Friday, May 2, 2014

What the Commission of Audit says about housing

The much anticipated report of the National Commission of Audit was released yesterday.

 (Chair of the National Commission of Audit, Tony Shepherd)

Of the comment generated so far, we reckon Fairfax's Peter Martin has nailed it with his criticism of the partial nature of the Audit: it looks at government spending, but not really at tax, and certainly not at tax expenditures.

Martin gives the example of retirement incomes; we can also see the flaw in the Audit in what is says about housing.

The Audit zeroes in on spending on Rent Assistance ($3.6 billion pa), affordable housing – in particular, the National Affordable Housing Agreement ($1.3 billion pa), which funds social housing, and the National Rental Affordability Scheme ($1.5 billion over four years) – and alleviation of homelessness ($159 million pa). It frames these as 'programmes that duplicate State responsibilities' (on the basis that 120 years ago, it did not occur to the drafters to include 'housing' in section 51 of the Australian Constitution).

The Audit notes the 'limited success' of these programs in delivering affordable housing and reducing homelessness, and so considers that the Commonwealth should pull back and 'limit its involvement in this area to providing rent assistance to income support recipients'. That includes social housing tenants, who'd henceforth be paying market rents. There'd be no housing agreements or grants to the States and Territories for social housing or affordable housing; the National Rental Affordability Scheme would go too.

The Audit mentions the Henry Review in support of the case for extending Rent Assistance and market rents to social housing; it does not mention, however, that the Henry Review also recommended an additional payment for 'high needs clients' of social housing.

And that's it. Because it doesn't really look at taxes, and certainly not tax expenditures, the Audit misses the really big housing subsidies: the $30 billion pa benefit for owner-occupiers effected by not taxing their capital gains, imputed rents or land values; and the $7 billion pa benefit for landlords effected by not taxing income spent on the costs of speculation (negative gearing) and only half-taxing the gains of speculation.

These benefits have encouraged households with money (or credit) to spare to spend it on their own housing, or on speculating on rental housing, driving up prices and limiting the effectiveness of the Government's own spending on social housing and affordable housing and homelessness alleviation.

The Audit has missed the real problem in housing policy, and the opportunity of offering real solutions.

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