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Monday, 24 November 2008
Page: 6

Senator STERLE (12:48 PM) —The incorporated speech read as follows—

I wish to speak in support of the National Rental Affordability Scheme Bill 2008. This is a landmark bill. It will pave the way forward in addressing many of the problems that currently exist with the capacity of the private rental market to provide affordable rental housing for households on low and moderate incomes.

There would hardly be an adult living in Australia over the past seven years, who would not be aware that housing stress brought on by rapidly declining housing affordability has become a major issue across the country.

The problem of housing stress because of declining affordability really took off in this country in a big way in the years after 2001. The first indication, that this was an increasingly serious problem for large numbers of Australian households attempting to enter the housing market, showed up with the huge surge in house prices after 2001.

In the period 2001 to 2007, figures published by the Housing Industry Association, show that the median cost of a first home more than doubled. To make matters worse over the same period average monthly repayments on a new first home purchase increased by approximately 130 per cent. Not only was there a dramatic rise in the cost of a first home owner house, the cost of repaying the mortgage on the house increased even further.

These rates of increase in the cost of home ownership, particularly for first home buyers, would not have been a problem if average household income had risen by a similar rate. Again, figures published by the Housing Industry Association with the Housing Industry Association/ Commonwealth Bank of Australia (HIA/CBA) Housing Affordability Index show that average household disposable income increased by only approximately 25 per cent in the period 2001 to 2007.

These trends were bound to have serious implications for the housing rental market and that is exactly what has happened.

To illustrate how the decline of housing affordability has affected individual Australian households you only have to look at the effect on household disposable income.

Based on figures published by the Housing Industry Association, in 2001 monthly repayments on a median priced first home would have amounted to approximately 20 per cent of average household disposable income.

By June 2007 monthly repayments on a median price first home amounted to approximately 37 per cent of average household disposable income.

The effect has been that successive groups of first homebuyers have been going back financially as inflation and higher mortgage costs have been taking a greater share of household real disposable income.

This has resulted in many Australian families, due to no fault of their own, being shut out of the benefits of Australia’s economic growth over the past 5-8 years.

It would do well for senators opposite to dwell on this fact and then perhaps it might dawn on their leader mismanaged their time in Government.

Whilst first home buyers particularly those on low and moderate incomes were, in relative terms, the first to feel the full effect of the Howard Government’s neglect of the problem of declining housing affordability, it has not taken long for increased rental costs to become the most pressing issue concerning housing stress in this country.

The latest figures on CPI growth, published by the ABS, show that over the 12 months to March 2008, the housing component of the CPI rose by 6.8 per cent. This was the largest annual increase since the June Quarter 2001. More importantly, the ABS’s September 2008 CPI release notes that this rise in the housing cost component of the CPI was in large part due to rent, up 8.2 per cent.

Clearly, we are seeing a rapid increase in rents brought on, by increasing numbers of people unable to afford or purchase their own home and because rental housing market supply has not kept up with demand, particularly in respect to the low cost end of the market. Large numbers of low and moderate income earners who have been priced out of home ownership are now being hit hard by unaffordable rent.

Today, it is estimated that there are 1.1 million Australian households in housing stress. Put another way, well over 1 in 10 households in this country are in housing stress. This is a situation that no responsible government can ignore

Furthermore almost 700,000 renters are in housing stress because of having to pay rents that are affordable only if renters scrimp and forego on what most other households regard as essential living costs.

Available statistics suggest that approximately one third of all renters are experiencing housing stress. This is the scale of the problem inherited by the Rudd government.

No wonder this was a key issue at the last federal election. No wonder communities across the country have for years been up in arms about the situation regarding housing affordability.

While there has been some debate on why the cost of housing went through the roof after 2001, what was really appalling was the lack of a meaningful response from the Howard government.

Unfortunately the Howard government, rather than grappling with the issue in a constructive way and providing national leadership to deal with what had become a particularly serious national problem, resorted simply to blaming state and territory governments for the problem.

For the federal government at the time to infer that it had no, or very little responsibility to materially assist in responding to seriously declining housing affordability across the nation was a travesty.

We only have to look at one of the major factors that contributed to dramatically rising housing costs after 2001, namely immigration.

In the years immediately prior to 2006/07 Australia experienced a very high increase in the level of net migration, a federal government policy responsibility.

The result was that in the 5 years to 2006/07 there were over 600,000 new permanent arrivals to Australia. In comparison, in the previous 5 years there were only approximately 450,000 new permanent migrant arrivals.

You have to go back to the second half of the 1980s to find a similar period of high migrant intake. I am in no way criticising the high migration policy but the Howard government should have been well and truly aware of the likely consequences for housing demand and costs that would flow from such a policy.

The Howard government’s attitude to simply leave it to the market to fix the problem has come at considerable long term cost to the national economy and to the individual financial and social cost of many hundreds of thousands of Australian families.

This is why housing affordability has been given a very high priority by the Rudd government. After years of neglect by the Howard government this is not a problem that is going to be easily or quickly fixed.

The National Rental Affordability Scheme is a key part of the government’s $2.2 billion affordable housing package. The initiatives contained in this package will increase the supply of affordable rental homes, help people save for their first home, lower housing infrastructure costs and build new homes for homeless Australians.

The Rudd government’s National Rental Affordability Scheme has been structured so as to encourage large scale private investment in rental housing for low and moderate income earners. This is something that for far too long has been sadly lacking in Australia’s private rental market.

The National Rental Affordability Scheme will create up to 50,000 new rental properties across Australia at a cost of $623 million in the first four years.

Importantly the scheme will offer institutional investors and other eligible bodies annual rental incentives every year for 10 years, provided the conditions of the scheme continue to be met.

The Rudd government’s National Rental Affordability Scheme is a long term scheme for a long term purpose.

The incentives in the scheme are made up of a Commonwealth contribution of $6,000 per dwelling per year and a state or territory contribution in the form of direct financial support or in kind contribution to the value of $2,000 per dwelling per year.

Incentives will be indexed to the rental component of the consumer price index.

The scheme is deliberately targeted at low and moderate income households.

Incentives are only available to providers on condition that dwellings are rented to low and moderate income households at 20 per cent below the market rate.

The Minister has estimated 1.5 million households will be eligible for tenancies under the scheme, including entry level police officers and teachers, carers, apprentices, cleaners, hospitality staff and childcare workers, for example.

The priorities listed by the Minister are backed by the findings of a study of occupations particularly affected by housing stress. This study was conducted and published by the Australian Housing and Urban Research Institute in 2006.

The study found that the occupations with the highest incidences of housing stress were hospitality workers (27 per cent), sales assistants (19 per cent), cleaners, carers and aides (16 per cent). As well researchers from the Australian Housing and Urban Research Institute found that over 16,000 households with road, rail and transport drivers were experiencing housing affordability problems.

While these occupations are predominately low paid, they perform essential functions in to-day’s society. However there are now many instances where the supply of people required to undertake these important functions is being compromised because of a shortage of affordable housing in required locations.

The Minister in introducing the bill in the other place acknowledged, on behalf of the government, the efforts of the National Housing Affordability Summit group which, over the last four years, has helped develop the idea on which the scheme is based.

In this regard it is important to recognise that the Summit group is a coalition of the Housing Industry Association, the Australian Council of Trade Unions, the Australian Council of Social Services, National Shelter and the Community Housing Federation of Australia.

In short the National Rental Affordability Scheme has been a collaborative effort and has engaged the advice and support of a wide range of stakeholders.

The scheme provides a new opportunity for all levels of government, the business sector and not-for-profit organisations to work together to increase the supply of rental housing for low and moderate income households.

In evidence given to the Senate Standing Committee on Community Affairs at hearings held in Canberra on Thursday 6 November 2008 in reference to the Senate inquiry into the National Rental Affordability Bill 2008 the Chair of the National Affordable Housing Summit, Professor Julian Disney had this to say;

   “The first thing to say very strongly is that we greatly welcome this scheme. It is something that we think is a very high priority and a very important initiative, but it will take time to deliver. This is a major long-term change. In our view, many of its greatest benefits will be seen 10 years or more out from now. It is achieving a substantial readjustment in the range of resources and the effectiveness to which they can be put to address problems of low-rent housing.”

Also at the Senate committee hearing were senior executives from the Housing Industry Association.

On the same day, Mr Christopher Lamont, Chief Executive of Policy with the Housing Industry Association stated to the committee:

   “HIA welcomes the commitment of the Australian government’s aim to increase the supply of affordable housing. The National Rental Affordability Scheme is one of the most innovative measures we have seen in recent times to encourage institutional investment and increase the supply of affordable rental accommodation for the private rental market”.

These are powerful and ringing endorsements from the Chair of the National Housing Affordability Summit and from the Housing Industry Association.

Mr Lamont from the HIA went on to say:

   “It is clear from HIA’s perspective that without an increase in government spending and/or additional incentives for investment in new affordable residential accommodation the incidence of rental stress and homelessness will surely increase.

   Insufficient housing supply necessary to meet growing demand, a consequence of Australia’s rapidly expanding migration program, and household formation rates, will put further pressure on existing public, community and private rental housing stock and emphasises the importance of housing supply measures.”

You have to ask yourself if these facts where obvious to Australia’s leading housing industry body, located less than 2 kilometres from the Australian Parliament, why weren’t they obvious to the Howard Government.

The Minister is to be congratulated for bringing forward this scheme so quickly.

I commend the bill to the Senate.