Monday, May 25, 2015

Minister Hazzard's Social Housing Forum

As part of the New South Wales Government's Social Housing discussion, Minister Hazzard has convened a Social Housing Forum - chaired by two former NSW Premiers, no less - to be held at the Australian Technology Park this afternoon.

If the Minister's press release is anything to go by, it should be a real cracker. "This is about as good as it gets", he says, "having former Premiers Morris Iemma and Nick Greiner chairing the forum and leading the way on what is one of the biggest issues facing the community..."

Messrs Iemma and Greiner weigh in with their own remarks, noting that "the Government has a strong and clear mandate to take action in this area" (Iemma) and "social housing is the greatest single opportunity area and the greatest unsolved problem for NSW infrastructure" (Greiner). These are strong words, and it's pleasing to see them being uttered by such high-profile commentators - particularly given the relative inaction on social housing supply over the last two decades, and the difficulties policy advocates have had in raising housing affordability as an issue that is inherently one of infrastructure.

So we're excited to see what comes of the forum. The Tenants' Union will be in attendance, and we've been given some insight into how the conversation will be guided. We understand there will be questions around the sorts of outcomes a social housing system might strive to deliver, how to encourage people to move from one form of housing to another as needs change, and how to innovate and get more money into the social housing system.

These questions are riddled with complexity and we expect there will be a broad range of views on offer at the forum. After all, it will be attended by representatives from the finance and banking sectors as well as experts from Government and the not-for-profit housing sector. We'll be doing our bit to keep the conversation focussed on the needs of those who live in social housing: tenants, and their households.

But we'll also be asking the forum to be bold.

Because when we talk about outcomes for the social housing system, we must also talk about what the private rental market delivers.

When we talk about a transition from one type of housing to the next, we must also talk about what the private rental market delivers.

And when we talk about the money that is, or isn't, or could be, or should be available to fund and innovate the establishment of more affordable housing... well, on that front we must also talk about what the private rental market delivers.

Friday, May 15, 2015

Senate's Affordable Housing Inquiry Reports

Last week the Senate Economic References Committee released its report on the Affordable Housing Inquiry, and its a doozy.

Of course, it hasn't made a dent on the policy landscape, but as with all documents of this type there's hope that one day it might. We certainly plan to keep a copy of it in the top draw, along with Ken Henry's 2010 review of the tax system.

Anyway, the Committee has made a number of recommendations that have made us very, very happy - at least in this one brief moment. There are 40 recommendations in total, but we've managed to identify our top five:

1. Recommendation 18 - As a national policy issue, affordable home ownership tends to overshadow affordable renting even though many Australians struggle to access affordable and appropriate housing in the rental market. With this in mind, the committee recommends that the Australian Government recognise affordable renting as a mainstream form of tenure in Australia and place it prominently on the national policy agenda.

Given that renting will be the only form of housing for many Australians, one of the key challenges for government is to change the traditional view of renting as a short-term transitional phase. The committee recommends that the Australian Government in collaboration with the states and territories, through the recommended ministerial council on housing and homelessness within COAG (see recommendation 2) start the urgent process of turning around this acceptance of short-term insecure tenure as normal. As a first step, the committee recommends that the proposed ministerial council consider tenancy regulations in the various jurisdictions with a view to delivering greater security for long-term renters.

2. Recommendation 20 - The committee also recommends the Australian Government:

  • together with the states and territories, investigate national minimum standards that would set specific minimum standards including security of tenure, stability of fairness of rent prices, a new efficiency and comfort standard, safety and security of the home, and better protection for groups in marginal housing;
  • review (and increase) funding levels and access to tenancy advice services;
  • in recognition of the value of tenancy advice services, make funding through the National Affordable Housing Agreement conditional on the states and territories ensuring that they have in place adequate tenancy advisory services; and
  • include as a priority for a re-established Housing Supply Council to review and publish detail on the current national rental affordability gap.

3. Recommendation 29 - The committee recommends that housing should be included in the Prime Minister's Closing the Gap report: that access to affordable and appropriate housing must be regarded in the same context as Indigenous education, health and employment.

4. Recommendation 5 - The committee recommends that state and territory governments phase out conveyancing stamp duties, and that as per the recommendations of the Henry Review, this be achieved through a transition to more efficient taxes, potentially including land taxation levied on a broader base than is currently the case.

5. Recommendation 13 - The committee recommends that, to the extent that such matters are not addressed by the White Paper on the Reform of Australia's Tax System, the Treasury should prepare and publish a study of the influence of negative gearing and the capital gains tax discount on home purchase affordability and on the rental market (including the effect on security of tenure for renters), the effect of these arrangements on revenue, and their effect (if any) on economic productivity. This study should examine the likely effects of alternative taxation treatments of investor housing. Alternative approaches in this study (including, where appropriate, in combination) should include:

  1. a housing specific 'quarantine' approach, wherein losses for investment properties can only be deducted against rental income, with provision for losses in excess of rental income to be carried forward and deducted against future rental income and capital gains;
  2. a broader 'quarantine' approach, wherein interest expenses on all investments, including but not limited to housing assets, are only deductible in any given year up to the amount of investment income earned in that year, with provision for losses in excess of this amount to be carried forward and deducted against future investment income and capital gains.
  3. limiting the application of negative gearing arrangements to new housing stock, or designated new affordable housing stock;
  4. limiting the application of negative gearing to a certain number of properties (assessing options for various limits in this regard);
  5. options for phasing out negative gearing on investment housing;
  6. applying the savings income discount recommended in the Henry Review to investment housing, with consideration given to the impact of this approach both with and without the implementation of the Henry Review's recommendations in relation to housing supply and housing assistance; and
  7. reducing or removing the capital gains tax discount for investment properties, or reverting to the pre-1999 system of taxing real rather than nominal gains on investment assets.
The report is worth a look - you can find it here. For National Shelter's initial response to the report, check out their press release.

Thursday, May 14, 2015

Anti-social housing?

Keen observers of the NSW Parliament will have seen an exchange between the Minister for Social Housing, the hon. Brad Hazzard, and the Member for Parramatta, Dr Geoff Lee, on Tuesday.

Dr Lee asked Minister Hazzard: "how is the Government cracking down on antisocial behaviour in public housing?"

The Minister's reply? "Three strikes and you will be out of public housing. It is that simple".

Now, we assume the Minister is referring to the Premier's pre-election announcement about a public housing crime 'crackdown', which we have spoken about previously.

We understand the crackdown will include many new initiatives, with the three strike rule part of a range of prospective reforms. Another of these reforms is the 'one strike rule', which will see the Tribunal robbed of its ability to do its job in some cases.

MPs discussing these reforms in Parliament is an ominous sign. We'll be keeping a close watch to see where the discussion goes from here.

In the meantime, here's a briefing paper outlining the Tenants' Union's concerns about one strike evictions and other measures relating to crime and antisocial behaviour in public housing. Please have a read, and share it around.

Monday, May 4, 2015

Who doesn't benefit from negative gearing?

The media has been all a-flutter about negative gearing. Following the release of the Australian Government's 're:think' tax discussion paper the controversial tax break has become a popular topic of conversation again. In particular, the Australia Institute has released a report showing that 55% of the benefit of capital gains discounts and negative gearing goes to the top 10% of income earners, while Social Services Minister Scott Morrison claimed it is mostly 'battlers' who access the perk. This has prompted a lot of analytical types to hit the numbers to find out - who really does benefit from negative gearing...?

Six of one...

We can see the appeal of this exercise. Honestly, we can. Of course it's important to know whether our tax system is delivering fair and equitable outcomes to income earners and taxpayers across the thresholds. But, with respect, getting to the bottom of who's getting the best breaks kind of misses the point.

The better question is: who doesn't benefit from negative gearing.

We think the answer is pretty clear. But to make sure our bias isn't clouding our judgement, we took a quick look at the tax stats for the 2012-13 financial year ourselves. They make for interesting reading, especially when compared to the previous year's data.

In 2011-12 there were around 806,000 rental properties in New South Wales, against which landlords lost almost $1500 each on average. This was predominantly on the back of their $7.29billion interest bill. Collectively they declared rental income of almost $11.5billion - or nearly $14,270 per property.

In 2012-13 - the year for which these latest figures apply - the number of properties in New South Wales increased by about 21,000. The average loss per property decreased to about $377 each, on the back of a lower interest bill ($6.63billion), a slightly higher repairs and maintenance bill (up by an average of about $65 per landlord to $700million) and higher rental income ($12.2billion - an average of around $14,750 per property).

Of course, when we talk about tax data we're talking about landlords who lodge tax returns. This doesn't tell us how many properties they each own, or the size or scope of their interests. It also doesn't account for landlords who do not lodge a return for whatever reason. And we're talking in averages - we can't assume that every landlord's portfolio is losing more than it makes for them.

What we can be sure of is that in the 2012-13 financial year investors' appetite for residential property grew in New South Wales. Those who bought in managed to increase the extraction of rent from the occupants of their investment. Regardless, landlords managed to register an overall loss of almost $312million. It is often claimed that negative gearing brings new landlords into the market, putting downward pressure on rents by delivering new supply. On the latest tax data, only one of those claims rings true.

Putting this all into very sharp perspective was last week's release of Anglicare's housing affordability snapshot, which looks at the availability and cost of Australian rental properties over a weekend in April. This annual survey showed that in 2015, as in previous years, the private rental market is simply not catering to low income households...

Who doesn't benefit from negative gearing?