A Competitive Market Can Fix Australia’s Housing Crisis
Wednesday, 19th October 2016 at 10:22 am
A new affordable housing model, developed by a private sector infrastructure body, promises to deliver returns from social housing at above market rent, without increasing the cost for tenants in need.
The report from Infrastructure Partnerships Australia (IPA), released Tuesday, found the existing social housing stock delivers poor financial returns and has not adapted to the community needs.
Under the new model, developed with KMPG, each state would sell its billions of dollars worth of “legacy” social housing, channel that money into a fund which would be used to cover the cost of housing subsidies and, in turn, generate income to boost the housing supply.
The proposed Social Housing Future Fund for each state and territory jurisdiction would be similar to the federal government’s Future Fund, and would grow funding for each public housing tenancy to an assumed 120 per cent of market cost.
IPA chief executive Brendan Lyon told Pro Bono Australia News they had been monitoring public housing closely for a number of years.
“What we’ve discovered on the way… is that the major problem that affects the public housing system is that we have too little money, too much demand and too few properties to accommodate it,” Lyon said.
“The sector must be financially sustainable and must have the capacity to accommodate the people that should be accommodated and should have the financial capacity to provide the wrap around services that they need.
“Public housing has a very rich endowment, many tens of billions of dollars in the major states, and we’ve looked at how you could redeploy that capital in a way that meets the core problems and the core challenges facing the system, how it can provide more money going into more places and better services for people.”
He said the model would be a 20-year staged conversion where stock is stold as existing tenancies expire.
“Large three-bedroom homes on the outskirts of the major cities [are] surplus to need, and not matching the needs of the current tenant profile.
“You convert those into a financial asset, you invest it for a commercial return, and all of a sudden you’ve got billions and billions of dollars of additional money that’s available without relying on stretched government sector budgets.
“This is really about how do you get more money and better services in place, how does government organise itself to know the problems and how does it fund itself to be able to purchase the solutions.”
Lyon said the above market revenue streams mean community housing providers would be in a position to leverage funding from the private sector.
“It will increase competition,” he said.
“This will create above market revenue streams, it will create a sustainable system – that will begin to switch on things like the ability of the community housing providers to borrow debt and to source equity.
“And in that way it really reverses the problem where at the moment we’re asking community housing providers to fill the gaps between what’s affordable and what’s been delivered.”
“We’re putting additional money on the table. It means that we can stop pretending that everything will be fine if we go with the status quo. And it also means that we’re giving the people who are experts in this field, the community housing providers, both the regulatory structure and, importantly, the funding they need to do it well.”
He also called on community leaders in the charitable and welfare sector to support the proposed model.
“We think it’s a very thoughtful and considered solution to the major problem, which is getting more money to be able to provide the services back,” he said.
“As to whether it becomes a workable model that’s implemented, that’s really going to depend on the charitable and welfare sectors being able to call this on.
“We have to remember that there are no votes in public housing, it’s not an issue that resonates with the community, it’s an issue that’s forgotten. That’s why it’s been allowed to fall into the situation that it is with people living in third-world conditions in one of the richest countries on earth.
“What we would really like to see how is a high degree of support and interest from the community and welfare sectors because they live this problem every day.
“It’s easy to be cynical, it’s easy to be challenged by change – certainly we’ll see that in terms of housing departments, housing ministers and others.
“But this is a real and workable solution that does bring billions of dollars of new money, does set up a system that’s geared around tenant need, and means that the system’s not based around the assets and the provider.”