Housing and Federation

Release Date: 
29 October 2015
Check against delivery


Thank you for the invitation to be here to discuss Housing and Homelessness in the context of reforming our federation. 

This is a big topic, with many complex issues. I hope today to provide an outline to you on the major issues that we are confronting and how we might be able to resolve them. 

Housing is much more than just bricks and mortar. At its most basic level, it satisfies the essential human need for shelter, security and privacy. It helps people gain social connections and raise a family. Stable housing is important for employment and for child wellbeing and development. Housing is also a significant part of the economy - dwelling investment accounts for almost 5% of GDP. 

Many Australians however find it difficult to afford housing that is safe, secure and appropriate to their needs.

More than 105,000 people were recorded as homeless in the 2001 Census. More than half of households on low incomes renting in the private market are considered to be under 'housing stress'. Other Australians face extra challenges such as mental health or domestic violence. 

There are many things that impact the housing market and therefore housing affordability. Many are influenced by government policy but not all are part of the federation white paper consideration.

Consider some of the larger policies that impact housing supply and demand.

  • The Commonwealth influences housing demand through policies such as immigration levels, financial regulation, income support, superannuation policy, taxation.
  • State and territories impact housing supply through planning, zoning, land release, infrastructure and regulation.
  • Tax settings across the board influence supply and demand.

Nearly all of these individual policy areas are sovereign to one level of government. That is, there is very little overlap and duplication. However, it is the operation of the individual measures collectively that impact on affordability. Governments can work better on these issues. These are being addressed through various reviews, including through the Commonwealth's Tax White Paper. 

The Federation White Paper process does not seek to duplicate this work and completely cover the field of housing affordability. Rather, its focus is on how the roles and responsibilities of governments are working in the areas of (1) direct housing assistance - made up of social housing and rent assistance and (2) homelessness services. 

As you are probably aware, the Governments spend about $10 billion annually on housing assistance with about 55% provided by the Commonwealth and 45% of the funding provided by the states and territories. 

Broadly speaking, the Commonwealth approaches the sector as an income support issue (with two thirds of its funding going towards rent assistance) while the states and territories look it more from a bricks and mortar issue, i.e. the provision of social housing. 

But, it is more complex than that. Because like some many other areas of the federation, there are overlapping responsibilities. The Commonwealth provides about a $1 billion towards social housing; there is overlap in the indigenous housing area, and homelessness services are mainly funded by the commonwealth, but mainly operated by the states. 

All of this creates an accountability deficit, which many in the sector have pointed out. If multiple levels of government are involved, no one is fully responsible. But there are also structural problems with the scope of responsibilities which lead to perverse incentives and sub-optimal outcomes. 

Some of the challenges include:

  1. public housing not being sustainable in its current form as the rental income that states receive is insufficient to cover the costs of maintaining existing stock. Commonwealth rent assistance applies to private dwellings but not to state owned dwellings.
  1. Inequities across the system depending on tenure type. Those who have a public house have thier rents capped based on a proportion of their income, whereas those in the private rental market generally pay higher market rents, and CRA are set to maximum thresholds regardless of the amount of rent paid. The outcome is that only 0.5% of people on low- incomes in public houses spend more than 30% of their income on rent in 2013, but 40% of CRA recipients spent more than 30% of their income on rent.
  1. This situation with public housing can also be a disincentive for people to look for work. They know if their economic circumstances improve, they may not get a public house or could have to exit from one.
  1. Lack of coordination of services. Many stakeholders have noted that because different levels of government are responsible for different parts of the sector, it is more difficult for services to be aligned and coordinated in a way that provides holistic housing services.

Possible solutions

There are three options being considered as part of the Federation White paper process to address some of these issues.

(1)  A Split system

This would involve the states having full responsibility for funding, policy, service delivery and regulation of social housing and homeless services.

The Commonwealth would cease to provide funding for capital for public housing or for homeless services. Instead, it would take full responsibility for Commonwealth Rent Assistance and would extend eligibility to public housing tenants.

This provides a neat solution in terms of clarifying responsibilities for particular measures, and is perhaps the easiest to administer. 

(2) A shared system manager

This largely maintains the same responsibilities across state and federal governments. It would mean that the Commonwealth and states would need to establish more robust governance frameworks to agree national priorities and reforms to deliver more integrated services and create pathways to affordable private rental and home ownership.

(3)  States and territories take full responsibility.

This is the most radical option and would shift all responsibilities for policy, funding, service delivery and regulation for housing assistance and homelessness services to the states. That is, the commonwealth would no longer provide Commonwealth Rent Assistance and would cease funding under the National Affordable Housing Specific Purpose Payment and homelessness funding.

This would increase flexibilities and maximise opportunities for reform across housing portfolios. However, it would break the link that the CRA has with the broader social security payments.

Where to from here?

These options in housing are being considered in the context of other options to better align our federation in schooling, health, VET, early childhood and federal financial relations.

The next step is the release of the Green Paper which will not be dissimilar to the discussion paper and then the White Paper next year. The Tax White Paper will sit alongside this as they impact on each other. The process will continue to be guided by the Expert Panel.

I remain confident that significant reform can be achieved, particularly in the housing

area. There has been great cooperation across the levels of government to date and I trust that this will continue.

Since the beginning of this year, we have had a rare 18 month window of having no Commonwealth or state election. We are seizing this opportunity.

If we get it right, it can not only improve our federation but make a substantial difference to the citizens we serve.