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From houses to homes - meeting Defence's future housing needs: ministerial address on the occasion of the 10th anniversary of the Defence Housing Authority, Mural Hall, Parliament House, Canberra



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From Houses To Homes - Meeting Defence's Futu... Page I o f4

THE HON BRONWYN BISHOP MP MINISTER FOR DEFENCE INDUSTRY, SCIENCE AND PERSONNEL

FROM HOUSES TO HOMES - MEETING DEFENCE'S FUTURE HOUSING NEEDS

MINISTERIAL ADDRESS ON THE OCCASION OF THE 10TH

ANNIVERSARY OF THE DEFENCE HOUSING AUTHORITY

Mural Hall

Parliament House, Canberra Monday 29 June 1998

Parliamentary colleagues, distinguished guests, ladies and gentlemen,

As a community, we ask much of the men and women of the Australian Defence Force (ADF), even during times of peace.

We ask them to take on a different lifestyle to that of most Australians, to be in a continual state of readiness, able to respond quickly to our Defence needs, whether they are on Australian soil or overseas. We ask them to regularly spend lengthy periods away from home on training manoeuvres - and the training we ask them to undertake is always arduous - and often dangerous.

Defence operational requirements also mean that we ask them to take on a highly mobile lifestyle, with postings to new locations, on average, every two to four years.

What may, on the surface, seem like a very adventurous lifestyle, becomes a whole new proposition when there is a family involved.

Regular absences place particular strains on family life. A new posting means not only a new workplace for the Defence member, it also means loss of employment for the serving member's spouse, new schools to find, new friends to make, new communities to fit into and new support networks to develop for the whole family.

But the first priority for every family is to turn the house provided by Defence into "home" for the next two to four years. And if the house is of good quality and well maintained, that task becomes so much easier.

Service families have adapted well to their lifestyle, most enjoy the challenge of regular postings, the lifelong friendships they have formed and, for the serving member at least, the sense of "family" which exists within the Defence community.

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Despite the differences between States in areas like education and medical services, families must settle quickly into their new community, to allow the Service man or woman to concentrate on the job at hand.

This resettlement is made easier by the fact that wherever families are posted, from Thursday Island to Hobart, or Sydney to Port Hedland, there is generally a suitable Defence Housing Authority (DHA) house waiting for them.

Imagine the impact on our highly mobile Defence force if housing was not provided and they had to resort to searching through the 'classifieds' each time they moved into a new community - in unfamiliar territory.

In Australia, only 19% of all housing is rental accommodation and with low vacancy rates, only 3% or less of this stock is available for letting, at any one time.

The majority of rental properties cater for younger people who are between the family home and buying their own home. Consequently, 50% of rental accommodation is semi-detached or apartments. Most are inner city units, far removed from areas of military bases, for obvious reasons.

DHA caters for families and 84% of the houses it provides are free standing family homes. Around 42% of DHA houses are in country or remote areas, with the majority of the remainder located in outer suburbs.

As well, short-term leases of one year or less dominate the private rental market, while the average posting period for Defence families ranges from two to four years.

Without the certainty of housing provided by DHA, Defence families would be competing for a limited supply of houses, particularly in remote and country areas.

It is thus not surprising that, wherever I go, families tell me how important the houses provided by DHA are to their family and lifestyle.

DHA came into being in 1988, with strong support from the Coalition, following the Hamilton Report which showed that the poor quality of housing was having a negative impact on morale and on the ADF's ability to retain personnel.

In fact, Professor Sue Hamilton is here with us today. I'm very pleased you were able to join us, Professor Hamilton. It must be particularly satisfying for you to see one of the issues raised in your Report so satisfactorily resolved.

At that time, housing was provided mainly through direct rental or through State Housing bodies.

It was not unusual for Defence families to live in unheated, uninsulated houses, to have to carry curtains and carpet pieces from one posting to the next, to endure houses without hot water or adequate storage. And stories of having to cut the grass that was growing through gaps in the floorboards were not uncommon. I know that the Convenor of the National Consultative Group of Service Families, Mrs Di Biggs, who is with us today has such memories!

The houses were generally poorly maintained and there was little consideration given to the unique demands placed on serving members and their families.

Over the past ten years, DHA has completely turned around the quality of housing. It now ensures the availability of over 22,000 houses across Australia, meeting almost 84% of the Defence housing requirement.

Housing has now become one of the positives of Service life rather than the negative it once was.

By 1995, DHA owed almost $600 million and its interest payment amounted to almost $50 million each year.

It had strayed from its task of being a provider of housing to becoming a developer - this resulted in uncommercial activities, over capitalising sites and other unacceptable practices which were stopped.

Its financial performance fell far short of its achievement in improving the quality of housing, and DHA's debt threatened its ability to continue to supply houses to meet Defence's operational requirements.

Since this Government came to power DHA has taken a number of steps that have significantly improved its performance, both financially, and in the methods it employs to meet the Defence's housing requirements.

DHA has radically changed the way it provides housing. Instead of relying on borrowings, it embarked on a program to reduce debt through an asset privatisation program, by increasing the involvement of individual investors through its "sale and leaseback" initiative. Private investment now provides 45% of all off-base houses. The leasing program pursued by this Government is transparent and commercial.

By the year 2000 DHA plans to be debt free with 60% of all off-base houses provided by individual housing investors.

Its sale and leaseback package is finding favour with individual investors who like the certainty provided by the

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long-term lease. DHA is currently selling around 1600 of its houses each year. These sales have not only allowed DHA to retire much of its debt, they have also allowed it to fund the Department's continuing housing requirement which amounted to almost 2,000 new dwellings in the last year alone.

Compare this to a debt accumulation of about $ 100 million a year under the previous government.

The increased involvement of individual investors has meant that now almost $2 billion of the entire Defence housing requirement is provided by some 8,000 private individuals who choose to invest in houses occupied by Defence personnel.

And this has occurred in an environment where there is literally no institutional investment in rental housing - all are provided by individual investors who, in the main, own only one rental property.

DHA's housing maintenance is also provided more efficiently. Since 1996, under this Government DHA has reduced the average cost of maintenance and improvements per house by 30%, resulting in an annual saving of $12 million.

And this has not led to a reduction in service to Defence families. In fact survey results show that the satisfaction rating has remained high at 88%.

There have also been significant savings as DHA moved away from direct involvement in housing design, construction and land development projects which was not its core business. Its strategy of purchasing houses from project home builders has saved in excess of $15 million annually on new acquisition costs.

Again these improved efficiencies have been achieved without any drop in the quality of housing provided. Indeed, there has been a significant improvement with tenant satisfaction with new housing being at an all time high of 92%.

DHA now arranges the supply of Defence housing through competitive contracts with Australian business and most of these flow to regional providers who are primarily small businesses or local housing investors.

The industry impact of Defence housing expenditure is considerable.

For example, for this financial year alone, the value of

• maintenance contracts was over $20 million • new house purchases, almost $80 million • established house purchases around $130 million and • newly leased established houses around $180 million

What a turnaround! An organisation, which once relied entirely on borrowings and poor commercial practices is now, under this Government, clearly demonstrating that private investors, in this case ordinary Australians who invest in bricks and mortar, can become successful long term partners with Government.

And the positive outcome of this partnership is that:

• Defence families are supplied with suitable houses, • Defence has an assured supply of family accommodation in all areas and is able to meet the needs of a highly mobile workforce, • Individual property investors benefit from a residential investment with long term tenancy assured and • The most cost-effective method for the delivery of Defence housing is now under this Government constantly

pursued.

As well. DHA has also improved productivity and efficiency along the way and is well placed to continue to meet its key objectives.

What are DHA's plans for the future?

Following a review of Commonwealth-owned commercial entities, this Government has decided that DHA would remain in Commonwealth ownership.

This decision was taken on the basis that DHA is not in competition with the private sector in providing houses and recognises the largely non-commercial nature of residential housing for the ADF. The acquisition and provision of homes has never been for commercial gain, but for operational needs. Put bluntly DHA has no real commercial equivalent. But it does need to be managed on sound commercial practices as this Government has introduced.

This has been achieved by the Board appointed by me and chaired by Peter Jollie and the Managing Director Louis Milkovits whose appointment approximately coincided with my becoming Minister.

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The decision then reflects this Government's intention to continue to provide for the needs of defence personnel and their families.

When operational needs change, housing needs change too.

I have already said that other than for unit style accommodation in inner city locations, the market availability of suitable dwellings near Defence establishments is very low. The Defence housing need is therefore most readily met by encouraging leasing, purchasing or by arranging construction near Defence locations. In this way, investors tend to come to locations where there is a Defence presence, rather than families having to seek out housing where rental housing happens to exist. Of course, where on-base housing is inescapable, DHA has little choice other than to provide houses on the base itself.

The next three years will see the highest level of activity for DHA in its entire history. In that time, it plans to provide 2,000 new houses worth around $400 million annually.

Some of this activity will replace the remaining pockets of unsuitable houses located largely on base, so that by the year 2000, all houses supplied to Defence, regardless of location, will be good quality, modem dwellings.

And a key driver for DHA's activity is the Defence move to the North.

In the past 2 years, DHA has provided over 1000 houses in Darwin, Katherine, Townsville and Caims. Similar levels of activity will continue, predominantly in regional locations - consistent with the restructuring of the Australian Defence Force and the military presence in the North.

This change will be funded almost entirely by sale and leaseback and by the sale of existing houses where Defence is reducing its presence. So it is quite clear that DHA needs the flexibility to trade stock in order to meet continuously changing Defence requirements.

All of this sounds like a large task. It is even more impressive when we realise that DHA is comprised of only 260 people, represented across the entire continent wherever there is a military presence.

They have contributed to the changes that have taken place within DHA and are delivering an outcome that is not only important to Defence families but is important to this Government as well.

I mentioned earlier that wherever I go, defence families tell me how important the homes provided by DHA are to their family and lifestyle. In reply I never tire of telling defence families that this Government recognises the vital role DHA plays in their lives and how that role will continue well into the future.

1 congratulate the Defence Housing Authority on its tenth anniversary.

See also:

• Other Media Statements and Speeches • Defence Home Page

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