Joining the dots on affordability

This week is Budget Week for New South Wales. There's still time for the Berejiklian Government to announce the forgotten part of their housing affordability package - the one that tackles Sydney's high rents. So far they've covered tweaking taxes and grants in favour of first home buyers over investors, and fast-tracking supply. But they've left off any policy that would directly affect the rent.

As we've noted before, the shift of incentives from investors to first home buyers is designed to have the strongest impact in the market for newly built properties. We've also previously noted that while the majority of investors do not purchase newly built properties, there has been a significant increase in investor driven demand lately for off-the-plan units. It is worth considering how this change will impact demand for new dwellings over the next few years.

Understanding your standard first home buyer is no easy task. We can go back to the ABS Feature Article from 2012, First Home Buyers in Australia, which tells us that just prior to the height of Australia's post-GFC first home buyer boom there were about 430,000 of them over the three years to 2010. Driven by stamp duty concessions and the Rudd Government's First Home Owner Boost that put either $14,000 and $21,000 into their hands depending on whether they bought an established or new home, slightly less than one-fifth of them bought a newly built property during that time. In the three years prior to that, when the grants were not quite so generous, there were around 320,00 of them with less than one-tenth buying off-the-plan.

This tells us that first home buyers do seem to respond to stamp duty concessions and direct grants, but just like their investor counterparts they are much more inclined to buy established properties than newly built ones. Of course, this is based on how they behaved in the bad old days when property prices were merely exorbitant, but the latest Digital Finance Analytics' Property Imperative Survey suggests these numbers remain in the ballpark - they've identified 330,000 first time buyers in their March report, noting that 80% are buying or intending to buy an established dwelling. But we must note here that an increasing proportion of these first timers identified by Digital Finance Analytics are investors, so they are buying another person's home rather than their own.

Now that prices are scandalous, it remains to be seen if anything much will change after the tweaking of stamp duties and grants. It is possible that 100% of Sydney's first time buyers will rush to the new apartment market to see what they can afford, since the houses they'd evidently prefer to buy are still likely to cost too much. But it's just as likely many will continue to rent the homes they want (or can afford) to live in. Either way, the removal of incentives for investors to buy off-the-plan is likely to see them withdraw from the new apartment market, and this wont be completely offset by any increased demand from first home buyers. Construction activity may well start to fall away in response. If that happens, no amount of rezoning to fast-track supply will save us from the plague of rising rents - assuming it ever could.

This brings us back to the forgotten part of the NSW Government's housing affordability package. Given the recent Federal Budget foreshadows a new Affordable Housing and Homelessness Agreement requiring the states to consider affordable housing targets, along with an Affordable Housing Finance and Investment Corporation that will provide a funding mechanism for the supply of new sub-market dwellings, the Berejiklian Government would do well to adopt planning and zoning reforms along similar lines to those announced by the NSW Opposition a couple of weeks ago. In the face of their own affordability package that might otherwise reduce demand for their services, this could be just the tonic our developers will need - to say nothing of our neighbourhoods and communities who are already crying out for some downward pressure on rents.

The Landlords' Budget

It's been dubbed the Budget that forgot the renters, but chances are your landlord is pretty happy with he 2017 Federal Budget's housing affordability measures. With first home buyer incentives that will push prices higher, and new rewards for speculative investment, this should be the stuff of landlords' dreams.

Let's take a quick look. We'll see what Lenny the Landlord - pictured below - thinks of the Budget's headline measures.

ABC TV's The Checkout presents: the landlord. Let's call him Lenny.

First up - unlocking supply. The Turnbull Government says it will ease restrictions that are holding back housing supply by sorting out some of the planning and zoning issues that make it hard for developers to build enough properties for landlords to invest in. They'll throw some money towards infrastructure upgrades to make sure developers don't have to worry too much about installing water supply pipes and sewerage systems, and so that future residents of new developments don't get too bogged down in traffic jams on their way to work every morning. They'll even tip in a bit of surplus land to help kick things off.

Lenny the Landlord says he quite likes these ideas. "Anything that gets me off the hook on housing affordability, I'm all for it," he grins. "As long as my high mortgage costs can continue to keep my tax bills down, I'm one happy chappie". A brief shadow of doubt creeps over him as he wonders whether all this fast-tracked supply could affect his longer term capital gains. His delight is palpable when he realises the measures would almost certainly result in higher land values where applied. "Forget the accountant," he chortles, "I'm heading straight to see my mortgage broker. Gotta get in on the ground floor, right?"

Next - creating the right incentives. The Turnbull Government says it is taking "prudent steps" to provide the right incentives for home-owners by allowing first home-buyers to make voluntary contributions to their super fund in the hope of saving for a deposit, and allowing older home-owners to top-up their super funds with the proceeds of sale. They'll also try to limit foreign investment by requiring half of all new supply to be sold to domestic buyers, and they'll prevent foreign investors from sneaking off without paying capital gains tax. What's more, they'll sting foreign investors with a levy unless they rent their places out for at least six months of every year.

Lenny the Landlord says he's a little worried about the impact of reducing foreign investment, but on balance he's still a fan of these measures. "Look, I'll be honest with you, this first home-buyer thing is a bit of a worry," he says. "There's not enough of them around, which makes it harder for investors to get the very best price when it does come time to sell. Thankfully we've got a steady stream of internationals coming in to stem the flow - capping the number of properties we make available to them could hurt. And who else can afford Australian property? I guess we might just have to settle for selling to other landlords in the long-run, so it's a good thing we've still got our tax perks."

When asked about a possible return of first home-buyer activity on the back of this Budget, Lenny laughs. "Yeah, please, that'd be great. Obviously this super fund thing is only going to help those who are already pretty much ready to buy - making sure they've got a bit of extra cash on hand to bid up prices is no skin off my nose." He thinks for a moment, and his eyes light up. "Actually, they might be able to bid up my property when it's time to cash out. That'd be, well... super!"

What does he think of the incentives for empty nesters? "Well, assuming some of them actually do it, I reckon it'd be good for those of us looking to pick up an extra investment property. More good homes on the market means more gains coming through hefty mortgages, makes it easier to ensure steady losses see, so you can get all the tax breaks and make it worth your while." He pulls out his mobile phone, but quickly puts it back in his pocket. "I must remember to make that call to my broker..."

The levy on empty houses? "Well, that's an interesting one," says Lenny. "I like the thought of foreigners having to rent their places out for six months at a time - that takes the pressure off me a bit. I can take my time between tenancies if I need to, keep the place vacant for a couple of months and still get my tax breaks. Bonus for me - with foreign investors evicting tenants every six months or so, there'll be plenty of competition for my place when I do put it back into the rental market. There'll be no trouble getting a little bit more rent here and there, so keeping my property empty every now and then could totally be worth it in the end!"

Lastly - improving outcomes for those most in need. The Turnbull Government says it will improve outcomes in social housing and homelessness by continuing to fund social housing landlords and homelessness services, encouraging "social impact investment", giving more tax breaks to landlords and creating a bond aggregator that will encourage private and institutional investment in new affordable housing products.

Lenny the Landlord says he's not really fussed with all this government housing business. "That's really not my concern," he mumbles. "I'm not running a charity here. I think the government should do that, so it's good they're doing that I guess".

When asked if the bond aggregator might prompt him to diversify his investment portfolio, he appears a little confused. "Diversify?" he asks. "What do you mean?" We briefly explain the proposed Affordable Housing Finance and Investment Corporation and how it could allow him to invest in other companies that would put money into the affordable housing sector. Perhaps he could even make a direct investment himself? He remains unsure. "Look, that all sounds interesting but I think I'll stick with what I know. I'm not sure investing in something other than the place I've got is a good idea. I mean what if some of this affordable whatchamacallit is built nearby, and my property ends up going down in value?"

"No, no," he says, reassuring himself. "We invest in property because we know prices always go up. Let me have another look at these new tax breaks you mentioned, they sound promising..." His mood picks up again. "You mean I can get an extra 10% off my capital gains tax if I give my place to one of these community housing dooverlackies for a few years to rent out at a smidge or two below the market? Sign me up! Heck, that means I could even sell the place a year or two earlier than I was thinking! I can start the ball rolling on buying the next one... and the next one... and the one after that..."

With that, Lenny the Landlord pulls out his mobile phone and walks off with a spring in his step.

Rental affordability - are we there yet?

Today's release of Anglicare's latest annual Rental Affordability Snapshot tells us nothing new - rents are climbing, and the hard slog continues for low income households across Sydney and New South Wales. For poor people, simply trying to get on with it, there is no end in sight.

Low income renters are sacrificing food, medical treatment, social interactions and any number of things just to keep a roof over their heads. For some even that can't be sustained - as rent arrears mount up the prospect of life without a home looms large.

We know why this is, and we know how to make it stop. But we don't.

For seven long years Anglicare has run its rental affordability snapshot - checking rental listings over a single weekend and counting how many homes would be affordable for a low income household. That is, how many properties are available for a person in the lowest two-fifths of Australia's income scale to rent at a cost of less than a third of their income. For seven long years the answer has been "next to nothing", and it's gotten worse every time.

In the meantime, house prices have soared. We've looked on in awe as the value of our housing has increased more in a given year than many would earn on even a decent Sydney wage. As first homebuyers are excluded from the market, and more and more debt fuelled investors pile in, we're constantly looking for solutions to this crisis that won't diminish the prospect of capital gains.

We devise new ways to drag people across the widening divide between rich and poor, where they can land in relative comfort on the good side. That's the side with all the nice picket fences, and perhaps room for a pool out the back, where everyone can enjoy the richness and fullness of life. Nobody should ever have to go without. But that gap just keeps getting wider, and wider, and wider, and wider...

We know why this is, and we know how to make it stop. But we don't.

For now, it's just a sheer numbers game. Most of us are already on the side where hope lives, and we're doing our best to stay there. For those less fortunate, the ability to drag yourself across that divide, over that line - by the bootstraps, if it comes to that - has always seemed possible. Indeed, that's why most of us are already there. Work hard, save harder, get your foot on that ladder. Sacrifice will pay off and soon enough you can make a place your own, just how you like it. Knock out a wall, put in a new kitchen, upgrade, whatever you like.

But this is not working anymore. Not for everyone.

The divide keeps getting wider. The line keeps moving. It gets harder to reach out and pull yourself across. And if you do find yourself on the good side of this shifting line it gets harder and harder to stay there. You've got to be able to move with it or you'll fall. We don't want people to fall, so we devise new ways, and new ways again, to help people stay on the good side of the line. Every time we do, that line moves, just a little bit further. The divide gets wider. It becomes just a little bit harder to get across that line.

It's true, at some point we've accepted that not everyone can make it. Our income support system is built on the assumption that most of us will have crossed the line by the time we retire, so we've had to dig deeper. We've tinkered and tampered with social housing until it's become a system of welfare housing - an option of last resort for those who can never make it across the divide. We've held onto a belief that this is only for the poor few, as most of us will get there if only we try. Many have failed to notice, from that side of the divide, how many are falling into the deep, dark hole in the middle... how easy it is to become lost in there, how hard to be seen. For those in the hole it's difficult to find solid ground, as the line continues to pull away. It's hard enough to hold your ground, let alone climb out on the other side.

We know why this is, and we know how to make it stop, but we don't. Sooner or later, we're going to have to. Adding to the supply of "welfare housing" - which is pretty much what we're expecting in the Federal Budget - sounds like some kind of solution. If done right, it could even start to shift the line on the poor side of the divide, and that would be a good thing. But if there's nothing putting the brakes on the line at the other side, all we can ever do is play catch up.

If we are serious about tackling housing affordability - and affordable rental housing in particular - we need to do more. We need to close the divide. Bringing the line back to the middle from both sides of the divide will take more than just "supply side" solutions - it will take a comprehensive rethink about the way our housing system works. Otherwise more and more of us will find ourselves stuck in that hole forever, where rental stress is chronic and getting worse every year.

Federal Budget Watch - priming the pumps

There have been a few developments since we last looked in on expectations for housing affordability measures in the coming Federal Budget. For instance there's the establishment of an affordable housing taskforce to come up with a UK style affordable housing bond aggregator that will suit local conditions, as well as intensifying speculation that first home buyers could be allowed to raid their superannuation funds in order to come up with a deposit before applying for a loan. In his address to the Australian Housing and Urban Research Institute yesterday, Treasurer Scott Morrison all but confirmed he will pursue these policies, which he believes will deliver housing affordability while ensuring house prices continue to soar.

It was an interesting speech, full of all the usual stuff about supply not keeping up with demand. It made a point of noting the majority of investors in the private rental market are small time speculators, holding only a single rental property with a low yield while hoping it will rise in value and deliver a solid capital gain. It suggested that any change to negative gearing would come at a cost to renters (although it didn't go into any detail about what that might be). And it had yet another go at the National Affordable Housing Agreement, suggesting its $1.3billion-ish annual spend is not producing the right outcomes because the effects of unaffordable housing are still being felt by low-income households.

What it didn't do was seriously consider the key drivers of unaffordability in our housing system. It steered clear of the capital gains tax exemptions that encourage home-owners to shovel excess income into their housing rather than other, higher taxed investments. It made no reference to the impact that small-time investors who trade in the same housing market - buying and selling mostly established dwellings - are having on the shape of the private rental market. It didn't even come close to considering what's recently been described as the financialisation of housing - the notion that a dwelling is is not a basic necessity but a means of accumulating wealth - is what's driving up the cost.

Or rather, it didn't consider these things to be a problem. In fact, in focusing on new ways to entice private investment into residential property - through the development of an affordable housing bond aggregator on the one hand, and providing incentives to stimulate home-ownership on the other - it goes so far as to suggest that further financialisation of housing will be the solution.

It's easy enough to see how allowing first home-buyers to dip into their superannuation will put upward pressure on prices. The more people have to spend, and the more competition there is in the market, the higher they'll be able to go. Without curbing existing tax breaks investors will continue to ride on the coat-tails of owner-occupiers, trading in the same market and pushing prices even higher. No doubt this will be to every buyer's satisfaction, once they become an owner, but for those who remain unable to buy despite their (potentially) increased access to debt it will simply exacerbate all the existing problems of relying on rental housing as the only long-term option.

Presumably this is where the bond aggregator and the development of new affordable housing portfolios comes in. According to the Treasurer in his speech yesterday, "the bond aggregator would issue bonds to the market, and on-lend these funds to community housing providers - allowing them to access cheaper and longer term finance". He also said "the goal is for affordable housing to be conceived not so much as a real estate investment, but a longer term fixed interest investment that can comfortably sit within institutional investment portfolios".

Perhaps the Treasurer has missed a point here. While financiers may be able to distinguish between affordable housing and real estate investment, community housing providers will not. They'll be buying, selling and renting into the same rising markets as everybody else. And while ever land values and housing costs continue to rise, so too will the need for "cheaper and longer term finance" for those who would deliver affordable housing to those markets. Community housing landlords may be accustomed to pushing against strong headwinds, but to date they've not had the full weight of Australia's affordable rental housing policies foisted upon them as they do. If we are to expect them to succeed, we may have to offer them more than just cheap debt. Taking some of the heat out of Australia's housing markets might also have to be on the table, and this means reforming negative gearing and capital gains tax concessions.

There's a final point to be made following the Treasurer's remarks yesterday. He concluded, correctly, that "there are no single solutions and the payback is achieved in some cases over a generation - not an electoral or budget cycle". With this in mind, let's acknowledge that whatever measures are proposed on budget night next month will be small consolation to many of the growing number of Australians who currently rent their home. Affordability is one thing, but knowing you can be evicted without a good reason is something else entirely. It's well beyond time to bring our renting laws up to scratch.

Federal Budget Watch - I rent and I vote!

The plot thickens as Federal Budget night edges near, with Treasurer Scott Morrison confirming the 2017-18 budget will include a "housing package" of sorts.

Comes with everything you need to construct a
new gingerbread house for Mickey and Minnie!

Speaking to Sky News on Sunday, he said:

I'm as much concerned about someone who is on a low income struggling with their rent as I am with someone who I know wants to get into the home ownership market. They're both important challenges.

This is fantastic news! In a remarkable break from tradition, the Federal Treasurer has acknowledged that people in rental stress are doing it tough!!!

Just exactly what this means is still a matter for speculation, but Morrison has suggested he'd like to collaborate with the states and territories to deliver a supply side intervention. This is in keeping with reports he's considering an Affordable Housing Bond Aggregator while backing away from the National Affordable Housing Agreement. It also fits nicely with current mutterings in favour of inclusionary zoning reforms for New South Wales. All things considered, this points to an increase in available funds for community housing landlords to deliver Affordable Housing tenancies - that is, tenancies offered at around 80% of market rents to eligible renters - while leaving the social housing system that delivers significantly more secure and affordable homes to low income households to fend for itself. This would be two steps forward and three steps back.

It remains pretty clear that tax reform wont make a strong appearance, if it makes one at all. Morrison derided the Opposition's intention to limit negative gearing and capital gains tax discounts as a "silver bullet" plan, implying such changes might not produce the Government's desired outcome of increasing supply. With respect, it's hard to see how tweaking the current tax regime to shift investor demand towards new construction would not deliver such a result, but given the extent to which the Government has steeled itself against the Opposition's tax and housing policies it would be a surprise to see them come out and support them now. That's a real shame, because as far as structural reform to improve Australia's private rental market goes, negative gearing and the capital gains tax discount are the low-hanging fruit.

The focus on increased supply over diminished speculative demand adds intrigue to any suggestion that incentives for first home owners might also be in the mix. From "no-deposit" loans for renters to allowing would-be home owners to dip into their superannuation to come up with a deposit, it seems the only kind of incentive that hasn't yet been flagged is a direct grant to first home buyers. Most would accept by now that grants for home buyers really just push prices higher and do very little to make housing affordable, beyond some light relief for those already in a position to buy. But for some reason these other kinds of incentive seem to be taken seriously. Indeed, they play off the idea that house prices rising in perpetuity is not only inevitable, but desirable, and that we must do everything within our means to minimise the number of people who miss out on the housing goldmine. Even if it means selling off the silverware for scrap.

Such incentives are not really housing affordability measures at all, but measures to encourage more people to buy into an unaffordable housing market. Without linking such incentives to the construction of new dwellings they would do little to relieve the stress on the rental market - a home buyer who exits the rental market after purchasing an established dwelling does not produce a new rental vacancy if the household they've displaced still requires somewhere to live. So, if the Treasurer does go against the Brown Couch's advice and moves to introduce some kind of incentive for first home buyers, it would need to be tied to the construction of a new dwelling if it is to qualify as a measure to combat rental stress. Anything less should not even be considered window dressing.

Again, this is all speculation, which is, after all, our national pass time. No doubt we'll be discussing this further between now and Budget Night on Tuesday May 9th.

Federal Budget Watch - housing affordability front and centre?

When Malcolm Turnbull became the 29th Prime Minister of Australia he promised that his will be "a thoroughly liberal government, committed to freedom, the individual and the market". His newly appointed Deputy, Julie Bishop, gave a hat-tip to Robert Menzies and the values that he instilled within the Liberal Party. We might assume this means placing a strong focus on home-ownership as a means of delivering social cohesion.

PM Malcolm Turnbull and Deputy Leader Julie Bishop
fronting the media on September 15th 2015

At the time we wondered what this would mean for housing policy, asking here on the Brown Couch:

So will a government lead by Turnbull and Bishop get back to work on the dream of a home-owning Australia, and wind back the tax incentives that are producing instead this nation of landlords? Or will they continue along the path their predecessors have set, and maintain that the only thing standing between you and liberation from the dogbox is a good job that pays good money?

In the fifteen or so months that have followed we've made progress from the "do nothing" days of the inquiry that made no recommendations to the appointment of an Assistant to the Treasurer on Housing Affordability, so things are looking good. Michael Sukkar, Member for the Melbourne seat of Deakin, was given the post in late January 2017. He's wasted no time in getting caught up on the basics, with reports today suggesting he views a strong economy as a key housing affordability measure, as this allows Australians to access highly paid jobs which is the first step to home-ownership.

New Assistant Minister to the Treasurer Michael Sukkar has been
tasked with solving Australia's housing affordability crisis

Aside from opening him up to the kinds of criticism his former colleague Joe Hockey copped for being a bit out of touch, this brings him more-or-less up to speed. But it's worth looking back over some of the other things he's said since taking the junior Ministerial position.

On January 24th he said there is no silver bullet that will solve Australia's housing affordability problem, and that:

(There will be a) multi-faceted approach that pulls the levers we can and assists the state governments to pull the levers that they can...

Which is as good a place as any to start.

The following day he spoke on RN Drive and explained that these levers would not include negative gearing and capital gains tax discounts, as they are not housing affordability measures. Further, he said that if we did make changes to negative gearing rents would go up all over the country. "We know that for a fact", he said. (We're not so sure about that, as we've argued many times, but we'll have to come back to that part of this discussion another time.)

More recently Mr Sukkar has been drawn into discussion about whether the Government would or would not countenance changes to capital gains tax discounts in the next Federal Budget. This was reported in The Australian yesterday as follows:

Mr Sukkar said there would be “a number of interrelated measures” in the budget and it was impossible to say at this stage what would be included in the final policy. 

“In some respects many of those will hang together, complement one another, and we’re not in a position yet to outline what exactly that is,” he told Sky News. 

“We are very serious about tackling this issue.” 

Asked if changes to capital gains were in the mix, Mr Sukkar would not say. 

“In answering that question, the basic point to make is we as a government have sought not to increase taxes. We think that increasing taxes on investment inevitably leads to less investment,” he said.“Having said that there are many ideas that are in the embryonic stage, as we speak, and we’re many months away from the budget.”

This follows reports from Fairfax late last week:

"The Treasurer and I have been methodically consulting with colleagues and developing policies that will help address housing affordability in our major cities. Addressing this issue will be a major priority in the next budget," he said.

"We [state and federal governments] all accept that addressing supply-side issues in the housing market is the primary issue in housing affordability and cannot be addressed by the federal government without the support and consent of state and territory governments."

None of this suggests he's made the very clear links between housing affordability and the culture of fear that resonates through our private rental markets. But no doubt the Assistant Minister to the Treasurer will be drawn into more conversations between now and budget night in early May, and we look forward to seeing what else he and the Treasurer might come up with.

Please, may we have some more?

The proposed transfer of 18,000 Public Housing properties to Community Housing landlords is as fine an example of placing your policy burden on somebody else's bottom line as ever you might see...

We hear every so often from the Australian Government about its debt and deficit worries. The significance of that debt is questionable, and it's low by international standards, but for the sake of the argument let’s accept the need for budget repair.

The NSW Government, on the other hand is completely debt free. It's hoarding a handy $4.7billion surplus, largely from a buoyant stamp duty take on the back of Sydney's eye-watering house prices over the last few years. Stamp duty has rapidly grown from about 20% of the state’s tax revenue just a few short years ago, to nearly 30% today, increasing from $4.5billion to $8.3billion in the last tax year.

One of the selling points of transferring properties to Community Housing is tapping the de facto subsidy for Community Housing landlords that's known as Commonwealth Rent Assistance (CRA). For people on low incomes, such as a Centrelink benefit or a minimum wage, CRA helps offset the high cost of renting in Australia by adding a few extra dollars to your take-home payments. Community Housing landlords calculate the rent to maximise their tenants' CRA entitlements, then take the lot. This is a nifty way for a state government to draw on federal money to fund their agreed Social Housing responsibilities.

The media release in which Minister Hazzard announced the Social Housing Management Transfer Program suggested it would give Community Housing landlords an extra billion dollars over the next twenty years. That's a billion dollars of federal money, delivered via individual tenants on account of their entitlements to CRA, in case we hadn't made that clear.

If the NSW Government, rich with the take from Sydney’s sustained property largesse, wanted to chuck a lazy billion dollars at the Social Housing system in order to improve it for tenants, it could very easily do so without adding to our apparent federal spending woes - or at least, without dipping into the only national scheme designed to assist tenants in the private rental market. If it really wanted to, it could do this more than once every twenty years or so without putting too much strain on the bank.

It's just a matter of priorities.

2016 Budget to deliver income management for Social Housing tenants?

A few weeks ago we noted the NSW Government's continued interest in a Compulsory Rent Deduction Scheme for social housing tenants, as they took the idea to the recent Council of Australian Governments meeting.

Such a scheme would make it compulsory for tenants in social housing to have their rent taken from a social security payment and paid directly to the landlord. As we have noted many times before, such a scheme already exists, but it works on a voluntary basis. Direct rent deductions work for some people some of the time, but they won't work for all people all of the time. Making the use of such a scheme compulsory will produce awkward results.

Now the idea has resurfaced as an expense measure in the 2016 Federal Budget. Here's what the budget papers say:

The Government will establish a Compulsory Rent Deduction (CRD) Scheme. 

Under the Scheme, occupants of public and some community housing who receive income support payments or Family Tax Benefit will have their rent and related tenancy costs deducted from their payments and automatically transferred to the relevant public and state approved community housing providers. 

The CRD Scheme will reduce the likelihood of individuals accumulating rental debt, leading to an expected reduction in evictions and improved social outcomes. It will also improve rental income streams for housing providers and so encourage investment in public housing stock. 

The expenditure for this measure is not for publication as the arrangement is subject to negotiation with the States and Territories.

We're not sure either claim - reducing evictions and increasing revenue collection - will hold true in New South Wales. Whenever we've raised concerns about the over-zealous management of rental arrears and recovery of related amounts by FACS Housing we've been politely informed that only a very small number of their tenants are ever in rental arrears, and that in monetary terms the outstanding amounts do not dramatically affect their bottom line.

On the other hand, current arrears management practice is to issue a notice of termination and apply to the Tribunal, rather than enter into sensible discussions with a tenant about getting arrears under control. We're told this is because tenants who are in rental arrears do not read their mail or answer their phones, but we're not convinced. We've heard of many Social Housing tenants who have started diligently paying off a rent arrears debt only to find themselves in the Tribunal to fend off a notice of termination anyway.

We're all for FACS Housing and other Social Housing landlords taking steps to reduce their use of the Tribunal for managing rental arrears, but allowing them to compulsorily redirect tenants' Centrelink benefits into their own accounts is nothing short of overreach.

Further information about the proposed CRD is available on the Department of Human Services website. Notably it provides that the Scheme is subject to the "passage of legislation", which suggests a change to Social Security laws is on the cards.

Of course, there's an election to be had in the meantime, which begs the question - will Labor support this Scheme? They tried to introduce something similar when in Government back in 2013. They even got as far as introducing an amendment bill into Parliament, before dropping it cold. Here's hoping they leave it there, where it belongs.

Young people, welfare, housing and work

The Federal Government's Budget proposal to deny social security payments for 26 weeks to young people out of work is in breach of human rights, says the Federal Parliament's Joint Committee on Human Rights. The Australian Council of Social Services and the Australian Youth Affairs Coalition agree, and so do we.

On the other side of the argument, the Social Security Minister has justified the denial of payments as 'a measure to address youth unemployment by encouraging young people to accept jobs rather than relying on income support at the risk of becoming disengaged – both socially and economically', while another Government member thinks that young people 'in this space' would just spend those payments on cheezels and video games.

The 26-week no-payment period poses a greater threat to young people's social and economic engagement and employment prospects than MSG-laden extruded cheese snacks.

The 26-week no-payment period means young people out of work wont be able to pay their rents. That's bad news for young people out of work – and bad news for young people in work, because landlords and agent will see them as a riskier proposition, and will be less inclined to rent to them.

We were speaking last week with a regional TAAS advocate, who despaired of the 26-week no-payment proposal for just this reason. She explained that in the far-flung catchment of her service, there are some towns with very high rates of youth unemployment and no jobs going, and other towns where the unemployment rate is lower, and jobs can be found. To get a job, those unemployed youths will have to move towns – and they'll need somewhere to live. As the advocate said:

If they're lucky, those boys might be able to line up a job, but if they cannot line up somewhere to rent, they can't take the job up!

 Damage young people's housing prospects, and you damage their mobility and hence their employment prospects. The 26-week no-payment period does this and should not proceed. 

Joint sector statement on Budget social security changes

The Tenants' Union of NSW has joined with the Australian Council of Social Service (ACOSS) and more than 100 other community sector organisations in a statement on social security changes proposed in the Federal Budget.

We, community sector organisations and leaders from around the country, have come together to express our deep concern about changes to social security payments currently being considered by the Federal Parliament.

We support a robust safety net to protect people in the event that they are unable to support themselves due to unemployment, caring responsibilities, disability, incapacity or other unforeseen circumstances.

We recognise that most of us will rely on this safety net at some point in our lives, and reject the division between those who 'lift' and those who 'lean'. We all lift and lean at different points in our lives, sometimes simultaneously....

To this end, we ask our elected representatives to reject the following budget measures:

• The removal of income support for six months of the year for young people looking for work (see factsheet here)
• The transfer of 22-24 year olds from the Newstart Payment to the lower Youth Allowance (see factsheet here)
• The indexation of pensions to CPI rather than wages including the Age Pension, Disability Support Pension, Carer Payment, Parenting Payment Single and Veterans Payments (see factsheet here)
• Changes to family payments which will reduce support to low income families including sole parent families (seer factsheet here)
• Increasing the Age Pension age from 67-70 years, in the absence of any increase to Newstart (see factsheet here).

Read the full joint statement at ACOSS.

Speaking for ourselves, as tenants advocates, we can only add our particular concern for what these changes would do to the ability of young people and people in receipt of social security payments to get and stay housed.

For our further thoughts on the Budget and fiscal policy, look under our Federal Budget and Modern Monetary Theory labels.

Under 30, renting, working...

In today's guest appearance, former Tenants' Advocate Hayley Stone discusses housing and income support for young people in Sydney.

***

I recently applied for a rental property. As part of this process, I provided my licence and my employment history, including the direct contact details of my past and current employers, to a real estate agent.

Federal government proposals around income support for jobseekers under 30, combined with an increasingly 'flexible' job market, could bode ill for under 30’s seeking to live independently in rental accommodation. The repercussions could impact upon a person's housing security for years to come.

The introduction of a waiting period - for as long as six months - before being eligible for government assistance, and a six month cap on assistance in any 12 month period of unemployment, would put pressure on families to provide for younger relatives who find themselves jobless. It assumes that parents will be able to, and will want to support adult children who fall on hard times. But this isn't always true. In any case, many people under 30 already live independently in the rental market.

But with no guarantee of income support, a person under 30 will become an automatic risk for landlords, so under 30s may face discrimination when applying for new tenancies. Real estate agents already have access to birth dates through licences, passports and other forms of personal identification. They can determine employment status through pay slips and calls to employers.

As part of their responsibilities to landlords, real estate agents must determine the ability of potential tenants to pay the rent. Changes to income support for under 30’s might lead to prejudice against even highly paid under 30s working to contracts or in casual jobs, as income support may not be assured if those jobs dry up. If applicants are already unemployed, there is little incentive for landlords to take them at all, as there may be no guarantee of income past six months.

The problem is, this discrimination will only be able to be speculated on, as the way that tenancy applications are assessed makes it impossible to know the reason why an application is rejected. Unsuccessful applicants will never know who they were up against or what criteria was used to rule them out, making it all but impossible to demonstrate if discrimination is unlawful.

Changes to income support would mean that even if real estate agents and landlords don’t stop taking under 30s as tenants, they might start putting them on shorter term leases to coincide with their employment contracts or limiting those on income support to 6 month agreements. They might also look to introduce “rental guarantees” or asking under 30’s to declare assets in the case that they are unable to pay the rent, to make it easier for landlords to take debt recovery action.

For those under 30s who are in fixed term residential tenancy agreements, proposed changes to income support could be catastrophic if their employment situation tanks. Two weeks rent arrears is sufficient to start the eviction process. Even those unemployed with good employment histories are looking at a waiting period of 4 weeks if they lose their job. It is safe to anticipate that under 30s will have to utilise break-fee clauses to leave properties they can no longer afford to rent, or to apply to the NSW Civil and Administrative Tribunal to terminate on hardship grounds (which is not without the risk that compensation will need to be paid to the landlord). If tenants are unable to pay break-fees (6 weeks in the first half of the fixed-term, 4 in the second half) there is the risk of being placed on a tenant database for outstanding debts. These databases are regularly searched by agents prior to selecting tenants and listing last for years, and a listing remains until the debt is paid.

While these income support measures are being considered in Canberra, we are experiencing a rental crisis across Australia, and a massive shortage of affordable housing. Housing support is stretched to the point where only the chronically unemployable will receive assistance to secure an affordable home. The National Rental Affordability Scheme, which seemed to promise some relief, has been discontinued by the Australian Government. In an additional blow, the NSW Government has delivered a funding shake-up to homelessness services across Sydney.

Applying the proposed income support measures for under 30s in the current climate would be setting young people up to fail. Many Australians are already struggling in a hostile housing market, and it can be difficult to achieve permanent employment in the jobs market as it is. Proposed changes to income support simply direct the focus away from housing and employment policy failings, and seem ambivalent to the impact these measures could have on future demands for social welfare.

For more on proposed changes to income support in Australia, check out the Welfare Rights blog at www.welfarewrites.org

National Reconciliation Week

Galit Aflalo, the TU's Aboriginal Legal Officer, reflects on National Reconciliation Week, times past and times ahead.

*

Unfair. Unequal. Inhumane.

The history of Australia tells a shameful tale of the pain and suffering of Aboriginal and Torres Strait Islander people. From the time of invasion of Australia, the murders, the imposition of an unfair legal system based on the notion that Australia was a land belonging to no one and the government policies intended to hurt and destroy the Aboriginal and Torres Strait Islander people.

 

Some things have changed today and we must acknowledge and commend the courage and leadership of all indigenous and non-indigenous Australians who have fought for fairness, justice and equality. 

However, we still today have a long path to travel before we can talk seriously about fairness and equality.

Today…

• Australia holds a public holiday on 26 January to ‘celebrate’ the anniversary of the invasion of Australia; an invasion that led to killings, illness, oppression, loss of culture, loss of family and loss of land for the Aboriginal and Torres Strait Islander People.

• Australia celebrates a multitude of public holidays (such as Queen’s Birthday, Labour Day, and even a holiday for horse racing, being Melbourne Cup Day in Victoria). However, Australia does not have a single public holiday recognising the courage and contributions of the Aboriginal and Torres Strait Islander people or commemorating the losses and deaths for which Australia is responsible.  

• Australia does not recognise the First Peoples of Australia in the Constitution.

• Australia has not taken sufficient steps to return the land appropriated from the Aboriginal and Torres Strait Islander people or made any acceptable form of reparation. Not only have the First Peoples of Australia been deprived of their country and culture, but our legal system endorses a notion that indigenous land rights are inferior to those of non-indigenous people who acquired land by force, by duress and by oppression. 

• Australians live in a sad reality where the “gap between indigenous and non-indigenous peoples’ quality of life by virtually all standards is still very significant”:

• Aboriginal and Torres Strait Islander people have a life expectancy of 15-20 years less than non-indigenous Australians and have significantly higher rates of preventable diseases such as heart disease, kidney disease and diabetes.

• Aboriginal and Torres Strait Islander people are over-represented in the criminal justice system. Whilst Aboriginal people make up only 3 per cent of Australia’s population, over 28 per cent of Australia’s prisoners are Aboriginal. Half of prisoners aged between 10-17 are Aboriginal.

• A significant number of Aboriginal and Torres Strait Islander people lack adequate or appropriate housing. Indigenous households are half as likely to own their own homes compared to non-Indigenous Australians and are more likely to live in overcrowded conditions.

• In contrast to other developed countries such as the USA, Canada and New Zealand, the gap between measures of human development between indigenous and non-indigenous Australians has widened.

Today, the Australian Government continues to implement policies that will almost certainly widen the gap even further between indigenous and non-indigenous Australians. These include dramatic cuts to indigenous programs and activities and cuts to welfare, health and education, which will disproportionately impact upon highly vulnerable Aboriginal and Torres Strait Islander people.

As the Aboriginal Legal Officer at the Tenants’ Union of NSW, I am overwhelmed by the significant disadvantage faced by the First Peoples of Australia. Too many Aboriginal and Torres Strait Islander people live in overcrowded, inadequate housing that is maintained in an unacceptable state of repair by landlords. In my work, tenancy issues are invariably deeply intertwined with the significant socio-economic issues affecting Aboriginal and Torres Strait Islander people. The gaps between indigenous and non-indigenous Australians in relation to education, health, housing, imprisonment, financial means and social status impact directly upon the tenancy issues that are brought to our attention. When tribunals and courts attempt to assess tenancy issues in a microcosm without giving due weight to the broader circumstances, they often lose sight of the underlying causes of the tenancy issues and substantial mitigating circumstances.

Any person or family who lacks affordable or appropriate housing who suffers significant financial hardship, who is detrimentally affected by the lack of cultural awareness and cultural safety by government authorities, who lives in remote locations and experiences substantial barriers in accessing key services and fresh food is likely to suffer significant stress in many aspects of their lives. Unfortunately, the Residential Tenancies Act and the Civil and Administrative Tribunal Act do not allow for appropriate consideration of the specific needs of and disadvantage faced by Aboriginal and Torres Strait Islander people. 

Terminations without grounds 

For example, section 85 of the Residential Tenancies Act allows a landlord (including a social housing provider) to give a tenant a termination notice to end a tenancy for no reason at all (provided that the tenancy is not in a fixed term and the tenant has not been in continuous occupation for at least 20 years). As a result of this section, vulnerable indigenous tenants including young families, single mothers and elderly people are being required to leave their homes and are being left with little choice but to live away from their land, their country and their communities. Due to the lack of affordable housing and the systemic barriers in accessing the private rental market, Aboriginal and Torres Strait families who receive termination notices without grounds are at significant risk of homelessness. Such housing instability threatens to have deleterious impacts on every aspect of a family’s affairs.

In deciding whether to make a termination order regarding a termination notice without grounds, the Residential Tenancies Act does not afford the Tribunal any discretion, so it cannot consider the specific needs of Aboriginal and Torres Strait Islander tenants, including indigenous families’ connection to their country and communities or prospects of securing alternative housing.

Landlords have specific rights to issue termination notices if a tenant is failing to carry out their duties as tenants such as failing to pay rent, causing nuisance or breaching the tenancy agreement. Provisions in legislation for terminations without grounds are unnecessary and unacceptable, especially in the context of the social housing tenancies of Aboriginal and Torres Strait Islander people.

In light of the systemic market issues of housing affordability and appropriateness which impact disproportionately on indigenous tenants, law reform is necessary to remove the power of landlords to issue termination notice without grounds.  Until that reform is implemented, social housing landlords should, as a matter of policy, always ensure that a tenant knows why the landlord is considering termination, and give the tenant an opportunity to respond, and never use termination notices without grounds where an alternative notice with grounds is available.

Law reform is also necessary to give the Tribunal discretion to consider tenants’ specific cultural needs and prospects of securing affordable and appropriate long-term housing before making termination orders, whatever the grounds.

I would like to highlight to efforts of the Aboriginal Tenancy Advice and Advocacy Services (TAAS) in providing critical and holistic assistance to Aboriginal and Torres Strait Islander tenants across New South Wales. 

Greater Sydney Aboriginal TAAS, Western Aboriginal TAAS, Murra Mia (Southern) Aboriginal TAAS and Northern Aboriginal TAAS work provide vital targeted assistance to Aboriginal tenants facing substantial disadvantage and experiencing complex legal issues. The Aboriginal TAAS understand and address the systemic barriers that Aboriginal and Torres Strait Islander tenants face in dealing with the legal system. They travel extensively throughout New South Wales to offer accessible and effective advice and advocacy assistance and provide intensive case management support to vulnerable tenants with complex needs. The Aboriginal TAAS work to address the underlying causes of tenancy issues by working collaboratively with key stakeholders and communities to achieve pragmatic, innovative and holistic solutions and liaising closely with community services such as health, housing and financial counselling services to identify and address clients’ unmet broader needs.

The Tenants' Union commends and respects each and every person that has fought and continues to fight for reconciliation, for an Australia that pays true respect to the Aboriginal and Torres Strait Islander people and for an Australia that is fair, just and equal. Enough with the rhetoric, scapegoating and funding cuts to critical services. Now is the time to look beyond an apology in words and commit to reconciliation through action.

---

I scream, you scream: reflections on an inequitable Budget

In today's guest appearance, legendary tenants advocate and now Older Tenants Project Officer at the TU, Dr Robert Mowbray, reflects on the Federal Budget.

My favourite gelato is scoops of panna cotta and hazelnut from Bar Italia in Norton Street, Leichhardt. But I always wondered what was planned for the long-time empty Harold Hawkins Court, a former aged care facility. It's smack-bang in the centre of the cafe strip along Norton Street and I look across at it everytime I indulge in my favourite gelato.

Just over a year ago, Leichhardt Council announced it was forming a partnership with UnitingCare Ageing to develop affordable housing in Leichhardt. The initial focus was providing accommodation for older people with intellectual disabilities and mental health issues. Old aged care facilities, such as Harold Hawkins Court and Annesley House (just around the corner), were to be given new leases of life through the National Rental Affordability Scheme (NRAS). That's really great!

But when I opened the Sunday paper after the Federal Budget, I found that the new round of NRAS funding has been scrapped. That means no NRAS funding for the proposed UnitingCare affordable housing in Leichhardt and elsewhere.

Although no one will feel the blow torch of this Budget more than the young unemployed with no family support who are being fast-tracked to homelessness, there are hidden in the Budget are other surprises for older persons, often struggling to meet housing costs. The Commonwealth-State agreement for concessions and discounts on travel, electricity and rates will be terminated. Financial planner Louise Biti says:

"It will hurt pensioners the most. This will cost $1000 to $2000 a year. No one was expecting that ... ''

Also cut: a voice in government for people with disability. The Coalition Government has announced that it will not fund a separate Disability Discrimination Commissioner at the Human Rights Commission when the term of the current Commissioner, Graeme Innes (ex-Residential Tenancies Tribunal Member), ends in July. This is despite the fact that 37 percent of discrimination complaints relate to disability, and those is so much more for a Disability Discrimination Commissioner to do.

Welcome to 'The Age of Inequality' – the paradigm for a future Australian society. We will see the wedge between the 'haves' and the 'have-nots' widen dramatically. High-income earners are barely affected: 'someone earning three times the average wage will lose just 0.9 per cent of their take-home income. And further up the income scale, 'the latest tax statistics show 75 ultra-high-earning Australians paid no tax at all in 2011-12':

It isn’t only millionaires. Tax Office figures show there are 1095 Australians earning in excess of $150,000 who pay no tax. Half of them sought tax advice and shelled out an impressive total of $98 million, which works out to $223,000 each. Their biggest lurk is negative gearing. Most lose large sums on properties they rent out in order to destroy their taxable incomes, hoping to make it up later when they sell the properties for a lightly taxed profit.

I wonder what high income earners will think should they sit down for a gelato at Bar Italia and just happen to look across the road at the empty Harold Hawkins Court?

What is a sustainable surplus?

Chair of the National Commission of Audit, Tony Shepherd, laments the widespread criticism of the Federal Budget. He says:

I wish people could... stand back, look at the overall picture of the Commonwealth budget and rather than say 'don't touch me', say 'what can be our contribution to a sustainable surplus'.

The terms of reference for Shepherd's Commission of Audit included that it 'make recommendations to achieve savings sufficient to deliver a surplus of 1 per cent of GDP prior to 2023-24.'

So what is a sustainable surplus?

There's probably no such thing, at least for the Australian economy. Government deficits are more sustainable than surpluses.

First, let's get clear on what a surplus is, and what a deficit is. Each refers to the government's net income over a period (a year). If the Australian Government's income (primarily taxes) is more than its spending, the Government is in surplus; and if its spending is more than its income, it is in deficit.

Of course, one person's spending is another person's income, so if the Australian Government is in surplus, everything that's not the Australian Government (households, firms, other governments) must, by identity, be in deficit.

(This means, incidentally, that rather than saying a government 'delivers' a surplus, it is better to say that it 'takes' or 'extracts' a surplus.)

We can narrow down that broad non-government sector by distinguishing an external sector (ie foreign households, firms and governments) from the Australian private sector.

For any given period, one (or two) of the three sectors can be in surplus – and two (or one) in deficit. Not all of them can be in surplus, or in deficit, at once. Their total surpluses and deficits for the period must net to zero.

In the case of Australia, what we pay to the external sector is nearly always more the income we receive from it (we have a current account deficit). With that in mind, when the Australian Government takes a surplus, the Australian private sector must be in deficit – paying out more than it receives in income.

The Australian private sector can do this by running down stocks of money accumulated in previous periods of Australian private sector surplus (that is to say, periods of Australian Government deficits).

This cannot be sustained for long. Theoretically, if the Government persisted bloodymindedly in taking surpluses year after year, the private sector would end depleting all its net financial assets, then start offering up real assets (houses, cars, the shirt off your back) to the voracious Government. More realistically, financially constrained households and firms would try to shore themselves up individually by spending less and saving more, thus reducing overall income and economic activity.

By contrast, when the Australian Government is in deficit, its spending is not financially constrained, because it issues the currency. With an Australian private sector that is inclined to save Australian dollars and other net financial assets, and an external sector of trading partners pleased to accumulate Australian net financial assets, an Australian Government deficit is the sustainable and appropriate way to promote economic activity.

Choose your parents wisely...

Choose your parents wisely, for they may be all that stands between you and poverty.

"A little high, a little low" ...

the Little household discusses rents and incomes.

Now that we've had a week to digest some of the proposed changes to the Australian budget, we can begin to wonder what life might be like if the brave new world it has set before us makes it through the Senate.

It will be particularly tricky for young people who rent. Reductions and limitations to income support will mean more rental stress and evictions in a market that is already failing to deliver housing for people on low incomes. We expect landlords will simply decline to rent to young people on low or insecure incomes, putting additional pressure on an already stretched social housing system.

But as we mentioned last week this budget is bad news for social housing landlords as well. Absent a well-funded saviour (State Government, anyone? Don't hold your breath...) the social housing sector will contract even further. The result: more people living with mum and dad for longer. Or, if that's not an option, homelessness...

Changes to income support are not just a concern for low-income or unemployed tenants who can't find a home. The prospect of a six month wait for Commonwealth income support will place all young people in the 'inherently risky' basket - even if you do have a job. If you can talk a landlord into renting you a place, expect it to be on a six month agreement at best. If you can't, you'll be living with mum and dad for longer. Or, if that's not an option, you'll be homeless.

Now, if you've been following our posts about the real housing supply problem, you might start to wonder at the sense of this. The Australian Government could have made some adjustments to the way housing is taxed, to encourage landlords away from speculative investment. As things stand landlords take a punt on high-cost housing because they think it will produce the juiciest capital gains. They'll need an increasing supply of mid- to high-income tenants to rent their houses to, because you just can't go renting high-cost housing out at affordable rents. Landlords need high rents to keep their losses manageable while meeting the interest payments on their loans.

At the 2011 census, 54 per cent of tenants in New South Wales earned less than $600 per week, and 29 per cent earned less than $300 per week. While the Government wants young people to avoid certain disaster by stepping up to the next income bracket, we're afraid it is just as likely to have the opposite effect. The ranks of low-income renters will swell. This could just as easily knock off a few underpaid landlords in the meantime; particularly those who have had to take the kids back in, without any income to contribute.

But thankfully for your landlord it doesn't stop there. Changes to tertiary education funding will result in lower disposable incomes and higher debts for students, but it will also mean reduced savings for graduates. Sure, this means your landlord will have to keep a spare room free while their kids are off earning or learning - just in case they come up short on the rent for six months or so... But it might also ensure mid- to high-income earners are priced out of home-ownership for longer. And that means they'll be renting. Look out while your landlord puts the rent up, because competition just got a little bit more stiff.

And if that means you can't afford it, don't worry. You can always just move back in with your parents.