Chapter 20 - Housing

Chapter 20 - Housing

20) HOUSING

21.This category comprises gross operating expenditures on welfare housing and Aboriginal housing. The category also includes administration costs and explicit interest subsidies paid on State run home purchase assistance programs. Costs attributable to the housing of State public servants are functionalised to the relevant expenditure category.

22.The ACT’s position relative to the States, based on the 1999 Review methodology and using the latest available data is illustrated on the next page. This sees the ACT being assessed by the Commission as having positive needs in this category.

STANDARDISED, ACTUAL & AUSTRALIAN AVERAGE

EXPENDITURE: HOUSING, 2000-01

Standardised expenditure is the amount that the Commission deems the ACT is required to spend if it is to provide an average level of service.

Actual expenditure is the actual funding spent by the ACT on this category in 2000-01.

23.A category structure is provided in the following table and illustrates the major components of the current assessment, together with comments on how the ACT is affected by the application of the different factors.

24.This chapter focuses on those components of the 1999 Review methodology that the ACT wishes to raise with the Commission. In particular, the ACT is seeking that the Commission address a number of perceived weaknesses in the application of the following components:

• national capital influences;
• socio-demographic composition factor; and
• building maintenance factor.

25.The ACT also requests the:

• continued assessment of input costs for the rental housing services component and scale affected expenditures; and
• introduction of an economic environment factor.

HOUSING:

SUMMARY OF THE CGC 1999 REVIEW METHODOLOGY

Component factors assessedACT position

Scale affected expenditure (wgt 4.87%) / The ACT is assessed as having positive needs due mainly to diseconomies of small scale.
Adminstrative Scale
Input costs
Rental housing services (wgt 94.89%) / The negative needs in this component arise mainly from the higher wages of public and private renters (and the resulting implied low demand for public housing) in the ACT combined with the relatively low numbers of Aboriginals receiving or in need of public housing in the Territory. The higher costs associated with maintaining the public housing stock in the Territory slightly offsets these negative needs.
Input costs
Dispersion
Building maintenance
Socio-demographic composition
Physical environment
Isolation (wgt 0.24%) / The ACT is assessed as having very small positive needs.
SUMMARY:
The bulk of the ACT’s funding in the housing expenditure category derives from the administrative scale factor which measures the Territory’s diseconomies of small scale.

Public Housing Stock

26.Over the period that the Commonwealth administered the ACT, it engaged in housing construction programs to supply accommodation for Commonwealth employees and their families transferred to or located in Canberra. This was significant in the post-World War Two period and particularly during the 1960s and 1970s. Canberra’s housing was initially designed and targeted for public servants and blue-collar workers.

27.Early housing involved the construction of weatherboard and fibro-cement houses on larger blocks. These were regarded as temporary accommodation. Later construction involved 3 and 4 bedroom brick veneer houses for families as well as multi-unit complexes (flats and bedsits) for single persons and couples.

28.The extent of this construction program in the 1950s to the 1970s is evident through the very high percentage of Canberra’s housing that was government housing (over 50% public housing in the early 1960’s). Through successive tenant sales programs and the construction of private housing, this figure decreased significantly, to around 11% of Canberra’s total dwellings when the stock of housing was transferred to ACT management in 1987.

29.The Commonwealth Government engaged in major tenant sales programs prior to ACT self-government that involved the sale of government houses to sitting tenants. The ACT inherited almost 12,000 rental properties (houses and flats/bedsits) and the Commonwealth retained the portfolio of some 5,000-6,000 mortgages (Commonwealth of Australia mortgages).

30.Tenants purchased the more attractive brick veneer properties and the ACT was left with the poorer quality and higher maintenance properties. This is evident in the clustering of a number of government-owned housing complexes in the ACT – in particular, the suburbs of Ainslie, Charnwood and the lower level of Narrabundah. The current high proportion of multi-unit complexes in public ownership is a consequence of units not being offered for sale (as they were not separately titled by the Commonwealth).

31.The Commonwealth Government engaged in major tenant sales programs prior to ACT self-government that involved the sale of government houses to sitting tenants. The ACT inherited almost 12,000 rental properties (houses and flats/bedsits) and the Commonwealth retained the portfolio of some 5,000-6,000 mortgages (Commonwealth of Australia mortgages).

32.Tenants purchased the more attractive brick veneer properties and the ACT was left with the poorer quality and higher maintenance properties. This is evident in the clustering of a number of government-owned housing complexes in the ACT – in particular, the suburbs of Ainslie, Charnwood and the lower level of Narrabundah. The current high proportion of multi-unit complexes in public ownership is a consequence of units not being offered for sale (as they were not separately titled by the Commonwealth).

33.The current level of government-owned housing in the ACT is 10.3%. A comparison of the percentage of residential properties held as public housing, between the States, is provided in the following Table 20.1.

TABLE 20.1 - HOUSEHOLDS RESIDING IN
PUBLIC HOUSING, BY STATE, 1996

NSW
% / Vic
% / Qld
% / WA
% / SA
% / Tas
% / ACT
% / NT
% / Aust
%
5.6 / 3.4 / 3.9 / 5.1 / 9.8 / 7.3 / 10.3 / 14.3 / 5.3

Source:Productivity Commission, Report on Government Services 2002, Vol 2, Housing attachment, Table 16A52.

ACT Rental Market

34.A further impact on the Canberra housing market has been the limited participation by private and community rental providers. With the earlier high proportions of government housing in the ACT, there was a limited demand for private rental accommodation. Public housing was readily available during the period the ACT was administered by the Commonwealth.

35.Further, private rental arrangements in the ACT can best be described as involving ‘accidental’ landlords with public servants and defence personnel temporarily re-located out of Canberra renting their family home. However, this is changing with more ‘mums and dads’ and non-residents investing in rental properties. There are no significant institutional investment arrangements in the ACT for private rental properties and the ACT has a relatively immature community rental sector.

36.With the limited alternative arrangements for affordable rental housing, pressure continues to be placed on the public rental system to meet the demand for low cost housing. This is a result of both the low private rental vacancy rate and high rent costs in Canberra.

Commonwealth State Housing Agreement (CSHA)

37.While the Commonwealth-State Housing Agreement (CSHA) has operated since 1945, the ACT did not become a party to this Agreement until 1987. At that time, the ACT was aligned to the CSHA and bound by the policies and obligations contained in that Agreement. Commonwealth Ministers and bureaucrats endorsed this arrangement prior to
self-government.

38.The primary purpose of the CSHA was initially the construction of housing. This enabled States to supply housing (using Commonwealth loan funds at concessional interest rates) and to meet operational expenses from rent proceeds (debt servicing charges, depreciation, repairs and maintenance and tenancy and property management costs). In the earlier years, the cost of repairs and maintenance would have been low.

39.During the early 1980s, the emphasis of the CSHA changed from general housing to welfare-based housing assistance with needs-based allocations introduced together with security of tenure for public tenants.

40.Capital funding to the States also changed to non-repayable grants. The States were also required to retain the existing investment in public housing through using sale proceeds to acquire new stock or upgrade existing stock. The ACT inherited this policy agenda in 1987.

41.In the context of Commonwealth-State relations for housing assistance, the current CSHA operates until 30 June 2003. This Agreement is currently under negotiation between the Commonwealth and the States, including any future funding commitments. This submission will not discuss that process but seeks to acknowledge its existence and contribution to the national policy on housing assistance measures.

Changing focus of Housing Assistance

42.Throughout the period 1945 until the late 1980s, the primary form of housing assistance in Australia had been delivered by the States through the CSHA. However, since the early 1990s, the Commonwealth has taken an increased role in the direct delivery of assistance for people renting through the substantial injection of recurrent funds for the Commonwealth Rent Assistance (RA) program.

43.Commonwealth CSHA funding declined by about 15% in real terms (from 1991-92 to 200001), while funding for its own RA program grew by about 62% over that period.

44.Annual Commonwealth expenditure on the RA program is now greater than that paid to the States under the CSHA. In 2000-01, Commonwealth expenditure on RA was $1,717.0m and on CSHA assistance was $1,407.0m.

45.The ACT, like the other States, applies market-based rents to public housing rental properties, as required under the CSHA, and offers rent rebates based on income. Effectively, the rent payable is based on the household’s capacity to contribute to the rent charge, capped at 25% of income. This is based on affordability principles, which dictates rent policies under the CSHA.

46.The difference between the market rent and the rent charged (based on 25% of income) is foregone as a rent rebate and is not required to be repaid by the tenant. Subsequently, this limits the capacity of the ACT and the other States to meet operating costs for their rental portfolios.

47.With the ‘welfarisation’ of the housing system over the last 15-20 years (public housing and rent assistance), the limited public housing is targeted to clients of Centrelink and other families and individuals on low incomes.

48.This has seen the proportion of tenants receiving rent rebates (and hence paying a reduced rent) increase to the extent that around 78% of ACT public tenants receive rebates. Other tenants remain in the public housing system because their incomes fluctuate or because they are coming close to the end of their working life and have limited capacity to support their own housing needs. Notwithstanding this, public tenants are protected by the security of tenure provisions contained in the CSHA.

49.RA and RR are provided to tenants to ensure that housing is affordable, in line with requirements of the CSHA. As noted earlier, the RR for tenants reduces States’ capacity to recoup their operating costs. In addition, to RR other aspects of the CSHA, such as security of tenure can cause pressures on demand for public housing.

50.Policies that limit tenant rent payments to a proportion of income do not have adequate ‘price signals’ for the type of housing consumed by that household. Some tenant households are small, comprising single people and couples, who occupy rental properties that are larger than what their needs dictate. Hence, in the ACT it is common to find single older tenants living in the family home of 3 or 4 bedrooms. These larger properties usually have higher market rents and higher maintenance costs but, because of income-based rent assistance policies, have low rent payments.

51.The Commonwealth’s RA program places an emphasis on affordable rent costs. This program offers welfare recipients financial assistance with their private rent charges, with a payment limit, based on a maximum rent contribution of 30% of income. For example, in May 2002, a couple with one or two children would receive the maximum RA payment where their fortnightly rent exceeded $298 (a fortnightly income of $993).

52.Tenants in high rental cost markets (such as Sydney, Melbourne and Canberra) will receive relatively less assistance than tenants in other cities and regions where rent costs are lower. The relatively lower RA payments increases pressure on public housing programs in high rental cost markets, as people who are paying these higher rents seek less costly, to the individual, accommodation alternatives.

53.The Commission currently assesses a building maintenance factor to reflect the difference in housing maintenance costs between the States. This factor reflects the expenditures relating to labour and materials for the physical maintenance of rented properties.

54.The relative costs of building maintenance are determined using the Rawlinson’s Building Construction Cost Index.

55.The ACT is disadvantaged as it faces relatively high costs for its building materials, which is driven by the fact that it:

• is an inland location, and materials need to be transported from interstate;
• does not have access to natural resources to the extent in the other States;
• is a small market and hence competition is limited more to smaller operators; and
• does not have the building supply manufacturers that are plentiful in the other States and thus is unable to reap the economies of scale available to the larger capital cities.

56.In light of the importance of the housing maintenance costs disability to the ACT, the Territory considers that this disability should continue to be assessed.

57.The ACT notes that the Commission has been concerned with the updating of the Rawlinson’s index because it ‘is causing large fluctuations in the redistribution of funding’. To address the concerns that the Commission has with the use of the Rawlinson’s index, the ACT suggests that data could be averaged from several indices to determine cost factors for the housing assessment to reduce these fluctuations.

58.The use of several indices will help to address the market fluctuations that occur from time to time, such as, for example, the increased building material costs evident in Sydney due to recent market factors such as the Olympics; Sydney storm natural disasters and construction boom.

59.The ACT suggests that Cordell’s Housing CostGuide (which specialises in residential housing costs), and Cordell’s Building Information Services (for the costs of the larger multiunit complexes) could be used to supplement Rawlinson’s Building Cost Indices.

60.The ACT supports the continued assessment of housing maintenance costs disabilities and notes that there are several options available to assess these disabilities if there are concerns with the current approach.

61.The ACT considers that the assessment of the housing category should be based on affordability factors. That is, the capacity of people to access rental housing (private, public or community-based), the level of assistance they require (this affects low income wage earners as well as Centrelink and Veterans Affairs beneficiaries) and the relative cost burdens between the Commonwealth and the various States.

62.It is essential to identify all people who require assistance. In some market places, because of high house prices and rent costs, this will include wage earners as well as Centrelink and Veterans Affairs beneficiaries. Also, many beneficiaries (particularly older persons) will be home owners and therefore will not have a need for housing assistance. The ACT Government’s Affordable Housing Task Force will be commissioning research into this area and this can be made available to the Commission when finalised.

Youth

63.The ACT attracts large numbers of youth (including Indigenous youth) from within its region for education, work and access to services. The ACT has a higher proportion of people aged 15-24 than any other jurisdiction. Youths aged 15 to 24 comprise about 16.4% of the ACT population (compared to 14% nationally). Of this group, there are more males than females.

64.The ACT has limited options to accommodate youth except within the public housing system. There are no boarding houses and the supply of one bedroom units is very limited. Where suitable accommodation is available for a short period of time, this is usually obtained by tertiary students studying at one of the three primary campuses – the Australian National University, the University of Canberra and the Canberra Institute of Technology.

65.The ACT public housing system carries a disproportionately high number of youth and younger people than other jurisdictions. Often the accommodation structure in the ACT is inappropriate as public housing is intended as longer term housing – and youth, generally, have a short-term housing need – and end up being accommodated in the larger multi-unit complexes.

66.The number of youth is also a significant driver of vandalism induced repairs and maintenance when compared to other demographic groups. Youth, particularly young males, have high social housing costs (and related welfare support services costs).

67.The ACT considers that the socio-demographic composition factor should incorporate an adjustment for the higher costs imposed on housing services by youth. A weight should be assessed for persons aged 15 to 24.

Indigenous Population

68.The ACT’s Aboriginal population, in particular youth, is increasing rapidly. Table 20.2 shows the recent and projected growth in the Territory’s indigenous population.

TABLE 20.2 - INDIGENOUS POPULATION, ACT

1991
(actual) / 1996
(actual) / 2001
(estimate) / 2016
(estimate)
1,583 / 2,844 / 4,000 / 12,700
% increase / 80% / 41% / 218%

Source: ABS 4705.0: Population Distribution, Indigenous Australians, 1996, Table 4: Census Counts, Place of Usual Residence – Census Years; Chief Minister’s Department Estimates.