Report Calls for Funding Subsidy to Bridge the Gap in Social Housing Costs

A draft report into social and affordable housing in NSW has called for a subsidy to bridge the estimated $950 million a year needed to run the social housing system in that state – a recommendation that has not-for-profit support.

The Independent Pricing and Regulatory Tribunal (IPART) draft report said it found little scope to change the current income-based approach for setting the rent tenants pay for social housing without making it unaffordable.

“At the same time, to be financially sustainable, housing providers need to receive sufficient rent revenue to recover the full efficient cost of provision,” the report said.

“Therefore, we are recommending a funding model where tenants continue to pay an income-based rent contribution, and government pays housing providers an explicit subsidy equal to the gap between the tenant contribution and the market rent.

“Such a funding model is currently used in New Zealand to achieve both affordable and financially sustainable social housing.

“We note that social housing providers, including the NSW government, are already implicitly paying for this gap through a combination of operating losses, deferred maintenance, unfunded depreciation and forgone returns on their assets.”

The report said an appropriate governance framework would also need to be in place to help ensure tenants and taxpayers received good value from their contributions to funding social housing.

“In addition, eligibility, prioritisation and allocation processes need to be reformed to improve the outcomes of social housing for both tenants and the community, including enhancing opportunities to find and sustain employment for those who can take advantage of them,” the report said.

“In order to assist those most in need, we consider that the government should focus available funding on social housing and alternative assistance for households in the lowest income groups. We therefore have not developed a recommendation for a rent model for affordable housing.

“Some time-limited private rental subsidies are already offered as an alternative to social housing for targeted households. We consider that these have the potential to be implemented more widely to assist more households in the short to medium term and avoid some of the need for longer-term social housing.”

IPART chair Dr Peter Boxall said: “Right now, there are almost 60,000 households on the waiting list for social housing in NSW, and the current system for providing housing lacks sufficient funds to maintain existing properties, let alone provide more.

“Existing social housing assets are not being maintained in acceptable condition, and the supply of social housing is not keeping pace with demand which has increased markedly in the past five years due to population growth and the decline of general housing affordability, particularly in Sydney.”

He said IPART had examined a range of options and was now seeking feedback on its draft recommendations before preparing a final report for the NSW government in June 2017.

IPART agrees we need greater #Investment in #affordablehousing in #NSW to address #inequality #nswpol @GuardianAus https://t.co/tihMQfwA6r

— Homelessness NSW (@HomelessnessNSW) April 13, 2017

Housing and homelessness peak bodies said the IPART draft report into social and affordable housing in NSW highlighted the scale of investment needed to fix the state’s social housing system.

The NSW Federation of Housing Associations and Homelessness NSW welcomed IPART’s acknowledgement that housing providers need an explicit subsidy to bridge the $950 million a year it estimates is needed to run the social housing system properly.

Homelessness NSW CEO Katherine McKernan said large scale investment and government commitment to addressing the issue was needed to improve living standards for current housing tenants and fund investment in more homes for people who need them.

“IPART has shown very clearly that the system is unsustainable and can’t continue as it is,” McKernan said.

“We agree with IPART that there need to be clear outcomes from the investment made. We need a clear property standard that everyone understands, improvements in tenant satisfaction across the board and a target for additional social housing that is consistent with the demand out there. Reporting on these outcomes must be transparent.”

Federation CEO Wendy Hayhurst said IPART had highlighted the direct link between spiralling rents and house prices and increased pressure on the state’s social housing system, with waiting lists up to 10 years in many areas and demand for homelessness services in Sydney increasing by 35 per cent between 2013/14 and 2015/16.

“IPART has understandably said that people in greatest need of social housing must be given highest priority for social housing, but there’s a huge group of people who risk missing out in the current debate around housing policy,” Hayhurst said.

“They don’t qualify for social housing but they don’t earn anywhere near enough to consider buying and they’re paying more half their income or more in rent. Many are working in important jobs but ones that don’t pay high wages. It’s why we argue for more ambitious affordable housing targets in the district plans and a comprehensive housing strategy that addresses the needs of the whole population.

“It makes good economic sense too. If more people are in affordable housing paying a reasonable rent then they have more to spend on goods and services and the government gets something back via GST.”

Federation and Homelessness NSW will be preparing submissions on the draft report which are due by 12 May 2017. Online submissions can be made here.