home ownership assistance measures, as well as identifying the regulations governing the private rental market; • Discuss the reasons governments in these countries have intervened to provide housing assistance and the influences that shaped the form of policy intervention; • Identify recent international housing trends in demand and supply policies; and • Discuss the relevance of overseas experience for housing policy and assistance measures in Australia.
Methodology Review housing policies in a number of overseas countries with a view to identifying the historical development, market circumstances and institutional arrangements that led to these policies. The review should concentrate on policies designed to address the needs of low- income renters and of indigenous people.
346 INDUSTRY COMMISSION O INQUIRY PROCESS
The overseas countries should include: • Canada • United States of America • New Zealand • United Kingdom • Germany • Denmark
Output A report that identifies for each country the processes that have led to the current housing policies and an assessment of their relevance in the Australian context.
Estimation of the size and distribution of housing subsidies by tenure in Australia
Aim The aim of this research task is to estimate the size and distribution of housing subsidies. The task might parallel the earlier work of Flood and Yates (1987). The estimates will be used to assess the extent of vertical and horizontal equity in the provision of housing subsidies in Australia. Specifically, the consultant is required to: • Identify the sources of housing subsidies for the different tenures; and • Estimate, on a per household basis and for different income levels (preferably using income deciles), the level of subsidy and the housing costs for different tenures.
Methodology Estimate the subsidies going to households using data from the 1989–90 ABS Household Expenditure Survey (or other appropriate data sources). The methodology of Flood and Yates might be used as a starting point, however, the appropriateness of the methodology would need to be assessed.
INDUSTRY COMMISSION 347 PUBLIC HOUSING
The consultant should also provide an estimate of the current level of subsidies by taking into account the impact of economic and demographic changes that have occurred since the conduct of the survey.
Output The report should include the following: • A discussion of the sources and recipients of subsidies (including tax expenditures) for housing; • A full description of the methodology used, including a discussion of and the basis for any assumptions made; • Estimates of the overall level of subsidy for each tenure in absolute terms and on a per household basis; and • Estimates of the level of subsidies for housing as well as the size of the expenditure on housing costs on a per household basis by income level and tenure.
The development of housing policies and programs in Australia under the Commonwealth–State Housing Agreement
Aims The aims of this research task are: • To identify the key policy decisions that have shaped housing policy and programs at the State level under the Commonwealth–State Housing Agreement (CSHA); and • To identify the factors that led to or influenced these decisions.
Methodology Given the overarching policy framework set by the CSHA for housing in Australia, the consultant should focus on the development of housing policy in States and Territories under the CSHA. The period to be examined is from the introduction of the CSHA in 1945 to the present.
348 INDUSTRY COMMISSION O INQUIRY PROCESS
Output The consultant should provide an historical perspective of housing policy development in Australia and should identify not only decisions made as part of the re-negotiation of the CSHA but also decisions that led to different levels and forms of housing assistance being provided in each State and Territory.
Testing the Industry Commission’s public housing rent setting model
Aim The aims of this research task is to assess the rent setting model proposed by the Commission using data for a sample of public housing tenants.
Methodology The Commission’s approach involves charging market rents for public housing dwellings and providing a rent rebate to tenants on low incomes so that those in similar circumstances receive the same benefit, rather than pay the same rent as at present. The rent rebates received by tenants under this approach are to be compared with the current rebates. Equations for calculating the rent rebate under the Commission’s approach will be provided.
Output A report setting out the assumptions made, the model used, the analysis undertaken and the results obtained. The analysis should examine, in particular, the distribution of current benefit and proposed benefit by location (inner and outer capital city, major regional centres and other), income level and family type.
INDUSTRY COMMISSION 349 PUBLIC HOUSING
ATTACHMENT O.4 INQUIRY PARTICIPANTS
Organisations and individuals who made submissions to the inquiry are listed below. Participants marked * presented submissions at public hearings. Participants marked ** made no written submission but appeared at hearings. The remainder made written submissions only. Participants Submission No.
Abbeyfield Society (Australia) Limited* 154 Aboriginal and Torres Strait Islander Commission* 116, 333, 370 Aboriginal Hostels Limited 211 Aboriginal Housing Board of South Australia (Inc) 344 Aboriginal Housing Board of Victoria* 21 Aboriginal Housing Council** ACROD Limited* 140, 304 AcrossTech 2 Adelaide Central Mission* 69 Aged Services Association of NSW and ACT Inc* 75, 230 Ahmat, G 311 Australian Capital Territory Council of Social Service, Inc* 80, 329 Australian Capital Territory Government* 109, 124, 318 Australian Capital Territory Youth Accommodation Group 66 Australian Citizen’s Action Network* 204, 258 Australian Council of Housing Societies Pty Ltd* 167 Australian Council of Social Service* 85, 352 Australian Greek Welfare Society 308 Australian Local Government Association 102
350 INDUSTRY COMMISSION O INQUIRY PROCESS
Barwon Region Housing Council 324 Bay Housing - Housing Support Service* 250 Beer, Dr A and Forster, Dr C – Flinders University* 59 Bendigo Tenancy Information Service* 161 Blacktown City Community Services Network* 76 Blue Mountains Community Legal Centre Inc 162 Bolter, I 13 Bonner, D 362 Brewer Street Welfare Rights and Advocacy Service 196 Brisbane City Council 56 Brotherhood of St Laurence and the Ecumenical Housing Unit* 152, 198, 368 Burdekin Report Action Group (BRAG) 134
Callan, P 314 Caloundra Community Centre 25 Caravan and Mobile Home Residents’ Association of Queensland* 219, 257 Caravan Park Residents’ Network* 182 Carlton Estate Residents Association Inc 247 CASA 284 Central Gippsland Regional Housing Council Inc 149 Central Queensland Joint Community Submission* 332 Central Queensland Regional Tenants Action Group* 298 Cerebral Palsy Association of Western Australia* 16, 278 Christian, A and V 288 City of Collingwood 197 City of Lake Macquarie 15 City of Melbourne 60 Coalition of Generalist Services* 125, 254 Coffs Harbour Detached Housing Office 62
INDUSTRY COMMISSION 351 PUBLIC HOUSING
Combined Pensioners and Superannuants Association of New South Wales Inc* 39, 266 Common Equity Housing Limited* 151 Commonwealth Office of Local Government* 126 Community Accommodation Support Service (SA) 24 Community and Institutional Parents Action on Intellectual Disability* 164, 236, 275 Community Housing Assistance Service of SA 303 Community Housing Associations Forum 325 Construction, Mining, Energy, Timberyards, Sawmills and Woodworkers’ Union of Australia (WA Branch) 55 Cooke, S J* 185, 243 Copp, K 312 Cornwell, G* 99 Corporate Diagnostics* 73 Cotgrove, R D M* 128 Council of Single Mothers and their Children Inc 160 Council of Social Service New South Wales 360 Council on the Ageing (Australia)* 168
Denigan, C* 203 Deniliquin Advisory Committee 363 Department of Family Services and Aboriginal and Islander Affairs (Qld) 14 Department of Finance* 353 Department of Health, Housing, Local Government and Community Services* 213, 331 Department of Housing, Local Government and Planning (Qld)* 135, 218, 345 Department of Immigration, Local Government and Ethnic Affairs 158 Department of Lands, Housing and Local Government (NT)* 17, 208, 261, 337 Department of Planning and Urban Development (WA)* 37, 192 Department of Social Security* 214, 331
352 INDUSTRY COMMISSION O INQUIRY PROCESS
Department of Veterans’ Affairs* 100, 104 Derby West Kimberley Shire* 70 Diamond Valley Ratepayers Association 150 Disabled Peoples’ International (Australia) Ltd* 118 Downs Active Residents and South West Queensland Tenants Association* 242
East Gippsland Regional Housing Council 173, 320 Eastern Area Service for Youth 19 Ethnic Communities Council of WA 53 Ettinger House, Fairfield Family Resource Centre* 86 Evans, K A G 50
Family Support Service** Fattah A, and Dearden, L 263 Federation of Housing Collectives Resource* 43, 273 Fitzroy Richmond and Collingwood Accommodation Service* 157, 251 Flemington Tenants’ Association* 141 Flinders University of South Australia 120 Flood, Dr J* 171 Forrer, H – Whitsunday Shire 46
Gateshead West Public Tenants’ Action Group 49 Good Shepherd Youth and Family Service* 148, 330 Goulburn Regional Housing Council Inc* 82, 245, 293 Gove, M 343 Graham, R J – University of Tasmania* 123
INDUSTRY COMMISSION 353 PUBLIC HOUSING
Habitat for Humanity Australia* 10 Hanover Welfare Services* 163, 295 Hassall, K* 89, 202 Hatton, The Hon J 9 Healthabitat** Helping Out Maintenance Experts (HOME)* 29 Homeswest* 51, 72, 228 Housing and Social Planners Pty Ltd 199 Housing and Young Peoples Outreach* 133 Housing Assistance Service Inc* 233 Housing for the Aged Action Group Inc* 181, 238 Housing Industry Association – National Office* 92 Housing Industry Association – Western Australia 71 Human Environment Movement** Human Wellbeing Group (Margate Embryo)* 95 Hunter, L 309 Hyslop, N 48
Ingemann, D and van Leeuwen, H 67 Inner Eastern Regional Housing Council 147 Inner Urban Regional Housing Council* 106, 259, 355 Institute for Science and Technology Policy (Monash University)* 41
Janz, G 212 Johns, R* 79 Joint Ministerial Advisory Committee on ARHP in Queensland* 346 Jones, J* 52 Jubow, L M* 282
354 INDUSTRY COMMISSION O INQUIRY PROCESS
Kaidialt Aboriginal Corporation 364 Kaspar, N 18, 292 Kimberley Development Commission* 35 Kununurra-Waringarri Aboriginal Corporation 7
L’Estrange, L 207 Leslie James Architects Pty Ltd* 105 Lidcombe Hospital’s Head Injury Unit and Wareemba Community Living 97 Liverpool Rental Housing Association and Bankstown Community Housing Association Ltd** Local Government and Shires Association of NSW 326 Local Government of Queensland Inc 206 Logan City Tenant Group – ‘LOGAN’* 119 Lovejoy, M A 3
MacDonald, E 315 MacFarlane, H** Mackay Housing Interest Network* 26, 328 Mackay Tenants Group* 313 Manly Warringah Interagency Association 63 Master Builders’ Association of WA* 6 Master Builders’ Association of Tasmania* 112 Master Builders’ Australia* 94, 319 McNelis, S 194 Mental Health Branch, Queensland Department of Health 290 Milpara Housing Group 64 Missionaries of the Sacred Heart – Justice and Welfare Office Sydney 110 Mortgage Review Task Force* 184 Municipal Association of Tasmania* 137
INDUSTRY COMMISSION 355 PUBLIC HOUSING
Murray Darling Riverina Public Tenants’ Association* 77, 189 Murrundi Regional ATSIC Council**
National Committee on Violence Against Women* 98 National Council on Intellectual Disability 300 National Dissemination Program of the Hunter Caravan Project 209 National Shelter Inc* 115, 221, 224, 339 National Women’s Consultative Council* 93, 222, 351 National Youth Coalition for Housing* 131, 306 New South Wales Government* 354 Ngnunnawal Land Council** North Brisbane Regional Tenant Group 327 North East Regional Housing Council (Inc) 338 North Melbourne Tenants’ Association Inc* 81, 244 North Queensland Regional Housing Forum 322 North Sydney Housing Interagency 177 North Western Regional Housing Council Inc 183 Northern Territory Aids Council Inc* 27
Office of the Status of Women 96, 349 Older Women’s Network NSW* 78
Partridge, M* 143, 264 Pensioners’ Action Group* 36 Pershouse, J 316 Perth Inner City Housing Association Inc* 267 Port Melbourne Public Housing Tenants’ Association* 170 Prahran Community Housing Inc* 179, 248, 350 Property Owners’ Association of Australia 187 Property Owners’ Association of NSW* 30
356 INDUSTRY COMMISSION O INQUIRY PROCESS
Property Owners’ Association of Queensland* 144, 235 Property Owners’ Association of Victoria* 156, 260 Proserpine/Whitsunday Support Group 297 Public Tenants’ Union of Victoria* 180, 321
Queensland Association for Mental Health Inc* 127 Queensland Community Housing Coalition Ltd* 336 Queensland Council of Social Service Inc* 91, 241 Queensland Disability Housing Coalition 121, 255 Queensland Health - Central Office 335 Queensland Independent Valuers (Withdrawn) 23 Queensland Shelter* 138, 307
Randolph, Dr B 216 Real Estate Institute of Australia* 103, 358 Reeves, R J and N F 287 Residents Action Group of Zillmere* 61, 229 Rockhampton – Family Emergency Accommodation Program 33 Rooming House Tenants’ Association* 201 Ross, Dr H* 215 Royal Australian Planning Institute Inc – ACT Division* 139, 347
Sapphire Coast Tenancy Scheme Inc* 114 Schizophrenia Fellowship of South Queensland 113 School of Architecture (SOLARCH) 90 Sear, B M* 117 Seare, V E* 270 Shelter Darwin* 20, 210, 262 Shelter Housing Action Tasmania* Shelter NSW* 305
INDUSTRY COMMISSION 357 PUBLIC HOUSING
Shelter SA* 54, 268 Shelter Victoria* 172, 253, 323 Shelter WA – Migrant Access Project* 28 Shelter WA* 47, 205, 271 Shire of Manjimup 1 Shire of Wongan – Ballidu 68 Singleton Equity Housing Ltd* 175, 249 Society of St Vincent de Paul - State Council of NSW 341 Softlaw Community Project Ltd* 130, 361 South Australian Co-operative Housing Authority** South Australian Council of Social Service 291 South Australian Government* 356, 357, 365 South Australian Health Commission 366 South Australian Housing Trust* 367 South Australian Youth Housing Network Inc 195, 285 South East Queensland Youth Accommodation Coalition* 132, 265 South Sea Islander Community of Mackay* 289 South Sydney Community Aid Co-operative Ltd* 45, 188 South Western Community Care 280 Southern Forum 122 Spastic Centre of New South Wales 11 Springvale Community Aid and Advice Bureau 31 St James Court Tenants Group 239 St John of God CLASS Inc 286 Star Victorian Action on Intellectual Disability 166 Stilwell, F 57 Stretton, H 269 Styles - Architectural and Building Component Design 190 Sunshine Coast Regional Housing Council* 107, 302
358 INDUSTRY COMMISSION O INQUIRY PROCESS
Sussex Street Community Law Service* 34, 272 Sydney City Mission 226
Tapper, A* 40 Tasmanian Co-operative Housing Development Society Ltd* 231 Tasmanian Council of Social Service Inc* 129, 234 Tasmanian Government* 217, 225, 342 Tenants’ Advice Service Inc 191, 334 Tenants’ Union of Queensland 155 The Salvation Army Crossroads Network* 165 The Salvation Army* 200, 252 The Union for Homeless Women and Children 279 Thompson, D J and S 310 Town of East Fremantle* 58 Trethowan, B 142 Troon, T E 145 Trott, A 317
Uniting Church - Synod of Western Australia 32 Uniting Church Youth Services Western Australia* 193
Victorian Consumer Forum for the Aged** Victorian Council of Social Service* 8, 169, 246, 359 Victorian Department of Planning and Development 227 Victorian Government* 159, 223, 232
Wakely, John* 301 Welfare Rights and Legal Centre Ltd* 101 Wensing, E* 108, 178 Western Australian Consumer Forum for the Aged 87
INDUSTRY COMMISSION 359 PUBLIC HOUSING
Western Australian Council of Social Service* 44, 220, 277, 340 Western Australian Government 276 Western Australian Municipal Association* 38 Western Australian Treasury 369 Western Regional Housing Council Inc* 174 Western Sydney Housing Information and Research Network* 84, 274, 348 Westernport Regional Housing Council 153, 296 Whittlesea Family Services* 237 Wide Bay/Burnett Regional Tenants’ Group 294 Widjeri Co-operative Ltd* 88 Wilderness Society of Tasmania* 136 Wilsonton and Rockville Tenants Group* 111, 240 Wimmera Community Care and Wimmera Regional Housing Council 83 Windermere Child and Family Services Inc 74 Wollongong Youth Refuge Association Inc 4 Women in Supportive Housing* 146 Woodland, A H 12
Yates, Dr J 186 Young, N 281 Youth Accommodation Association (NSW) Ltd 65 Youth Accommodation Coalition of Victoria* 176, 299 Youth Accommodation Coalition of WA* 42, 283 Youth Housing Project – Albion Queensland* 5, 256 YWCA of Alice Springs 22
360 INDUSTRY COMMISSION REFERENCES FOR VOLUME 2
ABS (Australian Bureau of Statistics) 1988, Housing Survey: Housing Costs and Occupancy, Cat. no. 4130.0, AGPS, Australia. —— 1990, Household Expenditure Survey, Australia: States and Territories, 1988–89, Cat. no. 6533.0, AGPS, Australia. —— 1992, 1991 Census of Population and Housing: Basic Community Profile, Cat. no. 2722.1, Australia, Unpublished. —— 1993a, 1991 Census of Population and Housing: Basic Community Profiles, Australia, Cat. no. 2722.0, AGPS, Australia. —— 1993b, PC Ausstats. Adams, P.D., Chung, C-F. and Powell, A.A. 1988, Australian Estimates Of Working’s Model under Additive Preferences: Revised Estimates of a Consumer Demand System for use by CGE Modellers and Other Applied Economists, Impact Project Working Paper No. O-61, Industries Assistance Commission, Melbourne, August AHL (Aboriginal Hostels Limited) 1992, Annual Report 1990–91, Canberra. —— 1993, Annual Report 1991–92, Canberra. ANAO (Australian National Audit Office) 1993, Report on Ministerial Portfolios Budget Sittings 1993, Volume 6: Health, Housing, Local Government and Community Services Portfolio; Social Security Portfolio, Audit Report No. 1, AGPS, Canberra. Appelbaum, R. 1986, ‘Swedish housing in the postwar period: some lessons for American housing policy’, in Bratt et al. (1986), pp. 535–57. Arrow, K.J. 1971, ‘Models of job discrimination’, in Pascal (1971), Chapter 2. Arrow, K.J. and Lind, R.C. 1970, ‘Uncertainty and the evaluation of public investment decisions’, American Economic Review, vol. 60, no. 3, pp. 364–78. ATSIC (Aboriginal and Torres Strait Islander Commission) 1992a, Annual Report 1990–91, AGPS, Canberra. —— 1992b, Interim Community Housing and Infrastructure Policy of the Aboriginal and Torres Strait Islander Commission. —— 1993, Building a Partnership, Discussion Papers, The Indigenous Australian Shelter Conference, Brisbane, 1–3 November. —— (forthcoming), National Housing and Community Infrastructure Needs Survey, Report Stage 1, Canberra.
INDUSTRY COMMISSION 361 PUBLIC HOUSING
Auerbach, A. and Feldstein, M. (eds.) 1985, Handbook of Public Economics, North Holland. Australia, House of Representatives 1981, Debates, vol. 123, 26 May–10 June. Australian Aboriginal Affairs Council 1992, ‘National Commitment to Improved Outcomes in the Delivery of Programs and Services for Aboriginal Peoples and Torres Strait Islanders’, Endorsed by Council of Australian Governments, 7 December. Badcock, B. and Browett, M. 1991, ‘The responsiveness of the private rental sector in Australia to changes in Commonwealth taxation policy’, Housing Studies, vol. 5, no. 3, pp. 182–92, July. Baer, W.C. 1986, ‘The shadow market in housing’, Scientific American, vol. 255, no. 5, pp. 27–33, November. Bartlett, W. 1989, Housing Supply Elasticities: Theory and Measurement, Discussion Paper No. 2, Joseph Rowntree Memorial Trust, School of Advanced Urban Studies, University of Bristol, December. Bewley, R.A. 1982, ‘On the functional form of Engel curves: the Australian Household Expenditure Survey 1975–76’, Economic Record, vol. 58, pp. 82–91. Binstock, R. and George, L. (eds.) 1990, Handbook of Ageing and the Social Sciences, 3rd edn., Academic Press, San Diego. Bisset, H., Blaskett, B. and Siemon, D. (forthcoming), Housing Affordability, Housing Poverty and Housing Assistance (working title), Brotherhood of St Lawrence. Black, G. 1986, ‘Housing assistance: rental rebates versus a consolidated housing allowance’, Conference Papers from Income Support Seminar, Melbourne, 8–9 December, pp. 264–77. Boadway, R. and Keen, M. 1993, ‘Public goods self-selection and optimal income taxation’, International Economic Review, vol. 34, no. 3, pp. 463– 78. Bradbury, K.L. and Downs, A. 1981, Do Housing Allowances Work?, The Brookings Institute, Washington, D.C. Bratt, R., Hartman, C. and Meyerson, A. (eds.) 1986, Critical Perspectives on Housing, Temple University Press, Philadelphia. Brennan, G. and Buchanan, J. 1980, The Power to Tax: Analytical Foundations of a Fiscal Constitution, Cambridge University Press. Brinkerhoff, R.O. and Dressler, D.E. 1990, Productivity Measurement: A Guide for Managers and Evaluators, Sage Publications, USA.
362 INDUSTRY COMMISSION REFERENCES
Bullock, A., Stallybrass, O. and Trombley, S. 1988, The Fontana Dictionary of Modern Thought, Fontana Press, London. Burgess, R. and Skeltys, N. 1992, The Findings of the Housing and Location Choice Survey: An Overview, Background Paper No. 11, National Housing Strategy, AGPS, Canberra. Burns, P. 1992, ‘Housing Asset Management — The Financial Imperatives’, Revised keynote address to a National Housing Authority Asset Management Conference, Surfers Paradise, Queensland, 28 May. Campbell, R. and Walsh, C. (eds.) 1988, Equity in Housing Support: Papers and Proceedings of the Second Housing Finance Workshop, Housing Industry Association, Canberra. Carlson, D.B. and Heinberg, J.B. 1978, How Housing Allowances Work: Integrated Findings from the Experimental Housing Allowance Program, Urban Institute, Washington. Carter, N., Klein, R. and Day, P. 1992, How Organisations Measure Success: The Use of Performance Indicators in Government, Routledge, UK. Cass, B. 1991, The Housing Needs of Women and Children, Discussion Paper Prepared for the National Housing Strategy, AGPS, Canberra. Coleman, A. 1990, Utopia on Trial: Vision and Reality in Planned Housing, Hilary Shipman Ltd, London. Community Law Reform Committee of the ACT 1992, Residential Tenancy Law, Discussion Paper No. 1, ACT Government, April. Coopers and Lybrand 1989, reported in DCSH (1989a), pp. 170–2. Corlett, W. and Hague, D. 1953, ‘Complementarity and the excess burden of taxation’, Review of Economic Studies, vol. 21, no. 1, pp. 21–30. DCSH (Department of Community Services and Health) 1988, Housing Assistance Act 1984 Annual Report 1986–87, AGPS, Canberra. —— 1989a, Housing Assistance Act 1984 Annual Report 1987–88, AGPS, Canberra. —— 1989b, National Housing Policy Review: Final Report, AGPS, Canberra. —— 1990, Housing Assistance Act 1984 Annual Report 1988–89, AGPS, Canberra. de Leeuw, F. 1971, ‘The demand for housing — a review of the cross-section evidence’, Review of Economics and Statistics, vol. 53, no. 1, pp. 1–10. Devereux, A. 1992, ‘Australia and the right to adequate housing’, Federal Law Review, vol. 20, no. 2, School of Law, ANU, pp. 223–39.
INDUSTRY COMMISSION 363 PUBLIC HOUSING
DHC (Department of Housing and Construction) 1987, Housing Assistance Act 1984 Annual Report 1985–86, AGPS, Canberra. DHHCS (Department of Health, Housing and Community Services) 1991a, Housing Assistance Act 1989 Annual Report 1989–90, AGPS, Canberra. —— 1991b, Explanatory Notes 1991–92, Budget Related Paper No. 8.4A, AGPS. —— 1992a, Program Performance Statements 1992–93, Budget Related Paper No. 9.8A. AGPS, Canberra. —— 1992b, Housing: Choices for a Changing Nation, Budget 1992–93. —— 1992c, Housing Assistance Act 1989 Annual Report 1990–91, AGPS, Canberra. —— 1992d, ‘Community Housing Program: Overview’, Prepared for National Discussions to establish the CHP, mimeo. —— 1992e, ‘Other Housing Options’, Consultation Paper No. 6, National SAAP Evaluation, mimeo, November. —— 1992f, ‘The Relationship Between Support and the Accommodation Provided in SAAP’, Consultation Paper No. 4, National SAAP Evaluation, mimeo, December. —— 1992g, ‘Linkages Between SAAP and Other Support Services’, Consultation Paper No. 5, National SAAP Evaluation, mimeo, December. —— 1993, ‘Community Housing Program; Developing Community Housing Infrastructure, Appendix’, Discussion Paper, Prepared for National Discussions to establish the CHP, mimeo. DHHLGCS (Department of Health, Housing, Local Government and Community Services) 1993a, Supported Accommodation Assistance Program: National Client Census, Home for a Night, One-night Census 14 May 1992, AGPS, Canberra. —— 1993b, Program Performance Statements 1993–94: Health, Housing, Local Government and Community Services Portfolio, Budget Related Paper no. 7.8A, AGPS, August. Diewert, W.E. and Lawrence, D.A. 1993, ‘The Deadweight Costs of Taxation in New Zealand’, Paper presented to the 1993 Conference of the Economic Society of Australia: Perth, 27 to 29 September. DSS (Department of Social Security) 1992, Behavioural Responses of DSS Assistance Recipients to Changes in the Level of the Payment, Report on Survey of DSS Rent Assistance Recipients, Draft Report. —— 1993, A Guide to Social Security Payment, 1 July 1993 to 19 September 1993.
364 INDUSTRY COMMISSION REFERENCES
Econsult (Australia) Pty Ltd 1989, Housing Allowances in the Australian Context: Market Impacts and Cost Effectiveness, National Housing Policy Review, Background Paper No. 1, Canberra. Econsult (Australia) Pty Ltd and Neil, C. 1993, ‘Other Government Programs and SAAP’, Draft of Final Report to SAAP National Evaluation Committee. Econsult Planning and Development 1991, Impact of Rent Assistance Changes on Rents, Consultant’s Report, Department of Social Security, March. Egan, R.J. & Associates Pty Ltd 1993, ‘The Development of Rental Housing Policies and Programs in Australia under the Commonwealth–State Housing Agreement’, Consultant’s Report to Industry Commission’s Public Housing Inquiry, mimeo. Elton, B. & Associates Pty Ltd 1991, The Supply-Side of the Private Rental Market, Consultancy Report for the National Housing Strategy, Background Paper No. 2, DHHCS, AGPS, Canberra. EPAC (Economic Planning Advisory Council) 1988, Income Support Policies, Taxation and Incentives, Council Paper No. 35, AGPS, Canberra. Ernst & Young 1992, Evaluation of CERC Sector Project 3, April. Feldman, A.M. 1980, Welfare Economics and Social Choice Theory, Kluwer Nijhoff Publishing, Boston. Flood J. 1990 ‘Optimal replacement strategies and taxation’, in Building Asset Management: International Building, vol. 3, CIB 90 Building Economics and Construction Management, International Council for Building Research, 14–21 March 1990. —— 1993, ‘Housing Subsidies 1990–91’, Draft Report for the Industry Commission and Commonwealth Department of Health, Housing, Local Government and Community Services, mimeo. Flood, J. and Yates, J. 1987, Housing Subsidies Study, Project No. 160, Australian Housing Research Council, AGPS, Canberra. Forsyth, P. 1991, ‘An accountability framework for government business enterprises’, Annual Research Lecture in Government Accounting, ANU and Australian Society of CPAs, Canberra, 7 November. Giles, D.E.A. and Hampton, P. 1985, ‘An Engel Curve analysis of household expenditure in New Zealand’, Economic Record, vol. 61, no. 172, pp. 450–62. Glazer, N. 1967, ‘Housing policy and the family’, Journal of Marriage and the Family, vol. 29, no. 1, February.
INDUSTRY COMMISSION 365 PUBLIC HOUSING
Graham, B. and Xavier, P. 1987, ‘Financial targets and dividend requirements for Commonwealth government business enterprises’, Paper presented to the 16th Conference of Economists, Surfers Paradise, Queensland, 23–27 August. Gratten, M., Morey, F., Dixon, J., Manning, K., Torzillo, P., Matters, R. and Erlich, J. 1993, ‘An Outbreak of Serotype 1 “Streptococcus Pneumoniae” Infection in Central Australia’, Medical Journal of Australia, vol. 158, pp. 340–2, 1 March. Hendrie, D. 1988, ‘Housing allowances — some empirical findings’, in Campbell and Walsh (1988), pp. 27–42. Hills, J. 1991, Unravelling Housing Finance: Subsidies, Benefits and Taxation, Clarendon Press, Oxford. Hills, J., Berthould, R. and Kemp, P.A. 1989, The Future of Housing Allowances, Policy Studies Institute, London. Housing Review Group of Commonwealth and State Housing Representatives 1991, Report on Functional Review of Housing, November. HREOC (Human Rights and Equal Opportunity Commission) 1989, The Toomelah Review, March. —— 1992, The Call for Recognition: A Report on the Situation of Australian South Sea Islanders, AGPS, Canberra. —— 1993, Human Rights and Mental Illness, Report of the National Inquiry into Human Rights of People with Mental Illness, (B. Burdekin, Chairperson), vol. 1, AGPS, Canberra. HRSC (House of Representatives Standing Committee on Aboriginal and Torres Strait Islander Affairs) 1992, Mainly Urban: Report of the Inquiry into the Needs of Urban Dwelling Aboriginal and Torres Strait Islander People, AGPS, Canberra. IC (Industry Commission) 1991, Seminar: Measuring the Efficiency of Government Business Enterprises, Canberra, edited transcripts. —— 1993a, Taxation and Financial Policy Impacts on Urban Settlement, Report No. 30, 2 vols., AGPS, 7 April. —— 1993b, Provision of Public Housing in Sydney: Some Empirical Evidence, Research Memorandum MR-85, Industry Commission, Canberra, November. —— 1993c, ‘A companion to the Swinburne Testing of the Industry Commission’s public housing rent setting model: presenting additional results’, mimeo. —— 1993d, Annual Report 1992–3, AGPS, Canberra
366 INDUSTRY COMMISSION REFERENCES
Independent Commission to Review Public Sector Finances 1993, Agenda for Reform: Report of the Independent Commission to Review Public Sector Finances, vol. 2, (L.E. McCarrey, Chairperson), Western Australia, August. Inquiry into British Housing 1985, Report, National Federation of Housing Associations, London. Johnston, E. 1991, National Report, vol. 4, Royal Commission into Aboriginal Deaths in Custody, AGPS, Canberra. Kemp, P.A. 1989, ‘Alternatives to housing benefits’, in Hills et al. (1989), pp. 56–71. —— 1990, ‘Income-related assistance with housing costs’, Urban Studies, vol. 27, no. 6, pp. 795–808. Kendig, H. 1990, ‘Comparative perspectives on housing, ageing and social structure’, in Binstock and George (1990), pp. 288–306. Kent, C. & Associates 1990, House Rules: Decision Making and Appeal Rights in State Housing Authorities, Report to the Department of Community Services and Health, AGPS, Canberra, September. Kirkby-Jones, W.J. 1990, ‘Management Accountability for Public Assets’, Royal Australian Institute of Public Administration Conference, 16 July, Canberra. Layard, P.R.G. and Walters, A.A. 1978, Microeconomic Theory, McGraw-Hill, New York. Lee, T.R. 1986, ‘Public sector contributions to home ownership — the role of the State housing authorities’, Urban Policy and Research, vol. 4, no. 1, pp. 8–12, March. Leigh, P. 1989, Investor Activity in Housing, Occasional Paper No. 1, Housing Analysis Group, Ministry of Housing and Construction, Victoria, October. Leonesio, M.V. 1988a, ‘In-kind transfers and work incentives’, Journal of Labor Economics, vol. 6, no. 4, pp. 515–29. —— 1988b, ‘Predicting the effects of in-kind transfers on Labor supply’, Southern Economic Journal, vol. 54, no. 4, pp. 901–12. McCarrey Report 1993. See Independent Commission to Review Public Sector Finances 1993. McLoughlin, J.B. and Huxley, M. (eds.) 1986, Urban Policy in Australia: Critical Readings, Melbourne, Longman Cheshire. Mant, J. 1992, Inquiry into the Department of Housing, Report of the Commissioner, Sydney.
INDUSTRY COMMISSION 367 PUBLIC HOUSING
Mayo, S.K. 1981, ‘Theory and estimation in the economics of housing demand’, Journal of Urban Economics, vol. 10, pp. 95–116. Milligan, V., Shaw, A. and Riordan, T. 1991, Review of Housing Policies, Queensland Department of Housing and Local Government, Discussion Paper on Major Public Housing Policy Issues, February. Mills, E.S. (ed.) 1987, Handbook of Regional and Urban Economics: Volume II Urban Economics, North-Holland, Amsterdam. Moffitt, R. 1992, ‘Incentive effects of the U.S. welfare system: a review’, Journal of Economic Literature, vol. XXX, pp. 1–61. Morel, P. and Ross, H. 1993, Housing Design Assessment for Bush Communities, Tangentyere Council Inc. and NT Department of Lands, Housing and Local Government, Alice Springs. Muth, R.F. 1971, ‘The derived demand for urban residential land’, Urban Studies, vol. 8, pp. 243–54. National Housing Policy Review 1988, Final Report, (D. Persson, Director), mimeo, February. Neil, C., Fopp, R., McNamara, C. and Pelling, M. 1992, Homelessness in Australia: Cause and Consequences, CSIRO and Victorian Ministerial Advisory Committee on Homelessness and Housing, Melbourne. Neilson, G., Streatfield, R.W., West, M., Johnson, S., Glavin, W., and Baird, S. 1993, ‘Rheumatic fever and chronic rheumatic heart disease in Yarrabah Aboriginal Community, North Queensland’, Medical Journal of Australia, vol. 158, 1 March. New South Wales, Department of Housing 1991, Rental for Investment: A Study of Landlords in New South Wales, Research and Policy Paper No. 3, March, Sydney. —— 1992, Annual Report 1991–92. New South Wales, Office of the NSW Ombudsman 1992, Final: The Ombudsman’s Report on Toomelah, Report under Section 26 of the Ombudsman Act, November. —— 1993, Special Report to Parliament: Ombudsman’s Report on the Local Government and Community Housing Program, Report No. 1/93. NHS (National Housing Strategy) 1991, Aboriginal and Torres Strait Islander Housing, Discussion Package, AGPS, Canberra. —— 1992a, Housing for Older Australians: Affordability, Adjustments and Care, Background Paper No. 8, AGPS, Canberra. —— 1992b, Housing Choice: Reducing the Barriers, Issues Paper No. 6, AGPS, Canberra.
368 INDUSTRY COMMISSION REFERENCES
—— 1992c, The National Housing Strategy: Summary of Papers, AGPS, Canberra. NHS (National Housing Strategy) and ABS (Australian Bureau of Statistics) 1992, Housing Characteristics and Decisions: A Comparative Study of Sydney, Melbourne, Adelaide and Canberra 1991, Department of Health Housing and Community Services, Canberra. Nichols, A.L. and Zeckhauser, R.J. 1982, ‘Targeting transfers through restrictions on recipients’, American Economic Review, Papers and Proceedings, vol. 72, pp. 373–7. Norton, W.E. and Aylmer, C.P. 1988, Australian Economic Statistics, 1949–50 to 1986–87, Occasional Paper No. 8A, Reserve Bank of Australia. NZDSW (New Zealand, Department of Social Welfare) 1991, Integrating Government Assistance for Accommodation, New Zealand. Office of Local Government, Department of Immigration, Local Government and Ethnic Affairs 1989, Aboriginal Communities and Local Government in New South Wales, AGPS, Canberra. Ogaki, M. 1992, ‘Engel’s Law and cointegration’, Journal of Political Economy, vol. 100, no. 51, pp. 1027–46. Olsen, E.O. 1987, ‘The demand and supply of housing services: a critical survey of the empirical literature’, in Mills (ed.) (1987), pp. 989–1022. Pabian, J. 1992, Outcomes Report: Housing Needs of Women and Children, Occasional Paper No. 3, Prepared for National Women’s Consultative Council. Paris, C. Randolph, B. and Weeks P. 1993(?), Impacts on Investment Market Following Changes to Landlord and Tenant and Associated Legislation, Paper prepared for the National Housing Strategy, AGPS, Canberra. Pascal, A.H. (ed.) 1971, Racial Discrimination in Economic Life, Lexington. Patel, M., Merianos, A., Hanna, J.N., Vartto, K., Tait, P., Morey, F. and Jayathissa, S. 1993, ‘Epidemic meningococcal meningitis in central Australia, 1987–1991’, Medical Journal of Australia, vol. 158, pp. 336– 40, 1 March. Paterson, J. 1975, ‘Social and economic implications of housing and planning standards’, in Priorities Review Committee (1975), pp. 373–434. Paterson, J., Yencken, D. and Gunn, G. 1976, A Mansion or No House, Urban Development Institute of Australia, Melbourne. Pender, H. and Ross, S. 1993, Income Tax and Asset Choice in Australia, Research Paper No. 3, EPAC, AGPS, March.
INDUSTRY COMMISSION 369 PUBLIC HOUSING
Pidgeon, J. 1993, ‘Testing the Industry Commission’s public housing rent setting model’, Centre for Urban and Social Research Swinburne University of Technology, September, mimeo. Podder, N. 1971, ‘Patterns of household consumption expenditures in Australia’, Economic Record, vol. 47, pp. 379–98. Polinsky, A.M., and Elwood, D.M. 1979, ‘An empirical reconciliation of micro and grouped estimates of the demand for housing’, Review of Economics and Statistics, vol. 61, pp. 199–205. Priorities Review Committee 1975, Report on Housing, AGPS, Canberra. Purdon, C. and Burke, T. 1992, Local Government and Housing, Background Paper No. 6, National Housing Strategy, AGPS, Canberra. Purdon Associates Pty Ltd and National Shelter 1989, National Evaluation: Local Government and Community Housing Program, Department of Community Services and Health, AGPS, Canberra, January. Queensland, Department of Housing, Local Government and Planning 1993, Housing Program Plan 1992–93. REIA (Real Estate Institute of Australia) 1992a, Market Facts: Darwin/Alice Springs March–May 1992, Curtin, ACT, 17 July. —— 1992b, Market Facts June 1992, 31 July, Curtin, ACT. Rimmer, M.T. and Powell, A.A. 1992, An implicitly directly additive demand system: estimates for Australia, Impact Project Preliminary Working Paper No. OP-73, Monash University, Melbourne, August Rosen, H.S. 1985, ‘Housing subsidies: effects on housing decisions, efficiency, and equity’, in Auerbach and Feldstein (1985), Chapter 7. Rothenberg, J., Galster, G.C., Butler, R.V., and Pitkin, J. 1991, The Maze of Urban Housing Markets: Theory, Evidence, and Policy, The University of Chicago Press, Chicago. Sach & Associates with Miller, T. and Burke, T. 1991, The Housing Needs of People with Disabilities, Discussion Paper, Prepared for the National Housing Strategy, AGPS, Canberra. Senate Standing Committee on Community Affairs 1990, Report on Accommodation for People with Disabilities, AGPS, Canberra. Smith, L.B., Rosen, K. and Fallis, G. 1988, ‘Recent developments in economic models of housing markets’, Journal of Economic Literature, vol. XXVI, pp. 29–64, March. Steinberg Schone, B. 1992, ‘Do means tested transfers reduce labour supply?’, Economic Letters, vol. 40, pp. 353–8.
370 INDUSTRY COMMISSION REFERENCES
Stern, N.H. 1982, ‘Optimal taxation with errors in administration’, Journal of Public Economics, vol. 17, pp. 181–211. Stiglitz, J.E. 1982, ‘Self-selection and Pareto efficient taxation’, Journal of Public Economics, vol. 17, pp. 213–40. Stretton, H. 1986, ‘Housing — an investment for all’, in McLoughlin and Huxley (1986), pp. 259–73. Sweeney, J.L. 1974, ‘A commodity hierarchy model of the rental housing market’, Journal of Urban Economics, vol. 1, pp. 288–323. Thurow, L.C. 1974, ‘Cash versus in-kind transfers’, American Economic Review, vol. 64, no. 2, pp. 190–5. Treasury (various years), Commonwealth Financial Relations with Other Levels of Government, Budget Paper No. 4, Circulated by the Treasurer, AGPS, Canberra. —— 1992a, Social Justice for Indigenous Australians 1992–93, Budget Related Paper No. 7, Circulated by the Honourable Robert Tickner, M.P., Minister for Aboriginal Affairs and Minister Assisting the Prime Minister for Aboriginal Reconciliation, AGPS, Canberra. —— 1992b, Budget Statements 1992–93, Budget Paper No. 1, Circulated by the Treasurer, AGPS, Canberra. Tresch, R.W. 1981, Public Finance: A Normative Theory, Business Publications Inc., Plano, Texas. Troy, P.N. 1991, The Benefits of Owner-Occupation, Urban Research Program, Working Paper No. 29, Research School of Social Sciences, ANU, December. True, C. 1979, ‘The economic rationale for government intervention in housing’, Social Policy and Administration, vol. 13, no. 2, Summer. Varian, H.R. 1990, Intermediate Microeconomics: A Modern Approach, Second Edition, W.W. Norton & Company, New York. Victoria, Department of Planning and Housing 1991, Directory of Social Housing Models, Victorian Housing and Residential Development Plan, Project 11, September. —— 1992, The Private Rental Market, Victorian Housing and Residential Development Plan Project 10. Wheaton, W.C. 1993, ‘Land capitalisation, tiebout mobility, and the role of zoning regulations’, Journal of Urban Economics, vol. 34, pp. 102–17. Whiteford P. 1985, A Family’s Needs: Equivalence Scales, Poverty and Social Security, Research Paper No. 27, Department of Social Security.
INDUSTRY COMMISSION 371 PUBLIC HOUSING
Williams, P. 1992, ‘Sustainable housing policies and the role of public sector housing organisations’, Seminar Paper, Urban Research Program, ANU, Canberra, August 1992. Wood, G.A. 1990, ‘Housing finance and subsidy systems in Australia’, Urban Studies, vol. 27, no. 6, pp. 847–76. —— 1992, ‘How do Australian State and Local governments tax residential housing?’, Australian Tax Forum, vol. 9, no. 4, pp. 441–72. World Bank 1992, Housing Indicators Study: Final Report, Washington. Wulff, M., Pidgeon, J. and Burke, T. 1992, ‘Public housing and poverty traps: the impact of rent-setting systems’, Paper Presented at the Sixth National Conference, Australian Population Association, Sydney, 28–30 September. Yates, J. 1989, Shared Ownership, Background Paper No. 6, National Housing Policy Review, Department of Community Services and Health, Canberra.
372 INDUSTRY COMMISSION GLOSSARY
Accessibility Accessibility is about how easy it is for households to change dwellings within the same tenure or between tenures. Barriers to change include search, transaction and relocation costs as well as discrimination and other practices which limit housing options for certain groups. How much choice is available at the time of moving, or seeking to move, also affects accessibility. Affordable housing Housing is affordable when rents or mortgage payments are low enough to leave households with sufficient income to meet the costs of other basic needs, for example food, clothing, transport, medical care and education. Allocative efficiency An optimal allocation of scarce resources between end uses to produce a combination of goods and services that best accords with the pattern of consumer demands. Appropriate housing A term used to describe housing which meets the needs of its residents. It can be described as a combination of the following attributes of housing: its quality; the way in which it is supplied and managed; its location in relation to employment, transport and services; its impact on the environment in which it is located; its suitability for occupants stage of life, household composition and cultural needs of its residents; its design and siting; and the degree of security and control it affords its occupants. Community housing A form of social housing managed by non-profit organisations for social purposes — usually to accommodate households with limited means or distinctive housing needs. Co-operative housing is a form of community housing.
INDUSTRY COMMISSION 341 PUBLIC HOUSING
Community service Community service obligations (CSOs) arise when obligations a government requires a public body to carry out activities that it would not do on a commercial basis or at the required price. Corporatisation The process of incorporating (usually) an existing legal entity, in some cases a government statutory authority, under its own legislation and possibly making it subject to corporations law. Cost rents Rents based on costs of production rather than rents based on currently prevailing market conditions. Deciles Ten percent groupings of an ordered population. Income deciles are determined by sorting all income units according to the amount of total weekly income. Income ranges are allocated to each ten percent ordered grouping of income units. Dwelling A structure or that part of a structure occupied by one household. Economies of density Factors such as those resulting from an increased level of demand within a particular locality or better utilisation of indivisible infrastructure which cause a reduction in the average cost of delivering goods or services. Economies of scale Factors which cause the average cost of producing a commodity or service to fall as the firm produces more of it. Economies of scope Factors which make it cheaper to produce a range of related products together rather than to make each of the individual products on its own. Effective marginal Attempts to take into account not only the statutory tax rate (EMTR) personal tax rate but also other aspects of the tax system which determine how much tax is actually paid. For example, some on low-incomes receive fringe benefits (free medical treatment, cheap transport and deductions on payment for some services such as housing rents) and tax-free allowances (for example family allowances). They lose these as their gross income rises.
342 INDUSTRY COMMISSION GLOSSARY
Efficient market A situation in a market where there is allocative operations and productive efficiency. That is goods and services are produced at least cost and allocated in a manner that best accords with consumer demands. Equity The principles of fairness, impartiality and justice. See also Social Justice and horizontal, vertical and intergenerational equity. Equivalence scales An estimate of the relative expenditure or disposable income required by households of different compositions and in specific circumstances to be equally ‘as well off’ (equivalent) in terms of their consumption. It is usually expressed as a set of numbers where the value corresponding to a single adult is set equal to unity and the values that correspond with other types of households are expressed relative to this household type. Externalities The impacts of activities that confer costs or benefits on a third party that are not fully reflected in prices. These effects may arise during production or consumption phases of the activity and be of an environmental, social or financial nature. General income Cash assistance without restriction on how the support recipient spends it. Headlease Where a property is leased with the intention to re- let to another. Horizontal equity The principle that those in similar circumstances ought to be treated similarly. Household A household is defined as a group of people who live together as a single unit in the sense that they have common housekeeping arrangements; that is they have some common provision for food and other essentials of living. Persons living in the same structure or dwelling, but having separate living arrangements constitute separate households.
INDUSTRY COMMISSION 343 PUBLIC HOUSING
Housing co-operative An organisation that principally aims to acquire and manage housing for its members. Co-operative housing principles stress democratic decision- making, mutual aid, and limitation of individual financial gain. Housing stress Where individuals would have to pay too large a proportion of their income to obtain adequate accommodation. Housing vouchers Vouchers, given as a form of housing assistance, that may only be spent on accommodation. Imputed rent on It is the reasonable value of the services that an owner-occupied owner could be expected to derive from use of the houses property. Imputed rental The notional income stream obtained within owner income occupied housing from its housing services. In-kind assistance Assistance effectively targeted toward increased consumption of a particular good or service. That is ‘effectively targeted toward increased consumption’ when compared to increased consumption resulting from general income support. Income units Income units are: (a) Married couple income units, ie husband, wife and dependent children (if any); defacto relationships are included; (b) one parent income units, ie a parent and at least one dependent child; and (c) one person income units, ie any person not included in (a) or (b) above. Non-dependent children living with their parents are classed as one person income units. Infrastructure A nation’s roads, railways, housing, hospitals, water supply and so on, accumulated from investment, often by governments. It includes intangible assets such as a trained and educated work force.
344 INDUSTRY COMMISSION GLOSSARY
Intergenerational Consideration of principles of fairness within and equity between generations. In the ecologically sustainable development context, there is an emphasis on the obligation of the present generation to provide further generations with at least as much ‘wealth’, including natural assets, as is available to the current generation. Land banking Accumulation of title over land that is destined to be developed so that the release and price of developed land may be affected. Government authorities may do this with the aim of stabilising the price of developed land by reducing speculation. Merit goods ‘Special’ goods that proponents argue merit to be subsidised if the level of their consumption without subsidisation is ‘too’ low. Such goods are argued to have socially desirable properties. Often included are education, health services and housing. Net expenditure Includes any government money paid for a subsidy particular purpose to a consumer group net of any money received from that group. Normal rate of return A rate of return that is the same as the rate of return accruing to other average or ‘normal’ assets within the economy. On-leasing Leasing a headleased property on to another. Out-of-turn Allocation by factors other than waiting time. For allocation example, allocation by need. Performance Quantitative and qualitative measures used to assist indicators in determining how successfully objectives are being achieved. They may be measures of, say, workload, efficiency or effectiveness. Poverty trap A situation where effective marginal tax rates reach such a high level that those on low-incomes (seeking to increase their income) find themselves only a little better-off or even worse-off as a result of efforts to secure additional private income.
INDUSTRY COMMISSION 345 PUBLIC HOUSING
Productive efficiency Production of a given level of output of a good at least cost. Public goods Goods which, because they cannot easily be withheld from one individual without withholding them from all, are often supplied communally (for example national defence, street lighting). Public tenant For the purpose of this inquiry, an individual or household who rents a dwelling from a State housing authority. Quintiles An ordered distribution divided into five equal parts. The bottom 20 per cent is called the lowest quintile. Rent assistance Commonwealth income support for low-income households receiving pensions and allowances from the DSS or DVA to help meet their housing costs when renting in the private rental market. Residual market A good might not be produced because there is a demand for it but may exist as a by-product of the production of some other good. For example, second-hand goods and their markets are a residual from the new goods market. Resource costs The real economic cost of resource use. Financial costs may not always reflect the real cost of an activity. Scale economies See Economies of scale. Security of tenure The extent to which an interest in or title to property is certain or guaranteed. More simply, for owners, purchasers and renters, it means conferring rights and obligations in respect to continued occupation of a home. Service flow subsidy Includes direct transfers, net tax expenditures and other housing related assistance such as public housing subsidies and concessional home loans. Shared equity Schemes where ownership of the assets is shared schemes
346 INDUSTRY COMMISSION GLOSSARY
Social Justice The right of members of a society to an equitable distribution of economic resources; equality of civic, legal and industrial rights; fair and equal access to essential services, for example housing, health and education; and the opportunity for everyone within the society to work towards personal development. Sovereign risk A risk to individuals and non-government bodies that of changes to government policy will affect the financial outcomes of their investment decisions. Targeted housing Any assistance which is tied to housing including assistance housing vouchers and allowances, public housing and headleasing. Tax expenditures Taxation rates may vary from some idealised system of taxation. The ‘benefit’ of this variation where a tax rate is lower than the ‘norm’, is referred to as a tax expenditure. It represents tax revenue ‘notionally forgone’ by government. In this respect it is considered an expenditure. Transaction costs The costs associated with the process of buying and selling. Vertical equity Principle of equity determining treatment of individuals where their circumstances are not similar. In regard to redistribution and welfare it is often the principle of assisting those worst-off, first. Wait-turn allocation Allocation in order of time spent on a list. Those longest on the list having priority.
INDUSTRY COMMISSION 347