Tuesday, September 9, 2014

NSW Land and Housing Corporation: receipts and payments

Our recent post about the Millers Point social housing sell-off triggered a discussion in the comments section about the NSW Land and Housing Corporation's finances. Let's have a look at LAHC's most recent (2012-13) annual report, and particularly its statement of cash flows (page 31), to find out where LAHC's money came from, and where it went. 


First, the money going in (receipts).

In 2012-13, LAHC received, in total, $1.17 billion from its operating activities and investing activities. Most of this money – $762 million – came from tenants, in the form of rents and other charges (yes, social housing tenants pay money to LAHC, not the other way around).

The next largest source of receipts was sales of property, plant and equipment. Proceeds of sales came to $190 million, of which $152 million were from sales of residential properties.

In third place, government grants to LAHC came to $145 million. Of this, $19 million came directly from the Federal Government, the rest from the NSW Department of Family and Community Services... but at least some proportion of that State money came indirectly from the Federal Government, because it gives the NSW State Government about $400 million per year for various housing-related purposes under the National Affordable Housing Agreement. (And as an aside, Federal government money is not taxpayers' money).

Now, the money going out (payments).

'Property and residential tenancy' payments were the largest category – at $454 million – and include payments for council and water rates ($210 million) and repairs and maintenance ($203 million).

Next largest were payments for the purchase of property, plant and equipment: $265 million. Of this, $115 million was spent acquiring, redeveloping and building social housing.

And then there were payments for administrative and working expenses ($164 million), personnel services expenses ($55 million) and some smaller categories. Total payments: $1.04 billion.

So, at the end of the 2012-13 year, LAHC's total receipts exceeded total payments by $133 million. Add to that $30 million cash from the previous year, LAHC ended the year with $163 million in the bank.

It also ended the year with 1 328 fewer social housing properties (145 248 properties). The total value of its assets, however, was up $2 billion ($34 billion).

Some interesting points:
  • Rents and other charges received from tenants ($762 million) were more than enough to cover all payments relating to operating activities ($726 million, being council and water rates, repairs and maintenance, admin, etc).
  • LAHC received $152 million from the sale of social housing stock, but spent considerably less ($115 million) on purchases of new social housing stock.
  • The Auditor-General elsewhere reports that in 2013 LAHC had a maintenance backlog of $317 million... yet it also had $163 million sitting in the bank.

12 comments:

  1. looks to me like they could afford to do some of the repairs tenants currently can not get done unless it goes to ncat. everyone deserves to have a livable house/flat/unit/whatever.

    ReplyDelete
  2. If you argue that governments don't spend taxpayers money, then then by corollary you must accept that they don't receive any income from housing tenants either.

    According to your argument (which is grossly misplaced, might I add) all of those monies are just a fabrication or construct. You suppose a government who is 'always solvent, and can afford to buy anything for sale in their domestic unit of account even though they may face inflationary and political constraints' (quoting your Wikipedia source). Tell that to Argentina. Or more recently Greece. Or Spain. Or...

    ReplyDelete
  3. Looks like they are fattening it up for privatisation ...

    ReplyDelete
  4. Anon (at 11:11 PM)

    Your proposition (first paragraph) is wrong. Currency-issuing governments do not spend tax receipts. LAHC receives income from tenants. LAHC is not a currency-issuing government.

    A government that issues its own currency is indeed always solvent with regard to liabilities in its currency.

    Argentina has its own currency, but from 1991-2002 pegged it to another currency ($US).

    Greece and Spain do not have their own currencies.

    Crucial differences from Australia.

    Further reading:

    http://bilbo.economicoutlook.net/blog/?p=24010

    ReplyDelete
  5. Chris, currency is fungible. I don't understand how you can argue that the receipt of funds on the debit side by the government is disconnected from the credit side of payment of funds. Seems like a bizarre argument...

    "The Australian Government spends by crediting the bank accounts of recipients of payments. This is effected by crediting the relevant banks' reserve accounts at the Reserve Bank by the same amount. ...When a person pays taxes to the Australian Government, they direct their bank to debit their account in favour of the Government and, in doing so, the bank also directs the Reserve Bank to debit its reserve account by the same amount."

    ReplyDelete
  6. Anon (at 5.00 PM)

    You refer to 'the government'. I refer variously to the Australian Government and to the LAHC. They are very different things.

    The Australian Government is a currency-issuer, and as such spends by issuing currency, and does not need to previously receive money from taxes to do so.

    The LAHC does not issue currency, and to spend must get money from somewhere: in fact it gets most of its money from its tenants, some from sales of assets, and some from the NSW State Government (which also does not issue currency) and the Australian Government.

    ReplyDelete
  7. Well, actually I was merely referring to government in the same sense that you referred to "Government" in your initial post, which is the same sense that the LAHC's 2012-13 annual report at page 47 refers to 'Government' under "Total Government Grants" (of $145 million), being the sum of Federal and State government grants .

    If you are seeking to distinguishing between state government as non currency issuer, and federal government as currency issuer... then your arguments fall apart. In that case you'd have to admit as a stamp-duty payer in NSW then my funds certainly contribute towards the NSW government's contribution to social housing. So case-closed.

    In terms of defining the LAHC, I don't suppose we disagree. It is a government entity in that is is tasked with meeting the government's policy objectives yet it is packaged in a the shell of a public trading enterprise (PTE), in the same way that other government service providers are.

    From the NSW Budget: "The public trading enterprise (PTE) sector comprises a range of government businesses providing major economic services. This includes State Owned Corporations (SOCs) governed by the State Owned Corporations Act 1989.
    ...
    Non-commercial PTEs receive Budget funding to meet policy objectives agreed with the Government when income from customers is insufficient to meet operating expenses and/or capital expenditure. Non-commercial PTEs include government businesses in the transport (excluding ports) and social housing sectors. "
    Source: http://www.treasury.nsw.gov.au/__data/assets/pdf_file/0019/21943/bp2_ch8.pdf

    ReplyDelete
  8. Anon (at 12.31)

    The initial post distinguishes between the Federal Government (the currency issuer) and the State Government (not a currency issuer).

    The importance of the distinction is explained in this earlier post:

    http://tunswblog.blogspot.com.au/2014/07/nsw-state-budget-2014-part-2-where-is.html

    As for where your stamp duty payments went... as I indicated in the post, LAHC received $126 million in grants from the NSW State Government... which itself received about $400 million in housing-related grants from the Federal Government. And LAHC had $163 million resting in the bank at the end of the year. Your (State) tax dollars at work? At least for 2012-13, it's not at all clear.

    What is clear is that rents and other charges paid by tenants comprise by far the largest source of receipts for LAHC.

    Re LAHC as a State PTE - yes, we agree. Thanks for linking the definition.

    ReplyDelete
  9. 1.Yes, i think your aside "Federal government money is not taxpayers money" has diverted attention from the main and crucial issue here - the mantra of state govs that public housing is a drain on the public purse. To be honest, i think you're splitting hairs and the process described in the other article is really only something that full-on finance nerds can easily grasp. It’s counter-intuitive at best, if not borderline disingenuous, to claim that Fed $$$ isn’t taxpayer’s money. Surely if we didn’t pay the taxes, the gov wouldn’t have the revenue needed to provide multiple public services like the NAHA.? By your smarty-pants reasoning, there’s even less justification for Joe Hockey to have his knickers in a knot about the need to raise revenue by crucifying the poor – if taxes (and presumably the deficit) are just an ILLUSION, a figment of keystrokes? Julia Gillard had no business slashing single parents’ pensions (an outrageous move but that’s another story), she could have just magically cooked up more revenue through these “electronic figments of accounting” of which you speak. If i tried really hard i could get my head around it, but I didn’t come here today to get a headache or have an argument!

    2. When discussing public housing could you please not refer to it as social housing (unless you are actually referring to both platforms in which case a concession to brevity may be understandable). Here in Victoria we public tenant activists have made a very conscious decision to own and protect the ‘public housing’ label. Once it’s gone as a concept, its physical death can’t be far behind.

    3. Thankyou for detailing the true picture of NSW public housing finances. These exposes are crucial to countering the phoney rationale of a broke system that drives the dismantling of public housing across most States. In Victoria we have also uncovered a profit of around $100 million for the past few years once operating costs are deducted from rental revenue (“Rental operating costs include maintenance, rates and charges, tenant utilities and operating expenses,” DHS Annual Report).

    Previously under State Labor, when the rents of Aged & DSP tenants were frozen instead of the usual twice-yearly hikes in line with pension increases, the rental revenue was down by about $20 million.

    Given the above $100 million profit, we wrote to the Vic Aud-General asking how his report ‘Access to Public Housing’ 2012 could assert that the Housing & Community Building Division was wearing a deficit of $42 million. He responded this was due to the Annual Reports having no ‘line item’ for the ‘administrative costs’ of the Housing Division.

    We can’t fully accept this response for several reasons but essentially there’s no evidence that the Aud-Gen has done the groundwork, the reference for this central conclusion of the above report is “In 2011, the Minister for Housing commissioned a review of the financial position of public housing. The review found that 2011 operating costs exceeded rental revenue by 42 per cent, up from 30 per cent in 2002".

    The Vic gov refuses to release the Minister’s review but we believe it was most likely carried out by KPMG. Hence the deficit. Any interest in these murky matters, and offers of expertise, from interstate policy wonks and financial geeks would be heartily welcomed.

    ReplyDelete
  10. Hi Matilda

    1. Understanding public finances is too important to be left to 'finance nerds' or, so that matter, any of the major political parties. There's nothing 'smarty-pants' or 'disingenuous' about saying that Federal Govt spending is not constrained by tax receipts. On the contrary, what's disingenuous, or at best fundamentally misconceived, is the claim that the Federal Government cannot afford to spend money on worthwhile public purposes like the alleviation of poverty. It is essential that more of us get our heads around this, so please read, share and discuss our posts (labelled 'Modern Monetary Theory') and follow the links to bill blog, New Economic Perspectives and elsewhere.

    2. I understand your point about 'public housing'. In the context of this post, 'social housing' is appropriate: LAHC owns properties under management of both Housing NSW and community housing providers.

    3. LAHC's financial statements are complex, and the presentation here focuses on its cash position as stated in the most recent annual report. The position changes from year to year; we look forward to the 2013-14 AR. Other analyses may consider other aspects of LAHC's finances.

    ReplyDelete
  11. Yeah, what the hell is going on? My financial counsellor picked up repeated errors in the rent that I am charged and in the case of Community Housing in my experience as a tenant they are accountable to no one. I went to the registrar who couldn't see the problem- we have wards of the State in our complex who don't pick through thier bills like I do.
    So, the Federal money comes via rent assistance and welfare payments combined? Yeah, I'm not a finance nerd but I do think that Housing should cost the tenant 25% of income including rent assistance- not 100% of rent assistance then 25% of what is left.
    So for me, Newstart I get $651 per fortnight which I am grateful for- I have worked all my life but I am off work at the moment due to something I can't publicly talk about right now.
    So, what are Housing doing with all of that money? It would be good to know. The organisation I am a tenant with do repairs only if they like you- they totally show favouritism- they have purchased a woman next door an air conditioning when another woman Nextdoor in a wheelchair doesn't have deadlocks!

    ReplyDelete
  12. We have their Funding sheets and who they fund would make a grown man cry ie: Local Government, Catholic Church. Certain Medical Centres Neighborhood centres community housing. Community legal centres etc etc. It doesn't sound too bad - does it? Unfortunately; Housing believe they own them and their tenants. So if there is a 'bump in the night' your number is up when it comes to most things. It was a real eye-opener but answered many of our questions.

    ReplyDelete

Please keep your comments PC - that is, polite and civilised. Comments may be removed at the discretion of the blog administrator; no correspondence will be entered into. Comments that are abusive of individual persons, or are sexist, racist or otherwise offensive will be removed, so don’t bother leaving them.