Want to stay housed? Stay poor.

In the 1930s, when the conservative NSW State Government of Premier B S B 'Bertie' Stevens was considering what to do about housing policy, it looked to Britain. Premier Bertie dispatched himself on a study tour of 'Housing, Slum Clearance and Abatement of Overcrowding in England' (1937), and returned to establish the shortlived Housing Improvement Board, which built the happily much longer-lived Erskineville public housing estate.

Now, a conservative British Government is considering making reforms to social housing tenancies there, including allowing British social landlords to adopt a policy familiar to public housing tenants here in New South Wales: fixed term tenancies, with reviews as to the tenant's continuing eligibility.

And the TU has appeared in the thinking Briton's newspaper, the Guardian, to warn why this is a terrible idea.


Fixed terms subject to reviews as to eligibility have been part of New South Wales public housing policy since 2005, when they were introduced along with increased rent rates for so-called moderate income earners. Both discourage public housing tenants from working.

We've discussed the work disincentive effect of public housing rent policies a couple of times previously (and see the TU's paper, too). This effect is particularly acute in the 'moderate income' band (the dollar amounts that define the band vary according to household type), because over the band the rent rate slides up from 25 per cent of household income to 30 per cent – and, in marginal terms, that means about 50 cents in every additional dollar earned in the band goes to Housing NSW in rent. And then there's income tax, reduced Centrelink benefits, and so on.

The reviews as to eligibility also refer to the moderate income band. If at the end of the fixed term of your tenancy (two years, five years or 10 years, depending on your circumstances) your household income is above the higher end of the moderate income band, you are ineligible to continue in public housing, and you can expect to receive a termination notice on that ground. You don't just lose so much of your earnings – you lose your house altogether.

The work disincentive effect of losing eligibility cannot be measured so readily as that of the rent rates in terms of effective marginal tax rates. But we can measure it in terms of actual results – and the actual result is that just about no-one in public housing in New South Wales earns so much as to lose eligibility. In the first 10 months of conducting reviews in 2007-08 (these are the only figures available), Housing NSW reviewed 3 514 tenancies – and just 28 were found to be ineligible. That's less than one per cent.

The whole point of this policy was to move moderate income earners out of public housing, so as to move people in from the waiting list. But in fact there's barely been any movement, and negligible benefit to the people on the waiting list. One might speculate whether more people might have moved out under their own steam, and more from the waiting list moved in, if tenants were not discouraged from working by high effective marginal tax rates and the prospect of losing their home at a time not of their choosing .

And tenants' decisions about work aren't the only decisions affected by this policy: it also bears on decisions about whether one's young adult children stay at home or must move out, or whether one's girlfriend or boyfriend takes the next step and moves in as a partner (because if your grown up kids or partner earns too much money, you'll lose your home). This is an odious interference in what should be personal decisions.

It should be said that there is another explanation for the failure of the policy to generate any movement of tenants and applicants: that is, that just about everyone comes in the higher end of the moderate income band because it has been set too high. But this explanation does not stack up. Housing NSW's 'moderate incomes' are quite modest. You can get a sense of this from the following tables, which show for various household types on incomes just above the respective moderate income band whether median rents for appropriately-sized private rental premises across Sydney of appropriate are affordable (ie less than 30 per cent of income), unaffordable (ie more than 30 per cent – the benchmark for 'housing stress') or very unaffordable (more than 50 per cent – 'housing crisis').

These tables update the tables in the TU's paper, linked above, with median rents data for the March 2011 quarter, and Housing NSW's current moderate income thresholds. ('Andy', 'Beth' and 'Cass' appear in the paper as typical households.)

(Inner ring Sydney LGAs)

(Middle ring Sydney LGAs)

(Outer ring Sydney LGAs)

As well as indicating the modesty of a 'moderate income', these tables also give a sense of how the policy bears on decisions about work. You can see how a public housing tenant who is giving thought to working and earning more might take a look at what they'd pay in the private market if they became ineligible... and in the inner and middle rings, just about nowhere are median rents affordable, and even median rents in most outer ring LGAs are unaffordable too. And you can see why they might take pains to stay right where they are.

We understand that British social housing landlords are to be given a choice as to whether they adopt this policy. Let's hope they choose not to, and instead try to ensure that social housing is a place where people are not afraid of enjoying the stability it gives them to get educated, and get employed. And let's hope the NSW State Government does the same for public housing tenants and applicants here.