Competition, contestability and informed user choice in social housing

The Productivity Commission's Preliminary Findings Report on introducing competition and informed user choice into human services makes for interesting reading, not least because social housing has topped the list of "services identified as best suited for reform".

The Commission has been asked "to examine the application of competition and consumer choice to services within the human services sector and develop policy options to improve outcomes". This preliminary report identifies six types of human service it considers might benefit from reform - social housing, public hospital services, specialist palliative care, public dental services, human services in remote indigenous communities, and grant-based family and community services. It invites public comment before further investigation and final recommendations will be made.

Before it gets into the guts of it, the Commission's report explores a couple of key issues. First, it considers the role of government in the provision of human services, acknowledging that there are several levels of government delivering and funding a range of complex services in a multitude of different ways. It acknowledges that people who use human services are diverse in their needs, and suggests there are varying degrees of capability around exercising informed choice for consumers. It falls short of discovering that informed choice is just as often limited by a lack of opportunity than by diminished capacity.

It then delves into what it describes as governments' "stewardship role" - identifying policy priorities and intended outcomes, designing models of service provision, and ensuring services meet standards of quality, accessibility and suitability for users. Somewhat ironically, given the later attention it pays to social housing and grant based family and community services, the report asserts that government involvement in the provision of human services comes with a community expectation that services should meet a minimum standard. "If governments do not adequately discharge their stewardship function," it says, "the effects can be damaging to service users, providers and governments".

Evidently a range of successive governments have missed that particular memo, especially when it comes to services that might be considered as some form of "welfare". The report cites vocational education and training reforms to demonstrate its point, but we suggest social housing and income support could each have made a more impressive case study. Governments who take this "stewardship role" to heart should have no trouble justifying the associated costs of welfare, instead of taking every opportunity to rationalise while looking for alternative "solutions".

Finally, the report considers just what "competition, contestability and informed user choice" might even actually mean. Competition involves services striving against one another to attract users, by reducing the price they charge, improving the quality of their service, innovating, or otherwise tailoring services to meet the needs of users. In a human services context, this usually means a voucher system, where users are able to choose from a range of providers based on their preferences. In the absence of any discernible range of human service providers, competition devolves to the point where service providers compete for government contracts, and services users simply take whatever they can get.

Contestability means ensuring that service providers do not get too comfortable, by placing upon them a "credible threat of replacement if they underperform". The report outlines several criteria for beneficial contestability: ongoing performance monitoring of providers, alternative providers or management teams that pose a credible threat of replacing an incumbent, and a mechanism to replace underperformers. At its very worst, this amounts to micromanagement, which simply distracts service providers from the provision of all but the most measurable of service. They must focus instead on securing their continued funding, and when combined with the kind of competition that comes from scarcity this helps to explain why service users are so rarely able to find a range of services from which to choose.

Which brings us to "informed user choice". That's all about ensuring consumers are empowered to be actively involved in decisions about the services they use - placing users at the heart of human services delivery. Of course, we'd say the same should go for service design and determining policy objectives as well. But achieving such things is all but impossible without strong, funded commitments to the provision of service in the first place.

Taking into account all the filters and complexities through which informed user choice sometimes needs to exist (capacity, agency, identifying needs, etc), the report suggests that "governments may need to facilitate the flow of information about services to the user and provide support to users to help them act on that information". With respect, they may also need to get their heads around competition and contestability properly first.

Then, with all of that behind it, the report looks at the scope for reform of its six identified human services. At the top of the list is social housing. It concludes:

Introducing greater competition, contestability and user choice could improve the effectiveness of the social housing system in meeting tenants' needs.

• There is substantial room for improvement in the current social housing system. There are long waiting lists, poorly maintained and underutilised properties, and a lack of information available to allow governments to select and monitor the performance of service providers.

• Four out of five social housing properties are managed by government entities, yet there are a large number of housing providers - both not-for-profit and for-profit - that could perform this service. Community housing providers outperform public providers on some indicators, including tenant satisfaction and property maintenance.

• There are currently not enough social housing properties to meet demand, limiting the housing choices available to social housing tenants. Nonetheless, approaches implemented internationally allow social housing tenants greater choice of home. Reform options could be explored in Australia to address supply constraints and increase the housing options available for prospective social housing tenants.

There's a lot to unpack in there, and we'll come back for a closer look as soon as we can. In the meantime, you can download the report here. If you'd like to lodge a submission in response to the preliminary report, you can do that here. Submissions are due by October 27th 2016.