Monday, December 17, 2018

Big numbers and good intentions: Labor's Affordable Housing Plan

The Federal ALP conference is happening in Adelaide at the moment, and one of the big early announcements was a plan to build a lot of 'affordable' housing. This can probably be treated as the first big housing announcement of the coming election campaign. Check it out here.

It has been met with near-rapturous support from community housing providers and their supporters, like the Everybody's Home campaign. Others, like ACOSS have been more circumspect. And some on twitter have raised some concerns. Let's dig in to what the policy is, and what we might expect to deliver.,

At its heart, this would be a reboot of the National Rental Affordability Scheme launched in 2008 by the then ALP government. Originally intended to create 50,000 'affordable housing' dwellings, the program was ended in 2014 with less than 40,000 properties either delivered or approved. The first dwellings built are coming to the end of their 10 year commitment this month, making this announcement from Labour timely. This NRAS 2.0 follows a similar model, scaled up to creating 250,000 'affordable housing' dwellings, though with some notable exceptions.

NRAS 'NRAS 2.0' proposal
Open to individuals and corporations Only open to corporations
Must be managed by an 'approved participant' - can be for profit or not-for-profit Must be managed by a 'registered community housing provider' - most, but not all, are NFP
Leased to people on low to moderate incomes, at 80% or less of market rent Leased to people on low to moderate incomes, at 80% or less of market rent
No restriction on resident's immigration status Not open to "international students, foreign workers and other non-residents"
Scheme length: 10 years per dwelling. Scheme length: 15 years per dwelling.
Subsidy in 2018/19 dollars - $8335.75 pa from federal government, and $2,778.58 pa from state governments. Subsidy in 2018/19 dollars - $8,500 pa from federal government. No detail on whether state governments will also contribute.
TOTAL $111,921.30* TOTAL $127,500 (plus any state contribution)

*It is open to the investor to exit the scheme at any time without penalty (apart from no longer being paid the subsidy) and we are aware of some instances where they did, or where the property stopped being eligible for the subsidy. It is unclear whether the proposal will operate similarly.

While a commitment to addressing housing issues is welcome, this is a limited model in a number of ways. There may be good reason to doubt whether it will deliver the 250,000 dwellings promised, and whether 80% of market rent is any kind of good way to ensure the dwellings are actually affordable.

The subsidy is very generous - anywhere on market rent of $815 or less receives more in subsidy than they give up in discount. At lower rents (anything below $407) the owner receives more than double the discount.

By closing access to private investors Labor are clearly hoping for more 'institutional investors'. This does not mean not-for-profit housing necessarily, nor necessarily better-behaved landlords. Just under half of the current NRAS properties are managed by for-profit providers.

There are a few obvious paths to funding. The federal National Housing Finance and Investment Corporation acting as a bond aggregator might lend to community housing providers for them to build and operate "NRAS 2" properties directly. The subsidy from this proposal would make the financial viability of those loans much easier to meet.

Inclusionary zoning models of the type able to be required under planning mechanisms like SEPP70 are also likely to utilise the proposal. Property developers in areas using inclusionary zoning rules will need to set aside some housing in large developments for affordable housing, and this payment will in many cases more than repay the lost revenue from that requirement. That's not an excellent result, as it is merely cost-shifting from the private sector to the public sector.

It is also very likely to form part of for-profit build-to-rent models because it will make those development propositions much more attractive.

There is a big question mark then over how many properties will actually be built. Labor promises to deliver 250,000 dwellings, but they aren't building them - the private sector is building. Labor has flagged the return of the National Housing Supply Council - a very welcome move - to help make sure properties are delivered in areas of need. But limiting properties to particular areas, and particular investors, means it is less likely that a match will occur and the right investor will be able to build in the right location. Will this limit how many properties actually get built?

What else can Labor do? Frankly it is an indictment of Australia's housing policy environment that they don't seem to be considering a large public housing build. Recent AHURI research demonstrated how much more sensible a publicly run housing program is, being by far the most cost-effective approach. And after development costs, directly running public housing is already cheaper than the rent. So why pursue such costly approaches?

In large part, it is because of a collective decision for an ongoing, bipartisan and cross-sectoral approach to housing which restricts access to social housing and casts its provision as welfare or even charity. While it is perhaps most enthusiastically pursued by conservative politicians, it is perpetuated by many in the not-for-profit housing sectors from advocacy to academia. One of the key ways this happens is by distinguishing 'affordable' housing from 'social' housing mostly along income lines. Because 'affordable' housing is only to be delivered by non-government organisations, this means that the non-government part of social housing can be subsidised by higher rents collected in affordable housing, but the government part cannot.

Consider that if instead social housing eligibility was opened back up to moderate incomes the cost to both construct and maintain would become much easier to manage. This is far better for all residents. The need for a complicated model such as 'affordable' housing would disappear, as would the stigma attached to social, and particularly public, housing. This is not an easy shift, as it would be important to ensure those on the lowest incomes aren't jettisoned, but with commitment it could happen.

Public housing has many advantages over the private market - it can be built where it is needed, without having to wait for the private sector to determine market conditions are favourable. It can be built in the type most suited - both dwelling structure and size - to the local conditions, rather than to what works out best for an investment manager. It has disadvantages too - shared with other social housing providers - of being a large bureaucracy that can struggle to respond to individual needs and often has nothing to offer tenants in being part of decision-making processes.

What is needed is a real conversation about the ways in which Australia can be housed, and a real vision for our housing system. Who can deliver that?

Monday, December 10, 2018

Factchecking the fourth estate

Media reporting of housing issues is a mixed bag. It certainly has gotten much better over time, and journalists and readers are becoming more educated. Over the last week there have been three instances we thought it was worth picking up on.

It was incredibly disappointing that in the same week that Choice, National Shelter and National Association of Tenants Organisations launched 'Disrupted' with excellent coverage across the nation, both of Sydney's main papers had a crack at our public housing tenants. And then the ABC dropped a clanger on Sunday.

The Sydney Morning Herald
Nine's Sydney Morning Herald
First on Tuesday, the Sydney Morning Herald ran with a story based on an Audit Office report which amongst many other elements found that the repairs bill in public housing had risen to $413million in the 2017-18 year.

The story opens with the line; "Cleaning up rubbish when tenants move out and maintaining ageing properties are pushing up social housing bills, with new figures showing expenses have soared 50 per cent in four years."

Does the claim stack up?

First the costs. They certainly have increased over the last few years. It is noticeable that since the current maintenance contracts started in April 2016 the costs have ballooned.

The Audit Office are pretty sharp, so they noticed the increase in costs, asked the Land and Housing Corporation for an explanation.From the report

LAHC advise the following main reasons for higher expenses:
• more calls from tenants requesting maintenance as they now have direct access to the contractors’ call centres
• reduced call response time
• regular pop-up events with contractors on hand at social housing sites
• age of residential portfolio and the increasing costs to maintain
• higher costs due to damage and rubbish removal from properties when they become vacant.
So LAHC advised four other reasons for increased expenses before anything related to tenants potentially acting to create repairs costs. All four also have an element which can reasonably be argued to have increased costs since the contracts started. The most interesting is the apparent latent demand from tenants needing repairs done - the claim from LAHC is that they were not previously calling, or perhaps their calls not being picked up. This suggests that the maintenance bill should actually have been much higher in previous years, and what we see now is in part a catch up. This makes a lot of sense given NSW's infamous and ongoing shortfall in maintenance budget.

The higher costs due to damage and rubbish removal on the other hand doesn't necessarily follow the same path - is LAHC claiming tenants are causing more damage and leaving behind more rubbish? It appears that the Audit Office accepted these claims without any evidence, or at least the evidence is not included in the report.

It would have been worth asking for instance, if the damage and rubbish removal costs are before or after seeking the tenants contribution. These are ordinarily costs that the tenants' would be held liable for and money sought to be repaid. It is pretty important to check whether this is the remainder, or if in fact it is the gross amount - before tenants have paid any money back.

The Herald journalist also accepted the claim without question, and in our opinion unacceptably, promoted this last point to be the leading cause of the increase.

This claim does not stack up. It vilifies public housing tenants and the Sydney Morning Herald needs to take responsibility for its role in boosting a spurious claim and taking an unfair and unevidenced swing at public housing tenants instead of scrutinising the claim itself.

The Daily Telegraph
Perhaps vexed by the Herald stealing its traditional patch of giving oxygen to baseless claims about repairs, the Telegraph stole back attention on Friday with this headline.
Murdoch's Daily Telegraph
The article is really talking about a trial in 20  units  which will run over the next three years. Check out what we know about that here.

What we're more interested in is the headline and opening paragraphs. This is entirely misleading. First, applicants will not have to 'get a job'. It's not even a possible outcome of the trial. Even the most feverish anti-tenant commentators acknowledge there are many people for whom that's just not appropriate.

Second, no public housing homes are funded by tax-payers. As we've said before: not one dollar of money raised from taxpayers is paid to public housing tenants or otherwise credited to their rent accounts. Not one dollar. Tenants pay money to FACS, not the other way around.

This claim was not only untrue, but also needlessly mean and irresponsible. It has caused immense distress amongst public housing tenants who are now afraid that though they may be old, living with disabilities or caring full time for dependants or children they will be forced to either find employment or be forced from their home

The ABC does it better

Oh Aunty, why are you in this list? Okay, they didn't engage in tenant-bashing, but they did pen this article on renting reform in Queensland (which sounds like it is going very well indeed - NSW is really starting to look left behind). 

But the article originally included this tidbit.
 Last year, more Australians bought their seventh home than those who bought their first, and research from PRDnationwide shows the number of first home buyers in Brisbane has fallen almost 4 per cent."Last year, more Australians bought their seventh home than those who bought their first." Sounds legit - we all know that buying property is easy if you lay off the avocado. But...

The claim really doesn't stack up. Over the last year 115000 bought their first property to live in, according to the ABS ( And in total the ATO reckons there were 20,000 people who owned 6 or more properties in 2015-16 (the latest data available. Check it here:

While the property market is changing and we are seeing more landlords consolidating the number of properties they own is changing, it is very unlikely to have changed so dramatically in just two years. The number of Australian residents who are landlord (or more specifically, are disclosing rental income) has grown from 7.3% of the population in 2005-06 to 8.7% in 2015-16. People receiving rental income from 6 or more properties is almost literally still the domain of the 1% - from 0.06% of the population in 2005-06 to 0.08% in 2015-16.

What may have happened is that someone looked at the 20,000 people who owned 6 or more properties and added all their properties up - collectively, they own more than 120,000 properties. This is higher than the number of people who bought their first property - but this is not the claim that was made, and doesn't tell us much anyway since they didn't all buy their properties in just the last year.

To their credit the ABC corrected the line to show the source of their information:
State Housing Minister Mick De Brenni said that last year, more Australians bought their seventh home than those who bought their first, and research from PRDnationwide shows the number of first home buyers in Brisbane has fallen almost 4 per cent. 

The Minister has not yet disclosed where he got his figures from, or whether they might be mistaken. Why would the minister want to draw attention to this? And why are we, with a clear interest in better renting laws calling attention to it?

It is for two reasons. First, because it is an attempt to set up
greedy corporate landlords as a bogeyman to avoid dealing with the trickier issue that in Australia we have created millions of people as small-holding landlords who only have one or two properties. In many cases quite unwillingly, these landlords are being used to justify not implementing the necessary reforms for a fair renting system. It is much easier to set up a bogeyman - but in doing so we may end up implementing policy proposals which avoid dealing with the issues. One good example of this is a semi-frequent call to limit negative gearing to one property per person. 

It also furthers the cultural idea that buying property is a good thing to do. Pushing back on that idea may be quite subversive in property-obsessed Australia, but it is necessary to get buying property back to it being at least a neutral endeavour.

By the way, people don't buy homes. They buy property. People make homes by living in them. Fact check that!

Update: The claim that more people bought their 7th property than their first has also been comprehensively factchecked by both The Conversation and The New Daily and found to be lacking by them as well. The ABC has deleted the reference entirely from the original article.

Opportunity Pathways trial - what you need to know

On Friday, Family and Community Services Minister Pru Goward was widely reported - initially via the The Daily Telegraph - as announcing a new program aimed at incentivising applicants and tenants in public housing to get a job. Goward’s framing of the new program – or at least her framing as reported via the Telegraph – suggests the requirements could apply to all tenants. The Daily Telegraph headline reading: “Want a house? Get a Job. Public housing tenants face tougher employment rules”.

If you read through for the detail it turns out what they are reporting on is a trial aspect of part of the broader Opportunity Pathways program about to be rolled out across NSW.

The trial will involve 20 properties in Punchbowl and Towradgi (in the Illawarra region). Applicants who ‘opt in’ for the trial will have their applications for housing moved through the priority waiting list (‘bumped up the queue’) and will get housed quicker. In return the applicants will be required to engage in education and/or job seeking requirements. Without further detail we're presuming these requirements might look similar to Centrelink’s ‘mutual obligation’ requirements with supports – such as connection to jobs or study, help writing resumes and interview technique tips - provided through a tendered external provider engaged specifically to deliver the Opportunity Pathways program.

Under the trial tenancies will only be 6 months in length. At the end of the 6 months the tenant’s engagement will be assessed. If they are no longer ‘engaging’ as required and haven’t met agreed goals they will be ‘assisted’ out of public housing. If they have found and maintained a job they will be moved into community housing or into the private rental market. So kicked out either way it seems … or in the Minister’s words "increase the number of tenants positively exiting the social housing system".

So much stick, but where’s the carrot?

We're very interested to see what forms of assistance are provided to tenants evicted at the end of 6 months because they didn't meet agreed ‘goals’ to ensure they find alternative housing, i.e. ensure they're not kicked out straight into homelessness. And given the current private rental market what assistance will be provided to tenants evicted after 6 months for finding and keeping a new job to ensure they're not moving immediately into ‘rental stress’.
The Opportunity Pathways program is a trial involving 20 properties in Punchbowl and Towradgi over the next 3 years.
The program is ‘opt in’. Applicants that ‘opt in’ will be provided earlier access to housing but will have to agree to undertake education and employment requirements of program.
If ‘successful’ the program may be rolled out to other areas across the state (note: this does not mean that the program would apply to all tenants, would like remain ‘opt in’ if expanded to other areas).
Some follow up questions we asked FACS and their answers:
  • When will the trial begin? 
FACS response: The Opportunity Pathways trial will commence from February 2019 and run for three years.
  • How will applicants access the trial? We understand that people will come from the waiting list - will applicants be approached en masse or individually. 
FACS response: Applicants on the Housing Register who may meet eligibility for the trial will be approached individually to be informed about the trial, to assess their suitability and gauge their interest in participating.  The program is completely voluntary and should an applicant not wish to participate, this will not affect their status on the register or future offers.
  • How will they be assessed for suitability for the program? That is, will there be some assessment for likelihood of success to avoid people agreeing to terms which are inappropriate for them.   
FACS response: Yes, participants will be assessed for likelihood of success. Suitability assessment will include their willingness and capacity to engage in education, training and employment goals.
  • What will be the eligibility criteria at review (at end of what we understand to be a 6 month tenancy agreement)?
    - i.e. on what basis can a tenancy agreement be terminated rather than extended? 
FACS response: Lease renewals are subject to continuing engagement in education, training and employment goals.
  • If becomes apparent that tenant is meeting all requirements of program but nonetheless continues to be eligible for social housing at review what will future agreement/social housing tenancy look like? - i.e. will there be a possibility of shifting to longer tenancy agreement (2, 5, 10 year agreements) and/or removal of 'special requirements' of program (in situations where tenant's circs change and requirements deemed no longer appropriate). 
FACS response: The trial provides six month leases that can be extended up to a maximum of three years. Eligibility of participants for further housing assistance at the end of the period will be subject to their circumstances.
  • Would this require relocation?
FACS response: See prior answer above.
There is a future briefing mid December. We'll keep you up to date on any further details about the Program we are able to share.

We're keen, for example, to know more about what will be considered measures of 'success' for the trial. Will FACS be tracking all applicants and tenants who take part in the program once they are evicted to find out their housing outcomes over the full duration of the trial? Though not consulted before the announcement of the program, we're hoping that FACS sensibly consults with the housing and homelessness sector as part of its evaluation!

Note: Post was edited 13 December to add in responses provided by FACS regarding the Opportunity Pathways trial.

Friday, December 7, 2018

Disrupt landlords

This is a slightly modified version of opening comments I made to the recent AHURI conference Disrupting the housing market in a session called 'New technologies, ethics and regulation'. Check out all the presentations here:

L-R: Sidesh Naikar, DSS; Nerida Conisbee, REA Group; Leo Patterson Ross, TUNSW; Prof Chris Pettit, UNSW City Futures. Photo Credit: AHURI

I frequently find myself arguing both against particular disruptions that show up, while wishing for serious disruption in our housing sector which is failing so many. In my few minutes I’ll make some observations about why we aren’t getting what we need.

We need to examine each change to our housing system with eyes open. It can be obvious to examine who benefits or suffers from change, but sometimes we can forget to also examine the impact of retaining the status quo.

We rightly point out that rent-bidding apps like Rentberry are not nearly as transparent as they claim and forces tenants to compete with other tenants to pay the highest rents possible. What we can miss is that allowing a real estate agent to set the rent based on what they think the market will bear is definitely untransparent and forces tenants to compete with other tenants to pay high the highest rents possible.

Similarly with online platforms which allow ever greater information to be gathered – they allow discriminatory behaviour. But it is na├»ve and demonstrably wrong to think that pen and paper applications and face to face viewings don’t also facilitate this.

The problem is with our competitive private rental market, which encourages people to use pre-existing biases as a shortcut to choosing a tenant, rather than the particular apps themselves.

It can also be easy to identify issues only within the frame of how a disruption is impacting the system without acknowledging the pre-existing systemic issues the disruption may highlight or exacerbate. This has been an ongoing issue in studies but particularly in media reporting around short-term letting.

In many ways, this relates to the democratisation of data - it is rarely put in the hands of practitioners or people with lived experience who ask different questions of the data.

Most data concerning the private rental sector in Australia has been created by and for the real estate industry, to aid investors who seek to enhance their investment decisions. The data is held in the hands of people who seek to profit from either holding the data or from the decisions which can be made from the data.  Controlling the data helps control the narrative which is a key tool used by all those in power – this is why rent increases are often reported in positive ‘growth’ terms rather than a negative phenomenon of loss.

The government and NFP sectors are not immune from this either, holding great data sets which are not made available to the public, or are made public only after being sanitised and asked the questions which are safe to ask from the data holder’s perspective. Given both the importance of providing shelter, as well as the degree of subsidy the public provides governments, community orgs, private investors and academics, there should be no reason why data created with the benefit of those funds shouldn't be as open as possible.

So, what do we need to do? So far disruption in Auatralian housing has ultimately designed to maintain the status quo. assist landlords and investors not tenants. it's interesting that Airbnb and Uber, as much as they are problematic otherwise, both set out to disrupt the service provider, hotels and taxis, not the traveller or the passenger. In Australia, tenancy disruptors like TrustBond, Snug, and others try and present as being for tenants, but I believe they realised that the power rests heavily with the service provider and since they don't have a plan to disrupt the physical supply of rental housing, they have sought to either reduce service provider costs without any benefit flowing to end user or eke out essentially private taxes from end users. This is particularly been the case with alternative bond loan products which claim to replace cash bond but actually protect current landlord interests by maintaining their current costs and risk profile, while extracting a fee from the end user tenant to access the product.

We need to disrupt landlords, of all sorts. The disruption needs to happen at three levels – first the current legal and social framework needs rewiring by either people or governments. We need to rebalance the relationship between landlords and tenants and recast the provision of housing as an essential service to be delivered to the people who need it when, where and how they need it. This will be the great disruption for many landlords. While we do that, we open up the data and let people ask the questions that need to be asked of our housing system. Those two things open up opportunities for disruptors, whether for profit or not, to seek to improve tenants lives, rather than just joining in the pile-on of people seeking to rake money off them.