Productivity Commission Report

Social housing system broken – Productivity Commission

The Productivity Commission’s draft report into Human Services has described the current social housing system as broken and failing those in housing need.

The draft report, which was handed down on Friday, describes the current arrangements as both inefficient, offering little choice within the system and access to the private market; and inequitable, with people in need receiving vastly different levels of assistance depending on whether they can access social housing.

The report comes after the 2017-18 Federal Budget flagged a new National Housing and Homelessness Agreement to replace the current federal-state housing and homelessness funding compacts. If adopted under this new agreement, the report’s draft recommendations would mean wide-ranging reforms to both the funding of housing assistance and the design of the social housing system.

A new system of funding for social housing

The report recommends a radical overhaul of funding arrangements to:

  1. Extend Commonwealth Rental Assistance (CRA) to public housing tenants and increase the rate (for both social and private tenants) by about 15 per cent, with future increases linked to increases in rents and not CPI (Draft Recommendation 5.1).
  2. Transition social housing providers (both public and community) to charging market rents, with states and territories providing a new high-cost housing payment to tenants in both social and private rental housing to bridge the affordability gap (5.2).  This would be supported by new intake processes that include assessment of eligibility for this high cost housing payment (6.3). Existing tenants would be grandfathered on the current rent model for up to 10 years.

Reforms to the social housing system

To support this new funding model, as well as choice for tenants and accountability for providers, the report proposes a range of complementary reforms, including:

  • the introduction of choice-based letting systems (5.3)
  • more contestable processes for the management of social housing (5.4)
  • separating the funding of social housing from tenancy support services (6.1)
  • a separation of the respective entities responsible for managing social housing assets and social housing policy (6.2)
  • measures to improve the consistency of reporting of the efficiency of social housing and on outcomes for both social housing tenants and those who use the high-cost housing payment to rent privately (6.4)
  • making publicly available the regulatory reports on the performance of community housing providers that are undertaken as part of the National Regulatory System for Community Housing (NRSCH) (6.5)
  • consistent regulation across providers — government, not-for-profit, mutual and cooperative, or for-profit.

On the issue of contestability, the Commission was not convinced of the merits of transferring title to social housing assets to the community sector, being sceptical in particular that such transfers can lead to growth in stock or lower borrowing costs.

The process from here

The Commission invited feedback on the draft report, with submissions due by Friday 14 July 2017 and has flagged that it will be seeking further input on whether the NRSCH is flexible enough to regulate different types of providers and, if not, the changes that are necessary.

The Commission is also interested in understanding the extent to which inconsistencies between jurisdictions under the NRSCH add to administration costs and create barriers to entry.

CHIA will be in the coming weeks working with state and territory housing peaks to ensure a coordinated national response to the report in consultation with their respective members. 

Many of the draft recommendations are welcome and reflect the peaks’ previous joint submission to the Commission.  The further consultation on the NRSCH is significant given the importance of reform of the regulatory system to the proposed bond aggregator model. While reform of CRA is needed, wider reform of the social housing funding and rent model is complex and may carry with it significant implications for both people disadvantaged in the housing market and the viability of community housing providers.

While implementation of the report’s recommendations may be some time away, it is worth bearing in mind that a Productivity Commission report formed part of the genesis of the National Disability Insurance Scheme (NDIS). The NDIS is now one of the most significant social reforms of our generation and its rollout has created both opportunities and risks for people using services and service providers.  The community housing industry may be about to embark upon a similar journey.

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