Monday, March 3, 2014

NSW Social, Public and Affordable Housing, in summary...

The Tenants' Union has finalised its submission to the Social, Public and Affordable Housing Inquiry. Under the rules of the Inquiry, we're not entitled to republish it - it is up to the hosts of the Inquiry to do that. We expect it will be published, and a link will appear on the Select Committee for Social, Public and Affordable Housing's website shortly.

(UPDATE 5/3/14 - find it here!)

In the meantime, we can give a brief rundown of what we've been thinking.

1. Houses are too expensive
Preferential tax treatment of housing encourages anyone with a bit of cash to spare to leverage it up and park it in housing. This has seen prices soar on the back of debt-fueled buying and selling throughout the past two decades. It is owner-occupied housing that gets the strongest preferential treatment, but rates of ownership are declining all the same. People buying property to rent get the next best treatment. But as landlords are buying and selling in the same market as owner-occupiers, their house prices are similarly distorted.

2. Expensive housing affects rental markets - stock
We can differentiate between the cost of housing (prices) and the cost of shelter (rents), and we can see that speculation has sent one of these to the moon without taking the other along for the ride directly. But rental stock has become more expensive because of speculation on house prices. Tax breaks for landlords (ie negative gearing) don't encourage reduced rents - they encourage more debt. And they don't encourage new supply, they only encourage demand for housing with good prospects for capital gains. Which means that when low-prospect, low-value, low-rent stock comes on the market, speculators tend to steer clear of it. It drops out of the rental market, becomes harder to find, and more expensive to rent.

3. Expensive housing affects rental markets - tenants
Higher prices means more would-be owner-occupiers are staying in the rental market for longer. The number of higher-income renter households continues to increase, and these households compete with low income households for fewer and fewer affordable properties. Usually, they win, and then do what they can to hang onto their affordable home. There are not enough affordable properties available for low income households to rent - which puts pressure on existing stocks of Social, Public and Affordable Housing.

4. Combined effect of house prices and rental market conditions
When you combine high prices with reduced supply and increased demand, you end up with a Social, Public and Affordable Housing system that is expensive to run and difficult to expand. In fact, the NSW system of Social, Public and Affordable Housing has been in relative decline for decades - not just in numbers, but in quality as well.

5. Administering the problem won't fix it
In response to these conditions, Social, Public and Affordable Housing administrations attempt to do a great deal more with much, much less. Policies have been implemented to target assistance to those with the "greatest need", which effectively reduces the availability of assistance to the growing numbers who require it. And in relying on a declining system to address the greatest need for housing, our Social, Public and Affordable Housing landlords become bogged down in the administrative drudgery of micro-managing tenants, looking for any excuse to free up the scarce resource of housing. In return, tenants do whatever they can to ensure their own need remains greatest, so they can stay housed.

Okay - that all sounds like a lot of doom and gloom, and we're sorry about that. We've made a number of recommendations about how the NSW Government can make a start on making things better... But if you want to get into all of that, you'll have to read our submission. We'll post a link to it once it's in the public domain.

(UPDATE 5/3/14 - find it here!)

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