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Monday, 24 November 2008
Page: 13

Senator FEENEY (1:07 PM) —I rise to support the National Rental Affordability Scheme Bill 2008, a bill designed to assist some of the millions of Australians who, whether out of choice or necessity, depend on the private rental housing market for affordable housing. The purpose of this bill is to establish the National Rental Affordability Scheme, to encourage private investment in rental housing by offering an incentive to participants. It aims to increase the supply of affordable rental dwellings and reduce rental costs for low- and moderate-income households. The scheme will offer incentives to providers of new dwellings on the condition that they are rented to low- and moderate-income households at 20 per cent below market rates. The bill provides for a refundable tax offset or payment to the value of $6,000 per dwelling per year, provided there is also a state or territory contribution in the form of direct financial support or an in-kind contribution to the value of $2,000 per dwelling per year. The incentive will be provided each year for 10 years to complying participants and will be indexed in line with the rental component of the consumer price index. The scheme is estimated to cost $622.6 million over the coming four years.

The modelling that underlies the bill calculates that the provision of these incentives will lead to the construction of approximately 50,000 additional new rental units by 2012. Since it is a condition of participation in the scheme that these units must be rented to people on below average earnings and at a rent below current market levels, the scheme is targeted at those who need it most. The construction of these 50,000 units will serve to reduce pressure in the rental market and help restrain the rise in rents. The scheme will thus make a contribution to housing affordability across the board and indeed, hopefully, across the nation.

This bill will be widely welcomed by the Australian community, particularly by middle- and low-income people such as those I represent in Victoria. It is part of the Rudd government’s commitment, foreshadowed during last year’s election campaign, to ensuring that the benefits of the long period of economic growth and prosperity that Australia enjoyed following the economic reforms of the Hawke-Keating governments are now equitably shared by all Australians. It may be that, as a result of the global financial crisis—GFC, as it now seems to be known to us all—triggered by policy failures in the United States, those years of growth may be coming to an end. I certainly hope not and know that the Prime Minister and the Treasurer are doing everything they can to ensure that Australia does not go into a phase of negative growth. They will be helped by the burst of confidence that the election of Barack Obama as President of the United States of America will cause and also by the massive stimulus package of $850 billion, the largest in history, announced recently by the Chinese government.

Australia’s efforts to avoid recession will not, however, be helped by the obstructionism of those senators opposite who appear determined to block key elements of the Rudd government’s budget, thus making it more difficult to keep the budget in surplus and the growth rate of our nation positive. We know what the Australian people think of the negativity and obstructionism of the opposition. The recent Newspoll showed that Mr Turnbull was the preferred Prime Minister by a mere 22 per cent of voters, down from 25 per cent only some two weeks previously. Mr Turnbull’s approval rating is now nearly as bad as that of Dr Nelson at the time that the Liberals dropped him as their leader. That has been the reward for two months of irrelevance and obstructionism by Mr Turnbull. All I can say is: keep up the good work! It is left to us on this side of the parliament to do the hard work necessary to ensure Australia’s economic future. That will no doubt involve some difficult decisions on spending and some difficult decisions on priorities. But this government, true to the traditions of Labor, will make sure that the burden of these uncertain times will not be allowed to fall entirely upon those least able to bear it. We will do everything in our power to protect low-income Australians and we will continue to ensure that our policies reinforce and build social solidarity and cohesiveness rather than undermine it. That is why this bill is so important.

As population and employment have grown, the provision of affordable rental housing has not kept up. With house prices in the capital cities booming, investment has gone into booming inner city apartment towers, often for those with better incomes than the average, and new homes in the suburbs for private buyers. As a consequence, there has not been sufficient investment in rental housing for those on average or below average incomes, and that is particularly acute in regional areas. The phenomenon I have just described is quite understandable—investments go where the profits are likely to be the greatest—but when this kind of phenomenon occurs it is the duty of government to intervene to ensure that everyone shares in the benefits of prosperity. Market failure is not a figment of our imagination.

The failure of the Howard government to see the benefits of economic growth flow to all Australians, not just to those who are already well off, means that large numbers of people are struggling to find and keep affordable housing. The Howard government coasted on the back of economic growth, assuming that the market could take care of all problems and that everything would be fine as long as the people they represented were doing well. So, while housing prices in Sydney, Melbourne and Perth, to name just three, have doubled and doubled again, making millionaires out of some of the people who inhabited them, in the rest of Australia rents have risen sharply and the availability of rental housing has fallen, and fallen dramatically.

Between 2000 and 2005 the average price of a home in Australia’s capital cities increased by an extraordinary 170 per cent. Not surprisingly, many young families, who in the past would have been buying a new home, are now unable to do so and they are staying in the rental market. We can see the increasing strain on the budgets of middle- and lower income Australians caused by rising housing costs when we look at the Housing Industry Association’s housing affordability index. In December 2001 the median house price was $210,100 and average monthly repayment was $1,049, which meant that the repayment-to-income index was at 14.6 per cent. Between 2001 and 2007, under the stewardship of the Howard government, there was a dramatic fall in housing affordability. By March this year the median house price was $425,600 and the average monthly repayment was $2,799. The repayment-to-income index had grown to 29.1 per cent. The index had thus more than doubled since 2001. The effect of this has been to push large numbers of young, hopeful homebuyers out of the market, forcing them to pay rent. That is why Mr Harley Dale, the Chief Economist of the Housing Industry Association, warned the Howard government in 2007:

This situation for new home building will in turn sustain the current problems of struggling aspiring home buyers and tightening rental markets.

The Howard government ignored that warning, as it ignored so many other warnings on so many other issues. Mr Dale was of course quite right: the high interest rates and increasing unaffordability of housing under the Howard government has indeed flowed through to the rental market. Between 1995 and 2005 the total number of rental households increased from 1.5 million in 1995 to an incredible 2.1 million. This increased demand has kept rental vacancy rates very low and has pushed up rents across all of the capital cities and in many regional centres. In the June quarter of 2008, rents across Australia increased by 2.2 per cent in the quarter, the largest quarterly rise since 1989. The increase for the whole of 2008 is expected to be 7.7 per cent. This is, of course, higher than the rate of growth of average weekly earnings and higher than the rate of inflation. Rents overall are now, on average, 60 per cent higher than they were in 1990. This is a very significant problem for working families living on average or below average incomes, trying to raise a family, to juggle work and family and to send kids to school, all the while paying a quarter or even a third of their income on rent.

The Rudd government understands this and the previous government did not. That is why Kevin Rudd announced during the election campaign that he would make housing affordability, particularly for renters, a key priority for a new Labor government. That is also why Kevin Rudd, together with Wayne Swan and Tanya Plibersek, held a housing affordability summit before the election, meeting with economists, developers and industry representatives to hear ideas and develop real solutions.

This year, a study by the National Centre for Social and Economic Modelling found that rental stress was affecting an increasing proportion of Australians. The definition of rental stress is when households have to spend more than 30 per cent of their income on rent. This study found that nearly 300,000 Australian households, more than 10 per cent of the total number of households in rental accommodation, are already suffering from rental stress. That means that about 750,000 people are living in households affected by rental stress. The centre estimates that this number will continue to increase sharply unless there is firm leadership from government to address this very real shortage of rental housing.

Rental stress contributes to a number of other very real and damaging social problems: substance abuse, child neglect and abuse, poor school retention rates, homelessness and rising crime. The notion that these problems are interconnected is of course not new. They all impose costs, social and financial, on the community as a whole. It is the responsibility of government to see that this scenario is prevented. I do not think that the Howard government, with its focus on growth as the solution to all problems and its faith that the market will always provide what the community needs, understood this. The Rudd government does and it understands the need for a constructive role for government in tackling housing problems and the other very real problems that Australia faces.

It may be that, as economic growth slows and house prices begin to come down, some of this pressure will begin to moderate. But the backlog of demand for rental housing is so high and the rate of construction of new rental units for middle- and low-income earners so slow that it will take a long time for the hundreds of thousands of Australians currently suffering from rental stress to gain any tangible benefit. So action by the federal government to help stimulate growth in the supply of rental housing remains timely and necessary.

This bill does not try to impose a government solution on the housing industry. We do not believe it is the role of the state to provide housing for the entire population. We want to see the private housing industry build the houses and flats that people want. But we acknowledge that at present the incentives provided by the market are not producing enough investment in rental housing for average income and low-income working families. That is a fact and that is why this bill is so important.

This bill is part of the government’s overall housing strategy, which includes $2.2 billion worth of housing commitments made in this year’s budget. Much of the pressure on the rental housing market has been caused by young Australians being pushed out of home ownership by the 10 rises in interest rates under the previous government. Hundreds of thousands of young Australian families who would like to start saving for and buying their own homes have not been able to do so because of skyrocketing house prices and high interest rates.

One of the proposals that came out of the housing affordability summit was the Housing Affordability Fund. The fund tackles two major impediments to housing supply: costs that result from planning delays and the impact of infrastructure charges. The fund will give local councils the chance to improve housing affordability in their communities. The fund has been welcomed by local government and the housing industry. Mr Wilhelm Harnisch, the Chief Executive Officer of Master Builders Australia, said:

The HAF is a welcome return of the Commonwealth into this vital part of the Australian social fabric and the economy. There has been a decade of policy neglect in addressing the supply side barriers and the HAF is supported by industry as a first and vital step in redressing this area of policy neglect.

It is pretty extraordinary that a leader of the private housing industry, not known in the past for its enthusiasm for the Labor Party, should make such a scathing assessment of the record of the Howard government. Let me repeat: he summed up the record of those opposite as ‘a decade of policy neglect’. That is the verdict of someone who has worked intimately in this area of public policy and this area of the market.

The Rudd government has a mandate to tackle the problem of housing affordability, and since last November the government has taken that mandate seriously and has delivered on its commitments. I am very proud to be part of a government that is delivering on its commitments; a government that is keeping its promises. I remind those opposite that the Howard government did not even have a housing minister. I do not know whose responsibility this issue even was under the previous government, but I suspect the answer is that it was none of them. Now, at least, the opposition has a shadow minister for housing. That person, I discover, is Mr Scott Morrison, the member for Cook, who was only elected to parliament last November. I am not, of course, being critical of him—I am, after all, a newbie myself—but it does show what little priority has been given to this area of policy and to the issue of solving the housing crisis left to the nation as a result of a decade of policy neglect. I commend the Minister for Housing for bringing in this bill. I commend the minister in her fulfilment of our election commitments. This is a government which keeps its promises, and that is why the Australian public is showing such confidence in this government and its stewardship of the economy. I commend the bill to the Senate.