A government-sponsored bank won’t help social housing

Michael Potter

28 April 2017 | Ideas@TheCentre

MP social public housing sirius building

Just over 400,000 Australian households live in social housing, comprised mainly of public and community housing. Tenants pay on average $9,444 per year below market rents: the main reason for the lengthy queue to get into social housing — at least 10 years wait for most of Sydney.

My latest research report, Reforming Social Housing: financing and tenant autonomy, states many other issues face the sector including poor maintenance, mediocre tenant satisfaction, and many dwellings inappropriate for tenant needs. The sector is arguably financially unsustainable; gives tenants almost no choice over accommodation; and is beset with substantial inequities and poor incentives.

These problems won’t be fixed by the latest proposal for a government-backed bond aggregator — effectively a government bank for social housing. An aggregator without government sponsorship could be worthwhile, but government backing brings with it many problems; particularly discouraging necessary reform of the sector.

Any government backing for the aggregator is only worthwhile if the benefit is fully passed on to housing providers. So why not give the benefit directly to social housing instead of using a costly and non-transparent intermediary? And if government-backed lending is good for social housing, why not do it for schools, hospitals, roads, and infrastructure more broadly?

Governments should instead pursue other reforms. Funding to state governments for public housing should be replaced by funding direct to tenants, while the remaining funding should strongly encourage other state reforms.

These reforms include allowing new social housing tenants to choose accommodation; differentiating rent by dwelling quality; ensuring policies treat public and community housing similarly; and transferring public housing to the community sector.

States should also have incentives to remove restrictive planning laws that cause housing unaffordability and increased social housing costs.

Such reforms offer more value than a government-sponsored bond aggregator, by giving tenants much more autonomy over their lives, making the sector more efficient and responsive to tenant needs, and doing much more for social housing affordability.

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