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Industry Commission Act - Industry Commission - Reports - No. 34 - Public housing, 11 November 1993 - Volume II - Appendices


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INDUSTRY COMMISSION

PUBLIC HOUSING

VOLUME 2: APPENDICES

REPORT NO. 34

11 NOVEMBER 1993

A u stra lian G overnm ent P ublishing Service C a n b e rra

© Commonwealth of Australia 1993 ISBN 0 644 32919 X (Volume 2) ISBN 0 644 32949 1 (set)

This work is copyright. Apart from any use as permitted under the Copyright Act 1968, no part may be reproduced by any process without prior written permission from the Australian Government Publishing Service. Requests and inquiries concerning reproduction and rights should be addressed to the Manager, Commonwealth Information Services, Australian Government Publishing Service, GPO Box 84, Canberra ACT 2601.

Printed in Australia by A. J. L a w , Commonwealth Government Printer, Canberra

TABLE OF CONTENTS

VOLUME 2 - APPENDICES

Page

A PARTICIPANTS’ VIEWS 1

A. 1 Groups with distinctive needs 1

A.2 Aspects of assistance 11

A. 3 Private rental market 29

A.4 Intergovernmental issues 34

A.5 State housing authorities 40

A. 6 Administration of programs (other than public housing) 52

B OVERVIEW OF HOUSING FOR LOW-INCOME PEOPLE 59

B . l Tenure characteristics 59

B.2 Location characteristics 62

B.3 Department of Social Security clients 64

B.4 Public housing applicants and recipients 67

B.5 High-income public housing tenants 69

B. 6 Demand responses 69

C RENTAL MARKET 73

C. 1 Nature of the good 73

C.2 Rental stocks 80

C.3 Government interventions 82

C.4 Market structure 88

C.5 Regulatory framework 91

C.6 Market operations 99

C.7 Supply responses 101

INDUSTRY COMMISSION "Hi"

PUBLIC HOUSING

D CSHA FUNDING ARRANGEMENTS 105

D .l CSHA funding 107

D.2 CSHA accounting structure 117

D.3 Understanding the accounts 122

D.4 Subsidies to housing authorities 127

D. 5 Accrual accounting 127

E EVALUATION OF HOUSING ASSISTANCE APPROACHES 129

E. 1 Housing assistance or cash payments for general income support? 129

E.2 Cost effectiveness of public housing 134

E.3 Impacts on the private rental market 142

E.4 Resource costs of public and private provision 143

E.5 Allocative efficiency 144

E.6 Review of studies 145

E.7 Extra benefits from public provision 147

E. 8 Rent assistance and headleasing 149

F EFFECTIVENESS AND EFFICIENCY OF PUBLIC HOUSING AUTHORITIES 151

F. 1 Objectives o f housing programs 151

F.2 Measuring performance 153

F.3 Tenancy management 157

F.4 Property management 161

F.5 Co-ordination 164

F.6 Transparency and accountability 165

Attachment F. 1 Government housing assistance schemes 168

iv INDUSTRY COMMISSION

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K.3 Inconsistencies in rental assistance 259

K. 4 Shared equity schemes for public housing tenants 259

L COMMUNITY HOUSING 263

L. 1 Community housing programs 266

L.2 Program objectives 272

L.3 Funding processes 278

L.4 Project allocation 282

L.5 Legal framework 285

L.6 Management by community groups 287

L. 7 Accountability 290

M SUPPORT ASSISTANCE PROGRAMS 291

Μ. 1 Supported accommodation and support assistance programs 291

M. 2 People who need supported accommodation assistance 302

M.3 Housing allocation and the provision of supported accommodation 308

M. 4 The role o f non-government organisations 310

N ABORIGINAL AND TORRES STRAIT ISLANDER HOUSING 313

N. 1 Program formulation and management 313

N.2 Funding and financial arrangements 320

N.3 Co-ordination with other services 327

N.4 Housing standards 328

N.5 Stock management and allocation 331

N.6 Incentives for recipients 332

N.7 Recent initiatives 333

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TABLES

B. 1 Number o f public housing tenants by income source and income quintile, 1990 69

B. 2 Elasticity estimates for housing services 72

C . l Nature of occupancy by State, 1991 81

C.2 Residential tenancy legislation and coverage, 1992 93

C.3 Anti-discrimination provisions 95

C. 4 Price elasticity components for supply of housing services 102

D . l Funds for housing and support services, 1993-94 106

D.2 Net Commonwealth payments to the States for housing, 1974-75 to 1991-92 108

D.3 State debt to the Commonwealth under the CSHA by loan type, at 30 June 1993 113

D.4 State loans from the Commonwealth under the CSHA by type, at 30 June 1992 113

D.5 Commonwealth and State grant funding by State, 1984-85 to 1987-88 114

D.6 Public housing rental income, rental rebates and households on rebated rents in Australia, 1986-87 to 1991-92 118

D.7 General Allowance — funds available and purpose to which they were applied, 1991-92 122

D.8 Balance of Rental Capital Account brought forward by State, 1989-90 to 1992-93 125

D.9 Receipts from the sale of land and dwellings by State, 1989-90 to 1991-92 125

D. 10 Cash outcomes of public housing rental operation by State, 1984-85 to 1987-88 126

F.l Possible indicators of efficiency 156

Η. 1 State housing authority asset valuation, 30 June 1992 193

H.2 Commission estimate of public housing asset values by State, June 1992 195

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M.2 Commonwealth CAP funding allocation, 1990-91 to 1992-93 294

M.3 Number and range of services funded under the SAAP and the Youth Social Justice Strategy by target groups, 1988-89 and 1992-93 294

M.4 Commonwealth appropriations for DHHLGCS People in Crisis Program, 1990-91 to 1992-93 296

M.5 Home and Community Care expenditure by government level, 1984-85 to 1992-93 297

M.6 Domiciliary Nursing Care Benefit, aged persons and people with disabilities by State, June 1992 and June 1993 299

M.7 Commonwealth nursing home subsidies and domiciliary care services, 1991-92 and 1992-93 300

N .l Commonwealth expenditure on Aboriginal and Torres Strait Islander housing from 1969 to 1993 321

N.2 CHIP housing and infrastructure funding, 1988-89 to 1993-94 324

N.3 CHIP capital and recurrent expenditure, 1988-89 to 1993-94 324

N.4 Aboriginal and Torres Strait Islander family units and persons requiring housing, 30 June 1992 325

N.5 Communities and people in minor urban, rural and remote areas which do not have adequate infrastructure, 30 June 1992 327

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A PARTICIPANTS’ VIEWS

The Commission received 370 submissions for this inquiry and held public hearings after the release of an issues paper and the draft report. This Appendix captures a selection of the views o f participants provided either in submissions or at the public hearings. These views indicate the wide range of issues brought

to the Commission’s attention by participants.

A.1 G roups with distin ctive n e e d s

... any definition of “special need” should be consistent and coherent within and between Government agencies. This is to avoid the possibility o f application of different criteria by Housing Authorities and Department of Social Security and other

agencies in meeting the needs, for example, o f women escaping domestic violence (National Women’s Consultative Council, sub 222, p. 1).

While we accept that affordability, appropriateness, equity and security are priorities as policy and program objectives, most vulnerable groups needing supportive housing require flexible interpretation so appropriateness becomes a key objective for any program (Uniting Church - Synod of Western Australia, sub. 32, p. 3).

... disadvantaged groups have the right to equitable access to stable, secure housing with appropriate levels of specialist support. Hanover recommends that greater emphasis must be put on targeting stock to special needs groups in structured co­

ordinated programs with appropriate health department and community agencies. At present, those in most need o f secure affordable housing are not having their needs met (Hanover Welfare Services, sub. 163, p. 7).

Aboriginal and Torres Strait Islander people

Regrettably, there is insufficient accommodation dedicated for Aboriginal use and consequently the descendants of the original inhabitants of this country are forced to compete on the “open market" for public housing (Australian Citizen’s Action Network, sub. 204, p. 5).

According to available research, [Aboriginal and Torres Strait Islander people] have major difficulties securing mainstream housing in both public and private sectors. They experience discrimination from owners and officials; there is a lack of housing stock able to accommodate large households; they are unfamiliar with procedures and

expectations; and the relevant information, advice and assistance is often not provided to them. (Society of St Vincent de Paul, State Council of NSW, sub. 341, p 8)

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At present Aboriginal families are not “subject to similar rules” [as other public housing tenants]. On numerous occasions Aboriginal families are subject to constant scrutiny by Homeswest Accommodation Managers. Often the word of a neighbour will be sufficient for Homeswest to give a warning to Aboriginal families, yet it is hard to determine if racial prejudice has played a part. Families are sometimes evicted under section 64 of the Western Australian Residential Tenancy Act, where a 60 day Notice of Termination with no reasons is given. In our experience a much greater percentage of those evictions are for Aboriginal families, as opposed to white families (Sussex Street Community Law Service Inc., sub 272, p. 9).

Sole parent Aboriginal women are even further disadvantaged to their Anglo counterparts. Apparently, it is extremely rare for an Aboriginal single parent to secure accommodation in the private rental market; and even rarer for them to secure accommodation in the private rental market that meets their needs. Refuge workers reported that more Aboriginal women came in to the refuge with large families of 4 or more children than white women, and that white women tended to come in with families of 2 to 3 children Family size can pose an additional access barrier for Aboriginal families in terms of obtaining appropriate sized accommodation in suitable locations (Tenants Advice Service, sub 191, p. 6).

Because of the absence of skilling. Aboriginal people have been disadvantaged in accessing equitable living ... (Helen MacFarlane, transcript, p. 329).

in other words 46 houses out of 53 contain more than one [Aboriginal] family (Widjeri Co-op, transcript, p 549).

It is salutary that education, health, employment and welfare departments have long seen it as a priority to engage Aboriginal staff in liaison and management positions, yet the housing market has not (Dr Helen Ross, sub. 215, p. 3).

A major issue facing all remote Aboriginal communities is the repairs and maintenance requirements of housing, in those localities. The issues of locational disadvantage have been recognised for remote and rural townships in the form of cross-subsidisation between city and country. Locational disadvantage applies to a far greater degree to

remote Aboriginal communities, yet the same cross-subsidisation does not seem to apply, even though those tenants have similar repairs and maintenance requirements (Kimberley Development Commission, sub. 35, p. 4).

South Sea Islanders

Our view is that [South Sea Islanders] should be recognised as a cultural and ethnic group in their own right facing special problems of their own, most o f which were not of their making The first step in correcting this problem would be for them to be included with Aboriginal and Torres Strait Islanders in all programmes covering ATSIC (L M Jubov, sub 282, p. 3)

Our unique history as non voluntary “immigrants” places us in a position where we have not been recognised because we do not ‘fit’ anywhere within the Government

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A PARTICIPANTS' VIEWS

structures as either ‘migrants’, or for at least one third of our people, as indigenous Australians. It is therefore vital that special consideration be given to our people’s unique place in Australian society today (South Sea Islander Community of Mackay, sub 289, p. 1).

People with disabilities

People with disabilities are one of, if not the most disadvantaged groups when seeking to access housing. Not only do they require a certain type of housing (eg with access), and often support services to enable them to live independently (eg personal care advocacy, supervision), they as a group tend to have less disposable income — either

because o f the undisputed extra costs of living with a disability or because as a group the option to work full-time at full wages is less likely than for any other sector within the community (ACROD, sub. 140, p. 4).

It is also more difficult for people with disabilities to access housing in the private rental market:

• their disability shows and despite community education, people make inaccurate assumptions and choose to rent to someone who appears normal,

• wheelchairs do cause damage to premises even with the most careful use — so why risk your property,

. renovations need to be accomplished for people with physical disabilities — why bother with that person,

• those on a pension are unable to pay market rates, particularly if they have extra costs of living as a result of their disability,

• concerns about unreliability of some persons with a psychiatric disability — the nature of the disability can in some instances result in a “poor history” of payment of rent, public utility charges etc (ACROD, sub. 140, p. 5-6).

It is a sad fact that, despite Federal and State legislation on Rights, Discrimination and responsibilities of certain Departments, the Psychiatrically Disabled tend to be discriminated against in the allocation and tenure of affordable public housing (Schizophrenia Fellowship of South Queensland, sub. 113, p. 5).

... we urge a ... non-discriminatory housing policy for all disabled people, and which should be applied by all governments in their attempts to meet the housing needs of a very disadvantaged group (Community and Institutional Parents’ Action on Intellectual

Disability (C1PAID), sub. 236, p 2).

There is not enough public housing and not enough choice; access to information is rarely straightforward, and often pervaded by discriminatory attitudes. However, even without all these, no housing is appropriate for people with a psychiatric disability without access to suitable, linked support. Housing policies, therefore, should

incorporate training programs for staff to understand the nature of psychiatric

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disabilities, and should be developed in collaboration with Government Departments providing support services (Queensland Association of Mental Health, sub. 127, p. 6).

... it is important to note that what constitutes “affordability” for the able-bodied, will not necessarily be affordable for people with disability. Due to the extra costs of disability, people have substantially less disposable income. For this reason low cost housing is essential and any affordability benchmarks must take into account the extra costs of disability (Queensland Disability Housing Coalition, sub. 121, p 3).

... most houses offered through [the South Australian Housing Trust Community Tenancy Program] are 3 bedroom houses with just the one living area. These often prove cumbersome with regard to accommodating three unrelated persons, designed as they were, for the nuclear family. It would be desirable to have more single occupancy units in this program or larger houses with two or more living rooms (Community

Accommodation Support Service o f South Australia, sub. 24, p. 1).

Various measures are needed to improve access to public housing including:

• linking housing units with community mental health services, such as through better siting of public housing singles units and more outreach services;

• increasing the number o f singles units;

• promoting innovative housing and housing support projects operating through the non-government sector such as ‘headleasing’ where the non-government agency can provide accommodation for a short period and then transfer the lease to the individual on a short-term basis; and

• avoiding financial penalties when people go to hospital and must continue paying for both their community accommodation and their hospital expenses (quoted from National Health Strategy Issues Paper No. 5, p. 146, by Mental Health Branch, Queensland Department of Health, sub. 290, pp. 2-3).

people are not officially allowed to apply for housing stock until they can guarantee accommodation support If New Service funding under the Disability Services Program is necessary and approved for accommodation support because the person has high support needs, there is an expectation that it will be spent during a limited time frame. The person could well have to wait, however, for two or more years for

housing stock to become available and this could jeopardise their accommodation support funding. There needs to be a recognition that both programs have lead times and applications have to be placed simultaneously to take account of this (Spastic Centre of New South Wales, sub. 11, p. 5).

Historically at least in Victoria significant numbers of people with a disability live in housing ranging from large to small institutional settings funded by State or Federal Government Health and or Community Welfare budgets. This has meant that there has been little pressure on public housing authorities and the CSHA to directly address and

provide for the housing needs of people with a disability. It also accounts for many of the issues and difficulties ... related to the co-ordination o f services (Singleton Equity Housing, sub. 249, p. 1).

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A PARTICIPANTS’ VIEWS

It is worth noting that from a West Australian point of view, special purpose built housing for people with disabilities has been sympathetically addressed by Homeswest (Cerebral Palsy Association of Western Australia, sub. 16, p. 1).

Generally, the experience of our unit has been that the [NSW Department o f Housing] has been flexible, patient and compassionate in their dealings with people with head injuries and their families. ... we have found that the Department has processed applications and dealt with a range of other matters within a reasonable time-limit and

often have been surprisingly prompt (Joint submission by: Lidcombe Hospital’s Head Injury Unit and Wareemba Community Living, sub. 97, p. 5).

The high levels of support which are required for people with severe and multiple disabilities — in other words, those which typify our client base — are currently well beyond the existing funding strategies provided by DHHCS (Cerebral Palsy Association o f Western Australia, sub. 16, p. 1).

People with intellectual disability [should] have the right to the full range of housing options as do the rest of the community. The rest of the community do not choose to live in institutions and it is therefore not acceptable that people with intellectual disability should have to either (Star Victorian Action on Intellectual Disability,

sub. 166, p. 1).

... a person with a disability may receive either the rental allowance or the mobility allowance but not both. This arrangement places people with a disability at a real disadvantage. If rental assistance arrangements are to be relied on to assist people with

a disability to access affordable housing then this should not be at the expense of some other form of assistance that is required (Singleton Equity Housing, sub. 249, p. 1).

People with intellectual disabilities (more so than other tenants) find it difficult, exhausting, expensive and intimidating having to perhaps frequently and/or unexpectedly hunt for new lodgings when a lease expires. Public housing ensures permanency of tenure as long as the guidelines are adhered to (St. John of God

CLASS, sub. 286, p. 1).

Some SAAP agencies report fear of losing their funding if they provide accommodation to people [with psychiatric disabilities] in treatment. This is another form of discrimination. The remedy is a housing policy resulting in more short to medium term

housing options rather than long term and crisis accommodation only (Mental Health Branch, Queensland Department of Health, sub. 290, p. 2).

People with disabilities are specifically excluded from receiving emergency and crisis accommodation provided through the Supported Accommodation Assistance Program (SAAP) because of their support needs. Most crisis accommodation is provided through respite care programs which may not be appropriate or the choice of the

individual or their family. Such accommodation may then become the only long term option for the individual (ACROD, sub. 140, p 1).

Currently, people with disability who require physical modification to housing they rent or buy, must pay substantial amounts of money for these structural changes. A

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program specifically targeted at assisting people to modify housing (both private and public, owned or rented) would significantly increase the access of people with disability to housing. Such a program would also assist people who acquire disabilities through ageing and require modification to their housing (Queensland Disability Housing Coalition, sub. 121, p. 3).

With limited modified housing stock available, every attempt should be made to use what is available to the most benefit. An integrated disability housing and accommodation support database could well assist this purpose (Spastic Centre of New South Wales, sub. 11, p. 4).

Mechanisms ... need to be implemented to ensure that Boarding Houses remain an affordable option [for people with disabilities], ... The unregulated boarding house market is full of less than scrupulous practices by some proprietors (Community Accommodation Support Service of South Australia, sub. 24, p. 2).

Aged

Older Australians, particularly men and women aged 70 years plus, who have very low income and assets, have had a very limited range o f housing choices available to them (Abbeyfield Society (Australia), sub. 154, p. 2).

[Frail aged] housing should not be in the form of large estates, but should be allocated to charitable, non-profit, public benevolent organisations in a manner which enables the co-location of subsidised self-care accommodation with resident funded accommodation. Such an approach would maintain and enhance the diversity of

options available and the social mix in aged care provision (Aged Services Association of NSW and ACT, sub. 75, p. 5).

Importantly, housing for older women needs to be flexible and suitable to meet their needs throughout the course of their older lives Support systems which can assist older women be maintained in housing options of their choice are considered preferable to moving to centres of increasing support (Office of the Status of Women, sub. 96, p. 6).

There has been a concentrated move to enable older people to stay in their own homes for longer periods but this does not necessarily address all housing needs. Many older women have reduced income in old age and housing affordability is a major issue. They may become trapped in inappropriate housing due to declining income and

mobility and the lack of other options (Older Women’s Network, sub. 78, p. 2).

Older people who are in need of support and community services are moving to inner city areas where supply of services is the best. The response of the public and private housing sectors to this trend has been slow. Inner city housing that is appropriate to the needs of older people has primarily focused on owner occupier one bedroom single

storey home units (Consumer Forum for the Aged, sub. 87, p. 2).

6 INDUSTRY COMMISSION

A PARTICIPANTS' VIEWS

... we believe that attention also needs to be placed on the needs of older people not yet needing support but looking for the opportunity to share their living arrangements (Older Women’s Network, sub. 78, p. 2).

... older people [prefer] to remain in their own homes, or a lower maintenance home, within their familiar neighbourhood. It is often the case that homes with the required design features are not available, or the cost is too high, necessitating a move away from familiar surroundings and supports. ... older people [need information] to assist in

decision making in housing choice, given the range of housing products and tenures now available (Queensland Department of Family Services and Aboriginal and Islander Affairs, sub. 14, p. 2).

Abbeyfield has increased the housing options available to older people with low incomes and limited assets by providing a socially attractive and cost effective housing model (Abbeyfield Society (Australia), sub. 154, p. 1).

Victorian figures show that there is a higher percentage per capita of older renters still renting in private rental arrangements compared to the national average. In recent years the State housing authority has adopted a “catch up” policy to redress this anomaly (Housing for the Aged Action Group, sub. 181, p. 5).

If an older person is not already a public housing tenant, he or she may have great difficulty in getting access to an independent living unit, particularly in a familiar area where they have friends or other supports. Long waiting lists can compel older people to continue in the private rental market where they can pay as much as 50 per cent of

their income as rent (Abbeyfield Society (Australia), sub. 154, p. 4).

In the UK experience, the presence of an Abbeyfield house in an area can encourage older people living alone to give up their home — owned or rented — thereby making available family housing stock which is needed by other generations (Abbeyfield Society (Australia), sub. 154, p. 9).

There is little crisis accommodation available across Australia for the frail aged (Aged Services Association of NSW and ACT, sub. 75, p. 8).

Youth

Young people, whether dependent or independent, have a right to be housed. However, given existing structural arrangements, especially the socio-economic position of many, young people’s housing options are limited. In the marketplace, limited accommodation options are closely linked to the very limited income potential

of young people, the high investment expectations of landlords in what is a favourable taxation regime, and the unwillingness of financial institutions to lend to young people In conjunction with these factors, young people have little access to limited public housing (South East Queensland Youth Accommodation Coalition, sub. 132, p 3).

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Shared living arrangements often expose vulnerable young people to situations of abuse and exploitation, similar to the experiences which initially led them to leave home, hence the cycle continues (South Australian Youth Housing Network, sub. 195, p. 14).

Responses by States to youth housing are becoming increasingly reliant on such joint venture programs where SAAP agencies or other community/church agencies manage the housing. This means young people must meet the auspicing agencies’ eligibility criteria, may have to meet conditions over and above tenancy legislation requirements to get housed, or may have restricted time limits on their stay in the housing (National Youth Coalition for Housing, sub. 131, p. 22).

This Association recommends young people aged fifteen years and over should be allowed to directly access the Department of Housing waiting list without any special conditions attached (Wollongong Youth Refuge Association, sub. 4, p. 6).

Public housing in Queensland under the previous administration was closed to single people aged under 40. The guidelines have been changed under Labor, to give access to single people over 18 for the first time. Those under 18 are still excluded from being housed by the Department o f Housing, Local Government and Planning, unless they

have children (Youth Housing Project, sub. 5, p. 5).

The lack of longer term housing options creates bottlenecks and results in crisis accommodation often not being available for those in crisis. Due to the lack of options, crisis accommodation becomes more than transitional accommodation; there are no affordable options for young people to access. The need to develop longer term accessible and affordable housing options for young people is crucial (South East Queensland Youth Accommodation Coalition, sub. 132, pp. 2-3).

Despite the legal basis by which minors are bound by contracts, including leases, there is great resistance and lack of knowledge that this is possible, causing further discrimination in the private rental market for young people (National Youth Coalition

for Housing, sub. 131, p. 26).

If a young person does choose or needs to leave home, they receive an income which does not reflect the real costs of living. Young people living independently have similar expenses to older members of the community. Costs of rent, food, transport, etc are not determined by age or income. Age has no relevance to the level of income required to live above the poverty line (South East Queensland Youth Accommodation

Coalition, sub. 132, p. 10).

The low level of income of young people and the resultant relative low level of rental payment currently create concern as to the financial viability for the providers of both public and community housing. The issues which must be addressed here are those of the income of young people and the cost of supply of such housing (South East Queensland Youth Accommodation Coalition, sub. 132, p. 14).

Those young people who choose to study and receive Austudy payments have no access to DSS rental assistance, and students who continue with their studies till they reach 21 years of age fall behind the normal DSS allowance rate for their age group.

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A PARTICIPANTS' VIEWS

Students do not access a higher income on turning 21 and are further disadvantaged (South Australian Youth Housing Network, sub. 195, p. 14).

Hom eless people

Three significant factors are identified as contributing to trends in youth homelessness: changes to the family unit; family violence; and economic recession. Therefore, it is suggested that for young homeless women, a holistic and co-ordinated approach to housing, income, social support and employment, education and training is required if women’s vulnerability to further risk is to be reduced (Office of the Status of Women,

sub. 96, p. 4).

While most young people who leave home do not become homeless, far too many do For those that do not, homelessness may be an ever present possibility, due to insecure and low incomes, an extremely depressed youth labour market, and lack of affordable appropriate youth housing (South Australian Youth Housing Network, sub. 195, p. 6).

Young people in real need are notorious for non-use of government or other resources because of authoritarian, patronising or other culturally inappropriate practices (Uniting Church Youth Services, Western Australia, sub 193, p 1).

A number of homeless people that this agency is in contact with have previously had public housing accommodation. They have found themselves with mounting arrears, that lead to eviction. The requirement that a lump sum payment must be made prior to rehousing means that future access to public housing is virtually impossible. ... We

recommend the provision of immediate supports to those having difficulty making rental payments so that there is a real attempt to prevent eviction and possibly homelessness (The Salvation Army Crossroads Network, sub. 165, p 3).

The private rental market offers little security of tenure for homeless youth. If they find somewhere they can afford, and maintain it successfully, and don’t lose their job or benefit, the likelihood of their rent rising to an unmanageable level is great. Inevitably, they are forced to move on (Youth Accommodation Coalition of Victoria, sub. 176,

P 9).

Once young people are homeless it is necessary to break the cycle of homelessness — to provide the young person with a place in our society. Support measures only affect the personal side of homelessness — there are the structural changes which need to happen such as equal youth incomes, job creation programs, legislative measures such

as anti-discrimination, construction of appropriate public housing, and putting value on young people as Australia’s future (South Australian Youth Housing Network, sub. 195, p. 6).

People in crisis

... caravan parks are continually being used by community services as emergency housing for families or mothers and children who leave the family home for varied

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reasons, eg domestic violence. This practice is convenient for the service but completely unsuitable for the family in stress, as many caravan parks are isolated and have inappropriate amenity arrangements (National Dissemination Program of the Hunter Caravan Projects, sub. 209, p. 1).

The provision of adequate and easily accessible refuge accommodation is clearly one very important component in the development of a comprehensive crisis response to women escaping violence, and the positive benefits of SAAP in funding crisis

accommodation and related support services for women escaping violence is acknowledged (National Committee on Violence Against Women, sub. 98, p. 2).

Recently arrived migrants

Lack of information on housing options and services is one of the major obstacles for recently arrived immigrants in accessing accommodation and related housing services and in exercising choice. ... The Multicultural unit established in the NSW State housing authority is a sound model for other State/Territory housing authorities to follow (Department of Immigration, Local Government and Ethnic Affairs, sub. 158,

P 2).

A migrant welfare worker cited a real estate agent who would not rent properties to refugees because he assumed that they could not use electricity and would start a fire. She reported that, when private rental properties are in short supply, it is almost impossible to secure accommodation for refugees, even with her advocacy support (Shelter WA, sub. 205, p. 1).

A Vietnamese community leader noted discrimination by real estate agents against Vietnamese people in general, particularly large families with children, unemployed people and people with Homeswest bond assistance (Shelter WA, sub. 205, p. 2).

Community housing initiatives ... have shown that community-based housing is a viable housing option for recently arrived immigrants (Department o f Immigration, Local Government and Ethnic Affairs, sub. 158, pp. 4-5).

People from non-English speaking backgrounds

Alienation is common when people who lack English skills are housed in locations which are inaccessible to culturally relevant facilities, such as English classes, places of worship, members of one’s community o f origin, welfare services and specialist shops,

in addition to employment, transport and child care (Shelter WA, Migrant Access Project, sub. 28, p 1).

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A PARTICIPANTS' VIEWS

People in rural and remote areas

In rural and remote communities some Councils, whilst reluctant to become involved in the provision of housing, have done so through the need to maintain their communities (Local Government Association o f Queensland, sub. 206, p. 1).

In several rural and remote communities there was limited or no private rental accommodation available. The construction cost of housing in these areas can be very high due to high transport and labour costs. Also the lack of capital growth in property values means that landlords must charge higher rents in order to achieve an adequate

return on their investment. The lack of capital growth is a major disincentive for investors (Local Government Association of Queensland, sub. 206, p. 7).

A.2 A sp ec ts of a s sis ta n c e

Shelter, after food, is the next most fundamental human requirement. It is essential for the preservation of individual health and dignity, the stability of domestic and community life and for access to the services and culture of a humane society.

Adequate shelter is therefore a basic right (Adelaide Central Mission, sub. 69, p 3).

Housing assistan ce concepts

Need

It is clearly difficult to develop an objective, equitable and quantifiable measure of a characteristic such as ‘need’ which is inherently subjective and unquantifiable. Efforts have focussed on a definition and measure of need which incorporates aspects of appropriateness and adequacy as well as affordability (Tasmanian Government,

sub. 217, pp. 6-7).

Affordability benchmarks

Queensland Shelter’s view has consistently been that affordable housing cannot be measured purely by a benchmark such as that proposed by the National Housing Strategy, although there are some merits in ascribing a proportion of income that should be spent on housing (Queensland Shelter, sub. 138, p. 4).

One of the most obvious problems that arises for governments in using an affordability benchmark is how it will be paid for. To provide income support for the 200,000 households in housing stress is an enormous budget commitment. As discussed in the National Shelter submission, if this demand is met now at the expense of public

housing, there will be a significant opportunity cost for future generations (Queensland Shelter, sub. 138, p. 9).

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National Shelter supports the principle o f affordability benchmarks but believes that an appropriate level is 20 per cent with a sliding scale decreasing this proportion for very low income earners (National Shelter, sub. 115, p. 1).

Welfare housing

It remains our view that welfare housing is likely to house less people in need than the current policy, with all its contradictions. The connotations o f the word “welfare” are negative and not widely supported by the community (Western Australian Council of Social Service, sub. 220, p. 2).

The view of public housing as a purely welfare measure tends to stigmatise the tenants of public housing, which in turn weakens public support for public housing and decreases its effectiveness as a response to housing need (Queensland Council of Social Service, sub. 241, p. 3).

Public housing

Public Housing is a lifestyle, you have to live it to know it! (B Trethowan, sub. 142, P 2).

... if we don’t have public housing, where are people who have no parents, the unemployed, single parents and low wage earners going to live? (T E Troon, sub. 145, P 2).

Subsidies from tax payers to public tenants by way of rental rebates for low income public tenants are not a cost to society. The loss to the taxpayer is balanced by the gain to the tenant (National Shelter, sub. 221, p. 5).

Public housing should be regarded only as a safety net for that section of the community which for various reasons is subject to hardship on account o f physical or economic factors. It should definitely not be regarded as a way of life for a substantial section of the population or something which people have a right to expect, as seems to

be suggested by so many social planners (Property Owners’ Association of NSW, sub. 30, p. 1, Summary).

The provision of public housing in Australia has a measurable benefit to the Australian community and is also economically efficient in the long run as there are very real costs associated with increased social dislocation and benefits associated with increased social cohesion (Welfare Rights and Legal Centre, sub. 101, p. 5).

Public Housing is the cornerstone of an effective and equitable government housing policy. It provides governments with an appreciating asset and ensures stock remains available for successive generations of those on modest incomes rather than providing for the private accumulation of wealth. It can also work as a major competitor to the private rental market ensuring that the rents are depressed rather than artificially inflated (Adelaide Central Mission, sub. 69, p. 28).

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The demand for public housing is not going to decrease In fact, as a result of the structural changes in our economy, it is likely that many more families will find themselves in worsening circumstances, and that they will seek to alleviate that suffering via public housing. (Good Shepherd Youth and Family Service, sub. 330,

p. 14).

... the state should not see public housing as a stepping stone to home ownership, but a viable tenure in itself. Some of the working class don’t want to aspire to home ownership regardless of state subsidies and public housing can and should fill that gap (Stan Jamce Cooke, sub. 185, p. 5).

Access

The Association would like to raise the inherent conflict that exists in the stated objectives for public housing assistance. The conflict arises from the objectives that seek to provide low income households with access to adequate and affordable housing. Access should not be equated with affordability. There appears to be a view that the two are synonymous, but in many cases we believe this to be purely illusionary

(Master Builders’ Construction and Housing Association Australia, sub. 94, p. 2).

Rental housing assistance should be needs tested so that public housing programs are not seen as an alternative to renting or owning in the private sector (Housing Industry Association National Office, sub. 92, p. i, Executive Summary).

Rearranging eligibility criteria that increases targeting to those ‘most in need’ is not addressing the real issue of the lack of affordable and appropriate housing (Women in Supportive Housing, sub 146, p 3).

One of the major reforms needed to public housing is a change in the way it is perceived. ... We need to broaden the mix of tenants by opening it up to a proportion of middle income earners An added benefit would be the increased rent these tenants would pay (Council of Single Mothers and their Children, sub. 160, p. 1).

Tenants evicted because of debt to the Commission will not be permitted to reapply for housing until their debt is repaid Tenants evicted because of nuisance or anti-social behaviour will not be permitted to reapply until six months has elapsed. After this six months, applications may be accepted, providing that a satisfactory reference can be

provided from a private landlord (NT Department of Lands, Housing and Local Government, sub. 208, p 4).

Eligibility for public housing is generally based on income. It is important that if two unrelated people are sharing public housing their individual incomes are considered separately when determining eligibility. People requiring support services and personal care will often need to share accommodation to enable them to pool hours of care to

enable their needs to be adequately met (ACROD, sub. 140, p. 5).

... all the people who are applying to be housed are in housing need and the difficulty is then assessing how that housing should be rationed and whose need is absolutely greatest. The reality is that there will never be enough low cost housing to go around

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under present systems — hence there will always be a need to maintain waiting lists (Queensland Shelter, sub. 138, p. 16).

The eligibility criteria, questions of security and location outlined in the report fail to take sufficient account o f the factors influencing housing needs. People’s access to power, support and resources at various stages in their life cycle must also be considered [when assessing housing need]. For example, women with children, newly arrived migrants, elderly people on the ‘eligibility margin’ in terms o f assets, all experience vulnerability which is not reflected in income alone. Clearly, flexibility and acceptance of social diversity are basic criteria for the delivery of effective public housing services (SA Council of Social Service Inc, sub. 291, p. 2).

Many people eligible for public housing do not apply for one or a number of the following reasons: lack o f information; the stigma associated with the old ‘Housing Commission’; lack of access; waiting lists are too long; no public housing available in the area (North Western Regional Housing Council, sub. 183, p. 12).

Waiting lists should be seen as a highly inaccurate indicator of housing need Many people do not apply when told how long the waiting time is and there is potentially a huge latent demand according to other income data. Waiting lists are able to be manipulated by governments who are able to restrict or expand access. For instance, by making young people eligible for public housing when previously they were

ineligible will have the effect of extending the waiting list as young people apply. Waiting lists are also a poor indication of housing need in areas where there is no public housing such as Emerald. If there is no housing, you can’t apply to get into it (Queensland Shelter, sub. 138, p 12)

... the existence of waiting lists for public housing plays an important, though probably, unintended role of sifting out the longer term clientele from those who may be requiring temporary assistance (Housing Industry Association National Office, sub. 92, p. 6).

Long waiting lists reflect more the inadequacy o f the home ownership and private rental tenures than a failing of public housing per se (Springvale Community Aid and Advice Bureau, sub. 31, p. 2).

We believe eligibility criteria should include ability to secure/maintain private rental (on a cost basis, and on a “proven discrimination”), income level, family make-up, previous housing history, potential housing options, health or safety reasons, overcrowding, or

family violence (Fitzroy, Richmond and Collingwood Accommodation Service, sub. 251, p. 6).

With around 24 months waiting period for a 2-3 bedroom flat in a high-rise or walkup, 4 years waiting period for a 3^4 bedroom house and up to 6 years wait for a 2 bedroom house or unit in the Melbourne metropolitan area, it is clear that the Department of Planning and Housing have inadequate stock to meet demand (The Salvation Army

Crossroads Network, sub. 165, p 4).

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Women escaping violence often need to move interstate because of ongoing harassment from perpetrators and would lose places on housing waiting lists without any transferability provisions (Office of the Status of Women, sub. 349, p. 2-3).

It must be noted that an unnecessarily inflated waiting list not only distorts demand but also can delay existing Trust tenants of the opportunity to move to alternative, perhaps more appropriate, accommodation (Greg Cornwell, Member for the ACT Legislative Assembly, sub. 99, p. 5).

... we believe there needs to be clear priority housing guidelines ... (North Sydney Housing Interagency, sub. 177, p. 2).

A number of community groups have expressed dissatisfaction with the existing process in considering requests for Priority Housing. Concerns focussed on methods of assessment of applications, the lack of guidelines against which priority applications are assessed and the nature of appeal processes (Shelter Darwin, sub. 20, p, 4).

Priority housing is considered by women to be extremely difficult to attain There was the perception that you could be subjected to a harrowing process of having to prove how desperate you may be. This is exemplified in the situation of domestic violence priority allocation. Women felt that the housing officers expected women to show

physical signs of the abuse before they would be given a priority interview (Women in Supportive Housing, sub. 146, p. 3).

The establishment of panels to determine the relative priority of people on waiting lists for public housing is generally supported. However, these panels must operate at the local and/or regional level, and within the policy and eligibility criteria established by the Tenant Manager Organisation. It is considered impractical and inefficient for these

panels to be centrally located, particularly in a vast and decentralised state such as Queensland (Queensland Health - Central Office, sub. 335, p 2).

Public housing also plays an important role in compensating for the private market’s discrimination against a range of groups including Aboriginals, Torres Strait Islanders and people with large families (Queensland Department of Housing, Local Government and Planning, sub. 135, p. 19).

Discrimination by real estate agents and landlord is a very real situation faced by people on low incomes, single parents, and Kooris Public housing is the only form of housing tenure in East Gippsland which does not discriminate against these people, who make up a significant proportion of the East Gippsland Community (East Gippsland Regional

Housing Council, sub. 173, p. 2).

The applicant is often in rental accommodation and therefore is required to give 3 weeks notice to their current landlord. Therefore having to pay two lots of rent one to the Department of Housing and one to their current landlord is impossible for most applicants (North Sydney Housing Interagency, sub. 177, p. 1).

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Affordability

In order to achieve a higher standard of living and an end to public housing eviction for Victorian public tenants, it is our policy and our demand o f government that the following steps be taken:

1. That the amount o f rent charged in public housing be reduced from 20-25 per cent of income to a flat 10 per cent.

2. That take home pay (net) rather than before-tax (gross), be used for the purposes of assessing rent.

3. That all income of children, regardless o f age be excluded from rent calculations. This includes Benefits, Child Maintenance, including in kind payments, allowances like Child Endowment and Wages.

4. That rents be adjusted no more than once per year.

5. That the government place a moratorium on all legal and harassing actions against tenants in arrears, while it enters a process of genuine negotiation with the Public Tenants Union and other appropriate organisations to develop a more socially acceptable policy (Public Tenants Union of Victoria, sub. 180, p. 10).

My rent is assessed twice yearly and is based on my weekly wages and any other declarable income I have. This assessment does not include the cost of my disability eg special transport, medical treatment, etc. I have written to the Minister o f Housing in NSW to ask whether the cost of disability can be taken into account when assessing

rental of the department’s accommodation. He advised that this would be investigated (Rosemund Johns, sub. 79, p. 1).

The current rent setting practices of public housing authorities ensures that renting an appropriate sized dwelling is affordable. If this practice were to be changed mechanisms need to be put into place to ensure that tenants were not being housed in a more preferred location and then facing the difficulty of being unable to afford other necessities, because of the increase in rent payments (Carlton Estate Residents

Association, sub. 247, p. 1).

Many people who qualify for public housing due to low income have relatively normal needs that do not require the intercession of welfare. Many people experiencing multiple needs now, in the private rental market, may find their lives are vastly improved by affordable housing, so they are able to cope with the other difficulties life provides, without support (Whittlesea Family Services, sub. 237, p. 3).

Appropnateness

Queensland Shelter has defined appropriate housing as being housing which meets the needs of the household That is, it should be well located, physically accessible, of the right size for the number and relationships o f the people in the household, be sound and well maintained, be constructed in such a way that heating and cooling costs are

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minimised and not distinguishable in a way that stigmatises the occupants (Queensland Shelter, sub. 138, p. 4).

Public housing is not designed for family living, eg living areas, bathrooms and kitchens are too small in a majority of homes (Wilsonton and Rockville Tenants Group, sub. 111, p. 2).

Design type can skew population mix ie if the majority of “units” in a building or group of buildings are, say, three-bedroom, this will influence social mix since only large families will be housed there. Immigrant families and lower socio-economic families are more likely to be larger. Welfare recipients and unemployed members are similarly

likely to be greater in such communities, and high child and teen to adult ratios has long been recognised as a precipitating factor in delinquency and vandalism in public housing. All these factors working together tend to create problem communities (School of Architecture, sub. 90, p. 4).

No consideration is given to the fact that placements in public housing away from support groups (family, friends or work contacts) have negative and costly consequences (Nadia Kaspar, sub. 18, p. 1).

In South Australia, outer suburban public housing estates can leave welfare-dependent families with severe problems of access to jobs, services and facilities, particularly if they do not own a car. Moreover, the higher turnover rates and the resulting shorter waiting periods for outer suburban public housing tend to concentrate families in most

need in those areas rather than in the more popular inner and middle suburban developments. The spatial distribution of public housing stock and the current welfare role of public housing in south Australia make a significant contribution to shaping distinct patterns of variation in well-being within the metropolitan area (South

Australian Health Commission, sub. 366, p. 2).

In the past Lake Macquarie has experienced the development of whole suburbs by the Department of Housing for public housing. This has concentrated those of a low socio-economic status and produced automatic prejudice against those who live in those particular suburbs. ... The key to improving on the past is not to construct huge

pockets of public housing where prejudice and problems are allowed to concentrate (City of Lake Macquarie, sub. 15, p. 1-2).

... I feel that integrated public housing in the suburbs is functional and advantageous. It takes away the stereotyping that occurs in housing estates, and it allows people with different values and cultures to fit into their chosen area (Nadia Kaspar, sub. 18, p. 3).

With regard to the value of different locations and the efficiency of locating/retaining public housing in these areas, it is essential to include all costs and benefits in any assessment and not only those that relate to the SHA. These external costs would include those borne by other agencies in locating public tenants in areas o f lower access

to services and employment as well as the costs to the individual household of different locations (Royal Australian Planning Institute - ACT Division, sub. 139, p. iii).

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A cluster of Ministry houses in a group of private owned houses when not properly maintained and when they do not blend in, degrades the property value of the private owned houses. The type of tenants placed in Ministry houses in areas o f prestige housing, causes concern to others who privately own houses as the attitudes of the tenants are not the same as those purchasing their homes (Diamond Valley Ratepayers Association, sub. 150, p. 1).

Security of tenure

The primary objective of the Commonwealth-State Housing Agreement is to provide secure housing to all Australians. Apart from home ownership, the only sector that can provide this secure housing is the public sector. The primary aim of investment in the private sector is commercial gain or profit, not security o f their tenants

(Goulburn Regional Housing Council, sub. 82, p. 6).

It is most important that State housing authorities make a legal reality of the widespread perception held by their tenants that they enjoy long-term security of tenure. (Softlaw Community Projects, sub. 130, p. 3).

... tenure in private rental is extremely insecure in Australia, without public housing low income people are condemned to insecurity o f tenure (North Melbourne Tenants Association, sub 81, p. 1).

Security of tenure bears a tremendous impact on the state of our mental health. For those with a mental illness, the situation becomes critical, because they know that they can become ill and need hospitalisation without due warning, and there is the concern about ongoing rent payments (Queensland Association of Mental Health, sub. 127, p. 3).

In Victoria in particular, it has been felt that if a family’s financial circumstances improve, they should no longer be eligible for public housing. This is a complex issue. Why should a family who has worked hard to improve their situation be faced with eviction? It goes against the provision o f “secure" housing. The payment by this family of “extra” rent through their increased income helps the government by the

decrease in rental rebates (Goulburn Regional Housing Council, sub. 82, p. 6).

The system as it stands encourages applicants and recipients of public housing to stay on welfare and stay in these homes. Because o f this there is not enough suitable public housing for those who urgently need it (Nadia Kaspar, sub. 18, p. 1).

One of the most important aspects of public housing provisions lies in the security of tenure provided to tenants. Those in housing stress generally are more mobile and have weakened support networks To put in place measures that effectively evict tenants if their incomes rise above arbitrary set levels would jeopardise the gains made in creating

a safe, secure home environment (Hanover Welfare Services, sub. 163, p. 10).

The Department of Housing includes a condition in its Tenancy Agreement which reserves the right to require a tenant to move to alternative accommodation if that accommodation is required for asset management purposes. This is used, for instance,

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to relocate tenants from a dwelling which is about to be redeveloped, or if the dwelling is substantially underoccupied (NSW Government, sub. 354, p. 10).

Tenants should be required to move from dwellings where there is an obvious over consumption o f housing. Procedures should be developed as a matter of urgency so that the existing public housing stock can be used in the most efficient way (Housing Industry Association National Office, sub. 92, p. ii, Executive Summary).

Tenants whose circumstances change resulting in under-occupancy of the dwelling may be transferred to more suitable housing if they have resided at that particular dwelling for less than twelve months. Tenants with more than twelve months residence are permitted to continue to occupy the same dwelling; if on a rebated rental they will be

required to pay “superior” rental, the difference between their rebated entitlement and the level applicable to the dwelling (Northern Territory Department of Land, Housing and Local Government, sub. 17, p. 14).

Until recently the Department guaranteed tenants not only tenure in the sector but also in the house they occupied. This is no longer the case. Tenants whose personal circumstances change and find themselves alone are to be moved to accommodation deemed appropriate to their need. Tenure for this Council means the right o f tenant to

their home as well as a house (Central Gippsland Regional Housing Council, sub. 149, p. 2).

Proposed limited tenure for young people fails to acknowledge the impact of unemployment and changes within labour force participation. Opportunities for young people to obtain a reliable income and move into home ownership as has been the norm in previous generations are diminishing with moves towards contract and part-time

work (SA Council of Social Service, sub. 291, p. 2).

If people are given suitable public housing close to support groups and work opportunities when they need it, and know that they have five years to become independent of the system, they will plan towards it (Nadia Kaspar, sub. 18, p. 3).

Equity

. . . equity, not equality should be the goal of government in delivering housing

assistance (Victorian Council of Social Services, sub. 169, p. 9).

Equity is about much more than “treating people in similar circumstances in similar ways”. Queensland Shelter believes that housing is more than a basic necessity — it is a human right. Equity considerations then demand that all people should have access to housing regardless of their ability to pay for that housing (Queensland Shelter,

sub. 138, p. 5).

In Queensland, which is very much decentralised, there is lack of public rental housing in country areas, far above that of metropolitan areas. This escalates inequity. Often this lack of public housing means people have to leave the area because o f the dearth of affordable, secure rentals (Coalition of Generalist Services, sub. 125, p. 2).

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While Master Builders’ - CHAA does not necessarily oppose the provision of public housing in inner-city areas it does question the equity and cost-effectiveness of such a policy (Master Builders’ Construction and Housing Association Australia, sub. 94, p. 5).

In would be particularly useful, both to increase equity between states and to inform policy, if agreement could be reached on a standard measure of household income and eligibility for rent rebate (Australian Council of Social Service, sub. 85, p. 12).

In Victoria, public tenants have all received a notice of a rent increase which will take cost rents to market value rents. Within the Wimmera Region some rents will be increasing by $25 per week. Within the region there are public tenants with below average incomes who will receive less rebate than a private tenant will receive in rent assistance paying the same rent (Wimmera Community Care and Wimmera Regional Housing Council, sub. 83, p. 4).

We get a feeling that living in the bush one does not need [security, privacy, screens, more space and regular maintenance], but we do as we pay the same rents (Iris Bolter, sub. 13, p. 1).

It is agreed that “housing assistance given to the better-off, ultimately reduces what is available to those who are less well o ff’. This is because the resources available to house people are limited and there must be trade-offs (Queensland Shelter, sub. 138,

p. 5).

Environmental issues

Through public and community housing the Government can set the agenda for energy efficient constructions which display an environmental conscience yet provide cost efficient, safe, secure, affordable housing (North Western Regional Housing Council, sub. 183, p. 8).

Our primary concern is that most public housing is not energy or environmentally efficient. A number of public housing policies focus on exclusively providing rent assistance rather than housing assistance. Consequently there has been a focus on obtaining the most amount of public housing space for limited budgets available (AcrossTech, sub. 2, p. 1).

... energy consumption in housing construction and operation, and energy consumption servicing urban and suburban populations, cannot be overlooked when considering social issues of housing.

A serious and often unrecognised drawback to Housing Department building or purchasing [solar efficient design] houses, is that buildings are only p o t e n t i a l l y energy efficient. Whether this potential is realised in reality depends very largely on the energy literacy and environmental consciousness o f t h e u s e r s o f those houses. Education and information programs are thus vital to the realisation of an efficiently managed/operated housing sector (School of Architecture, sub. 90, pp. 1, 2).

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Community housing

Community housing can be seen as an extension of public housing that provides additional choice and control for those who wish to be involved in the management of their own housing (Queensland Shelter, sub. 138, p. 6).

The Community Housing Program is the flexible arm of government policy, where the community is able to bid for the control and management of houses. Various groups and communities have been able to establish cooperative housing ventures as a result. Many Rooming Houses have community committees of management also. This is not to say that community management is always the preferred method management.

Advocacy groups have reported anecdotally that often the community managed groups are more likely to have to respond to issues such as rent arrears with eviction (Shelter Victoria, sub. 172, p. 21).

Specific groups which we feel would benefit from the more flexible management arrangements [of community housing] would include; young people, people with psychiatric, physical or intellectual disabilities, people with special health needs and those with personality disorders (Prahran Community Housing, sub. 179, p. 4).

... careful consideration must be given to equity issues in devolving responsibility for housing provision to community groups. Some o f these equity considerations include:

- large, more established groups and those with greater influence may attract funding, at the expense of smaller less vocal groups

- discrimination in favour of those of a particular ethnic or religious background

- community housing earmarked for immigrants or specific ethnic groups could lead to queue jumping on the public housing waiting lists (Department of Immigration, Local Government and Ethnic Affairs, sub. 158, p. 5).

People like to be involved at a very local level. Tenant participation is only possible at a localised level and on a small scale. The Common Equity Rental Housing Co­ operatives (CERC’s) have proved that tenant participation can be very effective when the groups are small enough for people to feel comfortable and small enough to be able

to participate (Goulburn Regional Housing Council, sub. 82, p. 7).

... [community] housing provision relies on community members who usually end up being on every committee, sacrificing their personal lives and health because their social conscience is so strong that they feel they have to pick up every task that no-one else volunteers for. The government has been able to get away with using these people up

for the last 10 years, but they can’t go on forever (East Gippsland Regional Housing Council, sub. 173, p. 3).

Many tenants in community housing with the assistance they receive during their tenancy go back into mainstream living and may never then require the assistance of public housing, and surely if we can accomplish this, the cost to the country is far less (Sapphire Coast Tenancy Scheme, sub. 114, p. 4).

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Community based management seems to work well in small rural communities with a strong self-help ethic, but it would be a far better use of funds to build on existing structures and improve management from that end (East Gippsland Regional Housing Council, sub. 173, p. 3).

Co-ordination difficulties have not been improved with the trend towards community managed housing projects. Generally community based housing programs are not readily accessible by people with a disability. Tenant management criteria are not appropriate when dealing with people with low intellectual capacity, poor speech and lack o f mobility (Singleton Equity Housing, sub. 175, p. 2).

Housing co-operatives have provided a means of allowing low and middle income earners to choose where they live, share in the management of their housing and enjoy security of tenure in rental accommodation. ... It would take a quite extraordinary leap of faith to believe that housing co-operatives were likely to make anything other than a marginal contribution to solving the national housing crisis in the next ten years (Inner Urban Regional Housing Council, sub. 106, p. 16).

Where community-managed housing is appropriate, it should be backed up with significant resources to ensure it is not exploiting local communities and creating an even more excessive drain on those already over-stretched people who tend to give their voluntary time (Western Regional Housing Council, sub. 174, p. 8).

SAAP/CAP

There are clearly not enough options to assist people who need time and resources in order to get back on their feet after experiencing a crisis (Fitzroy Richmond and Collingwood Accommodation Service, sub 157, p. 4).

Persons requiring assistance through SAAP/CAP generally take considerable time in resolving their problems, where the provision o f transitional accommodation and post crisis care is critical to the success of the programs. To subject these people to normal rental policies as applied to public housing tenants once income (only) has stabilised ... is to not take account of the long term support needs of this group (WA Government, sub. 276, p. 15).

Although we have expressed some criticism of public housing it is often the only option for people to exit from SAAP accommodation (Coalition o f Generalist Services, sub. 125, p. 7).

It is considered to be inappropriate that eligibility for emergency accommodation be established through a panel process. In all cases of crisis, and more particularly in situations involving the criminal assault of women in the home, service provision must be provided in a quick, efficient and timely manner. There simply would not be time for a panel to consider these situations. However after placement on a waiting list the individual’s need for medium to long term accommodation should be assessed

(Queensland Health - Central Office, sub. 335 p. 2).

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In particular cases, for instance domestic violence, it is imperative that people be placed in safe, secure accommodation which allows a degree of anonymity. If the only provision available to them is a house which is known locally to be crisis

accommodation then their safety is compromised (Westemport Regional Housing Council, sub. 153, p. 4).

The situation on the Sunshine Coast is chronic with insufficient accommodation available, large areas of the Coast that have the heaviest population demands have little or no emergency housing and housing that is available is not targeted to many groups in the population (Sunshine Coast Regional Housing Council, sub. 107, p. 9).

Mortgage and Rent A ssistance Program

Bond Assistance

Departmental processes [for bond and rent assistance] can be unsympathetic to the demands of the private sector. For example, consumers have found that the length of time to process applications is so long that real estate agents are reluctant to hold properties for them (Shelter Darwin, sub. 20, p. 6).

Bond assistance for private rental is not closely enough monitored. It is too easy for a landlord to keep Bonds which disadvantages the tenant from re-using the system (Prahran Community Housing, sub. 179, p. 3).

Under the Rental Assistance Scheme, bond assistance is given to private renters who pass a means test. The Department’s new policy is to no longer contest bonds that are claimed by landlords/agents. All a landlord/agent has to do is fill out a claim form for all or part of the bond and that money is paid to them. The Department requires no

itemisation of claim or proof (Blue Mountains Community Legal Centre, sub. 162, P Ο-

It is our experience that many landlords/agents will put in claims that are later shown to be grossly inflated or unjustified. If money is wrongfully paid out to landlords/agents then this is less money for bond assistance in NSW (Blue Mountains Community Legal Centre, sub. 162, p. 1).

Bond Assistance is not available to people that have a debt to Homeswest. However as they are unable to obtain Homeswest housing due to this debt, unless they are priority listed, it effectively excludes them from both public and private rental markets. Alternatives are relatives and possible overcrowding, refuges, cars, but little else

(Sussex Street Community Law Service, sub. 34, p. 6).

Headleasing

Schemes such as the [Community Rent Scheme] can provide greater security of tenure — although only in the short term as schemes are not allowed to take out leases of longer than one year at present. Discrimination can be side stepped through the sub­

leasing process. CRS does provide affordable housing and may also be able to house

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those with special needs under some circumstances. This an appropriate short term response to housing need (Queensland Shelter, sub. 138, p. 2).

The Community Rent Scheme (CRS) is also appropriate in that it addresses the issue of Discrimination. Groups of people such as Aboriginal and Torres Strait Islanders, people from Non-English Speaking Backgrounds (NESB), people with disabilities,

single parents, large families and youth are traditionally discriminated against in the private rental market. CRS practices positive discrimination in housing these groups of people. Even with rent subsidies, these people would still encounter discrimination in the private rental market (Southern Forum, sub. 122, p. 3).

The Community Rent Scheme (CRS) is also appropriate because it offers security of tenure to its tenants. The security of tenure afforded CRS tenants would not necessarily be afforded to recipients of direct rental subsidies who were accessing the private rental market for themselves (Southern Forum, sub. 122, p. 3).

... many landlords have lowered the normal rent of their properties due to the security that CRS can offer ie. guaranteed rental payments, free management, close contact with sub-tenants, and guarantee of restoring property to original condition (excepting fair wear and tear and damage not caused by tenants neglect or abuse) at the end of lease

(Sunshine Coast Regional Housing Council, sub. 107, attachment B).

... the Community Rent Schemes throughout Queensland play a vital role in providing affordable housing to people on low incomes. We do not, however, believe that this form of rental assistance should ever be considered a substitute for the adequate provision of public housing (Southern Forum, sub. 122, p. 2).

The local Community Tenancy Scheme has also had problems not being told when its tenants are about to be housed by the Department. This has resulted in rental arrears occurring and placing a financial strain on their funds in the past (North Sydney Housing Interagency, sub. 177, p 2).

DSS/DVA rent assistan ce

I think it is important for all low income tenants to be eligible for rental assistance. Otherwise we may have a situation where the tenant is ‘better o ff collecting unemployment benefits and rental assistance than working without the extra benefits gained by welfare recipients. Or we end up with a situation where the tenant simply can’t afford to rent which leads to a crisis situation (Nadia Kaspar, sub. 292, p. 1).

Recipients of rental assistance always seek out the cheapest accommodation so that the remainder of their low income can be used to survive!! (Fitzroy Richmond and Collingwood Accommodation Service, sub. 157, p. 2).

A very small portion of people already receiving rental assistance who are offered private rental accommodation on the basis o f their capacity to receive rental assistance renege on their rental obligations by utilising this assistance for other purposes. This leads to future discrimination against these types of tenants, as owners, or their agents,

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are reluctant to accept people with this performance history (Rea! Estate Institute of Australia, sub. 103, p. 19).

Aboriginal housing program

Koori women in particular felt that the rental structure [of public housing] — calculated on the income of all people living in the house — discriminated against Koori cultural practices that involve relatives and friends staying with the tenants of the houses (Women in Supportive Housing, sub. 146, p. 5).

We have found that the location of public housing when grouped together in large quantities, has adverse effects for the people living there. This stigma attached to State Housing is still prevalent in today’s society. It is of special concern for Aboriginal families as the area often becomes labelled “Aboriginal” (Sussex Street Community

Law Service, sub. 34, p. 2).

Home purchase and shared home ownership

... low income households should not be forced into home ownership when they cannot afford to do so. The recent debacle over the Homefund in NSW in recent years is a clear demonstration of the consequences (Ed Wensing, sub. 178, p. 2).

Some women felt the desire so strongly to own their own homes that they entered into these mortgage arrangements without considering the implications of other housing related costs such as rates, maintenance, utilities, location etc. (Women in Supportive

Housing, sub 146, p. 7).

Low-start loans with their escalating loan debt have increased potential for default. Recent reductions in property values compound this problem. Increased risk not only leads to the potential for increased capital adequacy risk weightings, but requires increased interest rate margins (Australian Council o f Housing Societies, sub. 167, p 7).

One of the biggest problems faced by consumers is the difficulty of comprehending the riskiness of low start and shared equity loans offered by government bodies. This reflects the glossy nature of sales brochures, the inadequate training of counter staff to deal with inquiries and the belief that government bodies ... would not offer a risky

product unless it felt confident consumers were safe (Inner Eastern Regional Housing Council, sub. 147, p. 9).

... access to sufficient deposits is one of the greatest barriers for first home buyers. Additional incentives are therefore required to encourage a broader range of savings through a range of financial institutions (Australian Council of Housing Societies, sub. 167, p. 14).

Pension and benefit recipients who are renting in the private rental market receive rental assistance which arguably can be seen to be contributing to the private landlord’s bank-funded mortgage repayments. There is no equivalent assistance to those

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attempting to purchase their own homes and pay all associated housing costs (Victorian Mortgage Review Task Force, sub. 184, p. 6, attachment)

[We do] not support the principle o f subsidised home ownership to overcome the inherent housing problems we are experiencing. The trend towards assisting potential home buyers only assist those people to purchase earlier than they would otherwise have done. This form of assistance does not assist the 30 per cent of the population who are unlikely to ever be financially able to purchase their own home (Central Gippsland Regional Housing Council, sub 149, p. 2).

Funding for subsidised or unsubsidised shared ownership programs should come from funds allocated for home purchase assistance and not from funds allocated for public rental housing (Ed Wensing, sub. 178, p. 3).

Other programs

The Rooming House program provides single adults with a real opportunity to access affordable, adequate accommodation. Our experience at Crossroads is that this is a very successful program. ... We certainly recommend the further development of this program (The Salvation Army Crossroads Network, sub. 165, p. 4).

... there is a need to develop new housing programs. In particular there needs to be programs which accommodate the needs of those who need affordable short to medium term accommodation options (Fitzroy Richmond and Collingwood Accommodation Service, sub. 157, p. 5)

Taxation issu es

The lack of a Capital Gains Tax is again a hidden subsidy. Whilst it may be admirable to view the family home as a consumer good and not an investment good, this tax foregone system has been the subject of many rorts in Australia. It has also crowded out investment in more productive spheres in this country. If subsidies are to be targeted effectively for the supply of low-income housing, these hidden subsidies have to be tackled and how they impact on the housing market (ACT Council of Social

Service, sub. 80, p. 2).

There can be little doubt that the taxation advantage ushered in by the Hawke Government (negative gearing and exemption from capital gains of home buyers) to create opportunities for the stimulation of private investment and thereby increase supply in the private market have failed to provide additional low income housing

opportunities. Projections also indicate that the market will continue to fail in delivering low rental good quality accommodation (Adelaide Central Mission, sub. 69, P 21).

The Commonwealth’s attitude to negative gearing should be reassessed It should be abandoned in favour of a greater emphasis on depreciation allowances as an incentive for investment. This would lead to an overall increase in housing stock, and increase the options for first-home buyers (The Salvation Army, sub. 200, p. 6).

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Property taxes are the primary source o f tax revenue for State/Territory Governments. The growth in these taxes, is a disincentive to investors in the private rental market and threatens the ongoing supply o f affordable private rental accommodation. Land tax is charged on rental properties, while stamp duties, which bear no direct relationship to

the cost of the services provided, are imposed on all property transactions (Real Estate Institute of Australia, sub. 358, p. 4).

Alternative types of assistan ce

Supply and income support measures must be a package, recognising that supply cannot be as easily or readily provided as cash The obvious problems are that increased funds for rental costs will increase demand and result in increased rents

charged. Rent control and fair rent determination are therefore issues which must be fully considered in order to protect income assistance as a real measure for increasing housing affordability While rent assistance of an adequate level will potentially aid young people in obtaining housing, it will not necessarily redress the major barriers they

face: discrimination and lack of security of tenure. For these reasons, NYCH continues to emphasise the importance of increased supply of public housing (National Youth Coalition for Housing, sub 131, p. 29).

There will always be a section of the community unable to provide for its own shelter needs. These people need and deserve government assistance. However, capital expenditure on the construction of government housing is inefficient. In the interests of equity, funds currently used for this purpose should be allocated to deserving

individuals in the form of rent subsidies through the welfare system (Real Estate Institute of Australia, sub 103, p. 3).

... a pure demand side approach is ... unlikely to deliver a smooth supply response to meet housing need on an ongoing basis. Perhaps more important, it cannot meet the main social objectives of providing housing security, better urban form, housing in

specific localities (particularly rural areas) and meeting special housing needs (Australian Council of Social Service, sub. 85, p. 17).

... the cheapest and most efficient method of providing rental accommodation is by the private sector — by the private property owners (particularly small landlords), without any capital outlays by the government. No other organisation — either government, local authorities or community schemes — is conducted on such low overheads, for

such low returns (4-5 per cent before tax) (Property Owners’ Association of NSW, sub. 30, p. 1, Summary).

A proposal [rental subsidies to private renters] that does not provide security of tenure to the resident and which has the potential to be an ever increasing, non-productive call on public monies can hardly be in the interest of the tenants or the wider community (Inner Urban Regional Housing Council, sub. 106, p. 21).

The private sector can provide housing in a more efficient and market responsive manner than that provided by the current system, or under arrangements that essentially

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maintain a Government monopoly on the provision of housing stock for public tenants. A social policy on housing which sets out to subsidise the rental payment of low income groups would serve to improve their financial position and, in addition, make the rental housing market a more attractive proposition for private sector investors (Real Estate Institute o f Australia, sub. 103, p. 6).

Private rental housing is a poverty trap for low income earners. Any proposals to extend rent assistance at the expense o f public rental housing would have to be combined with rent control at a national level as well as substantially strengthened tenancy law provisions supported by accessible disputes processes (Rockhampton Family Emergency Accommodation Program, sub. 33, p. 10).

The attempts to create equity among the poor by the introduction of a housing Benefit/Voucher system across all rental tenures will lead to a massive rent increase for most public tenants. Because of shortfalls in the funding levels of the Benefit, much of the newer and more desirable public housing stock in high market rent areas will be too expensive for low to middle income earners. This stock will become the new “hard to let” and face possible sale or transfer to other management systems (Public Tenants Union of Victoria, sub. 180, p 4).

... the real problem with housing allowances is finding a way to limit their overall cost without creating poverty traps at the same time (Ed Wensing, sub. 178, p. 2).

Rent subsidies, while providing short term gain to those on waiting lists, cannot guarantee an increase in rental properties, do not provide security of tenure, use public money to subsidise profiteering from rental and would geographically divide Australia along income lines (Port Melbourne Public Housing Tenants Association, sub. 170,

P 3).

It would be much better for the Federal Government to subsidise residential private rentals instead of spending huge amounts of taxpayers’ money on building more costly Government Housing, especially when so many low cost private rental properties are empty (Property Owners’ Association of Australia, sub. 187, p. 2).

For people with disability, rent subsidies achieve very little. As no accessible housing exists on the private rental market, receipt of rental subsidies will not provide access. For those who have accessed private rental housing however, rent subsidies alleviate the high cost of the private rental sector (Queensland Disability Housing Coalition, sub.

121, p 5).

Rent assistance is not always effective in reducing housing costs and ensuring accessibility. The potential for rent increases, lack of security of tenure and the reality of discrimination against particular groups leads to an erosion in the effectiveness of rent assistance in achieving its objectives (Brewer Street Welfare Rights and Advocacy

Service, sub. 196, p 1).

Rent Assistance needs to be redirected to the provision of better targeted low income housing Current arrangements for rental assistance need to be phased out to lessen the impact upon current recipients (Derby West Kimberley Shire, sub. 70, p. 6).

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Whilst targeted increased rent assistance may increase affordability o f low income households in the private rental market, ultimately this assistance ends up as a subsidy to those in the community who least need it (ie rental property investors who already achieve enormous tax concessions through negative gearing provisions)

(Springvale Community Aid and Advice Bureau, sub. 31, p. 1).

It is of no use to increase rental assistance at the expense of public housing provision if there is an over demand for affordable private rental accommodation (Eastern Area Service of Youth, sub. 19, p. 1).

... the Council does not favour [rent assistance] because it will be subject to government’s politics. As a direct welfare expenditure it will be vulnerable to cut and could not be guaranteed as an ongoing commitment. Traditionally, the Australian

community has shown little empathy to welfare recipients, at a time of economic recession this is unlikely to change (Central Gippsland Regional Housing Council, sub. 149, p. 2).

Land use planning and development is not the most effective way for a Government to deliver assistance to disadvantaged groups. Other means of income distribution provide a more efficient means of targeting special sections o f the community (Housing Industry Association of Western Australian, sub. 71, p. 5).

A.3 Private rental market

Accessibility

We have observed too often the private rental market’s failure to meet the needs of many groups seeking accommodation; the outcome of it being driven by profit rather than social objectives. The profit orientation has many consequences for many low income and marginalised groups trying to access the private rental market; including

Aboriginal people, single parents (predominantly women), people from non-English speaking backgrounds, older people, young people, single women, and people with disabilities (Tenants Advice Service, sub. 191, p. 4).

There are many hidden costs involved in having to constantly re-locate; including the payment of a letting fee if the property is let through a real estate agent ...

(Tenants Advice Service, sub. 191, p 7).

Other costs include removal costs; and if the relocation is to another area, buying new school uniforms for children and paying school fees; not to mention the stress of relocating changing school and the like (Tenants Advice Service, sub. 191, p. 7).

A family of eight were unable to move from SAAP accommodation for two and half years because private landlords refused to accept an application to rent from the family once family size was indicated. Finally a public housing property became available (Coalition of Generalist Services, sub. 125, p. 4).

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There were reports of some women being forced to lie about their family size in attempts to secure private accommodation. For these women public housing is their preferred option for reasons of affordability, security and appropriateness (Tenants Advice Service, sub. 191, p. 6).

A recent instance, as referred to the Youth Housing Network, was o f a 17 year old young pregnant woman and her boyfriend who were refused a lease by a Real Estate agent because they were using a Trust bond assistance cheque (South Australian Youth Housing Network, sub. 195, p. 11).

Certainly, a person’s income source has considerable bearing on their perceived “suitability” as a tenant (Tenants Advice Service, sub. 191, p. 5).

It could be asserted as a general rule that the desire of investors to secure a return on their property creates a propensity towards discrimination against disadvantaged groups such as sole parents, Aboriginal and Islander people and disabled people (Queensland Council o f Social Service, sub. 91, p. 8).

A glaring example of racial discrimination came to the Agency’s attention recently. The Vietnamese Tenancy Support Service was advised of three separate Vietnamese households in the Western suburbs who had each been advised by their respective agents (different agents in each case) within one week of signing a lease that they must vacate immediately as the properties had been re-let to other tenants. In each household minimal English was spoken or understood, real estate agents were seen as officials and through fear the tenants felt they must comply and vacate. Fear also prevented them from taking any subsequent action even with the support of a tenancy service (Good Shepherd Youth and Family Service, sub. 148, p. 4).

The reason the private market will never house all those in need is simple Housing authorities are bound to house all applicants who fit their eligibility requirements. Private real estate agents are under no obligation to house anybody. They will always house those people who they believe will best serve the interests of landlords. This leaves large sections of the population vulnerable to discrimination on the basis of gender, race, ethnicity and income (Flemington Tenants Association, sub. 141, p. 2).

The overt abuse of rights which exists within the private rental market will continue regardless of the level of housing assistance component because discrimination is not linked directly to the ability to meet rent payments but based on prejudices which cannot be controlled through monetary incentives (Westernport Regional Housing Council, sub. 153, p. 3).

At the community centre we administer emergency relief but cannot house people. Most of our inquiries from people needing help are housing based. We average five calls per week from people needing housing or who are housed inadequately

(Caloundra Community Centre, sub. 25, p. 2).

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Affordability

Planning, zoning and building regulations cause commercial housing to be constructed to a much higher standard and size than low-income people would freely choose ... (Dr Joe Flood, sub. 171, p. 2).

The shortage of public housing continues to be the most pressing problem for our clients. Lack of availability forces people into the private rental market where they are often destined to fail due to insufficient income (Windermere Child and Family Services, sub. 74, p. 1).

... public housing acts as a countervailing force to private rental. It helps keep rents down and increasingly sets high standards for rental housing stock (North Melbourne Tenants Association, sub. 81, p. 1).

Between 1954 and 1986, the amount o f low rental dwelling stock (ie with rentals less than 25 per cent of average earnings per employed male) decreased by 21.9 per cent. In 1954 a household on average weekly earnings could afford some 70 per cent of private rental dwelling stock. By 1986 only 30 per cent of dwellings were affordable

(Victorian Council of Social Service, sub. 8, p. 27).

High levels of employer subsidy in the private rental market have served to maintain high private rental charges. Darwin, for instance, has the highest cost of rent per value of dwelling in Australia (Shelter Darwin, sub. 20, p. 1).

Rents should not be determined solely by market forces. Legislation must empower tribunals to disallow excessive rent increases. In particular, legislative provisions must prevent speculative rent increases resulting from major events (eg Expo ‘88, Americas Cup Fremantle 1987), large development projects or shortages in supply

(National Shelter, sub. 115, p. 9).

Appropriateness

The private rental market generally fails to provide appropriate housing for significant numbers of tenants By failing to provide appropriate housing it discriminates against people in wheelchairs, those with large or extended families or those with special housing needs. This type of discrimination is not intentional. Rather it occurs because there is no mechanism within a market structure to meet the needs of groups who do

not necessarily have the means to pay (Queensland Shelter, sub. 138, p. 11).

Under current Queensland law, tenants have no rights to change locks on doors or make any modifications to their house that will ensure their safety. If the landlord will not make urgent repairs, there is no way of forcing repairs under current legislation. Safety is not guaranteed in the private rental market, particularly in the lower end of the

market which is frequently sub-standard. The situation worsens when the market is tight (Queensland Shelter, sub. 138, p. 9).

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Security of tenure

Private rental is the most insecure form o f tenure. A private tenant lives with a notice to vacate like a “Sword of Damocles” over their heads for the whole of their tenancy (Wimmera Community Care and Wimmera Regional Housing Council, sub. 83, p. 3).

Security of tenure, ie protected tenancy, is only sought by and for bad tenants, who do not pay rent regularly, cause damage, disturb the peace or use the property for illegal purposes or to accommodate more people than agreed to in the tenancy agreement. Only such people need laws to prolong their illegal anti-social activities (Property Owners’ Association of NSW, sub. 30, p. 4, Issues Paper on Public Housing).

Landlord tenant issu es

Our records show that the most frequent problems encountered by tenants in the private rental market relate to bond recovery, privacy, rent issues, problems relating to a lease and termination issues (Tenants Advice Service, sub. 191, p. 3).

Tenancy legislation between states are not consistent (Consumer Forum for the Aged, sub. 87, p. 4).

Tasmanian Tenancy Law is antiquated and irrelevant to the realities o f the private rental market of today. The little legislation that exists is mostly in favour o f the landlord, not the tenant (Housing and Young Peoples Outreach, sub. 133, p. 3).

Council of the Aging ... considers it imperative that the Commonwealth take the initiative in achieving national standards for tenancy protection (Council of the Aging (Australia), sub. 168, p. 8).

Governments appear to believe that any attempt to regulate private tenancies will lead to disinvestment by property owners. The disinvestment argument has been raised each time new tenancy legislation has been proposed even though there is no data to substantiate the claim (Tenants’ Union of Queensland, sub. 155, p. 3).

For letting a flat or house, we as owners cannot charge our tenants, but we get charged by our agents! ... these costs fall more harshly on owners than on rental-occupants who do not have to pay huge stamp duties, legal costs, selling costs or high interest charges and set-up fees. The Bond cost is peanuts and is in most cases under the law just the last (four week’s) month’s rent unfortunately, which leads to encouragement of irresponsibility in tenants refusing to look after the premises and clean up when they leave. For welfare tenants, it is completely free under the State’s Bond Assistance

Scheme which is funded by private owners (Property Owners Association of Victoria, sub. 156, p. 6).

Single women, including female single parents, also report incidences o f harassment from the owner or agent of their rented premises (Tenants Advice Service, sub. 191, P 8).

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Rental stocks

The private sector chronically under supplies housing for low income earners; mainly because o f planning controls but also because of risk (Dr Joe Flood, sub. 171, p. 2)

It is Hanover’s belief that vacancy rates should be maintained above 5 per cent for low cost private housing, through the introduction and modification of appropriate fiscal measures to stimulate supply without making landlords maximise rental income. A thorough analysis of current measures is therefore required to develop sufficient

incentives to achieve the above objectives (Hanover Welfare Services, sub. 163, p. 8).

The experience of various property trusts which invested in residential housing and eventually had to sell these investment due to heavy losses demonstrates that residential rental accommodation is not suitable for institutional investment or management (Property Owners’ Association of NSW, sub. 30, p. 2, Issues Paper on Public Housing).

Other forms of accommodation

Rooming house tenants are socially isolated, discriminated against, frequently verging on homeless or moving between being homeless and housed, and without financial resources that would secure them more affordable self contained accommodation, and without social skills and references which would allow them access to self contained accommodation in the private rental market (Rooming House Tenants Association,

sub. 201, p. 5).

More attention needs to be given to the transaction and access costs experienced by the most vulnerable groups — tenants of boarding or rooming houses and caravan parks. The high mobility of these tenants (due to the high cost of accommodation and poor security of tenure) means that they face transaction and access costs much more

frequently than other sectors of the community. With no control over the length of tenancy, the costs of moving every six months or yearly are not insignificant This contributes to a downward spiral into poverty and increasing vulnerability within the housing sector. The cost of moving a relocatable home from one site to another is also

high (Council of the Aging (Australia), sub. 168, p. 3-4).

... if there is appropriate planning and design, good management and the location is not isolated, caravan park communities can be supportive and nurturing environments for children. Unfortunately most caravan park facilities reflect the holiday lifestyle and do

not meet the needs of families with young children (National Dissemination Program of the Hunter Caravan Project, sub. 209, p 1).

Until the election of the Goss Government in Queensland the needs of park residents were largely ignored. Several programs are underway now which are designed to lift the lifestyle out of the gipsy age (Caravan and Mobile Home Residents Association, sub. 219, p. 1).

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Caravan parks were often considered to be public housing’s poor cousin People moved into parks whilst awaiting private or public housing availability (Caravan and Mobile Home Residents Association, sub. 219, p. 1).

Energy poverty is an ongoing problem for caravan park residents (Caravan Park Residents Network, sub. 182, p. 5).

Caravan park residents are often ineligible for Government assistance because their level of assets are over the allowable level. This is a ridiculous situation when one considers the relatively low income levels and lack of tenure security they face. Home ownership does not equal security of tenure in this example (Caravan Park Residents Network, sub. 182, p. 7).

Once a resident buys a movable home and locates it in a park, they find themselves ‘locked into’ a system which greatly benefits (financially) the park owner. The ongoing costs of housing for caravan park residents continue to increase in many inequitable ways that are rarely explained prior to taking up residency (Caravan Park Residents Network, sub. 182, p. 4).

A.4 Intergovernm ental is s u e s

Roles of governments in housing

Governments have always been involved in the provision of housing, both directly and indirectly, and with a range of motives ... What is needed now is a clear strategy, one with a long-term perspective, to underlie Federal spending on housing assistance

schemes (Brotherhood of St Laurence and the Ecumenical Housing Unit, sub. 152, P Ο

The main objective of government policy should be to develop a favourable environment for investment in rental housing eg provision o f long-term, low interest loans for rental housing; accelerated depreciation allowances; abolition of land tax on residential accommodation; abolition o f capital gains tax for long term investors (of,

say, 5 years and over); removal of burdensome local government and development regulations (the “not in our street” syndrome) (Property Owners’ Association of NSW, sub 30, p. 1, summary of submission)

If the Commonwealth is committed to ensuring the objectives of the CSHA are met for all Australians, then we recommend that it provide a stronger financial commitment to housing assistance than the current 2 per cent of the total budget outlays (Prahran Community Housing, sub. 248, p. 1).

I think it’s the State and Federal Government’s role and responsibility to provide affordable housing to the disadvantaged, the people on low incomes, the less fortunate, the poor. If Governments won’t defend the defenceless, who will? (B Trethowan, sub. 142, p. 2).

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Our research into housing costs and labour market trends and their consequent impact on the extent of housing stress and housing poverty in Australia has led us to the conclusion that the Commonwealth government should take a more active role in the provision of housing assistance (Brotherhood of St Laurence and the Ecumenical Housing Unit, sub. 198, p. 1).

New South Wales maintains that the Commonwealth should take total responsibility for income support and provide a level of assistance that ensures that the costs of housing provision by the States is fully recovered (NSW Government, sub. 354, p. 6).

Whilst we understand that it is the responsibility o f the Commonwealth Government to provide income support, we suggest that the provision of housing should not be left entirely just to the States. It has been proven in the past that without Commonwealth money as well, the States tend not to assign sufficient money for housing provision

(Goulbum Regional Housing Council, sub. 293, p. 1).

Given that there are State Governments that do not share the Commonwealth’s commitment to public and community housing programs, the Commonwealth must take a more pro-active role and hold the States accountable as there are thousands of people in housing crisis that could be assisted with those unspent funds. If the answer is more tied grants then this must be more common (Prahran Community Housing, sub. 179,

P 10).

The current CSHA provides a series of checks and balances that, despite the (somewhat unmeasured and possibly not completely measurable) inefficiencies, provide an opportunity to, firstly, ensure that housing programs are buffered from the often oscillating policies developed by either a vote seeking state or Commonwealth

government, as the case may be (Federation of Housing Collectives, W.A., sub. 273, P I)·

Without the Commonwealth, Homeswest’s actions in late June to close the Homeswest Independent Appeals Tribunal and its replacement by a new system would have proceeded without challenge. ...A major problem for the Commonwealth is that although the H o u s i n g A s s i s t a n c e A c t requires an independent appeals process, the

Commonwealth has in the past permitted other States to implement systems which would not generally be seen to be independent. Hence the Commonwealth has not made full use of the limited power that it does have (Western Australian Council of Social Service, sub. 277, p. 7).

... post-industrial thinking sees housing policy as a set of services designed to improve clients’ welfare. It recognises that as far as possible decisions should rest with the client rather than with the bureaucrat. In the industrial culture the bureaucrat could justify a paternalistic approach by claiming to “know what’s best” for an uninformed

dependent client. In the post-industrial culture such a patronising approach is no longer justified. Society is more diversified, clients are better informed as to their own welfare needs and in general are better able to make decisions affecting their welfare than are remote, albeit well-meaning, government bureaucrats (R D M Cotgrove, sub. 128,

p. 1).

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The CSHA should therefore, remain the lynch-pin of Federal State co-operation in delivering housing assistance to low to moderate income households. Continuation of the CSHA and Commonwealth involvement in specific purpose programs (particularly

in crisis accommodation, supported accommodation, Aboriginal housing, and housing for the elderly) are vital to ensuring that all Australians can have access to secure, affordable, adequate and appropriate housing (Ed Wensing, sub. 108, p. 47).

Undoubtedly the allocation and stock management practices o f the public housing authorities can and should be improved, but this is within the power of the Commonwealth if it chooses to take the initiative. Value for money is not easily achieved in any context and particularly where the Commonwealth chooses not to supervise its own interests (Housing and Social Planners, sub. 199, p. 2).

The 1988 CSHA amendments no longer permitted rent rebates to be paid for out of CSHA funds. This ultimately means that the burden of paying for rent rebates has fallen to the states, whilst the Commonwealth retains responsibility for private rental relief. The State housing authorities are therefore having now to act not only as suppliers of low rental housing but as providers of income assistance to its increasingly poor population o f tenants. This causes unacceptable distortions in the apparent inability of State housing authorities to balance their books. Adelaide Central Mission therefore recommends that the Federal Government assume funding responsibility for all income security payments, including rent rebates for low income public tenants and rent relief for private tenants (Adelaide Central Mission, sub. 69, p. 54).

Local Government has considerable, but limited, potential to assist in meeting local housing needs. It can help to ensure that a local balance exists between provision of housing by the private, public and community housing sectors by mobilising their distinctive characteristics so that community needs are met efficiently and appropriately. It can play this significant role by:

• reducing impediments to the efficient operation of the private market,

• providing information,

• participating in planning the provision of public housing, and

• supporting or directly providing local housing, such as through community housing (Commonwealth Office of Local Government, sub. 126, p. 7).

Local government authorities, by virtue of their size, accessibility and knowledge of the local area, have the potential to respond more quickly and sensitively than any other sphere of government (Australian Local Government Association, sub. 102, p. 4).

In New South Wales, Councils also have the opportunity to develop effective housing strategies for their areas and can levy developers for the provision of appropriate and affordable housing as one example of the additional resources which can be put into the system by the involvement of all spheres o f government. (Local Government and

Shires Association of NSW, sub. 326, p. 2).

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Local Government is often reluctant to become directly involved in either housing provision (eg through LGACHP) or providing services for those occupying public housing: it senses that it may be signing a blank cheque. Therefore there is need to clarify Local government’s roles and obligations (Municipal Association o f Tasmania,

sub. 137, p. 3).

Funding and financing of subsidised housing

Most European countries have much greater housing expenditures than Australia because historically they have tended to provide that assistance as a universal right (Brotherhood of St Laurence and the Ecumenical Housing Unit, sub. 198, p. 4).

[The Commonwealth] continues to provide once-off subsidy support for rental housing and to supplement tenant income with ad hoc rental assistance unrelated to the cost of providing rental housing. The States, with a lower revenue base from which to raise funds, are also not prepared to take on such responsibilities (Dr Judith Yates, sub. 186,

P 15).

Just because capital is provided through Government grants does not indicate that public housing is necessarily subsidised. Housing subsidies are related to the ongoing costs of financing, managing and maintaining housing and whether the rental system reflects the long-term economic cost of providing that housing. With an appropriate

rental system in place, any tenant paying full-rental is not receiving any subsidies. Moreover, if the artificial constraints on borrowings by the State housing authority were lifted, it could borrow the funds to acquire an additional dwelling (Victorian Council of Social Service, sub. 169, p. 20).

It appears that grant funding, while a slow way of meeting the waiting lists which continue to grow under increasing unemployment, family breakdown, and an ageing population, is nevertheless a better way to invest socially in low-income housing assets (Dr Joe Flood, sub 171, p 4).

Rebates to public housing tenants absorb a significant proportion of the Commonwealth-State Housing Agreement Budgets. We have affirmed for some years that housing subsidies should be directly funded from the Social Security budget and all funds earmarked for housing should be used for that purpose (Housing for the Aged

Action Group, sub. 181, p. 15).

... the Commonwealth’s outlays on housing to the States and Territories since 1984-85 had been reduced by 42 per cent (excluding ACT) by late 1991. The current commitment of $1016 million each year for the four years commencing 1989-90

represents a further reduction in real terms of 18 per cent over the four year period. By 1992-93 Commonwealth funds will have declined by 50 per cent since 1986-87 (Adelaide Central Mission, sub. 69, p. 2).

The efforts by successive SA Governments to invest heavily in public housing has also been penalised, with the reduction of CSHA funds to SA (caused by moving to a per capita funding formula) falling from 12.5 per cent to 8.6 per cent by the 1992-93

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financial year, savagely biting into the ability of the SA Housing Trust to build new homes for the 43 520 applicants on waiting lists by late 1991 (Adelaide Central Mission, sub. 69, p. 2).

The capital funding o f social housing in [The Netherlands, Denmark, Sweden and Finland] is increasingly arranged through off-budget mechanisms. The bulk of capital funds are borrowed directly from institutional finance markets with guarantees provided on a shared basis by central funds and governments (Joint submission by: Henk van Leeuwen and Dennis Ingemann, sub. 67, p. 4).

It would seem appropriate to set a target of 15 per cent public and community- managed housing in Australia. In order to achieve this however, governments need to establish appropriate market conditions for attracting private sector finance into community housing so that social objectives will not be compromised. It is likely that achieving this target will take twenty years; and in the interim, current levels of housing stress will continue, unless addressed through the public housing program (The Salvation Army, sub. 200, p. 8).

Much of the difficulty in raising funds [for social rental housing] arises because rental yields are not adequate to attract investment at the lower end of the rental market. The creative financing approaches employed 'have been made financially viable through credit enhancement (through State guarantee or insurance or indemnity), through

subsidies in the form of Commonwealth tax expenditures or direct outlays and/or through implicit State absorption of establishment costs and construction and operating risks (Dr Judith Yates, sub. 186, p. 6)

The report from [Caversham] indicated that institutional investors have little (or no) interest in investing large sums in social rental housing unless guarantees from a State housing authority on minimum rates of return are provided (Dr Judith Yates, sub. 186, P 11)

If borrowing is required to undertake large-scale housing construction projects, this is obviously far better undertaken via lower interest public sector borrowings (Western Regional Housing Council, sub. 174, p 10-11).

... new financing arrangements [should] be sought for the building o f public housing, perhaps 50 per cent through the Commonwealth State Housing Agreement money and the other 50 per cent through off-budget finance sought and developed especially for this purpose. The repayment of the off-budget monies could be made possible by the

increased rental income from the tenant rental from those middle income tenants who pay full cost rental or 20-25 per cent of their income up to a ceiling

(Goulburn Regional Housing Council, sub. 82, p. 8).

There is a capacity to build more public housing and to provide more home ownership assistance by using State and Federal Government housing funds as a “top-up” to funds raised from private sources rather than using capital funds (Master Builders’ Association of Tasmania, sub. 112, p. 3).

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Housing can only be provided cheaper than headleasing from private landlords if private funds can be obtained at real rates of 4 per cent to 5 per cent or less. However, capital grant funding, while slow, builds up an asset base and will eventually lead to more low-income housing than all forms of recurrent subsidy funding (Dr Joe Flood,

sub. 171, p. 6).

Increased use o f bulk leasing could encourage institutional investors to view this area as an attractive investment opportunity — leading to the development o f agencies specialising in the lease of large numbers of properties to government — and thus reducing the costs to the tenant manager. This has been the experience of the Defence

Housing Authority (Department of Health, Housing, Local Government and Community Services and Department o f Social Security, sub. 331, p. 56).

... we are well aware of serious budgetary constraints. We would argue that there are other revenue options such as capital gains tax on owner occupied housing; re-embargoing negative gearing provisions; taxing the imputed rent on owner occupied housing; and examining the feasibility of utilising superannuation funds. Some of these

options are politically unpalatable and therefore, perhaps, unachievable, however we argue that government must more seriously examine these options if the housing crisis confronting this country is to be effectively addressed (Springvale Community Aid and Advice Bureau, sub. 31, p. 3).

Any funding available to Local Government under Commonwealth programs should be paid direct to the local authority without State Government controls and administration requirements. Local Government is a responsible level of government and this should be recognised by all levels of government. Unnecessary costs are incurred with the

existing funding arrangements (Shire of Wongan - Ballidu, sub. 68, p. 2).

Co-ordination issu es

While government departments seem to have great resources ... non-government volunteers and staff are finding their energies drained by the endless consultation which often leads to a dead end. The multiple layers of government — Commonwealth, State, Local — are not well co-ordinated (Uniting Church - Synod of Western

Australia, sub. 32, p. 2).

There are major problems in the co-ordination of housing between the State and Commonwealth Governments, this is particularly noticeable in NSW. Examples of poor co-ordination include the use o f SAAP in NSW to provide residential care for State wards and young people aged 12-15, which results in less available

accommodation for the young people targeted by the program’s objectives (Western Sydney Housing Information and Research Network, sub. 84, p. 3).

[We] strongly support the move for a single authority to be responsible for housing and care services for the frail aged in the community (Aged Services Association of NSW and ACT, sub 75, p. 2, attachment).

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... addressing areas of housing need also requires co-ordination of support services, consistency in the definition of special need and adequate consultation if housing outcomes are to be appropriate (National Women’s Consultative Council, sub. 93, P 3).

A.5 State h ou sin g authorities

Objectives

New South Wales believes that the objective underlying all policies and programs relating to the availability of Government-funded rental housing should be the provision o f housing on a needs basis, not the provision of public rental housing on a universal basis (NSW Government, sub. 354, p. 3).

the “vagueness” of CSHA objectives are addressed by the States’ annual Housing Assistance Plans [HAP], which are subject to community and tenant input The HAP consultation process is often about finding the least unpopular trade-offs for the SHA

(Shelter WA, Sub. 271, p 1)

Whereas prior to 1980 housing authorities attempted to provide public housing to a broad range o f clients, their focus is now much narrower and seeks to provide direct housing assistance to those most in need, for example, single parents, long term unemployed, and pensioners (R J Graham, University of Tasmania, University of Tasmania, sub. 123, p. 1).

. .. moves to limit the role of the housing authorities to exclusively meeting the needs of those on the lowest incomes would, in the long run, be counter-productive for those people as this would lead to a weaker, more residual public housing sector (Queensland Council of Social Service, sub. 241, p. 3)

While improved accountability and financial management o f public housing programs are required, a focus on social and housing objectives is vital in the administration of housing assistance. Economic considerations must be cognisant o f low income earners’ access to and ability to maintain their housing. Performance indicators must reflect the outcome for clients (National Youth Coalition for Housing, sub. 131, p 39).

Public housing policy has the opportunity to help in the establishment of other desirable urban development policies such as urban consolidation, energy efficiency, and sustainable development practices ( R D M Cotgrove, sub. 128, p. 5).

Public sector housing activity has also provided “leadership” to the private sector in providing demonstration sites for urban housing (Master Builders’ Association of Western Australia, sub. 6, p. 3).

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Roles and functions

The challenge for social housing agencies is no longer one of providing a standard product to which all housing consumers have to adapt. Rather it is to provide a range of choices for housing consumers (Victorian Council of Social Service, sub. 8, p. 8).

In the past, the Department of Housing acknowledged a responsibility for providing not only the physical, but also the social infrastructure for housing estates, so that communities could develop. The Department has now changed its approach. As part of this change came the transference of the responsibility for the Housing Estate

Worker Program to the Department o f Community Services (DOCS) in 1992. The funds for the Program were not part o f this transference. Consequently, the Program as a whole no longer exists and DOCS only picked up 4 of the 10 projects; Blacktown’s was not one of them (Blacktown City Community Services, sub. 76, p. 1).

MBA sees no reason why a public housing agency should compete with the private sector in land development at the upper end of the market (Master Builders’ Association of Western Australia, sub. 6, p 5)

Homeswest should no longer be involved in the acquisition, development and retailing of residential land and all existing land supplies (apart from endowment land) should be placed under the control of Land Corp (Housing Industry Association, Western Australian Division, sub 71, p. 5).

The provision of housing is also different from the provision of other public utilities ... First, ... State housing authorities need to produce a very diverse product which is closely linked to a range of cultural and social preferences and values. Second, ...

Housing is consumed over a long period of time and, for the most part, is an appreciating asset. Third, ... Social housing agencies operate in an environment where most housing is privately produced and owned (Victorian Council of Social Service, sub 169, p. 15).

It is important for State housing authorities to implement strategies that will enable them to consult with workers in the community sector There are community based workers with years of experience and accumulated knowledge and skills who could make positive contributions to the development of housing programs (Western Sydney

Housing Information and Research Network, sub. 84, p. 4).

Performance

Few would deny there have been major difficulties in State housing authorities management of public housing, and there are still areas for improvement. However there has in recent years been a more concerted approach to planning and efficient work practices. On the positive side Victoria has been in the forefront of policy

development, innovative schemes and stock design, winning awards for design and creativity (Housing for the Aged Action Group, sub. 181, p. 14).

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There have always been wastes and inefficiencies in the way public housing is provided ... A history of inefficiencies is not, however a reason for dismantling the system or changing it to the extent that it no longer achieves what it was intended for (Western Regional Housing Council, sub. 174, p. 2).

Public housing authorities must, however, continue to improve their fiscal performance. However, this must be within the context of achieving social objectives. In other words, the driving force o f the State housing authorities must be the achievement of

social objectives. This provides the context within which State housing authorities can improve their financial efficiency and effectiveness. Financial efficiency and effectiveness must not be the driving forces of State housing authorities (Victorian Council of Social Service, sub. 8, p 38).

Housing authorities should be encouraged to improve the efficiency o f program delivery. Any gains from such measures should be kept by the authority and not passed back into general revenue, otherwise there is little incentive for improvements (Housing Industry Association National Office, sub. 92, p. 10).

. .. the level of resources devoted to public housing should be increased However, this does not mean that there is no room for improvement in the management of public housing. On the contrary, despite substantial recent reforms in the public housing system in Queensland there is much room for improvement in that system (Queensland Council of Social Service, sub. 91, p 11).

... significant efficiency gains can be achieved if public housing authorities were to improve the administrative procedures and review technical standards required for the provision of public housing (Master Builders’ Construction and Housing Association Australia, sub. 94, p 3).

... whilst recognising Homeswest innovations, a range of problems still exist including:

a) many households are waiting some years for public housing to be allocated.

b) many designs are not appropriate to climatic conditions.

c) the needs of Aboriginal people are not well met and the view held by Aboriginal groups and the community sector is that Aboriginal people receive inferior housing and service from Homeswest.

d) maintenance has been identified as a major issue for existing tenants.

e) need for improved services for migrants, of non English speaking background.

0 addressing the security needs of women and people with disabilities

(Brewer Street Welfare Rights and Advocacy Service, sub. 196, p. 2).

... there is still scope for greater public scrutiny of the State housing authority, in spite of significant advances which have been made in this area in Queensland. We believe that this accountability should include measures of performance which reflect the primacy of social objectives in the role of State housing authorities. Thus, in addition to performance criteria relating to financial efficiency, it is important to design a set of

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performance criteria which measure their performance of their social objectives. These would include measures of tenant satisfaction, measures of success in the task of integrated planning and monitoring of success in areas such as affirmative action on behalf of disadvantaged groups (Queensland Council of Social Service, sub. 91, p. 15).

The NSW Housing Department has an appalling record of consultation in this State which has worsened in the last few years....... Short time frames, poor or total absence of resourcing, inadequate briefing, lack of recognition of structure in the community sector, basic ignorance of good consultation processes and lack of real commitment to

good consultation has caused the terrible rift between the NSW Housing Department and the Community Housing Sector (Wollongong Youth Refuge Association, sub. 4, p. 9).

For our organisation, on more than one occasion, housing which we have identified as suitable for modification for a particular resident group has been lost because the Department has not been able to respond quickly and spot purchase (Spastic Centre of New South Wales, sub. 11, p 4).

Targeting is obviously better with a greater range of programs available, but this does lead to greater administrative costs There is a need for the Commonwealth to aggregate assistance, building greater flexibility into tied funding arrangements (ACT Housing and Community Services Bureau (Questionnaire Response), sub 109, p. 6,

Attachment 1).

Innovation in housing support programs is obviously an important goal but the financial viability should be rock solid Public housing authorities should not use their programs to experiment with housing design or financial arrangements without adequate prior public debate and cost benefit assessments (Housing Industry Association National

Office, sub. 92, p i, Executive Summary).

The quick and effective collection of performance and quality of service data on Australia’s housing authorities provides an effective platform for the assessment of best practices, the development of innovation, co-operation and co-ordinated reform (Corporate Diagnostics, sub. 73, p 2).

However there would appear to be further opportunities for achieving increased efficiency dividends from the greater involvement of the private sector. Some of the measures that have been suggested by Association members include:

• for core public rental stock, normal industry design and quality standards be used rather than specifications that exceed these

. State housing authorities to develop closer consultation with industry associations and builders in the provision of public rental stock

• in the medium to longer term, governments to put in place arrangements that will facilitate private sector financing and management of ‘normal’ public housing rental stock (Master Builders’ Construction and Housing Association Australia, sub. 94, p. 4).

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The following principles should govern [social housing] reform:

1. Greater focus on asset management in public housing

2. Greater focus on customer service within public housing

3. Greater diversity of stock to better match the needs of a more diverse population

4. Providing diversity in the range o f management options within the social housing sector

5. Sensible targeting o f social housing stock

6. Restructure social housing to achieve greater horizontal/longitudinal equity (Brotherhood of St Laurence and the Ecumenical Housing Unit, sub. 198, pp. 9-10).

Accountability

... there is almost no accountability mechanism identified in any State housing authority program which would permit an evaluation of the adequacy o f stock or tenancy management. ... accountability by State housing authorities is seriously limited by the lack of transparency in their financial accounting. A serious implication of this is that it is very difficult to determine the contributions to achieving the overall objective of improving supply made by the various operations of State housing authorities (Australian Council of Social Service, sub 85, p 6).

... public landlords are more accountable both to the tenants and the wider community than private landlords. Because they are large and subject to community and parliamentary scrutiny their activities are more easily monitored and visible than the many small private landlords (North Melbourne Tenants Association, sub 81, p. 2)

We would consider, as desirable, a national body with specific expertise in housing, with terms of reference to focus on monitoring State housing authorities administration of CSHA funds. It would also be essential that such a body be empowered to make recommendations to State housing authorities in regard to the administration of public housing Such a body would need to be provided with the appropriate legal authority to enforce agreement upon State housing authorities (Western Sydney Housing Information and Research Network, sub 84, p 5)

Tenancy management issu es

Under present policy, interstate residents may list for public housing in Queensland in a limited range of circumstances, but waiting time accrued in another State is not transferable (Queensland Department of Housing, Local Government and Planning, sub. 345, p 18).

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MBA believes that there is a need for the on-going assessment of public housing tenants to ensure that the rent they pay reflects their economic circumstances (Master Builders’ Association of Western Australia, sub. 6, p 7).

To avoid the so-called poverty trap creating a disincentive for people to work, we would recommend that rent assessment remain at the same level for a period of three months before re-assessment. This provides for catching up on rent arrears or other unpaid expenses (North Brisbane Regional Tenant Group, sub. 327, p. 2).

A critical social cost that has been managed by the State has been rent arrears. In some cases tenants’ debt has accumulated over a number o f years. The “Fair Rents Working Group” of the Public Tenants Union cites 18 000 households in arrears in November 1989. This represents over 30 per cent of the then total number of households. Many

of these tenants remain on arrears agreements which demonstrates their effort to resolve arrears problems while trying to maintain lifestyles (Shelter Victoria, sub. 172, p. 10)

If applicants have previously been evicted from DOB Housing we feel they should not be rehoused at a later date especially when waiting lists are excessively long. ...

DOB needs to have the authority to go ahead and evict tenants who breech the Tenancy Agreement in relation to nuisance and annoyance. Depositions from 5 neighbours should be adequate to prove that there are problems and evictions are warranted (Murray Darling Riverina Public Tenants Association, sub 189, p. 1, 2).

There appears to be little flexibility in the provision of housing through the public housing system and people are often forced to accept a house in an area distant from the place of the person’s origins (Western Sydney Housing Information and Research Network, sub. 84, p. 2).

Twenty four hours to view properties as required by the [NSW] Department of Housing and provide a response is difficult for applicants as there are often financial restraints for them to travel to the area of allocation. There is also only one offer of accommodation ... (North Sydney Housing Interagency, sub. 177, p 1).

Often prospective tenants are so desperate for accommodation they are forced into accepting housing which will meet their short term needs that may have long term negative consequences for their family. A system such as a house exchange program which operates in Victoria should be considered for this State department (‘LOGAN’,

Logan City Tenant Group, sub. 119, p. 2).

Inexplicable rules such as the refusal of the Victorian Department of Planning and Development to provide fences around detached homes renders these homes totally inappropriate for families with young children and stigmatises the houses making them identifiable (Wimmera Community Care and Wimmera Regional Housing Council,

sub 83, p 1)

Another case is of a 72 year old woman with a history of orthopaedic problems requiring surgery She needs to walk with a frame. Because of many steps at home, she was rendered housebound. The Department approved her rehousing. Tenants

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knew of an accessible and vacant unit in the same block, but the Department was unwilling to transfer her to the unit. Department responded by saying “tenants can’t pick and choose where they live”. An offer of accommodation was made, but in far west region of Sydney away from existing community contacts (South Sydney Community Aid, sub. 188, p. 1).

... effective housing management cannot be achieved without tenants being involved in the planning, development and management of their housing (Public Tenants Union of Victoria, sub. 180, p. 8).

It is obviously crucial that the Homeswest Independent Appeals Tribunal remains totally independent from Homeswest (Shelter WA, Migrant Access Project, sub. 28, P 3).

... appropriate and accessible review mechanisms for State housing authority decisions can have substantial benefits both for the public tenant and for the SHA. Potentially, the tenant gains an enhanced security o f tenure under the “rule of law” while the State housing authority enjoys a predictable and effective mechanism for dealing with client dissatisfaction and the systemic benefits of competent external review (Softlaw Community Projects, sub 130, p. 4).

The Union also has some concern about the rights of tenants in public and community housing. In Queensland these tenants have no clear rights under legislation. To ensure housing equity and security for all, tenancy legislation should cover all types of tenure (Tenants’ Union o f Queensland, sub 155, p 7).

Prospective tenants and current tenants often received conflicting information on eligibility, and allocation processes. Much of this misinformation/misunderstanding contributes to great personal distress For example, women from non-English speaking backgrounds have even greater difficulties in obtaining important information, with many having to rely on their children to act as interpreters (Women in Supportive Housing, sub 146, p. 4).

Co-ordinating support services and other programs

Many people with disabilities who are eligible for and wish to live in public housing do not even bother to apply because they know that they will not be able to locate the additional support services they require to maintain themselves in the housing if it

becomes available (ACROD, sub 140, p 4)

... there is a need for governments to improve coordination between departments whose responsibility includes older public tenants, ie Health, Community Services, Housing, Planning, Development Public housing linked with support services for older persons provides the potential for security and a feeling of well being (Housing for the

Aged Action Group, sub. 181, p 13).

Generally, those in need of support either already receive it or are able to obtain it from service providers in the same way as any other members o f the community. Thus,

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placing [public housing] tenancy management in the hands of the Department responsible for welfare provision would not necessarily improve access to services since the whole range of services required by clients is provided by more than one State agency. Furthermore, in many key areas of community service provision such as those

for aged people and people with disabilities, actual services are delivered by non­ government agencies (NSW Government sub. 354, p. 8).

Our past experiences have indicated that Homeswest will now not approve of the allocation of funds until such time as appropriate funding for accommodation support has been guaranteed by the appropriate funding bodies, and as such there is now a considerable time delay between an application for funding for support funding; the approval of the support funding; the application to Homeswest for consideration of a

development; the design and tender process for the mobility dwelling; and the actual construction and completion of that dwelling by a builder (Cerebral Palsy Association of Western Australia, sub. 278, p. 1).

A sset management

During the 1960’s some of the public housing policies pursued by State Governments in the guise o f urban renewal and slum clearance verged on social engineering, a most inappropriate role for an agency responsible for the provision of housing. These activities resulted in the destruction of local communities and the creation of significant

social problems. Much of the stock created in this process is now in urgent need of replacement, a major impediment to the creation o f additional new stock. There is significant mismatching of stock and residents, a difficult issue but one which in a climate of restricted resources must be addressed (The Salvation Army, sub. 252, p. 1).

By the end of the 1970s, the results of the experimental use of concrete panels in walk- up flats and houses were becoming apparent: many houses were badly cracked, subject to mould and condensation and were sub-standard (Victorian Council of Social Service, sub. 8, p. 19).

More preventative maintenance, the introduction of condition reports and the reinstatement of annual inspections would improve the condition of existing public stock (Port Melbourne Public Housing Tenants Association, sub. 170, p. 3).

Much of Queensland’s public housing is in large estates on the urban fringes, isolated from services, public transport and employment (Youth Housing Project, sub. 5, p 6)

In recent years the demand for public housing is from single parents, individuals and aged persons. This present problems for the State housing authorities in finding ways o f adjusting the composition and location of the stock to meet these needs. Widened eligibility criteria for single people and people with disabilities have also expanded the

range of needs that public housing is being expected to meet (Ed Wensing, sub. 108, p. 27).

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Homeswest has increased its construction of four, five and six bedroom houses by 37 per cent since last year. This move is to be commended, as extended families need large housing (Shelter WA, Migrant Access Project, sub. 28, p. 2).

Public housing should only be sold from a stock management perspective. For example, when the dwelling and the land on which it is located are considered to be no longer suitable or appropriate for longer term use as public housing (Ed Wensing, sub. 108, p. 20-21).

Whilst public sector housing providers have responsibilities to respond to demand pressures, there does not appear to be well developed mechanisms or structures which provide feedback from users to designers and/or providers. Homeswest have advised that post occupancy evaluation will be undertaken (Kimberley Development

Commission, sub. 35, p. 3).

The extent to which the State housing authorities can achieve urban consolidation objectives, will depend on the priority given to redevelopment of existing stock ahead of construction of new dwellings as well as to whether or not stock in inner locations is retained. The balance between redevelopment and new construction in turn relates to the balance given to upgrading stock for existing tenants and providing additional accommodation for applicants on the waiting list (Royal Australian Planning Institute - ACT Division, sub. 139, p. 12).

House prices are currently at a more affordable rate than previous years, yet the spot purchase program which allows government to purchase existing private dwellings has received little or no resources. Spot purchase is particularly relevant for built up areas in the inner city belt and allows areas such as Brunswick to have public housing in a

municipality which has little land available for building (North Western Regional Housing Council, sub. 183, p. 9).

... State housing authorities, at least for their core rental operations, [should]

• implement a policy of regularly turning over stock to take advantage of the capital gain to fund new capital programs as well as minimising asset maintenance liabilities

• contract out to the private sector the management and maintenance of public rental stock

. contract out the project management and design work

• review and improve the cost-effectiveness of the current tender process in the context of the total cost of providing public housing stock (Master Builders’ Construction and Housing Association Australia, sub 94, p. 5).

With greater emphasis being placed on developing business, particularly value adding in rural Australia, it is important that assistance be given to provide housing in country areas to accommodate the staff required ... Approaches have been made to Homeswest for additional housing in the community, however in the absence of a long waiting list they are reluctant to provide more rental housing Industry/Business is reluctant to

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develop without any housing to accommodate staff. Something needs to be done to overcome this dilemma (Shire of Wongan - Ballidu, sub. 68, p. 2).

We believe that structures and skills for efficient property management of public residential housing is lacking outside the State housing authorities, and that to some extent State housing authorities are not the appropriate place for this management, where tenant, funding, and allocation issues sometimes take priority, and where the size

of the Housing Authority makes it difficult to respond in an appropriate and timely way to property management issues. Where new community/public housing programs are being developed or considered, the efficient property management aspects should be an important consideration (Common Equity Housing, sub. 151, p. 4).

Property Maintenance Issues

Current Tenancy Law does not require owners to supply window locks, deadlocks or security doors. Many of [our] users have major concerns with break-ins and violence in the inner urban area. This is particularly so in the high rise public housing estates (Fitzroy Richmond and Collingwood Accommodation Service, sub. 157, p. 3).

The common and most worrying thread through reports from tenants is the evidence of extensive delays, of months and years, even where quite clear health and potentially fatal risks are involved . ... At the very least the [NSW Department of Housing] has a serious problem of not adequately informing clients of their rights, of what services are

available and how to obtain them. At worst there is an ‘informal policy’ of cutting back costs by making repair and maintenance services as difficult as possible for tenants generally to obtain (Justice and Welfare Office Sydney, sub. 110, pp. 7-8).

... comments from public housing tenants indicate that maintenance is carried out in an inconsistent manner. Some tenants who have been in properties for a number of years find it difficult to obtain maintenance (such as the painting of walls and ceilings) from the Department, whereas others have been able to obtain a series of renovations in the

same period (Shelter Darwin, sub. 20, p. 3).

A number of tenants stated that they have given up reporting needed repairs to the [NSW Department of Housing] because of lack o f response, rudeness on the part of staff, and being fed up with being given the run-around (Justice and Welfare Office Sydney, sub 110, p. 8).

Contracting out for services

... in Victoria both maintenance and rent collection were contracted out — maintenance to Honeywells and rent collection to first National Australia Bank, then Australia Post.

While we were not in public housing before the contracting out of maintenance, ... the stories we hear are that when the Ministry staff did maintenance, the service was

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efficient, effective and prompt and there were no complaints about maintenance staff not showing up (Stan Jamce Cooke, sub. 185, p. 15-16).

Contracting out management to community groups is already commonplace in Victoria. Maintenance services are already contracted out to private tradespersons with the exception of inspection services, where special skills and accountability is needed.

Given recent scandals in NSW within the building industry, allegations of tendering improprieties and the Victorian land scandals, there is community scepticism of greater private sector involvement in the delivery of social rental housing services. Greater use of private contractors must be accompanied by better service to rental housing consumers, savings to the social housing sector, a higher degree of regulation and more stringent auditing processes (Victorian Council o f Social Service, sub. 169, p. 19).

Organisational structure

In [The Netherlands, Denmark, Sweden and Finland] central government agencies such as Ministries for Planning and Housing or National Housing Boards, are responsible for the policy development, forward planning, co-ordination and accountability of finance for and the facilitation of social housing programs. It should be noted however that the central Department of Agency does not own, allocate or manage social housing (Joint submission by: Henk van Leeuwen and Dennis Ingemann, sub. 67, p. 4).

New management models should be introduced into State housing authorities to increase their flexibility and their efficiency and effectiveness. These management models should be devolved so that effective housing programs are complementary and that different types of tenures exist under the umbrella of public housing (ACT Council of Social Service, sub 80, p. 3)

In Victoria the State housing authority has undergone continued reorganisation and restructuring over the past ten years. Numerous attempts have been made at devolving responsibility for the management of public housing to zonal/regional/area offices. It is unclear to us whether this ongoing restructuring has provided any clear benefits to public housing tenants or improved the efficiency and effectiveness of the State housing authority (Victorian Council of Social Service, sub 169, p. 19).

Housing management in the Kimberleys has been conducted for many decades from Perth. This has resulted in the current mix of poorly built, inappropriate and undesirable houses that is Derby’s housing stock. In recent years Homeswest has

begun to regionalised its management, and for the first time Derby has a chance to have the necessary planning and management it needs to develop its public housing. Today’s construction program now consists of well designed and built properties (Derby West Kimberley Shire, sub. 70, p 5).

Social housing stock [in The Netherlands, Denmark, Sweden and Finland] is acquired, owned and managed by local and regional based corporate structures, which are administratively co-ordinated by local municipalities and provincial councils (Joint submission by: Henk van Leeuwen and Dennis Ingemann, sub. 67, p. 4).

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The Department is developing a philosophy of providing unified service delivered to its tenants through the multi-skilling o f its staff. The introduction o f the Tenancy Management System whereby small teams are responsible for all facets o f tenancy management in small districts comprising approximately 500 tenant families is an

initiative under this philosophy (Northern Territory Department of Land, Housing and Local Government, sub. 17, p 10).

... the administration of State housing authorities should be regionalised with each regional office having management autonomy within an approved budget for management of the new and existing housing stock (Housing Industry Association National Office, sub. 92, p. ii, Executive Summary).

The major challenge to public housing providers is to move from centralised public works organisations to decentralised asset management and tenancy service operations. Logical outworkings would be:

• some separation of policy and service delivery functions;

• the transfer of rent rebate subsidies to the Department of Social Security (subject to the caveat that rents are set on the cost basis set out below);

• devolution of business units;

. a new consumer focus; and

• a new focus on stock quality and suitability (Brotherhood of St. Laurence and the Ecumenical Housing Unit, sub. 152, p. 3).

Corporatisation

The Salvation Army rejects as totally inappropriate any attempts to privatise the public housing sector (The Salvation Army, sub 200, p. 16).

This paper does not exclude corporatisation per se but rejects some of the elements that have been associated with corporatisation —· commercialisation, contracting out and privatisation — as contrary to the achievement of social objectives (Victorian Council of Social Service, sub. 8, pp. 3— ^1)

We can distinguish between corporatisation, commercialisation and privatisation and thus point out that there is not necessarily a connection between them. ... For most of the past 50 years, as the Housing Commission Victoria, the State housing authority has operated separately from the direct processes of Government. There are some

advantages in this separation In particular, the State housing authority has a voice of its own rather than being subject to its political masters (Victorian Council of Social Service, sub. 8, p. 39).

The danger inherent in such a proposal [commercially driven property management] is that tenants may be selected for the wrong reasons, ie, financial compliance. This could result in selection of tenants who are less disadvantaged . . .(Hanover Welfare Services, sub. 295, p. 4).

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It is essential that [commercial] goals [of a government business enterprise] are placed in a social justice context. The emphasis on access and equity, rather than profit by any means, should distinguish the government from private enterprise (Shelter WA, Migrant Access Project, sub. 28, p. 4).

Increased use of bulk leasing could encourage institutional investors to view this area as an attractive investment opportunity - leading to the development of agencies specialising in the lease of large numbers of properties to government - and thus reducing the costs to the tenant manager. This has been the experience of the Defence Housing Authority (Combined: Department of Health, Housing, Local Government and Community Services and Department of Social Security, sub. 331, p. 56).

Whilst we argue that corporatisation can offer efficiencies in the provision o f public housing, we are of the view that privatisation of public rental housing is not necessarily efficient or effective and will place stress on the achievement of community welfare needs (Common Equity Housing, sub. 151, p. 2).

A.6 Administration o f program s (other than public hou sin g)

Community housing

The current management of the LGACHP involves some State Local Government Associations in resourcing the program, and the State housing authorities in administering the program. In some States there is no resourcing through Local Government bodies In both cases these processes are cumbersome and involve a high degree of misdirection and/or unnecessary duplication. This is not only confusing to funded projects, but is costly in terms of inefficient use of resources (Australian Local Government Association, sub. 102, p. 8).

It is proposed by the ALGA that Local Government undertake full responsibility for developing and resourcing local government involvement in the Community Housing Program, including both the financial and legal administration (Australian Local Government Association, sub. 102, p 10)

The challenge for elected government is to take the risks of genuine community empowerment and spend more early in the program in order to attain more efficient management and greater consumer satisfaction in the longer term. The danger is that the pressure to cut costs or fear of transferring power to the community will result in frustrated community housing groups which lack the resources, skill and authority to manage efficiently (M Partridge, sub. 143, p. 6).

Council of the Ageing (Australia) recommends that the introduction of the Community Housing Program is not used by State housing authorities as justification to restrict access by community groups to capital funding under mainstream housing programs (Council of the Ageing (Australia), sub. 168, p. 2).

52 INDUSTRY COMMISSION

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the basis that they will be paying for reasonable maintenance as per the residential tenancies act (East Gippsland Regional Housing Council, sub. 173, p. 4).

While social housing and especially non-profit forms of tenure should be encouraged by all levels of Government, investment in social housing should not be at the expense of the construction of public housing (Bendigo Tenancy Information Service, sub. 161, p. 3).

The Queensland Government administers two separate community housing programs. These are the CHP and the CHPP. Sadly, the reasons for these two programs not being brought together into one package have nothing to do with the interests of the users (The Local Government Association o f Queensland, sub. 206, p. 3).

Community Housing (or Tenancy) Schemes are not a viable solution. They are neither efficient nor effective. They cannot survive without constant series of massive subsidies and usually either collapse due to internal dissent and financial mismanagement or have to be taken over by a public housing authority (Property Owners’ Association of NSW, sub. 30, p. 2, Issues Paper on Public Housing).

SAAP/CAP

For the SAAP, it is the responsibility of the Department of Community Service to provide current funding support. For the CAP, it is the responsibility of the Department of Housing to provide capital funding to secure housing provision for the SAAP. Nevertheless, no mechanism or guidelines exists to streamline the co-ordination

(Ettinger House - Fairfield Family Resource Centre, sub. 86, p. 3).

This Association recommends peppercorn rents be charged by the NSW Housing Department for CAP properties (Wollongong Youth Refuge Association, sub. 4, p 5).

A critical feature of the services provided by The Salvation Army is the large number of crisis accommodation services providing a first point of contact for many of those who are homeless. The increasing emphasis on the need for appropriate assessment and referral of those in crisis seeking assistance and the increasingly complex needs of people as a result of de-institutionalisation have placed far greater pressures on these services than ever before (The Salvation Army, sub. 200, p. 14).

Hanover has been developing an alternative model of transitional supported housing, in which we lease private rental properties appropriate to meeting the needs of the client, once assessed as appropriate for transitional supported housing. As the client resolves his/her crisis and develops greater resources to live independently, the rent is increased

to the full amount and finally the lease transferred to the client. There are significant advantages in the model:

- client is housed in a supportive environment

- client will take better care of property as ‘home’

- property is matched to individual household type

54 INDUSTRY COMMISSION

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- additional traumatic move is eliminated

- support is more empowering (Hanover Welfare Services, sub. 163, p. 5).

Hanover strongly believes that we could deliver the same quality facilities and services more efficiently — both in capital costs and on-line earlier, if we could take overall responsibility for these projects according to an agreed contract and schedule within an approved budget (Hanover Welfare Services, sub. 163, p 6).

In order to achieve best possible outcomes for those in short-term housing crisis which would result in homelessness, increased financial resources in the form of relief funds should be provided to community agencies such as Hanover for distribution. In this way, a greater number of those in crisis may be maintained in their existing tenancy

(Hanover Welfare Services, sub. 163, pp. 6-7).

Our recommendation is that supportive housing funding be better integrated with other housing funding, since it is not really possible to separate “welfare” from “accommodation” needs for those in special need (Uniting Church - Synod of Western Australia, sub. 32, p. 2).

Clearly the provision of emergency accommodation should rest with housing services as any necessary welfare assistance may be accessed by the housing worker in conjunction with other agencies (Westernport Regional Housing Council, sub. 153, P 4).

Costly time delays occur between approval of CAP funding for projects and funds for building or purchase This results in massive costs in terms of worker time, administration hours, CPI increases and hardship for those who are or will be seeking assistance from these services. Lengthy delays which can amount to 3 or 4 years are

unfortunately not uncommon in such joint funding arrangements (Burdekin Report Action Group, sub. 134, p 2).

Aboriginal housing programs

In fact we have got a situation in Bunbury at the moment where there is some surplus funding, and people in houses where the floorboards are sagging are going to get ceiling fans (Judy Jones, transcript, p 308).

It may be significant that badly maintained State housing stock is, in our experience, often used to house Aboriginal people (Sussex Street Community Law Service, sub. 34, p. 7).

Older housing in all the communities is dilapidated and frequently beyond repair. Contrary to popular belief, the principal cause of this problem can be attributed to the quality of the houses built, mostly in great numbers and at the cheapest price, the climate, which is a great destroyer of all building materials in the tropics, and

overcrowding The present program is making little impact on the housing shortage in the communities, as one new house frequently replaces an older house, which is no

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longer fit for habitation (Queensland Department of Housing, Local Government and Planning, sub. 218, p. 24).

The East Kimberley Housing Meeting started from Aboriginal people of the region requesting good housing to provide a much needed improvement in living conditions in their communities. Their situation has not changed for many years, poor government co-ordination and policy making prompted this need (Kununurra-Waringarri Aboriginal Corporation, sub. 7, p. 4).

Government housing programs must include funds for housing support functions specifically in the areas o f administration, repairs and maintenance, and family support services (Kununurra-Waringarri Aboriginal Corporation, sub. 7, p. 58, no. 5).

... the Government as a matter of priority [should] establish a single housing, services and infrastructure agencies to co-ordinate their provision on Aboriginal communities (Kununurra-Waringarri Aboriginal Corporation, sub. 7, p. 59).

Aboriginal and Torres Strait Islander Communities are often in remote areas which are difficult to service through State Government agencies located in regional centres or service agencies in smaller towns. The decentralised nature of Queensland must be considered in any decision about servicing such areas. It would be inefficient to have a potentially small and varying number of tenancies managed by a relatively centralised

structure (Queensland Department of Housing, Local Government and Planning, sub. 345, p. 25).

The Territory has implemented a Pilot Program for Community Housing Management which aims to investigate barriers to community housing management and develop strategies to overcome them. The program will also make some assessment of the

capacity of communities to pay cost rents and whether or not some recurrent funding is necessary if housing stocks are to be preserved (Northern Territory Department of Lands, Housing and Local Government, sub. 17, p. 5).

The distance and remoteness have enormous implications on the cost of providing goods and services while the small size of the communities to be served provides little scope for economies of scale These costs are reflected, not only in the cost of providing housing and infrastructure, but in the cost of goods and services purchased by local people at their communities. This again impacts upon housing and

infrastructure as the high cost of goods and services impinges on residents’ capacity to pay rent sufficient to cover housing management costs (Northern Territory Department of Lands, Housing and Local Government, sub 17, Attachment C, Aboriginal Housing Strategy, p. 9).

There is every indication that most Aboriginal communities do not have the economic base from which to charge rents to meet all housing management costs (Northern Territory Department of Lands, Housing and Local Government, sub. 17,

Attachment C, Aboriginal Housing Strategy, p. 16).

The grant has remained at the same basic level for some years. However the purchasing/rebuilding costs in Victoria have increased dramatically and each year the

5 6 INDUSTRY COMMISSION

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Board has had to decrease the number/type of properties it can purchase/rebuild within each region (Aboriginal Housing Board of Victoria, sub. 21, p. 1).

The ATS1C program is supplementary, to enable the catching up of the backlog caused by many years of neglect (Aboriginal and Torres Strait Islander Commission, sub. 116, p.8). "

We recognise that in many areas of the service delivery, efficiency needs to be improved. The review of housing organisations is aimed at improving efficiency at the local level The results of the review into Aboriginal and Torres Strait Islander housing organisations will enable ATSIC to act in an appropriate manner to improve the

knowledge and efficiency o f these organisation in the provision of services to the people. Cultural differences, in many cases, cause misunderstandings that require patience and goodwill from both parties before they can be resolved (Aboriginal and Torres Strait Islander Commission, sub 116, p. 13).

It is also assumed that maintenance can and should be undertaken entirely from rental incomes, despite the fact that rentals are low, most tenants would qualify for subsidised rentals if living in a town, and maintenance costs are high owing to the travel component involved for tradespeople. .

All of the attention to appropriate design has been devoted to relatively remote areas. Aboriginal people of the metropolitan and coastal areas of Australia also have culturally-related design needs. ...

My research shows that the layout of the settlement, especially the distances and relationships between dwellings, is actually more important that the design details of the house itself. People suffer more stress from inappropriately placed houses, than from inappropriately designed ones ...

I believe it would be useful for State housing authorities to employ a number of Aboriginal staff, trained for the purpose, to liaise between the specialist staff of the authority and Aboriginal communities (Dr Helen Ross, sub 215, pp. 1-4).

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B.1 Tenure ch aracteristics

Household type and tenure

This section deals with all Australian households, not just low-income people.

Figure B.1: Distribution of households by type within tenure, 1991 Per cent

Source: ABS 1991 Census of Population and Housing (Catalogue no. 2722.1).

I I Other households

EM Single person

EH Sole parent

H Couples with children

■ Couples without children

Figure B.1 from the Australian Bureau of Statistics (ABS) 1991 Census reveals that:

• Sole parents1 form 26 per cent of public housing tenants even though they comprise only 9.5 per cent of the population;

• Couples with children make up 60 per cent of purchasers;

• Couples without children make up 24 per cent of all households but only 12.8 per cent of public renters;

1 ‘Couples with children" and ‘sole parents' refer only to those with dependent children

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. Couples (with or without children) represent 72 per cent o f owners and purchasers but only 65 per cent of all households; and

• The owner category most closely resembles the profile o f the population as a whole.

Figure B.2: Distribution of households by tenure within household type, 1991 Per cent

Sole Couples Couples Other Single All

parent without with households person

children children

Private renter

Govt renter

Purchaser

Owner

Source: ABS 1991 Census of Population and Housing (Catalogue no. 2722.1).

Figure B.2 also from the ABS 1991 Census reveals that:

• 80 per cent of couples (both with and without children) are owners or purchasers;

• Sole parents are evenly spread across tenures, ranging from 20 per cent in public housing to 32 per cent as owners;

• 81 per cent of couples with children are owners or purchasers; and

• Over half of ‘other households’2 are in private rental.

2 ‘Other households" include group households, multiple family households, and households with boarders. Less than 7 per cent of all households and fall into this category.

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Tenure across income quintiles

Figure B.3: Distribution of income units by tenure within income quintiles, 1990 Per cent 100

80 -

60 +

Lowest Second Third Fourth Highest

Income quintiles

I I Renters - other

Π Η 1 Renters - private

B Renters - govt

ϋ Purchasers

H Owners

Source: ABS 1990 Income Distribution Survey, unpublished data.

The choice of tenure in Australia is significantly correlated to income:

• Governm ent renters make up nearly 6 per cent o f all income units, three quarters o f whom are in the lowest two incom e quintiles;3

• Private renters make up 19 per cent of all income units. They are quite evenly spread across the income range, with some concentration in the middle income;

• Home purchasers make up 28 per cent o f all income units. They are concentrated in the higher income quintiles; and

• Home owners make up 41 per cent of all income units. They are

concentrated in the two lowest income quintiles because many home owners tend to be older — 60 per cent of owners in the two lowest income quintiles are over 65 years old (ABS 1990 Income Distribution Survey, unpublished data).

3 In this survey, the ABS used income units as its base. Income units are singles and couples with or without dependent children (that is, children under 15 or under 19 if studying full­ time). Several income units can join together to form a household. There are over 20 per cent more income units than there are households.

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B.2 Location ch aracteristics

State differences

Figure B.4: Distribution of income units in lowest two income quintiles by tenure within State, 1990

Γ1 Other renters

IT I1 Private renters

§ Govt renters

^ Purchasers

ϋ Owners

NSW Vic Qld WA SA Tas ACT NT

Source: ABS 1990 Income Distribution Survey, unpublished data.

There are significant differences in the tenure profile for low-income people in each State.

Queensland has a small public housing sector due in part to the sale of assets in the 1970s. The Territories have a large component o f public housing. This is the result of past housing policies intended to attract people to these areas.

Capital city compared to the rest of State

Differences between capital cities and the ‘rest of States’, on an Australia-wide basis provide a yardstick against which regional differences can be measured.

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Figure B.5: Distribution of income units in lowest two income quintiles by tenure within States, capital cities, 1990 Per cent 100

□ Other renters ιτππ Private renters B Govt renters Purchasers

m Owners

Figure B.6: Distribution of income units in lowest two income quintiles by tenure within States, rest of State, 1990

Note: ACT and NT do not have disegregated figures. ACT has been included in capital cities and NT in rest of State. Source: ABS 1990 Income Distribution Survey, unpublished data.

Figures B.5 and B.6 show, for those in the lowest two income quintiles, that:

• Owners make up 49 per cent of income units in the capital cities and 53 per cent in the rest of States;

• Purchasers are about 11.5 per cent of income units in both capital cities and rest of States;

• Private renters make up 21 per cent of income units in capital cities and 18 per cent of rest of States; and

• Government renters make up 12 per cent of income units in capital cities and 9 per cent in rest of States.

Incomes tend to be higher in the capital cities. For instance, the highest quintile makes up 22 per cent of all income units in capital cities and the lowest two quintiles make up 38 per cent. The equivalent figures for the rest of State are 15.5 per cent and 44 per cent, respectively.

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B.3 Departm ent of Social Security clients

DSS clients In public housing

• There were 244 800 families in receipt of government pensions, benefits or Family Allowance Supplement (FAS) in public housing at the end of 1 9 9 2 4 jh is means just over 70 per cent of public housing households

receive Department of Social Security (DSS) payments;

• 32 per cent of pensioners were in public housing compared with only 12 per cent of beneficiaries;

• Approximately 62 per cent of public housing tenants are pensioners; and

• Approximately 134 000 family units in public housing were not pensioners. Of these ‘non-pensioners’ over 20 per cent became unemployed or began to experience financial difficulties during 1992.5 A further 11.5 per cent were long-term unemployed. Another 12.5 per cent had incomes sufficiently low to qualify for FAS-.

Rent A ssistance

• Renters other than government renters remain the most likely group to be paying over 30 per cent of income on housing. There are over 1.5 million income units renting outside the public housing sector (ABS 1990 Income Distribution Survey, unpublished data) of which over 460 000 pay more than 30 per cent of their income on rent. Of these, 445 000 are in the lowest three income quintiles. As of June 1992 there were about 900 000 DSS pensioners, allowees and FAS recipients and Department of Veterans’ Affairs (DVA) pension recipients receiving rent assistance (sub. 214 and sub. 100).

• The proportion of income paid in net rent6 by DSS recipients of allowances and FAS declines the longer they have been receiving payments. The inverse is true of recipients of government pensions. This

4 DSS clients are divided here into beneficiaries and pensioners. Pensioners include the aged, people with disability, wife (usually as a carer), sole parents and widow (class B). Benefits are paid for sickness, unemployment, FAS and Special Benefit (mainly used to assist those in need not eligible for other benefits). There were a further 10 300 recipients of Department of Veterans' Affairs (DVA) pensions in public housing in July 1993. Data provided by DVA.

5 Significant financial difficulties here means being in receipt of the Special Benefit. This benefit accounted for approximately 7 per cent of beneficiaries in November 1992. 6 ‘Net rent’ refers to proportion of income paid in rent net of rent assistance.

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pattern may help explain the greater representation of pensioners in public housing.

• The State where the highest proportion o f pensioners in private rental pay more than 30 per cent o f their income in net rent is NSW with 49 per cent, the lowest is Tasmania with 42 per cent. However, 9 per cent of Victorian pensioners pay over 50 per cent of their income on housing compared to

3 per cent in Tasmania.7

• In NSW, 60 per cent of allowees pay more than 30 per cent of their income in net rent, compared to 42 per cent in Tasmania. Those paying over 50 per cent o f their income represent 14 per cent of allowees in NSW and 7 per cent in Tasmania.

• FAS recipients are less likely to be paying over 30 per cent of their income in net rent, ranging from 36 per cent in NSW to 13 per cent in Tasmania. Furthermore, the number o f FAS recipients is much less (54 700 for FAS compared to 778 800 for the other two categories combined). Unlike

allowees and pensioners, the proportion of FAS recipients paying over 30 per cent of income on housing actually declined between January and June 1992 (although the numbers receiving FAS increased during this time).

7 Information provided by DSS for the financial year ending June 1992.

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Figure B.7: Proportion of pensioners, allowees and FAS recipients in private rental spending more than 30 per cent of income on rent, before and after rent assistance, by family type, June 1992 Per cent

Single Sole

parent

Couple without children

Couple with children

FAS

recipients

Pensioners before RA

Pensioners with RA

Allowees before RA

Allowees with RA

FAS before RA

FAS with RA

Source: DSS data provided to the Commission.

Within private rental alone (this excludes boarders, lodgers and ‘other tenancies’), it can be seen from Figure B.7 that:

• Before rent assistance, nearly 90 per cent of single allowees spent over 30 per cent of their income on rent;

• After receiving rent assistance, the proportion of families with children paying over 30 per cent of income on rent declines more than for those families without children; and

• Over half of single allowees spent over 50 per cent o f their income on rent. Rent assistance brings this figure down to 17 per cent.

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B.4 Public h ou sin g app licants and recipients

Figure B.8: Distribution of additions to waiting list and new public tenants by family type within State, 1991-92

Per cent Added to waiting lists

NSW Vic WA SA Tas ACT

Per cent New tenants

100

80

40 -

NSW Vic Qld WA SA Tas ACT

Π Unspecified HI Couple with children

ΕΠ Ι Single H Couple only

ϋ Sole parent

Notes: ‘Unspecified’ includes‘Other’. Northern Territory data not available. Queensland data not available for waiting list. Source: Department of Health, Housing, Local Government and Community Services, preliminary data.

The demographic profile of new public housing tenants and those added to the waiting list differ from one another as is shown in Figure B.8:

• South Australia stands out as being quite different from the other States. ‘Singles’ and ‘couples without children’ form much higher proportions of both new tenants and those added to the waiting list than is the case in other States;

• Couples with children are only 7 per cent of the lowest income quintile (ABS 1990 Income Distribution Survey, unpublished data). However they

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made up 25 per cent of those accommodated in public housing in 1990-91;

• Sole parents are nearly 10 per cent o f low-income earners (ABS 1990 Income Distribution Survey, unpublished data), but represent 37 per cent of those accommodated in 1990-91; and

• This leaves singles and couples without children in public housing, who represent 83 per cent o f low-income earners (ABS 1990 Income Distribution Survey, unpublished data) being allocated only 39 per cent of new tenancies in 1990-91.

The distribution of incomes of people on public housing waiting lists by length of time on the list is shown in Figure B.9.

Over 60 per cent o f people on waiting lists have incomes less than $300 per week.

Figure B.9: Distribution of income units by income within time spent on waiting list, 1988

□ $600+

M $500-$599

B $4004499

^ $3004399

m $2004299 ® $1004199

■ <$100

<1 year 1-2 years 2-5 years >5 years

Time on waiting list

Source: ABS 1988 Housing Costs and Occupancy Survey (Catalogue no. 4130.0).

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B.5 H igh-incom e public h ou sin g ten an ts

Of the 341 4008 income units in public housing, 86 200 are in the highest three income quintiles. Of these 38 400 are in the highest two quintiles.

• There are 34 500 income units in the top two income quintiles paying less than 20 per cent o f their income on rent — 1800 are professionals or self- employed, 1100 are on government pensions and benefits,9 the remaining 31 600 are wage and salary earners.

• 10 per cent o f people in government housing are in the top two income quintiles and are paying less than 20 per cent o f their income on rent.

• Over 26 per cent of all public housing tenants are paying less than 25 per cent o f their income on rent and are in the top three income quintiles.

These people are mostly paying the maximum rent. Until rents are set at real market rates, many will be in receipt o f a government subsidy.

Table B.1: Number of public housing tenants by income source and income quintile, 1990

3rd quintile 4th quintile 5th quintile Total

Government pensions and benefits 6 000 1 400 0 7 400

Self-employed 1 800 1 300 500 3 600

Wages and salary 38 900 23 600 11 600 74 100

Other private income3 1 100 0 0 1 100

Total 47 800 26 300 12 100 86 200

a Including superannuation. Source: ABS 1990 Income Distribution Survey, unpublished data.

B.6 Demand r e s p o n se s

The demand for housing services changes with the circumstances of owner- occupiers and renters, and with the cost of housing. There are two principle measures of these effects:

8 Government renters by income source are 17 200 less than total government renters. The difference consists mostly of people who have undeclared or unknown income source. Government renters should not include those in government employee housing. 9 This figure is unexpected and the Commission was unable to obtain further details on these

income units.

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• The incom e elasticity of demand for housing services. That is, the percentage by which the demand for housing services increases (typically) in response to a 1 per cent increase in income (other factors remaining the same); and

• The p ric e ela sticity of demand for housing services. That is, the percentage by which the demand for housing services decreases (typically) in response to a 1 per cent increase in price (other factors remaining the same).

In the case of housing services, researchers have found these measures of response difficult to estimate. A comprehensive survey guide to some o f the problems encountered may be found in Olsen (1987). Estimates may be different for reasons other than methodology:

1. Different households have different tastes and hence different demand functions. So even if all households had a demand function of the same form, different samples from the same population would yield different estimates.

2. There is no reason to believe that the population mean values of parameters are the same in different times and places. Therefore, even highly accurate estimates of these population means could be quite different for different populations.

3. It is undoubtably the case that a household’s price and income elasticities are functions of prices and income. When demand functions that are not linear in the logarithms of the variables are estimated they are typically calculated at the sample mean of the explanatory variables. So even if the estimated demand functions were identical, the reported elasticities could be quite different (Olsen 1987, p. 990).

Two methodologies are generally used to estimate the long-run demand elasticities for housing services. They are the complete demand system approach and an approach that examines the demand for housing in isolation from other demands (the single equation approach).

The complete demand system approach attempts to model consumers’ demand for housing services within the framework o f their demands for other broad categories of consumption goods. Recent estimates for Australia, by Rimmer and Powell (1992), using this approach are given in Table B.2. These results appear consistent with previous complete demand system estimates for Australia (see Adams et al. 1988, Bewley 1982, and Fodder 1971) and within the range of estimates for other countries (see Giles and Hampton 1986, and Ogaki 1992).

Estimates obtained by modelling housing demand without regard for other demands have yielded more varied but usually lower estimates o f long-run or

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permanent income elasticities. However, this approach has been subject to criticism:10

Filtering theories and simulation models stress the interrelationships between demand and alternative forms of supply in the housing market. Yet surprisingly few e m p i r i c a l studies have recognised this connection and specified their econometric models appropriately. Conventional, single-equation models are faced with a dilemma. If on the one hand they

include prices, vacancies and various supply adjustments as regressors, the coefficients of these variables will be either subject to simultaneous-equations bias or, at best, difficult to interpret in a reduced-form context. If on the other hand, they exclude such variables, their model is subject to specification error from omitted-variables bias

(Rothenberg et al. 1991, p. 38, italics in the original).

Conclusions from surveys o f single equation results (using American data) and sources are also presented in Table B.2.

The dynamics of demand responses remain poorly researched. Available evidence is that adjustment may be a lengthy process. Mayo (1981, p. 112) suggests that changes in consumption patterns may only be 90 per cent complete after eight to ten years.

Even though, ‘broad’ elasticity estimates of demand for ‘general’ housing services are worthy of attention, of more interest to this inquiry are separate estimates for the demands for differing qualities of housing services. Rothenberg et al. (1991) model housing sub-markets from low- to high-quality

with American data and suggest that:

The relevant elasticities also vary across submarkets. The responsiveness of demand with respect to own-submarket price becomes increasingly inelastic at lower quality levels until, at the lowest rental submarkets, housing behaves like a Giffen good.11 The elasticity of demand with respect to market valuation in substitute submarkets of higher

quality is the greatest in the lowest-quality submarket, is insignificant in other renter submarkets, and is large across the entire array in the ownership tenure, (Rothenberg et al. 1991, p. 515).

They found that housing quality is important and is valued by those on low- incomes. Lowest-quality housing is a very inferior good that households strive to move out of as their income increases.

Rimmer and Powell’s broad estimates of an income elasticity for housing services of 0.9 and price elasticity of -0.8 confirm what most recognise through casual empiricism. At all levels of income, and especially where housing costs

10 Still, they have often attempted to differentiate between the demands of owner-occupiers and renters. 11 A Giffen good is an inferior good that comprises a significant portion of a consumer’s expenditure. An inferior good is one that consumers purchase less of as their income

increases.

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are high, housing remains a sizeable component of consumer expenditure. Consequently, when the economy improves and average incomes rise the aggregate demand for housing will increase significantly — as it has in the past. Prices will rise quickly in the short-run in response to excess demand and housing units will probably be lost from the rental market to owner occupiers. As a result, those on low incomes will suffer increased housing stress. As well as facing increasing rent levels they will face increased discrimination. Discrimination will increase in a situation o f excess demand in rental markets.

Table B.2: Elasticity estimates for housing services

Source and approach Income elasticity estimate Price elasticity estimate

Complete demand system (Australia)

Rimmer and Powell (1992) 0.9 -0.8

Single equation: owner-occupiers (USA)

Wheaton (1993) 0.7 to 0.8

Mayo (1981) 0.5 to 0.7

Polinsky and Elwood (1979) >0.8 -0.7

de Leeuw (1971) 1.0

Single equation: renters (USA)

Mayo (1981) 0.3 to 0.5

de Leeuw (1971) 0.8 to 1.0 -0.7 1O-1.5

Source: Industry Commission.

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Governments intervene in the private rental market because o f perceived problems, particularly in the low-cost sector.1 These include:

• An inadequate supply of a ffordable private rental housing for those with low incomes;

• A lack of a p p ro p ria te accommodation, including housing to meet the needs o f groups such as the disabled and elderly;

• The limited sec u rity o f tenure within the private rental market; and

• D iscrim in a tio n by landlords against some prospective tenants.

It is necessary to understand the market for low-cost rental accommodation before assessing how best to address these perceived problems.

C.1 Nature o f the g o o d

‘Rental housing services’ have a number of features that make analysis difficult. These include:

• The high cost o f su p p ly: This affects those who consume and those who may supply the service, that is, tenants and both existing and prospective landlords. Rent payments can account for a significant share of income, especially for low-income tenants.

• D urability: Housing is not costlessly modified and the service flow remains for a long period. This suggests that the preferences of the community and o f later users require explicit consideration. This may be part of the justification for governments’ building restrictions and their

efforts at co-ordinated planning.

• H eterogeneity: Houses differ in their characteristics, construction and quality, and in the services that they offer (for example, the number of bedrooms). The cost of acquiring knowledge makes the market less competitive because o f the difficulties when comparing price, quality and

quantity.

1 Low-cost housing is defined as housing which, because of its rent level, is usually occupied by households on low incomes. Low-income households would include most social security beneficiaries.

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Rooming and boarding houses

With de-institutionalisation private boarding houses have become a major form of housing for people with psychiatric disabilities. The Report o f the National Inquiry into the Human Rights of People with Mental Illness (HREOC 1993) reported that:

An expert witness giving evidence to the NSW hearings estimated that of 1,300 people in boarding houses in central Sydney, 70-80 per cent are seriously mentally ill (the majority with schizophrenia) (p. 387)

The report also found that many boarding houses were sub-standard and ‘a national disgrace’:

... the physical conditions in many boarding houses are depersonalising, depressing and completely unconducive to any dignified life. Many boarding houses have no living space appropriate for any form of leisure activity. Security is poor ... Many rooms are dark, cramped, crowded, dirty, unsafe and poorly maintained (p. 388).

Evidence of widespread human rights abuses and exploitation of boarding house residents include the denial o f the resident’s choice of doctor and access to crisis services, sexual abuse and the ‘selling’ of residents by boarding house managers to other operators. Many residents become fully dependent on the boarding house manager:

... managers often convince [residents] to hand over control of their bank accounts. ... This ensures the rent is always paid, but forces the residents to ask the manager for money whenever they want to buy anything ... (p. 396).

Boarding houses are no longer affordable accommodation for those receiving only pensions and benefits. People living in boarding houses generally pay 85 to 90 per cent of their pensions (including rent assistance) for room and board.

Residents have no security of tenure and no right to exclude the landlord from the rooms they rent. This can occur because State landlord and tenant legislation does not apply to boarders or lodgers (see C.5).6

In most States, boarding houses are required to be licensed if their clients include people with disabilities. Existing regulations impose minimal standards concerned with physical criteria (such as room size, door size and windows) rather than ‘quality of life’. Where they extend beyond physical standards, as in New South Wales, they are routinely breached or ignored (HREOC 1993).

Despite poor conditions and widespread abuses, there is continued demand for such relatively ‘affordable’, low-cost accommodation. For some people

6 Victoria has specific legislation (the R o o m i n g H o u s e s A c t 1 9 9 0 , Victoria).

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boarding houses have advantages, including few responsibilities and few questions being asked. However, the only alternative for many is homelessness.

In this context some participants expressed concern that the amount of boarding house accommodation had declined, particularly in inner city areas (The National Youth Coalition for Housing, sub. 131). The Rooming House Tenants Association said that retaining an adequate number of boarding houses in boom-

times was a problem, with many rooming houses ‘ear-marked for redevelopment for businesses of higher yield and requiring less day to day personal investment to manage’ (sub. 201, p. 8). The City o f Collingwood suggested that:

... the State Government should introduce legislation requiring owners of boarding and rooming houses to obtain approval from Local Government before being able to change the nature o f accommodation they offer, (e g., change o f use from boarding house to back packer hostel) and should require planning permission with specific reference to social

impact considerations (sub. 197, p. 8).

However, greater regulation of boarding houses will not encourage investment in new boarding houses and is likely to deter current operators. Without the provision of appropriate alternatives this will increase homelessness.

Caravan parks and transportable homes

Caravan parks and mobile homes are two non-traditional forms of permanent rental accommodation that have increased substantially in recent years.7 The Caravan Park Resident Network (Victoria) said that a Victorian survey had found 16 000 caravan park residencies in 1992 (sub. 182).

The growth in these alternatives is in large part due to the lack of affordable ‘traditional' housing. According to the Western Sydney Housing Information and Resource Network, a growing group of low-income people rent on-site vans for long periods of time. They said such tenants could not afford to rent in the traditional private rental market due to high up-front costs (for example, bond

and rent in advance) of about $2000.

Many participants criticised caravans and mobile homes as inappropriate forms of housing. The National Youth Coalition for Housing said:

[Caravans and mobile homes are] often thought to be an affordable housing option for young people. However, the costs may often be only marginally less, and are sometimes more than in other forms of private rental. Residents of caravan parks have little security of tenure and few tenancy rights, and conditions are often far from adequate

Discrimination and other negative aspects o f private rental can be more pronounced (sub. 131, p 27).

7 Owners of mobile homes typically purchase their home and rent a site in a caravan park.

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However, the Caravan and Mobile Home Residents Association said that many Queensland residents, particularly elderly people, appreciate the lifestyle and community offered by ‘mobile home parks’ (sub. 219).

A particular problem identified was the lack of legislative protection for tenants of boarding houses and caravan parks. In many States the general residential tenancy legislation specifically excludes boarders and lodgers, and does not apply to caravan parks or mobile homes (exceptions to the latter are New South Wales and the Northern Territory). However, Victoria has specific legislation for caravans and mobile homes and Queensland has specific legislation applying to mobile homes (see C.5, Table C.2).8

Formal and informal landlords

Informal tenancies typically occur when an owner lets a room or sub-lets a house without signing a lease or lodging a bond. Although the number of formal tenancies can be gauged in some States from sources such as rental bond authorities (for example, New South Wales and the Australian Capital Territory), this is not the case with informal tenancies. Informal tenancies

comprise a small but significant 10 to 15 per cent of all rental tenancies (Brian Elton & Associates 1991, pp. 51-2).

A ccess to private rental accommodation

The private rental market serves the needs of a majority of people in private rental tenure reasonably well. Between 70 and 75 per cent of all private renters are not in housing stress.9- 10 However most participants submitted that those on

low incomes and people with special housing needs, such as those with disabilities and some Aboriginal people, are not well served (see Appendix A).

As noted previously, rental accommodation that is accessible to low-income people is often considered inappropriate in that it may be run-down or in a location isolated from employment opportunities, shops and other community infrastructure. Alternative forms of relatively affordable private rental

8 Other States are considering enacting legislation for caravans and mobile homes. 9 Estimates derived from the ABS 1990 Income Distribution Survey (unpublished tables) indicate that 26.1 per cent of low-income private renters (defined as those in the bottom 4 income deciles) were paying 30 per cent or more of income on rent. The proportion of

private renters in the lowest 6 deciles paying 30 per cent or more of income was 314 per cent. 10 The Victorian Department of Planning and Housing’s (1992, p. 3) estimate is 70 per cent. The 75 per cent is based on an estimate of the need for ‘social housing’ by Bisset et al.

(forthcoming).

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accommodation, such as caravan parks and boarding houses, may be inappropriate for some as a long-term tenure (for example, see HREOC 1993).

A large number of participants cited discrimination as a significant problem of private rental (see Appendix A). Youth, those with psychiatric illnesses, migrants from non-English speaking backgrounds, Department of Social Security clients and Aboriginal, Torres Strait and South Sea Islander people were all mentioned as being subject to discrimination. Discrimination further restricts their limited choice (see C.5). It was claimed to be a major problem for

low-income people with special housing needs (Queensland Disabilitiy Housing Coalition, sub. 121).

Security of private rental tenure is also regarded as a problem. Although tenants cannot normally be evicted within the fixed period of the lease, once the fixed term has expired a tenancy can generally be terminated with a month’s notice. The tenants’ desire for secure accommodation is often at odds with a landlords’

desire for a good return and an easily relettable or resaleable dwelling.

In economic terms, rental markets are far from perfect. Leases cannot cover all eventualities and incentives often exist to withhold information from the other party. Tenants generally, and low-income tenants in particular, lack power in the bargaining process. The cost of monitoring and ensuring compliance also

creates perverse incentives (for example, landlords making false claims against bonds and tenants departing with rent owing). People on low incomes are also at a disadvantage when it comes to paying rent-in-advance and bond monies, as well as moving costs and utility connection fees. Although all tenants face

these problems, low-income and special needs groups are at greater risk as they are less able to afford the costs o f moving or enforcing their rights.

Supply respon ses in the private rental market

The market for rental housing that is affordable to low-income people is a residual one and supply responses are therefore restricted (see C.4, Box C.l). Characteristics of supply peculiar to the low-cost end o f the market include:

• A majority of landlords are small investors with 1 or 2 properties. Often, they invest for security and capital gains, or they intend to rent only for a limited period of time (see C.4).

• Much of the housing has ‘trickled down’ from other uses.

These suggest that the supply response to increased rents will be small. The limited empirical evidence available supports this (see C.7).

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C.2 Rental sto c k s

Changes in the private rental stock

Private rental accommodation accounted for about 40 per cent of all occupied dwellings in 1947. This proportion rapidly declined in the 1950s and 1960s, before stabilising at about 20 per cent in the 1980s (see Figure C.l). In the 1991 Census the proportion o f households renting privately was about 21 per cent (see Table C .l). The decline in the private rental market to about 20 per cent of all dwellings has coincided with a gradual rise in the level of home purchase and ownership, while the public housing stock has increased to about 6 per cent of the total housing stock.

FigureC.1: Occupied private dwellings by nature of occupancy, 1911 to 1991 Per cent

Year

a Other renter includes private renters. b From 1976 to 1991 the public renter category refers only to housing authorities. The ‘other government renter’ category has been included in Other’ for these years. Notes: Data for 1911 to 1976 refers to dwelling structures, 1981 to households, while 1986 and 1991 refer to

occupied private dwellings. Because data for the 1991 is classified similarly to previous years it is not consistent with Table C. 1. See notes to Table C.l. Sources: Troy (1991, pp. 10, 60); ABS ( 1993a).

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The long-term decline in the relative size of the private rental market obscures differences between rental sub-markets. Individual city, country and local markets have performed quite differently (see Brian Elton and Associates 1991). Variations in the relative size o f private rental markets (see Table C .l) can be

partly attributed to public housing and home ownership policies of each State.

Table C.1: Nature of occupancy by State, 1991 (per cent)

Occupancy NSW Vic Qld WA SA Tas ACT NT Australia

Owned or purchasing 71.0 75.4 69.4 70.5 71.0 73.3 65.7 42.5 71.6

Private rental 21.4 19.3 25.0 21.2 15.7 16.7 20.5 29.9 20.9

Housing authority 6.3 4.3 4.0 6.5 12.0 8.7 12.5 20.0 6.2

Other government 1.3 1.0 1.5 1.8 1.3 1.4 1.3 7.6 1.4

All groups 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Notes: The ‘other’, ‘not stated' and inadequately described category have been excluded. The sub-category ‘rental not stated’ has been allocated proportionally between rental categories. Columns may not sum due to rounding errors. Derived from ABS (1993a) Source: Industry Commission.

Stock type and location

In 1991 about 80 per cent of Australian households lived in detached housing. The proportion of private renters living in non-detached housing is 45 per cent and 9 per cent for owners and buyers (ABS 1993a). This reflects the preference of Australians for detached dwellings, and the affordability of certain types of higher density housing. Private rental accommodation is distributed unevenly

within cities (see Figure C.2). For example, in Sydney and Melbourne, the inner or core areas of these cities have a high proportion of private renters. The proportion of private rental accommodation declines as the distance from the city centre increases.

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Figure C.2: Tenure distribution in Sydney and Melbourne, 1991

Per cent 100

80

60

40

20

0

Total Inner or Middle Outer Fringe

core

I I Other

DU Public renter

1H Private renter

Hi Owner or purchaser

Zone

Note: Data is combined for Sydney and Melbourne. Source: Burgess and Skeltys (1992, p. 81).

C.3 G overnm ent interventions

Government intervention affecting the supply o f private rental accommodation includes tax-based provisions (such as negative gearing and depreciation rates), taxation (such as stamp duties and land taxes), non-taxation of imputed rent, capital gains tax exemptions, and direct subsidies to providers o f low-cost rental housing.

Taxation of income from housing

Notional tax concessions to home owners include the non-taxation of ‘imputed rent’ and the tax exemption o f capital gains on the family home. Owner- occupied housing generates returns in the form of capital gains and ‘imputed rents’. Imputed rent is the value of the housing services consumed by the

owner-occupier. While the exemption o f the principle residence from the capital gains tax is a readily identifiable concession, imputed rent is typically not seen as a tax concession (similar to the tax treatment of cars and whitegoods, but of much greater significance).

The major effect o f these incentives has been to increase the demand for owner- occupied housing and the price of housing generally.

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Capital gains tax exemption

The capital gains tax has been applied to assets acquired since 20 September 1985, including rental property. However the sole or principle residence is exempt, subject to some restrictions.11 Flood (1993) estimated that a tax on real capital gains to owner-occupiers would have raised $409 million in 1990-91.

Many participants submitted that the exemption of owner-occupier housing from capital gains tax is a major distortion in the housing market, giving this form of tenure an advantage not enjoyed by private rental tenants (Victorian Council of Social Service, sub. 169). Some participants advocated an increase

in subsidies to other tenure forms to achieve equity between tenures.

The exemption of owner-occupied housing from capital gains tax affects the relative shares of rental and owner-occupier stock. Empirical analysis of the possible effects of the tax on owner-occupied housing in the United States suggests that the proportion of households in private rental could increase 4 to

6 per cent.12 -

Non-taxation of imputed rents

Taxation of imputed rent was introduced by the Commonwealth in 1915. Under the scheme, 5 per cent of the capital-improved value of the taxpayer’s residence was included as taxable income. The tax was removed in 1923 to encourage home ownership. Imputed rents remain untaxed.

The non-taxation of imputed rent increases the value of property because the expected savings are capitalised to some degree. This raises the return required by investors in rental property, and hence rents.

Raising the general level of rents has implications for the low-cost end of the market. It increases the demand for low quality stock and reduces the demand for newer, high quality housing. This discourages new rental housing, which in the long-run reduces the supply of low-cost, ‘trickle down’ stock. Higher rent

levels also raise the minimum rent required by landlords for the lowest quality housing, encouraging renewal or redevelopment of what is now low-cost, low quality rental housing.

11 Capital gains tax applies to real capital gains on a realised rather than accrual basis with some roll-over provisions. Assessed capital gains are added to an investor’s taxable income. 12 Empirical estimates by Rosen and Rosen (1980) indicate the proportion of private renters could increase by 4 per cent Hendershott and Shilling (1982) estimate that the proportion

of private renters could increase by 5 per cent with an assumed marginal tax rate of 15 per cent (6.6 per cent with a marginal tax rate of 30 per cent) (both quoted in Rosen 1985, p. 399).

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Re-introduction o f the tax could increase the supply of rental housing services. More intensive use would probably be made of owner-occupied housing (for example, an increase in informal tenancies). Troy (1991) doubts whether there would be a major impact on the availability of low-cost rental accommodation:

Introduction of taxation of imputed rents would certainly reduce the relative attraction of owner occupation but it is not clear that it would necessarily improve the lot of renters, especially low income earners (it would more likely dramatically increase the numbers of aged persons living in poverty) (p. 49).

However, Rosen and Rosen (1980) estimate that taxing imputed rents could result in a long-run shift from owner-occupation to renting of about 4 per cent in the United States (quoted in Rosen 1985).

The taxation o f imputed rent would be difficult to re-introduce because the discounted stream of benefits from the imputed rent exemption is partly or fully capitalised into house prices. Therefore, the tax would need to be phased in. A particular problem is the effect on asset-rich, income-poor households such as pensioners. Any narrowing of the tax base through concessions to ‘special groups’ (for example, local rate concessions to pensioners) would undermine the benefits of taxing imputed rents.

Tax based interventions in the rental market

In September 1985 the Commonwealth Government quarantined negative gearing to rental property and introduced a 4 per cent depreciation rate to apply to new rental property. The depreciation rate was reduced to 2.5 per cent and negative gearing was reintroduced in September 1987.

While negative gearing and depreciation are of benefit to owners o f rental property, they are available to investors and companies generally and are not specifically related to housing.

Negative gearing

Investors can receive a tax benefit by gearing a rental property such that interest payments and expenses exceed rental income, and off-setting the difference against income. This tax benefit only accrues where there is other income.

Negative gearing is significantly more attractive to investors under inflationary conditions because nominal interest payments are deductable, and only real capital gains are taxable. According to Pender and Ross (1993), the effective

tax rate facing negatively geared investors is negative under inflation rates of 3 per cent or more (p. 12, Table 5).

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The effect o f negative gearing on the low-cost rental market is likely to be small relative to the size o f the tax expenditure, making negative gearing a costly way o f increasing the supply o f low-cost rental accommodation.

Depreciation

Income-producing residential buildings are not depreciable for tax purposes unless built after July 1985. Depreciation is calculated on a straight-line basis to building construction costs and does not necessarily reflect the economic rate of depreciation at any point in time.

An increase in the depreciation rate would increase the immediate return to the owner, allowing an earlier write-off of the asset. For example, the reduction in the depreciation rate from 4 to 2.5 per cent increased the depreciation period for new buildings from 25 to 40 years, reducing the attractiveness o f the provision. At high depreciation rates a return-maximising owner decreases maintenance and replaces buildings sooner (Flood 1990). In the very long-term, this will tend to reduce the amount of low-cost rental housing.

Like negative gearing, depreciation provisions are not specifically targeted at any particular type o f stock or price level. However, they apply only to buildings constructed since July 1985.

Subsidies targeted to providers of low-income rental housing

The Commonwealth Government introduced the Private Rental Subsidy Scheme in 1989 for the purpose of subsidising additions to the low-income rental stock by private investors (Treasury 1992b). According to the Department of Health, Housing, Local Government and Community Services (DHHLGCS sub. 213) the scheme was intended to subsidise approved State Government financial instruments for the use o f private sector funds to acquire or construct private rental dwellings. Funding of $13 million was allocated in 1990-91, increasing to $65 million in 1995-96. However, funds were never appropriated under this program. DHHLGCS stated:

State housing authorities were unable to access [private rental subsidy] funds to date largely as a result o f the difficulty and cost associated with establishing appropriate off- budget financial structures (sub. 213, p. 86).

The Commonwealth abolished this program in the 1992-93 Budget, stating that:

... the Government guarantees necessary to attract investors have effectively made proposals ineligible for subsidy (Treasury 1992b, p. 3.128).

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organisations, this fell to 20 500 taxpayers in 1987-88 with an average liability of $2800 (Wood 1992, p. 456).

Land tax can affect rental property values when they are above the general exemption thresholds. The Industry Commission stated:

The exemptions are distorting and may unduly discourage certain land uses, for example, rental housing is disadvantaged relative to owner-occupied housing (IC 1993, p. 286).

Land tax is likely to have had a disproportionate impact on low-cost rental accommodation in inner-city areas where land costs are high. High land taxes on rental accommodation discourage the construction and encourage the renewal o f low-cost units in inner-city areas. Despite the apparent distortion, a high proportion of rental housing in Sydney and Melbourne is located in inner- city areas. This reflects the demand for the greater amenity offered by an inner- city location (see Figure C.2). However, Figure C.2 does not indicate what proportion of rental accommodation in inner-city areas is low-cost

accommodation.

C.4 Market structure

The backgrounds and motivations of landlords (and real estate agents as property managers) are important in determining government policies with respect to the private rental market.

Landlord profiles

There have been few major, systematic studies into the characteristics of investors in rental properties.21

The NSW Department of Housing (1991) classified landlords as:

U nintentional la n d lo rd s: Landlords who have inherited property or who let their residence while working interstate or overseas. A typical holding size is one property.

In form al landlords·. Property owners who informally sub-let rooms or share houses.

21 Recent studies include one by the NSW Department of Housing (1991) and a study of real estate agents for DSS (Econsult Planning and Development 1991). The ABS conducted a survey o f rental investors in July 1993.

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In v esto r la n d lo rd s: A diverse group including:

• S ec u rity investors who invest directly in rental property as a form of superannuation or as an intended retirement home. They typically own a small number o f properties or block of flats;

• Tax reducers who reduce overall taxable income through holding a small number of highly geared properties (negative gearing). Properties are sold when equity reaches 40 to 50 per cent or rental income comes close to covering costs;

• C a p ita l a ccu m u la to rs who own steadily increasing, relatively large (on average) holdings o f properties. Properties are re-financed as capital values increase so as to purchase further property;

• R en ta l p ro p e rty o p era to rs who are typified as an incorporated company with relatively large holdings and high equity levels. Rental income is more important than capital gains; and

• R en o va to rs o r traders who are characterised by short-term ownership of a small number of highly-geared properties.

Individual landlords are the dominant form of investor in residential rental property. An analysis of New South Wales rental bond lodgement forms (NSW Department of Housing 1991) found that 64 per cent were sole landlords. About 29 per cent were partners and about 6 per cent were companies.22

However, companies held 19 per cent of the stock, compared to individuals’ holdings of 53 per cent. The National Housing Strategy (NHS) drew on this and other studies to find that:

• Individuals holding only one or two properties account for 70 to 80 per cent of private rental landlords;

• The proportion o f equity-driven landlords, including a large number of small investors seeking to secure retirement income or pass property on to children, ranges from 30 to 60 per cent of investors;

• Unintentional landlords appear to be a significant proportion of the market, varying from 10 to 30 per cent of investors;

• Informal landlords account for about 10 to 15 per cent of the market and this appears to be increasing;

• Large corporate investors appear to have withdrawn from the market;

• Small corporate investors constitute about 5 per cent of landlords nationally, but control 10 to 15 per cent of the market nationally;

22 ‘Informal’ landlords who let a room or share their house were not clearly identifiable and were therefore excluded from the study results.

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• Individual landlords are concentrated in the older age groups, hold their investments in the long-term and often manage their own investments;

• Migrant landlords appear to be a significant proportion of owners within the informal sector, equity-driven investors and owners o f boarding houses and private hotels; and

. Low- to moderate-income earners are more likely to be provided with affordable accommodation by equity-driven investors and informal landlords than other classes of investors (NHS 1992c).

The dominance o f owner-occupied housing in Australian housing markets has resulted in unintentional landlords being an important source of rental accommodation in most local rental markets. However, the majority of this group let properties at the upper end of the market (Elton and Associates 1991).

It is clear from the investor profile that the low-cost private rental market is a residual market (see Box C.l). The Victorian Council of Social Service said this meant that the private rental market is unlikely to provide an adequate supply of affordable and appropriate rental housing:

There are major barriers to investment in the private rental market. Major corporate and institutional investors have largely divested themselves of private rental housing. Given the current profile of investors, it appears unlikely that future investment will provide an adequate supply o f affordable and appropriate rental housing. Any concerted growth in the private rental sector will largely be the result of renewed interest by these institutional

investors. However, to date large investment in the private rental sector has not been forthcoming (sub. 169, p. 11).

The variety of landlord types and motivations, and the importance of unsophisticated individual and informal landlords in the low-income sector have implications for the responsiveness of supply and hence government policy.

Real estate agents

Real estate agents have information functions with respect to rental property. Search costs may be reduced as agents have a superior knowledge o f current market rentals for particular types and areas. Agents may also achieve economies of scale in the management o f properties, and improve efficiency by managing properties for inexperienced or ‘unsophisticated’ landlords.

Real estate agents act as property managers for the landlord, not the tenants. Agents act as ‘gatekeepers’ for the owner, choosing between potential tenants. They are usually better informed about the legal rights and responsibilities of the landlord and tenant, and better positioned to act (for the owner) with respect to tenancy disputes. These functions are without doubt important to the

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unintentional or absentee landlord. According to Econsult (1991), agents with small portfolios have a significantly higher proportion o f low-income tenants.

Box C.1: A residual market

Most of the housing provided for low-income renters by the private sector was not built for this purpose. It has usually filtered down from previous uses for which it is no longer suited. In some cases it is provided by unintentional landlords who have inherited property or who have had to

vacate their own property and do not wish to sell immediately.

Others have become landlords to acquire a ‘bricks and mortar’ investment, to obtain capital gains, or to take advantage of negative gearing. That is, their primary concern is property as an investment vehicle. Their choice of low-income rental accommodation often reflects their limited capital.

As this is a residual market, supply is relatively unresponsive to price. Econsult stated:

... the supply o f private rental housing has increasingly become the preserve of smaller, unsophisticated investors; as a residual investment sector it does not appear that private rental housing will deliver the smooth supply responses required of it by a large scale housing allowance program (1989, p. ii).

On the basis of overseas experience, Kemp concluded:

... despite this renewed confidence in markets, income-related housing allowances have apparently not, by themselves, been sufficient to induce an adequate supply of low-income rental housing (1990, p. 807).

C.5 Regulatory fram ework

Residential tenancy legislation

All States have some form of residential tenancy legislation. However, there is wide variation in the coverage and provisions between States (see Table C.2). In some cases, bonds must be lodged with a rental bond board or authority, whereas in the Northern Territory a bond is held by the landlord. In Victoria a bond must be lodged in a trust account with a bank or approved financial

institution.

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In some States, legislation specifies standard leases while in others certain provisions are read into all lease contracts.23 However, standard lease agreements do not guarantee that all disputes can be eliminated. State tenancy legislation therefore specifies mechanisms, such as tribunals or the courts, to resolve disputes.

In most States, landlords are prevented from increasing rents within the fixed period specified in a lease (although the parties determine the fixed period o f a lease). Once a fixed lease period expires, rent increases are generally allowed with a specified period of notice (typically a minimum o f a month). In some States (for example, Victoria) the frequency of rent increases is limited by legislation. Under most legislation either party may end a lease prematurely only in specific circumstances.

In some cases, residential tenancy legislation specifies the responsibilities of each party with respect to maintenance or repairs to rental properties. These include provisions for prompt repairs in emergencies or dangerous situations, notification of damage, and the maximum time for carrying out repairs. Most also give the landlord access to the premises in order to carry out repairs or maintenance.

Variations between States make it difficult to compare tenancy legislation although some have similar provisions. The complexity o f the legislation and language used can create problems for people in understanding their rights and obligations, providing the potential for abuse. For example, the Consumer Forum for the Aged said:

Information and interpretation of the tenancy legislation in a format that is easily understood is required so older people are informed and are able to ensure their rights as tenants are not breached (sub. 87, p. 4).

Most States have recognised this and established tenancy advisory services.

23 Standard leases reduce transaction costs by reducing information needs (see C.6).

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Table C.2: Residential tenancy legislation and coverage, 1992

NEW SOUTH WALES Residential Tenancies Act 1978 a Applies to landlords, tenants and people who are neither, (see also the Retirement Villages Applies to public housing and co-operative housing. Act 1987; and the Housing Co- Specifically excludes boarders and lodgers.

operatives Act 1991) Excludes hotel, motel, holiday, educational, college, hospital, nursing home, aged and disabled accommodation. VICTORIA Residential Tenancies Act 1980 Applies to residential tenancies only; a lease must exist for

(see also the Caravan and Movable legislation to apply. Applies to public housing. Dwellings Act 1988; the Does not apply to single rooms unless ‘self contained’; Retirement Villages Act 1986; and excludes hotel, motel, hostel, holiday, educational, college, the Rooming Houses Act 1990) hospital, nursing home, aged and disabled accommodation.

QUEENSLAND Residential Tenancies Act 1975 Applies to landlords and tenants. [subject to new legislation]; Excludes boarders and lodgers, holiday premises or Rental Bond Act 1989. premises licensed for the sale of alcohol.

(see Retirement Villages Act 1988; Does not apply to public housing. and the Mobile Homes Act 1989b)

WESTERN AUSTRALIA Residential Tenancies Act 1987

SOUTH AUSTRALIA Residential Tenancies Act 1978 (see also the Retirement Villages Act 1987; and the Housing Co­

operatives Act 1991)

NORTHERN TERRITORY Tenancy Act 1979

AUSTRALIAN CAPITAL TERRITORY Landlord and Tenant Act 1949

Applies to landlords, tenants and people who are neither. Applies to public housing. Specifically excludes boarders and lodgers Also excludes hotel, motel, hostel, holiday, educational, college, hospital,

nursing home, aged and disabled accommodation.

Applies to landlords, tenants and people who are neither. Applies to co-operative housing. Specifically excludes boarders and lodgers. Also excludes hotel, motel, holiday, educational, college, hospital,

nursing home, certain aged and disabled accommodation. Does not apply to public housing (subject to a review).

No lease is required for the Act to apply. Applies to landlords, tenants and people who are neither. Applies to caravans, mobile homes, retirement accommodation. Does not apply to hotels, motels, guest or holiday premises,

or boarding houses. Does not apply to public housing.

Applies to private residential premises subject to a lease. Some provisions apply only to ‘dwelling-houses’, including lodging or boarding houses. Generally does not apply to public housing, boarders,

lodgers, hostels, caravans or mobile homes. Does not apply to Territory or Commonwealth Agencies.

a Coverage of Act was extended in 1989 to include movable dwellings including caravans and mobile homes, b Queensland’s Mobile Homes Act 1989 does not apply to caravans. Source: Community Law Reform Committee of the ACT (1992).

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Costs and benefits of tenancies legislation

Tenancies legislation involves trade-offs between costs and benefits.

A major benefit from rental tenancy legislation can be improvements in economic efficiency (see Box C.2). This could result from reduced information and transaction costs where rights and responsibilities are clearly defined and disputes are resolved relatively easily using the mechanisms provided. Other potential benefits include greater certainty (for example, increased security of tenure for tenants and clarification o f legal positions). Costs include

compliance and administration (for example, rental bond authorities, tribunals), as well as restrictions on the freedom for the parties to agree upon acceptable terms.

Box C.2: Incentive difficulties in private rental markets

A lease requires both parties to enter into a contract where they agree to future performance. The quality and quantity of this performance cannot be known beforehand. The tenant agrees to pay the rent promptly and to use the property with due care. The landlord agrees not to interfere unreasonably with the tenant’s use o f the property and to promptly carry out

certain maintenance and repairs as required.

In this type of market, incentives to meet the other party’s needs are somewhat diminished. The reasons include:

• Incom plete contracts: The rental agreement cannot cover in detail every eventuality. Even if it is possible to write such a contract it would be too costly for both parties;

• H id d en know ledge: it is of value for each party to withhold

information from the other;

• O pportunistic behaviour: Opportunities arise where it is profitable for one or other of the parties to renege on their agreement. For example, tenants may leave owing rent a nd landlords may make false claims against bond monies; and

• M onitoring, com pliance, a n d en forcem ent costs: To monitor, comply and enforce performance for either o f these parties is both difficult and costly. In this process there are always net losses.

Most of these problems arise because incentives are not compatible. Instead of being directed toward mutual advantage, they are often geared toward gain at the other’s expense. Legislation and dispute resolution procedures can mitigate these incentive problems.

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Anti-discrimination legislation

Although Commonwealth legislation applies generally throughout Australia, it is limited in application to the State Governments and their instrumentalities. However, all States have their own anti-discrimination legislation, other than Tasmania and the Northern Territory (Community Law Reform Committee of the ACT 1992, p. 64).24 Anti-discrimination and equal opportunity provisions vary (see Table C.3).

In some circumstances it is not unlawful to discriminate against people with physical impairments. Under Western Australia’s Act it is not unlawful to discriminate against people with a physical impairment where it would impose

hardship on the provider. However, it is unlawful to impose conditions separating a blind or deaf person from their guide or hearing dog in South Australia and the Australian Capital Territory. State tenancy legislation has no anti-discrimination provisions (except on the grounds of discrimination because

of children).

Table C.3: Anti-discrimination provisions

Jurisdiction and Act titles Relevance and application to accommodation

COMMONWEALTH Racial Discrimination Act 1975

Sex Discrimination Act 1984

NEW SOUTH WALES Anti-Discrimination Act 1977

Residential Tenancies Act 1978

Prohibits discrimination on the grounds of race, colour, national or ethnic origin. Prohibits discrimination in relation to sex, marital status or pregnancy.

Prohibits discrimination on the grounds of race, sex. marital status, physical and intellectual impairment or homosexuality.3 No discrimination provisions.

VICTORIA Residential Tenancies Act 1980 Prohibits discrimination against people with children (with exceptions). Equal Opportunity Act 1984 Does not apply where provider or near relative lives on

the premises, or to hostels for special groups. Discrimination on the basis of children possible where accommodation is not suitable. Discrimination on the basis of impairment possible if there is a significant

risk of injury to them or others.

24 Under inter-government agreements, State Commissioners for Equal Opportunity administer both State and Commonwealth legislation in Victoria, South Australia and Western Australia. The Commonwealth administers discrimination legislation in the Australian Capital Territory and Queensland. There is no such agreement in New South Wales.

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Table C.3: Anti-discrimination provisions (cont.)

Jurisdiction and Act titles Relevance and application to accommodation

QUEENSLAND Residential Tenancies Act 1975 Anti-Discrimination Act 1991

WESTERN AUSTRALIA Equal Opportunity Act 1984

Residential Tenancies Act 1987

SOUTH AUSTRALIA Residential Tenancies Act 1978

Equal Opportunity Act 1984

AUSTRALIAN CAPITAL TERRITORY Discrimination Act 1991

Landlord and Tenant Act 1949.

Not known. Similar to legislation in other States. Illegal to discriminate on the basis of age.

Prohibits discrimination on the grounds of race, sex, marital status, pregnancy, religious or political conviction, physical and intellectual impairment.b Sexual harassment is also unlawful. Discrimination is lawful for physical impairment where it would impose hardship on the provider. Prohibits discrimination against people with children except where provider lives on the property or next door, or if the agent lives next door.

Prohibits discrimination against people with children except where provider lives on the property or next door, or if the agent lives next door Prohibits discrimination on the grounds of race, sex.

sexuality, marital status, pregnancy, age, physical or intellectual impairment.0 Unlawful to impose a condition separating a blind or deaf person from their guide or hearing dog. Discrimination is lawful for physical impairment if premises are not accessible to impaired person.

Unlawful to discriminate on the grounds of sex, sexuality, transsexuality, marital status, status as a parent or carer, pregnancy, race, religious or political conviction, physical or intellectual impairment, illness or association with a person in one of these groups. Prohibits discrimination on basis of children.

NORTHERN TERRITORY Tenancy legislation prohibits discrimination against Tenancy Act 1979 people with children.

a Exceptions include accommodation for aged persons, members of a voluntary organisation, and where provider or near relative lives on the premises, b Non-profit, voluntary and religious organisations are exempt from some provisions. c Some provisions do not apply to a provider or near relative living on the premises, or to non-profit bodies

offering accommodation to one sex or for one age group only. Note: Legislation may not apply in some cases. For example, to religious organisations, charitable or voluntary bodies, student accommodation (on the grounds of sex), or if modifications for impairment would cause unjustifiable hardship to a landlord (and in some other cases). See Community Law

Reform Committee of the ACT (1992) for details. Source: Community Law Reform Committee of the ACT (1992).

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The impact of legislation

Participants emphasised the difficulties faced by low-income and disadvantaged groups in private rental markets. The Tenants Advice Service Inc. (Western Australia) said:

Discriminatory practices need to be countered with stronger legislation and more rigorous enforcement and penalties for breaches of the Act. Even with stronger legislation problems will continue in proving that discrimination took place (sub. 191, p. 11).

Others expressed concern that existing legislation already favours tenants. The Property Owners’ Association of Australia said:

No one should deny that ownership and tenancy of property are different. The owner of an investment property must receive a commercial return with reasonable security, as well as the ability to control and realise the investment on reasonable short notice ... (sub. 187, p. 2).

Paris, Randolph and Weeks (1993?) reviewed changes to tenancy and discrimination legislation that took place between 1984 and 1992, and analysed the significance of these changes on investor attitudes. They conclude that economic factors are much more likely to determine future investment decisions

than recent or proposed legislative reform. The study found that:

• Capital gains, and to a lesser extent rents, are crucial in the economics of private rental markets: neither the current legislation nor proposed changes have any significant impact on these factors;

• Legislation impacts differentially on different types of investors. Some investors may withdraw while others may be attracted to the sector;

• Professional private rental managers see many advantages in the reforms in place or proposed, and generally consider that they do not affect the economic fundamentals; and

• Any ‘psychological’ impact of legislative reforms appears short-lived. Once in place legislation is generally seen as stabilising (p. 17).

However, the effect of legislative changes on the low-income rental sub-market is less certain. Low-income earners are more likely to rent from small security- driven or informal landlords who manage their own properties (Elton and Associates 1991, p. 53). To the extent that these landlords perceive a

disproportionate impact on their management of a property, legislative changes may result in significant dis-investment by these groups. Flood summed up the difficulties involved in tenancies legislation:

... landlord-tenant legislation is a near-irresolvable issue for low income earners. Low- income people require security of tenure at least as much as higher income people, but they cannot afford this through conventional means such as home ownership. The desire

of tenants for secure comfortable accommodation in an environment of their choice is

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often incompatible with the desire o f landlords for a good profit and a fairly liquid investment through an easily relettable or resaleable dwelling (sub. 171, p. 1).

While legislation may increase efficiency and reduce the scope for abuse, it cannot solve the supply problems associated with the low-cost end of the private rental market or for those with special needs.

State and local government planning and building regulation

Regulation of building and planning has a major impact on the construction and maintenance of dwellings.25 While some regulations provide public benefits (for example, fire exits, public health and safety), others (such as a planning

approval requirement for all developments, renewals, additions or renovations) increase delays and may unnecessarily raise costs. The Industry Commission stated that:

... Australia does not have a consistent system of development controls, but a multi­ tiered, often ad hoc and uncoordinated approach with each level o f government controlling different aspects. The various tiers operate independently, often applying different criteria for similar developments. The existing system o f regulation has ... made the development approval task costly and time-consuming (IC 1993, p. 402).

The Commonwealth Office of Local Government (sub. 126, p. 2) estimated that land development and building approval delays increase the cost of residential development by $750 million annually (see also Industry Commission 1993, pp. 404-5).26 According to Flood and Yates:

Building regulations in Australia are strict, and require a high minimum standard for new dwellings. Fire and planning regulations have also played a part in the decline of inner- city low-rent housing, particularly boarding houses. Many low-income households would choose a lower standard of accommodation if given the option, leaving themselves more money for food and necessities. The increasing incidence of ‘squatting’ and the increasing number of homeless bear witness to this (1987, p. 51).

This has implications for what society regards as ‘appropriate’, and the benefits and costs to individuals of regulation designed to ensure housing meets these standards.27 Flood concluded that:

... low income earners (including almost everyone on benefits without capital assets) cannot afford the minimum level o f housing that society regards as acceptable (sub. 171, p. 1).

25 Each State has responsibility for legislating and implementing its own controls.

26 The objective of the Local Approvals Review Program is to encourage co-operative reform of local approval processes.

27 It also has equity implications. Flood and Yates (1987, p. 1) argue that government should off-set the impact that planning controls have on low-income people. This is because such controls force people to take higher cost accommodation than they would otherwise choose.

98 INDUSTRY COMMISSION

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Local government planning regulation can greatly affect the ‘shadow market’28 as a source of low-cost housing. Some possibilities are noted by Baer:

Because it is a local phenomenon, the shadow market is not dependant on national housing policy and funding priorities. Instead it is most susceptible to zoning and land- use regulations — a local government function. By selectively altering these regulations local governments could significantly increase the effect of the shadow market. Existing

housing could be more readily adapted to changing patterns in demand (1986, p. 27).

C.6 Market o p eration s

The efficiency and effectiveness o f the private rental market depends partly on the nature of the good (see C .l), partly on the characteristics of those involved in the market (see C.4), and partly on the market structure (see C.3).

Barriers to entry and exit

Both landlords and tenants face barriers to entry and exit from the private rental market. For example, prospective landlords face barriers to entry (stamp duties, search and legal costs) when considering whether or not to invest in rental property. However, barriers to entry and exit are more important in the case of

tenants.

The costs for a tenant to move and enter into a new rental arrangement can be high. The tenant faces search and information costs, as well as the uncertainty as to whether tenancy applications will be accepted. Once accepted, the tenant must meet the up-front costs of moving, the posting of securities (rent in

advance and bonds), the connection of telephone, electricity and gas services, and, where applicable, lease stamp duties (see C.3) and letting fees.29 Most States provide some assistance with these costs (for example, rental bond loans).

Securities and risk

For the landlord there is a degree of risk that the tenant will leave without paying rent, cause damage or leave the property in poor condition. Rent in advance and rental bonds have evolved to minimise this risk. However, relations between landlords and tenants are often difficult and there are

28 The shadow market comprises processes which modify existing buildings to meet changing housing demands, for example, sub-dividing, merging, renewal and other modifications.

29 In Western Australia the tenant pays a real estate agent a letting fee of one week’s rent. In other States the landlord pays this fee.

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incentives to withhold information and for opportunistic behaviour (see Box C.2).

Landlords face the residual risk that the posted securities will not cover the full cost of restoring a property or losses from any termination o f a lease. Where such risks are perceived to be high (for example, groups, tenants with pets), tenant(s) may be charged higher rents to off-set this risk. Alternatively,

landlords may exclude tenants perceived to be in high-risk groups.

For the tenant, rent in advance and bonds pose a significant barrier to entry and reduce tenant mobility. While many States require bonds to be lodged with independent authorities or financial institutions, disagreements over claims on bond monies and delays in returning bonds can cause low-income tenants

serious hardship.

Pricing

The nature of housing creates problems in determining what is a ‘market price’. Because price information is dependent on many factors, it is only after the inspection of many similar properties that prospective tenants may assess the true ‘market price’ of a particular property.

Econsult (1991) suggests that agents play a major role in setting prices. It said that letting is an iterative process, with agents pricing according to known market rent levels. If no suitable applicants are found, the price is dropped fractionally and re-advertised. However, the high cost o f vacancies (that is, rent forgone) places limits on this process.

Econsult (1991) differentiates between the ‘base rent’ and ‘quality’ sectors of the rental market (see C .l).30 While ‘quality’ properties tend to follow the iterative process described above, prices o f base-rent properties fluctuate in line with property prices rather than rental market conditions. Because there is

always excess demand for base-rent properties, agents emphasise non-price factors when selecting tenants (for example, the tenant’s rental history and ability to pay).

The DHHLGCS said that landlords (or their agents) respond to the higher perceived risk of low-income tenants by setting higher rents:

Landlords charge for bearing such risks, with the charge being higher if they are unable to pool the risks or are risk averse. Landlords tend to associate being poor with being high-risk particularly in terms of rent payments (sub. 213, p. 50).

30 Agents often described dwellings in the base rent category as sub-standard, but the concept of sub-standard differed widely between markets (Econsult 1991).

1 0 0 INDUSTRY COMMISSION

C RENTAL MARKET

Alternatively, where offered a choice of tenants, landlords or their agents may choose lower-risk tenants. Under such circumstances, landlords or their agents may discriminate against low-income tenants.

Efficiency of the low -cost private rental market

The private rental market falls well short of the perfectly competitive benchmark. The low level o f competition in the low-cost private rental market follows from the residual nature o f the market and from the ‘unsophisticated’ nature of participants (see C.4). Low competition levels also follow from the

information problems and high transaction costs. As Smith, Rosen and Tallis note:

The heterogeneity o f housing stock prevents the development of an organised commodity market, in the sense o f a quoted price for a homogeneous unit, and means that accurate price information is not available without a costly search (1988, p. 37).

The lack of a single clearly defined market for housing services is supported empirically by Rothenberg et al. (1991). They found that:

... there was not a single “price” per unit o f housing quality. ... Over time the various segments of a given metropolitan area’s housing market do not change to the same degree or even in the same direction. To speak of changes in “the” housing market is thus misleading (1991, pp. 514-15).

C.7 Supply r e s p o n s e s

Supply elasticities

When the p ric e ela sticity o f h o u sin g su p p ly is low, policy changes that result in an increase in demand will result in a limited increase in the quantity of housing and large price increases. Clearly, the effectiveness of demand-side policies designed to increase the supply o f housing depends on a high supply elasticity.

The nature of housing (a long-term, durable asset with a significant construction time) means that new construction cannot satisfy short-run increases in demand. Although the supply o f houses can be considered fixed in the short term, a short term increase in the supply of housing services (as opposed to houses) is

possible through filling vacant buildings or by more intensive use of existing houses. Estimates of the price elasticity o f the supply of housing services range from 0.24 to 0.83, with little known about the supply response resulting from more intensive building use (see Table C.4).

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Table C.4: Price elasticity components for supply of housing services

Type o f supply estimate Estimate

Filling of existing vacant buildings Estimates range from 0.24 to 0.83 More intensive use of existing dwellings Little known Maintenance and conversion Direct estimates, a lower limit of 0.3 Indirect methods yield higher estimates New construction United States: 3

United Kingdom: 2

Long-run supply estimates 11.5 for the United States of America of housing services 5.5 for the United Kingdom

Source: Bartlett (1989).

In the long ran, increased supply can occur through maintenance and conversion activity as well as new stock. Available direct estimates put a lower limit on this supply response of 0.3, whereas indirect estimates (derived from estimates o f factor substitution) are higher (see Table C.4). Elasticities vary widely across locations, being low in highly developed city locations.

Although the long-run estimates of the elasticity o f supply are higher than those for the short-run, they are not infinite due to limitations on factor inputs, particularly o f land. Bartlett concludes that:

Taking the various components o f supply together, the best current available estimates of the long-run supply elasticities of housing services work out at about 11.5 for the USA and about 5.5 for the UK, where land availability constraints and hence high shares of land in construction costs, as well as important feedback effects on building costs through the labour market, impinge relatively more upon the ability of the housing market

to respond to shifts in demand (1989, p. 2).

In addition to these broad elasticity estimates for general housing services, supply responses for particular sub-markets have been estimated. Rothenberg, et al. (1991) found differences in supply responses between quality sub-markets as well as between owner and rental tenures. They conclude that there are

‘important systematic variations’ across sub-markets. The supply ‘mix’ varies for both owner and rental tenures. New construction predominates in the highest quintiles and conversion in the lowest. They conclude:

The market-period elasticity of stock supply is less in owner than renter submarkets, but in all except one it is extremely small. The medium-run supply function in all owner submarkets appears to be perfectly elastic over a three-year time horizon, while high- quality renter submarkets have somewhat less elastic responses. No consistent indicators

of medium-run supply elasticities in the lowest-quality submarket could be observed, but that is to be expected given the evidence that these [lower quality] submarkets function as “residuals” reacting primarily to events in other submarkets (p. 515).

1 02 INDUSTRY COMMISSION

D CSKA FUNDING ARRANGEMENTS

‘Housing’ in its various forms accounts for approximately 2 per cent of the Commonwealth’s total outlays of $115.1 billion budgeted for 1993-94. Funding for the Commonwealth-State Housing Agreement (CSHA) represents about half of Commonwealth outlays on housing.

The CSHA provides housing for low-income people. Its two major areas are public housing and home purchase assistance. The Commonwealth provides funding in the form o f grants which are mostly channelled to public housing. Under earlier agreements, the Commonwealth also lent money to the State

housing authorities at concessional rates over a long period.

Funding by the Commonwealth for other housing and housing support services is provided primarily through the Supported Accommodation Assistance Program (SAAP), rent assistance programs provided through the Department of Social Security (DSS) and Department o f Veterans’ Affairs (DVA), and

Aboriginal and Torres Strait Islander Commission (ATSIC) programs. The funds provided by the Commonwealth Government under various housing and housing support programs in 1992-93 are shown in Table D .l.

At the State level most housing assistance is funded through the CSHA. Over $1.24 billion in State funds was provided under the CSHA as grants, loans and internal funds in 1991-92, mainly for public housing and home purchase assistance. Of this amount, $325 million was in grants to match

Commonwealth payments of untied funds.

At the local government and community level, aggregate information on funding o f housing for low-income people is not readily available.

Governments assist with housing in other ways — the Home and Community Care Program enables people to remain in their home outside supported care for as long as possible. There are also residential care programs for older people, disabled people and post-acute or palliative care and other housing assistance programs for people with disabilities.

Some States offer pensioners rate and land tax rebates and concessions on charges and also generally offer additional housing programs outside the CSHA.

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Table D.1 : Funds for housing and support services, 1993-94

C 'wealth Program Sub-program Funding in

Department 1992-93

$m

DHHLGCS3 CSHA Untied rental assistance 829.6 b

Rental assistance for Aborigines 91.0

Pensioner housing grants 49.3

Community Housing Program from 1992-93 or Local Government and Community Housing Program to 1992-93 24.4

Mortgage and rent assistance - Mortgage and rent relief 30.9 b

- Home deposit assistance 22.6

Crisis Accommodation Program 27.1

DSSC Rent Assistance Pensions 553.2

Allowances 297.1

Family Allowance Supplement 77.3

DSSd Assistance with Home Loans for aged pensioners 0

Equity Conversion

DVA Housing assistance Rent assistance 24.8

Home Acquisition Assistance 58.1

DVA Community health care services 0.6

DIEAe Accommodation For migrant and detention centres 2.5

expenses

DHHLGCS Supported Accommodation Assistance Program 94.7 b

DHHLGCS Emergency relief 30.2

DHHLGCS Emergency assistance To refugee status applicants 3.5

DHHLGCS First Home Owners Scheme (superseded) 14 8

DHHLGCS State Grants (Housing) Interest pay ments on State expenditure in Act 1971 1971-72 and 1972-73 5.5

DHHLGCS Home and Community For people needing post-acute or palliative care 12.2 b Care Program For the aged 261.0 b

For people with a disability 66.1 b

DHHLGCS Aged care^ Financial support 2194.3

ATSIC Land and economic Home ownership (largely self funding) 31.2

development

ATSIC Social advancement Community Housing and Infrastructure Program 164.9 Aboriginal Hostels Limited 29.6

a Department of Health, Housing, Local Government and Community Services. b State matching required. c For 1991-92. d $10m allowed for 1993-94. e Department of Immigration and Ethnic Affairs.

f Includes nursing homes and hostels. g Includes $10.5 million for having and $21.6 million for infrastructure funded under the National Aboriginal Health Strategy. Sources: Commonwealth Budget Papers 1993-94.

1 0 6 INDUSTRY COMMISSION

D CSHAFUNDING ARRANGEMENTS

D.1 CSHA funding

Under the current (1989) CSHA, Commonwealth funds are provided mostly as ‘untied’ grants. States must match ‘untied’ grants on a $1 for $2 basis.1’ 2 About 74 per cent of the $1.08 billion o f Commonwealth funds for the CSHA were in the form of ‘untied’ grants in 1992-93.

Some Commonwealth funds are provided as special purpose payments and tied to programs.3 Since the 1989 CSHA, special purpose payments apply to:

• pensioner rental housing;

• Aboriginal rental housing;

• mortgage and rent assistance (MRAP);4

• local government and community housing (LGACHP and CHP); and

• crisis accommodation (CAP).

Grants for pensioner housing are allocated between the States according to the number of aged and sole parent pensioners who receive DSS or DVA rent assistance. Since 1989-90 these grants have been regarded as an unmatched portion of untied funding. Grants for Aboriginal and Torres Strait Islander housing are on the basis o f assessed housing needs5 with each State and the Northern Territory having a guaranteed minimum level of funding. The

remaining special purpose payments are allocated on a p e r capita basis with most also having a guaranteed minimum level of funding.

States match Commonwealth tied grants for the MRAP on a $1 for $1 basis.

1 Nevertheless these ‘untied’ grants must be used for CSHA activities.

2 States match funding on a $1 for $2 basis from 1992-93, having moved gradually towards this from $1 for $4 in 1989-90. At least 50 per cent of State grant matching funds must be as grants for public housing; the remainder can be as loans for home purchase assistance. Some State matching grants which are in excess in a particular year may, with agreement,

be carried over.

3 Special purpose payments are made under s.96 o f the Constitution whereby the Parliament may grant financial assistance to any State on such terms and conditions as it sees fit. The majority are subject to conditions which ensure that policy objectives set by the Commonwealth, or national policy objectives agreed by the Commonwealth and the States,

are met.

4 Under this program short-term help is available to private renters to cover costs such as rental bonds and removal costs, and to low-income home buyers.

5 Needs are determined on the basis of the Aboriginal Development Commission and Department of Aboriginal Affairs Housing and Accommodation Needs Survey of 1986-87.

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Funding source changes

Funding changes over the period 1975-76 to 1991-92 are illustrated by Figures D .l and D.2 in nominal and constant prices.6 For 1975-76 to 1985-86 funding was entirely from Commonwealth, State and Northern Territory loans and grants. However, a significant proportion of Commonwealth funds was used for State repayments of loans (see Table D.2).

Table D.2: Net Commonwealth payments to the States for housing, 1974-75 to 1991-92 ( $ m )

Year

Total

C 'wealth payments

State

repayment o f advances

State

repayment o f interest

Total State repayments to C ’wealth

Net C 'wealth payments

1974-75 709.6 34.7 159.5 194.2 515.4

1976-77 550.3 34.7 167.3 201.9 348.4

1978-79 411.2 37.9 181.9 219.9 191.3

1980-81 276.0 35.6 164.7 200.3 75.7

1982-83 557.6 40.0 178.9 218.9 238.7

1984-85 1 035.3 46.6 207.5 254.1 781.2

1986-87 1 284.7 54.7 243.8 278.5 1 006.2

1988-89 1 017.7 68.5 277.2 345.8 672.0

1990-91 1 040.3 74.6 296.3 370.9 669.4

1991-92 1 058.3 74.6 296.3 370.9 687.4

Notes: Derived from Australia, House of Representatives (1981, p. 2926); DHC (1987, pp. 40-1); DCSH (1988, pp. 34, 45; 1990, pp. 25, 35); DHHCS (1992c, pp. 13, 18); unpublished data provided by DHHLGCS Source: Industry Commission.

The period 1982-83 to 1988-89 saw another funding layer in the form of nominated Loan Council Funds. These funds were borrowed at favourable rates by the States and the Northern Territory from the Commonwealth and were treated as advances (as were the earlier loans). The last year that the Commonwealth made loans to the States and the Northern Territory was in

1983-84 (apart from nominated Loan Council Funds).7

6 Constant prices derived from the weighted average o f 8 capital cities Consumer Price Index for housing in 1989-90 dollars. The use of this index leads to underestimation in periods of rising interest rates and overestimation in periods when interest rates fall sharply.

7 Nominated Loan Council Funds are borrowed funds. They cannot be compared in simple dollar terms with grants.

108 INDUSTRY COMMISSION

D CSHAFUNDING ARRANGEMENTS

Figure D.1: Source of CSHA funding, nominal prices, 1974-75 to 1991-92 $m 4500 T

I I Private sector

ϋ Loan Council

4000 --3500 -3000 -

C'wealth 2500 -2000 --1500--1000 --

500

75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92

Source: DHHLGCS (1992c); and unpublished data provided by DHHLGCS

Figure D.2: Source of CSHA funding, constant 1989-90 prices, 1974-75 to 1991-92

$m

I I Private sector

HI Loan Council

4000

3500 -3000 -■

C'wealth

2000

1500 -1000 -500 -

75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92

Source: DHHLGCS (1992c); and unpublished data provided by DHHLGCS.

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State governments continued to favour loan funding until the 1989 CSHA. Since the 1989 CSHA, States have been required to match Commonwealth grants with grants. State grants are mainly for public housing and were progressively increased to at least 50 per cent of the State matching requirement from 1992-93 onwards. The remaining State matching funds can be as loans for approved home purchase assistance programs. States may, if they wish, lend monies to the State housing authorities over and above their obligatory matching funds.

The recent increase in funds, borrowed from the private sector, has substantially expanded loan funds available under CSHA home purchase assistance programs. The 1989 CSHA actively encourages this use o f private funds. States are allowed to provide up to 50 per cent of their matching requirements

as borrowings for this purpose. The Agreement also allows borrowing for schemes that operate on a commercial basis to be treated as outside the Australian Bureau of Statistic’s classification of financial activity counted towards a State’s surplus or deficit (DHHCS 1991a, p. 23).8

Since 1988, funding relationships between the Commonwealth and States have shifted significantly. Nominated housing advances, provided under States’ Loan Council programs, were transferred into CSHA grants in 1989-90 and States were required to make grants to their housing authorities. One reason for this was to improve the financial viability of public housing by reducing debt.

It was agreed at the June 1990 Loan Council meeting that Commonwealth debt to the private sector acquired on behalf of the States would be replaced by State debt to the private sector. This placed full responsibility on the States for financing and managing their own debt. Debt management requirements were

also partly responsible for the increasing use o f private sector funds in recent years (mainly for home purchase funding) as States tried to comply with their Loan Council borrowing limits.

The funding trends, illustrated in Figures D. 1 and D.2, have resulted in a major build up of debt. The 1988 Review established that if the financing arrangements under the 1984 Agreement were allowed to continue, there would be a rapid and substantial decline in the number of new houses supplied under the CSHA, with Commonwealth grants increasingly being used to cover the cost

of mounting interest charges on State borrowings. For example, in 1987-88, 30 per cent o f the $813 million State matching funds were loans, 13 per cent

8 Further to this, the 1992 Loan Council meeting agreed that State home finance schemes, that operate on a commercial basis, would be treated as outside the global limits, but that any concessionary elements of such schemes be included within the global approach (Treasury (1992), Budget Paper No. 4, p. 62). See Figure D.5 for more detail.

110 INDUSTRY COMMISSION

D CSKA FUNDING ARRANGEMENTS

were grants and 40 per cent were home purchase assistance revolving funds. The revolving funds, under the CSHA, had to be reapplied to housing assistance whether or not they were included as matching funds (National Housing Policy Review 1988, p. 117).

Since 1984-85 Commonwealth and nominated Loan Council funds have mainly gone towards public housing while the private funds have predominantly been used for home purchase assistance. This is illustrated in Figure D.3.

Figure D.3: CSHA funding for public housing and home purchase assistance by funding type 1984-85 to 1991-92 $m

Nominated C'wealth State funds Private Nominated C'wealth State funds Private Loan funds funds Loan funds funds

Council Council

funds funds

Public housing Home purchase assistance

Note: Includes other State housing program funding Source: Unpublished data provided by DHHLGCS.

If funds for home purchase assistance are netted from the CSHA funding but not debt repayments, then funding in real terms for public housing was relatively constant between 1985-86 and 1991-92 (see Figure D.4).

Debt

State debt through CSHA arrangements for public housing at June 1993 is shown in Table D.3. About 70 per cent of this debt is directly to the Commonwealth. Little o f the debt to the Commonwealth has been retired. This

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PUBLIC HOUSING

is understandable because the loans were at concessional rates for 53 years.9 Following negotiations with the Defence Housing Authority concerning the conversion o f housing for service personnel to use as public housing, most States increased public housing and their debt to the Commonwealth above that incurred through the CSHA housing advances and Nominated housing loans as detailed in Table D.4. Also, when the Northern Territory gained self­ government in the late 1970s, the housing authority purchased Commonwealth staff housing, taking on a consequent substantial increase in debt. Box D. 1 describes housing authority debt for public housing to other than the Commonwealth. Table 3.1 in Chapter 3 gives overall public housing debt by State.

Figure D.4: CSHA funding excluding home purchase assistance funding, 1984-85 to 1991-92 in 1989-90 prices

□ Private sector

B Loan Council

ϋ State

II Cwealth

1984-85 1985-86 1986-87 1987-88 1988-89 1989-90 1990-91 1991-92

Sources: DCSH (1988, 1990), DHC (1987); DHHCS (1991a); ABS (1993b); unpublished data provided by DHHLGCS.

Details of Commonwealth and State grant funding for 1984-85 to 1987-88 in Table D.5 show the limited use of State grant funding in those years. Thus, most of the State funds in Figures D .l and D.2 were funds borrowed from the private sector with the debts repayable by the State housing authorities.

9 Interest rates on loans taken out between 1945 and 1968 ranged from 3 to 4.4 per cent. The rates between 1969 and 1984 were between 4 and 6 per cent with Commonwealth loans for State home purchase programs fixed at 4.5 per cent from July 1973.

112 INDUSTRY COMMISSION

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Table D.3: State debt to the Commonwealth under the CSHA by loan type, at 30 June 1993 ($m)

State Housing advances Nominated housing loans Total

NSW 1 292.4 521.2 1 813.6

Vic 1 024.9 507.0 1 532.0

Qld 359.7 188.2 547.9

WA 340.6 322.5 663.2

SAa 499.9 314.9 814.8

Tas 229.0 159.8 388.9

ACTb 284.2 0 284.2

NT 37.4 180.4 217.8

All 4 068.2 2 194.0 6 262.1

a Excludes $350.2 million of debt waived for South Australia, b ACT debt was negotiated when ACT gained self-government. Source: DHHLGCS communication.

Table D.4: State loans from the Commonwealth under the CSHA by type, at 30 June 1992 ( $ m )

Housing advances _____________Nominated housing loans

State

For public housing For home purchase

Total

borrowed

For public housing For home purchase

Total

borrowed

NSW 1 195.5 434 8 1 630.3 536.0 0 536.0

Vic 902.9 407.2 1 310.1 419.5 103.8 523.3

Qld 270.7 178.0 448.7 0 194.0 194.0

WA 307.6 124.1 431.7 129.2 203.7 332.9

SAa 360.5 331.7 692.3 568.4 43.6 612.0

Tas 199.1 71.1 270.2 142.6 22.0 164.6

ACT 0 0 0 0 0 0

NT 0 39.7 39.7 170.1 14.6 184.7

All 3 236.4 1 586.7 4 823.0 1 965.8 581.6 2 547.4

a $276.2 million of nominated Loan Council Fund debt and $74.0 million of housing advances owed by South Australia was waived by the Commonwealth. Source: DHHLGCS communication.

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PUBLIC HOUSING

Table D.5: Commonwealth and State grant funding by State, 1984-85 to 1987-88

($m )

Grants by NSW Vic Qld WA SA Tas NT Total

1984-85 C’wealth 193.1 142.2 78.6 58.8 71.2 27.1 30.6 601.6

States 29.1 (164) 0 1.0 6.1 14.7 0 50.8

1985-86 C’wealth 204.6 149.8 88.1 61.4 71.1 27.0 29.8 631.7

States 0.6 0 0 17.4 0.9 2.9 0 21.9

1986-87 C’wealth 217.8 158.9 98.6 64.7 71.4 27.0 31.2 669.6

States 18.8 0 0.9 1.7 13.1 13.6 0 48.1

1987-88 C’wealth 220.9 160.2 104.6 65.4 68.1 25.5 30.2 675.0

States 4.2 0 1.8 13.2 17.8 13.5 na 49.9

na Not applicable. Notes: Brackets indicate losses. Grants exclude grants applied to Mortgage and Rent Relief. Estimates of State grants were based on the Coopers and Lybrand’s study of State housing authority

accounts.

Source: DCSH (1989a, p. 171).

Capital grants and concessional loans

Since the 1989 Agreement, Commonwealth and State capital grants have been the prominent means of funding public housing. In order to provide these grants, the public sector borrowing requirement (PSBR) is increased. Thus behind grants is public sector debt with direct costs equal to management costs

and the interest rate paid on the associated debt. These subsidies to the State housing authorities hide the true cost of the housing program. They contribute to the lack of transparency which shrouds public housing finances.

Commonwealth debt or State Treasury Corporation debt can generally be raised at a lower cost than any other means available to governments. However, the subsidies should be made explicit in the accounting process.

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Box D.1: Debt for public housing to other than the Commonwealth

Most New South Wales non-Commonwealth debt for public housing is to the NSW Treasury Corporation and was issued between 1990 and 1993. The loans are due to mature in 6-8 years and have an interest rate o f 11-12 per cent. The almost $13 million owed to the private sector is for State

loans taken out during 1960-83 at interest rates of 3.5 to 6 per cent over 53 years.

About half o f Victorian non-Commonwealth debt is from long-term, low- interest State loans. Another 30 per cent o f the debt is in loans from Treasury Corporation which have an interest rate of 12.5 per cent and mature in 1996. The remainder is mostly short-term debt where the interest

rates of the loans range from 5.5-14 per cent. Because of the corporate treasury approach which the authority takes, some of this debt applies to home purchase assistance.

In Queensland all non-Commonwealth debt for public housing is in the form of a loan from the Queensland Treasury Corporation. The loan was taken out in 1990 at an interest rate of 8 per cent and will mature in 2002.

South Australian Housing Trust public housing non-Commonwealth debt comprises about two thirds to the State at interest rates of 4 to 5.7 per cent ($63 million of which matures in 20 years and the rest in 38-49 years) and about one-third as interest only Common Public Sector Interest Rate loans at an average rate o f 11.75 per cent.

About 95 per cent of Homeswest non-Commonwealth public housing debt is to the State and is from loans obtained through the Western Australian Treasury Corporation from State allocations o f Loan Council programs. These loans which mature between 2019 and 2042 have interest rates of 4.5 to 6 per cent, apart from $43 million that has an 11.9 per cent interest rate. A further $9 million which Homeswest owes directly to the private sector

also faces low interest rates (5.125 to 7.4 per cent) and a long time to discharge (14 to 20 years).

In Tasmania, the debt owing to the State is repayable over 6 years at an interest rate of 11.946 per cent. There are no private sector borrowings.

All non-Commonwealth Northern Territory housing authority debt is to the Northern Territory Treasury. The loans have interest rates mostly between 3.5 and 7 per cent and mature between 2021 and 2042.

The ACT Housing Trust non-Commonwealth debt is an interest only loan from the ACT Treasury at 12.66 per cent which matures in 1994-95.

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Most of the Commonwealth debt held by housing authorities for public housing is now repaid with Commonwealth grant money, reducing the grant funds available for public housing expansion. But most, if not all, Commonwealth debt for home purchase activities is paid directly from the Home Purchase Assistance Account. Thus Figure D.4, which includes all of the Commonwealth grant monies used to repay Commonwealth CSHA principal and interest (and not just that owing on public housing activities) may marginally overstate funds available for public housing. Figure D.4 is also deceptive in that the State funds shown for 1985-86 to 1988-89 are mostly funds borrowed from the private sector while those for 1989-90 to 1991-92 are grants to the authorities.

Governments, by providing concessional loans, forgo some o f the interest due on monies borrowed by them and must also increase the PSBR to provide the concession. Figure D.5 illustrates the size o f the interest rate differential for concessional and non-concessional loans.

Disbursement of funds

Per capita basis

Since 1992-93, Commonwealth CSHA ‘untied’ funds have been distributed to the States on a p e r capita basis subject to a guaranteed minimum payment. This is a substantial change from the regimes of the 1973 and 1978 Agreements where funds were allocated on the same proportional basis as Loan Council Nominations by States (Egan 1993, p. 12). The 1981 Agreement was the first to give a base level of funding and to introduce payments for specific activities. From 1982-83 onwards, State allocations were adjusted each year so that the trend was towards p e r capita allocation of untied funds (House of Representatives 1981, p. 2440).

Direction of fund distribution

Under the current CSHA, Commonwealth and State governments provide capital grants to the housing authorities. The 1989 Agreement specifies that most of the grants be paid to an account which mainly provides funds for public housing construction, purchase or renovation. To the extent that funds are used

for that purpose, assistance is for potential public housing residents. Since 1991-92, 100 per cent o f repayments (to the Commonwealth) o f principal and interest may be paid out of that account. From 1 July 1993, States may only pay principal and interest to the Commonwealth from that account up to an

amount equal to any loss on rental operations in respect o f that year. This method of financing does not enhance transparency.

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Figure D.6: Financial flows for public housing

Rental Capital Account

Current Account

General Allowance

Home Purchase Assistance Account

Rental Capital Account (above)

Maintenance

Management

Interest

Shared equity schemes

Mortgage

Rental income

Private borrowings

State Govt loans & grants

Upgrading & renewal

Land & rental housing

Funds to housing groups

Leasing arrangements

Rental subsidies

Internal

Rates & charges

Commonwealth interest subsidy

Commonwealth Government

State Government grants & loans

State housing authority sale of assets

Joint ventures, shared ownership schemes Consultancies & information provision

Cash surplus on rental operations

Other

Other principal & interest repayments

Principal & interest repayments to Commonwealth

Source: Industry Commission

INDUSTRY COMMISSION

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State debt to other sources for public housing, however, must be met from the Current Account. Income into the Current Account is largely from public housing rents.

Box D.3: Rental Capital Account outgoings

The Rental Capital Account funds may be used to:

• Construct rental housing, acquire, plan and develop land for rental housing development, provide open space, landscaping, community facilities and meet costs associated with land development, including contributions to headworks and reticulation o f services, directly related to rental housing;

• Upgrade rental housing;

• Purchase housing for rental;

• Engage in urban renewal activities relating to rental housing;

• Allocate funds to local government bodies for the construction or purchase o f rental housing;

• Participate in joint ventures, co-operative enterprises or similar arrangements to provide rental housing integrated with private housing to achieve a desirable socio-economic mix;

• Construct or purchase dwellings for rental to participants in shared ownership schemes; and

• Pay principal and interest falling due during the year on

Commonwealth loans provided to the State under previous housing agreements (H o u sin g A ssista n c e A c t 1989, s.23(l)).

General Allowance

The General Allowance identifies funds in the Rental Capital Account which may be used for public rental housing other than capital expenditure (see Box D.4). The available funds and application o f the General Allowance for 1990-91 are shown in Table D.7.

About 30 per cent of untied Commonwealth grants and State matching grants available in 1991-92 as General Allowance, were used. All States except

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Queensland have used the General Allowance. New South Wales, Victoria and South Australia have used it each year over 1989-90 to 1991-92.

Table D.7: General Allowance — funds available and purpose to which they were applied, 1991-92 ($m)

Item NSW Vic Qld WA SA Tas ACT NT Total

Funds to housing 9.09 12.88 5.90 27.87

groups Leasing and lease 13.84 13.84

subsidies Subsidies to private 2.79 0.35 3.13

renters Transfers to HPAA 4.99 4.99

Consultancies 0.01 0.05 0.05

Information 4.94 0.98 5.92

provision Tenant and 9.86 7.68 17.54

community support Other 0.01 0.11 0.11

Funds used 22.93 22.75 0 0 18.52 0 2.79 6.47 73.45

Funds available 91.70 55.76 34.48 20.52 19.83 8.59 4.44 6.66 241.98

Source: Unpublished data provided by DHHLGCS.

D.3 U nderstanding the a cco u n ts

The 1989 CSHA included procedures to improve accountability. Limits were placed on funding discretion by requiring certain funds to be put into the Rental Capital Account and into the Home Purchase Assistance Account. As well,

limitations were placed on the purposes to which funds in these accounts could be applied.

The 1993 amendment to the Agreement further limited funding discretion by changing the timing of Commonwealth grant payments from monthly payments to funding based on a State’s forward expenditure plan.

The Annual Reports of the housing authorities do not enhance transparency. They fail to identify costs of services provided, cost recoveries or resource control. The accompanying accounts fail to disclose relevant information about cash flows (for example, details of proposed expenditure plans and reasons for

122 IN D U S T R Y C O M M IS S IO N

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any failures to meet those objectives; and details of any borrowings) and how well the operating objectives and were achieved.

Box D.4: General Allowance outgoings

The General Allowance may be used by the States:

• To provide funds to organisations such as non-profit, charitable bodies, rental housing co-operatives, voluntary bodies, local government bodies and other housing management bodies or groups as are approved by the State Minister;

• Where agreed between the State and Commonwealth Ministers:

- to lease,

- to subsidise leasing, and

- to subsidise other arrangements not o f a capital nature in relation to, rental housing;

• To provide rental subsidies for renting private housing for those who are unable to obtain or maintain affordable finance for adequate and appropriate housing purchase from the private sector or from other sources outside the Agreement;

• For payment into the Home Purchase Assistance Account up to a level of 15 per cent of the Commonwealth untied grants and State matching grants paid into the Rental Capital Account;

• To meet costs associated with:

- consultancies related to development of Commonwealth-State plans,

- the provision o f information to the Commonwealth which is required under the Agreement; or

. For any other purpose agreed between the State and Commonwealth Ministers (H o u sin g A ssista n c e A c t 1989, s.23(2)).

IN D U S T R Y C O M M IS S IO N 1 2 3

P U B L IC H O U S IN G

Housing authorities control at least $31 billion of housing assets yet there is no means of determining whether those assets are well used. For example, the published accounts do not enable a rate of return on the funds used to be calculated. Mant (1992, pp. 16-18) recently attempted to estimate rates of return for activities o f the NSW Department o f Housing. He found it necessary to restructure the accounts into 9 activity lines11 and attribute all o f the relevant costs to each o f the Department’s core activities including apportioning corporate support and overhead costs. He estimated a 3 per cent return on the building asset conservatively valued at $13 billion.

No analysis o f accountability would be complete without some assessment of how well the State housing authorities achieve non-fmancial objectives. Some authorities provide some information in their Annual Reports, but it does not appear to be a State reporting obligation under the Housing Assistance Act.

A number of accounting practices stemming from the CSHA could contribute to poor performance and accountability.

First, public housing and home purchase assistance activities are not readily separated, despite separate accounts — the Rental Capital Account with its current account and the Home Purchase Assistance Account. Housing authorities have given the Commission details of fund transfers between the Rental Capital and the Home Purchase Assistance Accounts since 1989. Only South Australia has used the Rental Capital Account to meet home purchase assistance debt ($16.6 million). New South Wales has provided capital support to the Home Purchase Assistance Fund of $95 million from the Rental Capital Account. Victoria ($229.2 million), Western Australia ($95.1 million), the

ACT ($48.8 million) and Tasmania ($5 million) have transferred funds from the Home Purchase Assistance Account to the Rental Capital Account for use in public housing activities. Queensland and the Northern Territory have made no

transfers.

The presence or absence of money in the Rental Capital Account does not reflect management skill in tending the resources put to that account. Other data are needed to judge the quality of spending from that account. Also, balances can be altered by changing the cash surplus on rental operations transferred or through the level of sales of land and dwellings (see Tables D.8

and D.9).

11 Estate management; procurement of dwellings; housing assistance; housing finance; land banking; land development and retailing; home purchase assistance; consumer services; and housing policy.

1 2 4 IN D U S T R Y C O M M IS S IO N

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Table D.8: Balance of Rental Capital Account brought forward by State, 1989-90 to 1992-93 ( $ m )

Year NSW Vic Qld WA £4 Tas ACT NT Total

1989-90 425.7 - 22.3 19.2 17.0 484.1

1990-91 233.5 - - 45.0 - - - 22.9 301.4

1991-92 134.9 - - 36.6 - 6.1 - 27.9 205.4

1992-93 -42.5 - - 65.8 9.8 9.6 0.4 14.3 57.4

Sources: DHHCS (1991a, 1992c); unpublished data provided by DHHLGCS.

A sizeable carryover o f funds in the Rental Capital Account would be appropriate in the short-term if, for example, land and dwellings that give a poor return in their current use or are not well placed to meet the needs of prospective tenants are sold. The purchase o f properties which give a higher

return and are more appropriate for current or expected needs of the State housing authorities could be deferred to a new accounting period.

Table D.9: Receipts from the sale of land and dwellings by State, 1989-90 to 1991-92 ( $ m )

Year NSW Vic Qld WA SA Tas ACT NT Total

1989-90 45.3 55.9 3.1 12.1 37.2 6.3 0.6 1.2 161.7

1990-91 136.8 14.9 4.1 9.0 41.1 6.7 0.5 8.4 221.4

1991-92 33.7 20.9 8.8 9.4 34.4 5.6 8.7 10.0 131.5

Sources: DHHCS (1991a, 1992c); unpublished data provided by DHHLGCS.

Second, subsidies are not explicitly included in the financial accounts. For example, rental rebates are not factored into the accounts published in the Housing Assistance Act 1989 annual reports (although sometimes State housing authorities do this o f their own accord). When rebates are not factored into the

accounts, State housing authority activities are less transparent.

Third, minor maintenance is paid from the current account; major maintenance and renewal from the capital account. These arrangements do not necessarily encourage a best practice combination o f minor and major maintenance. Spending on maintenance, as reported by State housing authorities, declined from about $1300 per dwelling in 1985-86 to about $700 per dwelling in

1990-91. This decline may reflect increased efficiency of delivery of

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maintenance, but there is some evidence that minor maintenance is the residual element in the current account. If this is so, then minor maintenance is likely to be forgone when funds are tight.

Fourth, the current arrangements do not treat depreciation as a cost to public housing and so understate the costs of providing public housing. Unless there are other arrangements to cover maintenance (for example, through renewals accounting), depreciation allowances should be explicitly included in the accounts. Funds are not put aside for housing renewal or major renovation activities. Until depreciation is recognised, a sustainable public housing sector will always need additional funds for this purpose.

Accountability in the use of funds has increased, but lack of transparency remains. DHHLGCS stated:

It is notable that State housing authorities typically achieve close to break-even result on their rental operations (ie operating revenue is roughly equal to operating costs — which was expected by the Commonwealth under these arrangements), so the absence of a capital charge represents a convenient way of providing the implicit subsidy level, which

is approximately equal on average to the cost of funds.

If governments were to charge State housing authorities for the use of grant capital provided under the CSHA, they would of course also need to provide a subsidy to State housing authorities to enable them to meet the charge (sub. 213, p. 58).

Whether the funding arrangements lead to a sustainable public housing sector is open to question. But improved financial and qualitative accounting could lead to the authorities focusing more clearly on management of both the property and tenant aspects of public housing. A 1989 report on the financial operations of State housing authorities found that all States except Queensland had losses on their rental operations (see Table D. 10).

Table D.10: Cash outcomes of public housing rental operation by State, 1984-85 to 1987-88

($ m )

Year NSW Vic Qld WA SA Tas NT Total

1984-85 2.4 (29.4) 19.8 (19.2) (12.8) (16.7) (16.2) (72.1)

1985-86 (22.6) (42.1) 21.3 (27.8) (21.8) (13.9) (17.4) (124.3)

1986-87 (28.7) (45.2) 20.9 (27.6) (37.6) (15.1) (25.7) (159.0)

1987-88 (49.0) (56.7) 23.5 (29.6) (19.4) (20.1) na (151.4)

na Not applicable Note: Brackets indicate losses. Source: DCSH (1989a, p. 172).

126 IN D U S T R Y C O M M IS S IO N

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D.4 S u b sid ie s to h o u sin g authorities

Part of the Commonwealth grants for public housing could be regarded as equivalent to a DSS or DVA rent assistance component. The remaining grants and earlier loans include a subsidy element stemming from zero to concessional rates o f interest.

It is difficult to determine the extent o f the capital subsidies to the State housing authorities for public rental operations. Under the current arrangements:

• The Commonwealth subsidises new funds by giving grants for public rental operations which must be put to the Rental Capital Account; and

• The States subsidise new funds by giving grants for public rental operations which must be put to the Rental Capital Account (and also may subsidise loans to the Home Purchase Assistance Account).

These funds may be provided from tax revenues or by borrowing. The mix is indeterminate and therefore so are the subsidies.

Under previous Agreements both the Commonwealth Government and the State governments made grants and loans to the State housing authorities. Subsidies existed in the grants. Subsidies only exist in the loans to the extent that interest was at concessional rates.

D.5 Accrual accou n tin g

The current accounting arrangements do not attempt to fully cover or report the costs of public housing provision. There is no commonly agreed basis for valuing the housing and other State housing authority assets, and no provision for depreciation in the Housing Assistance Act annual reports. Houses are reported by number o f dwellings only — no value is given.

Public houses, the major asset o f State housing authorities, have a life of say 30 to 50 years and a current value in excess o f $31 billion. The worth of these assets may bear little relationship to their construction or purchase costs. As Graham and Xavier observe:

It has long been recognised that, particularly where inflation is significant, accounts drawn up on historical cost conventions are misleading especially where assets are long- lived. Balance sheet figures o f original cost do not represent the values of assets to the business, profits and financial trends are misrepresented. If accounts are to show

resource use and economic performance they must allow for general inflation, fluctuations in specific prices and costs, and for technological progress resulting in changes to the value o f capital equipment (1987, p. 19).

IN D U S T R Y C O M M IS S IO N 1 2 7

P U B L IC H O U S IN G

If the long-lived assets are measured using historical cost asset valuation, the cost of capital employed in providing the houses or holding the land is likely to be understated. Two possible methods of valuing the current cost are the d isco u n ted fu tu r e incom e stream a p p ro a ch and the rep la cem en t co st approach.

The d isco u n ted fu tu r e incom e strea m a p p roach estimates the value of assets with respect to the future income that will be generated for the housing authorities. The method estimates a market price for the assets. It may not always be easy to estimate a market value in the case o f public housing estates. There could also be difficulties in estimating earnings potential in the presence of uncertainty on the tenure o f tenants — particularly long-term tenants with declining incomes who live in areas o f potentially rapidly increasing rents. However, this approach accounts directly for poor investment decisions. Low asset values arrived at using this technique may therefore partly reflect poor asset management or pricing policies which do not fully recoup costs.

The replacem ent cost a p p ro a ch of valuing assets at their (written down) replacement cost fails to directly account for ill-judged investments. It also ignores technological improvements which reduce the cost o f providing services but there are techniques available to overcome this difficulty.

It would be impractical to revalue all of an authority’s assets each year. Monitoring is not costless and therefore some lumpiness in changes in asset valuation may be inevitable.

In the Commission’s view, the use of accrual cost accounting by all State housing authorities would signal to the managers and the community that the authorities are accountable for both the resources they control and their performance in using those resources.

Accrual accounting is directed at reporting assets and liabilities and changes in them. Accrual cost accounting procedures recognise the financial effects of transactions and other events in the reporting period in which they occur, irrespective of whether cash has been received or paid. The accrual basis of accounting would ensure that the economic resources (assets) and obligations (liabilities) of the authorities, the cost of activities (expenses) and cost recoveries, and other revenues all appear in the statement of accounts. Current

cost asset valuation is only one aspect of accrual accounting.

1 2 8 IN D U S T R Y C O M M IS S IO N

E EVALUATION OF HOUSING ASSISTANCE APPROACHES

In order for low-income tenants to have an adequate standard of shelter and to have sufficient income to meet other needs, after paying for their housing costs, some form of assistance is required. Whether this assistance should be provided through public housing or through rental vouchers or cash rental assistance

payments to help people rent in the private market is a hotly debated question. This question is the main focus o f this Appendix; but first, the more general issue of whether general income support is preferable to assistance targeted towards housing is discussed.

E.1 H ousing a s s is ta n c e or c a sh paym ents for general incom e support?

The argument for general income support is that it leaves recipients free to determine the proportion o f their income that is spent on rent. Other things being equal, people will gain more satisfaction from a given amount of government expenditure (on assistance to them) if they, not the government,

decide how the cash should be spent.

However, there are counter arguments that assistance should be more closely tailored to recipient needs and that other things besides the level of recipients’ satisfaction must be taken into account. These include the following.

Targeting

When income support is given to a family, the spouse and children are amongst the intended beneficiaries. With tied support such as housing assistance, either subsidised public or private provision, there is more certainty that they receive benefits.

Also, there is a self-selection argument why targeting may be better. It is that everyone has an incentive to obtain cash, because cash is always of value to recipients regardless o f need, while some forms of assistance are only of value

IN D U S T R Y C O M M IS S IO N 129

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to those who are genuinely in need.1 In this context, the opportunity to rent public housing of modest amenity at a discount is unlikely to have the universal appeal that an offer of cash has.2

Moral hazard and fraud

A related problem with cash payments is that perverse incentives can arise. If recipients believe the government will quickly assist them with cash if they appear to be in financial difficulty.3

If government makes a commitment to welfare provision (where necessary), some potential recipients may behave in a manner likely to increase their level of assistance. Furthermore, if given cash some may not spend adequately on necessities in the expectation that this may elicit further support.4

A further difficulty with cash is that it can be more easily and less visibly misappropriated than some forms of tied or in-kind transfer, such as public housing.

Socially desirable externalities

External benefits from adequate affordable housing include fewer social problems, better public health, lower crime and better cities.5 As the Inquiry into British Housing stated:

‘The negative aspects of our lives — ill health, vandalism and crime, racial prejudice, loneliness, mental illness, family break-up — are multiplied and exaggerated by housing

1 The most obvious form of ‘in-kind’ support that is only of value to those in genuine need is medical care (for example a heart transplant). With most in-kind support those who are not in genuine need may also value the assistance, although their personal valuation is likely to be less than that of those targeted. Consequently, if a barrier is created a certain amount of

‘self-selection' is likely to take place because only those with a higher (personal) valuation are likely to attempt to hurdle it. The self-selection approach, in the context of optimal taxation, is examined in Stem (1982),

Stiglitz (1982) and in Nichols and Zeckhauser (1982) as well as more recently in Boadway and Keen (1993).

2 This point is noted in Nichols and Zeckhauser (1982). 3 This is referred to in economics as a ‘moral hazard’ problem. It expresses a concern that those receiving assistance may make little effort to adequately house themselves in the expectation that their plight will invoke greater levels of support.

4 With cash payments, it would be costly and intrusive to distinguish between genuine and undeserving recipients.

5 These benefits can be reduced where provision is inappropriate, for example, with poorly designed public housing.

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shortages and bad housing conditions. The cost of curing these social ills is correspondingly increased’ (1985, p.3).

The case against poorly designed, and otherwise inadequate and inappropriate accommodation is forcefully documented in Coleman (1990). She concludes:

Social breakdown, like charity, begins at home. Psychologists have long stressed the importance of the home, as a family, during the child’s formative years, and we now stress its importance as a p l a c e . Shared nests, however lovingly designed by experts, can interfere with the quality of parenting and colour the attitudes of generations reared in

them (p. 170).

Social externalities are difficult to confirm or quantify.6 The community’s perception of their significance can nevertheless influence the ways in which it chooses to provide housing assistance.

T axpayers’ p referen ces

Many taxpayers prefer assistance to be given in-kind to individuals who they consider need to be looked after.7 They may prefer this approach because they are happy for money provided by taxpayers to be spent on such things as housing, but object to taxpayers providing money which may be spent, for

example, on alcohol.

They may also prefer the approach because they believe that their evaluation with respect to what is good for the recipient is better (than the recipient’s own view). In some cases, for example, when it comes to support for those with mental illness, almost everyone agrees that this is so.

Just as some taxpayers prefer assistance to be given in-kind, others are known to prefer it to be given only in cash.8

Ignoring taxpayers’ preference for a mode of delivery is difficult to justify. To the extent that they are willing to subsidise ‘merit’ goods, to further their own wishes, there can be no cogent argument against what results in mutual advantage.

6 For detailed discussion of housing externalities see also Glazer (1967), True (1979), Appelbaum (1986), Stretton (1986), Kendig (1990) and Hills (1991). 7 Whereas other taxpayers support for in-kind assistance may simply express sentiments as to what constitutes a good society (Thurow 1974).

8 This is sometimes referred to as the consumer sovereignty argument (although not all of its proponents advance this argument in a strongly prescriptive form).

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Social justice

Governments’ interventions are often on grounds of social justice. With regard to housing in general and low-cost accommodation in particular, concern for social justice has been a stated imperative o f the Commonwealth Government.

National Shelter in its submission argues that adequate affordable shelter is a ‘right’ as a matter of social justice (sub. 115). Devereux (1992) states that, having ratified the International Convention on Economic, Social and Cultural Rights (ICESCR) in 1975, the Commonwealth Government:

... incurred an obligation to respect, protect, promote and ensure each individual’s ‘right to adequate housing’ (p. 223). ·

Whether it is a right or is not, adequate shelter is necessary to participate fully in society and that some members of society have to live in inadequate accommodation encroaches upon notions of human dignity. As Devereux concludes:

The aim is not necessarily to achieve an equal standard of living for all. It is simply to accord each individual’s right to adequate housing due respect so that “the bottom [standard of housing] is at a sufficiently high level to be consistent with human dignity” (P- 239).

In Australia, housing is a necessity that many people on low incomes find unaffordable.9 Non-taxation of imputed rent and other concessions for homeowners have increased the costs of renting. Health and building regulations have also increased the costs of housing generally.10

It can be argued that people receiving general income support, in this situation, are free to choose. However, it is unclear in what sense they have freedom of choice. Housing is not affordable (to them), not because it is in short supply, but because of government interventions that affect housing costs and the desires of those with greater incomes to have a greater share of these particular resources.11

Many inquiiy participants emphasised the importance o f adequate and affordable housing for a stable society. Some mentioned experiences in other

9 Affordability is defined in Chapter 2. 10 Due to planning, zoning and building regulations many on low-income cannot afford the minimum level of housing society regards as appropriate (Paterson 1975, Paterson et al. 1976). For this reason, homelessness rates are higher in developed countries than

developing countries (World Bank 1992). Submission by Flood (sub. 171). 11 In a ‘free’ market economy the power to express one’s preferences is approximately proportional to one’s income. Not only do those on lower incomes typically have less of everything of value but they also have relatively even less of anything that those on higher

incomes have strong preferences for.

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countries — such as in the USA with the 1992 Los Angeles riots — to indicate the costs borne and dangers that arise when members of a section of society consider themselves to be alienated from benefits (which can include adequate housing) accessible to the rest.12

Efficiency, poverty tra p s and work incentives

To the extent that beneficial externalities exist, housing assistance would improve efficiency when those on low incomes increase their consumption.13 Even without the existence of externalities there can still be efficiency arguments for giving assistance in-kind (in preference to relying on cash

assistance alone).14

The conventional economic wisdom15 is that combining income support with a subsidy on a commodity will usually be more efficien t16 than income support alone.17 Consequently, whether there is reason to subsidise rental accommodation (for the less well off) for efficiency reasons also requires

consideration.

A dilemma with cash income support targeted on low-income people is that for targeting to be effective the cash assistance has to be reduced significantly as income from other sources rises. This may lead to very high effective m arginal t a x r a t e s , even over 100 per cent. The consequent disincentive to work is

known as a p o v e r t y t r a p .

Giving some well targeted in-kind assistance may make it possible to reduce the disincentive to work. If a subsidy for housing has less effect in making leisure (not working) more attractive than does general income support, a mix of general income support and housing assistance will increase the supply of

12 Alienation defined as ‘a sense of estrangement from society, a feeling of powerlessness to affect social change, or a depersonalisation of the individual’ (Bullock et al. 1988).

13 This standard result concerning externalities may be found in Tresch (1981) Chapter 6 or in Feldman (1980) Chapter 5, p. 96.

14 The argument that cash payments or general income support is the best and most efficient is based on other things being and remaining equal. The type of payment that satisfies this requirement is referred to by economists as an unconditional lump-sum transfer. In practice it is accepted that it is infeasible to achieve welfare (or taxation) objectives (effectively) by

such transfers (Brennan and Buchanan 1980, p. 57).

15 Brennan and Buchanan (1980).

16 More efficient in that it makes a recipient better-off, and has a less deleterious effect on the incentive to earn income while costing the government the same.

17 The detailed argument is to be found in Corlett and Hague (1953), Layard and Walters (1978), Tresch (1981, p. 336) and Leonesio (1988a, 1988b).

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labour compared with spending the same amount solely on income support. Steinberg Schone (1992) shows that this is likely to be the case. However, it is not clear that the relative increase in the labour supply would be significant. This is an area that still requires research.18

These arguments suggest that using targeted housing assistance is preferable to relying on general income support alone. They do not distinguish between forms of housing assistance and can be used to support either cash rental assistance or public housing.

E.2 C ost e ffe ctiv en ess o f public hou sin g

There are further arguments which suggest that it can be cheaper in the long-run to provide the same level of assistance through public housing rather than through rental assistance.19 Some, but not all, of these arguments stem from the nature of the private rental market for low-cost houses (see Appendix C). The

arguments are as follows.

Discrimination

Some renters face discrimination in the private rental market for reasons other than lack of income. Reasons and instances of this are many and varied. Those discriminated against may come from particular racial or ethnic backgrounds, have poor written or oral English language skills, be young, be old, have young

children or receive pensions or benefits, or have physical or mental disabilities.

18 ‘The lack of research on the effects of in-kind transfer programs is a serious problem ... It is doubtful that a full understanding of the incentive effects ... can be understood without such studies’ Moffitt (1992, pp. 18-19). However, recent work by Diewert and Lawrence (1993) suggests that the effects may be important. For a different purpose, they estimate average compensated elasticities of demand between four consumption goods, including leisure, using New Zealand data. Their estimates for the cross-price elasticities between the demand for general consumption with respect to the price of leisure (0.38) and between the demand for housing with respect to the price of leisure (-0.79), lend empirical support to arguments favouring the efficiency of some in-kind assistance. 19 Much of the discussion in this and in the preceding section relies on long-run (static

equilibrium) comparisons. Aspects not considered within this framework, concerning differing types of need for assistance and dynamic aspects (that modify these conclusions), are dealt with later.

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Some may be members o f groups that are perceived rightly, or wrongly to be more risky as tenants.20

Inquiry participants emphasised the extent o f discrimination against many who require rental accommodation.21

Many participants referred to discrimination experienced in the private rental market (see Appendix A). The following are two typical accounts of the problem:

It is in our charter to house, on a comparative basis, all classes, religions and creeds in relation to our community but, as we lease properties on the private rental market, we find it almost impossible to house Koori tenants because of perceived ideas and prejudices (Sapphire Coast Tenancy Scheme Inc., sub. 114, p. 5).

Even when young people are old enough to sign a lease agreement and have the money to pay for rental/bond costs, they are often faced with reluctance or refusal by agents or landlords due to negative stereotyping. Young single parents, young Aboriginals, young people sharing, young unemployed and young people from non-English speaking

backgrounds are often blatantly discriminated against. Young people with physical disabilities are often refused access for reasons of “physical constraints”, rather than attempts being pursued to accommodate any specific requirements (National Youth Coalition for Housing, sub. 131, p. 26).

Discrimination might be overcome by selectively providing large enough rent assistance payments. However, this could be a very expensive solution to the problem.

Self insurance

One reason why rents in the low-cost private market often appear high, given the nature and condition o f the dwellings rented, is that many private landlords are risk adverse and it is difficult and costly (if only for reasons of moral

20 This situation is referred to as ‘statistical discrimination’. When it applies to situations, such as drivers who drink, where the chosen behaviour is causally linked to an increased risk of traffic accidents, almost all accept ‘statistical discrimination’ as ethically valid. In situations where there is neither a causal link nor any choice about inclusion in the more

risky group the ethical validity of ‘statistical discrimination’ is no longer clear. 21 Although there are many popular economic arguments why discrimination ought not to exist or persist in apparently competitive markets, the predictions of these theories appear to be at odds with evidence. This point is discussed in Arrow (1971).

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hazard) to get adequate insurance. A large organisation like a State housing authority can self-insure (Arrow and Lind 1970, Tresch 1981, p. 508).22

Administrative c o st of effective rent a ssista n c e

If vouchers and rent assistance do not vary with the level o f rent paid, their effects are very similar to those of giving an equivalent sum of extra income.23 The benefit o f having assistance targeted toward housing is largely lost (see Chapter 5).

Vouchers and housing allowances can be made conditional on the level o f rent paid, and thus influence relative prices. However, administrative problems arise and cost effectiveness diminishes because extra information must be gained and checked on rent paid.

The Experimental Housing Allowance Program in the USA is reported to have had program administration costs (in addition to the cost of rental property administration borne by private landlords) of 20 per cent of program outlays. It was projected that the administrative cost of a nation-wide scheme would have been in the order o f 23 per cent. Costs of Great Britain’s Rent Allowance Program (where targeting was less comprehensive) were o f the order o f 12 per cent (Hendrie 1988, Carlson and Heinberg 1978).

There may also be indirect costs Landlords and tenants may collude about the level of rent paid. Also, tenants do not have as strong an incentive to seek the best value for money in terms of accommodation (when they do not pay the full extra cost) with a result that rents may increase.

Sovereign risk

There may be reluctance to invest in low-cost rental dwellings if prospective investors believe there is a risk that the level of rent assistance may not be maintained in real terms.

22 Large entities have advantages over smaller entities when it comes to risk bearing. The Arrow-Lind theorem demonstrates that under fairly broad conditions a government (or any similarly large commercial entity) has no need to include a premium for risk in any assessment of a project.

23 This point is illustrated by Varian (1990, pp. 26-31), using the US food stamp program.

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The Department o f Health, Housing, Local Government and Community Services argues that:

One would expect rational private investors to charge a ‘sovereign risk’ premium to compensate for the risk of future governments not maintaining the real value of allowance payments. It is expected that this premium would be built into rent levels.

It can be assumed that governments do not have to build into their costs, risk premiums to account for their own behaviours. Since governments are in a position to make firm commitments to provide an ongoing real level of housing assistance, they can choose in effect to prepay the subsidy outlay by purchasing dwellings to accommodate subsidised

clients (sub. 213, p. 50).

Financial saving to the governm ent w hen rent increases

Rent assistance is only effective if it increases the supply of accommodation services. However, supply will only increase if rents (and therefore returns) increase. The higher rents are paid to owners of existing dwellings as well as those of the new dwellings. By its ownership o f public housing stock the

government receives part o f the benefit o f these rent increases.24

Increasing the supply o f dwellings will still increase the average cost of a dwelling since additional resources attracted into the industry will on average cost more. But with all the housing in this sub-market owned by government, the cost to government is only that necessary to attract extra resources.25 An undesired transfer to private landlords is avoided.26

The unavoided transfer to existing landlords under an effective housing allowance has important implications for government funding.27 The size of

24 Some, but not all of the increased earnings to landlords (from higher rents) would be returned to the government in taxation. This would be less than the 100 per cent returned where government owns the housing. 25 The assumptions (used here for exposition of the principle) are in one case that the

government owns all the low-cost housing (in this sub-market) and in the other case that the private sector owns all this housing. The results for these polar cases are compared. The existing situation, a mix of private and public ownership in this sub-market, corresponded to a weighted average of the differing outcomes. 26 These financial gains would instead go to the States, as the owners of public housing.

Nevertheless, it ought to lower the States’ demand for Commonwealth funding indirectly. 27 It also has efficiency implications because it is not costless (in terms of resources used) for government to raise revenue. If government requires greater net expenditure to achieve the same goal, greater revenue needs to be raised. The revenue gathering process decreases

efficiency (in aggregate).

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this transfer depends on the extent that the quantity o f housing services supplied expands as price increases (referred to as the supply elasticity).28

Figures E .l, E.2 and E.3 compare, under different supply elasticities, the marginal cost to government o f effective rent assistance (with the entire housing stock effected owned privately) with government provided housing (where the government entirely owns the relevant stock).

Figure E.1: Relative cost of inducing additional rental accommodation

$ per week 250

200

& 150 o

ts o « e

100

0

0 2 4 6 8 10 12

Elasticity of supply assumed

Note: This figure compares the marginal costs of using induced private provision of low-cost rental accommodation (with ownership completely in the private sector) instead of public provision (with complete public ownership) under different supply elasticity assumptions. The demand elasticity is 100, the subsidy $80 per week and the rent paid by tenants is $40 per week. The government funding required to provide one extra unit of housing services is significantly different depending on the method used and approach to ownership. Public provision (and ownership) is represented by the lower horizontal line. It is considerably more cost effective than the alternative, induced private provision, represented by the curve above it. (Although the additional marginal cost, to government from pnvate ownership, would be reduced by taxation to some extent.) Source: Industry Commission.

28 An elasticity of supply of a good is the percentage increase in the quantity of the good supplied following a 1 per cent increase in price.

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Figure E.2: Additional marginal cost of inducing the supply of additional rental accommodation with private ownership of the housing stock compared to complete public ownership, high elasticities Per cent

0 2 4 6 8 10 12

Elasticity of supply assumed

Note: This figure compares the extra cost to government from using induced private provision instead of public provision (and public ownership of the entire stock) under different supply elasticity assumptions. The demand elasticity is 100, the subsidy $80 per week and the rent paid by tenants is $40 per week. The dramatically increasing marginal cost at supply elasticities of less than 4 is

continued in Figure E.3. (Although the additional marginal cost, to government from private ownership, would be reduced by taxation to some extent.) Source: Industry Commission.

To illustrate this cost difference, it is assumed that both sectors are equally efficient.29 For exposition, it is assumed that private provision is accomplished by an effective rent assistance payment.30

Likewise, public provision is assumed to be accomplished by a government agency that receives a normal rate of return by charging a market rent. In this complete government ownership example, part of the market rent is paid by

29 During the inquiry there was no evidence presented that would lead to the conclusion that the public sector is less efficient than the private sector in this area. Also, for ease of exposition, the extra administrative costs involved in an effective rental assistance scheme have been assumed to be zero. 30 Under these assumptions instead of rent assistance paid to the tenant, there are many

alternative schemes that could be tried. With any regime, relying on inducing a private supply response, the effects would be similar (ignoring details such as administration costs and monitoring).

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tenants, the difference being recompensed by a subsidy.31 With p u b lic ow nership, economic rent from government action (in this situation) remains in the public purse.

In Figures E .l, E.2 and E.3, a subsidy o f $80 per week is assumed and a rent contribution from tenants of $40, giving an overall market rent o f $120. A demand elasticity of 100 is assumed.32

Figure E.3: Additional marginal cost of inducing the supply of additional rental accommodation with private ownership of the housing stock compared to complete public ownership, low elasticities Per cent § 1000

S 900

o. 800

a 700

‘S 300

Elasticity of supply assumed

Note: This figure continues the previous one for elasticities lower than 4. Note that the scale of the vertical axis has changed markedly and although the extra cost at an elasticity of 3 looks visually small it is, in fact, 50 per cent. Although the percentage extra cost at low elasticities is large the government would not necessarily recognise that its actions were resulting in this extra cost for the reasons given in the text. (Although the additional marginal cost, to government from private ownership, would be reduced by taxation to some extent.)

Source: Industry Commission.

Figures E .l, E.2 and E.3 illustrate significant cost dangers, associated with low supply elasticities (that is, the quantity being supplied being unresponsive to a price increase), especially in the short-run if the government attempts to meet

31 Which would be equivalent to the effective rent assistance payment. 32 This assumption is made because the government is only willing to supply or induce the supply of extra housing services in situations where there is a need and the extra accommodation can be easily filled.

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affordability targets through rent assistance alone. Even with larger elasticities (where the increase in housing services supplied is large following a price increase) and in the long-run (when there is more time for adjustment to take place), the extra cost is quite significant. See Box E.l for a discussion of relevant supply elasticities in the low-cost rental market.

These extra costs from the leakage o f economic rent, especially when hidden by fluctuating prices, are not easy to identify or quantify.33 A cost blow-out may not be recognised as an outcome o f this leakage.

Box E.1: What are the relevant supply elasticities?

Bartlett (1989) reported that the long-run supply elasticities for housing services have been estimated as ‘about 11.5 for the USA and about 5.5 for the UK’. In a USA study by Muth (1971) they ranged from 18.5 at the edge o f a city to 1.5 toward the city centre. Short-run elasticities are always lower and in the very short-run approach zero.

In the low-cost rental market, long-run supply elasticities will be lower than for the general market. The principal reason is that rental stock at the lower end, is not purpose built. To attract the professional investor, returns would have to increase significantly (Kemp 1989). If the government were willing to spend sufficient money to underwrite the higher return, the long- run supply in this market may become quite elastic.

The Experimental Housing Allowance Program in the USA, reported in Bradbury and Downs (1981), found no significant impact on the low-cost rental market rate. The ‘no significant impact’ was a supply elasticity of about 4, which is quite elastic but not elastic enough to invalidate this cost-

effectiveness analysis. Important also were the small relative size of the program and the high vacancy rates in these experimental markets. The vacancy rates ranged from 16 per cent to 4 per cent. With many vacant houses the price response was low, not surprisingly.

33 A definition of economic rent is the difference between the return made and the return necessary to keep a factor of production (in this case a housing unit) in its current use. If some rental housing services were being supplied at a lower rental return then any extra that these particular housing units receive is part of economic rent.

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A numerical example can illustrate how this net extra government expenditure arises. Say there are 100 houses receiving a rent of $100 per week. If the government wishes to provide or induce the provision of an extra house, with a supply elasticity of 1.0, it will cost it the net present value of a rental flow of

$101. But the houses already in the market will now receive rent of $101 also. If the government owns the houses it pays this extra amount (100 times $1) to itself. If the private sector owns the houses then the additional cost is not netted out. Rather, it represents part of the marginal expenditure o f providing the extra house.

Even with a supply elasticity o f 12, there would be significant extra expenditure if the government attempts to induce the supply of an extra house without the advantage of owning the stock.

Assume there are 100 houses but with a full market rent of $120 per week (for ease of exposition). The government pays a subsidy of $80 and tenants a rent of $40. To induce an extra house (with a supply elasticity o f 12), full market rent would rise to $120.10 (market rent has increased by 10 cents). If the government does not own the other 100 houses the net cost of providing this

extra unit through rent assistance (while keeping the others at a rent of $40) is $10 per week greater (100 multiplied by $0.10), or $90.10 compared to the extra net subsidy cost of $80.10 (for the extra unit) when the other houses are owned by the government.

E.3 Impacts on the private rental market

The impact of public housing provision on the private rental market requires careful consideration. For example, the provision o f this form o f housing by construction has an effect on the demand for and hence the rentals received for low-cost accommodation.

Typically, housing units deteriorate throughout their lives to lower levels of quality. The speed of this process is influenced by landlord decisions on maintenance. Decisions on the level o f maintenance they undertake are, in turn, influenced by the levels of rent they receive. Lower returns for low-cost housing can result in poor maintenance and loss o f stock to urban renewal. This

can increase the cost of providing income support and affordable housing for those with low incomes.

Consequently, a strategy that relies on construction alone, should at least in the long-run, be supplemented by other means such as spot purchase. A spot purchase strategy ought to target properties at risk of loss to redevelopment that also are in demand by those on low incomes and are capable o f being brought

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up to an appropriate standard. Another part of a long-run strategy to increase the stock o f lower quality housing could involve changes to lower the need for and to increase the provision of maintenance. This could be achieved by, for example, changes to building standards and moves to improve the performance

of maintenance services industries — painting, plumbing, renovating, and so on.

A framework developed by Sweeney (1974) allows analysis of the likely effects of policy options on price, quality and welfare. His conclusions were that removing people from the lowest quality accommodation and placing them in public housing will:

... benefit the poorest families who do not themselves live in public housing by lowering the prices that they face for privately supplied housing ... The effect of the public housing program would not be limited to those receiving subsidies (p. 313).

However, he warns that if those worst off are not targeted perverse outcomes are possible. If only moderate income families are targeted then:

.. while such a program will benefit moderate income families, it will adversely affect the poorest families by increasing the house prices that they face (p. 314).

Hence those worst off should be assisted first.

E.4 R esou rce c o s t s o f public and private provision

In evaluating the relative cost o f public and private provision like has to be compared to like. Existing private rental accommodation that has ‘trickled down’ from other uses is likely to be less expensive than accommodation that has been constructed by State housing authorities to increase supply. The former is a naturally occurring base supply in this market whereas the latter is

supply at the margin. Public provision when it increases supply will be at least as expensive as existing accommodation and must be compared with the cost of any similar marginal supply that could be induced within the private market.34 Government initiatives aimed at attracting more professional investors have

been unsuccessful. The low-cost rental market is a residual market characterised by small investors (see Appendix C).

State housing authorities may have advantages over small investors in this private market. Advantages could arise from economies of scale, scope and

34 Also, an aim of public housing is to provide adequate and appropriate accommodation. As this is of a higher standard than the lowest quality accommodation found in the private rental market it is more expensive. Commission estimates of the responsiveness of housing demand to changes in income (IC 1993b) indicate that substantial cash payments would be

required if people on low incomes are to have affordable and appropriate accommodation in the private rental market.

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density. The scale o f State housing authority operations allow specialisation with the employment of skilled professionals. Economies of scope are possible because most low-income renters are clients of government in other ways. Other economies of scope include integration of asset management activities including the purchase and sale of properties, redevelopment activities,

overseeing construction of new stock and financial management such as raising substantial capital. Economies of density arise from State housing authorities’ concentration in particular areas, lowering their average costs o f servicing and maintenance. However, it is not clear that all potential advantages for efficiency gains have been realised.

It was argued in Section E.2 that public ownership is more cost-effective for the government. It was assumed that private and public sectors are equally efficient at delivering these services. Also, the extra administration costs o f an effective housing allowance were ignored.

If indeed public and private provision were as efficient and the extra administration costs were zero, then the resource costs would appear to be the same — private provision would simply require more revenue to be raised. But, there is an efficiency loss when governments raise revenue through taxation. This loss has been referred to as the m arg in a l excess burd en p e r d o lla r o f redistribution (EPAC 1988).

As detailed in Section E.2, landlords receive extra income (in the form of economic rent), from government intervention in the low-cost housing market. If governments attempted to get this money back by taxation, further losses would be involved. This process is referred to as ‘churning’.

Tax exemptions, some low interest rate concessions, and some better terms of borrowing due to government guarantee should not be included in any assessment of the resource cost and allocative efficiency advantages of State housing authorities.35

E.5 A llocative efficiency

In the private rental market it is likely that few vacant bedrooms would exist in homes occupied by those receiving assistance. This could be taken to be evidence of overcrowding. However in comparison, the presence o f empty bedrooms in public housing (discussed further in Appendix J) might be argued

35 A concessional interest rate consistent with a credit rating conforming to the nature of the asset, government superiority in risk bearing (Arrow and Lind 1970) and the performance of the authority is appropriate.

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to mean that taxpayers’ money is not being spent wisely. Also, if there was higher occupancy (per bedroom) within public housing then the pressure on the private rental market and the rent level would be lower.

Although there is an apparent sizeable mismatch in public housing and consequent allocational inefficiencies, it is important to recognise the advantages offered by public ownership of two or three bedroom homes. They are less expensive per bedroom and offer greater flexibility to public housing providers. They may be more easily sold and allow differing family sizes to be

catered to.

Where there is a great mismatch between the distribution of types of public housing tenants and the types of houses owned, authorities can still take measures to achieve better targeting. One approach is to lease or rent out to the private sector stock less in demand by public housing tenants. The proceeds

could then be used to headlease more appropriate stock from the private sector. This way it is likely that with the same resources tenants’ needs could be better satisfied (this is further discussed in Appendix J).

E.6 R eview o f s tu d ie s

The Commission reviewed two recent studies of the costs and benefits of public provision of housing.

E consult’s study for the N a tio n a l H o u sin g P o lic y R e v ie w

Inquiry participants frequently drew upon the 1989 N a tio n a l H o u sin g Policy R eview study by Econsult (1989) to demonstrate that in the longer term conventional public housing is more cost-effective than a broad-based housing allowance program.

Econsult showed that if a government has a fixed annual budget in real terms, it can (after 12 to 15 years) assist more people by investing in public housing rather than providing housing allowances.

The study uses a cost-effectiveness approach and applies three methods of comparing the net present value of funds outlaid for public housing with funds used as a housing allowance. In each case, public housing is shown to be more cost effective in the longer term.

The study assumes that tenants obtain equivalent levels o f housing and pay the same level of income on rent under both approaches. Intuitively, the cost- effectiveness of the two approaches should therefore be similar.

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The likely reason for the difference is that some of the assumptions influence the results in favour of public housing. For example, the administrative costs for a housing allowance program are high. Econsult assumed a cost of $700 per household per annum in 1988 dollars. This compares with the average DSS rent assistance payment in 1987-88 o f $600 per household per annum. DSS estimates current administrative costs for rent assistance as likely to be about 2.9 per cent of program outlays.36

However, the main reason that the analysis finds in favour o f public housing is the low discount rate used in the analysis. The discount rate measures society’s preference for current consumption. To obtain net present values, the study uses real social discount rates o f zero, 3 and 5 per cent. Of these, Econsult prefers 3 per cent.

Social discount rates that are below the opportunity cost o f funds introduce an implicit bias in favour of bringing forward capital investment and hence a bias towards public housing.

A real discount rate of 5 per cent would be more appropriate. This would reflect the marginal costs of government borrowings given that at the margin governments are funding their expenditures from borrowings.

National Shelter benefit-cost analysis of public housing

National Shelter (sub. 115) submitted a benefit-cost analysis of public housing provision. This analysis identified the benefits of public housing but in the Commission’s view failed to quantify them correctly. Moreover, future benefits

and costs were not discounted.

Benefit-cost analysis provides a way of assessing the net benefits and costs of using resources in a different way. It requires the definition of how resources are to be used in the activity examined and how they would be used in the absence of the activity. The alternative is usually referred to as the ‘base’ case.

The net benefits and costs measured are the economic return and cost o f the alternative use of resources.

In the National Shelter analysis some o f the claimed benefits are overstated because the cost of diverting resources or the benefits gained in alternative uses are included.

36 Although, an effective housing assistance program (similar to the Experimental Housing Allowance Program in the USA) could be expected to have high administrative costs.

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For example, National Shelter attributes the benefit received by the community as equal to the government subsidy. It is true that the community may receive benefits (usually referred to as paternalistic benefit) gained at the cost of the subsidy. If the alternative was taken to be no provision of public housing the community would not have to bear the cost o f the subsidy. Hence the cost is

attributable to provision and must be counted. Another way of looking at this is that a rational government would provide public housing if the net benefit (that is, total benefit minus total cost) were positive.

The inclusion of assumed multiplier effects is also inappropriate. These are not net benefits because they are also realised in any alternative situation that involved people consuming housing at the same rate. Moreover, the existence of ‘multiplier effects’ is itself contentious and the study gave no indication as to how they were derived.

Failure to discount causes future benefits, such as capital gains, to receive too much weight.

E.7 Extra b en efits from public provision

As well as long-term financial savings, public provision has advantages when compared to rent assistance, vouchers or other indirect approaches.

Security of tenure

Public housing provides security o f tenure. Substantial changes in the private rental market would be required to provide this level of security, and it is not clear whether these changes would be advisable.

The security provided by public housing comes at a cost. It may lead to an over-consumption of housing where people remain in their present accommodation when their circumstances and needs change, for example, when children leave the family home.

The problem is avoided in the private rental market as people choose to move to minimise their expenditure when their needs are reduced. Presently, in public housing there are few incentives to move, but these could be introduced by an appropriate pricing policy.

Discrimination reduced

Private rental is unlikely to avoid problems of discrimination, even with legislative changes. Public provision is capable of reducing discrimination.

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Better maintained accommodation

The view has been put that maintenance is better in public housing. In private rental the landlord may gain, at a tenant’s expense, by delaying maintenance indefinitely. With public provision the incentives can be different because of accountability to government.

Reduction of search and a c c e ss co sts

With public provision there are reduced search and access costs. Access costs include rent in advance, connection fees and moving costs. They can be o f the order of $1500. Search costs are particularly high for those subject to discrimination by landlords (see Section E.2).

Better and more diverse choices

Those with low incomes, even when assisted, have less choice in the private rental market. Inquiry participants favoured the choice available in public housing.

Presently choices within public housing in terms o f both location and appropriateness are limited but this is being improved. It is not clear whether rent assistance could bring better outcomes without significantly greater expenditure.

Avoidance of profiteering and a hedge against sudden rent increases

In the private rental market there are opportunities for profiteering. Landlords can take advantage of unforseen changes in circumstances, for example, in Fremantle during the America’s Cup and Brisbane during the 1988 Expo. Governments incur costs in having to provide for those on low incomes who are disadvantaged by this opportunistic behaviour.

Public housing (and headleasing) provide an effective hedge against volatile movements in accommodation rental rates for those on low incomes. When substantial increases occur the need for increasing levels o f assistance is greatest. Unfortunately, this often coincides with other increased demands on government revenue. Ownership of public housing mitigates these problems.

If tenants pay only 20 to 25 per cent of a cost increase, as they would under effective rental assistance, there is less incentive for landlords to offer competitive rents and for tenants to seek them out. This moral hazard problem

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for both landlord and tenant can result in collusive behaviour where both share the proceeds o f ‘higher rents’.

E.8 R ent a s s is ta n c e and h ead leasin g

The arguments in the previous sections should not be taken to mean that there is no role at all for rent assistance or for headleasing from the private sector. Some needs for housing assistance are best met by means other than public provision.

Different needs

Individual’s needs for housing assistance vary. The short-term unemployed, for example, may find their needs best catered for by rent assistance in their present accommodation. It is neither practical or desirable to assist them by public provision. Also highly mobile people are not best served by public housing.

Given limitations on government expenditure and funding for capital works, it is sensible that public housing provision is targeted first to those who require long­ term assistance or have special needs.

Rent assistan ce

The comparative benefit of rental assistance is that it avoids the need for capital outlay, it is flexible and is easily implemented. Because there is no capital the immediate cost to the government is smaller than is the case with public housing, but the cost advantage is reversed in the longer run.37

As discussed in Section E.2, rent assistance relies on a residual private market that appears inadequately responsive to increased demand for low-cost housing and there may be financial risks for government if it relies heavily on it.

Headleasing

Headleasing, mitigates security of tenure, maintenance and discrimination problems. It does not require capital outlays by the government, and as there is lower risk and less monitoring required, it can be attractive for private investors.

37 Ownership for a limited time incurs higher average costs because of the cost of buying and selling the property. See the discussion in Section E.2 for the long-term cost advantages of ownership.

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If the scale o f headleasing increases this could attract new small private investors into the low end o f the rental market. Eventually a market in leased properties might develop. This would both provide more choice for consumers and an additional investment option which could be highly valued by some individuals — for example self-funding retirees.

* * *

The findings o f this Appendix are summarised in Chapter 5 and in Table 5.1, a Social Audit Table. Four housing assistance approaches (cash payments, effective rental assistance, headleasing and public housing) are assessed against a variety of qualitative criteria.

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This Appendix examines the performance of housing authorities in a number o f operational areas against the principles enunciated in the proposed national objectives — namely that the supply of affordable housing is commensurate with the need for it; that housing assistance is provided in a cost-effective,

efficient and equitable way; that choice is maximised; and that all forms of assistance are effectively integrated.

F.1 O bjectives o f h o u sin g program s

Most of the housing authorities were established immediately before and after the Second World War to build low-cost housing. This naturally led to a focus upon production issues. More recently the housing authorities have been required to meet broader welfare needs and to deliver housing services as targeted welfare assistance.

Although all States have agreed to a set of basic principles in the Commonwealth-State Housing Agreement (CSHA), there have been significant differences in the way they have used public housing to meet their community’s housing needs. There have also been problems making

operational the many public housing objectives (see Chapter 4).

Objectives are unclear

The objectives of the housing authorities — as described in their annual reports and other publicly available documents — are not, on the whole, specific enough to enable an observer to determine whether they are being achieved or not. Some housing authorities publish more detailed objectives

than others. All can improve.

The Australian Council of Social Service submitted that:

In general a number of these objectives have not been given clear operational meanings. As a result there has been very little ability to ensure that they have been achieved, or that SHAs have even sought to achieve them (sub. 85, p. 6).

Tapper stated that:

The size and importance of Homeswest is obvious enough; its success or failure is another matter. To judge this, we need both good information about its operation and some agreement about its objectives. Much has been done by its executive in the past

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five years to improve the management and administration of the organisation. But at a fundamental level its goals and strategy remain unclear (sub. 40, p. 2).

These comments would apply to most housing authorities.

Objectives som etim es conflict

There is sometimes conflict between public housing objectives. For example, there is conflict between the objectives to provide quality public housing in areas with good access to community facilities and employment prospects, and to provide housing for all people in housing need. Housing in central locations is more costly than housing on the fringe. Given that funding is

limited, there is a trade-off between providing fewer houses in central locations or more houses on the fringe.

The Master Builders Construction and Housing Association o f Australia submitted that:

In terms of location of public housing stock, we support the need for dispersion of rental stock, but also express concern about the increasing move by state housing authorities to provide public housing in inner city areas as part of urban consolidation strategy. We argue that this could actually widen the inequity that currently exists

between public and private rentals ... (transcript, p. 860).

On this point, the Independent Commission to Review Public Sector Finances (1993) in Western Australia examined some near-city developments by Homeswest. It found that construction costs appeared higher than other Homeswest projects because of structural costs, imion loadings, general site

servicing costs and inner-city contractors’ margins.

Virtually all the housing authorities have innovation in housing design and energy efficiency as objectives, and often are a market leader in these areas. Again there is conflict between spending on (risky) innovative housing and supplying affordable housing commensurate with the community’s need.

The Housing Industry Association said that:

Innovation in housing support programs is obviously an important goal but the financial viability should be rock solid. Public housing authorities should not use their programs to experiment with housing design or financial arrangements without adequate prior public debate and cost benefit assessments (sub. 92, p. i).

Virtually all housing authorities have regard to environmental issues such as energy efficiency. Energy efficiency, if pursued as part of a least cost approach to providing services to clients, is laudable. If it is part o f a broader environmental policy it ought to be clearly identified and paid for out o f that budget.

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Improving the energy efficiency of a public house will certainly reduce the costs for tenants in heating and cooling, but money spent on this is money that cannot be spent housing other people on the waiting list.

Conflicts in objectives arise because housing authorities are responsible for a wide range o f functions. These include selecting and managing tenants and providing the dwellings to meet the housing need.

Tapper argues that:

Homeswest is ... essentially a welfare agency. ... Its welfare functions are, however, being ‘managed’ by little more than guesswork. No publicly-argued criteria or standards are being applied, no evaluations conducted, no research commissioned This failure ought to be obvious to anyone in the organisation, but it is not; mainly, it

would seem, because Homeswest’s attention is fully occupied by its quasi-commercial component, and by its desire to improve its ‘image’ and its internal staff relations. The failure is also political (sub. 40, p. 19).

The Combined Pensioners and Superannuants Association of NSW stated that:

The public housing sector is also used by governments to: regulate the economy through the building industry; achieve urban design and regional planning aims; and achieve welfare and social aims.

All of these aims have costs which should not be apportioned to the public housing sector (sub. 39, p. 2).

The ACT Division of the Royal Australian Planning Institute submitted that:

Public housing has been used by governments to achieve a range of objectives other than providing accommodation for low income groups. These have included support to the construction industry, economic objectives and more recently urban consolidation objectives. Apart from the limited scale of this tenure and hence its capacity to achieve

these objectives, they have often been in conflict with the housing related objectives of the SHAs. One consequence of this is that the needs of consumers have not always received priority. There is a need to clearly define the role of public housing. This should be undertaken before strategies to improve its delivery are developed (sub. 139,

p. iii).

Conflicting objectives could occur where there is no clear separation of policy advice, tenancy management, the provision of housing and other functions.

F.2 M easuring perform ance

Performance can only be assessed against clearly defined objectives. The objectives of housing authorities throughout Australia, as defined in the CSHA and in their own annual reports and corporate plans, are vague and difficult to put into practice. Conflicting objectives further complicate performance

assessment.

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Housing authorities currently control, to some extent, the level o f demand for public housing (tlirough control of the waiting lists) and the supply of public housing (through construction and purchase programs). Poor performance in housing provision can be covered up by adjusting the size of the waiting lists.

Sharing responsibility for supported accommodation arrangements with community service agencies also clouds transparency. Accountability becomes a question of justifying unmeasured outcomes.

Inadequate data

There is a dearth of current and comparable data by which to assess the performance of housing authorities. Annual reports o f the housing authorities were found to be of little value and responses to the Commission’s questionnaire (see Appendix O) were partial. The areas covered by housing

authorities in responding to the questionnaire rarely overlapped, making assessments and comparisons difficult.

In a paper titled Sustainable h o u sin g p o lic ie s a n d the role o f p u b lic sec to r h o u sin g organisations, Williams described similar difficulties in his attempt to assess the performance of housing authorities in Australia:

The annual reports are of varied quality. Relatively little information is given about their [housing authorities] performance in terms of voids, turnaround times, repair response times and standards, tenant participation and complaints, rent arrears etc

indeed the whole panoply of the housing management function. Again there is little detail about staffing levels in the different areas of the organisation and the actual structure of their operations, eg, number of local offices and the usage made of them.

The absence of this detailed management information in the annual reports does not mean those data do not exist nor that the systems are devoid of standards, targets and actual performance measures. Indeed it is evident from the ACT Housing Trust and other SHAs that there is a great deal of internal management information which is used within the organisation but not reported on externally. In addition the new state housing plans begin to give a clue as to forward plans, detailed objectives and performance targets. These suggest that over time the SHAs will move to a much more performance driven regime in which questions of value for money, efficiency and effectiveness are more easily asked and answered. However these apparent gaps make it very hard for any independent observer to take stock of the SHAs and all the evidence suggests the DHHCS [Commonwealth Department of Health, Housing and Community Services] have the same problem (Williams 1992, p. 7).

The Housing Assistance Annual Reports which are the major source of comparable data on State housing authorities are not available in a timely fashion. This was noted by the Australian National Audit Office (1993, p. 11) in a recent preliminary study of the CSHA. The elapsed time for the tabling of the last seven reports in Federal Parliament has ranged from 49 to 75 weeks.

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It also recommended a range of measures to improve the content and presentation of these annual reports.

The Australian National Audit Office (ANAO) also questioned the role that the Federal Department o f Health, Housing, Local Government and Community Services (DHHLGCS) has played in monitoring and assessing the performance of State housing authorities. It observed that:

.. the types of data sought [by the Department from the States] had changed little in recent years and that compilation of that data occurred without much Departmental analysis. ... In the ANAO’s view, the absence of routine analysis of the data provided to the Department meant that opportunities to identify and promote best practices and value for money in administration of the States’ housing assistance schemes were being

overlooked (ANAO 1993, p. 12).

It recommended that in addition to the joint effort by DHHLGCS and the State housing authorities to develop performance indicators, the Department should set realistic targets against which performance by the States and the Department can be measured.

Indicators of performance

It is very difficult to establish useful performance indicators under the current arrangements. There are no uniform statistics. For example, housing authorities value their housing stock in different ways — most use historic cost (that is, what the dwelling and land cost when first built or bought); some use market value for land and historic cost for buildings; some use a net

written down value; and others use an approximation o f market value. Definitions also vary between housing authorities. The costs of renovation, for example, may appear in one housing authority’s reports under ‘maintenance’, but under ‘construction’ in another.

In a covering letter to its questionnaire response, the Victorian Department of Planning and Development advised that:

The Commission should be aware that some categories of information being provided need to be considered in light of the various definitions used by each SHA. The responses to the questionnaire are a direct product of how costs, functions or attributes are defined by each SHA for its own management and financial reporting purposes

For example the terms ‘administration’ and ‘maintenance’ are imprecise and costs assigned to each of these items in SHA budgets vary Comparisons between SHAs are, therefore, meaningless unless supported by detailed investigation of exactly what functions or costs are covered by these terms (sub. 227).

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Table F.1: Possible indicators of efficiency

State Administration as Maintenance Average length o f

a proportion o f total funding

per dwelling vacancy between

tenants

per cent $ days

NSW 8.9 495 na

Vic 19.6 1126 35

Qld 4.6 835 18

WA 4.9 540 12

SA 17.7a 675 na

Tas 12.0 1037 16

ACT 13.0 1639 na

NT 10.0 980 18

na Not available. a Based on recurrent housing program funding. Note: Based on 1991-92 data supplied by housing authorities. Source: Industry Commission.

The difficulty in measuring the performance of individual housing authorities flows over to comparisons between authorities. Three indicators that may allow performance to be compared are reported in Table F.l. There are significant variations between housing authorities in expenditure on administration per dwelling, maintenance per dwelling and in the average length o f vacancy between tenants, but it is unclear whether these variations reflect degrees of operational efficiency or differences in the definitions of

‘maintenance’ and ‘administration’ used by the housing authorities.

In recognition of the need for comparable statistics, the Commonwealth expanded the role of the Institute of Health and Welfare (previously the Institute of Health) in 1992. A Housing Unit was established to encourage greater comparability in the collection of data.

Outputs and outcom es

It is understandable that most of the progress in performance measurement by housing authorities has been in operational areas. There is a greater degree of quantifiable data in these areas. There is, however, a need to balance these indicators of throughput and activity with measures to cover outputs and outcomes.

The Australian Council of Social Service stated that:

Performance must be subjected to more rigorous outcome evaluation without imposing excessive control over inputs ... Financial and other operational information must be

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made far more transparent and comparable. This will not only make local housing operations accountable to their government clients — State and Commonwealth departments — but also to their direct clients — housing consumers and the local community. At the same time, it will provide stock and tenant managers themselves with more appropriate information on which to make the most effective and efficient

use of their available resources (sub. 85, p. 19).

Housing authorities currently measure performance by expenditure on programs and supply outputs (for example, stock o f dwellings) rather than the achievement of specific outcomes for clients.

Too many programs

There are currently hundreds of housing assistance programs and schemes (see Attachment F.l). These range from conventional public housing, through numerous forms of community housing, special needs housing, rent assistance, bond assistance and home ownership assistance. The vast array o f programs makes determining the flow of funds and clarifying objectives difficult,

impairing performance assessment.

It is difficult to discontinue programs. Once assistance is provided to a particular group in a particular way, expectations develop that assistance will continue.

Specific programs improve the targeting of assistance. There is, however, a trade-off between improved targeting and the increased costs in administering more programs.

The ACT Housing and Community Services Bureau submitted that:

Targeting is obviously better with a greater range of programs available, but this docs lead to greater administrative costs. There is a need for the Commonwealth to aggregate assistance, building greater flexibility into tied funding arrangements (sub. 109, p. 6).

It is likely that the administrative cost of the plethora o f specific programs outweighs their benefits. The Commonwealth and Tasmanian Governments, amongst others, have indicated their intention and desire to rationalise the current number of programs.

F.3 Tenancy m anagem ent

The role of housing authorities has changed from one o f building houses to meeting the housing requirements of people in need. While housing authorities have improved their performance in tenancy management over the last decade, the community generally is still far from satisfied.

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A report commissioned by the Commonwealth Government on the development of independent appeal mechanisms for tenants described the relationship between the community and housing authorities in the following terms:

There are widespread perceptions amongst consumers and consumer groups that administrative systems are very poor. Many examples of poor management and administration were cited, for example the fact that new tenancies can be in arrears within weeks, maintenance contracts not supervised, etc. SHAs were generally perceived as large, alienating, muddling bureaucracies which exercised significant discretion and could as easily be punitive and judgemental as benevolent and co­ operative. The role, behaviour and attitudes of counter staff and field staff were very often commented upon adversely. Lack of transparency in decision making processes combined with lack of clear policy combines to create a climate of anxiety and paranoia (Kent 1990, p. 6).

A number of participants submitted that the performance of housing authorities in tenancy management can be significantly improved:

Shelter Darwin recommends that Department policy be more clearly articulated. There is no publicly available document covering appeal or out of turn policy. The current internal appeals is inconsistent with other states and government departments.

A number of community groups have expressed dissatisfaction with the existing process in considering requests for Priority Housing. Concerns focussed on methods of assessment of applications, the lack of guidelines against which priority applications are assessed and the nature of appeal processes (sub. 20, p. 4).

Inquiry participants complained about the poor response to maintenance requests by housing authorities, ranging from roofs that have leaked for months to missing flyscreens, or lack of secure entries to high rise units. They also expressed dissatisfaction and frustration with the process for raising grievances with the housing authorities.

The Migrant Access Project of Shelter WA expressed concern that many non- English speaking people are unaware of Homeswest’s existence. Commenting on a survey conducted in Sydney of 700 migrants (which showed that none

used the multi-lingual pamphlets provided by the Department of Housing), it was stated that:

It is essential that housing agencies publicise their services through more appropriate channels than pamphlets — eg ethnic radio and newsletters; guest speakers at ethnic associations; employing bilingual workers with community contacts (sub 28, p. 3).

Various community groups expressed their dissatisfaction with the current arrangements for tenant participation, airing grievances or appealing decisions:

For the public housing program, there is no proper channel for potential public housing tenants to have a say in the public housing design and construction process. The involvement of residents in the day-to-day management is rather minimal

(Ettinger House - Fairfield Family Resource Centre, sub. 86, p. 5).

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Ironically one of the problems of public housing authorities is that they are well intentioned towards their tenants and because of this they have in the past believed that they will automatically know what is best for the tenants without bothering to consult with tenants. The Tenant Associations have been effective in disabusing the Victorian

public housing authority of this belief, and keeps reminding the authority that this is a fallacy (North Melbourne Tenants Association, sub. 81, p. 2).

Shelter SA submitted that:

For the public housing system to operate at an increased level of accountability, the following minimum steps are needed to further inform tenant and community input:

• An increased level of responsive consultative mechanisms to be established as an ongoing practice.

• Independent tenant representation on the SA Housing Trust board.

• Independent community housing organisations representation on the SA Housing Trust board.

• Increased resources to tenant and community housing groups to enable them to input into the consultative process effectively.

• Increase the quality and quantity of information to tenants, housing groups and the community.

These measures would increase accountability and assist tenants, housing groups and the community in general to make an informed and beneficial input into the management of the public housing system in South Australia (sub. 54, pp. 11-12).

Allocation

There are significant differences in the time applicants have to wait for different types of accommodation (for example, number of bedrooms) in the same region. For example, a household that qualifies for a three bedroom public house in the Blacktown-Mount Druit area waits an average of

19 months from application to receipt of a public house, while a household that qualifies for a two bedroom house in the same area waits an average of 22 months. A single person waits an average of 46 months (NSW Department of Housing 1992). This is inequitable.

The income eligibility criteria used by Australian housing authorities for applicants for public housing tend to discriminate against larger families. This means larger families become ineligible for assistance at proportionally lower income levels than smaller families if incomes are adjusted for family size.

There are also inequities between States on eligibility for public housing, and on eligibility for priority allocations (see Appendix J for further discussion of these and other allocation issues).

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Landlord and tenant legislation

Some housing authorities are specifically exempt from landlord and tenant legislation. This creates inequities in those jurisdictions between private tenants (who are covered by the Act) and public tenants (who are not).

In the ACT, the L a n d lo rd a n d T enant A c t 1949 protects tenants against arbitrary eviction, frequent rent increases, liability to have furniture removed for rent, and prohibits the payment of money for a lease other than as rent or bond. Tenants in ACT Housing Trust public houses are specifically excluded.

The ACT Housing Trust reportedly sees difficulties in applying tenancy law in the ACT as it stands to public housing:

The ACT Housing Trust considered that the application of tenancy legislation to both public and private housing could present difficulties and increased costs for the Trust which could reduce the resources the Trust had to provide public housing.

The Trust considered that the rules in the L a n d l o r d a n d T e n a n t A c t 1 9 4 9 which limited rent increases to once every 12 months for private tenants would pose considerable administrative problems for the Trust which would have to then make separate rent adjustments for its tenants who number in excess of 12,000 (The Community Law Reform Committee of the ACT 1992. p 13).

The Trust suggested that the legislation could be changed.

Rent setting practices

The rents public housing tenants pay are not related to the market value of the property, which depends on factors such as location, size and condition. This results in inequity since public tenants in similar circumstances can be allocated houses of significantly different amenity, but pay the same rent.

The quality of public housing is quite variable. The rental price charged for public housing often does not reflect the differences in quality or security of tenure between public and private rental.

Currently, muted pricing signals provide little incentive for tenants to seek housing appropriate for their needs. Most tenants (about 85 per cent) pay a rent related to their income. For them, the rent paid does not reflect the value of the service they are receiving because they are not affected by changes in the rental price of their dwelling. As public rentals rise, so does the amount of rebate received by tenants. This ensures that they continue to pay the same proportion of their income on rent.

Tenants paying these affordable rents have little incentive to change their housing circumstances as their income or family composition change.

As public tenants base their decisions on distorted or non-existent price signals, housing authorities are not able to easily discern what type of

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dwelling tenants value most. Tenants may not value some properties as highly as others relative to their real cost. If tenants paid rents that reflected the difference in the real costs of different properties, both tenants and authorities should benefit.

Because the rent most public tenants pay is limited to a fixed proportion of their income, the housing authorities do not receive valuable information on tenants’ preferences for housing location and characteristics (see Appendix I).

F.4 Property m anagem ent

Valuation of stock

For housing authorities to properly manage their stock, they need to have an inventory of each unit by location and value. Market values should be used as the benchmark for valuing property assets where possible. Market valuations reflect the opportunity cost to the housing authority of retaining that unit of

stock. A housing authority can then make informed decisions as to the best way to meet the housing needs of its clients.

As discussed above (see also Appendix H), housing authorities have different asset definitions and value their assets using different methodologies. These differences make it difficult to arrive at consistent estimate of the total value of public housing assets.

Poor incentive structure

The current arrangements provide few incentives for long-term asset management. A major reason for this is that housing authorities do not have to value assets using market benchmarks. Rents are sometimes based on historical costs of provision rather than current property values and ‘market

rents’. This has reduced rental collections from those public housing tenants who pay less than ‘market rents’, contributing to the deficits o f housing authorities. As a result, discretionary spending such as maintenance is squeezed.

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Regional management

It is unreasonable to expect a centralised manager to effectively manage stock over a large region with a wide variety of town sizes and climates. The Derby West Kimberley Shire stated that:

Housing management in the Kimberleys has been conducted for many decades from Perth. This has resulted in the current mix of poorly built, inappropriate and undesirable houses that is Derby’s housing stock. In recent years Homeswest has begun to regionalise its management, and for the first time Derby has a chance to have

the necessary planning and management it needs to develop its public housing. Today’s construction program now consists of well designed and built properties (sub. 70, p. 5).

Security of tenure

A problem for property management is the common perception o f public tenants that once they have a public house, they are entitled to stay there for life. The National Housing Strategy (NHS 1992b) pointed out that:

... public tenants do not necessarily enjoy life-time security of tenure. Many tenants sign a lease or ‘Acknowledgment of Tenancy’ which is usually silent on the term of the lease. In effect, this means that tenants may, in the absence of legislative provisions, have security of tenure for as little as two weeks, in consideration of rent being paid fortnightly in advance (p. 45).

The NHS went on to point out that one factor that may impinge on the occupancy rights of public tenants is:

... the general stance adopted by State housing authorities that public rental housing tenants have security of tenure within the sector, but not necessarily of a particular dwelling (p. 45).

As the composition of the household changes, there can be benefits in encouraging a public housing tenant to move to a dwelling o f more appropriate size. The CSHA does not oblige housing authorities to provide security of tenure over a particular property to a public tenant.

The Housing Industry Association submitted that:

The flexibility of public housing authorities to continue to manage their stock of dwellings to meet the changing need of their clients is severely hampered by policies which allow tenants to stay in a dwelling even if their family situation has changed. ... HIA is not advocating forced removal of tenants over-consuming housing without suitable tenant protection but there should be established set procedures, made known to prospective tenants, which can be put in place in such situations. Such procedures could include the offer of a more suitable dwelling in the neighbourhood and would be applicable for both expanding and contracting household situations (sub. 92, p. 9).

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The perception of security of tenure over a particular house is impeding the efficient use of stock. Public tenants should have security o f tenure to a preferred general area, but not to a specific house.

Shelter and amenity

Some public housing constructed to be of an appropriate standard in itself has been less than adequate in its setting. Broad-acre public housing developments with a lack of variety in unit designs, although less expensive to build, have sometimes exacerbated social problems.

These larger estates were thought to bring economies of scale in construction and administration. However, the extent of these economies or how they varied with the size of the estate do not appear to have been documented. The savings from building large estates can be illusory if on-going costs are passed

on to the rest of the community. For example, broad-acre developments may contribute to increased crime and social problems.

State housing authorities are adjusting to community expectations. There is increasing recognition that the objective is the welfare o f clients and that the physical assets provided by housing authorities are only to be valued in terms of their contribution to this objective. In some authorities the activities of tenancy management have been organisationally separated from other

functions.

This change of emphasis is important because individuals value housing not just for the shelter but for the amenity it provides.

Contracting out

The housing authorities now contract out the vast majority o f their construction and maintenance work. However, the Master Builders Construction and Housing Association of Australia said that:

We see a greater role for contracting out the project management and design work involved for the construction of public housing and certainly a number of our builders are very concerned about the cost-effectiveness and current tender processes involved with the provision of public housing stock (transcript, p. 860).

and while there has been significant gains in efficiency:

... there would appear to be further opportunities for achieving increased efficiency dividends from the greater involvement of the private sector. Some of the measures that have been suggested by Association members include:

• for core public rental stock, normal industry design and quality standards be used rather than specifications that exceed these;

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• SHAs to develop closer consultation with industry associations and builders in the provision of public rental stock; and

• in the medium to longer term, governments to put in place arrangements that will facilitate private sector financing and management of ‘normal’ public housing rental stock (sub. 94, p. 4).

The Commission accepts that it may be cost- and time-effective for housing authorities to conduct some maintenance internally.

F.5 Co-ordination

The efforts of the various organisations involved in providing housing assistance and support services could be better co-ordinated. The Western Sydney Housing Information and Research Network submitted that:

There are major problems in the co-ordination of housing between the State and Commonwealth Governments, this is particularly noticeable in NSW. Examples of poor co-ordination include the use of SAAP in NSW to provide residential care for State wards and young people aged 12-15, which results in less available

accommodation for the young people targeted by the program’s objectives (sub. 84, p. 3).

There are also problems of co-ordination between housing authorities and other agencies providing housing assistance:

The local Community Tenancy Scheme has also had problems not being told when its tenants are about to be housed by the Department. This has resulted in rental arrears occurring and placing a financial strain on their funds in the past (North Sydney Housing Interagency, sub. 177, p. 2).

Many participants referred to the need for better co-ordination of accommodation and support services. Singleton Equity Housing Ltd, for example, stated that:

There also appears to be a general lack of co-ordinating between departments responsible for the funding of support services and departments responsible for housing projects (sub 175, p. 2).

The Uniting Church Synod of Western Australia commented that:

... support funding other than SAAP funding for people with disabilities, for example needs much better integration We have had examples of much needed programs having the necessary housing stock available, but being unable to go ahead because the support dollars are not available from the many possible avenues available (sub. 32, pp. 1-2).

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Participants also referred to problems in obtaining housing once support services are found. The Spastic Centre of New South Wales stated that:

... people are not officially allowed to apply for housing stock until they can guarantee accommodation support. If New Service funding under the Disability Services Program is necessary and approved for accommodation support because the person has high support needs, there is an expectation that it will be spent during a limited time

frame. The person could well have to wait, however, for two or more years for housing stock to become available and this could jeopardise their accommodation support funding. There needs to be a recognition that both programs have lead times and applications have to be placed simultaneously to take account of this (sub. 11, p. 5).

In the ACT and Tasmania, the community service functions of government have been grouped together with the housing function in recognition of shared responsibilities and the increased efficiency in working together. The Commonwealth has also grouped these functions under the one portfolio.

Co-ordination amongst all the organisations involved in providing housing assistance and related support services is a matter addressed in Chapter 10.

F.6 Transparency and accountability

Transparency

Transparency should be a crucial aspect of the operations o f housing authorities. Because public money is involved, the public has a right to know what the options are and where money is being spent.

The subsidies provided to public housing tenants cannot be easily identified. This is especially so where housing authorities use internally generated funds from other areas of their operations, such as land banking, to cross subsidise public housing provision. This obscures the real cost to the community of

providing public housing. Governments and the community could make more informed decisions about how much public housing to provide if the size of the subsidy were known (see Chapter 3).

With regard to the NSW Department of Housing, Mant stated that:

The financial and accounting structure of the Department has denied any proper system of accountability. There seems to have been a deliberate strategy to aggregate the accounts of Landcom, the main surplus generating operation, with the remainder of the Department. The costs and performance of the various parts of the Department lie

buried under the aggregated information published in the annual financial statements. A demand by the former Premier that the Department disaggregate the accounts into separate businesses was never met (Mant 1992, p. 37).

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Participants complained about incomprehensible housing authority annual reports. The Australian Council of Social Service, for example, said that:

... as an operational point of view I think that's one of the key issues that State housing authorities generally haven't been accountable in a variety of ways. If you try and read their financial reports, it's — well, let's say if we use ‘opaque’ or ‘dense’ or ‘indecipherable’; I mean, you don't really know what's going on (transcript, p. 683).

Additional functions and objectives

Where the Commonwealth wishes to impose planning requirements on a housing authority, the extra cost of providing public housing in that way or location should be clearly identified and separately funded.

For example, Commonwealth ‘Building Better Cities’ objectives and requirements for housing authorities can cloud transparency and should be clearly identified and separately funded.

The Commission believes that housing authorities should not be involved in land banking and land development functions (see Appendix G). If they are, however, transparency requires that any transactions between the two activities be explicitly identified and separately funded, so that the full cost of land for public housing is accurately revealed.

Accountability is also clouded where housing authorities are required to support elements of the building industry or provide a counter-cyclical stimulus to the industry.

The South Australian Treasury, in discussions with the Commission, commented that, in hindsight, attempts to use public housing construction as a counter-cyclical boost to the building industry in that State had often ended up being pro-cyclical due to the time it took to get new projects up and running.

If a government wishes to assist the building industry, it should clearly identify the assistance and fund it separately from public housing.

As noted by Mant in relation to the Department o f Housing in NSW:

The primary objective of the Department should be to get the best value for the tenants it assists now and in the future. If the Government wishes to assist the building industry from time to time, then it should find other ways of doing so. To perpetuate a primary role of assisting the industry will continue to harm tenants and will deny opportunities to obtain assets which provide the best value for money (Mant 1992, p. 8).

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Accountability

Housing authorities have recognised that a greater degree o f accountability is required of them than in the past, and are slowly developing and implementing performance indicators.

The Queensland Department of Housing, Local Government and Planning commented that:

... like a lot of organisations we are struggling with the whole concept of output management, of performance measurement and performance standards, and I think we have moved a fair way down the track to developing a range of efficiency and effectiveness performance indicators and in increasing the publicity — not through our

annual report but through housing assistance plans and various reports on performance that are available on a regular basis (transcript, p. 1279).

The YWCA of Alice Springs recommended that:

Making the current system more responsive, with greater accountability, and creating more options for clients, should be of primary importance.

Performance indicators for the Department of Lands and Housing in the NT are not well publicised or understood (sub. 22, p. 2).

The Northern Territory Department of Land, Housing and Local Government said that for each of its programs, performance indicators are measured and reported upon regularly to the Secretary of the Department:

What we have in the department is a set of corporate directions, a number of strategies and programmed business plans — for example, a home ownership plan which sets the objectives and provides performance measures against those objectives. They are used as a management tool. We are, like everybody else, in the business of developing and

improving our performance measurement and indicators that we have in place and looking to identifying those that would be of interest to the public. So we are in the process, 1 guess, of getting our indicators in place first in our business plans and then looking to see what sort of indicators we can put in — for example, our annual report or various publications from time to time (transcript, p. 33).

Accountability can be increased by greater involvement of tenants. The Mackay Housing Interest Network submitted that:

We have had many experiences whereby tenant participation has increased the monitoring of events and acted as ‘watchdogs’, thereby increasing the accountability of the Government Department (sub. 26, p. 3).

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ATTACHMENT F.1

GOVERNMENT HOUSING ASSISTANCE SCHEMES

New South W ales

Public rental housing

Public rental housing

Crisis housing

Rental subsidies

Maintenance and dwelling improvements

Housing initiatives for aged people

Defence Housing Authority

Public equity partnership scheme

Housing for people with disabilities

Housing for Aborigines

Community housing

Crisis Accommodation Program

Special purpose housing (disability support) program

Community Tenancy Scheme

Community Housing Program

Special program for homeless young people

Hostel and care program

Tenant participation program

Housing estate workers

Home and Community Care

Independent Living Housing Scheme

Homes on Aboriginal Land Program

Home modification and maintenance sub-program

Private rental assistan ce

Rental Assistance Scheme

Rental Housing Assistance Fund

Tenancy service

Home ownership assistan ce

HomeFund low start affordable loan

HomeFund low start loan

HomeFund homeowner loans to tenants

HomeFund aged persons home update loan

Project homes scheme

Rent-buy scheme

Loansure insurance

State home purchase payment scheme

Mortgage assistance scheme

Land acquisition and development

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F.1 GOVERNMENT HOUSING ASSISTANCE SCHEMES

Victoria

Public rental housing

Public rental housing for families, elderly people, youth, singles and shared housing

Defence services housing program

Estate Improvement

Estate Security

Home Energy Advisory Service

Pensioner Rental Housing Program - Independent Living Housing Scheme

Moveable Units Program

Intellectual Disability Services State Plan

Community housing

Community Resourcing Program

Community Facilities Program

Joint Ventures/Project Partnership

Emergency Housing/Housing Information Services Program

Common Equity Rental Co­ operatives

Housing and Support Program

Rental Housing Cooperatives

Tenant and Community Support Program

Q ueensland

Public rental housing

Public rental housing

Supported Crisis Accommodation

Non-supported Crisis Accommodation

Regional Housing Councils

Rooming House Program

Group Housing Program

Aboriginal Housing Program

Community Housing Program

Private rental assistan ce

Bond Assistance

Housing Establishment Fund

Home ownership assistan ce

Home Opportunity Loans Scheme

Shared Home Ownership Scheme

Priority Support Loans Scheme

Mortgage Relief

Home Renovation Service

Disability support program

CAPIL scheme

Urban Homesteading

Deposit Assistance Scheme

Homes Now

Enforcement o f housing standards

Individual Self Build Program

Group Self Build Program

Disability housing strategy

- Capital works program

- Home modifications program

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Community housing

Community Housing Program

Cooperative Housing Program

Crisis Accommodation Program

Youth Headleasing Transfer Scheme

Community Housing Partnership Program

Private rental assistance

Housing resource services

Community Rent Scheme

W estern Australia

Public rental housing

Public rental housing

Aboriginal Rental Housing (Urban and Remote)

Rental Rebate Scheme

Community housing

Crisis Accommodation Program

Emergency Housing

Lodging Houses

Community Housing Program

Youth Focus Program

Joint Venture Housing

Community Residential Accommodation Program

Community facilities accommodation program

Special projects

Tenant participation

Bond loan program

Rent subsidy scheme

Home ownership assistan ce

Home Ownership Made Easier program

HOME (shared) scheme

Deposit assistance

Mortgage assistance

Private rental assistan ce

Bond assistance and rent relief scheme

Rental support scheme

Home ownership assistan ce

Keystart loan scheme

Housing Loan Guarantee Act

Start-a-home scheme

Mortgage support

Deposit assistance program

Cash assistance program

First mortgage

Senior citizens home purchase

Aboriginal home purchase

Home buyers' guarantee scheme

Flexible deposit scheme

Shared equity scheme

Wisechoice program

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South Australia

Public rental housing

Public rental housing

Aboriginal fringe dwellers program

Aboriginal Rental Housing Program

Housing for the disabled

Housing for non aged single persons

Youth housing

Aged persons housing

Priority housing

Independent Living Scheme

Youth housing - direct lease scheme

Housing for single parents

Rental rebate scheme

Boarding houses

Community housing

Joint Ventures

Co-operative Housing Program

Community Housing Associations Program

Community Tenancy Scheme

Crisis Accommodation Program

Tasm ania

Public rental housing

Public rental assistance program

Rental rebate scheme

Private rental assistan ce

Rent relief scheme

Emergency Housing Office

Housing Improvement Act

Rent control

Home ownership assistan ce

Homestart lowstart

Home Ownership Made Easier program

Homestart top-up loans

Homestart refinance loans

Purchased home program

Office of government employee housing program

House sales program

Progressive purchase plan

Special home ownership plan

Rental purchase scheme

Refinancing

Mortgage relief scheme

Homesure

Community housing

Crisis accommodation program

Community Housing program

Rental housing cooperatives

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Aboriginal housing program

Neighbourhood houses program

Supported Accommodation Assistance Program

Youth homelessness

Accommodation services program

Private rental assistance

Mortgage And Rent Assistance Program

Financial support

Rent relief

Australian Capital Territory

Public rental housing

Rental assistance program

Rental rebates

Priority housing

Rental relief

Youth housing

Rental accommodation facilities

Property development sub-program

Jerrabomberra Boarding House

Community housing

Community Organisation Rental Housing Assistance Program

Crisis Accommodation Program

Northern Territory

Public rental housing

Rental and management program

Bonds and relocation assistance

Substandard Housing Control Act

Home ownership assistan ce

Home purchase scheme

Mortgage assistance

Voluntary early repayment scheme

Rent purchase scheme

TDA Home ownership finance scheme

Shared equity - people with disabilities

Singles share accommodation scheme

Community Housing Program

Private rental assistance

Rent relief

Home ownership assistan ce

The Commissioner for Housing Loan Scheme

First or second mortgage

Refinancing loans

Mortgage relief

Income support

Industry housing assistance scheme

Pensioner rental housing

Part rental rebate

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Aboriginal housing

Aboriginal Housing Advisory Service

Aboriginal land servicing

Serviced land availability plan

Town camp housing and infrastructure program

Public housing maintenance program

Public housing acquisition program

Construction and redevelopment upgrading

Housing client services

Community housing

Supported Accommodation Assistance Program

Crisis Accommodation Program

Community Housing Program

Private rental assistan ce

Mortgage And Rent Relief Scheme

Home ownership assistan ce

HomeNorth Easy Start First Mortgage Loan Scheme

HomeNorth Sales Scheme

HomeNorth Early Start Deposit Assistance Scheme

Loan Transfer Scheme

Note: This program list was compiled from the 1990-91 annual reports of the State housing authorities. Where housing authorities have provided updated information it has been incorporated. However, the list may be incomplete or include programs no longer in existence.

Source: Industry Commission.

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W here transparency is lacking, p erfo rm a n c e becom es d ifficult to m easure. W ithout a g re e d p erfo rm a n ce m easures, acco u n ta b ility suffers. W ithout clea r go als a n d appropriate p e rfo rm a n c e m easures, there is no w ay to determ ine the effectiveness o f a h o u sin g policy.

F ailu re to determ ine effectiveness m eans that efficien cy becom es at b est irrelevant, at w orst unknow able.

Each State housing authority in Australia has its own historical, economic, social and political context, and each has its own unique arrangements. Therefore, the concepts discussed in this appendix — accountability, efficiency and responsibility — must be considered as a continuum along which each State

housing authority may currently be arrayed.

G.1 A im s o f organisational reform

The performance of an organisation is very much influenced by incentives. In turn, incentives are linked to the structure of the organisation — does it promote responsibility and accountability?

R esp o n sib ility must be clearly defined. Clear demarcation of responsibility is required if accountability is to be demanded.

A cc o u n ta b ility can be seen as flowing upwards (within the organisational hierarchy, and from the organisation through its board to the Minister, to the Cabinet and to parliament), whilst responsibility flows downwards. Managers should only be held accountable for those decisions for which they have

responsibility.

Accountability is enhanced by transparency. This in turn calls for timely, relevant and comprehensible information about the performance of the organisation.

There are three main dimensions to performance relevant to public housing:

• E ffectiveness — the degree to which aims have been fulfilled and whether they have been fulfilled at least cost.

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• E fficien cy — involves both cost-efficiency (that is, internal efficiency) and allocative efficiency (that is, the best use of resources generally).

• E q u ity — embraces elements o f both efficiency and effectiveness in addition to the normal concepts of fairness and social justice.

Without a clear understanding of costs it is difficult, if not impossible, to determine what is an equitable distribution o f publicly owned goods. Subsidies must be explicit if equitable outcomes are to be achieved.

The last important determinant of accountability and responsibility is the will of the owners (in this case governments) to demand it. Without this, structural reform is pointless.

Clarification of objectives

Mant found evidence of quite unrelated objectives in the procurement process of the NSW Department of Housing. These include:

• Solving the “housing shortage”.

• Building specific solutions to meet specific needs of today, regardless of what may be the needs of the future; building to solve the problem of the next person on the waiting list.

• Supporting the building industry directly.

• Demonstrating new designs, achieving urban consolidation, urban renewal or heritage conservation.

• Satisfying the long-term needs of anticipated tenants and thereby adding positively to the asset base of the rental activity (1992, pp. 31-2).

Most State housing authorities have a similar range of objectives.

Efficiency, effectiveness and accountability can all suffer when there is a large menu of objectives. It is more difficult to identify and assess inefficiencies, thereby reducing the likelihood that they will be corrected. If objectives are not operational and the trade-offs between objectives (for example better design

versus more houses) are not explicit, the effectiveness o f programs becomes difficult to measure (Forsyth 1991, p. 6).

Given the difficulty in measuring performance, accountability becomes a question of justifying unmeasured outcomes.

Accountability

The accountability of government agencies relies on the reporting of performance to the parliament (which represents the owners). A Minister is

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accountable for performance only insofar as it is measured, and measurement calls for performance indicators.

The current structure of State housing authorities provides no clear delineation of where policy ends and administration begins. This may be acceptable in a small organisation, a department producing simple outputs, or a policy (central) agency but not to a complex service delivery agency such as a housing

authority.

If a Minister is held responsible for what he or she cannot control, then the incentive for the Minister is to obscure outcomes thereby reducing responsibility. The need is to hold the Minister responsible for monitoring the performance of the agency, not for the performance itself. The incentive for the

Minister would then be to clarify rather than obscure performance. A Minister should be responsible for administration in general, but not day-to-day administrative matters.

Accountability is enhanced where spheres of responsibility are clearly mapped out. A Minister should be responsible for setting policy, selecting board members (in the case of statutory authorities) and monitoring performance; all tasks that a Minister can properly be expected to control. The Chief Executive

Officer (CEO) should be responsible, through a board if appropriate, to the Minister. All three should be responsible to parliament, the Minister directly, and the others usually through parliamentary committees. The CEO would not

be directly responsible to the Minister as this undeimines the authority of the board. It is also important that the board be independent of both the Minister and the CEO.

The role of commercialisation

Commercialisation will increase effectiveness only in areas where some commercial focus can be fostered such as land banking and property management. Effectiveness in the provision of public housing, and in matters of heritage conservation, environmental sustainability and support to the building industry, is unlikely to be directly affected by the adoption of the

commercial model p e r se. But there should be significant indirect gains if property management is made more effective by such means. It would lead to a better match of supply with need, and thereby contribute to cost-effectiveness.

Adverse effects can arise from commercialisation if pressure to achieve financial returns distorts the outcomes of public housing. This danger would be all the greater if commercial property management and non-commercial tenancy management activities were carried out within the same organisation. Full

corporatisation of property management under Corporations Law is an option,

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but it needs to be demonstrated that the social objectives of governments will not be compromised.

G.2 R ecent reform initiatives

The New Zealand approach

New Zealand has taken a radical approach to public housing reform. It has combined the public housing subsidy, rent assistance and mortgage assistance for private tenants into a single Accommodation Supplement that can be used for public or private rental and for home ownership. The Accommodation

Supplement is administered by the Department of Social Welfare (equivalent to the Australian Department of Social Security).

Under this system, having lost monopoly provision of subsidised housing, small teams, responsible for about 1200 houses, compete directly (at least in theory) with private providers. As they are obliged to charge market rents, it is expected that they would compete on service.

The new company set up to provide housing is Housing New Zealand Ltd (HNZ). Its objectives (as set out in the enabling legislation) are to be:

• As profitable and efficient as comparable businesses that are not owned by the crown;

• An organisation that exhibits a sense of social responsibility' by having regard to the interests of the community in which it operates; and

• A good employer ( H o u s i n g R e s t r u c t u r i n g A c t ( 1 9 9 2 ) part. 1, s.4).

Clarification of objectives

In New Zealand the commercial imperative has dominated. HNZ is required to be ‘as profitable and efficient as comparable businesses that are not owned by the Crown’. But there are no comparable businesses (in Australia or New Zealand). Private providers at the low-cost end of the rental market are either

small individual investors, or charitable organisations, neither of which can be used for valid comparisons.

Potentially more important is the conflict between the objectives set out in the enabling legislation for HNZ, specifically between profitability and social responsibility. There is a cost attached to social responsibility. The question is how to manage the trade-off. A paper by the New Zealand Department of

Social Welfare states that HCNZ (as HNZ was then known) was put on ‘a purely commercial footing’ (NZDSW 1991, s. 3.8). The social responsibility

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criterion is not mentioned at all in the paper. It is claimed that (supported only by a means tested subsidy to low-income earners) this will lead to the best possible outcome.

The requirement that HNZ be a good employer (New Zealand H o u sin g R estru ctu rin g A c t 1992, s.4) may also cut across the profitability objective. If its personnel policies are dictated by commercial objectives, there is no need to specify that it be a good employer. If the requirements go beyond this, it is

likely to lose some of its competitive edge.

New Zealand has greatly simplified its delivery system. It has put all responsibility for welfare into the one department.

Accountability

The New Zealand model improves accountability by reducing the function to simply maximising profitability. As profitability is easy to assess, accountability becomes quite straight forward. However this is achieved by disregarding potential medium- and long-term outcomes. Mant (1992, p. 49) quotes several potential outcomes of over-emphasing financial returns:

• discrimination against high risk groups;

• reliance upon ever cheaper, and often marginal, alternatives; and

• eventually, an end to the public provision of housing.

The rather vague aim of maintaining a sense o f social responsibility whilst pursuing ‘purely commercial’ objectives has the potential to blur accountability. That HNZ and the Department of Social Welfare are both responsible for the welfare o f public tenants does not make the government doubly accountable, the

opposite is more likely to result.

By moving to a demand-side only response, the New Zealand Government has reduced its responsibility. It no longer seeks to ensure that all New Zealanders have access to affordable and appropriate housing.

The New Zealand Government has pinned its hopes for increased efficiency on the competition that is expected to come from the private sector. This competition, at least in the Australian context, is unlikely to be strong enough without significant additional government inducement. As government

provision in the long-term is cheaper than rental subsidy (as argued in Appendix E), the long-term outcome must be reduced effectiveness and efficiency .

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Equity

The gains in equity claimed by the New Zealand Government (NZDSW 1991, ss. 3.2-3.3) are questionable. If the government wants to increase private sector involvement, yet government provision is more cost-effective, then the total number of people assisted must decrease. The increased horizontal equity between private and public renters may come at a cost to the welfare o f low- income people as a whole.

Tenure implications

The question remains, can HNZ be competitive with the private market whilst offering any kind of tenure security over and above what is offered by private landlords?

The 'Mant' approach

The model which Mant (1992) has outlined for New South Wales goes some way to redressing the problems in public housing discussed in Appendix F. It must first be said that it is an interim model only. The structure which Mant

anticipates could develop from the interim model resembles the Commission’s preferred option, with one significant difference (discussed below).

Mant (1992) proposed that the (NSW) Department of Housing be split into three parts:

• The first part would be made up of consumer protection agencies. He suggests they should be independent of the other activities, with many of them possibly being administered by the Department of Consumer Affairs.

• The second part would be a Ministry of Housing. This would have several broad functions serving as:

- a policy agency giving advice on all tenure forms;

- a contractor of services from the ‘Department and other rental housing providers’;

- the funding agency of assistance payments;

- the manager of Commonwealth-State housing agreements; and

- promoting, developing and generally supporting alternative tenure forms.

• The third part, the Department of Housing, would retain most o f the remaining functions. These include property and tenancy management, land banking, land development and sales, state-wide tenancy applications database, corporate and technical services and home finance. The

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relationship between these functions was seen as a ‘federation of semi- autonomous management units’ (Mant 1992, p. 71). Each of these would have separate budgets. Support services would be provided on a user-pays basis.

Regional housing offices would serve as property and tenancy managers. Each office would enjoy significant independence.

The main difference between the Mant approach and the Commission’s proposal is the separation of tenancy and property management. Under Mant the same body would control both supply and demand. The effect would be to mix commercial and welfare objectives. Trade-offs between these objectives,

which are clearly matters of policy, would remain embedded in administrative decisions. There is a possibility that in the long-term, one perspective (welfare versus commercial) would come to dominate.

An important gain arising from the restructuring required in the Commission’s model would be that clients are looked after by a tenancy manager concerned about the delivery of services and dedicated to equitable distribution of publicly owned goods. An holistic approach to the delivery o f welfare services is more

likely to be achieved.

Furthermore, the cost of unrelated objectives could no longer be hidden, and therefore borne by, the public housing sector.

G.3 The C o m m ission ’s proposal

Most of the State housing authorities have been taking steps to separate tenancy and property management as business units within the one organisation. For example, the Queensland Department of Housing and Local Government has established a business unit called the Housing Production Service responsible

for producing and maintaining public housing as required by a Housing Services Group. The Housing Services Group is responsible for the day-to-day management of tenants.

The Commission believes that reform should go further. Public housing property management should be commercialised and tenancy management should be institutionally separate from property management. With these further changes, improved accountability, transparency and co-ordination

between agencies, as well as better incentives and enhanced client service would follow. The reforms involve the following:

• Creation of a separate body (options are explored below) with the task of managing the housing stock. This property manager would be charged

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with ensuring the supply of housing to the tenancy manager. The property manager would also be responsible for the maintenance of stock.

• Creation of a tenancy manager which would lease properties from the property manager or private landlords and be responsible for tenancy management generally. Options for the institutional location o f this tenancy manager are explored below.

• Consolidation of housing policy functions into an organisation separate from the tenancy manager and the property manager.

• Relocation o f land banking and land development activities to other agencies.

• Relocation of consumer tribunals to an appropriate department such as consumer affairs.

Separation of tenancy and property management

The separation of property and tenancy management is recommended:

• To reduce the scope for cross-subsidisation so that the full cost o f public housing becomes explicit. Only then can its merit relative to other government programs be fully assessed.

• To encourage a commercial culture for the property manager and a client focus for the tenancy manager.

• To prevent either commercial or welfare objectives dominating the other. This is important when property management is fully commercialised and is required to pay a dividend to government.

The proposals are consistent with the thrust of micro-economic reform in other parts of the public sector.

Policy functions

Strategic policy would be set by an organisation separate from property and tenancy managers, perhaps a department or ministry o f housing whilst operational policy would be set by the head office of the tenancy or property manager. The strategic policy unit would control funding and also be responsible for monitoring the way funds are spent.

Tribunals

State housing authorities are currently responsible for administration in relation to public housing tenants’ complaints and appeals. It is appropriate that tenants’, and applicants’ complaints about decisions should first be lodged with State housing authorities. If tenants or applicants are dissatisfied with their

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treatment an independent arbitrator is required. However, there is an obvious conflict of interests when the final arbitrator is also one of the protagonists (see Downs Active Residents and South-West Tenants Group, transcript p. 2625; Mant (1992), Sussex Street Community Law Service Inc., sub. 272). The criteria to be observed if an independent tribunal is to be effective are given in Box G .l.

The tribunal should be located in a department such as consumer affairs. Consumer affairs departments are already involved in private tenancy conflict resolution in several States. The public housing tribunal could be amalgamated with private tenancy dispute tribunals. Public tenants should have at least the

same rights as private tenants (The Community Law Reform Committee of the ACT, 1992). Additional rights may also apply to public tenants.

Box G.1: Principles for an independent tribunal

The Community Law Reform Committee of the ACT (1992, p. 108) found that a tribunal would be effective and efficient if it:

• Is able to hear and decide matters speedily;

• Reaches outcomes which are just and deals fairly with those who appear before it;

• Is inexpensive, efficient and accessible to all;

• Facilitates agreement when the parties can fairly agree;

• Provides results which are practical and lasting;

• Is consistent and predictable in its decision making; and

• Maintains records of reasons for decisions and statistics so the public is aware of what it does and what the law is.

G.4 Institutional and adm inistrative arrangem ents

There is a range of institutional and administrative arrangements that could accommodate the proposed separation of the property manager and tenancy manager. These are discussed below.

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Property management

The property manager would have a commercial focus. Its primary role would be to manage the public housing stock leased at a commercial rate to the tenancy manager. It would buy, sell and lease properties to meet the needs of the tenancy manager. One limitation to commercial activity would be that it would have to obtain approval from the tenancy manager before it could sell

surplus properties.

Operations would be decentralised, with power devolved to regional offices. This would allow for better matching of supply with local demand. It could also allow a degree of competition between regions (even if only on the basis of performance measures). Many State housing authorities are already moving

down this path.

The property manager could manage other State-owned housing stock and headlease properties to other government departments, for say employee housing.1 It would be appropriate for the property manager to lease some of its stock to local councils and non-government welfare organisations for

community housing.

Options for the location of the property manager are considered below. Under the first two the property manager would be established as a statutory corporation. Regardless of the model adopted, the property manager would require adequate capitalisation.

The options include:

1. A national government trading enterprise (GTE):

Under this option States would transfer their stock of housing to a corporation that would report to a council of ministers. Ownership would be shared according to the value of the contribution of stock. This means that ownership and provision of public housing stock would no longer be linked. The stock portfolio may extend beyond public housing to some or all of government employee housing and possibly Defence Housing Authority stock.

1 This activity should be limited. Too much dependence on private market provision would lead to increased prices thereby hurting those who governments seek to help. Furthermore, as direct government provision of low-income is financially cost-effective for governments, this should be reflected in the form of housing assistance.

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2. A State agency set up solely to manage property:

Under this option, the property manager would be set up in each State as a government owned corporation, possibly incorporated under Corporations Law.

3. A business unit located within a department:

Under this option, the property manager would form a separate business unit in a department responsible, for example, for regional and urban development or government asset management (such as the Property Services Group in NSW).

Consideration of options

Under Option 1, the potential for arbitrary interference in the day-to-day activities of the property manager would be diminished, as would the likelihood that States could saddle the property manager with untenable levels o f debt.

The Commonwealth may see advantages in fostering a national approach but the States may not favour Option 1 without some Commonwealth inducement. The ownership structure could be complex.

The corporatised structure applying to Options 1 and 2 would favour the pursuit of commercial objectives o f the property manager.

The main advantage of Option 3 (cited by participants to this inquiry) is that it allows for co-ordination of housing with planning activity. However, the commercial focus of the property manager should exclude it from ‘special consideration’ in housing policy. If public housing were to be used as an

instrument of government policy, the property manager would need to be fully compensated if government requirements impose additional costs. Under Option 3, the potential for cross-subsidisation between ‘commercial’ activities would remain.

Tenancy management

The tenancy manager should have a client focus. Its prime responsibility is to ensure that appropriate housing assistance is available to meet the needs of people requiring housing. To do this the tenancy manager would lease properties, under long-term contracts, from the property manager or from the

private sector at a commercial rate. It would then sub-let to tenants selected from waiting lists or to existing tenants transferring within public housing.

The tenancy manager would negotiate with the property manager on the quantity, type, location, timing and quality of stock required. The tenancy

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manager would set appropriateness standards and would ensure that the stock submitted by the property manager was of that standard. The tenancy manager would have to ensure that the stock was maintained at the appropriate standard.2

The tenancy manager would manage the waiting list and collect rents, but would also assist people to meet their housing needs. This would involve ensuring that tenants and applicants have access to programs that would best

satisfy those needs. The tenancy manager would be responsive to clients’ changing needs, not just their needs upon entry to public housing.

The tenancy manager would provide information to policy units on the effectiveness of both support programs and housing assistance programs.

Options for the location of the tenancy manager include:

1. A housing authority with the property management function removed.

2. A ‘stand alone’ tenancy management agency.

3. A separate unit within a department providing community services.3

Consideration of options

Option 1 would be least costly as it requires the least change. However, it could result in too little change in the current corporate culture. It would allow the continued co-ordination of home ownership assistance and public housing

Option 2 has the advantage that it involves a break with the past. It would have relatively simpler, and therefore clearer, objectives.

Options 1 and 2 would reduce the fear of increased stigmatisation that many participants voiced in regard to Option 3. Co-ordination with other service departments would have to be through higher level policy co-ordination groups. This would be unlikely to achieve the level o f co-ordination sought by participants such as Queensland Health (sub. 335).

The integration of the provision of welfare services with the provision of housing is laudable. ... It is the view of the Program Development Branch that the inclusion of health services and management in this process will further enhance the appropriate provision and integration of services to the community (Queensland Health, sub. 335, P 1)

2 This may not be the same as the property manager’s responsibility for maintenance. The property manager may decide that the age or standard of a particular building makes it no longer worthwhile to spend funds on maintenance. In this case the tenancy manager may wish to take on all maintenance liability in order to keep a particular property available.

3 Programs that could be co-located with public housing tenancy management include Supported Accommodation Assistance Program, Home and Community Care, Disability Services Program, community health programs and other State support services.

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Option 3 would promote the co-ordination in ways which develop an holistic approach to people’s needs, including non-housing assistance.

The majority of tenants in public housing do not require additional support services. However the need for support services is increasing as more aged and sole parent tenants enter public housing and as access is extended to homeless youth, people with intellectual, psychiatric and physical disabilities, and people

arriving from crisis shelters. Indeed this already appears to be the trend (see South Australian Health Commission, sub. 366, p. 2).

Option 3 would strengthen the co-ordination of support services at the policy and planning level. This would allow for trade-offs to be made between different support services based on need, and more efficient and effective delivery o f services to people needing more than just accommodation. The assessment o f peoples’ needs would be done once only, reducing cost to both government and clients. Single point access would also benefit people who are

less able to deal with complex government structures.

However, there are important objections to Option 3. First, it can be difficult to provide services that involve counselling clients when those services come from a department that is responsible, for example, for deciding whether or not to evict a tenant. Even if a department has procedures to prevent information

flowing between functional areas, tenants may not perceive this to be the case. Second, it may give one department too much power over the lives of individuals. Third, the large number of support programs could diffuse focus upon assisting people in need.

Other objections (voiced by participants) include: the greater potential for stigmatisation of public housing tenants as welfare recipients, and the potential loss of co-ordination with other housing related programs.

G.5 R equirem ents for s u c c e s s

This section focuses mainly on the property manager, but is applicable to other corporate bodies responsible, for example, for land banking.4

4 The Commonwealth Management Advisory Board and its Management Improvement Advisory Committee has produced a series of publications covering in more detail some of the issues discussed in this section.

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Legislation

The enabling legislation to establish the property management authority should set out the broad objectives and role o f the authority, together with reporting requirements, accounting method and details of the structure o f the board and its responsibilities.

The charter for the property manager should be to meet the needs o f the public and community housing sectors in an efficient and professional manner. The corporate objectives need to be:

• comprehensive;

• measurable (measures may be qualitative);

• outcome orientated; and

• complementary.

The importance of corporate objectives is evidenced by the widely differing outcomes between States with similar objectives. The disparity between stated objectives and outcomes in some cases suggests that the link between objectives and performance is weak.

Corporate plans and goals

With corporate objectives defined in the enabling legislation, corporate plans and goals would be negotiated between the Board and the Minister. The plan would define the responsibilities of both sides of the agreement and would be a form of contract between the Minister and the Board. Once approved, the government would be committed to support the plan and the Board committed to achieve the outcomes specified in the plan.

The corporate plans of the property manager need to be complementary to those of the tenancy manager. They should set out the limits to its trading activity, that is, with whom and to what purpose it may trade.

Performance indicators

Performance indicators should be in place from the start so as to assess the effectiveness o f the new organisation and the gains from the proposed reforms.

The effectiveness of performance measures depends on how well they measure intended and unintended outcomes. However it must be remembered that performance indicators in themselves create incentives and thereby can alter behaviour (Carter, Klein and Day 1992, pp. 166-7).

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Indicators are just that — they pose questions as often as they point to solutions. They are not absolute measures. This means they must be treated with some flexibility.

Performance indicators can be divided into those that measure outcomes (effectiveness) and those that measure processes (efficiency). Both are required.

To be effective, performance indicators must be linked back to corporate goals. That said, they must capture the whole output for which the organisation is responsible but only that which is within the control o f the organisation. There is often a tendency to concentrate on two or three indicators such as rate of return, labour productivity and total factor productivity. Apart from the fact that these can be manipulated, they are only partial measures of performance

and say very little about the effectiveness of the organisation (IC 1993, Appendix J; IC 1991, p. 92).

When assessing the effectiveness of the tenancy manager, outcomes for low- income people in general, and tenants in particular should be included - economic and financial indicators only measure the process of meeting these outcomes. These social factors should be measured in order to ensure their

achievement and to affirm their importance in the corporate culture.

It is important that a core set of performance indicators be available that are consistent across States and over time to provide information on trends and to allow comparisons between States. This is one of the tasks o f the Standing Committee of Commonwealth and State Housing Officials. In addition to a core o f standard quantitative indicators, there should also be State and perhaps region specific indicators.

For the property and tenancy managers, the three broad areas that need to be measured are financial performance, internal efficiency (asset and labour productivity) and outcomes for clients (such as client satisfaction, responsiveness to clients, and specifically for the tenancy manager, equity and

targeting issues).

Some useful indicators have already been developed by State housing authorities in their annual reports, corporate plans and Housing Assistance Plans. These require further development. A confidential Coopers and Lybrand report, commissioned by the housing authorities, identified financial

performance indicators for public housing and other indicators have been

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proposed by the Australian National Audit Office.5 The Queensland Department of Housing, Local Government and Planning in its Housing Program Plan 1992-93 has produced some useful indicators on equity and client satisfaction.

Those measuring and using performance indicators need to have some ownership over them and be involved in their development. In developing indicators, management is encouraged to analyse and reassess its objectives. This is in itself valuable.

Reporting requirements

Annual reports are a useful tool of accountability. They serve not just to hold the organisation accountable to Parliament, but also to interested parties and to the public. Apart from the usual financial information, they should contain a report o f non-financial performance showing achievement against goals, and set out the next year’s targets. This reporting regime should give the Board and the Minister enough information for effective monitoring.

Auditing and review

The audit process of government organisations often does not extend to non- financial performance. When it does (for example, in Western Australia) the audit process can enforce discipline on the selection of performance indicators.

The auditor could be the government auditor. Private sector auditors are often used as consultants by government instrumentalities in which case the integrity of the auditor could be compromised.

The property and tenancy management agencies should be subject to Freedom of Information legislation and open to review by the Ombudsman where applicable.

Adequate capitalisation of the property manager

Adequate capitalisation is important. The Defence Housing Authority found that its capital base would mean that ‘within two years, solely as a result o f the interest burden, the Authority will be operating at a loss’ (Kirkby-Jones 1990, p. 17). Without an adequate capital base, it is difficult to foster a commercial

5 Following the Auditor-General’s 1993 report into the CSHA, the Australian National Audit Office provided the Department of Health, Housing, Local Government and Community Services with some possible indicators.

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culture. Furthermore, capital deficiency will eventually lead to the stock being run down. If governments wish to reduce their involvement in public housing they should make that decision explicit.

With adequate capitalisation and a pricing policy as recommended by the Commission, the authority can and should be required to provide a return on equity and to meet the full cost of borrowings whilst maintaining the value of the stock.

It is important that a corporatised property manager not be used as simply the means of moving government debt off budget.

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H.1 Valuation

An important precursor to any assessment o f State housing authority performance is to value property portfolios. Table H .l summarises the book values o f State public housing assets.

Table H.1: State housing authority asset valuation, 30 June 1992

State Valuation

Value per house Valuation method used

$m $

New South Wales 12 982a nc Market value: houses and landb

Victoria 4 768 77 700 Market valuec

Queensland 1 213 nc Historical cost: buildings, office furniture

483 Market Value: land

Western Australia 900 25 500 Historical cost (after depreciation)

South Australia 3 600 58 200 Values used for property rating1*

Tasmania 575 40 500 Historical cost

Australian Capital Territory 1 400 113 300 Market value®

Northern Territory 729 77 700 Market valuef

np Not provided. nc Not calculable. a Value from the NSW Department of Housing Annual Report 1991-92 (1992, p. 86). It includes commercial properties. Mant (1992, p. 17) notes that the value of the NSW housing estate includes 240 office and

commercial properties. b The NSW Department of Housing (1992) uses market benchmarks for residential property. These are adjusted using value movements, by location and dwelling type, from the Valuer-General Commercial properties are "valued internally’. c Calculated as the capital improved market value, net of one year accumulated depreciation.

d Information provided by the South Australian Government. Based on property values determined by the Valuer-General for property rating purposes. e Estimate given at the Canberra public hearings by the ACT Housing Trust (transcript, p. 1029). f Revalued every 3 years by the Australian Valuer-General. The asset value has a historical and revaluation

component .

Note: Based on submissions, transcripts, questionnaire responses and Annual Reports. Source: Industry Commission.

State housing authorities have different asset definitions and value their assets using different methodologies. Queensland, for example, uses market values for

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land and historical cost for other assets, while the Northern Territory uses market values. Tasmania values both housing and land at historical cost. This makes it inappropriate to sum the asset values in Table Η. 1 across States.

The national conference on Public Housing Asset Management held in May 1992 highlighted the lack of comparability of the financial and product performance between authorities. This led to the commissioning o f a review of accounting and financial practices. The review has been completed and a common standard for accounting and financial reporting proposed. States have not indicated whether they will adopt the recommendations. Ensuring consistency and comparability in such practices is an important step towards bench-marking, defining performance indicators and measuring performance.

The Commission conservatively estimates the market value of State housing authority rental housing assets to be in the order o f $31 billion (Table H.2).

Debt levels

As at 30 June 1992, State debt to the Commonwealth (comprising housing advances and nominated housing loans) for public housing and home purchase assistance totalled $6.3 billion (Appendix D, Table D.3). These borrowings are at concessional rates and are repayable over 53 years. In addition, there is debt to both the States and private sector.

The total debt to Commonwealth, State and private sector related specifically to public housing is $6.6 billion, representing a debt to equity ratio of about one to four (Table H.3). This is based on the market value o f assets estimated by the Commission to be in the order of $31 billion. Debt as a proportion o f equity varies from 8 per cent in Queensland to 78 per cent in Tasmania (the large

amount of debt for the Northern Territory reflects borrowings related to staff housing).

Valuation of assets

Market values should be used as the benchmark for valuing property assets where possible, since market values reflect society’s current valuation of the assets (that is the next best use of the resources). As Mant states:

The use o f commercial-style accounting, which includes a balance sheet showing the present value of the assets employed in providing the services is intended to put pressure on the managers of those assets to obtain the best possible social return from them. ... At present, there are no such pressures on the managers o f the rental housing operation of the [NSW Department of Housing] (1992, p. 61).

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Table H.2: Commission estimate of public housing asset values by State, June 1992

NSW Vic Qld WA SA Tas ACT AT Aust

Housing authority 124 559 65 184 44 115 35 120 63 022 13 768 12 251 11 440 369 459 properties (number)3 Metropolitan 70 60b 55 75b 60b 60b na 59 na

(per cent of total) Country 30 40b 45 25b 40b 40b na 41 na

(per cent of total) Separate houses 54 54 70 60 35 66 62 72 na

(per cent of total)c Metropolitan house price ($'000) (lowest quartile) 135 110 106 80 88 71 134 100d na

Country median house price® ($'000) 68 55 53 40 44 36 na 50d na

Metropolitan median flat price (lowest quartile) 115 85 85 65 70 60 100 60d na

($’000) Estimated market value ($m)f Metropolitan houses 6 341 2 341 1 988 1 255 1 179 389 1 016 398 14 909

Metropolitan flats 4 625 1 515 673 692 1 709 168 467 91 9 941

Country 2 522 1 434 924 351 1 109 196 na 297 6 834

Estimates by State ($m) 13 489 5 291 3 586 2 299 3 997 753 1 483 786 31 683

na Not applicable. a Includes Aboriginal housing provided under the Aboriginal Rental Housing Program but not housing provided by ATSIC. Excludes community housing, b Commission estimate,

c ABS 1991 Census, d Price data for Darwin are for May 1992. e Median lowest quartile country price estimated at 50 per cent of the metropolitan lowest quartile median price. f Estimated market values are calculated as the number of properties times the lowest quartile price. For

country areas the estimated median countiy house price has been used for all properties. Notes: Derived from REIA (1992a and b); Commission estimates (where indicated); housing authority submissions and questionnaire responses; NSW Department of Housing (1992). Source: Industry Commission.

The usefulness (and indeed relevance) of historical cost data is dubious given the very long lives of buildings. This is because economic conditions change over long periods of time (for example, relative input and asset prices). These changes are implicitly incorporated in market values.

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Table H.3: State borrowings related to the value of public housing assets by State, June 1992

NSW Vic Qld WA £4 Tas ACT NT6 Aust

Public housing assets ($m) 13 489 5 291 3 586 2 299 3 997 753 1 483 786 31 683

Public housing debt ($m) 2 072 1 692 273 583 1 287 329 165 624 6 603

Debt to equity ratio 0.18 0.32 0.08 0.34 0.48 0.78 0.13 3.86 0.26

na Not available. a Northern Territory includes debt related to staff housing. Note: Derived from Table H.l; Chapter 3 Table 3.1. Source: Industry Commission.

The principle advantage of historical cost accounting is that it is easy to understand and to verify objectively. The main disadvantage is that financial targets derived using historical cost data are not a meaningful economic measure for long-lived property assets.1

Perhaps the major reason for the continued use by housing authorities of historical cost accounting in reporting is a requirement by State governments to do so (transcript pp. 353-4). Movement to a current cost accounting approach may require changes in reporting requirements.

Although average property values (for example, the average or median for a suburb) can give a more accurate valuation than historical cost, they obscure the value of individual properties. Since public housing is often assumed to be of lower value than the average or median property, such a measure would tend to overvalue public housing assets.2

Market valuation is not without cost. According to information provided to the Commission, the cost of a complete market valuation of aH public housing stock could amount to $25 million nationally. However, most States are already changing their valuation procedures and the costs of implementing the Commission’s proposal will therefore be minimal.

After the initial assessment, revaluations could be done annually using statistical sampling methods with a full valuation at intervals of about three

1 The under-valuation of property that results from the use o f historical costs can reduce borrowing capacity — but this is o f concern only where housing authorities are free to borrow against assets.

2 This may be the result o f low building or design standards, minimal maintenance levels or the absence of features desirable to home-owners (for example, garages, landscaping, ensuites).

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years.3 In order to ensure the integrity of the valuation process it might be conducted independently (as in the Northern Territory and the Defence Housing Authority).

Property can be valued on the basis of market rent — the present value of the discounted stream of rent receipts — where capital gains are assumed to result from expected changes in the future rent revenues. However, private rent levels tend to go in cycles that reflect short-run changes in the market for rental property services. These changes may not be fully reflected in property values

if they are expected to be temporary or there are significant barriers to entry into the market (refer Appendix C.6).

However, reliance on market property values is only possible where similar accommodation is traded in the private property market. This is not the case in some public housing estates, or for housing located in many country or remote areas. Where market property valuations are not possible, assets should be valued at the depreciated current replacement cost.

There are major advantages in using market values. Market valuations can provide a basis for borrowing and dividend decisions, allow the maintenance of a prudential financial position and the assessment of overall performance against agreed benchmarks.

Moreover, an objective assessment of assets (of which valuation is an important part) is necessary to determ ine the su b sid y to p u b lic h o u sin g tenants. It is only by identifying the cost of housing assistance that rational decisions can be taken on how best to meet housing needs given scarce community funds.

A better understanding of the financial position o f housing authorities would allow governments to properly assess the size o f the su b sid ies n ecessa ry to m eet h o u sin g objectives. Realistic asset valuations are therefore important in assessing the ability of the housing authorities to meet public housing needs.

Finally, it is in the interest of Australian taxpayers to com pare the p erfo rm a n c e o f h o u sin g authorities. A market basis for asset valuation would assist in setting the benchmarks needed to compare performance between housing authorities and enable the cost effectiveness of different forms of housing assistance to be

determined.

3 The Defence Housing Authority uses ABS sampling methods to annually revalue houses which are not on the Department of Defence land.

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H.2 A ss e t m anagem ent

Asset management is concerned with what services are to be provided, what assets need to be acquired and how they have to be maintained to meet these services, where they need to be, when to upgrade, when to dispose of — all with the objective of optimising housing services to the community (Bums 1992, p. 2).

Asset management includes planning and aspects of design, as well as maintenance, acquisition, renewal, redevelopment and disposal.

Identifying the problems

Many participants made reference to inadequacies in housing authority asset management practices. These views were summed up by the Royal Australian Planning Institute ACT Division which stated:

Approaches by SHAs to asset management have been traditionally ad hoc, reactive to external factors or in response to tenant initiatives (sub. 139, p. 9).

Until recently asset management has not had high priority. According to Bums:

... little effort was put into existing housing stocks, with the result that maintenance and location problems grew, and they grew at a faster rate than anybody expected them to. The effect on services was considerable. ... It was said that lack of maintenance and maintenance funding was responsible for increased costs and reduced revenue and for reduced services to client. But that was wrong! It was poor asset management — that is, poor forward planning and poor identification and classification of objectives (1992, pp. 1-2).

Forward planning has not always been central to housing authority operations. For example, prior to the current reforms4 in New South Wales, Mant had stated:

Contemporary thinking on asset management has only recently been introduced into the [New South Wales Department of Housing], A comprehensive Country Land Strategy based on asset management principles has recently been prepared and a similar exercise in respect of the metropolitan area has begun. However, I get no sense that asset management issues have moved to the centre stage of the Department’s thinking and certainly the Regional Managers have not been asked to make the active management of

assets one of their primary responsibilities (Mant 1992, p. 32).

Conflicting objectives within the housing authorities have detracted from good asset management. The problem is no less real where the conflict stems from governments using public housing to achieve broader social objectives. The Commission’s proposed reforms would help to avoid conflict in the objectives facing property managers (see Appendix F).

4 See New South Wales Government (sub. 354).

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Constraints on asset management

Housing authorities are constrained in their stock management by the often unlimited tenure granted to existing tenants, inadequate information on the value and condition of the stock (see Section H .l), the perverse incentives provided under current funding arrangements (Appendix D) and limits on future

funding. The ageing stock is also a problem in many States.

Unlimited tenure has inhibited the replacement of unsuitable stock and making more effective use of under-occupied housing. Better policies are needed to free up under-occupied housing (see Appendix I).

Changes in funding arrangements are desirable to provide the proper incentives for asset management. As discussed in Appendix D, there are problems relating to the separation of the capital from current funding, inadequate depreciation provisions and shortfalls in the current account used to fund maintenance.

Shortfalls in funding for maintenance occur because rent receipts (net of the rent rebate) have declined and, at the same time, there has been a large increase in maintenance requirements in many States as the proportion of older stock

rises. These pressures on finances create the incentive to minimise minor maintenance in the knowledge that major upgrades and renewals that eventually result can be funded from capital expenditures. Alternatively, run-down stock can be sold and the capital funds used to acquire new properties.

It must be realised that State public housing stocks are of different ages, designs, compositions and conditions. In the 1950s and 1960s most housing authorities undertook major public works and building programs that resulted in the construction of large housing estates and blocks o f units. These are

gradually being replaced. The Victorian Government recognised that:

There are still more than 15,000 public rental dwellings which are over thirty years old with problems of poor design and poor physical condition ... In particular, there are 12-13,000 mostly 3 bedroom concrete units built in the fifties and sixties with high maintenance costs ... (sub 159, p. 14).

Maintaining the public housing stock

The current arrangements provide little incentive for long-term asset management. For example, assets have been valued at historical cost rather than market benchmarks. This reduces rents collections from tenants who do not qualify for rebates and limits the funds available for maintenance.

Depreciation provisions have also been inadequate thereby limiting the amount of funds available for stock replacement and renewal.

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There is evidence of a general running down o f the public housing stock, especially in States with older stocks. The Queensland Department of Housing, Local Government and Planning (sub. 135) said that there had been low levels of maintenance spending and a deterioration of older stock prior to 1989. Mant (1992) refers to declining standards of accommodation in NSW as the result of insufficient maintenance (Box Η. 1).

The Westemport Regional Housing Council said:

In the Westemport region there is a high incidence of older housing stock which requires major upgrade to meet current day standards. Consequently, maintenance costs are considerable and a drain on housing finance. As the housing authority struggles to meet its obligation to the tenant and maintain at least minimum standards, lack of adequate funding prevents any significant improvements from being made. The result, therefore, is deterioration of a valuable commodity — housing stock — which will ultimately be seen as too costly to continue to maintain. ... Care must be taken in future developments to avoid mistakes of the past (sub. 153, p. 1).

Some of the maintenance problems of public housing were attributed to poor design or workmanship. Women in Supportive Housing said:

Maintenance was seen as a continual problem because of poor design, poor materials and workmanship. This problem was perceived as perpetual (sub. 146, p. 4).

An estimate of the average maintenance expenditure per house can be derived from housing authority maintenance spending and the number o f houses. On this basis the real level of spending per house almost halved from $1330 in 1985-86 to $731 in 1990-91 (1991 dollars). It is impossible to say to what

extent this is a result of productivity gains (for example through contracting out) rather than conscious decisions to limit maintenance expenditure.

Disposal and replacement

Past disposal policies often reflected home ownership goals rather than asset management principles. Lee states:

Nowhere are the divergent social attitudes to housing more evident than in the policies espoused by the various State housing authorities towards the sale of public housing stock. Thus, some State housing authorities have seen themselves in the vanguard of the national pursuit for near-universal home ownership (1986, p, 10).

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Box H.1: Asset management within the NSW Department of Housing

The move to an asset management approach will highlight some difficult issues. Deficiencies in maintenance will need to be confronted. Expenditure on existing stock will need to take increasing precedence over acquisition of new stock. Trading in stock to get a better balance between housing and needs will raise questions about what to do about under­

occupancy.

Because insufficient external painting and associated repairs have been carried out, the assets are deteriorating and, in the long-term, costs will be higher. The theoretical 7 year cycle is continually extending with over 30 000 dwellings currently outside the cycle. This category of maintenance

is regarded as discretionary. Day-to-day repairs have first call on maintenance funds.

Internal painting and some upgrading to current standards are done when properties become vacant. This is more convenient to tenants than a cyclical program, but there is inevitable deterioration when tenants uncomplainingly occupy a dwelling for many years. Furthermore, the cost

of renovating vacant houses can be tens of thousands of dollars, but there have been instances where maintenance and redevelopment plans have not been co-ordinated.

A proper asset management approach will require the resolution of outstanding policy issues and a different organisation structure and culture.

Source: Summarised from Mant (1992, pp. 33^1).

Lee notes that the public housing stock in Queensland accumulated ‘largely by default’. A central theme of the Mant report (1992) is the emphasis on housing construction rather than asset management by the NSW Department of Housing:

Over the years, the Department has built many homes. At times, some of these have been sold, generally at the option of tenants, rather than as part of a comprehensive plan for adjusting the stock to meet contemporary needs. The Department’s $12 billion property portfolio is simply the net result of successive construction programs minus sales (p. 33)

Good asset management requires the disposal of under-performing properties and replacement with higher yielding, more appropriate stock. Any decision to dispose of a property deemed surplus needs to have regard to the property’s market value and the opportunity cost of the resources tied up in that property. In the short-run it may be cost-effective to rent surplus stock privately.

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Improvements in a sset management

Improvements in housing authority asset management were noted by some participants. The Royal Australian Planning Institute ACT Division said:

In recent years, however, most if not all SHAs have been developing strategic approaches to management of their assets. There have been a number of factors driving the agenda for the development of more effective and efficient strategies including the quality, age and type of much of the stock, the location of the stock, increasing and changing public housing demand, the apparent inappropriateness and inflexibility of the stock, fiscal

restraint, urban planning objectives and pressures for improved public sector asset management (sub. 139, p. 9).

Public housing has started to become more demand orientated. The Tasmanian Government said that the objective o f its public housing spot purchase and construction programs is to provide housing ‘where it is most needed’:

On the demand side, applications ... clearly identify the areas in which public housing applicants wish to be accommodated, while the rental stock and vacation rate data indicate the extent to which this demand may be met through turnover of the existing

stock. A comparison of the two sets of data reveals areas where demand is expected to remain unmet unless action is taken ... (sub. 217, p. 8).

Some housing authorities (for example, the South Australian Housing Trust) use asset modelling to improve asset management. According to Bums (1992) the major benefit of asset modelling is to enable the property manager to make informed choices. It can also be used to provide benchmarks to measure asset manager performance and to demonstrate the benefits o f better asset planning.

Financial pressure has also resulted in greater use of contracting out. Homeswest and the Northern Territory Department of Lands, Housing and Local Government contract out maintenance work. Homeswest has also trialed private property managers for a year (sub. 51) but claims this had not resulted in significant savings. The McCarrey Report (1993, p. 72) considered the trial had been ‘too small to provide any real appreciation of possible financial benefit’.

Establishing the ‘property manager’

The reforms proposed by the Commission separate the functions of property and tenancy management (see Appendix F and Appendix G). The functions proposed for the property manager are very similar to those o f the Defence Housing Authority (see Box H.2).

To enable a property manager to plan effectively it needs to know future housing requirements well in advance (including the level, appropriate locations and stock types, modifications and required standards). The exchange of

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information between the property and tenancy managers is therefore critical. As the South Australian Youth Housing Network Inc. states:

The need for the property manager to know and respond to future housing requirements would be a critical factor in the long term viability of asset management, and therefore the need for information exchange with the tenant manager is essential. The methods of, and barriers to, inter-departmental, or inter-agency, communication must be clearly

identified (sub. 285, p. 4).

Box H.2: Asset management within the Defence Housing Authority

Many o f the asset management practices of the Authority have relevance to public housing property managers:

• Stock is acquired in the most cost-effective way. This can be spot purchase, construction or headleasing;

• There are agreements on standards (for example, quality, types, specifications, special needs) that apply to all acquisitions;

• The property manager has discretion regarding the disposal of houses deemed surplus. The tenancy manager determines which houses are surplus;

• Market rents are used where possible. Market rents are determined by independent assessors. However, in remote areas there is often no private market to upon which to base rents; and

• The tenancy manager covers the cost of vacancies in order to offer tenants a choice.

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1.1 Current rent setting

CSHA rent principles

The 1945 Commonwealth-State Housing Agreement (CSHA) set public housing rents to the cost of constructing the dwellings. The concept o f market- related rents was introduced in the 1978 CSHA with rebates to be offered to those who could not afford to pay the market rent. The market rent approach

was abandoned in 1984 and a system of cost rents was again implemented. The 1989 CSHA refined the definition of cost rents and introduced a system where a State could apply either market or cost rents (Egan 1993).

The current CSHA sets out two rent setting principles for rent actually paid by tenants.

The first is capacity to p a y. Section 26(2) of the Housing Agreement states that in determining capacity to pay a State should:

• Have regard to the level of income, including income from assets of the tenant and other household members;

• Take into account the number of dependent children in the tenant’s household;

• Ensure that tenants with similar capacity to pay, pay similar rents;

• Ensure that work disincentives are minimised; and

• Have regard, as agreed between the Commonwealth Minister and State Minister, to the receipt by any member of the tenant’s household of Family Allowance Supplement (FAS).

The second is cost recovery. State housing authorities have agreed, under section 26(1) of the Housing Agreement, to set rents (for those with the capacity to pay) that at least recover costs (as set out in the Schedule of the CSHA) or market rents.

In determining cost rents, State housing authorities pool costs across their stock. However, they take into consideration variations in housing standards and location of their stock and adjust the cost rents charged to tenancies to reflect these differences. The CSHA, while giving State housing authorities the option

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of setting a market rent, does not define how they are to determine market values for their properties.

The rent setting policies of State housing authorities affect the financial performance o f their rental operations. Under the CSHA, the capital funding approach assumes that rental receipts cover program administration as well as maintenance costs.

A 1989 Coopers and Lybrand report on the financial operations of State housing authorities, undertaken prior to the introduction o f the 1989 CSHA, found that all States (other than Queensland) have had losses on their rental operations and that, apart from South Australia, their losses had been increasing. The cash surplus shown for Queensland included profits from non-public housing activities such as commercial housing which Coopers and Lybrand was unable to separate from the public housing accounts. Queensland reported small losses on public rental housing operations over that period (DCSH 1989a, p. 170).

The Coopers and Lybrand findings on the cash outcomes of rental operations are reported in Table D. 10.

A s s e ss m e n t o f capacity to p a y

State housing authorities assess the capacity o f tenants to pay rent on the basis of gross income of members of the household and the structure o f the household. Few tenants have a sufficient level of income to pay the full rent set by the State housing authority. The difference between the rent for a property (cost recovery or market rent) and the rent payable by a tenant (set by the tenant’s capacity to pay) is called the rent rebate.

The Commission estimates that approximately 85 per cent o f public tenants currently receive rent rebates (see Chapter 2). Therefore, most tenants generally pay some pre-determined portion of their income as rent. Table 1.1 provides details on how States determine the rent payable by tenants.

In most States, capacity to pay is set between 20 and 25 per cent of gross income. Accordingly, rent paid by different households is a reflection of differences in income only rather than amenity o f the dwelling.1 This is consistent with the CSHA approach of ‘tenants with similar capacity to pay, pay

similar rents’ (H ousing A ssista n ce A c t 1989, s.26(2)).

The advantage of such a rebate system is its simplicity and flexibility. If a tenant’s income falls they can apply for a reduction in the rent they have to pay

1 Amenity includes size, location and quality of housing.

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and therefore obtain an increase in the rental subsidy. However, in practice this cannot be done frequently (see Chapter 6).

Moreover, there are no incentives for tenants to disclose an increase in their income until their circumstances are reviewed. This has two effects. First, tenants will be in rent arrears and will have to repay the arrears should the State housing authority find out about the increase in the tenant’s income. Second, if

State housing authorities do not find out about the higher tenant income, the tenant receives a higher rent subsidy than they should with a consequential loss of program effectiveness.

Milligan, Shaw and Riordan (1991) stated that:

The benefits of the rent rebate system are also not readily recognised by all tenants For example, most tenants do not perceive that they are receiving a rent subsidy (p. 26).

The practice o f setting rent on the basis of income creates a disincentive for tenants to improve their income as this will raise their rent. The Department of Social Security (DSS) in its submission showed that public housing rebates in Victoria and New South Wales ‘added 20 per cent to effective marginal tax rates (EMTRs) when DSS payments were not being withdrawn and added 10

per cent to EMTRs when DSS payments were withdrawn at 50 per cent’ (sub. 214, p. 18). Further, DSS estimated that in some income ranges for sole parents with two children in Victoria and New South Wales rent rebates may increase EMTRs to above 100 per cent. That is, households in these income ranges would effectively suffer a drop in income if their earnings increase.

Full rents s e t b y S tate housing authorities

The Australian Capital Territory, New South Wales and Victoria have adopted a form of market rents for their housing stock. The other State housing authorities — except Queensland — apply cost rent formulas in determining full rent levels. The basis of determining the full rent employed by each State is

described in Table 1.2.

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T a b le 1.1: B a s is fo r d e te rm in in g c a p a c ity o f p u b lic te n a n ts to p a y re n t

b y S tate , D e c e m b e r 1992

State Base income

Rent paid by additional

Above base income income earners

NSW 20 per cent of pensions/ benefit/allowance or non- statutory income up to $350 per week.

15 per cent of FAS.

Savings of $5 000 or more are calculated at a deemed interest rate of 5 per cent (4 per cent as from 31 May 1993).

Non-statutory income between Under 18 is nil. $350 and $650 per week assessed on a sliding scale from 18 to 20 is 12.5 per cent to a 2 1 per cent to 25 per cent. maximum contribution of

$73.50 per week.

$650 to $800 per week in country areas assessed at 25 per 21 to 24 is 20 per cent up to a cent. maximum contribution of

$79.00 per week.

$650 to $ 1000 per week in Sydney metropolitan area 25 years and over 20 per cent, assessed at 25 per cent. If income is non-statutory it is added to tenant/ spouse

income. AUSTUDY paid at the living at home rate is non-assessable.

Vic 20 per cent of income under the Up to a maximum of 25 per threshold amount of $307 per cent for any income that is over week for a single or married the threshold amount, couple.

15 per cent of FAS to a maximum of $16 per family.

10 per cent of income to a maximum of $30.70 per week for any other resident’s income.

Qld Income up to the State Minimum Wage is assessed at 20 per cent.

Additional income from the State Minimum Wage and up FAS assessed then rent reduced by $1.50 per child under 13 to National Average Earnings is and $3.50 for children between assessed at 25 per cent. the ages of 13-15.

Additional income above National Average Earnings is assessed at 30 per cent.

Children under 19 add 10 per cent of income to a maximum of $12 per week. If under 25, 10 per cent of income up to a maximum of $24 per week. Over 25, 10 per cent of income. Other over 25, add their

income to tenants’ income.

WA For existing tenants, rent is calculated at 21 per cent of income up to a limit of $329.30 per week. New tenants' rent is calculated at 22.5 per cent of this income limit.

Any additional income is calculated at 30 per cent of gross assessed income.

21 per cent of gross income (100 per cent for new tenants) of any other residents or all non-dependent household members with an income, which is added to the tenant’s assessed income.

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T a b le 1.1: B a s is fo r d e te rm in in g c a p a c ity o f p u b lic te n a n ts to p a y rent

b y S tate , D e c e m b e r 1992 (co n t.)

State Base income

Rent paid by additional

Above base income income earners

WA (cont.)

SA

For other household occupants, their gross income is added to the tenant’s.

15 per cent of Additional Family Payment is added to the tenant's rent.

The threshold limit of $329.30 per week per household is indexed according to the Consumer Price Index.

19.5 per cent up to $100 per week (18.5 per cent for country areas).

Additional income calculated on a sliding scale rising to a maximum of 25 per cent at $250 per week or more ($290

per week or more for country areas).

10 per cent of FAS (or

additional family payment for children of pensioners) while Family Allowance (FA) is not assessable. Children under 21, $5 per week

added to rent. Between 21-25, 5 per cent of gross income with a minimum of $5 per week Over 25, 10 per cent of gross income with a minimum of $5 per week.

Tas Income up to the State

Minimum Wage is assessed at 20 per cent.

Additional income calculated on a sliding scale, increasing by 1 per cent for every $35 up to a maximum of 25 per cent of

income.

50 per cent of salary for any blood related permanent resident and/or 100 per cent of salary of others.

ACT 20 per cent of that part of gross weekly income of the tenant which does not exceed 50 per cent of the ACT Average

Weekly Earnings (AWE).

23 per cent of that part of gross weekly income of the tenant which exceeds 50 per cent of the ACT AWE.

From 1 July 1993 rent

contributions for this category will increase to 25 per cent.

10 per cent of dependent child payments.

10 per cent of the weekly income of any independent person in receipt of income at least equivalent to the single

adult rate for Newstart.

From 1 July 1994 rent will include 25 per cent of that part of a tenant’s income exceeding 50 per cent of the ACT AWE

but less than the ACT AWE and an additional 30 per cent for that part of the income which exceeds the ACT AWE.

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T a b le 1.1: B a s is fo r d e te rm in in g c a p a c ity o f p u b lic te n a n ts to p a y re n t

b y S tate , D e c e m b e r 1 992 (c o n t.)

State Base income

Rent paid by additional

Above base income income earners

NT For tenants other than

pensioners, income up to the Northern Territory minimum wage (NTMW) is assessed at 20 per cent.

Pensioners pay 14 to 18 per cent of income up to the social security income threshold.

Any income above the NTMW is assessed up to a maximum of 28 per cent for tenants other than pensioners.

For pensioners, any income above the threshold is assessed at 20 per cent.

10 per cent of income of

household members under 25 earning in excess of the

dependant AUSTUDY rate.

20 per cent of income of

household members 25 and over earning in excess of the dependant AUSTUDY rate. Amounts are added to the rent payable assessed on the income of tenant and spouse, to the maximum rent (cost rent) payable on the dwelling.

Notes: Derived from State housing authorities’ responses to Industry Commission questionnaire; DUUCS (1992c), additional information provided by State housing authorities. Source: Industry Commission.

In Queensland all tenants pay a proportion o f their income in rent with those on higher incomes paying up to a full rent of $200 per week.2 This full level of rent is set for all properties in Queensland, whilst in other States the rent would be limited to the market or cost rent, reflecting the amenity of the house.

The Queensland Housing Trust set this full rent level to exceed market rents in most traditional public housing locations (Milligan, Shaw and Riordan 1991). This policy was adopted as a disincentive for higher income tenants remaining in public housing.3 In June 1990 only 0.6 per cent of tenants were paying more than $150 per week in rent. Milligan, Shaw and Riordan (1991) argue that the policy creates a disincentive for tenants to improve their income or reveal their full income.

A study by Wulff, Pidgeon and Burke (1992) on poverty traps for public housing tenants shows that a sole parent on social security payments and in a public house faces an EMTR on disposable income ranging from 22 per cent up to 140 per cent for any additional private income earned.

2 Tenants who receive $780 per week or more pay the full rent of $200 per week regardless of the property value. 3 By ensuring that higher income tenants could obtain the same quality of housing in the private rental market at a lower rental price.

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However, the study found that there are other factors, apart from the effects of withdrawal of income support, that discourage employment amongst Queensland public housing tenants. For instance, sole parents may have to choose between work and parenting because the cost of child care increases the

EMTRs and there are risks involved with insecure job prospects. Also, State housing authorities have difficulty quickly adjusting rent levels for public housing tenants when their incomes drop and this often leads to financial difficulties.

Table 1.2: Basis for determining the full rent charged by State, 1992

State Type o f rent charged Basis o f rents charged

NSW Rent is set comparable to that charged for market rent.

Vic Rent is set comparable to that charged for market rent.

Qld An income determined rent with a

nominated minimum of $32 per week and a maximum of $200 per week.

WA Rents charged are based on the cost rent formula of the CSHA.

In calculating market rents the following factors are taken into consideration, the size and type of dwelling and the location. The Valuer-General (VG) provides market rents for a number of

benchmarks which are then spread to all Department properties. Rents are reviewed annually and benchmarks are reviewed regularly

Capital improved value, site value and market rent are provided by the VG of Victoria every 5 years. In the interim years the VG provides indexes by Local Government Area for market

rent value, which are used by the Department of Planning and Development to determine the market rent.

This rent does not take into account the amenity of the dwelling.

The cost rent covers all costs in providing, maintaining and servicing the rental stock as well as operational costs such as administration, rates and insurance.

Operational costs are combined to work out a total cost pool. This is spread over the rental stock on a state-wide basis. Each category of accommodation has a cost rent relative to the

standard — a 3 bedroom house. The cost rent for each category is calculated based on quality, age and location and given a high, medium and low classification level.

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Table 1.2: Basis for determining the full rent charged by State, 1992 (cont.)

State Type o f rent charged

SA Rents charged are based on the cost rent formula of the CSHA.

Tas An income base rent system is used. Rent charges are based on the level of gross household income, up to a maximum of $132 per week.

ACT Rent is set comparable to that charged for market rent.

NT Rents charged are based on the cost rent formula of the CSHA.

Basis o f rents charged

Weighted averages are applied to full rents for dwellings of a similar type, with similar living areas. However a rent differential of

approximately 5 per cent applies between metropolitan and non-metropolitan locations.

The maximum rent charge of $132 per week is based on the average private rental for a 3 bedroom dwelling within the major population centres.

In calculating market rents a number of variables are taken into account — size of dwelling, facilities (such as carpeting and carports), number of bedrooms and location (for example, premiums are charged for inner city dwellings).

Maximum rents are at a fixed rate for size of dwelling in Darwin and Alice Springs. A number of amenity factors (such as carports, wardrobes, heating, swimming pool) add an

additional 3 per cent to the base costs for each dwelling. A series of discounts apply to public housing rentals in certain localities.

Notes: Derived from State housing authorities' responses to Industry Commission questionnaire; and additional information provided by State housing authorities. Source: Industry Commission.

Rent payment and collection

The procedures for collecting rents from public housing tenants and the sanctions for non-payment are set out in the Residential tenancies acts or State housing acts.

Public housing tenants generally pay rent in advance. Tenants are generally given the option of paying rent weekly, fortnightly or monthly depending on their income cycle (except in Queensland, where tenants must pay rent every fortnight). In all States debt recovery processes are initiated when a tenant falls behind by one or two payments. However, public tenants are not required to pay a bond at the beginning of the tenancy.

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Eviction of tenants in rent arrears is a last resort option. Generally, the tenant is approached by the State housing authority, either by mail or a personal visit, notifying the tenant of their failure to meet rent payments and to determine why this has happened. Tenants who are found to be facing financial hardship are

generally referred to a welfare officer, accommodation manager or a community group for help on options to reduce the debt. State housing authorities will initiate eviction processes when a tenant continues to avoid paying rent and makes no effort to clear the debt.

1.2 Implicit su b sid y

Economic and financial rates of return

In a competitive market, the ‘market rents’4 for public housing should in the long-term reflect the economic cost of the land in its current use plus the economic cost of the capital involved in the house (which is reflected in the current depreciated replacement cost of the property), plus the operating costs,

minus any appreciation of the property.

The net return5 from a particular property in the long-term should be sufficient to provide a normal economic return on the capital invested. If it does not, then the resources could be better used elsewhere within the economy.

However, land is subject to higher than normal economic returns because o f tax concessions.6 Without capital market imperfections these tax concessions and other imperfections would be expected to be capitalised into the value o f the land. However, this has not occurred. Given these imperfections, it would be

administratively difficult for State housing authorities to calculate the true market rent for its assets. Therefore, they should aim to set market rents at a level that is at least comparable with equivalent quality private rental accommodation.

The provision of public housing also provides the taxpayer with a social economic benefit (see Appendix E).

4 ‘Market rents' in this case refer to the full rent that State housing authorities could charge for their dwellings. It does not represent the rent paid by most tenants as they would receive a rebate on this market rent, therefore reducing their rent payable.

5 Net return can be defined as the ‘market rent’ plus the increased land value minus the decrease in property value and the maintenance and administrative costs.

6 These would include the taxation of the real value of a capital gains rather than the nominal.

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Market and cost rents

Clause 26 o f the CSHA gives the principles of the cost rent formula. It states that State housing authorities should:

. . . not [apply the principles] to the costs o f individual dwellings but rather to the total cost pool of the rental stock. In allocating the total cost pool to individual tenancies, a State will have regard to variations in housing standards and locations within the constraints of available administrative arrangements for assessing these variations (DHHCS

1992c, p. 33).

The costs that State housing authorities are required to recover under the agreement include operating costs (maintenance, rates, insurance and administration), depreciation and interest charges.

Rents charged are calculated on a pooled basis. This principle applies because State housing authorities continuously acquire or construct new stock which would result in individual cost rent for these new dwellings being far greater than their equivalent market rents.7 Therefore pooling allows for the cost of

older, low-cost public stock to off-set the higher costs of more recent constructions. Consequently, pooled cost rents will lead to lower rents in the public sector as compared to the private rental market.

Where cost rents are used, rather than market rents, public housing tenants are likely to receive an implicit subsidy in addition to the rent rebate paid. This implicit subsidy is the difference in the pooled cost rent charged (before rebates are deducted) and the market rent. Black (1986) suggests that during the 1980s pooled cost rents in public rental were on average 75 to 90 per cent o f market rents. In Western Australia, Homeswest calculated that this implicit subsidy is

on average approximately $ 10 per week per tenancy (information supplied by Homeswest).

This difference between public housing rents and market rents has been reducing. Over the last few years, public housing rents before rebates have increased faster than private rents. For example, from June 1991 to September 1993; privately owned dwelling rents rose by 0.9 per cent; and rents for government owned dwelling by 7.2 per cent. This outcome may have resulted from three factors. The first is that some States have moved to full rents based on market values, therefore raising the level of full rents. The second is the construction of new public housing and the selling of older stock, thereby raising pooled cost rents in those States. The third is the introduction o f a

7 State housing authorities continue to construct new dwellings because they are increasing the supply of rental accommodation, therefore, keeping market rents lower than they would otherwise have been. Further, scale economies may exist in building new stock that lower the cost to below that of purchasing existing properties and renovating.

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notional interest charge on grant funds invested in rental housing by State housing authorities to be included as part of cost rents from the commencement of the 1989 CSHA.

Table 1.3 compares the standard scale of weekly rentals for public housing in the Northern Territory compared to the median market rental for the Territory. A number of amenity factors (such as carports and wardrobes) can increase the public base rental by 3 per cent for each amenity. This would reduce the rental

variation between public housing and the median market rent.

Table 1.3: Standard scale of weekly rentals for public housing compared to the median market rental, Northern Territory, 1992

Type o f dwelling Public base rent Median market rent Rental variation

$ per week $ per week per cent

Bedsitter 65 75 + 15.4

1 Bedroom flat 80 90 + 12.5

2 Bedroom flat 95 120 +26.3

2 Bedroom unit 110 165 +57.9

3 Bedroom house 125 215 +72.0

4 Bedroom house 135 240 +77.0

Source: Northern Territory Department of Lands, Housing and Local Government, (sub. 17).

In some rare circumstances the public rentals may be greater than private rentals for an equivalent dwelling. For example, the North-West Youth Accommodation Group said that:

There were times, especially in a housing slump, where the cost-based rent formula exceeded the market rent ... So in that regard the top end o f that public housing system was possibly disadvantaged ... maybe the cost-based housing rental system would work in a boom time as opposed to a market-based rental system working in a slump, a

housing slump (transcript, p. 1889).

Security of tenure

Recital D of the CSHA specifies that ‘people in rental housing shall have security of tenure’. The relevant principles in the Agreement are:

• Tenants are not to be forced to leave their home because of actions inconsistent with this agreement by a State. Where a tenant is required to move from one dwelling to another by a State, a choice of dwelling and locations appropriate to the tenant’s needs is to be provided;

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• A physical and locational environment appropriate to the tenant’s needs should be provided; and

• Recognition is accorded to the rights of applicants and tenants and other users of assistance.

Security o f tenure in public housing infers that a public tenant will have a permanent position in the system once they meet the eligibility criteria of the State housing authorities. This is consistent with the CSHA principle. Security o f tenure offered in the private rental market is much weaker. Generally, private renters are offered security of tenure for the life of their lease with private rental leases generally running for six to twelve months. Once the fixed term has expired a tenancy can generally be terminated with a month’s notice.

The Housing and Locational Choice Survey8 found that public tenants view security of tenure as the most important advantage of public rental, after affordability. Private renters quoted lack of security o f tenure as the second most important (affordability being the most important) disadvantage of private rental.

Clearly public housing provides a further benefit, security of tenure, over and above the implicit subsidy that tenants receive. This benefit should ideally be reflected in the rental price of public housing. That is, security of tenure should add a premium on public rental prices, at least for those who do not receive a rebate. The rental price o f public housing would be greater than the comparable private rental price by the value of the additional security of tenure received by public renters. This price differential would be small, say 2 or 3 per cent, and considerably less than the differential currently applying in Queensland.

Housing quality

Housing quality refers to the types and level of amenities offered by a particular house; and its location relative to support services, shops, transportation, place of employment and health facilities.

The quality o f public housing is quite variable. The rental price charged for public housing should reflect the differences in quality between public and private rental. Where public housing is of higher (or lower) quality, the market rent should reflect this quality difference.

8 For further information on the survey see Burgess and Skeltys (1992).

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1.3 Efficiency and equity

Key pricing policy considerations

Ideally, a pricing policy ought to ensure that public tenants pay affordable rents for adequate housing, with equity between households in terms of rents paid relative to services received. It should allow choice while encouraging efficient use o f stock by both tenants and housing authorities. Targeting is an important

consideration. The numbers of those the program was designed to benefit ought to be maximised, and the numbers o f unintended recipients minimised. The pricing policy ought to be harmonised with other policies so that problems are not unintentionally created or exacerbated (for example, a potential poverty

trap). Partially satisfying all these criteria implies trade-offs which also require explicit consideration. Finally, pricing policy should be transparent in terms of subsidies given and be relatively simple to administer.

Key considerations then are efficiency, equity, targeting, harmonisation, incentive structure, transparency and administrative simplicity.

An ideal pricing policy would provide the many different groups concerned with public housing the information and the right incentives to improve and co­ ordinate their decision making. These groups include, at the broadest level, the Commonwealth and State governments and the general public. Those more

directly concerned, whose behaviour pricing policy ought to target, are the State housing authorities, income and welfare support agencies (such as DSS), as well as existing and potential clients.

Tenants’ incentives

Currently, pricing signals are muted and do not provide appropriate incentives for tenants and State housing authorities to be frugal with housing resources.

About 85 per cent of tenants pay a rent related to their income. For them the rent paid does not reflect the value of the service they are receiving. This is because they are not affected by changes in the rental price o f their dwelling. As public rentals rise, so does the amount of rebate received by tenants to

ensure that they continue to pay the same proportion of their income on rent.

There is a loss of efficiency because there are few incentives, or opportunities, for tenants to change their housing circumstances as their income or family composition change.

Even for the 15 per cent of public tenants who pay the full market or cost rents, pricing signals and incentives are poor. The full rent charged by some State

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housing authorities is based on an average of cost recovery rates or market value across a region. Consequently, price signals do not reflect the quality or value of the particular house they are in. Where this value is greater than that of similar accommodation in the private rental market, these unintended beneficiaries can be expected to stay.

Management incentives

As public tenants base their decisions on distorted or non-existent price signals, State housing authorities are not able to easily discern what type of dwelling tenants value most. Tenants may not value some properties as highly as others relative to their real cost. If tenants paid rents that reflected the difference in the real costs of different properties, both tenants and authorities should benefit.

For example, if there was little or no demand for a particular type or style of property amongst the public housing tenants (after deducting a rebate from the full market rental price of the particular property) this would be a signal to the State housing authorities that this housing is not appropriate for its current use. The property could be sold and the funds better used elsewhere. Likewise high demand for some other type of accommodation (similarly rebated down from its full market price) would indicate the need to expand holdings of that type.

Equity

It is reasonable to expect that public housing tenants would be willing to pay different rents for the same quality dwelling in different locations or for different quality housing in the same location provided the rents are affordable.

However, State housing authorities do not adjust the tenant contribution to reflect the cost of living incurred by different household types. Although larger households receive higher levels of service by being accommodated in larger houses, explicit account of their family structure is not made so that rent paid (compared to other household types) is inequitable in terms of its impact on their cost of living.

Further, State housing authorities may allocate a higher or lower quality house within a particular region to similar tenants, but these tenants will still pay the same rental. Therefore some tenants receive a higher benefit compared to

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others in a random manner.9 This is clearly inequitable. However, some tenants who are lucky enough to be allocated a higher quality house while paying the same pooled rent may have some o f this windfall benefit reduced by the fact that the waiting time for these dwellings is generally longer.

Co-ordination of benefit withdrawal rates

The current rebate system exacerbates the disincentives public tenants face with regard to earning extra income. Rent setting policies of State housing authorities exacerbate the problem for social security recipients, but it is not a problem which can be solved by public housing policy alone.10 It requires

harmonisation of social security, taxation and housing policies.

1.4 Rent settin g reform

Listed below, are principles that attempt to satisfy the criteria of efficiency, equity, targeting, harmonisation, incentive structure, transparency and administrative simplicity. They are used to develop a rent setting model. They challenge the principle in the Housing Agreement that tenants with similar capacity to pay, pay similar rents. It depends on tenants being able to choose between different properties by responding to price signals.

Principles

1. The level of assistance given should differ according to circumstances.

People with different needs should be treated differently. To this end, families and individuals can be classified into broad categories — such as single, single with one child, single with two children, couple, couple with one child. Various other categories would include smaller numbers, such as

those with particular disabilities.

Within each of these categories, for administrative simplicity and equity, all on the same level of income would be treated the same.

9 For Sydney, econometric estimates by the Commission (IC 1993b) indicate a substantial degree of horizontal inequity. However, due to data deficiencies, the size of the errors associated with estimates of market rents and the difficulty o f capturing all elements of the current public housing allocation process, this study may overstate the problem.

10 An earlier section of this appendix illustrated the poverty traps associated with social security, taxation and housing policies

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2. Income should be used for determining the level of rent paid within these categories.

Ideally the relevant income would be total after-tax income including (most) social security payments. As the after-tax income would be administratively difficult to use, the (generally equivalent) gross income may be used instead. An appropriate rent payment would be calculated from this income level for each category. That is, it would be recognised that people in different circumstances require different levels o f income to attain an adequate level of well-being.11

3. Those on a lower income ought to pay a smaller proportion of their income on rent.

Generally the range 20 to 25 per cent is used in public housing. The principle is that those most in need should benefit the most. Hence they should pay the least proportion of their income on rent.

Families of different composition require different levels of income to be just as well-off. Housing authorities need to determine different income equivalence scales to take account of these differences.

4. The extra rent paid per extra dollar of income should increase as income increases.

As the government is not able to assist everyone, it needs to target those below a certain income, and withdraw this assistance as income rises. The proportion paid in rent for each extra dollar of income should increase as income increases.

Two conflicting objectives need to be balanced in order to determine an appropriate rate at which to withdraw assistance. First government must maximise the cost-effectiveness of public housing by targeting assistance to those most in need. Second they must minimise any income effect that would discourage those targeted from improving their situation.

Pursuing a rapid increase in rent discourages the targeted low-income individuals from availing themselves of income increasing opportunities. At the very least the residual income they have for other expenditure ought to increase as income increases. Similarly, pursuing the second objective by adopting ‘too gentle' a rate of rent increase would involve too many unintended payments. The implied trade-off must not be considered in

11 That is, special payments, such as those for disabled children, should not be included and situations such as that of Rosemund Johns (sub. 79) require special consideration.

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isolation but only after taking into account marginal tax rates and the rate of withdrawal of social security benefits.

5. There should be a level of income, within each category, at which the rent paid will be the full market rent.

Above this level of income the rent paid ought to be either the market rent or, preferably, a higher than market rent to reflect the additional security of tenure public rental provides over private rental. The precise level at which the payment of market rent comes into effect again depends on an

appropriate rate of withdrawal of assistance.

6. Those with identical incomes, within each broad category, should receive the same rebate.

This is an application of the principle o f horizontal equity, those in equivalent circumstances should be treated similarly. This means that those in better housing, as reflected by its particular market price, ought to pay the extra.

That is, the rent paid should relate to the market rent of the property. The rebate should not be directly related to this rent. Rather the rebate should be related to the market rent of appropriate housing.12

Different individuals or family units have differing individual circumstances. They usually know best what these are and it is costly and intrusive for an authority to gather this private information.

If a family unit decides that it does not value the benefits that a superior location bestows (as reflected in the higher market rent of such a property) as highly as others do it will not pay this higher rent. Instead it may choose to locate in a less expensive property, leaving the other property available

for those who value it more.

Under this scheme, those with the same income who value a particular property the most will be more likely to be located in that particular property. The 'price signals’ provided within the occupied stock will result in an improvement in allocative efficiency.

To summarise, the rebate for a particular household should depend on the market rent for appropriate housing minus the determined rent payable.

12 Appropriate housing would have to take into consideration particular needs. For example, some people with disabilities require expensive modifications

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7. Public tenants must have a reasonable choice at the time of allocation and must be able to transfer between properties.

A tenant should be given a choice of at least four different dwellings with a range o f rents within their area of interest when they come to the top of the waiting list. The tenant can then choose, for example, whether to trade-off the higher cost inner city property with lower transport costs associated with housing in that location. Where tenants are unable to be given a choice of properties then their rent could be set so they pay no more than the

affordable benchmark rent (see below) for a household on their income.

8. Public tenants should not pay ‘too large’ a proportion of their income on rent.

Generally, the proportion of income considered appropriate to be paid on rent by public tenants is 20 to 25 per cent. In the 1992 Budget the Federal Government announced as part of its long-term reform agenda the establishment of an affordability benchmark. Under the affordability benchmark, assistance would be provided in meeting the costs of people on low incomes paying more than 20 per cent of their income on rent (DHHCS

1992b).

10. Rents should be paid in advance.

This is desirable to alleviate rent arrears problems for State housing authorities, even if that means a rent holiday for the initial rent pay period.

1.5 Model

As a starting point the Commission’s rent setting model has a constant rebate on the full market rent of each particular property that a prospective tenant has a choice of renting within public housing.13

The size of the rebate is determined by income, family composition and the mar ket rent of an appropriate dwelling.

The rebate for a prospective tenant would be calculated as follows. An equation — one of a set of equations for different family types — would be used to calculate the affordable benchm ark rent, given the tenant’s current income. The affordable rent could be set on a sliding scale starting at 20 per cent of income for those on low incomes and increasing to 25 per cent of income for those on higher incomes.

13 An example of the type of rent setting model proposed can be found in Industry Commission (1993b).

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To calculate the rebate, a sta n d a rd m arket rent for public houses that meet an affordable standard for the family would be determined. For instance, the standard market rent for a family o f two adults and two children might be the average o f the market rents for all public houses o f appropriate quality with three bedrooms within a particular area. The rent rebate would be calculated as the difference between the standard market rent and the affordable benchmark

rent.

For the particular rental property chosen by the tenant, their rent would be the market rent for that property less the rebate. The rebate would be constant, irrespective of the property chosen.

The prospective tenant would, ideally, have a range of choices of accommodation within public housing and, with a constant rebate, incentives to obtain value for money (in terms of full costs) when making that choice.

Tenants whose incomes are such that they receive a negative rebate (that is, would pay above market rents) should pay at most a market rent plus a premium for security of tenure.

Examples

Single no children

There would be an agreed formula for the a ffo rd a b le b en ch m a rk rent for a single person. With a Job Search Allowance or New Start Allowance a tenant would have an income of $141 per week (assuming that the benefit was their only income). Using this formula their affordable rent might be $28 per week. With m a rket rent of accommodation appropriate to their needs being, say, $85 the rebate would be $57 per week. Any unit they considered renting would be priced at the full market price minus this rebate.

Single with 1 or 2 children

A single person with 1 child receiving a sole parent allowance, would have an income of $170 per week (if the benefit was their only income) plus family payment. Using the appropriate formula the a ffordable ben ch m a rk rent could be $34 per week. If the sta n d a rd rent were $120 per week, the rebate would be

$86 per week.

Couple no children

A couple with an age pension, Job Search Allowance or New Start Allowance would have an income of $260 per week. Using the affordable b en ch m a rk rent

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formula, they should pay about $52 per week. With sta n d a rd ren t of $130 their rebate would be $78 per week.

A modified model

The model set out above needs to be adjusted where it results in tenants paying too high a proportion of income (say more than 30 per cent) on rent.

A method o f limiting the rent paid by a tenant to reasonable bounds may be to discount the additional cost (or saving) to tenants of renting houses with market rent different to the standard market rent. That is, the tenant may pay in addition to the affordable benchmark rent a certain per cent for each dollar the market rent is above the standard market rent. The extra cost (or saving) is

shared between the tenant and the housing authority. This would allow a tenant to rent a property with a higher rent value whilst at the same time ensuring that their rent payment remains within reasonable bounds.

1.6 A ss e ss m e n t of the m odel

The Industry Commission’s proposed pricing model was tested by the Centre for Urban and Social Research, Swinburne University of Technology using a sample of 1000 public housing tenants taken from the Queensland Department of Housing, Local Government and Planning Public Client Database (augmented with Rental Bond Authority data) as at March 1992.14 This data included rents paid by public housing clients in and around Brisbane by household type, region and dwelling type. Rental Bond Authority data for private accommodation (in the same locations, o f the same dwelling type and with the same number o f bedrooms) was used to estimate the market rents for the public housing. For each household, a current rebate (as the difference

between estimated market rent and rent currently paid) and the suggested rebate (the difference between the standard market rent for appropriate accommodation and the affordable benchmark rent) were estimated.15

As there can be differences in rent levels according to location, the Industry Commission’s proposal allows for a State to be split into a number of regions with different standard market rents set in each region. For this exercise,

14 More detailed results on the testing of the rent setting model are available in Pidgeon (1993) and Industry Commission (1993c) 15 The variation in stock quality and therefore rents in Queensland is understood to be quite small compared to other States. Therefore changes in rent payments from switching from

the current rent setting arrangements to those proposed by the Commission for public tenants will not be as large in Queensland as in other States.

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Queensland was divided into separate regions but the standard market rents were the same across regions. This means that public tenants with similar household compositions and on the same income but situated in different distances from Brisbane metropolitan receive the same level of rebate.

Figure 1.1 plots for the sampled households an estimate of the current rent rebate against the subsidy under the model proposed by the Commission. The households are categorised by region and within each region ordered by income of tenant. For many singles there is a large difference between the benefit they

receive under the current arrangements and that under the Commission’s model. This is because they reside in 2 or 3 bedroom detached dwellings.

Figure 1.1: Comparison of current and proposed benefit, ordered by region and income, single households

$/Week 160.00 ,

140.00 .. Current

Proposed 120.00 --100.00 ..

80.00 ..

60.00 --

40.00 --

20.00 ..

Regional centres 20 - 30k 0 - 10k

10-20k

30k

Note: Metropolitan Brisbane includes all observations except those for ‘Regional centres’ and ‘Other rural'. Within each region, households are ordered by income. Source: Pidgeon (1993).

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Under the Commission’s proposal single tenants in inner regions are not worse- off compared to those in other regions.16 Lower-income single tenants are also better-off than those on higher incomes within approximately the same distance from Brisbane. Singles in 2 or 3 bedroom detached dwellings would be worse-

off, regardless of the distance from Brisbane, under the Commission’s proposal.

Implementation of the proposed model need not affect the rents paid by those who are already in public housing. It could be used for new tenants, with existing tenants either benefiting from a ‘grandfather clause’ or by having their rents change gradually (to those proposed by the model).

1.7 Implementation difficulties in large urban areas

Market rents vary widely in large urban areas, such as Sydney or Melbourne. The rents paid depend on the size, location, standard of construction and level of maintenance of the accommodation. The rents reflect the amenity provided by properties, with large variations in rent indicating large variations in amenity.

The policies of public housing authorities have increased the variability of amenity of public housing in comparison with the low-cost private rental market.17 The increased variability stems mainly from a mismatch of stock to tenants’ needs due in part to a lack of appropriate stock for tenants to move into when their circumstances change. Another source of variability can be the location of public housing in areas where property values are high.

In the longer term, the effect o f implementing the Commission’s proposals would be to reduce the variation due to mismatch between stock and clients requirements (implicit in the standard o f housing that people are nominally eligible for when they enter public housing). Stock would not be provided in high-cost areas at levels of amenity above that regarded as appropriate unless governments decide this to be desirable and were prepared to meet the necessary additional subsidy and made it available to all public housing tenants. Nor would the stock be concentrated in areas of low amenity. The construction

and maintenance standard of accommodation would be uniformly higher within public housing than in the low-cost private rental market.

With an efficient rent setting and allocation regime and a suitable range of appropriate accommodation choices offered, some variation would remain. However, even in large urban areas, the resulting variation of market rents (for

16 For other household types, tenants in inner Brisbane were generally worse-off under the Commission's rent setting model.

17 On average, public housing stock has a higher amenity than stock in the low-cost private rental market.

226 INDUSTRY COMMISSION

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appropriate public rental accommodation) should not prevent the application of the proposed rent setting model.

The feasibility of implementing the Industry Commission’s model was tested for new tenants using Sydney rental data (see Table 1.4). It is assumed that housing stock is available in appropriately located areas and that the standard market rent is set at the median rent for properties o f an appropriate size in the

private rental market. Families on the lowest incomes are given rebates that would allow them to access accommodation (at least as good as 50 per cent of the accommodation offered in the private rental market) priced at the median rent (while still only having to pay at most 20 per cent of income in rent).

Given choice, these families may choose accommodation more expensive than the median rent. So, for this analysis, payments up to 30 per cent of income on rent were considered affordable.

Figure 1.2: Distribution of rents for one, two and three bedroom private rental accommodation in Sydney, 1991

Cumulative Proportion

0.6

y

— = 4-

/

One bedroom

' Two bedroom

Three bedroom

= f s ±

100 150 200 250 300

Rent $ per week

Note: This figure, of cumulative distributions of rents paid, was compiled using a sample from the Housing and Locational Choice Survey (ABS and DHHCS 1991) of one, two and three bedroom properties in the Sydney private rental market. Source: Industry Commission.

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The assumption that the standard market rent is equivalent to the median rent in the private rental market is consistent with National Housing Strategy (NHS) ideals of adequacy and appropriateness. If the level of assistance were too high it would reinforce perceptions that the best housed public housing tenants are advantaged and this could create resentment in the wider community. The associated subsidy (or rebate) required is shown in Table 1.4. The subsidy is consistent with the current implicit average subsidy of $92 for all rebated public housing tenants within New South Wales.18

The analysis shows that if public tenants were assisted to the degree assumed, they would be able to choose dwellings in the public sector that have better amenity (as reflected by current market rents) than most dwellings in the private rental market. The proportion of one, two and three bedroom rental properties that could be accessed in the Sydney private rental market by various client categories on lowest incomes (under these assumptions and rebates) are presented in Table 1.4.

For existing tenants, any variation due to a mismatch of stock and its location in high-cost areas, such as in Sydney, would be too great for the proposed model — unless it were modified. The mismatch could result in rents for some properties being not affordable to low-income people. Yet a variant of the rent

setting model could be implemented immediately. In the variant (introduced in Section 6.4) tenants would pay the affordable benchmark rent plus (or minus) so many cents per dollar difference between the market rent and the standard market rent, instead of paying (or benefiting from) the full difference.19 Modifications of this type would allow the spread of rebated rents within Sydney to continue to fall within affordability limits (of say 15 to 30 per cent) for different categories of families on the lowest incomes (receiving standard benefits).

The level of adjustment required to make rents affordable where there is a mismatch between stock and client need (assuming that households have one

18 Industry Commission estimate.

19 Consider a couple with one dependent child on an income o f $301 per week choosing a two bedroom house with a market rent of $190 per week. Under the basic model, with the standard market rent $150 per week and the subsidy $90 per week, the tenant would pay a rent o f ($150 - $90) + ($190 - $150) or $100 per week (see Table 1.4).

Assuming a discount of say 25 per cent of the extra cost of the market rent over standard rent, or the tenant paving 75 per cent of the difference, the tenant would pay rent of ($150 - $90) + 0.75 x ($190 - $150) or $90 per week.

With a discount of 100 per cent, the model reverts to the current rent setting system used by housing authorities From a horizontal equity perspective, the outcome becomes more inequitable the larger the discount

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additional bedroom) and their houses are located in high-cost areas could be a discount of the order of 75 per cent, with tenants paying 25 cents per dollar of the difference. This adjustment would allow public housing properties of amenity comparable to between 70 and 80 per cent of those found in the Sydney

private rental market to be accessed affordably by those on lowest incomes (see Table 1.4 last column).

If the mismatch problem were overcome but the stock was still located in high- cost areas then adjustments of 50 cents per dollar difference would allow all public housing properties of amenity comparable to between 69 to 87 per cent of properties in the Sydney private rental market to be accessed affordably (see Table 1.4, second last column and Figure 1.2).

The analysis indicates that housing authorities should place priority on determining what is ‘appropriate’, changing the overall distribution of the stock so that there is a better match between stock and the needs of tenants, and encouraging people to move. The size of the discount required for existing tenants under the ‘grandfather’ arrangements proposed by the Commission

indicates the size of the benefit that would flow with better allocation and changes to the location of public housing.

Rents on public housing properties as low as 15 per cent of income would be equivalent in all categories to accommodation of amenity better than 20 per cent of that found in the Sydney private rental market. Yet during the transition period, some properties may be of such low amenity that under the rent setting

proposal tenants could pay less than 15 per cent of income. In extreme cases they might pay little or no rent.

However, if the properties offer poor amenity it is equitable that tenants should pay less. It would provide authorities with the right incentives. The existence of such an unsatisfactory state of affairs would ensure that an authority would move rapidly to correct the situation — by reviewing what it regarded as

‘appropriate’, by ridding itself of inappropriate stock and through upgrading.

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na Not available. a Income with nominal DSS pensions and allowances. b Rebate determined so that tenant contribution is 20 per cent of income based on the median rent in the private market. c This is the proportion of properties in the Sydney private rental market accessible with a tenant contribution up to 30 per cent of income at the indicated rate of discounting (the difference

between the standard market rent and the market rent of the tenant’s property (see section 6.4)). d Where the dwelling has one additional bedroom to that required. Note: Estimates derived using a sample from the Housing and Locational Choice Survey (ABS and DHHCS 1991) of one, two and three bedroom properties in the Sydney private rental market.

Source: Industry Commission.

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State housing authorities need to ration their stock. Historically, they have used waiting lists as a rationing tool. The allocation of public houses to those people on a waiting list has been on a ‘wait-turn’ basis. Priority allocations are given in cases of special need.

J.1 Waiting lists

To be eligible for public housing, applicants must apply, and fulfil a number of criteria. Each State housing authority has its own set of eligibility criteria (see Table J. 1).

Apart from Queensland and South Australia, housing authorities set income thresholds. People are eligible to apply if their income is below the threshold. State housing authorities vary income thresholds by the size o f households and the number of dependent children. Generally, the income levels chosen relate

to Average Weekly Earnings in the State. In addition they operate asset tests, whereby people wishing to apply for a public house may not own other property or assets exceeding a certain value.

In all States, applicants must show that they have been a resident of that State for a certain period of time. They must also be above a certain age (generally between 15 to 18) before they can apply.

However, public housing is not available immediately to those who apply (see Table J.2). Generally, State housing authorities allocate dwellings to eligible applicants on a ‘wait-turn’ basis. Waiting times in a particular region and for certain types of housing may be longer than others. Some applicants,

considered to be in greater need, may be allocated ‘out-of-tum’ from a priority list.

The waiting period also varies between States. These variations can be attributed to differences in:

• Eligibility criteria;

• Availability of housing stock;

• The housing needs of non-home owners; and

• The response time required to meet adjustments in housing needs.

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Table J.1: Eligibility criteria for wait listing by State, 1991-92

State

Income Test General criteria Aged pensioners Cash or asset test Household composition 1 person 2 persons

3 persons 4 persons 5 persons 6 persons

$ per week 395 500 580 665

720 775

No separate criteria. No maximum limit but

savings over $5 000 are assessed at a deemed

interest rate of 5 per cent (4 per cent as from 31 May 1993) which is converted

into a weekly income.

Household composition Single person Couple, no children Couple, 1 or 2 children Couple, 3 or 4 children Couple, 5 or 6 children Couple, 7 or more children

Singles sharing*’

$ per week 370 568 640

700 748 784 370

Singles $360.

Couple, no children $602.

Maximum cash or liquid assets of $18 600, discretion to apply to $31 000.

Low to moderate income. No specific limit.

Over 90 per cent of households assisted in 1990-91 received incomes of less than $400 per

In receipt of standard pension and supplementary rent assistance.

Applicants cannot own a dwelling.

Residency Age

NSW

Vica

Qld

week.

No other income in of $30 per week.

Must be a resident of New South Wales or have

employment in the State.

interstate persons are accepted where: applicant has a job offer in Victoria;

is an ex-Victorian; or

returning for family reasons.

Must be

Queensland application.

resident at time

15 or over with an

independent income.

of of

Single people must be 17 or over if not living at home. People with dependants may apply at any age.

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Residency

Must be resident of Western Australia at time of

application.

A ge

Can apply from age 17.

Must be resident of South Australia at time of

application and while waiting. Applicants may be out of the State for up to a maximum of six months without penalty Amounts in excess of six months are deducted from the accrued waiting time

Can apply irrespective of age provided the applicant can demonstrate receipt of an independent income (from a wage, Australian pension, superannuation, benefit, investment income, or interest or DSS payment) paid directly to the

individual

233

Residency A ge

Applicant should be Under 18 years old

resident of Tasmania at time generally housed via of application and while community group sub-waiting. leases.

In exceptional circum­ stances an application may be accepted from a person residing interstate (for example, chronic illness of a relative).

Must be resident or

employed in the Australian Capital Territory at time of application and during the waiting period.

Must be 16 or older

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Table J.1: Eligibility criteria for wait listing by State, 1991-92 (cont.)

Income Test

State General criteria Aged pensioners Cash or asset test Residency Age

NT Household composition 1 person 2 persons 3 persons 4 persons 5 persons 6 persons

$ per week No separate criteria. 481 577 673 769 865 962

Applicants must not have Must be resident of the any interest in residential Northern Territory at time property in Australia. of application and while waiting.

Must be over 18, or have a guarantor

a Victorian income limits are for January 1993. b Per client, two highest incomes cannot exceed $568. Notes: Tables derived from State housing authorities’ response to Industry Commission questionnaire; DHHCS (1992c); additional information supplied by State housing authorities. Source: Industry Commission.

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Table J.2: Details on waiting and priority lists by State, 1991-92

Details NSW Vic Qtd WA £4 Tasa A C f° NT

Waiting list (at 30/6/91)

64 895 44 634 22 507 17 784 43 520 4 659 3 751 6 167

Applicants added 30 090 24 010c 20 111 12 456 16 807 4 538 na 4 847

Cancelled or withdrawn

10 482 9 550 10 299 9 276 9 445 3 082 na 735

Dwellings allocated to those on the waiting list

13 045 9 704 8 487 6 270 8 095d 1 576 1 556 I 663

Waiting list (at 30/6/92)

71 458 52 522 24 448 14 694 42 787 4 539 6615 8 061

Allocations of emergency or priority

accommodation

1 962 1029 85e 652 896 800 717f 125

Allocations made on a priority basis (per cent)

15.0 10.6 1.0e 10.4 111 50.8 50.0f 7.5

na Not available. a Tasmanian data is an estimate only. Accurate details were only available for portion of the financial year after the introduction of the housing assessment system, b ACT moved to a new computing system and was unable to provide all figures, c Not all applicants were approved and therefore were not added to the waiting list, d Includes Aboriginal Housing Unit allocations e Queensland Department of Local Government and Planning estimate, f ACT Housing Trust estimate. Notes: Derived from State housing authorities’ responses to Industry Commission questionnaire; unpublished

information provided by DHHLGCS; and additional information supplied by State housing authorities. Source: Industry Commission.

J.2 C hoice of hou sin g

In every State, applicants may nominate a general region in which they would prefer to be housed. In some circumstances they may nominate a particular suburb, for example if they need to be close to a particular support service. Applicants may nominate more than one region but each nomination is treated

236 INDUSTRY COMMISSION

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as equal. However, State housing authorities have discretion when deciding the size, type and location of the property which they offer to the applicant.

Applicants can specify the type of housing they are interested in, given their family size and the location of support services. The size, type and location of housing allocated is based on the number of people in an applicant’s household and any special requirements of the household. For example, State housing

authorities may provide a bedsitter or 1 bedroom dwelling to a single person. A single parent with 2 children may be offered a 3 bedroom dwelling (see Table J.3).

Applicants are generally offered a choice of dwellings. If an applicant is not satisfied with any of the units offered, their waiting period is generally extended until the State housing authorities can find suitable accommodation. In South Australia, applicants can reject up to three housing offers before the South Australian Housing Trust extends the applicant’s waiting time. In New South Wales they have a ‘choice’ of one. If that is rejected, then the applicant goes to

the bottom of the waiting list.

There is an excess of around 5000 to 8200 bedrooms in the Queensland housing stock compared to the nominal requirement of households.1 But there are also a significant number of old age pensioners in small ‘bedsitters’.

1 Commission estimates based on data provided in the Queensland submission (sub. 135). Housing stock was matched with family size, for example couples with no children were allocated either a one or two bedroom apartment house or flat.

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Table J.3: Type of public house typically offered to applicants by household size and State, June 1993 (cont.)

State Single person Couples or sharers Family or single parent Family or single parent Family or single parent I child 2 children 3 children

Family or single parent 4 children

na na na na na

1 bedroom flat/ garden 1 or 2 bedroom 2 or 3 bedroom 3 bedroom 3 or 4 bedroom

flat/ townhouse. 1 and 1 Zi bedroom.

Aged person units are allocated to those on the aged pension.

accommodation. accommodation. Single parents may also be allocated a 2 bedroom flat.

accommodation. accommodation.

1 bedroom apartment. 2 bedroom apartment. 2 or 3 bedroom accommodation. 3 bedroom accommodation.

3 or 4 bedroom accommodation.

na

3 or 4 bedroom accommodation depending on the age and gender of the children.

na

na Not available. Notes: Table determined from State housing authorities’ responses to Industry Commission questionnaire; additional information supplied by State housing authorities. Source: Industry Commission.

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J.3 Priority a c c e s s

State housing authorities supplement the ‘wait-turn’ list with a priority waiting list. The priority list ensures that applicants with greater needs (requiring more urgent assistance) are housed sooner. Offering assistance ‘out-of-tum’ extends the waiting time for ‘wait-turn’ applicants. Therefore State housing authorities

apply stricter assessment requirements for priority applicants (see Table J.4).

In 1991-92, most State housing authorities averaged 7 to 15 per cent of allocations from the priority list (see Table J.2). Around 50 per cent of allocations came from the priority list in Tasmania and the Australian Capital Territory and about 1 per cent in Queensland.

State housing authorities adopt a case-by-case approach when determining priority listings. The criteria generally used are: homelessness; current housing costs; current housing circumstances (such as, overcrowding and unsafe housing); domestic violence; and health problems compounded by inappropriate housing. To be eligible for priority listing, applicants must generally satisfy more than one of these criteria.

Usually the decision to place an applicant on a priority list is made by a panel of people representing a cross-section of the community, including social workers, State housing authorities representatives and tenancy area managers. State housing authorities give priority applicants the same housing choices as ‘wait- turn’ applicants. However, the quality o f the dwelling is often of a lower

standard because of the need to house the applicant quickly. The Queensland Department of Housing, Local Government and Planning stated that:

Applicants for public housing who receive priority allocations are entitled to the same type of housing. However, the Department cannot guarantee that applicants will be housed in the location of the applicant’s choice. This situation will continue to apply once the new priority allocation policy is in place (sub. 135, Attachment 1, p. 29).

Shelter WA (sub. 54) argue that those on a priority list tend to end up in the least appropriate housing.

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Table J.4: Priority list criteria and assessm ent method by State, 1991-92

State Criteria and assessment methods

NSW Cases are referred to independent committees to consider priority allocation.

Vic Area-based committees consider individual cases for priority allocation. May comprise two Ministry officers and a third nominee from relevant interest groups. Priority housing is provided to clients who are homeless or facing homelessness or whose housing situation is critically inappropriate or unsafe and who are unable to

access alternative accommodation such as private rental.

Qld Departmental interviewers determine priority. Priority allocations are available to people who have lost their homes through natural disaster, people whose lives are endangered because of evidence they have provided in a court case and where a child is returning to the custody of the parent after being in

care and no other options exist. A broader-based priority allocation system is to be introduced in early 1994. It is expected that no more than ten per cent of allocations will be on a priority basis.

WA Applicants are assessed by regional officers. If an applicant is refused for priority assistance, the applicant can appeal to the Regional Tenancy Management Committee which comprises regional manager, accommodation manager and applicant’s officer.

SA A formal referral scheme is available to social workers in government and non­ government organisations. South Australian Housing Trust decisions are reviewed by a priority committee of officers of the Trust and other agency representatives. The Trust has its own internal procedures where staff in their day-to-day activities

identify households in urgent need of assistance. All decisions on priority are made after an assessment of the applicant’s medical, social, financial and accommodation circumstances.

Tas Four Regional and District Assessment Committees investigate applications and determine priorities. Each committee includes outside representation (community or welfare person) and one other departmental officer.

ACT Priority applications considered by a committee comprising three members of the ACT Housing Trust. Priority applicants must demonstrate that their needs are greater than those on the wait-turn list. Circumstances considered as special need include: ill health or

disability; inadequate accommodation; severe financial difficulties; domestic violence; the applicant is facing imminent eviction or is experiencing some other similar problem.

NT A committee investigates out-of-turn requests. The committee includes a welfare officer and area manager. People with extenuating circumstances may be allocated a house out-of-turn.

Notes: Table derived from State housing authorities’ responses to Industry Commission questionnaire; DHHCS (1992c); additional information supplied by State housing authorities. Source: Industry Commission.

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J.4 E quivalence s c a le s

An equivalence scale is an estimate of the total expenditure or disposable income required by households of different compositions and in specific circumstances to be equally ‘as well o f f (equivalent) in terms o f their consumption. It is usually expressed as a set of numbers where the value corresponding to a single adult is set equal to one and the values for other types o f households are calculated relative to this household type. Table J.5 illustrates a selection of equivalence scales developed in Australia and overseas.

When determining eligibility criteria for entry onto public housing waiting lists it is important for State housing authorities to establish income thresholds for different household compositions that are ‘equivalent’. This will equate the adequacy of income for different households’ capacity to pay. That is, a household of 1 adult and 1 child would be tested against a lower income threshold than a household with 2 adults and 2 children.

Most State housing authorities have adopted eligibility criteria with different equivalent income scales (except for South Australia and Queensland, which have no income limits) for different household sizes and compositions (see Table J.6). For example, in Victoria, the eligibility criteria imply that a married

couple with no children would require 1.54 times a single person’s income to have an equivalent income.

Most State housing authorities tend to provide unfavourable treatment to larger family structures. That is, equivalent income factors for larger families are smaller than the equivalence scales. For example, it is implicit in Victorian and Western Australian housing authority income limits for eligibility that a family with 2 adults and 2 children requires 1.73 and 1.70 times the income of a single person to have equivalent income. The OECD equivalence scale is 2.68, that is,

a family with this composition needs 2.68 times the income of a single person to have equivalent income. The Kakwani expenditure scale for a family with 2 adults and 2 children is 2.25-2.30.2

2 See Whiteford (1985) for more details on the OECD equivalence scale and the Kakwani expenditure scale.

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Table J.5: Selected equivalence scales3

Kakwani Implicit DSS

Type o f Henderson poverty line expenditure payment scales

household OECD (1954) scales (1967) (1978-79)

Single adult 1.00 1.00 Income level (1967): 1.00

<$4 800 1.00

$12 000 1.00

$16 000 1.00

Married couple 1.69 <40(age) 1.33 Income level (1967): 1.79

<$4 800 1.67

$12 000 1.64

$16 000 1.64

Married wife working: Income level (1967): 2.02

couple child <6 1.81

(<40) plus 2.19 wife not working: <$4 800 2.02

1 child child <6 1.53 $12 000 1.97

$16 000 1.97

Married wife working: Income level (1967): 1.88

couple plus 2 children 2.68

m 6-15; f0-6 2.12 <$4 800 2.30

wife not working: $12 000 2.25

m 6-15; fO-6 1.83

$16 000 2.25

Married wife working: Income level (1967): 2.23

couple plus in 15+; f 6-15 ,

4 children 3.66 m 6-15; f 0-6

2.72

<$4 800 2.57

$12 000 2.46

wife not working: $16 000 2.44

m 15+; f 6-15; m 6-15; f 0-6 2.44

Sole parent 1.49 male <40; 1.38

1 child <6 ■ 1.23

female <40 1 child <6 1.21

a Equivalence scales from Whiteford (1985) have been re-calculated with a single person as the base rather than a married couple with no children. Source: Whiteford (1985).

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There is a need to treat any comparisons between general equivalence scales (Table J.5) and the implicit scales of State housing authorities (Table J.6) with caution. The general equivalence scales rank different family compositions on overall welfare needs, whilst the State housing authorities’ scales are looking at the housing needs of different households. Therefore variations in the two

measures for a given family structure may represent differing income requirements to meet their housing needs as compared to general welfare needs.

Homeswest stated that its income eligibility limits for different household types are based on the equivalence scales that were used in developing the Henderson poverty limits (sub. 228, p. 5).

Table J.6: Implicit equivalence scales in State housing authorities’ income eligibility criteria, 1991 92

Type o f household NSW Vic Old HAa SA las ACT NT

Single adult 1.00 1 00 na 1.00 na 1.00 1.00 1.00

Married couple 1.27 1.54 na 1.32 na 1.23 1.67 1.20

Married couple plus 1 child 1.47 1.73 na 1.58 na 1 41 I 83 1.40

Married couple plus 2 children 1.68 1.73 na 1.70 na 1.48 2 00 1 60

Married couple plus 4 children 1.82 1.89 na 1 96 na 1 73 2.17 2.00

Sole parent (1 child)

1.27 1.54 na 1.32 na 1.41 1.67 1 20

na Not applicable as these States have no income criteria limits for those wishing to enter the public housing sector. a Homeswest advised that eligibility limits have been simplified to be practical mid to aid their understanding. Therefore two adults have the same implicit scale as an adult and a child. Note: Derived from State housing authorities' responses to Industry Commission questionnaire; additional

information supplied by State housing authorities Source: Industry Commission.

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J.5 Efficient and equitable allocation

The existence of waiting lists is not of itself cause for concern because there can be benefits as well as costs associated with using waiting lists to augment a price allocation system.

C osts and benefits of waiting lists and pricing

Pricing, under many conditions, allows efficient allocation in a manner that cannot satisfactorily be achieved by any other approach. Benefits typically include:

• The distribution of the good to those willing to pay the most for the good;3

• The allocation is efficient; and

• The transfer of information on scarcity.

This method of allocation, though, is sometimes criticised because those with higher incomes have a greater ability to express their preferences and fluctuations in price can result in rapid and inequitable changes in the distribution of wealth and purchasing power.

Allocation by waiting lists has a number of costs. These include:

• The cost to the client of having to spend time and resources in finding extra information on availability (as well as price); applying for a position on the waiting list; attending an interview; and facing a restriction in mobility.4 These costs may include any change in behaviour a person undertakes to fit

within the eligibility criteria; and

• The cost to authorities in managing the waiting list. The larger the list the greater the administrative costs and co-ordination required to ensure that the waiting list operates smoothly.

They have, in certain circumstances, a number of advantages over simply using a pricing system. These include:

• Facilitating the screening of clients to ensure that those in most need obtain a spot on the list;

• Acting as a disincentive to those who require temporary assistance;

• Allowing authorities to better manage the demand for their stock; and

3 In situations where consumers’ incomes are equal, presumably those who value the good the most will make a higher bid for the good.

4 Restrictions on mobility to a large extent may be lessened by changes to the transfer criteria

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• Allowing authorities to obtain lower vacancy rates for their stock than would otherwise occur under a pure price rationing system.5 6

Proposed allocation principles

In an attempt to take advantage of the costs and benefits of both the rent setting and waiting list approaches, the following principles have been developed.

1. One segmented waiting list for each State.

This principle has two important parts. First, there would be one waiting list for the whole State. This has the advantage of simplicity. Households with similar needs would generally wait the same length of time regardless of where they prefer to live within the State.

Second, the waiting list would be divided into a number of segments. People who are in similar need of housing assistance would be placed in the same segment of the list in order of their application. The Commission believes that more than two segments for a waiting list should be possible and worthy of investigation.

2. All on low incomes who qualify for rent assistance should be eligible to apply for public housing.

For simplicity and equity, all those eligible for rent assistance should also be eligible for public housing. Some in this group may value the benefits of security of tenure and lack of discrimination highly. If they are willing to wait their turn (an expression of their valuation o f the benefit) they should not be excluded/’

3. Those in greater need should receive assistance sooner.

Those most in need have most to benefit from public housing and consequently it is appropriate and equitable to make them wait the least time.

The rate at which people from a particular segment of the waiting list are allocated housing assistance would be determined by the relative need of the people in that segment. This would mean that the average waiting time for

5 In the private rental market there are almost always vacancy rates, typically o f about 3 per cent. As the price system does not clear the market, the allocative benefits usually attributed to a pricing system do not automatically follow.

6 There should be two checks on eligibility criteria. One at the time of the application for public housing. The second just prior to the applicant reaching the top o f the list.

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assistance would be shortest for that segment of the waiting list occupied by people in greatest need, and grow longer for each successive segment. It is important that people in all segments are eventually allocated housing assistance.

Eligibility limits for entry onto the list should take into account the housing needs of the different sizes and compositions of families. These limits should be set to ensure that people on the waiting list get housed within a reasonable period.

4. Each applicant’s circumstances should be considered within flexible guidelines.

Applicant’s relative need should be assessed against a set o f criteria — such as household income and composition, potential for discrimination in the private rental market, and current living conditions. The assessment of need could include an assessment as to whether the need is likely to be short-term

or long-term.

Clearly the guidelines should be interpreted broadly given the specific nature of individual cases. The relative housing need of applicants would be determined as well as the appropriate segment on the waiting list. Those in special circumstances, for example those currently in crisis accommodation, will require a greater degree of subjective assessment of the gravity of their needs.

The initial assessment could be undertaken by either a panel or a case officer from the tenancy manager’s office working within the eligibility criteria. Where the initial decision is made by a case officer for applicants to receive more urgent access to housing assistance, that decision may need to be

validated by a panel. A right to appeal against decisions made by case officers or the panel should also exist. When the circumstances of people on the waiting list change substantially they should have the right to be reassessed.

5. Those wishing to transfer from one State’s waiting list to another should have the time they have been waiting credited to the new list.

Mobility between States should be treated neutrally, hence those who are on a waiting list should not to be unduly discouraged or penalised from transferring to the waiting list of another State (but neither should they be encouraged). Time spent on a waiting list in one State should be able to be

credited elsewhere (in full).

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6. Those within public housing should be given the opportunity to transfer.

There are greater problems in pursuing a policy of transfer neutrality for those within public housing. Some areas are highly desirable in which case a transfer could be to a waiting list. Where someone wishes to move from a desirable area to a less desirable area (as indicated by expected waiting times) then they should be given the opportunity with a minimum penalty.

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K.1 Rent a ssista n c e

Pensioners, allowees, special beneficiaries and Additional Family Payment recipients renting in the private rental market are eligible for assistance with their rents under schemes operated by the Commonwealth Department of Social Security (DSS) and Department of Veterans’ Affairs (DVA). The DVA scheme

is identical to that operated by the DSS. Rent relief, which includes bond and relocation assistance, is also available under the Mortgage and Rent Assistance Program (MRAP) of the Commonwealth— State Housing Agreement (CSHA).

DSS and DVA rent a ss ista n c e

Rent assistance was introduced in 1958 for pensioners as a supplementary allowance It provided additional income support for the aged, invalid and widow pensioners.

Since then the program has been extended to include new groups — disability support pensioners, sole parent pensioners, Jobsearch and Newstart allowees, recipients of Additional Family Payments — and the level of assistance has increased significantly.

The degree of targeting has been improved over the last 10 years by eliminating a number of anomalies in eligibility and reducing assistance to those paying relatively low rents The rate of assistance has been raised substantially over the last 5 years for those facing relatively high rents.

Those eligible for rent assistance include people who pay rent other than to the Commonwealth or State housing authorities for private rental accommodation. Eligibility extends to people who pay rent as:

• lodging — where board and lodging is paid and the amount for lodging cannot be identified, two-thirds of the amount paid is treated as rent;

• site rent or fees for a caravan, vehicle, vessel or other accommodation in which they live;

• services provided in a retirement village; or

• accommodation in a nursing home where accommodation cannot be identified, two-thirds of the amount is h eated as rent.

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Rent assistance is not payable to people who own their own home but pay accommodation fees elsewhere, except during a period of residence in a nursing home.

The amount of rent assistance varies with rent paid. If rent is below a minimum payment threshold, no assistance is paid. Where rent is above the threshold, assistance is paid at a certain rate for each dollar o f rent paid above that threshold. The amount of assistance paid is capped at specified maximum rates. The amount of rent assistance paid does not vary with income until income is

such that all other DSS benefits are withdrawn. At this point, rent assistance is phased out at 50 cents per dollar as a client’s income rises.

The rent thresholds are indexed in line with the CPI in March and September each year.

Changes to rent assistance eligibility introduced in February 1992 include:

• The abolition of waiting periods for those aged 18 to 60. Only single allowees and beneficiaries under 18 years o f age without children have a waiting period. However, for this group the waiting period was reduced from 26 to 18 weeks; and

• The extension of eligibility for rent assistance to include 16 and 17 year olds who qualify for the homeless/independent rate.

Changes to rent assistance eligibility criteria have increased the number of people receiving assistance from approximately 510 000 in June 1984 to around 930 000 in June 1993. Over this period assistance rose from $10 per week to a maximum payment of $42.60 per week (see Table K. 1).

Commonwealth outlays on rent assistance totalled approximately $1.2 billion in 1992-93. This represents a real growth of just under 150 per cent since 1984-85. In contrast the Commonwealth spent $1074.9 million on the CSHA in 1992-93, which is slightly higher in real terms than 1984-85 (see Appendix D).

DSS pension, benefits and allowance payments at March 1993 are listed in Table K.2.

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Table K.1: Maximum rates of rent assistance, November 1983 to September 1993

($ per fortnight)

Client group

Nov ‘83

Dec ‘88

Jun ‘88

Dec '89

Jun ‘90

Sept ‘90

Mar ‘91

Mar ‘92

Mar •93

Sept ‘93

Pensioner - without children 20 30 30 40 50 60 62.00 62.90 67.20 68.00

- with 1 or 2 children 20 30 40 50 60 70 72.40 73.50 73.80 74.80

- with 3 or more children 20 30 40 50 70 80 82.70 83.90 84.20 85.20

Beneficiary - without children nil3 20 20 40 50 60 62.00 62.90 67.20 68.00

- with 1 or 2 children nil 30 40 50 60 70 72.40 73.50 73.80 74.80

- with 3 or more children nil 30 40 20 70 80 82.70 83.90 84.20 85.20

FAS recipient - with 1 or 2 children nil 30 40 50 60 70 72.40 73.50 73.80 74.80

- with 3 or more children nil 30 40 50 70 80 82.70 83.90 84.20 85.20

a Only pensioners and sickness allowees received rent assistance at this time. Sources: DSSsub. 214.

From March 1993 the rate at which assistance is paid increased from 50 to 75 cents for every dollar paid above the minimum rent threshold. To improve targeting of private renters with housing affordability problems, higher minimum rent thresholds and maximum amounts o f assistance were introduced

(see Table K.3).

The Commonwealth Government described these changes as the first step towards achieving its affordability objective. The level of assistance was raised for many of the social security clients and veterans, and in particular sole parents, single pensioners and single allowees. The National Housing Strategy

had identified these groups as facing the greatest affordability problems in the private rental market.

The Commonwealth has foreshadowed further improvement to the adequacy and targeting of rent assistance. In the 1992-93 Budget it made a commitment to establish a benchmark of housing affordability for all low-income private renters:

As a key outcome in its long-term agenda of reform, the Government is setting a benchmark of housing affordability where:

People on low incomes paying more than 20 per cent of their income on rent will be assisted by the Government towards meeting those costs — the level of assistance would be related to both rent paid and level of income (DHHCS 1992b, pp. 14-15).

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Table K.2: DSS benefits, March 1993 ($ per fortnight)

Benefit

Single no children Single one child a

Couple no children Couple one child a

Age pension 312.10 312.10 520.60 520.60

Pharmaceutical allowance 5.20 5.20 5.20 5.20

Sole parent pension na 312.10 na na

Guardian’s allowance na 29.00 na na

Job search allowance (JSA) 282.70b 312.10 520.60c 520.60c

Newstart allowance (NSA) 282.70 312.10 520.60c 520.60c

Basic family payment1 1 na 20.90 na 20.90

Additional family payment na 61.90 na 61.90

Total family payment na 82.80 na 82.80

Rent assistance (maximum rale) 67.20 73.80 63.20 73.80

na Not applicable. a Child assumed to be under 13 years old. Family payments must be added to the pension or allowance to determine total fortnightly income, b Need to be 21 years and over to receive this rate, c For couples, each individual receives $260.30 per fortnight in pension or allowance and $2.60 pharmaceutical

allowance. d From January 1993, this payment is paid to the principal carer, usually the mother. Family Allowance Supplement (FAS) and the guardian allowance have been replaced by the Family Payment. Sources: DSS ( 1993); additional information provided by DSS.

The Commonwealth is also looking to reduce the difference between the level of rent assistance for social security recipients with rent rebates for public and community housing tenants:

Leading up to the year 2000, the Commonwealth, in consultation with the States and Territories, will examine the feasibility of having this benchmark of affordability used to calculate assistance not only for those social security recipients renting from private

landlords, but also those in rental accommodation subsidised by governments through the CSHA and community housing (DHHCS 1992b, p 15).

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Rent assistance is the only form of payment from DSS specifically aimed at helping people to meet their housing costs. It is provided in the form of an income supplement. DSS states that:

rent assistance is designed to support [the primary objective of providing adequate income for DSS clients and their dependants] by providing supplementary assistance to meet the additional cost of private rental housing...Unlike rent rebates in public housing, rent assistance does not therefore function as a direct subsidy on the rents of private tenants. While the amount of the rent assistance is related to the level of rent and assists

people to meet the costs of private rental accommodation, the payment is delivered as a component of pension or allowance. Recipients may elect to allocate the payment to rent but by the nature of the payment are not required to do so (sub. 214, p 2).

DSS clients receiving rent assistance clearly see the payment as an income supplement rather than an allowance to help pay for housing costs. A survey conducted by DSS revealed that recipients of rent assistance were more likely to spend an incremental change in the assistance on other items such as food,

clothing and paying bills rather than improving their accommodation:1

Responses to questions on spending priorities and the receipt of additional rent assistance would suggest that among the sample selected recent rent assistance increases have not been a catalyst to changing accommodation and that a further increase of $20 per week

would not be sufficient incentive to induce a change... Food, clothes and bills were the key items for additional expenditure for all groups, whilst children featured highly in the sole parent and married allowees with children sub-groups (DSS 1992a, p 18).

Table K.3: DSS rent assistance schedule, September 1993 ($ per fortnight)

Rent

Client group Thresholds Rent Ceiling Max. amount o f assistance

single no children 60 149.20 68.00

single 1 or 2 children 80 178 00 74.80

single 3 or more children 80 192.00 85.20

couple no children 100 189.20 64.00

couple 1 or 2 children 120 218.00 74.80

couple 3 or more children 120 232.00 85.20

Sources: DSS sub. 214, additional information received from DSS.

1 The question asked in the survey by DSS (1992, p. 11) was: ‘if rent assistance was increased and you received $20 more per week in your social security payment, what would be the three most important things you would spend it on?’

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There has been a small and highly targeted rent subsidy scheme also in operation, however, this is being scaled down in recognition of the improved level o f income support being provided to private renters through the Department of Social Security (sub. 135, p. 7).

NSW and Queensland use MRAP funds for their Community Tenancy and Community Rent schemes respectively. Under these schemes, community groups are funded to headlease properties from the private sector and sub-let them to those in need of assistance. These properties are let to households on

the public housing waiting list at the same rent as if they were public housing tenants. In 1991-92, NSW provided $12.8 million for such schemes from a total of $40.5 million MRAP funding.

There are other State schemes to assist private renters which are funded outside the CSHA. For instance, funds for the Housing Resource Service scheme in Queensland are raised from interest earned on bond lodgements to the Queensland Rental Bond Authority. Community organisations are provided

grants through this scheme to provide information and advocacy services to private renters.

K.2 C o n sisten cy in private and public rental a s sis ta n c e

There are inequities arising from the treatment of those in similar circumstances in public housing compared to those renting privately and receiving rent assistance.

Despite the increases to DSS rent assistance over the past 10 years the amount is less than the rent rebates received by public tenants under the CSHA. Prior to the 1993 changes to rent assistance, Wood (1990) argued that the maximum financial assistance available to eligible private renters under rent assistance was approximately 50 per cent of the average subsidy received by public renters

under rent rebates. Flood (1993) found that the total housing subsidy for public tenants was $2885 per year per household as compared to $968 for private renters.

DSS argues that full parity between rent assistance and public housing subsidisation will not be achieved in the short term:

Limits to the capacity of the social security system to emulate both the wider range of benefits available to public housing tenants and the structure o f rent rebates ... mean that full parity in assistance between public and private renters is unlikely to be achievable (sub. 214, p. 14)

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Table K.4: State rent relief programs, January 1993

State Type of assistance Eligibility 1991-92 expenditure

No. of people assisted 1991-92

NSW Primarily payment of bonds, but also rent in People satisfying normal public housing eligibility advance, removal expenses, temporary criteria, who are homeless or at risk of homelessness, accommodation costs, electricity and gas connection fees.

Vic Loans for bond maximum $400 individuals, $600 Commonwealth Health Care Card holders with difficulty households and group (average payment $437 per meeting initial establishment costs of renting, household).

Qld Rent subsidy of maximum $50 per week (very strict eligibility criteria) being phased out and replaced with grants of 2 weeks’ rent with strict eligibility criteria in June 1993. From

April 1991 loans for bond, no maximum amount.

Rent subsidy — ongoing payment. Maximum $25 per week (average payment $ 16.28 per week).

Rent subsidy — ongoing payment, reviewed 3 monthly. $5 - $25 per week, depending on proportion of income spent on rent. Also loans for bond.

WA

Bond Loan Program: must be resident in current area of Qld 6 weeks or more, with income less than $325 per week (single), or $525 per week (family), and cash assets

less than $1000. For rent grant, must also be on waiting list for public housing and exiting crisis centre.

People resident in SA 3 months or more, with income $300 per week or less, paying 40 per cent or more on rent.

Low-income people and AUSTUDY students (not DSS beneficiaries) with income less than $335 per week (single), $441 per week (2 people); paying more than 25

per cent (but less than 75 per cent) on rent.

$ m

6.1

6.7C

5.6a

20 869

21 217

14 358a

582b

9 291

17 676c

17 108a

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Table K.4: State rent relief programs, January 1993 (cont.)

No. o f people assisted

State Type o f assistance___________________________ Eligibility________________________________________1991-92 expenditure_____________1991-92

$ m

0.9b 750b

3.8 1 784d

1.0 1 235

(excluding family vehicle) under $5000.

a Bond loans, b Rent subsidy, c Rent relief. d Current as at 30 June 1992.

Notes: Derived from information supplied by DSS. Source: Industry Commission.

Tas Rent subsidy — on-going payment. Maximum $30 per week. Also bond loans/grants: maximum $600 (repaid if leaving

accommodation and not transferring bond to next lease). Cost of removals (cheapest of 3 quotes).

ACT Rent subsidy — on-going payment. Maximum (single or couple) $50 per week, plus $10 per child.

NT Rent subsidy — on-going payment. Maximum $60 per week, reduced by any rent assistance from DSS. Also bond loans, emergency' arrears and relocation assistance grants.

People with dependent children, eligible for public housing and Health Care Card, paying 45 per cent or more of income on rent. Income threshold of $380 per week with 1 child, increasing for each additional child. No cash assets allowed.

People on public housing waiting list; income $330 per week or less (single), $550 per week or less (2 people), plus $55 per week per additional person; paying 30 per cent or more on rent, or 10 per cent of FAS and all DSS rent assistance.

People resident in NT at least 3 months, over 18 years old. Income of $636 per week or less, paying more than 40 per cent on rent. Must be on public housing waiting list and not own a dwelling or land. Realisable assets

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However, DSS believes that the gap between the assistance received by its clients and public tenants can be narrowed further within the current fiscal constraints by improving the adequacy and targeting o f rent assistance to those paying 20 per cent or more of their income on private rental. The three changes suggested by DSS to improve consistency in the short-term are:

• Increases in the maximum rates of assistance to all categories of recipients. This would raise the average value of assistance and reduce the incidence of financial housing stress and therefore narrow the gap between public rental rebates and rent assistance;

• Further gradation of maximum rates of assistance and rent thresholds to reflect not only the family composition but also the different ages of children and their lower earning entitlements under the age of 21; and

• The modification of the poverty traps that currently exist within the public rebate system.

DSS goes on to argue that in the longer term parity between rent assistance and rental rebates can best be achieved through an income support system:

DSS considers that greater parity in financial assistance to public and private renters should be further considered in the medium to long-term through the integration of all financial assistance to renters within Commonwealth income support entitlements (sub, 214, p. 24).

This is consistent with the Commonwealth Government’s objective of ‘evaluating" the possibility of obtaining full parity of assistance between public and private renters by the year 2000.

A concern expressed by many participants is that increases in the level of rent assistance do not necessarily result in greater assistance because private landlords raise the level of rent. For example, the Fitzroy, Richmond and Collingwood Accommodation Service stated that:

... rental assistance payments from the Federal Government does drive up the cost of private rental ...As more people are able to pay increased rents, the Agents then increase the rent again using affordability as the absolute benchmark, and not other criteria such as standard of accommodation, previous rental record, applicant’s links to the area etc

(sub 157, p. 1).

The Derby West Kimberley Shire also submitted that:

The result of Rental Assistance as a component of DSS benefits has been clearly identified as a stimulus for higher rentals, rather than a relief from high rentals (sub. 70, p, 6).

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However, not all participants held this view. The Property Owners Association of Victoria referred to evidence that:

... ‘Direct” Rent Assistance to the welfare recipient has no effect on the market rentals because the existing rents have not increased for the last 2 to 3 years despite large cost increases and during a period o f consistent increasing welfare payment amounts. The vacancy rates are also staying consistent at 5 per cent to 10 per cent in different areas

(sub. 156, p. iv).

As argued in Appendix E, it is effective for governments to provide long-term housing assistance through the provision of public housing. Consequently, there is an argument for maintaining different rates of assistance to public renters as compared to private renters to capture the benefits of public housing.

This is not inequitable in the long-run because everybody eligible for rent assistance is also eligible for public housing.

K.3 In co n sisten cies in rental a s sis ta n c e

DSS recipients on higher incomes receive the same level of rental assistance as those on lower incomes, if they pay the same rent. This is inequitable.

Further, rent assistance does not explicitly take into account differences in the size and composition of households. Larger households are disadvantaged as their equivalent income would tend to be lower (see Appendix J) but they receive the same level of rental assistance, based on the amount o f rent paid.

Further, not all low-income households renting in the private rental market are eligible for rent assistance.

K.4 Shared equity s c h e m e s for public h ou sin g tenan ts

In many cases public housing tenants will have insufficient income to bridge the gap between public rental and home ownership, even with State government assistance through Home Purchase Assistance. State housing authorities have introduced shared equity schemes which may be appropriate for this group of

people. That is, those who cannot take out a loan for full ownership of the home may be able to buy a share of the house with the State and increase their ownership of the house as their income increases. They pay both mortgage repayments in respect of the loan for their share of the house and rent in respect

of the share owned by the State.

Most States — New South Wales, Victoria, Queensland, Western Australia and South Australia — have implemented shared ownership programs. The schemes in New South Wales and South Australia target existing public housing tenants.

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The Victorian scheme targets both existing public tenants and those who have reached the top of the list for home purchase assistance. The Western Australian scheme targets those who are eligible for home purchase assistance and operates in conjunction with other home purchase assistance schemes. The

Queensland scheme is aimed at all low-income households who cannot proceed with outright home purchase.

The Commonwealth Government announced in the 1992-93 Budget its Social Housing Subsidy Program which will provide funding to the States to help them raise additional funds for the provision o f the public equity component of shared home ownership and certain other rental accommodation for low- and moderate-income people. The Commonwealth will provide $8 million in

1993-94, $16 million in 1994-95 and $24 million in 1995-96.

There are a number of advantages associated with shared ownership. Yates stated that shared ownership:

... provides both a means o f bridging the deposit gap for those households for whom ownership would otherwise not be an option and a tax effective means o f accumulating wealth (1989, p. 3) .

The DHHLGCS submitted that:

Shared ownership has the potential to make the characteristics of home ownership available to clients on such low incomes that they would otherwise have little chance of enjoying these characteristics (sub. 213, p. 33).

Under shared ownership schemes, the household is generally responsible for rates, maintenance and repair costs. This releases some of the financial burden of governments. Further, it increases tenant participation in the management and control of the house. However, the Victorian Mortgage Review Task Force argued that the added financial burden on low-income borrowers can result in the run-down of the property and its value:

... low income borrowers who are repaying loans in conjunction with other associated housing costs, such as municipal and water rates and compulsory insurance as well as family living expenses, often cannot afford costly maintenance and repairs, leading eventually to a decline in the value of the property (sub. 184, p. 4, attachment)

One o f the main advantages with home ownership is that with inflation housing costs decline as a proportion of income over time. Yates (1989) argued that home buyers of the traditional nature only sustain a high housing cost to income ratio for approximately 5 years, while for households participating in a shared equity scheme this does not begin to decline until the 25th to 35th years when the mortgage is discharged. Implicit in this is an assumption o f high inflation.

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During periods of low inflation these benefits will take even longer to be achieved. Wensing submitted that the role of shared ownership schemes in periods o f low interest rates is minimal:

Unsubsidised shared ownership programs have very limited role to play between eligibility for public rental housing and home purchase assistance for full purchase under CSHA programs. Their role increases in times of rising interest rates and conversely decreases under times of falling interest rates (sub. 178, p. 3).

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are shareholders in the co-operative. Membership to a Shared Equity Rental Housing Co-operative gives tenants the right and responsibility of co-operative management. Holding co-operative shares entitles tenants to security of tenure provided they contribute to the management of the co-operative and pay rent to cover certain repayment costs.

(Victorian Department of Planning and Housing 1991, pp. 1.1, 2.1, 3.1, 4.1.)

All four types of community housing are delivered. State governments determine the mix (see Table L. 1).

Table L.1: Co-operative and community housing programs by State, 30 June 1993

(i) Co-operative housing programs

Dwellings Source of Ave. no. o f dwellings

State Program Co-ops Metro Other Total funding in scheme in 1992-93

NSW3 CO-OPS 9 45 LGACHP/CHP 6.4

Vic RHC 21 535 196 731 CSHA untied 34 8

Vic CERC 62 181 121 302 LGACHP/CHP 9.1

CSHA untied

Qld CO-OPS 29 64 45 109 LGACHP/CHP 3.8

Qld CoHP 21 68 72 140 CSHA untied 6.7

Qld CHPP 2 0 10 10 State 5.0

SA CO-OPS 61 925 21 946 LGACHP/CHP 17.7

CSHA untied

Tas CO-OPS 4 45 0 45 LGACHP/CHP 11.3

ACT CO-OPS 7 32 0 32 LGACHP/CHP 3.7

CHEP

CSHA untied

NT CO-OPS 1 5 LGACHP/CHP

All 217 2 365

a Six of the co-operatives are in the metropolitan area.

(ϋ) Joint ventures

Dwelling Source o f Ave. no. o f dwellings government in scheme in

State Program Co-ops Metro Other Total funding 1992-93

Vic PP 16 113 46 159 State 9.9

Qld CHPP 185 148 568 716 State 3.9

WA JV 84 528 333 861 State 10 3

SA JV 165 764 912 1 676 CSHA untied 10.2

Tas JV 4 20 1 21 CHP 5.3

All 454 3 433

Notes: NSW has some joint ventures but no specific program outside CHP. See below for abbreviations.

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(iii) Other community housing programs

Dwellings Source o f Ave. no. o f dwellings

State Program Groups Metro Other Total funding in scheme in 1992-93

NSW3 LGC 59 305 LGACHP/CHP

NSW CTS 61 1 493 1 540 3 033 MRAP 50.9

NSW ARHP 1 1 033 2 743 3 776 ARHP 3 776.0

Vic AHB 1 150 712 862 ARHP 862.0

Vic EH 83 MRAP

Vic LGHP 52 204 LGACHP/CHP 3.9

Vic RHP 81 1 121 112 1 233 CSHA untied;

State

15.2

Vic YHP 109 205 84 289 CSHA untied 2.6

Vic GHP 113 130 89 219 CSHA untied 1.9

Qldb CRS 26 268 741 1 009 MRAP 38.8

Qldc LGCHP 115 76 659 735 LGACHP/CHP 6.4

Qld ARHPd 1 2 523 ARHP 2 523.0

Qld ARHPe 34 2 805 ARHP 239.6

WA CRTP 23 36 10 46 State 2.0

WA CFAP 29 28 22 50 State 1.7

WA AHBcf 1 755 1 745 2 500 ARHP 2 500.0

WA AHBd§ 1 717 717 ARHP

WAb LH 14 14 1.0

SA CHA 23 503 86 589 LGACHP/CHP

CSHA untied Commercial

28.0

mortgages

SA CTS 124 492 146 638 C’wealth

programs Stale Private

5.1

SA AHB 1 932 596 1 528 ARHP 1 528.0

Tas CTS na 44 43 87 MRAP na

Tas ARHP 1 253 253 ARHP 253.0

ACT CORHA 47 176 0 176 CSHA untied 3.7

NT CTS 1 5 0 5 MRAP 5.0

NT ARHP 1 1 882 CSHA tied 1 882.0

All 1 003 25 478

a 14 of the groups were in the metropolitan area and 45 in the country, b CRS numbers refer to households housed at 30 June 1993, not dwellings, c Refers to non-co-operative projects. d Refers to dwellings owned and/or operated by Queensland Department of Housing, Local Government and

Planning. e Refers to dwellings owned and/or managed by Community Groups. f These dwellings are Homeswest mainstream rental properties specifically allocated to Aboriginal people, g These are dwellings constructed since 1972 for remote Aboriginal communities who manage the properties

themselves. The current condition of these properties is unknown. Note: More detail on Aboriginal Rental Housing Program (ARHP) in Appendix N.

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Key to abbreviations

AHB Aboriginal Housing Board

CERC Common Equity Rental Co­ operatives CHA Community Housing Association

CHPP Community Housing Partnership Program CO-OPS Co-operative Housing Program

CRS Community Rent Scheme

CTS Community Tenancy Scheme GHP Group Housing Program LGC Local Government and Community Projects

LH Lodging Houses

PP Project Partnership

RHP Rooming House Program

ARHP Aboriginal Rental Housing Program CFAP Community Facilities Accommodation Program CHEP Community Housing Expansion

Program

CoHP Co-operative Housing Program

CORHAP Community Organisations Rental Housing Assistance Program CRTP Community Residential Tenancies Program EH Emergency Housing

JV Joint Ventures

LGHP Local Government Housing Program MRAP Mortgage and Rent Assistance Program RHC Rental Housing Co-operatives YHP Youth Housing Program

Sources: Randolph (sub. 216, p. 39); DHHLGCS Communication; Industry Commission estimates.

Community housing infrastructure provision by non-government and local government organisations

Funding of non-government and local government organisations that support community housing is provided mainly by the States. Some of the organisations focus solely on community housing tenants, others include advice and support for community housing managers while the remainder have organisations which include functions outside the sector. The resources that are provided vary in emphasis and range of support across the States. Table L.2 lists these resourcing organisations and the sources and size of their funding.

L.1 Community housing program s

Community housing is generally funded through the CSHA. LGACHP stemmed from the Australian Labor Party’s 1982 housing policy platform which provided for a Community Housing Expansion Program (CHEP) and a Local Government Housing Assistance Program (LGHAP). These two programs were

combined in late 1984 to form LGACHP.

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Table L.2: Community housing organisations by State, 1993

State Organisation Funding source

NSW Association to Resource Co-Operative Housing (ARCH) Australian Federation of Housing Associations

Vic Municipal Association of Victoria Common Equity Housing Ltd (CEHL) Resource co-operatives Resourcing for rental housing co-ops Joint co-operatives

Ecumenical Housing Unit Regional Housing Councils (RHCs)

Qld LGACHP resource workers Co-op housing program Community- Housing Partnership Program (CHPP) Housing Resource Sendees

LGACHP

LGACHP Untied CSHA LGACHP and Untied CSHA State housing authority No funding yet

LGACHP State Co-operative Housing Program Auctioneers and Agents Fund Rental Bond Authority, Grants and Community Organisations and CSHA

SA South Australian Co-operative Housing Authority (SACHA)

Co-operative Housing Assistance Sen-ice of SA (CHASSA) Community Housing Associations Forum (CHAF) Community Housing Associations Program Advisory Committee (CHAPAC) Youth Housing Network

CSHA - Commonwealth - State State grants Internal sources^ Grants Other

F u n d i n g

1992-93

$ ’000 195 50

129 280

97

210

4 853 2 022 577 1 564

308 37

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Table L.2: Community housing organisations by State, 1993 (cont.)

Homeswest, DHHLGCS and LGACHP/CHP Homeswest and LGACHP/CHP (50:50) LGACHP/CHP

Funding 1992-93

$’000

48 8

600

79 c

16

a 1993-94. b 1991-92. c Each RHC employs 1 grant funded employee, at a cost of about $34 000 per annum. The co-operatives receive an operating subsidy from the State housing authority. The subsidy reduces as the number of properties acquired approaches 35, Once 35 properties have been attained workers are funded from co-operative’s own resources

and the operating subsidy has to be repaid, d Julv-December 1992. e Also paid for costs for provision of administrative services and travel, f This represents a contribution of $ 1871 per annum from each co-operative household,

g Over 2 years. Source: DHHCS(!993).

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The Housing Assistance Act 1984 Annual Report 1985-86 noted:

LGACHP is a new and innovative program designed to achieve the following objectives:

• To encourage local government bodies and community groups to provide rental housing and to facilitate greater tenant management of such dwellings.

• To respond to specific housing needs which have been neglected in the past.

• To attract local government and non-government funds and other resources into the program which would not otherwise be available.

• To involve local government and community groups in the identification of housing needs and the formulation of local housing policies (p. 83).

In 1988-89 Purdon Associates evaluated the effectiveness and efficiency of the Program. National Shelter evaluated the success o f the Program in facilitating greater tenant participation in the management of their dwellings (Purdon Associates Pty Ltd and National Shelter 1989).

New guidelines followed in 1989 with higher priority given to tenant participation and the aim of establishing a viable co-operative housing sector.2

CSHA tied programs

The Community Housing Program (CHP) encompassed LGACHP from 1 January 1993. The CHP goes further than LGACHP in that:

The prime objective of the CHP is to develop a viable Community Housing sector. The rental accommodation supplied under the CHP should be appropriate and affordable. It should provide tenants with the choice of location, physical type and management arrangement, security of tenure and an opportunity to maximise control over their housing in a responsive environment

Central to the growth of the sector is the development of effective partnerships between Government and non Government organisations, which maximise the self-management of the sector within an agreed policy and administrative framework (Interim Program Guidelines — Guidelines yet to be finalised ).

The CHP differs from LGACHP in several significant respects:

• The objectives of CHP are broader, encouraging integration with State programs as well as promoting linkages with support services and

2 The 1989 Program Guidelines indicate that: The LGACHP is designed to involve local government and community groups in the provision and management of long-term housing for people on low incomes Whilst housing is to be provided in accordance with the principles of Recital D of the CSHA,

the program seeks to encourage the development of new housing models. By testing the effectiveness of such models the program will provide a vehicle for the adoption of greater diversity in mainstream public housing.

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maximising tenant involvement. The over-riding objectives of the CHP are to develop a viable sector whilst also providing legal, technical and management infrastructure to support its expansion;

• Funding may be directed through State-based community housing programs;

• The Commonwealth may nominate projects of national significance;

• Strategic planning is to take a higher profile with greater involvement of community representatives in joint planning with Commonwealth and State governments;

• A framework to improve accountability and streamline the implementation o f the program is to be established;

• Anti-discrimination conditions apply to tenant selection; and

• There are broad guidelines on various administrative and legal security matters, while allowing the exact form of relationships between community organisations and State housing authorities to reflect local conditions. (Arrangements for planning, implementing and evaluating CHP are more defined than for LGACHP.) (DHHCS 1992b)

To plan and implement the CHP, each State will have a Community Housing Advisory Committee or equivalent.

Use of funds for LGACHP and CHP

CHP funds can be used for:

• Capital purposes including residential accommodation for essential support workers, and extensions to existing structures. (LGACHP did not provide capital assistance to organisations for residential accommodation for support workers within projects);

• Developing infrastructure to support long-term viable expansion of community housing, for example, training o f managers, organisations and tenants, financial structure and legislation development, research and development. The ability to use funds for development purposes was

applauded by a number of participants (for example, the Australian Local Government Association (sub. 102, p. 10) and the Central Gippsland Regional Housing Council (sub. 149, p. 3)). (LGACHP allowed activities of a non-capital nature associated with the development of the program to be funded but the use of funds for this was to be minimised); and

• Existing State funded initiatives, provided that State financial effort in community housing is maintained and other accountability requirements are satisfied. (This feature was not in LGACHP.)

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Funds cannot be used in CHP and LGACHP:

• To meet administrative costs o f the program;

• To cover recurrent costs including subsidies to projects and/or tenants, except as agreed between Commonwealth and State Ministers; and

• Except for infrastructure projects, for the payment of non-capital costs such as wages associated with the provision o f support services for tenants.

Bodies receiving LGACHP or CHP funds must be legally incorporated and be able to demonstrate sound accounting procedures and management structures. Generally they are non-profit organisations.

Disbursement of funds

Fund allocation procedures for CHP will be detailed in State operational guidelines and a CHP Strategic Plan. Fund allocation obligations for CHP are more stringent than for LGACHP. CHP funds will be allocated to the States on a p e r ca pita basis with a guaranteed minimum per year of $400 000 for each

State ($200 000 for LGACHP). CHP funding will be continuous and guaranteed to 1995-96. LGACHP only required one funding round each year. In both LGACHP and CHP, State governments bear the program administrative costs. In 1992-93, $42 million was spent on LGACHP and little on CHP as the

program was being established. This will change in future years. There has been $52 million allocated for the CHP in 1993-94, $57 million in 1994-95 and $64 million in 1995-96.

Funds were allocated in 1990-91 amongst local government (28 per cent), community (17 per cent), co-operative (43 per cent), and joint and other projects (12 per cent). While LGACHP funds had to be fully allocated each year, there was a high carryover from year to year, particularly in New South

Wales. This is due in part to the long lead time for capital progress.

Funds from local government and community groups

One of the aims of LGACHP and CHP is to attract local government and community group funds. In the first 3 years of LGACHP’s existence at least $7.6 million or 22 per cent of project funds was provided by them. However, not all non-fmancial contributions were costed so the figure was probably higher. The Australian Local Government Association said that:

Councils donate approximately 30 per cent of the capital costs (to LGACHP); and all of the recurrent costs are met locally, apart from very limited access to rent rebates (in some States). All municipalities provide extensive recurrent support to local housing projects, and ensure an ongoing relationship to the local management committee (sub. 102, p. 7).

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Published statistics do not permit an estimate of funding contributions by local government and community groups. National Shelter said:

Community housing can provide significant benefits to tenants in the form of greater flexibility and more control over their housing circumstances. However this is only achieved by the tenants or community managers bearing a higher share of the costs, particularly administrative costs. But governments do not necessarily reduce their own administrative costs because they may need special administrative skills and procedures to manage the government’s involvement in community housing (sub. 115, pp. 38-9).

Other community housing programs

Some State governments fund community housing programs outside CHP. For example, some are funded by CSHA untied funds. Examples are the Victorian Rental Housing Co-operatives Program, the Queensland Co-operative Housing Program and the Victorian Group Housing Program. Some are funded from CSHA tied funds such as the Victorian and Western Australian Aboriginal Housing Boards. Another is the New South Wales Community Tenancy Scheme which is funded under the Mortgage and Rent Assistance Program (MRAP).3

As well, some States run community housing projects outside the ambit of the CSHA. Queensland’s Community Housing Partnership, which requires applicant organisations to provide land plus 10 per cent of purchase or construction costs, is funded from the Auctioneers and Agents Fund.

A summary of the co-operative and community housing programs as at 30 June 1993 is in Table L. 1.

L.2 Program objectives

There were a number of problems in achieving the objectives o f LGACHP. The Western Australian Municipal Association said:

One of the problems (and possible advantages) of LGACHP has been that there is no clear prioritisation of the many objectives which produces a very wide range of understandings of what the program is ‘‘really all about” and “really trying to achieve”.

• From one perspective it is about trying to reduce the costs for central governments of public housing provision by encouraging local contributions toward housing developments for low-income people ... ;

3 That program provides interim, affordable community managed rental housing for low- income households usually through headleasing arrangements with private sector landlords.

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• From another perspective LGACHP is about the searching for, and identification of, viable organisations who have the necessary resources to undertake housing development and management responsibilities in local areas ... ;

• Part of the innovation aspect of LGACHP which is receiving increased emphasis is the area of tenant participation ... ; (and)

• It has been stated that many potential benefits can flow from a long term rental accommodation for low income people which is provided and managed by local organisations and involves tenants in decision making (sub. 38, pp. 1-2).

Partridge referred to conflicting objectives in CHP:

Success of the Community Housing Program depends on the successful reconciliation of the goals of economic efficiency and community empowerment. A balancing of these goals may only be achievable if structural action is taken early in the expansion of the

program. ... Structural action to resolve goal conflicts will require clear identification of the interests, goals and cultures of potentially contending players and of the rewards, sanctions and resources that influence them (sub. 143, p. 2).

It is too early to comment on how well the arrangements for CHP address conflicts in the objectives.

Achieving viability

The Community Housing Program focuses on the future — developing viability. Participants gave various opinions on how to establish a viable community housing sector. The view of the Brotherhood of St Lawrence and Ecumenical Housing Unit was that:

The community housing sector requires:

• a sounder funding base incorporating both the Community Housing Program and state funds:

• greater autonomy from public housing providers without diminished accountability to state governments;

• the rationalisation of overly fragmented programs;

• the establishment of a legal, technical and financial capacity upon which individual programs can rely; and

• a training program for participants in management of the properties (sub. 152, P 3).

The major limitation seen by Derby West Kimberley Shire (sub. 70) was that a dearth of capital funding available for community housing in Western Australia has resulted in the creation of only small scale projects and very limited opportunities for expansion. The Shire has begun providing community

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housing expertise to interested groups, giving rise to a number of community housing management groups.

According to the National Housing Strategy (NHS 1992b, p. 92):

It is not possible to indicate a precise level of funding that might be required to expand community housing to a level sufficient to ensure financial viability and to deliver the benefits that are associated with it. ... However, it is apparent that additional funds are required.

NHS (1992b) was also undecided on the appropriate level o f borrowing in the funding mix, noting that investors require a return on their investment. The NHS observed that this could come from sources other than rents, such as tax concessions.

For housing projects, both LGACHP and CHP provide only capital funding. Therefore, financially viable projects are those which generate enough income to cover recurrent costs and to put aside funds for major maintenance. Aspects to viability are funding; project selection processes (to prioritise, to weed out projects which would not be viable and to determine the mix of project type); whether to construct, purchase or renovate properties; project size;

infrastructure to support the managers and tenants; management; and tenants with sufficient income or a means of subsidising the projects to cover costs. Allied to this are ownership and stock issues as well as rent setting and collecting arrangements.

Unless the financial or ‘sweat’ equity input by the sponsoring body is initially high, a project is likely to be financially viable without external recurrent financial input only where tenants do not have very low incomes. This of

course raises the question whether government funds are being distributed to people who are not in greatest need.

Training as an aid to viability

Community empowerment was regarded as important by many community bodies. CHP processes encourage this more than LGACHP did. There is also more awareness of the need for training. The NHS referred to:

... several stages in the development of community housing projects, all of which require different forms of expertise and training. These stages are:

• forming the group that is to be the community housing manager;

• conceptualising the housing project;

• financing the project;

• constructing or acquiring; and

• managing the housing.

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Bisset suggests that ... there are two different approaches to providing this training:

• a self-development approach whereby community housing organisations, usually under an umbrella organisation, develop and provide training for those involved in providing and managing community housing. It is likely that such training will tend to focus on management issues and this is likely to be its strength A

possible problem, if this is the only form of training, is that it may not encourage a critical analysis of established procedures or innovations as the training is likely to focus on explaining how things are currently done; and

• professional development whereby training is available through tertiary or post­ secondary institutions (such as Technical and Further Education colleges). A significant advantage of this approach is that it should encourage a wider view of the role of the community housing manager.

As Bisset points out, both forms of training have their place and therefore both are desirable (1992b, p. 89- 90).

Partridge said that ‘there needs to be a strategic approach to education and training and a significant increase in its quality, quantity and appropriateness’ (sub. 143, p. 4). DEBT could facilitate this more effectively than housing authorities.’ He noted several dimensions to the problem:

• the need to integrate housing provision with other community management needs (services and employment); and

• the need to staunch the ‘brain drain’ of more experienced community managers from the community sector to the public sector.

Partridge stated:

There arc two important challenges facing housing co-operatives if the level of internal skill and commitment and hence voluntary management effectiveness is to be raised. One challenge is to move as quickly as possible towards routine processes which ensure that new entries to co-operatives (new or existing) are genuinely able and willing to assume the responsibilities expected of them without creating a distortion towards privileged

sections of the community. The second challenge is to establish routine processes which are equitable and acceptable for resolving the problems of co-operatives where a conflictual organisational culture has developed as a result of management problems or value incompatibilities (sub. 143, p. 6).

Most concerned participants appear to hold the view that training for community housing is inadequate. For example, the Federation of Housing Collectives Resource (sub. 43) supported a national resourcing centre. And the Sunshine Coast Regional Housing Council stated that:

... community programs depend upon the capability of the community to manage them. As there is generally no resourcing or training in an on-going way of the management committee, these programs may not be as beneficial to the community as they could be (sub. 107, p. 6).

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Community support and viability

Support for community housing by inquiry participants varied:

• Randolph noted that:

In part, the current interest in community housing has been prompted by a disenchantment with the performance of public housing as provided by State housing authorities. Community housing has been promoted as a way of diversifying social housing and stimulating reform in the public sector by providing ‘competition’ for State housing authority provision (sub. 216, p. 33);

• Shelter SA considered that tenants benefit greatly in their personal development through belonging to a housing co-operative and that this flows on to improving their employment prospects (sub. 54, p. 14);

• The Federation of Housing Collectives Resource said:

The human needs of tenants for autonomy and some control over the living environment is an important factor [in endemic social problems]. For example, a tenant-control program introduced to some high rise estates in Scotland contributed to a 40 per cent increase in employment of the estate’s population (sub. 43, p. 4);

• The Institute for Science and Technology Policy, Murdoch University said:

Community housing strategies ... encourage self help at neighbourhood and community levels and provide individuals with opportunities to learn a wide range of useful social and work-place related skills — whilst at the same time providing housing assistance. ... The key to the gains promised by community strategies lies in their capacity to mobilise energy and resources in the community which are largely dormant and which state provision -— whether in cash or kind — leaves untouched (sub. 41, p. 3);

• Central Gippsland Regional Housing Council:

. . supports] the program’s guidelines regarding tenant participation in management and planning. [and] believes that the community housing program can respond to specific needs in the community more effectively than the State housing authority (sub. 149, p. 3);

• Queensland Shelter said that public and community housing are not direct substitutes and that they meet different market needs (sub. 138, p. 14). ACOSS considered that there is an imbalance between housing choices offered through community housing programs and mainstream public housing (sub. 85, p. 11); and

• The interest of the Commonwealth Office of Local Government was in empowering local government:

The development of Local Government's role in housing would be assisted by recognition of its significant role by other players, such as by greater involvement in the CSHA planning process Additionally, definition of Local Governments’ role in the provision of community housing and in the CSHA planning process would be strengthened by the

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development of negotiated partnership agreements between the Commonwealth, State and Local Government peak organisations (sub. 126, p. 6).

Achieving effective delivery

The Victorian Government gave the following preconditions to improve efficiency and effectiveness in the provision and management of community housing (as identified through the Victorian Housing and Residential Development (VHARD) process):

• improved management and legal infrastructure;

• rationalisation of administrative arrangements with government to promote efficient and equitable treatment of community housing in policy, planning, distribution of funds and accountability;

• access to affordable capital funding;

• improved housing management training for both workforce and management; and

• effective regular evaluation of community housing performance (sub 159, P- 19)

Promoting community housing

Opinion was divided on the best method of spreading knowledge of the community housing option. For example, the Western Australian Council of Social Service (sub. 340) supported a housing information service. The Federation of Housing Collectives Resource (sub. 43) favoured a shop-front

service to recipients of housing and support services while some housing authorities informed all potential public housing tenants o f their housing options including community housing.

The Community Housing Associations Forum thought that community infrastructure, that is peak or federating bodies, is essential for co-ordinated and effective delivery of community housing. The Forum also said that:

The relationship between Associations, Co-operatives, the South Australian Housing Trust and joint ventures must be defined This is particularly important if tenants are able to transfer their type of tenure or their dwelling between programs. Flexible tenure arrangements would be a benefit to tenants, but the stock available within the programs

must retain equitable distribution (sub 325, p. 4).

The Forum thought that flexible tenure arrangements would enable special needs groups to move on as their independent living skills increased.

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L.3 Funding p r o c e s s e s

The present system of funding for LGACHP and CHP is submission led. As noted by Randolph (sub. 216), this limits the potential for ensuring that funds are spent in the most effective way on an integrated needs-based planning approach.

Some participants considered that the funding process under LGACHP is cumbersome (for example, Housing Industry Association (sub. 92); Shelter WA (sub. 47)). The Western Australian Municipal Association noted that:

... the administrative overheads ... and bureaucratic handling procedures involving approvals from all 3 spheres of government are unwieldy and there are unnecessary duplications (sub. 38, p. 4).

The Australian Local Government Association (sub. 102) referred to unnecessary delays in receiving project approvals, funding agreements and other critical documentation from State Departments.

The Shire of Wongan-Ballidu, reflecting the view of the Australian Local Government Association (sub. 102), stated:

Any funding available to Local Government under Commonwealth programs should be paid direct to the local authority without State Government controls and administration requirements. Local Government is a responsible level of government and this should be recognised by ail levels of government. Unnecessary costs are incurred with the existing funding arrangements (sub. 68, p 2).

A view of the Sunshine Coast Regional Housing Council (sub. 107, p. 6) was that ‘the land and capital component can be beyond some groups to manage.’ The Local Government Association of Queensland noted:

... the submission process is alien to many rural and remote Councils that lack the expertise of their urban counterparts. The large distances make on the ground resourcing of these Councils difficult. . .. The guidelines for the new CHP deserve special mention as they are unnecessarily wordy and not readily accessible by the community at whom they are targeted (sub. 206, p. 3).

The Australian Local Government Association said:

The program has suffered from a lack of ‘on-site’ and ‘off-site’ support and monitoring; lack of financial support in terms of ‘establishment grants’ or State Government ‘untied’ assistance; and limited access to rent rebates (sub. 102, p. 8).

Some jurisdictions seem to be more successful in delivering the service than others. Table L.3 illustrates the extent to which jurisdictions carry over funds.

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A number o f participants4 supported the expansion o f the community housing sector provided that it was not at the expense o f public housing or other programs.

The Queensland Department o f Housing, Local Government and Planning (sub. 345, p. 21) noted that the CSHA ‘tied programs have only accounted for a small proportion of overall effort in community housing.’ They also considered that the real effect of community organisations bringing additional resources to the sector is likely to be very small given the size of the tenure.

Table L.3: LGACHP funds carried over to next year and jurisdiction population, 1989-90 to 1991-92 (percentage)

State Proportion of Annual funding carried over to next year Australian populationa 1989-90 1990-91 1991-92

NSW 36 56 53 47

Vic 28 14 14 13

Qld 14 8 6 9

WA 8 7 12 13

SA 9 11 10 11

Tas 3 2 3 4

ACT 1 1 2 2

NT 1 1 1 1

All 100 100 100 100

a ABS population figures for 1992 Note: Derived from NSW Ombudsman (1993, p 7). Source: Industry Commission.

Income of tenants and meeting recurrent c o sts

Tenants with very low incomes may be unable to pay a rent that covers their share o f essential community housing costs. The dilemma of tenant selection was expressed by the Western Sydney Housing Information and Research Network:

There is a need for expanded community based, co-operative housing programs which target the most disadvantaged in our community. This and similar programs must be

4 WACOSS (sub. 44, p. 7), Ethnic Communities Council of WA (sub. 53, p. 1), ACT Youth Accommodation Group (sub. 66, p. 5), Goulbum Regional Housing Council Inc. (sub. 82, p. 7), Wimmera Community Care and Wimmera Regional Housing Council (sub. 83, p. 4), Queensland Disability Housing Coalition (sub. 121, p. 4), Queensland

Shelter (sub. 138, p. 14) and National Shelter (sub. 339, p. 10).

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realistic when seeking community contributions and the departments involved must allocate funding to provide resource staff for the development of these projects (sub. 84, p. 4).

The Western Australian Municipal Association noted that:

All projects must be self-supporting from the rents extracted from tenants. Those tenant groups that have very low incomes, (such as youth who only receive job search allowance) can only be charged 25 per cent of their income in rents. ... (These projects)

are unable to obtain enough rental income to budget for all the expenses necessary to maintain the units (sub. 38, p. 3).

The National Youth Coalition for Housing stated that ‘young peoples’ incomes are generally insufficient for them to realistically be included in community housing projects. ... Experiences from Housing Associations in Britain have been that very low income earners eventually become excluded (sub. 131, p. 23).’ The proposals in Chapter 9 will help overcome this problem in Australia.

Also commenting on overseas experience, the Institute for Science and Technology Policy, Murdoch University said:

... the Canadian co-operative programs, unlike their Australian counterparts, were originally pitched to assist moderate income earner caught in the affordability gap. In recent years, Canadian co-op programs have sought to accommodate higher proportions of very low income earners — but it would be worth reflecting on the degree to which Canada’s co-ops owe their success to the generally higher income profiles of their earlier primary target group (sub 41, p. 13).

Construction and purchasing

Problems arise in both spot purchasing and constructing community housing. ‘Spot purchasing of appropriate properties can be fraught with difficulty’, according to the NSW Ombudsman (1993, p. 91) who noted the inability of the Department to act swiftly when an appropriate property’ came on to the market. The Western Australian Municipal Association, expressing the view of several participants, said that:

... in some cases involving the spot purchase of properties under LGCHP the type of property actually obtained is inappropriate for the target group specified in submissions. ... This has resulted in a necessary and unfortunate change to the target group (sub. 38, p. 4).

Shelter WA pointed out that ‘the ability of groups to develop innovations in design ... has been hampered by the requirement that construction costs are comparable to mainstream public housing’ (sub. 47, p. 4).

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State-specific problems

The NSW Ombudsman in a recent report to the NSW Parliament stated:

The investigation reveals that the NSW Department of Housing did not establish the procedures required to efficiently manage community based housing initiatives. Instead, a mystifying bureaucratic maze has obstructed the approval and funding of projects, in some cases for years. ... Since the change in administration of the Department of

Housing, there have been significant moves to improve the functioning of the program. Equally clearly, significant work is essential before the program functions effectively in NSW (1993, Summary, pp. I-II).

A number of inquiry participants referred to slow progress with community housing in Western Australia:

• The Federation of Housing Collectives Resource thought that the State has:

... shown a marked lack of commitment to community housing generally, and co­ operative housing in particular, in previous years. For example, there was a 3 year moratorium on the development of co-operatives prior to 1991 due to poor ministerial support and lack of a suitable funding model (sub. 43, p. 1).

• The Western Australian Municipal Association said:

Delays in Ministerial approvals of funding recommendations have been lengthy (in excess of 4 months). ... Funding rounds have often been poorly timed in relation to Council budget timeframes. The transition to rolling programs under CHP is welcome (sub. 38, p. 7).

• Shelter WA noted that over several years there was a Tack of any commitment of state funds or Homeswest funds to supplement the limited tied grants available from the Commonwealth through LGACHP’ (sub. 47, p. 4). This has changed recently.

• The Federation of Housing Collectives Resource noted that:

... allocation procedures have been slow, and ad-hoc and inconsistent administrative practices have been endemic. These arrangements are under review and will hopefully improve in the future (sub. 43, p. 5).

The Australian Local Government Association expressed concern that:

... in the development of the national guidelines for the Community Housing Program, local government was denied representation on the Working Group established to develop new guidelines. ... The ALGA recommends that any local government involvement in the Community Housing Program, must be underpinned by the principle that local government must be considered as an equal partner, with the Commonwealth and the

States. This partnership approach will be supported by a negotiated contractual agreement ... based upon an integrated local area planning approach (sub 102, p. 9).

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L.4 Project allocation

While each State has a State Advisory Committee (SAC) through which LGACHP or CHP applications for funding are processed, responsibilities and duties of those SACs differ. The differences should be less marked under CHP as the new arrangements are to be more defined. Final CHP guidelines have yet to be agreed. The delivery processes of community housing programs are

summarised in Table L.4.

Table L.4: LGACHP programs by State

State

Overseeing agency Any program subdivision Features of program(s)

NSW Department 1 program of Housing Each applicant may nominate the type of community housing management they require

from common equity rental co-operatives to community housing associations. The SAC assesses all projects after the preliminary assessments and advises the Minister.

Regional staff make preliminary assessments. Co-operative projects are assessed by ARCH. ARCH works with potential co-operative applicants for about 12 months before submissions are developed, helps prepare submissions and provides the first assessment prior to any departmental consideration. ARCH’s 2 stage assessment comprises an assessment of the viability of the co-operatives itself and the viability of the project, including technical advice provided by independent consultants.

Vic

Department of Housing

2 sub-programs:

Local government and municipal program; and

Each gets about 50 per cent of available funding and each has a SAC. The program manager for each reports to the Minister through its SAC on funding and policy recommendations.

Normally the housing authority pays 80 per cent of the project with the local council paying 20 per cent. Half of the funds go to local

government housing.

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T a b le L.4: L G A C H P p ro g ra m s b y S ta te (c o n t.)

Overseeing Any program Slate agency subdivision Vic Common Co-operative

(cont.) Equity program

Housing Finance Ltd

Qld Department 3 programs:

of Housing Local Government Local and Community

Government Housing Program; and Planning Co-operative Housing Program; and Community Housing

Partnership program

WA Homeswest 1 program

Features of program(s) The full annual allocation is administered by a non­ profit, unlisted public company, Common Equity

Housing Finance Ltd, run by a board of 9 directors. There is cross ownership between this company which owns all the properties provided to the co­ operatives, and the CERCs. CERCs are small

community based housing groups, legally organised as co-operatives and managing up to 20 residential properties each. Each CERC has responsibility not only to further

the aims of the individual CERC, but also the program as a whole The tenancy agreement, barring defaults, is renewable at the CERC member’s request, which

means that a tenant can choose to stay in the CERC for life. Because the company must spend its allocation

within 12 months, most housing is provided through purchasing houses. Thus tenant participation is generally restricted to management rather than design of projects.

Funding for the Co-operative Housing and Community Housing Partnership Programs is from State funds and separate reference groups existed for them. A State Advisory Committee (SAC) operated for LGACHP. It comprised

representatives from State and Commonwealth Housing Departments, local government, and community housing sector representatives. The SAC recommended funding packages to both State

and Federal housing Ministers. A Community Housing Advisory Committee (CHAC) was established under CHP late in 1992-93. It replaced the SAC for LGACHP and

reference groups in place for the State programs. The CHAC provides advice to the Minister on all long-term community housing programs. The CHAC has representatives from the non­

government sector and all levels of government.

All applications are considered by SAC, who make recommendations to the Minister directly. SAC comprises 1 Commonwealth, 1 State, 2 local government, 2 community sector and 2 co-operative

sector representatives.

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T a b le L.4: L G A C H P p ro g ra m s , b y S ta te (co n t.)

State

Overseeing agency Any program subdivision

SA South There are 2

Australian programs: Housing Local Government; Trust; and

South Australian Co-operative Housing

Authority

Community' Housing

Tas Housing

Services Division of Department of Community and Health Services

1 program

ACT ACT Housing Trust 1 program

NT Northern

Territory Department of Lands and Housing

1 program

Features o f program(s)

Funding is equally distributed between the 2 programs. The SAC advises the Minister directly on who should get funding. The SAC comprises 1 representative from the housing trust, 1

Commonwealth, 4 local government, and 4 community sector representatives and an independent chairperson. Funding agreements are prepared by the Crown Solicitor’s Office on instruction from the SAC.

In 1990-91 few appropriate submissions were made but the Tasmanian Co-operative Housing Development Society was established and will use

its funding to provide for the establishment costs of new housing co-operatives. Since then there has been an increasing demand on the program.

Source: Industry Commission.

Project size

The NHS noted that the community housing sector may not be viable, in part because of the small size of projects relative to their management overheads. They said:

The average size of cooperatives in Australia is about 17 dwellings compared with 34 dwellings in Canada The average size of community housing projects in Denmark is about 700 dwellings, compared with Australia’s average of 11. In Britain, some housing associations manage over 20 000 properties. ...

Questions which need to be resolved ... include:

• how large can a project be to support the growth of community housing and to be economically viable;

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• how small does a project need to be to meet its social objectives and to be responsive and sensitive to the needs of tenants; and

• does the size of the projects or agencies matter if there is adequate sectoral infrastructure (for example, an umbrella organisation to assist and represent community organisations involved in housing) and protection of the interest of tenants and other participants in projects (1992b, p. 88)?

Common Equity Housing Limited thought that between 2000 and 5000 units was ideal in terms of efficiency and effectiveness.

Below this level infrastructure and administrative overheads on a per unit basis are less efficient; above this level housing becomes less responsive to people at different stages of their lives (sub. 151, p. 2).

Queensland Council of Social Service (sub. 91) said that the quality of service from organisations around Queensland managing small amounts of housing was in some cases excellent while in others it was relatively poor. On the same theme, the Sunshine Coast Regional Housing Council stated that ‘the numbers

of houses to be managed in order for economies of scale to operate can be beyond the capacity of community groups’ (sub. 107, p. 6).

Rural support

Some participants argued that community housing had advantages over public housing in housing low-income people in country districts. The Commonwealth Office of Local Government expressed a common view that:

In rural areas where the supply of private rental stock is limited and where it may not be efficient to maintain State Housing Authority administrative machinery, local councils may be able to take a greater role in housing provision (sub. 126, p. 6).

Others, such as Western Australian Municipal Association (sub. 38, p. 5), argued that ‘people requiring affordable housing should not be forced to leave the community of their choice to seek accommodation in metropolitan areas.’ Some such as the Goulbum Regional Housing Council (sub. 82) and the

Wimmera Community Care and Wimmera Regional Housing Council (sub. 83) sought preferential funding for rural areas.

L.5 Legal framework

Ownership and stock

The States have developed various ownership models for community housing. Under some, ownership is retained by the State, for example, the Victorian

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Common Equity Rental Housing Co-operatives and the Victorian Group Housing Program, while others permit community organisations to increase their proportion o f equity over time, for example, under the New South Wales Rental Co-operative Housing Program. Organisations of community housing providers vary also. For example, the South Australian Co-operative Housing Authority is an incorporated autonomous body. Most States have less

independent arrangements.

Title to CHP properties is normally held by the sponsoring organisation(s) with the State governments ensuring the security of their proportionate funding. State housing authorities may hold the title under some circumstances. Title is to be secured by means o f an appropriate legal instrument, legally binding and readily enforceable.

Some jurisdictions have difficulty in finding appropriate legal instruments. Others find difficulty with the legal agreements. The Western Australian Municipal Association stated that:

There are difficulties inherent in Homeswest’s legal agreements attached to LGACHP projects which do not take into consideration the fact that land is an appreciating asset whilst bricks and mortar depreciate in value. Most Councils have contributed freehold land to projects. This raises the question of shared equity and how to assess fair equity distribution between State and Council in the event that the projects terminate.

Concepts of “sweat equity” and “appropriate” usage of project surpluses have not yet adequately been addressed by both SAC or Homeswest in relation to LGACHP in WA (sub 38, p. 7).

On the same theme, Shelter WA noted that while partnerships:

... have the potential to increase the viability of community housing provision, equity issues (such as the Deed of Trust in WA) must be resolved before partnership can proceed. Equity considerations must recognise the initial sponsors contribution over time, and further investigation is required of ways in which sweat equity, in-kind and direct contributions are recognised (sub. 47, p. 14).

Queensland Council of Social Service referred to problems with shared equity schemes (sub. 91). It noted that some users and analysts found that the current arrangements are weighted heavily in favour of the State housing authority with the tenant/owner being required to pay for all maintenance and improvements, as well as paying rent, but having to share the financial benefits o f these with the State housing authority.

The Federation of Housing Collectives Resource stated that ‘private investments should be encouraged, though these sorts of shareholders should only have limited membership and no influence on the management and administration of Community Housing’ (sub. 43, p. 5).

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Tenants and tenancy agreements

Tenancy agreements under CHP are to be at least equivalent to those outlined in existing tenancy legislation in each jurisdiction. Selection processes must satisfy anti-discrimination legislation. The proportion of tenants who are financially eligible for public housing must correlate with the CHP contribution.

Some communities have great difficulty in evicting violent people. Mediation arrangements are also an issue.

L.6 M anagem ent by com m unity groups

Partridge noted that:

The State housing authority manager has very minimal control over the selection or dismissal of community housing staff or management committees. This limited ability to ensure the ability and willingness of community-based managers to pursue State housing authority goals and a greatly limited ability to induce correction of behaviour seen as

inappropriate will inevitably lead to some frustration of goal attainment from the perspective of the State housing authority senior management. Indeed, if community- based managers retain scope to set goals which are in conflict with State housing

authority managers then an incentive arises to limit the capability of the community managers. This is the area in which the success of community housing depends upon a genuine partnership of trust and mutual respect between State housing authority and community expressed through negotiation of strategic plans. ...

In practice, housing bureaucracies have frequently responded to signs of conflict and poor management with structural controls which incorporate community housing organisations more tightly into the authority system of the bureaucracy. Rather than addressing a problem of powerlessness through a strategy of empowerment which enhances self-management capabilities they choose tighter controls — disempowerment.

A variant of this approach has been to move from models with a high degree of tenant autonomy to new flavours of the month which attach housing tenants to an existing management system such as a local council (sub. 143, p. 3).

Devolution of management

The Commonwealth Office of Local Government said:

Strategies to meet local housing needs require a holistic approach to the overall housing market and to influences over it. ... Devolution of the delivery of public housing to Local Government are not possible within that [medium-term] timeframe because

councils have neither the skills, resources nor sufficiently widespread interest to perform that task. Sydney City Council has sold its relatively extensive stock of housing to the NSW Housing Department because of the council’s difficulties in managing housing on a larger scale (sub. 126, p. 6).

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While WACOSS (sub. 44) saw both benefits and costs in community housing programs, it did not support the widespread devolution of public housing to community groups to manage.

Managing flow of funds

Ernst & Young (1992) in its E va lu a tio n o f C E R C S ecto r P ro ject 3 said that ‘an approach should be made to appropriate lenders to establish the feasibility of developing a loan facility and/or mortgage loan arrangement to better match Common Equity Housing Limited’s cash flows than existing debt funding and to lower the costs of debt funds.’

The NSW Ombudsman was less sanguine about the situation in NSW:

Although the Director of Housing decided in late 1991 to delete the clause [which provided that the department would be responsible for payments of instalments due under the first mortgage where the co-operative defaulted], an apparently simple task, no pro forma deed of agreement is yet available apparently because no substitute default procedure has been developed. ...

Without a deed of agreement, it would appear that there is no mechanism by which co­ operatives can repay the LGACHP funding they have received. Money which should be recouped by the department is being banked by the co-operatives in expectation of one

day paying back the subsidies they have received ... While funding is tied up with existing projects which are unable to repay their loans to the department for lack of an established mechanism, LGACHP funds are being wasted (1993, p, 32-3).

Shelter SA stated that:

Co-operatives issue Debentures to SACHA to the value of the properties they manage. Apart from being a debt recording instrument, the Debentures enable SACHA to identify and monitor the income stream to the Program in a simple and effective fashion (sub. 54, P 14).

Security of tenure

The Western Australian Municipal Association said that ‘the security of tenure of tenants in community housing can only be as secure as the management body itself (sub. 38, p. 6). This was one of the problems which Common Equity Housing Limited foresaw in its B u siness P lan a n d S tra teg ic R eview . In its section on internal failures with a CERC, it saw the three major threats as:

• the actual failure of a CERC through financial mismanagement (noting that it was doubtful if all existing financial control systems were adequate in all CERCs);

• that participants may eventually ‘burnout’ with consequent apathy and resentment towards the program; and

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• that participants may lack a purpose once they gain housing.

On the other hand, the Community Housing Assistance Service of SA noted that:

Community housing in many respects breaks the boundaries between public housing and private home ownership. People perceive ownership of the house that they rent from the community housing organisation (sub. 303, p. 2).

Skills of tenants

Goulbum Regional Housing Council said:

Tenant participation is only possible at a localised level and on a small scale. The Common Equity Rental Housing Co-operatives (CERCs) have proved that tenant participation CAN BE VERY EFFECTIVE when the groups are small enough for people to feel comfortable and small enough to be able to participate (sub 82, p 7).

National Youth Coalition for Housing does not support proposals where security of tenure for young people is based on their ability, willingness and skills to participate in management. ...

If community housing is restricted to those who are eligible for public housing, young people will be excluded from both community and public housing in those states where they are not eligible for public housing (sub. 131, p. 23).

Support issues

The Youth Accommodation Association (NSW) Ltd regretted that the NSW Department of Housing had provided insufficient access to LGACHP for youth over the last few years, reducing possible housing options for them (sub. 65).

The South Australian Youth Housing Network Inc. said:

It is generally seen by the youth housing sector that co-operative housing must only be an option for young people, as the model demands a high skill and commitment level from people who already have independent living skills. The new Community Housing program, which replaces LGACHP, does not guarantee any increase in the possible exit

options available for young people under its interim guidelines and will need to be monitored by youth housing organisations as to its applications to youth housing (sub. 195. p. 12).

The Western Australian Municipal Association noted that: In some cases the most marginalised tenant target groups (and often the most needy) are perceived to be the most risky to house from the sponsor bodies perspective. This issue is sometimes exacerbated by the fact that there are no ongoing subsidies for maintenance

under LGCHP ... This raises the question of gaps in programs and that not all housing needs fall neatly into the grid of short term ‘crisis’, transitional and long term ‘independent’ [and ‘responsible’] tenancies. ... (Also) strategies need to be developed to overcome the ‘not in my backyard' barriers and reactions arising in some communities

(sub. 38, pp. 4-5).

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L.7 A ccountability

Despite being incorporated, not all o f the 2200 LGACHP fund recipients were audited. Governments hope to institute more accountable procedures with CHP.

A view of Partridge was that:

... transfer to the community of significant management responsibilities and expectations of accountability can not be achieved without a very dramatic rise in commitment by government to a systematic program of community management training and support services (sub. 143, p. 1).

This view was supported by the Community Housing Associations Forum (sub. 325) and the Queensland Community Housing Coalition Ltd (sub. 336). Partridge also proposed that efforts to develop the managerial potential of community housing be integrated with employment development through community enterprises and other community services. He further proposed that:

... a Community Service be established as a partner to the Public Service with direct budgetary allocations and a role in establishing management, training and accountability systems and standards as well as creating viable career paths which lead back and forth between the public and community sectors (sub. 143, p. 2).

The Community Housing Associations Forum noted that ‘housing managers are becoming an essential for all associations as requirements become more complex and accountability is essential’ (sub. 325, p. 7).

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This appendix primarily deals with people who are homeless or in crisis, the supported accommodation services available to them and the problems they face in accessing public housing. The problems faced by people with special housing needs are also discussed.

Government departments other than State housing authorities provide publicly funded accommodation for people with disabilities. For example, Singleton Equity Housing Limited said that:

Historically at least in Victoria significant numbers of people with a disability live in housing ranging from large to small institutional settings funded by State or Federal Government Health and or Community Welfare budgets (sub. 249, p. 1).

This accommodation is publicly funded and therefore could be considered public housing, but in the Commission’s view it is outside the scope of this inquiry to investigate this type of accommodation.

This appendix draws on information provided by inquiry participants and the findings of earlier studies, including those of the National Housing Strategy and evaluations of the Supported Accommodation Assistance Program.

M.1 Supported accom m odation and su p p ort a s s is ta n c e program s

Supported Accom m odation A ssistance Program

The Supported Accommodation Assistance Program (SAAP) was established in January 1985 to provide supported accommodation for people who are homeless and in crisis. The objective of the SAAP is:

... the provision by eligible organisations, with financial assistance from the Commonwealth and the State, of transitional supported accommodation services and related support services to people who are homeless and in crisis to help them move towards independent living, where appropriate, or other alternatives such as long term

supported housing, as soon as possible ( S u p p o r t e d A c c o m m o d a t i o n A s s i s t a n c e A c t 1 9 8 9 , Schedule Part 3).

SAAP is a joint Commonwealth -State program that is administered by State governments through community service departments. Ministerial Advisory Committees and Joint Officers Groups (comprising the Commonwealth and State departments for community services and housing) assist State governments

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in administering the program. Services funded under the program are operated by non-government organisations, and in some cases local authorities.

Organisations seeking funds under the SAAP forward submissions to the State community services department responsible for the day-to-day administration of the program. The preliminary assessment of funding applications is made by the State community services department. Submissions that meet the priorities set out in the State Plan are then considered by the Joint Officers Group which develops an agreed funding package for SAAP to be forwarded to the State and Commonwealth Ministers for approval. State departments are responsible for working with non-government organisations to get the services into operation.

Commonwealth SAAP funding to the States is in the form of specific purpose payments for recurrent purposes. The Commonwealth and States are required to maintain their respective annual program base recurrent funding levels in real

terms, with additional growth funds from the Commonwealth required to be matched on $1 for $1 basis. SAAP funding for 1991-92 was $161 million with the Commonwealth contributing $90.2 million. Funding for 1992-93 was $167 million, with a Commonwealth contribution o f $95 million. Approximately

$183.3 million has been made available for SAAP in 1993-94. This amount comprises $103.3 million from the Commonwealth and $80 million from the States (data provided by DHHLGCS).

Some 1600 services that provide a range of supported accommodation (shelters, refuges, half-way houses and hostel accommodation) and other support services receive SAAP funding. Approximately 11 000 people (including dependent children) are accommodated in SAAP services each night. Some 31 per cent of people assisted through the SAAP stay for 2 to 6 months (data provided by

DHHLGCS). Table M.l provides details on Commonwealth SAAP funding.

Crisis Accom m odation Program

The Crisis Accommodation Program (CAP) was introduced in 1984-85 under the Commonwealth-State Housing Agreement (CSHA) to provide capital funding for dwellings for people who are homeless or in crisis. CAP is administered by State housing authorities in much the same way as the funding

and administrative arrangements for SAAP. Funding is allocated on a p e r capita basis.

CAP provides for the purchase, construction, renovation or leasing of dwellings primarily used as accommodation for SAAP services. Organisations that do not receive SAAP funds are eligible to apply for CAP funds for crisis accommodation so long as the funds are directed to the homeless. In 1990-91,

$39.6 million was used to acquire 205 new dwellings and upgrade 87 existing

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dwellings. Expenditure for 1992-93 was $5.4 million, which was less than the funds allocated (see Table M.2). Approximately $76.6 million (comprising $43.3 million from the Commonwealth, and $33.3 million in unspent funds held by the States) is available for 1993-94 (data provided by DHHLGCS).

Table M.1: Commonwealth SAAP funding allocation to the State and local governments, 1990-91 to 1992-93 ($’000)

State 1990-91 1991-92 1992-93

NSW 28413 30 640 32 076

Vic 17 333 19 454 21 554

Qld 12 307 13 732 15 206

WA 7 549 8 035 8 533

SA 7 143 8 118 8 813

Tas 3 515 3 409 3 492

ACT 2 567 2 853 3 037

NT 2 056 2 314 2415

All 80 883 88 555 95 126

Source: Unpublished data provided to the Commission by DHHLGCS.

In 1989, an additional one-off allocation of $10 million was made to CAP as under the Youth Social Justice Strategy initiative. Funding for youth accommodation was a high priority from 1989-90 to 1992-93 (DHHCS 1992a, pp. 286-94; 1992c, p. 38). See Table M.2 for CAP funding details.

Youth Social Justice Strategy

The Youth Social Justice Strategy (YSJS) was introduced in 1989 by the Commonwealth Government partly in response to the Burdekin Report on youth homelessness. The Commonwealth Government has provided a $100 million package of initiatives designed to assist disadvantaged young Australians,

including homeless youth (DHHCS 1992c, p. 38).

Funding and administrative arrangements for the accommodation and support components of the YSJS are the same as those for SAAP and CAP.

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Table M.2: Commonwealth CAP funding allocation, 1990-91 to 1992-93 ($’000)

State

1990-91 1991-92 1992-93

To or through States To or through States To or through States

NSW 13 595 13 511 0

Vic 10 182 10 156 7 344

Qld 6 678 6 772 3 882

WA 3 754 3 802 0

SA 3 358 3 337 642

Tas 1 064 1 057 389

ACT 655 655 225

NT 369 365 26

All 39 655 39 655 12 508

Sources: Australian Treasury (various years); unpublished data provided to the Commission by DHHLGCS.

During 1991-92, and again in 1992-93, $5.2 million was provided by the Commonwealth for innovative projects for homeless youth. The States matched this amount on a $1 for $1 basis. Approximately $5.4 million will be provided in 1993-94 (DHHCS 1992a, pp. 286-94; DHHLGCS 1993b, p. 384). A further

$0.6 million will be provided by the Commonwealth Government over 2 years for a study of the housing needs of young people who live independently. See Table M.3 for the range and number of services funded under SAAP and the

YSJS.

Table M.3: Number and range of services funded under the SAAP and the Youth Social Justice Strategy by target groups, 1988-89 and 1992-93

Target group 1988-89 1992-93

Youth

number 428

per cent 33

number 685

per cent 40

Women 276 21 320 19

Families 299 23 317 19

Single men 186 14 161 9

Single women 57 4 62 4

General use 44 3 146 9

All 1 290 100 1 691 100

Sources: DHHLGCS (1993b, p. 380); data provided by DHHLGCS.

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Emergency Relief

Emergency relief is directed at assisting individuals and families in times of financial crisis. The assistance is usually in the form o f cash for immediate needs such as food, electricity, gas or rental bills.

Funds are provided as grant payment direct to community organisations from the Commonwealth. Services funded under the program are delivered through some 1000 non-government agencies with over 1200 separate outlets Australia­ wide.

State Advisory Committees provide advice to the delegate o f the Minister on the distribution of funding to agencies within each State. Community sector representatives form part of the State Advisory' Committees.

The majority of Emergency Relief recipients are DSS clients.

The Commonwealth Government provided over $30 million in 1992-93 for emergency relief. This amount included the original allocation of $15.3 million, $3 million allocated under the One Nation Statement, a top-up o f $2 million in January 1993 and over $9 million through the Christmas Appeals Matching

Grants. In 1993-94, $17.6 million will be provided for emergency relief.

In 1991-92, $4.5 million was provided as emergency assistance to refugee status applicants. In 1992-93, $3.4 million was provided for this purpose. The then Department of Immigration, Local Government and Ethnic Affairs assumed responsibility for assistance to asylum seekers as of 1 January 1993.

The assistance is now provided through the Australian Red Cross Society.

See Table M.4 for Commonwealth appropriations for DHHLGCS People in Crisis Program.

Home and Community Care

Home and Community Care (HACC) provides a range of basic support services to people living in the community who without these services would be at risk of premature or inappropriate admission to residential care services.

The HACC service is delivered under the H o m e a n d C o m m u n ity C are A c t 1985 and is administered in accordance with agreements between the Commonwealth and State governments.

The services provided by HACC include home help, personal care, home maintenance and modification (changing light globes, provision o f ramps, handrails and some minor renovation work), community respite care, transport, allied health services, community nursing, assessment and referral, education

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and training, information, co-ordination and such other services as are agreed upon by the Commonwealth Minister and State Minister.

Table M.4: Commonwealth appropriations for DHHLGCS People in Crisis Program, 1990-91 to 1992-93 ( $ ’000)

Appropriation

1990-91 outcome

1991-92 outcome

1992-93 estimate

Supported Accommodation Assistance Program 80 983 90 260 94 702

Housing Assistance Act 1989 (part)3 39 655 39 655 5 352

Emergency relief 9 648 16 341 30 245

Emergency assistance to refugee status applicants na 4 500 3 461

Crisis Accommodationb - Innovative service development (ie Youth program) 4 700 5 248 5 150

- Rural and remote pilot study 240 240 -

- Pilot project for unemployed homeless youth - - 2 630

Special payment to The Salvation Army 1 000 - -

Payment to Aboriginal Hostels Ltd 200 200 200

SAAP national research and development 117 96 113

Total 136 543 156 540 141 853

na Not applicable. - Zero or rounded to zero. a Only expenditure for the Crisis Accommodation Program is included, b The major funding for the Crisis Accommodation Program is listed above. Sources: DHHCS(199lb, 1992a), DHHLGCS communication.

HACC services are available to public housing tenants. However, people receiving similar support services from other government programs are not eligible to receive assistance under HACC. For example, people accessing SAAP services are not eligible to receive the same services under HACC.

State governments are responsible for the day-to-day administration of the Program. Commonwealth and State governments jointly approve projects and the upper limits of funding. Funds are allocated on a needs basis within each

State.

The Commonwealth provides matched funding in each State according to an agreed ratio. In 1990-91, the Commonwealth provided an average of 57 per cent of matched programs funds nationally. In 1991-92, this rose to 60 per cent.

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Total Commonwealth expenditure was $315.4 million in 1991-92 and $341.8 million in 1992-93. For 1993-94, the Government made available $370.6 million for the program. In 1992-93, $40 million in unmatched funds was provided, to be used over a four year period, to extend the reach of respite

services under the existing community care programs, including HACC. HACC expenditure from 1984-85 to 1992-93 is detailed in Table M.5.

Table M.5: Home and Community Care expenditure by government level, 1984-85 to 1992-93 ($ m )

Year State Commonwealth Estimated total

1984-85 74.1 78.1 152.2

1985-86 91.3 100.8 192.1

1986-87 104.1 135.1 239.2

1987-88 125.7 169.2 294.9

1988-89 144.5 204.8 349.3

1989-90 165.8 241.8 407.6

1990-91 188.2 278.7 466.9

1991-92 205.7 315.4 521.1

1992-93 222.7 341.8 564.5

Notes: Table excludes Planning and Development fimds. State estimate is based on expenditure required to match Commonwealth outlays. Includes unmatched money provided in the 1986-87 Budget. Sources: DHHLGCS (1993b, p. 244), data provided by DMHLGCS.

There are approximately 215 000 people receiving assistance under HACC each month. Of these people, some 20 per cent have a disability and are under 65 years of age. A further 117 000 people receive assistance under HACC as carers (DHHCS 1992a, pp. 147-57, 169-79).

HACC comprised three sub-programs in the 1992-93 Budget:

• Home and community care for people needing post-acute or palliative care;

• Home and community care for the aged; and

• Home and community care for people with disability.

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H om e and Community Care for p eo p le needing post-a cu te or palliative care

The objectives o f this program are:

To provide high quality and cost-effective post-acute or palliative care in the community to individuals with an assessed need for such care, in a way which complements the provision of services through the acute health care system and avoids inappropriate or

premature admission to residential care (DHHCS 1992a, p. 147).

Post-acute and palliative care is the primary responsibility o f State governments through the acute health care system. It has been designated a ‘no-growth’ service under HACC. Approximately 4 per cent of program expenditure funds ‘no-growth’ services including post-acute and palliative care.

Hom e and Community Care for the a g e d

The objectives of Home and Community Care for the aged are:

To enhance the quality of life of the frail aged and their carers who have an assessed need for community care services so that inappropriate or premature admission to residential care is avoided: and to provide financial support to carers to assist frail aged people who would otherwise require nursing home care to remain in the community (DHHCS 1992a. p. 169).

Home and Community Care for p eo p le with a disability

The objectives o f Home and Community Care for people with a disability are:

To enhance the quality of life of people with a disability with an assessed need for community care services so that inappropriate forms of residential care are avoided; and to provide financial support to carers to assist people with a disability who would otherwise require nursing home care to remain in the community

(DHHCS 1992a. p. 229).

This program complements the accommodation support services provided by State governments under the Commonwealth-State Disability Agreement.

Domiciliary Nursing Care Benefit

The Domiciliary Nursing Care Benefit (DNCB) is a sub-program o f HACC. The DNCB provides financial support to carers who look after those who would otherwise require care in a nursing home.

In 1992-93, $40.3 million was provided through this program and $47.9 million was allocated in 1993-94 (data provided by DHHLGCS). Table M.6 provides details on DNCB numbers and costs.

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Table M.6: Domiciliary Nursing Care Benefit, aged persons and people with disabilities by State, June 1992 and June 1993

For the aged ____________________For the disabled

State

Beneficiaries Cost Beneficiaries Cost

1992 1993 1992 1993 1992 1993 1992 1993

No. No. $m $m No. No. $m $m

NSW 10 465 11 118 10.34 12.98 2 548 2 494 2.52 3.09

Vic 6 264 6 433 6.79 7.64 1 462 1 451 1.58 1.81

Qld 4 270 4 877 4.48 5.43 1 159 1 271 1.22 1.29

WA 2 648 2 111 1.51 3.01 628 665 0.44 0.71

SA 1 511 1 758 2.52 1.95 438 449 0.60 0.46

Tas 761 821 0.77 1.01 252 258 0.26 0.24

ACT 334 335 0.3 0.38 79 87 0.07 0.09

NT 76 89 0.09 0.12 33 42 0.04 0.03

All 26 329 28 208 26.8 32.56 6 596 6 717 6.73 7.75

Notes: Numbers include all approved beneficiaries, including those where benefit is suspended because the patient is temporarily out of care. Minor differences in numbers are due to rounding Source: DHHLGCS (1993b, pp. 257, 323).

Aged Care Program - Financial support (for residential care of the aged)

The objectives of the Financial Support sub-program are:

To ensure that appropriate, equitably distributed and cost effective forms of residential care are available at an affordable cost to frail aged people and that, where possible, an equivalent level of personal care is available to maintain them in the community (DHHCS 1992a, p 190).

Capital grants are provided to non-profit organisations to build, buy, extend or upgrade nursing homes and hostels. Recurrent funding is also available to both non-profit and profit organisations for care services:

• The Commonwealth Nursing Home Benefit — a recurrent subsidy is — payable to approved nursing homes in respect of qualified nursing home residents and currently varies according to the relative care needs of residents; and

• Care subsidies are provided to hostels which vary according to the relative care needs and financial status of residents. These subsidies include the Hostel Care Subsidy, Personal Care Subsidies, Hostel Care Respite Subsidy and Low Personal Care Subsidy.

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Other programs provide a range o f care services to aged people living in the community and for the development and support of innovative services for special needs groups.

Residents in nursing homes are required to contribute to the cost of their accommodation and care. Since July 1991, residents are generally charged at a maximum rate o f 87.5 per cent o f the standard pension and rent assistance combined. A small proportion of nursing homes are exempt from the standard fee and benefit arrangements so as to allow them to provide for those who are prepared to pay for a higher standard o f care and service.

The prime target group o f the new focus for Aged Care Program support are Aboriginal and Torres Strait Islander people, people from non-English speaking backgrounds and people in rural and remote areas.

Funding provided for the Financial Support sub-program in 1993-94 is estimated to be $2.3 million (DHHLGCS 1993b, p. 232).

A summary of nursing home subsidies and domiciliary care services is provided in Table M.7.

Table M.7: Commonwealth nursing home subsidies and domiciliary care services, 1991-92 and 1992-93 ( $ m )

Services

1991 92 Actual

1992-93 Estimate

Nursing Home Benefit 1 605.5 1 637.0

Nursing Home Capital Subsidies 46.9 42.0

Domiciliary Nursing Care Benefit 33.5 38.7

Community Nursing 79.9 89.1

All 1 765.8 1 806.8

Source: DHHLGCS communication

Disabilities Services Program - - support for individuals

Prior to the signing of the Commonwealth-State Disability Agreement (CSDA) in July 1991, the Commonwealth and State governments were involved in providing accommodation support services for people with disabilities under the Disability Services Program (DSP). By July 1993, administrative responsibility

for the provision o f accommodation services to the disabled had been

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transferred to State governments under the CSDA. The Commonwealth government has administrative responsibility for employment services for people with disabilities.

Approximately 900 accommodation support services providing support for almost 15 000 people with a disability were transferred to the States under the CSDA.

The Commonwealth Government is providing $245 million in additional funding to States governments over the 5 year term of the Agreement. Of this amount, $145 million is to improve services and $100 million for growth in disability services.

People with disabilities are also able to access the Domiciliary Nursing Care Benefit sub-program of HACC under the DSP. The DNCB is payable to carers who provide, at home, continuing nursing care to a chronically ill or disabled, relative or friend (aged 16 and over) who has been assessed as requiring the level o f care provided in a nursing home. The DNCB is a tax-free payment of

$52 per fortnight and is not means tested. The benefit will be indexed in January each year. Since January 1993, beneficiaries have been able to receive the benefit while the person being cared for is in respite care for up to 42 days per year (data provided by DHHLGCS).

Social Housing Subsidy Program

This program is to be established. It will enable State governments or other managers of social housing programs to raise additional funds to cover the cost of the public equity in shared ownership arrangements and to raise funds for other rental accommodation for low- and moderate-income people. The program is expected to cost $8 million in 1994-95, $16 million in 1995-96, and

$24 million in 1996-97.

Aboriginal Hostels Limited

Aboriginal Hostels Limited provides low-cost short-term accommodation to support improvements in the quality of life and living conditions o f Aboriginal and Torres Strait Islander people. See Appendix N for further details.

Department of Veterans’ Affairs Programs:

Community Health Care Services provide entitled veterans and war-widows with access to a range of community based health and welfare services that cannot be met by departmental services. Respite care provisions allow the frail

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aged to be admitted to nursing homes for up to 63 days in a year when their carers are in need of a holiday. In-home respite is an option.

In 1988, $400 000 was made available under the Department of Veterans’ Affairs (DVA) Vietnam Veterans Counselling Service and the Veterans Emergency Accommodation Grant Scheme (VEAGS) to ex-service groups to help establish emergency accommodation centres around Australia for veterans and their families. The aim of VEAGS was to:

provide short-term emergency accommodation for veterans and their dependants who are (a) homeless as a result of crisis, (b) undergoing counselling and/or related treatment, and (c) in need of assistance to move towards independent living or to re-establish themselves in the community (sub. 104, p. 1).

The scheme funded the setting-up and first year’s operating costs of seven emergency houses. In August 1992, local boards of management took over the control of five o f the houses funded under the scheme. The two remaining houses are to be handed over to local boards of management when their two year grant period expires.

M.2 People who need supported accom m odation a s sis ta n c e

Supported accommodation is the provision of accommodation and support services to those in need. It is provided on a short-, medium- or long-term basis through various government and non-government organisations. Supported accommodation services can involve the total care of individuals in institutions, hostels or nursing homes. It can also mean assisting people to live independently or helping them to return to independent living within the community.

People with disabilities

Some people with disabilities require full-time care in institutions, hostels and nursing homes, but the increasing flexibility in care and accommodation services is enabling many people to live within the community. The policy of deinstitutionalisation has encouraged patients to move out of institutions into the wider community.

Although there are numerous programs to assist people with disabilities to maintain independent lifestyles, Sach and Associates et al. (1991) indicated that many people with disabilities are unable to access suitable accommodation and support services.

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People with disabilities on low incomes who do not own their own home and are unable to obtain public housing must rent privately or remain dependent upon family members. Some low-income people (not Department o f Social Security (DSS) pension or benefit recipients) who rent privately are unable to

obtain rent assistance. This can lead to financial hardship. The extra cost arising from a disability can mean that people with disabilities have less disposable income for rent and other necessities. Where there are problems in obtaining affordable accommodation, people with disabilities may have to

accept sub-standard accommodation. This can compromise their health.

People with disabilities are often unable to access appropriately designed accommodation. Houses in the private rental market, for example, normally do not have wheelchair access, ramps or handrails.

Even in public housing it is not uncommon for people with mobility problems to be allocated a house or unit that is accessed via stairs rather than a ramp. People requiring specially modified houses frequently experience delays in being allocated appropriate public housing.

Singleton Equity Housing Limited suggested that appropriately modified dwellings should be listed on a register (that covered both the public and private markets) (transcript, pp. 2216-7). Such a register would enable people with disabilities to have greater choice over where they live. It would assist public housing providers to purchase houses from the private sector already modified.

People with psychiatric or intellectual disabilities, mental illnesses or other behavioural problems are severely disadvantaged in accessing accommodation. The Queensland Association for Mental Health said:

... the long wait for public housing leads to other inappropriate solutions to the basic human need for shelter. Some return to their families, who may be ageing or ill- resourced to support them. Alternately they may be ‘placed’ inappropriately in accommodation designed for ageing or physically disabled people. Worst of all, many

become homeless, with all the concomitant dangers of physical and drug abuse, or drift from shelter to boarding house (sub. 127, p 4).

The National Inquiry into the Human Rights of People with Mental Illness reported that.

The accommodation available is often expensive, substandard or inappropriate. Crowded, dilapidated boarding houses have become the ‘new institutions’ ... Government programs frequently exclude mentally ill people, because of rigid demarcation and poor coordination between departments and agencies. Support services are inadequate for mentally ill people living in independent housing — and for those living with their families there is not enough respite cate (HREOC 1993, p. 337).

Some State housing authorities require that tenants must be capable of independent living before they can obtain a public house. This means that

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people with psychiatric and intellectual disabilities, mental illnesses and those requiring live-in care are unable or find it difficult to obtain public housing. In discussing this requirement, the Schizophrenia Fellowship o f South Queensland said ‘this is a concept that can be (and reportedly is) manipulated to the

disadvantage of people who have chronic schizophrenia, but are stable’ (sub. 113, p. 5).

People with an episodic disability who require periodic hospitalisation, can have difficulty retaining a public house because of prolonged absences and problems in meeting rent commitments.

People with disabilities who are homeless can access crisis and supported accommodation services such as those provided under SAAP and CAP. However, there is evidence that people with disabilities are not always able to access SAAP shelters and refuges (Sach and Associates et al. 1991, p. 49; Econsult and Neil 1993, pp. 37, 49). The Mental Health Branch of the Queensland Health Department said:

... people with psychiatric disabilities, particularly young women seem to be excluded from receiving emergency and crisis accommodation through SAAP because of their support/treatment needs. Some SAAP agencies report fear of losing their funding if they provide accommodation to people in treatment (sub. 290, p. 3).

Those who seek assistance under the SAAP face further difficulties when they exit the program because the shortage o f low-cost long-term accommodation means they have nowhere to go. Consequently, many homeless people with disabilities become locked into a cycle that sees them permanently using SAAP

shelters as their only source of accommodation (Econsult and Neil 1993, p. 128).

Better planning and co-ordination between support service providers and housing providers would reduce the need for SAAP services particularly on the part of people with disabilities living with ageing parents.

The responsibility for care, support and housing programs is shared between the three levels of government. This contributes to problems of co-ordination, not confined to the Commonwealth or State level. The Senate Standing Committee on Community Affairs (1990, pp. 40-1) reported that there is a need to co­ ordinate services at the local level so that people with disabilities can seek assistance from one organisation.

The CSDA has helped delineate responsibilities. Under the CSDA, the Commonwealth is responsible for the administration of employment services for people with disabilities; State governments are responsible for the

administration of accommodation and support services.

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Elderly people

Elderly people on low incomes who do not own their own home find it difficult to obtain appropriate, affordable accommodation and support services (NHS 1992a). They face similar problems to people with disabilities. For example, many elderly people rely on family to provide accommodation and support

assistance. Often elderly people with mobility problems are unable to access appropriately designed accommodation in the private and public rental markets. Those who are homeless and have accessed SAAP and CAP face problems

when exiting shelters and refuges. People who require support assistance encounter difficulties when trying to access public housing.

Young people

High unemployment, family breakdown, physical, sexual and emotional abuse, lack of appropriate living skills, low incomes, and a lack o f low-cost, appropriate accommodation all contribute to youth homelessness. Young people have difficulty in accessing both public and private rental housing.

The Housing and Young Peoples Outreach said ‘young people face serious discrimination in the private rental market because of their age, marital status, lack of income’ (sub. 133, p. 3). The South East Queensland Youth Accommodation Coalition claimed that:

Equity does not exist in terms of eligibility criteria for public housing. Single young people and couples without children are ineligible for housing unless they have attained 18 years of age. Young people deemed to be homeless can apply for public housing at 17

years of age but will not be allocated until the age of 18 (sub 132, p. 18).

Young people under 18 years are often denied access to accommodation because landlords are unsure whether they are legally able to sign a lease. The NHS reported that:

Minors may enter into contracts and enforce those contracts but others may not enforce contracts against them. If a minor enters into a contract for the purposes of obtaining personally, or for his or her family, the necessaries of life, then the minor is bound by the terms of the contract. There is then, no legal impediment that prohibits a minor entering

into a contract for the provision of shelter.

Fixed term agreements that involve an interest in property are, however, only binding until repudiated by the minor By implication, while a minor remains in occupation of premises he or she cannot be said to have repudiated the contract. Therefore an obligation to pay any accrued rent and comply with any terms or conditions of the

tenancy prior to repudiation would exist. Only future obligations beyond the repudiation date would not be enforceable (1992b, p. 32).

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State governments have implemented a number of programs that specifically target the housing needs of the young. The programs generally provide short- to medium-term accommodation. They include direct leasing and headleasing schemes, community housing and emergency accommodation. Although providing short- to medium-term relief, young people are again required to seek

suitable accommodation at the end o f the tenancy.

Young people may apply for assistance through the DSS. The DSS provides a Homeless (formerly Youth Homeless Allowance) or Independent Rate (benefit) to young unsupported people. However, those under 18 years, who also wish to receive rent assistance must be in receipt of the Homeless or Independent Rate

(benefit) for at least 18 weeks before they become eligible for rent assistance. The 18 week waiting period for rent assistance is to be abolished in March 1994. Unsupported AUSTUDY and ABSTUDY students can apply for the Student Homeless or Independent rate (benefit) from the Department of Employment, Education and Training (DEET). AUSTUDY and ABSTUDY recipients are not entitled to DSS rent assistance.

Despite these programs, homelessness amongst young people remains high.

In addition to the assistance provided by DSS and DEET, homeless young people are able to seek assistance through services operated under the SAAP, CAP and the Youth Social Justice Strategy (YSJS). The YSJS provides accommodation for homeless young people and is administered in a similar manner to the SAAP. Although young people accounted for about 28 per cent of those receiving SAAP assistance (on the night of the May 1992 SAAP national client census), many young people often do not access these services

(DHHLGCS 1993a, p. 6).

Pabian (1992) and Neil et al. (1992) contend that violence forces some young homeless people out of refuges and that young girls often do not access SAAP services because they are afraid that their safety may be jeopardised at mixed population shelters and refuges.

Accommodation provided through SAAP services is linked to support services. This may deter young people who only require accommodation. Concerns have also been expressed that the linking of accommodation with some services can bring together young people and those involved in substance abuse (NHS 1992b, pp. 67-8; DHHCS 1992f, pp. 3,7).

Poor communications skills mean that some young people do not seek assistance. Others who suffer from mental illnesses are unable to access SAAP services. Some SAAP services exclude difficult people because their behaviour is socially unacceptable, or staff are not Pained to assist people with mental illnesses. Young people who cannot gain access to SAAP programs also find

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they cannot access mental health services until they are 18 years of age. Drug users may not access some SAAP shelters and refuges (Econsult and Neil 1993; Sach and Associates et al. 1991).

With changes in child welfare legislation in some States many children under 16 years of age who were once considered State wards are now accessing SAAP services. This has led to concern that:

... reduced intervention affords governments with the opportunity to abdicate their responsibilities for young people who are not actually being abused, but who are, for various reasons, unable to live with their families but are still in need of greater supervision and support than is available to them through independent living or youth

refuges.

These issues are highlighted in reports that young people who are under the care and protection of the state have far greater access to accommodation, material support, and counselling and support services than those who do not fall within a statutory mandate. Therefore, a reduction in the number of wards represents a direct reduction in the number of young people able to access necessary services thereby increasing the risk of homelessness (Econsult and Neil 1993, p. 12).

Accessing SAAP and YSJS programs does not guarantee that young people will find secure accommodation. There is a shortage of medium- to long-term accommodation that would enable young people to exit the program.

Women

Women who are escaping domestic violence, are experiencing marriage breakdown or are sole parents are often in need of assistance with accommodation.

Long public housing waiting lists prevent many women finding affordable accommodation when they are most in need o f shelter. In the private rental market they often face discrimination because landlords fear they will not be able to meet their rent commitments.

Women who face homelessness may receive assistance under the Emergency Relief program. This program provides cash for immediate needs such as food, electricity, gas or rental bills for people in crisis. SAAP and CAP provide assistance to women who have become homeless.

Women who have substance abuse or psychiatric problems may not be able to access SAAP services. Women with children may find that the shelter or refuge does not have facilities for children, thus deterring them from seeking assistance (Econsult and Neil 1993, pp. 83, 91).

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There is a shortage of low-cost, medium-, and long-term housing to enable people to exit emergency accommodation. This means that many women, particularly those escaping domestic violence, are not able to access SAAP. They either remain homeless, move to unsatisfactory arrangements, or go back to the violence they are trying to escape.

As with elderly, disabled and young people, the dearth of long-term, secure, appropriate accommodation places women in a housing crisis that sees them moving frequently (Cass 1991, p 59).

Aboriginal and Torres Strait Islander people

Aboriginal and Torres Strait Islander people can seek assistance from the various organisations which offer help to people in crisis. However, in addition to receiving assistance under the SAAP, CAP, YSJS and Emergency Relief program, they are able to seek help from Aboriginal Hostels Limited (AHL). AHL operates a number of hostels for the homeless, transients, and victims of substance abuse. See Chapter 11 and Appendix N for further information on AHL.

M.3 H ousing allocation and the provision of supported accom m odation

Public housing is the main means by which people who require supported accommodation assistance can obtain long-term, secure, affordable and appropriate accommodation. Access to public housing is gained by joining the ‘wait-turn’ waiting list. Depending upon location, it may take several years before a house becomes available.

Those in crisis can apply to be included on a priority waiting list, that is an ‘out- of-turn’ list intended to ensure that applicants with greater needs are housed sooner.

The decision to place an applicant on a priority list is commonly made by a committee comprising a cross-section of the community, including social workers, State housing authority representatives and tenancy area managers. A range of factors including homelessness, current housing costs, current housing circumstances, domestic violence and health problems determine whether an applicant will be placed on the priority listing. Applicants generally have to satisfy two or more of these criteria.

In some States people wishing to apply for priority housing must also prove that rental housing is not available from a real estate agent, and they must have an

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address before they can apply (Sapphire Coast Tenancy Scheme Inc., sub. 114). Women who are escaping domestic violence are required to provide legal proof that they are fleeing from domestic violence (Econsult and Neil 1993, p. 68). Some women may be afraid to seek legal or medical assistance because of fear

o f reprisal. People with disabilities face delays while they prove that support services will be available once they are allocated a house. ACROD Limited said:

... in NSW the requirement that availability of support services is “proved” has delayed or obstructed applications for priority housing from people with disabilities. Non­ disabled applicants only have to identify housing need (sub. 304, p. 3).

Inclusion on the priority waiting list does not mean that applicants will be immediately housed. Applicants may wait many months. Remaining at the top of the priority waiting list is difficult. Applicants can lose points once they are in a refuge, and the time spent in a refuge is not taken into consideration when points are allocated. The Housing Assistance Service said:

The points allocation system must be reviewed with special reference to women in crisis refuges to ensure their points are not reduced when they stay at a refuge. Women in medium term accommodation need their temporary status recognized. The system must take account of the fact that if suitable long term accommodation is not available, women will be homeless (sub. 233, p. 82).

The long delays mean that applicants continue to suffer because they are forced to remain at crisis shelters and refuges, move into group houses, go back to unsatisfactory relationships or go homeless until a house becomes available. Undue stress is placed on organisations providing supported accommodation

assistance because of the bottle neck effect that is caused by the lack of medium- to long-term housing that would provide exit points for clients out of the programs.

The Sydney City Mission suggested that there should be an increase in the proportion of money allocated each year to provide for the purchase o f priority housing stock so more places are made available for those in need (sub. 226). The Mission said that people on priority housing waiting lists should be able to

receive supplementary funds that would enabled them to access other accommodation options while they wait for public housing.

Some participants favoured community housing as a medium-term solution, but argued that community housing should not be provided at the expense of public housing. This is further discussed in Appendix L.

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M.4 The role of non-governm ent organisations

Non-government organisations assist people in crisis by providing support or accommodation services generally on a short- to medium-term basis. In addition to seeking donations from the general public, non-government organisations receive financial assistance under SAAP and CAP. State housing authorities operate a number of programs that involve headleasing properties to non-government organisations for people in crisis.

A major problem faced by non-government organisations (and AHL) in providing assistance is, again, the shortage of medium- and long-term accommodation to allow people to leave refuges and shelters.

Public housing waiting lists (including priority lists) are long. Consequently, some people on waiting lists are required to move from one crisis centre to another until they obtain secure accommodation. Some have little chance of accessing public housing because they have an existing debt with a State housing authority. The housing authorities will not re-house these people until they pay their debt.

Non-government organisations refer to bureaucratic bungling and delays by Commonwealth and State governments in approving funding submissions. The Wollongong Youth Refuge Association Inc. (sub. 4) said that in 1989 it forwarded submissions for SAAP and CAP funding to the relevant State departments, but in 1993 the Association was still operating from temporary accommodation because it had not received CAP funding.

Applications for funding under SAAP and CAP are assessed against the State Plan by the relevant State department. The assessments are discussed with the Commonwealth-State Joint Officers Group. The Joint Officers Group then prepares a funding package for approval by the State and Commonwealth Ministers. Delays in processing applications can increase the level o f funding required if the projects are to proceed. Delays can also result in the loss of opportunities to obtain appropriate properties while the organisations seek funding (Hanover Welfare Services, sub. 163).

The Sydney City Mission said that State governments may delay projects in order to take advantage o f the interest earned on CAP funds. The interest earned on the monies granted to State governments by the Commonwealth does not appear to be allocated to CAP projects. The Mission would like governments be more open about:

• the total amount of money available each year under different housing programs;

• the way this money is distributed and how much is unspent each year; and

310 INDUSTRY COMMISSION

M SUPPORT ASSISTANCE PROGRAMS

• how much interest is accrued on the money which is awaiting allocation and what purposes this interest is used for (sub. 226, pp. 4-5).

Non-government organisations appear to receive little feedback from State departments on why their applications are unsuccessful. The lack of consultation and co-ordination by the departments responsible for the day-to­ day administration of SAAP and CAP was highlighted by the Western Sydney

Housing Information and Research Network:

There is a failure of both departments to consult with service users and providers. One department will allocate funds without consulting the other department, this results in SAAP projects operating in temporary accommodation pending a CAP approval (sub. 84, p. 8).

The NHS (1992b, pp. 69-70) attributed the lack o f co-ordination by government departments to ‘the absence of clear and simple administrative arrangements and commitment to co-ordination between the government sectors’. The shortcomings in co-ordination lead to duplication and poor delivery o f services.

The overlapping provision of short- to medium-term accommodation provided under the CAP and other community housing programs could be overcome if governments at all levels were to integrate and co-ordinate programs (DHHCS 1992e, p. 7).

Non-government organisations are critical of the inflexible interpretation of the guidelines and procedures used by departments when assessing submissions. They claimed that this inflexibility can increase costs because alternatives are not always considered.

Long delays in processing submissions, unrealistic price estimates determined by government departments, and inflexible interpretation of regulations and guidelines were said to drain the limited funds available and hamper the delivery of services.

The problems faced by non-government organisations do not end once funds have been received. The tying of SAAP and CAP to specific housing means that non-government organisations are less able to meet individual client needs. People who only require accommodation must accept support. Those who need

support and accommodation must be accommodated specifically in CAP houses. Hanover Welfare Services said there is an:

... inherent inflexibility with CAP properties. ... Although the CAP program does fulfil the need for shelter, it is a restrictive or inflexible form of crisis/supported housing provision — not conducive to meeting individual client needs (sub 163, p. 5).

Non-govemment organisations expressed concern that as assistance increases under SAAP, assistance provided by government agencies is decreasing. For

INDUSTRY COMMISSION 311

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example, non-government organisations are increasingly being called upon to assist young people, who in previous years have been State wards.

Numerous government departments provide support and accommodation. The Singleton Equity Housing Limited commented on problems o f co-ordination when referring to the funding for people with disabilities. The provision of housing by numerous government departments:

... meant that there has been little pressure on Public Housing Authorities and the CSHA to directly address and provide for the housing need of people with a disability. It also accounts for many of the issues and difficulties raised in the Industry Commission’s report related to the co-ordination of services (sub. 249, p. 1).

State housing authorities are reluctant to provide support related services, or consider that the provision of these services is not part of their role. The prospect of having to co-ordinate the provision of services provided by a range

of departments may deter individuals from applying for public housing assistance and other support services. The National SAAP Evaluation, Consultation Paper No. 5 reported that:

The needs of homeless people could be better addressed through the development of structural links between relevant government departments This could include planning the co-location of complementary services and joint funding of cross program initiatives (DHHCS 1992g, p. 5).

Attempts have been made to improve linkages to long-term housing and related services by the inclusion of State housing representatives on both the Ministerial Advisory Committee and the Joint Officers Group in each State. The problems highlighted in submissions to the Commission suggest that considerable improvements have yet to be achieved.

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Given the expected increase in both the population and the number o f [Aboriginal and Torres Strait Islander] households, it is very unlikely that the level o f fin d s provided will ever meet all the housing needs. It is important to determine funding priorities in order to ensure that the expenditure o f each dollar achieves maximum

long-term efficiency and effectiveness (NHS 1991c, p. 28).

N.1 Program form ulation and m an agem en t

Aboriginal and Torres Strait Islander people gain access to housing through:

• Private rental;

• General public housing;

• The Aboriginal Rental Housing Program (ARHP) under the

Commonwealth-State Housing Agreement (CSHA);

• The Community Housing and Infrastructure Program (CHIP) administered by the Aboriginal and Torres Strait Islander Commission (ATSIC);

• Commercial home loans;

• State operated home ownership programs for people on low incomes;

• State home ownership schemes for Aboriginal and Torres Strait Islander people;

• The Aboriginal Home Ownership Program administered by ATSIC; and

• Aboriginal Hostels Limited (AHL) (temporary accommodation only).

Accommodation is also provided in some States under the Community Housing Program.

Private rental

Few Aboriginal and Torres Strait Islander people are able to afford private rental housing. Moreover, as documented in the National Housing Strategy (NHS 1992b), they face considerable discrimination from private landlords.

INDUSTRY COMMISSION 313

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General public housing

Some Aboriginal and Torres Strait Islander people gain access to general public housing, having applied on the same basis as non-Aboriginal people. It is not known how many are general public housing tenants because tenants are not required to provide details of race.

Aboriginal Rental Housing Program

The ARHP commenced in 1979. It was established as a separate program under the CSHA to accelerate the provision of housing for Aboriginal and Torres Strait Islander people in recognition of the acute housing disadvantage o f this group. Housing under ARHP is provided in addition to general public housing services. The aim of the program is to ensure that:

Housing programs [under the ARHP] are directed to the provision of accommodation of a type, design, and at locations which would enable Aboriginals and Torres Strait Islanders to enjoy accepted standards of health and social well-being and consistent

with the commitment to self management (DHHCS 1992c, p. 7).

The ARHP is administered by State governments. The Commonwealth, however, retains a close involvement in program planning, and the relevant Commonwealth Minister is responsible for approving the annual program plan jointly with the State Minister. Aboriginal Housing Boards and management

committees assist some State housing authorities in their program administration and delivery. Each jurisdiction has an advisory structure to assist in program planning and delivery.

The program is managed in ways intended to assist Aboriginal and Torres Strait Islander communities achieve self-management. ARHP funds are directed towards the provision of housing under a range of ownership and management arrangements that include:

• Public rental housing managed by State housing authorities and identified for Aboriginal and Torres Strait Islander people. This housing is managed in a similar manner to general public housing, with some consideration given to the special needs of Aboriginal and Torres Strait Islander people;

• Rental housing owned and managed by incorporated Aboriginal and Torres Strait Islander organisations on discrete communities in urban, rural and remote localities; and

• Rental housing owned and managed by incorporated Aboriginal housing associations and co-operatives in areas of mixed settlement, generally urban.

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In addition to providing rental housing, ARHP funds support ancillary activities such as housing advisory services, administrative support for State Aboriginal Housing Boards and Aboriginal community associations, and community housing management pilot projects.

All housing provided under the ARHP is covered by the provisions of the CSHA. Therefore, with sales, all proceeds are required to be returned to the program to provide for additional housing.

During 1991-92, 677 dwellings were added to the ARHP stock giving a total at 30 June 1992 of 16 341 dwellings (unpublished data provided by DHHLGCS).

Aboriginal and Torres Strait Islander people may access housing provided under the ARHP through waiting lists maintained by State housing authorities or through community housing organisations. The number of people seeking housing assistance under the program is not known because Aboriginal

housing organisations are not required to provide this information. See Figure N. 1 for details on waiting lists. Figure N.2 outlines institutional structures.

Figure N.1: Net changes to waiting lists for ARHP accommodation, 1991-92

2000 τ

1800

1600

1400 1

Waiting List 1 July 1991

1200 +

Applicants Housed 1991-92

1000 -

Waiting List 30 June 1992 800

600

400 -200 -

Notes: Information is incomplete for Queensland and the Northern Territory. New South Wales figures for dwellings allocated include households allocated general housing as well as Aboriginal housing. Source: Unpublished data provided by DHHLGCS

INDUSTRY COMMISSION 3 1 5

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Figure N.2: Housing assistance: Institutional arrangements under the ARHP

Advisory Committees

Aboriginal Housing Boards

SHA managed rental housing

State housing authorities

Support/Advisory Service/Land Servicing

Aboriginal & Torres Strait Islander communities/Land Councils

Commonwealth-State Housing Agreement (CSHA) Aboriginal Rental Housing Program (ARHP) Administered by the Department of Health, Housing, Local Government and Community Services

Source: Data provided by DHHLGCS.

ATSIC housing and infrastructure programs

ATSIC was established in 1990 (see Figure N.3 for ATSIC structure details). Its functions under the Act include the requirement:

(a) to formulate and implement programs for Aboriginal persons and Torres Strait Islanders;

(b) to monitor the effectiveness of programs for Aboriginal persons and Torres Strait Islanders, including programs conducted by bodies other than the Commission;

(c) to develop policy proposals to meet national, State, Territory and regional needs and priorities of Aboriginal persons and Torres Strait Islanders;

(d) to assist, advise and co-operate with Aboriginal and Torres Strait Islander communities, organisations and individuals at national, State, Territory and regional levels;

(e) to advise the Minister on:

(i) matters relating to Aboriginal and Torres Strait Islander affairs, including the administration of legislation; and

(ii) the co-ordination of the activities of other Commonwealth bodies that affect Aboriginal persons or Torres Strait Islanders ( A T S I C A c t 1 9 8 9 , s.7(l)).

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Figure N.3: Housing assistance: Institutional arrangements under ATSIC

ATSIC

Community 30 Regional Offices

State Offices

National Office

Canberra

Board of

Commissioners

State Advisory

Committees

Aboriginal

Hostels

Limited

36 Regional Councils

representing

17 Zones

Department of Prime Minister and Cabinet

Aboriginal Affairs Portfolio

Minister: The Hon. R. Tickner

Aboriginal Corporations

and Aboriginal

Housing Organisations

Resource Organisations

State and Local

Land Councils

Sources: Treasury (1992a, pp 21, 113); AHL (1992); ATSIC (1992a).

There are 36 Regional Councils representing Aboriginal and Torres Strait Islander people in 17 Zones across the nation. The Councillors who sit on the Regional Councils are elected by ballot held amongst Aboriginal and Torres Strait Islander people. The Regional Councils elect 17 Councillors to the ATSIC Board of Commissioners. The Minister appoints a further 2

Commissioners to the Board, giving a total of 19 Commissioners.

The role of the Regional Councils is to: develop regional plans, assist and advise ATSIC and other government agencies in relation to the implementation of regional plans; decide on how funds will be allocated within their region; advise ATSIC on Aboriginal and Torres Strait Islander

views concerning government activities; and represent Aboriginal and Torres Strait Islander people from their region. Regional Councils liaise with the local communities, Aboriginal corporations and housing organisations, ATSIC, State Advisory Committees (comprising ATSIC Commissioners and

Regional Council Chairpersons or their nominees), and other government bodies.

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ATSIC provides housing assistance through its CHIP and Aboriginal Home Ownership Program. It also provides funding to Aboriginal Hostels Limited. The programs are governed by the objectives in s.3 of the A b o rig in a l a n d Torres Stra it Isla n d er A c t 1989.

ATSIC primarily sees its role (in relation to housing and infrastructure) as one of providing a supplementary service:

As stated in the CHIP objectives, the main responsibility for providing for housing and infrastructure to Aboriginal and Torres Strait Islander residents rests with the State/Territory and Local Governments. The ATSIC program is supplementary, to

enable the catching up of the backlog caused by many years of neglect (sub. 116, p. 8).

Community Housing and Infrastructure Program

Housing and infrastructure is provided under CHIP in urban, rural and remote areas. Priority has been given to infrastructure in remote areas.

The objectives as approved by the ATSIC Board of Commissioners are:

To promote a better quality of life for Aboriginal and Torres Strait Islander peoples by ensuring that they have access to secure, adequate and appropriate housing at an affordable price.

To maximise, through strategies which are consistent with Regional Plans, Aboriginal and Torres Strait Islander ownership and control of housing.

To support through strategies which are consistent with Regional Plans, Aboriginal and Torres Strait Islander aspirations to live in a location of their choice with access to facilities and services consistent with and appropriate to their expressed needs (sub. 116, p. 5).

Funding under CHIP is intended to provide:

• Grants to Aboriginal and Torres Strait Islander Housing Organisations for the construction of adequate and appropriate rental housing in urban, rural and remote areas where there is no government housing, and for the construction of shelter- type housing where preferred by the community; and

• Grants to accelerate the provision of essential services and municipal services (water, sewerage, electricity, roads, etc) to severely disadvantaged rural and remote Aboriginal and Torres Strait Islander communities, including those living in town camps, outstations or excision areas on pastoral properties (Treasury 1992a, p. 112).

Grants for housing and infrastructure are not made unless the organisation applying for assistance has secure tenure or a long-term lease over the land where the houses are to be constructed. Aboriginal housing organisations which obtain housing and infrastructure assistance under CHIP are responsible for the dwellings constructed. They are also responsible for tenancy management. Ownership of the houses and infrastructure provided under the

CHIP resides with the Aboriginal housing organisation.

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Since 1974-75, more than 8500 dwellings have been provided under CHIP and its predecessor programs.

Aboriginal Home Ownership Program

The Aboriginal Home Ownership Program was established in 1974. Its aim is to assist low-income first home buyers.

Administration, including approval and disbursement of loans, is undertaken through ATSIC Regional Offices. A Housing Loans Advisory Group meets three times per year and regular discussions are held with housing authorities and concessional lending institutions.

By 1992-93, the program had assisted 6500 families at a cost of $311 million.

It is considered by ATSIC to be one of its most cost-effective programs. However, only 28 per cent of Aboriginal and Torres Strait Islanders own or are purchasing their own home. This compares to 70 per cent in the general population (Treasury 1992a, p. 113).

Aboriginal Hostels Limited

Aboriginal Hostels Limited is a company responsible for the provision of low- cost, temporary accommodation services to Aboriginal and Torres Strait Islander people. It provides accommodation through its 49 hostels and the funding of approximately 109 community support hostels located in urban,

rural and remote areas.

AHL also operates a Student Rental Subsidy scheme whereby community organisations are funded to subsidise accommodation for Aboriginal and Torres Strait Islander full-time students.

Company hostels are staffed by Aboriginal and Torres Strait Islander people and provide accommodation for:

• aged people;

• people undergoing medical and substance abuse rehabilitation;

• people undergoing rehabilitation in relation to offences against the law;

• children and adults undertaking education at facilities located away from their local communities;

• transient people; and

• homeless people.

Hostels are required to operate at an occupancy rate of no less than 60 per cent. Over the past five years the average bed occupancy rate has been 70 per cent (sub. 211).

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Most tenants are in receipt of government benefits. Some 50 percent of residents each night are women. Tenants are generally only permitted to stay at the hostels for three months. However, AHL is increasingly being called upon to provide long-term accommodation because residents cannot obtain

alternative accommodation. Many of AHL’s residents are people who cannot gain access to general public housing because they have an outstanding debt with a housing authority.

Over the period 1990-91 to 1992-93 the Commonwealth provided $84.2 million towards the operation of the hostels.

The company estimates the value of its assets is $24.4 million using historical cost methods and $26.1 million using market value methods.

N.2 Funding and financial arrangem ents

Funding for Aboriginal and Torres Strait Islander housing is provided by the Commonwealth Government through the CSHA, ATSIC and AHL. Table N. 1 provides details on Commonwealth expediture on Aboriginal and Torres Strait Islander housing from 1969 to 1993.

Commencing in 1991-92, $232 million o f Commonwealth funding is to be provided over a five year period under the National Aboriginal Health Strategy (NAHS). Approximately 75 per cent of the funds will be spent on housing and infrastructure. These funds are expected to be supplemented by broadly matching effort on the part of State and Territory governments.

State governments provide funds through State programs, the CSHA Rental Capital Account, and by supplementing Commonwealth funding for repairs and maintenance. They also administer Commonwealth programs. The cost to the States of administering the ARHP is unknown because housing authorities jointly fund general public housing and the ARHP.

Bodies such as Aboriginal Land Councils, the Aboriginal Affairs Planning Authority, and the State Lotteries Commission of Western Australia also fund Aboriginal housing organisations.

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Table N.T. Commonwealth expenditure on Aboriginal and Torres Strait Islander housing from 1969 to 1993 ($m )

__________ Application o f funds__________________________

Dept, o f Housing ARHP A l l

Aboriginal loans

Affairs housing grants to State and NT

governments

1969 2.3 2.3

1970 3.3 3.3

1971 4.8 4.8

1972 5.2 5.2

1973 2.0 10.7 12.7

1974 8.1 14.7 22.8

1975 17.1 17.6 2.4 37.1

1976 19.3 13.2 7.6 40.1

1977 13.2 12.8 13.6 39.6

1978 13.7 10.1 4.0 27.8

1979 16.9 11.1 6.9 34.9

1980 20.5 12.9 6.7 40.1

1981 22.1 10.7 9.4 22.1 64.3

1982 23.7 8.9 34.2 66.8

1983 26.9 13.1 34.2 74.2

1984 30.6 12.4 52.0 95.0

1985 33.5 17.8 52.0 103.3

1986 35.6 19.5 54.3 109.4

1987 34.0 23.8 58.0 115.8

1988 44.1 31.5 60.0 135.6

1989 46.1 29.3 70.0 145.4

1990 43.7 15.7 91.0 150.4

1991 53.9 23.1 91.0 168.0

1992 50.0 28.3 91.0 169.3

1993 50.6 36.4 91.0 178.0

Notes: Funding to housing organisations includes National Aboriginal Health Strategy funds for housing of $0.6 million in 1991-92, and $10.5 million in 1992-93. Housing grants to organisations do not include those to Aboriginal Hostels Limited. Since 1986-87 tied funds for the Northern Territory under ARHP have been used to provide housing in rural areas. Sources: ATSIC (1993) and data provided by ATSIC.

Year ending Housing

30 June grants to

organisations

Funding under the Commonwealth-State Housing Agreement

The funds provided under the CSHA for the ARHP are allocated to State housing authorities through the Department o f Health, Housing, Local Government and Community Services (DHHLGCS). The allocation is based on a housing needs assessment endorsed by the Australian Aboriginal Affairs

Council. States do not have to match the funds provided under the CSHA.

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Since 1980-81, $801 million has been provided by the Commonwealth for housing and infrastructure under the ARHP. Annual funding has been set at $91 million per year since 1989-90. See Figure N.4 for details on the distribution of ARHP funds.

NSW Vic Qld WA SA Tas ACT NT

Source: Unpublished data provided by DHHLGCS.

DHHLGCS has advised that the current funding arrangements for ARHP are to be changed:

... work has commenced on the development of new and more efficient arrangements for the planning and delivery of Aboriginal housing, which will also ensure more effective coordination with related infrastructure services. ...

The broad aim is to integrate the current programs delivered by the States/Territories using ARHP and State/Territory funds, with housing programs currently funded by ATSIC, into a single Aboriginal and Torres Strait Islander housing program administered by each State or Territory under a bilateral agreement with the Commonwealth (sub. 213, p. 40).

Funding under ATSIC

ATSIC is required, under s.63 of the Act, to provide a draft budget for each year. The draft budget sets out the amount proposed for allocation by Regional Councils and proposed allocations to ATSIC program items. Regional Councils contribute to the draft budget in that they are required

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under s.97 to include program details that show the organisations to be funded.

Program details are arrived at through consultation between Regional Councils and local communities. Local communities submit details on the projects they want funded. Regional Councils assess the projects and identify the programs that each project relates to. Where a project does not relate to any of the

programs operated by the Regional Councils it does not receive funding.

The ATSIC Board of Commissioners is responsible for determining the proportion of the total ATSIC budget to be allocated by each Regional Council. Under the current arrangements, ATSIC initially decides the amount for allocation by Regional Councils in each State. It decides on the allocation

of these funds between Regional Councils in each State in light of advice from State Advisory Committees.

Regional Councils allocate the funds to local community projects. This is done through ATSIC Regional Offices which administer all expenditure, including fund allocations proposed by Regional Councils.

It is a requirement that funds not be granted to communities unless they are incorporated bodies under s.89 o f the Act or declared by the Board under s.205. Communities must comprise 20 or more adults before they can be incorporated, and must have secure land tenure or a long-term lease before

funds will be granted by Regional Councils. Aboriginal housing organisations are required:

. .. to provide regular financial statements as part o f the grant acquittance procedures In addition, physical performance reports are also required. Audited financial statements are required annually (sub. 116, p. 7).

The level of funds allocated for housing and infrastructure in any year is the sum o f allocations proposed by Regional Councils and any national program allocations (predominantly NAHS funding). Throughout the course of each

year, funds may be transferred between programs in both National and Regional Council program estimates, subject to certain limitations imposed by the Act. Such transfers will generally be at the margin to accommodate emerging priorities and project slippages.

Of the $165 million (including $32 million from the NAHS) allocated to CHIP in 1992-93, approximately 91 per cent was allocated by Regional Councils to projects within their region. The balance was allocated to State governments as grants. Various arrangements apply to the use of these funds. For example,

in New South Wales a committee comprised of representatives of the State Government’s Office of Aboriginal Affairs, ATSIC and the NSW State Land Council decides how funds under the Tripartite Agreement will be spent. Table N.2 provides details on housing and infrastructure funding.

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Table N.2: CHIP housing and infrastructure funding, 1988-89 to 1993-94

( $ m )

1988-89 1989-90 1990-91 1991-92 1992-93 1993-94

Housing 46.1 43.7 53.9 49.4 40.1 50.0

Infrastructure 69.2 93.2 98.6 94.9 92.7 103.7

All 115.3 136.9 152.5 144.3 132.8 153.7

Notes: 1988-89 to 1992-93 actual expenditure. 1993-94 estimated allocation as at October 1993. 1991-92 to 1993-94 does not include funding under the NAHS. NAHS expenditure on housing for 1991-92 was $0.6 million, and $10.5 million in 1992-93. Expenditure on infrastructure in 1991-92 was $2.90 million, and $21.6 million in 1992-93. $73 million is available under the NAHS in

1993-94, amounts to be allocated to housing and infrastructure have yet to be advised. Sources: ATS1C (1992b, Table 1) and data provided by ATSIC.

A further $58 million under the NAHS has been allocated for housing and infrastructure in 1993-94. These funds are broadly matched by State governments.

Capital and recurrent expenditures under CHIP are detailed in Table N.3.

Table N.3: CHIP capital and recurrent expenditure, 1988-89 to 1993-94 ($m)

1988-89 1989-90 1990-91 1991-92 1992 93 1993-94

Capital 90.4 105.1 112.1 99.9 88 4 105.1

Recurrent 24.9 31.7 40.4 44.4 44.4 48.6

All 115.3 136.8 152.5 144.3 132.8 153.7

Notes: 1988-89 to 1992-93 actual expenditure. 1993-94 total allocation. 1991-92 to 1993-94 NAHS not included. Sources: ATSIC (1992b, Table 2) and data provided by ATSIC.

Funding for housing under CHIP declined from $53.9 million in 1990-91 to $40.1 million in 1992-93 (excluding NAHS funds for housing of $10.5 million). Allocation of funds for 1993-94 is estimated to be $50 million.

The 1992 A b o rig in a l a n d Torres Stra it Isla n d er C om m ission H o u sin g a n d Infrastructure N eeds Su rvey — Stage 1 estimates that it will cost $1132 million to provide housing for the 9555 family units and 6584 single persons who require assistance in the areas covered by the survey (ATSIC

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forthcoming). The Aboriginal Housing Board of Victoria (sub. 21), described the Needs Survey as ‘far too limited’. See Table N.4 for details on those requiring housing.

Table N.4: Aboriginal and Torres Strait Islander family units and persons requiring housing, 30 June 1992

State Family units3 Single persons^ Total persons

NSW 1 631 1 348 6 671

Vic 264 288 1 219

Qld 2 252 1 888 9 463

WA 1 966 1 226 8 592

SA 508 356 2 183

Tas 1 3 7

ACT 7 9 33

NT 2 926 1 466 14 245

All 9 555 6 584 42 413

a Family units include sole parents and extended families. Children defined as persons less than 21 years of age. b Single persons include single youths (under 21) and single adults. Notes: Information relates to centres surveyed to date. Metropolitan and major urban areas are not included.

Source: ATSIC (forthcoming, Table 2).

Aboriginal Hom e Ownership Program

Applicants for an Aboriginal Home Ownership Program (AHOP) loan must pass an income test, a points test, and show that they have the capacity to meet the repayments over the term of the loan. Applicants must also have a minimum deposit of 5 per cent and be able to pay the cost o f legal and

valuation fees as well as insurance.

Repayments are set at between 20 and 30 per cent of gross income. Applicants are required to seek part of the loan from another lending institution if the main income-earner’s gross weekly income combined with

half the spouse’s gross weekly income is within 50 to 150 percent of the National Average Weekly Male Earnings. Applicants exceeding the 150 per cent income limit are not eligible for assistance under the program.

Home ownership loans are at concessional rates. Commencing at 5 per cent, the rate escalates each year by half a percentage point until it is one point below the Commonwealth Bank Home Loan rate.

During 1992-93, ATSIC approved 441 loans and disbursed $36.4 million (agency fees, insurance, legal costs and other incidentals are included in this amount). Loan repayments and discharges for the year totalled $28.3 million.

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A further $10 million was appropriated. In 1993 -94, $2 million was appropriated.

In addition to the AHOP, the States provide home ownership programs specifically for Aboriginal and Torres Strait Islander people. Some assistance is also available through State managed home ownership programs.

Aboriginal H ostels Limited

Funding of AHL is provided by the Commonwealth Government through ATSIC. The appropriation for 1990-91 was $26 million, $28.9 million in 1991-92, and $29,1 million in 1992-93. Figure N.5 provides details of program expenditure in that year.

Figure N.5: Aboriginal Hostels Limited, application of funds, 1992-93

□ Administration

Hostel operations

Capital and replacement works

Major maintenance

Community support hostel subsidies

Source: Data provided by AM

Company hostels are required to maintain records that provide details on expenditure, occupancy level and income.

Community Support Hostels submit quarterly returns that explain how they have acquitted their grants. All hostels are subject to annual audit.

Students receiving rental subsidies are required to present a rental receipt from their landlord before reimbursement is carried out by organisations that AHL funds.

During 1992-93 the total number of resident beds was 3046. The cost to provide these beds was $33.81 per night per bed.

With the exception of students who receive a rental subsidy, residents must pay tariffs. Tariffs are determined in accordance with a resident’s ability to pay. That is, tariffs take account of whether residents are employed, receiving government benefits and have dependants. Residents are required to pay rent

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one week in advance. If rent due is more than two weeks in arrears residents may be evicted.

Accommodation charges and rent subsidy income was almost $3 million in 1989-90, $3.1 million in 1990-91, $2.9 million in 1991-92, and $3 million in 1992-93.

N.3 Co-ordination with other se r v ic e s

The responsibility for co-ordination and provision o f services to communities in rural and remote areas and fringe locations of urban centres is unclear.

Basic amenities, such as sewage and waste collection services and transport infrastructure, are non-existent or in poor condition in many communities. The 1992 Needs Survey has pointed out that the water available for human consumption in 302 communities does not comply with the National Health

and Medical Research Council guidelines used by the communities to assess the quality of their water (see Table N.5).

Homeswest indicated it has built settlements where there has been no water or electricity supply (transcript, pp. 368-9).

An inquiry participant, Janz (sub. 212) claimed that the Queensland Department of Family Services and Aboriginal and Islander Affairs recently provided a ‘completed’ house for a Torres Strait Islander living at Yorke Island. At the time of occupancy there was said to be an inoperative solar hot

water heater, no stove and no electricity.

Table N.5: Communities and people in minor urban, rural and remote areas which do not have adequate infrastructure,

30 June 1992

Infrastructure not available Communities People

Water 31 la 14 616

Sewage disposal system 137 3 557

Fully sealed roads 256b 28 814

Electricity supply 251 8 438

a Communities in which the quality of water available for human consumption does not comply with the National Health and Medical Research Council guidelines, b Excludes outstations/homelands Source: ATSIC (forthcoming, Tables 6, 9, 11 A, 22).

The reluctance of State and local government authorities to provide adequate facilities prompted the communities of Toomelah, Boggabilla and Goondiwindi to seek assistance from the Human Rights and Equal

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Opportunity Commission and the NSW Ombudsman. The Toomelah Local Aboriginal Land Councils and the Toomelah Aboriginal Co-operative have been seeking since 1988 to have basic facilities provided by State and local authorities (Human Rights and Equal Opportunity Commission 1989; Office o f the NSW Ombudsman 1992).

The payment or non-payment of local government rates by local communities remains a contentious issue. It helps to explain why many local governments are reluctant to deliver services to Aboriginal people and Torres Strait Islanders.

... the issue of unpaid rates on the part of Aboriginal communities and the non-provision of services on the part of Local Government underlies a great deal of misunderstanding between Aboriginal communities and councils (Office of Local Government 1989, p. 4).

In Alice Springs the town camp dwellers have sought waste disposal service funding from ATSIC. As the local government will no longer fund the service, the community is seeking exemption from payment of rates.

The payment of rates and access to local government services were issues raised by the Royal Commission into Aboriginal Deaths in Custody (Johnston 1991), the Human Rights and Equal Opportunities Commission (1989) when investigating problems at Toomelah and the House of

Representatives Standing Committee on Aboriginal and Torres Strait Islander Affairs (1992).

The Industry Commission understands that the Commonwealth Government has provided funds for a report to be prepared on the issue of rate payments by Aboriginal and Torres Strait Islander communities.

N.4 H ousing standards

Many Aboriginal and Torres Strait Islander people live in what can only be termed sub-standard housing. Their houses are poorly designed and do not comply with local government building regulations. This contributes to poor standards of health (Gratten et al. 1993; Neilson, et al. 1993;

Patel et al. 1993). The criticisms apply to both urban and remote settings.

In reporting on Aboriginal and Torres Strait Islander housing in ‘mixed, usually predominantly non-Aboriginal, towns and cities’, the House of Representatives Standing Committee on Aboriginal and Torres Strait Islander Affairs said:

Overcrowding, poor standards of workmanship, discrimination, poor maintenance scheduling, high maintenance costs, inadequate maintenance budgets, basis of housing allocation, lack of appropriate services and inappropriate design were all factors that

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contributed to the problem of rental housing accommodation conditions for urban dwelling Aboriginal and Torres Strait Islander people, who utilised the mainstream housing of the State and Territory housing authorities (1992, p. 134).

In rural and remote locations it is not uncommon for community members to request and be assigned standard three bedroom, brick houses. The designs can be inappropriate because they do not cater for extended families or extreme climatic conditions.

Inquiry participants argued that poor consultation with community members contributes to the choice of inappropriate housing. Consultation was said to overlook cultural practices and the importance of settlement layouts. Ross said that:

... the layout of the settlement, especially the distances and relationships between dwellings, is actually more important than the design details of the house itself. People suffer more stress from inappropriately placed houses, than from inappropriately designed ones (sub. 215, p. 3).

An inquiry participant, MacFarlane, said that greater consideration should be given to community access to the environment, space, privacy, location to food source, hygiene requirements, need for permanency, finances, and customaiy behaviours (transcript, pp. 331— 4). These factors should influence

not only the type of design but also housing location. More appropriate housing might be achieved by making communities aware of their rights in relation to the use of consultants and architectural services, and by improving consultation with local community members, particularly the prospective

tenants.

Morel and Ross (1993, p. 137) claim that the design process could be enhanced if consultants were to give greater consideration to the potential for property damage, and assist communities in selecting appropriately designed housing by getting people to draw their own plans, inspect housing in other

communities, peg out the dimensions of a house, and use models, videos and cut out shapes to represent rooms.

Ross (sub. 215, p. 4) suggested that the employment by State housing authorities of Aboriginal liaison officers, trained to liaise between specialist staff and local communities, may also contribute to better housing design and

layout.

Overcrowding occurs because of insufficient housing. Large families requiring 5 or more bedroom houses are living in 2 and 3 bedroom houses. The Commission received evidence of 20 to 30 people residing in some

houses (see for example, Tuohy, transcript, pp. 548-9). Improved stock management and additional funding would help.

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Compliance with local government building codes and health regulations would also improve housing conditions. Many of the houses constructed on Aboriginal and Torres Strait Islander land do not comply with local government building regulations. The Toomelah Review found that:

At present it appears that no person or organisation takes responsibility for ensuring that houses for Aborigines in Toomelah and Boggabilla meet satisfactory standards of construction. In particular, the Review was told that there is no inspection process to

ensure that new houses meet the requirements, inter alia, of Ordinance 70 of the L o c a l G o v e r n m e n t A c t 1 9 1 9 (NSW). This has resulted in, for example, roof drainage

systems which allow rainwater to drain into houses, kitchen sinks being constructed without greasetraps and good drainage, with resultant overflow into the houses, and sewer systems which block up and force sewage back inside the houses (HREOC 1989, p. 3).

It is not clear whether rural and remote Aboriginal and Torres Strait Islander communities are aware that the onus for adopting local government ordinances resides with the community. Communities can apply to have local government standards applied.

The adoption of local government building regulations and the linking of contractor and builders payments to inspections would lead to an improvement in housing standards, it would reduce the opportunity for contractors and builders to undertake fraudulent construction work and reduce maintenance

and repair costs. Pholeros said that in the Pipalyatajara community maintenance costs were invariably tied to poor initial construction work:

It wasn't overuse or vandalism but in almost all instances it was initial construction that was at fault, particularly initial construction of underground works. They were by far and away the greatest maintenance dollar eater throughout the year (transcript, p. 2780).

Local governments could be more active in seeking to have local government building codes applied within rural and remote communities. They could do this by advising communities on the benefits of complying with local government ordinances. For their part, Aboriginal housing organisations

should be more aware of their responsibilities in relation to local government regulations and the links with community health.

Communities in urban areas are required to comply with local government regulations, but even here it is unclear whether Aboriginal housing organisations are aware of their responsibilities. In the inner-Sydney suburb of Redfem, for example, many tenants are housed in sub-standard conditions.

The responsibility for maintaining dwellings in a habitable condition resides with the owner of the property, but if dwellings fall into a state o f disrepair local government authorities may take steps to have the houses brought up to

standard, or condemned.

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Aboriginal communities are poorly represented in local government. Greater representation would help to ensure that their voice is heard: it would also facilitate greater community understanding and more favourable attitudes towards local government regulations.

N.5 S tock m anagem ent and allocation

Where responsibility for the housing stock is a local community function. Aboriginal housing organisations are responsible for tenancy and rent collection, housing allocation, repairs and maintenance, dwelling upgrades and construction. They are also responsible for obtaining funds and acquitting

expenditure under funding programs. The aim of giving responsibility for housing to the local community is to promote self-determination.

Housing organisations are required to ensure that tenants pay rent, but many communities have not implemented rent collection policies that will enable them to cover the costs of repairs and maintenance, administration, and municipal services.

That said, the cost of food and clothing in remote areas can leave little for rents, and in some communities dwellings are in such a poor state of repair that tenants have refused to pay rent. Family relationships and responsibilities can also determine the willingness of elected officials to adhere to rental

policies.

ATSIC provides some funds for repairs and maintenance, but ARHP funds are generally intended to be spent on capital projects.

The States contribute to the funding of repairs and maintenance of the ARF1P stock, but information is not available on the extent of funding.

The 1992 Needs Survey indicates that 58 percent o f the homes owned or administered by Aboriginal housing organisations require repair work ranging from minor maintenance to replacement. The cost of repairing (or replacing where necessary) the current housing stock in rural and remote areas is

estimated to be in the vicinity of $286 million (ATSIC forthcoming). Clearly, funding for repairs and maintenance is falling well short of requirements.

Aboriginal housing organisation officials and employees sometimes do not have the necessary management skills and training. Program accountability and transparency are compromised when officials lack the skills required to ensure that funds are spent in accordance with their intended purpose. Matters

such as the allocation of houses and investigation of wilful damage to homes may be influenced by family relationships and responsibilities.

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Morel and Ross in their report H o u sin g D e sig n A sse ssm e n t f o r B ush C om m unities, comment:

The reality is that the failure to set up a system of maintenance results in little or no maintenance being carried out, and higher capital costs in the long-run as renovations and ‘upgrades’ are commissioned, and houses require more frequent replacement. None of the communities studied has a comprehensive system of housing management. This is hardly surprising, as community advisers and staff are funded mainly through ATSIC. Managing housing is not designated explicitly as part of their duty statement (though a community and the individuals employed have considerable discretion to choose and prioritise their duties). The community’s staff and administrative budget is not increased in line with additions to the housing stock or the workload of maintaining an old stock. Collecting rent and organising maintenance is hardly a motivating task for people who already have full workloads. Only crisis management, and sometimes involvement in preparations for housing such as budget negotiations and consultation, therefore take place (1993, p 170).

Although Aboriginal housing organisations are required to provide audited financial statements to their grant provider, information is not readily accessible on ways in which Aboriginal housing organisations spend the money they receive. Consequently, it is difficult to determine whether housing organisations are using funds in an efficient and effective manner.

N.6 Incentives for recipients

ATSIC does not provide repairs and maintenance funding to Aboriginal housing organisations which do not maintain rent collection policies. However, despite the incentive for communities to collect rent, ATSIC claims that ‘there is evidence that many tenants are not paying sufficient rent’. The

condition of many houses indicates that tenants are either unaware of or unconcerned about the consequences of not paying their rents.1

As each community is responsible for determining its own housing policies, it is difficult to know whether Aboriginal housing organisations require their tenants to pay bonds or sign lease agreements.

ATSIC has the option of providing grants or loans to Aboriginal housing organisations. The option of loans has not been pursued because ATSIC considers that most Aboriginal housing organisations are not in a position to

repay a loan.

The continued use of grants is not assisting Aboriginal and Torres Strait Islander communities to understand that governments do not have an endless supply of funds. If communities are to continue to determine their priorities, they need to be better informed in financial management practices so that they

1 The Commission was unable to obtain information on rental arrears.

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can take into consideration the impact for the future of the decisions they make today.

The desire to relocate to outstations is an example. Relocation has implications for the future in relation to education, health, transport and communications. The provision of these services will be costly.

Will governments be willing to fund these services in the future, given the high costs involved? The Commission found little evidence that recipients are aware of the cost implications, or that governments have sufficiently well informed plans to meet the costs. Nor is it clear which level o f government

has responsibility for co-ordinating the provision o f these services.

N.7 R ecen t initiatives

The problems with Aboriginal housing are not new. Other reports such as the National Housing Strategy (NHS 1992b) have pointed to:

• Low rates of home ownership;

• Poor co-ordination and delivery of services by Commonwealth, State and local governments;

• Insufficient funding for construction, upgrades, repairs and maintenance, and administration;

• Poor housing standards;

• Poor consultation with Aboriginal and Torres Strait Islander people;

• Poor management; and

• Lack of transparency and accountability.

Governments are aware of these problems and have taken steps to address them. For example:

• The Queensland Department of Housing, Local Government and Planning is undertaking a review of its Aboriginal Rental Housing Programs with the view to implementing a strategic housing plan (sub. 135, pp. 12-3);

• The Northern Territory Department of Lands, Housing and Local Government is developing a housing and infrastructure database that will provide detailed information on dwellings, and assist in assessing program effectiveness. The Department is also investigating community

housing management (sub. 17, p. 5);

• ATSIC is reviewing the operations of Aboriginal housing organisations (sub. 116, Appendix 4); and

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• In December 1992 the Council o f Australian Governments endorsed the N a tio n a l C om m itm ent to Im p ro v ed O utcom es in the D e live ry o f

P rogram s a n d Services f o r A b o rig in a l P eoples a n d Torres Strait

Islanders. This agreement gives the commitment:

... that bilateral agreements be entered into between the Commonwealth and State/Territory Governments specifying the responsibilities of each government, identifying funding arrangements and providing a framework for the planning and delivery of services and programs in specific functional areas within the

respective State/Territories; and

... that in the negotiation of bilateral agreements, Local Government will be consulted where appropriate on the planning, management and delivery of services (Australian Aboriginal Affairs Council 1992, p. 10).

Work has commenced on new arrangements which will involve bilateral agreements the between the Commonwealth and each State government, and consultation with Aboriginal and Torres Strait Islander people. The aim is to integrate the current programs into a single Aboriginal and Torres Strait Islander housing program, with funds channelled through ATSIC. Each State will administer the program under a bilateral agreement with the

Commonwealth (sub. 213, p. 40).

Some State governments and ATSIC also support an enhanced role for existing Aboriginal housing boards or the establishment of an independent Aboriginal housing authority within the State. ARHP and CHIP funds would be channelled direct to the Aboriginal housing authority which would be jointly responsible to ATSIC and the State government (ATSIC 1993).

In the Commission’s view, these initiatives, although helpful, will not bring the funding and administrative arrangements needed for rapid improvement in the provision of housing to Aboriginal and Torres Strait Islander people. The Commission’s proposals for change are set out in Chapter 11.

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O INQUIRY PROCESS

The inquiry terms of reference were received on 5 November 1992.

An Issues Paper was distributed to individuals and organisations with an interest in public housing. The paper raised likely issues and reform options.

Prior to the start of the public hearings, discussions were held with individuals and organisations to help the Commission set an agenda for the inquiry. The discussions also served to establish our credentials in the reform of government trading enterprises such as the State housing authorities and to allay concerns

expressed by some about the Commission’s involvement.

The people and organisations visited are listed in Attachment 0 . 1.

A questionnaire was sent to State housing authorities early in the inquiry. It was developed in consultation with the authorities and the then Commonwealth Department of Health, Housing and Community Services. The questionnaire is reproduced in Attachment 0.2.

Information and advice was also requested from many other organisations. The Commission is grateful for the high degree of co-operation.

Three consultancies were arranged:

. A review of overseas housing assistance measure (Centre for Urban and Social Research at the Swinburne University o f Technology);

• The estimation of the size and distribution of housing subsidies by tenure in Australia (Dr J Flood); and

• The development of housing policies and programs in Australia under the Commonwealth-State Housing Agreement (R J Egan and Associates).

The consultancy into the size and distribution of housing subsidies was jointly funded with the Department of Health, Housing, Local Government and Community Services.

The consultant briefs are reproduced in Attachment 0.3.

In addition, a study was undertaken by the Centre for Urban and Social Research at the Swinburne University of Technology to empirically test the rent-setting model proposed by the Commission. The consultant brief for this study is also in Attachment 0.3.

The first round of public hearings was held between 12 February 1993 and 27 April 1993 with hearings in each of the capital cities and one regional centre.

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The draft report was released on 2 August 1993.

A further round of public hearings focusing on the proposals in the draft report was held between 27 August 1993 and 15 October 1993 with hearings in each capital city and one regional centre.

The inquiry was conducted over twelve months. Completion was delayed for one week to allow participants at the Indigenous Australian Shelter Conference to give consideration to the Commission’s proposals for Aboriginal and Torres Strait Islander housing.

There was wide participation in the inquiry. Over 1200 individuals and organisations registered an interest and 370 submissions were received. All relevant State and federal agencies participated. The participants are listed in Attachment 0.4.

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ATTACHMENT 0.1

VISITS AND DISCUSSIONS

Location Individual, Company or Organisation

NSW Aboriginal Home Care Services

Aboriginal Housing Company Ltd ACOSS ARCH (Association of Resource Co-operative Housing)

Burnside Department of Local Government and Co-operatives Erambie Housing Corporation MacFarlane, Helen

Housing Industry Association Mant, John Meriton Apartments Milligan, Vivienne

Murrumbidgee/Lachlan Regional Council New South Wales Treasury Salvation Army Society of St. Vincent De Paul

Sydney City Mission Toomelah Boggabilla Local Aboriginal Land Council Yates, Associate Professor Judith

Victoria Aboriginal Hostels Limited

Australian Institute of Family Studies Brotherhood of St Lawrence Common Equity Rental Co-operatives Department of Planning and Development

Housing Services South Melbourne Melbourne City Mission Public Tenant Union of Victoria Singleton Equity Housing Ltd

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Victoria (cont.) Wulff Research and Swinburne Centre for Urban and Social Research Victorian Council o f Social Service Victorian Treasury

Queensland Housing Industry Association Mental Health Branch, Queensland Health Office of Cabinet, Treasury, and Department of Housing and Local Government

Queensland Council of Social Service Queensland Disability Housing Coalition

Western Australia Aboriginal Affairs Planning Authority ATSIC Kununurra Regional Office Blackburn and Company Wood, Gavin Homeswest Kalumburu Aboriginal Housing Corporation Warrangarri Aboriginal Corporation

Housing Industry Association Western Australian Treasury

South Australia Aboriginal Housing Board CHASSA Co-operative Housing Authority Housing Industry Association Shelter SA

South Australian Housing Trust South Australian Treasury

Tasmania Department of Health, Housing and Community Services Municipal Association of Tasmania Tasmanian Treasury

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ACT Aboriginal and Torres Strait Islander Commission

ACT Housing Trust Albon, Dr Robert Defence Housing Authority Department o f Health, Housing, Local Government and

Community Services Department of Social Security Disney, Professor Julian Dixon, Patricia

Edwards, Dr Meredith Housing Industry Association L’Arche National Shelter National Youth Coalition for Housing

Real Estate Institute o f Australia

Northern Territory Aboriginal and Torres Strait Islander Commission Alice Springs Regional Office Department of Lands, Housing and Local Government Shelter Alice Springs Tangentyere Council

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ATTACHMENT 0.2

QUESTIONNAIRE SENT TO STATE HOUSING AUTHORITIES

1. Housing a ssista n c e program s

1.1 The Commission has compiled a list o f State and Territory housing assistance programs from 1991 annual reports (see Attachment 2 in the Issues Paper). Please complete and update this list, providing the following information for each of the programs:

(a) the program objectives;

(b) funding (both amount and source, including internally generated funds);

(c) the number of families/households assisted at a point in time or an average for a year and, where appropriate, the number of dwellings provided;

(d) the number of families/households on the waiting list;

(e) the eligibility criteria to qualify for the assistance under each program;

(f) the percentage of total program funding spent on administration; and

(g) how long the program has been in operation, what factors led to its introduction and when it was last reviewed.

1.2 Does the large number of programs result in better targeting o f assistance? Do the gains outweigh the additional administrative costs?

1.3 On what basis are program funding requirements determined (both existing and new)?

1.4 A list of government organisations involved in the provision of housing assistance has also been compiled (see Attachment 3 of the Issues Paper). Please update this list, making any necessary corrections and additions, describing their roles and noting any inter-relationships.

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2. D em ographic inform ation

2.1 Please provide the following information by program for those on waiting lists, recent public housing recipients (say, less than 3 years) and long­ term public housing recipients (more than 3 years):

(a) household type;

(b) age and sex of head of the household;

(c) current income distribution by household type;

(d) whether recipients are Aboriginal or Torres Strait Islanders, people of non- English speaking background or people with disabilities (by household type); and

(e) whether recipients main source of income is government benefits by household type.

3. M anagem ent o f public rental h ou sin g sto c k

3.1 Please itemise your housing stock by size, age, type and location.

3.2 What are the occupancy standards or rules used to allocate housing to clients? What is the current level o f occupancy/utilisation? [Percentage o f stock currently under-utilised (single people living in 3 bedroom houses, for example)? Percentage of public housing stock vacant? Average length of vacancies between tenancies?]

3.3 How do you determine when and where new housing is required? To what extent does access to employment, transport and community services affect the choice of location?

3.4 How is the type of new housing determined (for example, number of bedrooms, density, special features for disabled people)?

3.5 What community consultation processes are used in determining the type o f housing, location and other building decisions?

3.6 How is new stock acquired? What determines decisions to spot purchase, construct by government builders, use joint ventures with the private sector, and tender out to private contractors?

3.7 What tendering system is used? How far in advance is your capital program for construction or purchase planned and committed?

3.8 How and for what reasons do you dispose of public rental stock? What is your annual rate of stock turnover as a proportion of total stock? How is

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the sale price determined? Under what circumstances does the sale price incorporate a discount from market value?

3.9 What percentage of total funding (both internal and external) for public rental housing is spent on administration?

3.10 What is the value of your assets, both historically and at current market values (the sum o f each property’s individual market value)? How do you value your assets for accounting purposes (historical cost, replacement cost or current market value)? Are all the costs of inputs such as land and infrastructure services included in the value?

3.11 In what ways do you seek to maintain or improve the value of your assets? Is there a maintenance backlog?

3.12 Does tenancy management for public housing require greater effort than for landlords in the private rental market? If so, why and what is the additional cost?

3.13 Are public housing maintenance requirements higher than in the private rental market? What is the cost difference?

3.14 Please provide details of your maintenance standards and your policy on charging tenants for repairs beyond normal wear and tear.

3.15 What has your annual maintenance bill been in each of the last five years?

3.16 Is public housing managed on a zone or regional basis? Is there a minimum viable size for management on a regional basis? What are the advantages and disadvantages of a regional approach?

3.17 Please provide details of any equity sharing schemes you have in place. How many dwellings are involved?

3.18 What are the benefits of vesting control or management of housing with community tenancy organisations? Are management and/or maintenance costs lowered?

3.19 Please provide us with a sample contract/deed for the vesting of housing with a community organisation or co-operative.

3.20 How are State and Local Government rates and charges determined for public housing? Who pays?

3.21 Please describe any ‘land bank’ functions you perform.

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4. Rental policies

4.1 How do you determine the full rent payable (before rebates are determined) for public rental houses? Are rents averaged, or determined individually for each property? What is your gross income from rent?

4.2 Where ‘market rents’ are used, how are these determined? Are there any location premiums for inner-city dwellings? Where ‘cost rents’ are used, how are these calculated? What is the rationale for the particular rent policies you have adopted?

4.3 Please describe the method used to calculate rental rebates, defining includable and excludable income. What factors besides income influence the effective rent of people who are eligible for a rebate? Is there a sliding scale and how does it operate?

4.4 What proportion of tenants currently receive rebates? What is the current distribution of rent paid by household type for those on waiting lists, recent public housing recipients and long-term public housing recipients?

4.5 What are your rental collection policies? How often are rents reviewed for individual tenants?

4.6 What provisions are there for those who can not pay? What sanctions are there for non-payment?

4.7 In what ways do you encourage tenants to relocate to more appropriate dwellings, or move out of public housing as their circumstances change? What features of the current rental eligibility criteria encourage or discourage mobility? Are there provisions for relocation if family size

exceeds or falls below house size?

4.8 What is your policy on security of tenure? W hat advantages or difficulties arise from this policy?

4.9 Do tenants have to meet any additional housing-related costs other than rent?

4.10 On what grounds are tenants evicted? How many evictions are there per year? Can evicted tenants later return to public housing?

4.11 The Commission is seeking information on the length of stay of public housing tenants. Could you provide a time series of how many households entered public housing for the first time in a given year; how many left public housing in that year; how many public tenants transferred to

another public house in that year; and the total number of households served at the end of each period.

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5. M ethods u sed to allocate hou sin g

5.1 Please describe the methods used to allocate the various types o f housing assistance.

5.2 Are there priority allocations? On what basis? What proportion of total allocations are priority allocations?

5.3 What degree of choice do recipients have over type or location?

6. Financial m anagem ent

6.1 Please describe your financial planning and budgeting processes.

6.2 What is the nature and annual value of any taxation concessions in your operations?

6.3 Please indicate your current annual rental arrears, relative to the full rental applicable and the rental rebate.

6.4 Briefly describe any areas of housing assistance (including home ownership assistance) that involve commercial funding. How are the funds raised? Does the Government guarantee the funds in any way? What are the advantages and disadvantages of using private funding? Do you see any scope for increased use of private funds in providing housing

assistance?

6.5 To what extent are administrative and risk provision costs passed on to individual borrowers in home ownership programs?

6.6 Are common program costs, such as administration, allocated to individual programs and if so on what basis?

6.7 What is the nature and value of any investments you have in property outside of public rental housing?

6.8 What procedures are in place to detect fraud?

7. Program perform ance

7.1 What measures are used to assess whether programs have achieved their objectives?

7.2 What review processes are in place to ensure that objectives are achieved cost effectively?

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7.3 What are the main performance indicators used to assess the effectiveness of programs and the authority/department generally? Are these performance indicators published or publicly available and where?

8. Future role of h ou sin g authorities

8.1 As part of the National Housing Strategy (NHS), a number of housing authorities prepared papers on their future role. If your organisation prepared such a paper, would you please provide the Commission with a copy.

8.2 We draw your attention to questions in the Issues Paper concerning commercialisation and corporatisation. You are invited to respond to the questions and comment generally on reform options.

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ATTACHMENT 0.3

CONSULTANT BRIEFS

R eview of o v e rse a s hou sin g a s s is ta n c e m ea su res

Aims

The aims of this research task are to:

• Provide a statement o f the housing policy objectives in a number of comparable overseas countries;

• Review the current policies and assistance measures for housing in these countries. This review should examine policies and assistance measures addressing the needs of low-income renters and where appropriate the needs of indigenous people;

• Identify the policy decisions that led to the current housing, rental and home ownership assistance measures, as well as identifying the regulations governing the private rental market;

• Discuss the reasons governments in these countries have intervened to provide housing assistance and the influences that shaped the form of policy intervention;

• Identify recent international housing trends in demand and supply policies; and

• Discuss the relevance of overseas experience for housing policy and assistance measures in Australia.

Methodology

Review housing policies in a number of overseas countries with a view to identifying the historical development, market circumstances and institutional arrangements that led to these policies.

The review should concentrate on policies designed to address the needs of low- income renters and o f indigenous people.

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The overseas countries should include:

• Canada

• United States of America

• New Zealand

• United Kingdom

• Germany

• Denmark

Output

A report that identifies for each country the processes that have led to the current housing policies and an assessment o f their relevance in the Australian context.

Estim ation o f the s iz e and distribution o f h o u sin g s u b s id ie s by tenure in Australia

Aim

The aim of this research task is to estimate the size and distribution of housing subsidies. The task might parallel the earlier work o f Flood and Yates (1987).

The estimates will be used to assess the extent o f vertical and horizontal equity in the provision of housing subsidies in Australia.

Specifically, the consultant is required to:

• Identify the sources of housing subsidies for the different tenures; and

• Estimate, on a per household basis and for different income levels (preferably using income deciles), the level o f subsidy and the housing costs for different tenures.

Methodology

Estimate the subsidies going to households using data from the 1989-90 ABS Household Expenditure Survey (or other appropriate data sources). The methodology of Flood and Yates might be used as a starting point, however, the appropriateness of the methodology would need to be assessed.

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The consultant should also provide an estimate of the current level o f subsidies by taking into account the impact of economic and demographic changes that have occurred since the conduct of the survey.

Output

The report should include the following:

• A discussion of the sources and recipients of subsidies (including tax expenditures) for housing;

• A full description of the methodology used, including a discussion of and the basis for any assumptions made;

• Estimates of the overall level of subsidy for each tenure in absolute terms and on a per household basis; and

• Estimates of the level of subsidies for housing as well as the size o f the expenditure on housing costs on a per household basis by income level and tenure.

The developm ent of hou sin g p o licies and program s in Australia under the C om m on w ealth-S tate H ousing A greem ent

Aims

The aims of this research task are:

• To identify the key policy decisions that have shaped housing policy and programs at the State level under the Commonwealth-State Housing Agreement (CSHA); and

• To identify the factors that led to or influenced these decisions.

Methodology

Given the overarching policy framework set by the CSHA for housing in Australia, the consultant should focus on the development of housing policy in States and Territories under the CSHA.

The period to be examined is from the introduction of the CSHA in 1945 to the present.

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Output

The consultant should provide an historical perspective of housing policy development in Australia and should identify not only decisions made as part of the re-negotiation of the CSHA but also decisions that led to different levels and forms o f housing assistance being provided in each State and Territory.

T esting the Industry C om m issio n ’s public h o u sin g rent settin g m odel

Aim

The aims of this research task is to assess the rent setting model proposed by the Commission using data for a sample of public housing tenants.

Methodology

The Commission’s approach involves charging market rents for public housing dwellings and providing a rent rebate to tenants on low incomes so that those in similar circumstances receive the same benefit, rather than pay the same rent as at present. The rent rebates received by tenants under this approach are to be compared with the current rebates.

Equations for calculating the rent rebate under the Commission’s approach will be provided.

Output

A report setting out the assumptions made, the model used, the analysis undertaken and the results obtained. The analysis should examine, in particular, the distribution of current benefit and proposed benefit by location (inner and outer capital city, major regional centres and other), income level and family

type.

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ATTACHMENT 0.4

INQUIRY PARTICIPANTS

Organisations and individuals who made submissions to the inquiry are listed below. Participants marked * presented submissions at public hearings. Participants marked ** made no written submission but appeared at hearings. The remainder made written submissions only.

Participants Submission

No.

Abbeyfield Society (Australia) Limited* 154

Aboriginal and Torres Strait Islander Commission* 116, 333, 370

Aboriginal Hostels Limited 211

Aboriginal Housing Board of South Australia (Inc) 344

Aboriginal Housing Board of Victoria* 21

Aboriginal Housing Council**

ACROD Limited* 140, 304

AcrossTech 2

Adelaide Central Mission* 69

Aged Services Association ofNSW and ACT Inc* 75, 230

Ahmat, G 311

Australian Capital Territory Council of Social Service, Inc* 80, 329

Australian Capital Territory Government* 109, 124, 318

Australian Capital Territory Youth Accommodation Group 66

Australian Citizen’s Action Network* 204, 258

Australian Council of Housing Societies Pty Ltd* 167

Australian Council of Social Service* 85, 352

Australian Greek Welfare Society 308

Australian Local Government Association 102

3 5 0 INDUSTRY COMMISSION

O INQUIRY PROCESS

Barwon Region Housing Council 324

Bay Housing - Housing Support Service* 250

Beer, Dr A and Forster, Dr C - Flinders University* 59

Bendigo Tenancy Information Service* 161

Blacktown City Community Services Network* 76

Blue Mountains Community Legal Centre Inc 162

Bolter, I 13

Bonner, D 362

Brewer Street Welfare Rights and Advocacy Service 196

Brisbane City Council 56

Brotherhood of St Laurence and the Ecumenical Housing Unit* 152, 198, 368

Burdekin Report Action Group (BRAG) 134

Callan, P 314

Caloundra Community Centre 25

Caravan and Mobile Home Residents’ Association of Queensland* 219, 257

Caravan Park Residents’ Network* 182

Carlton Estate Residents Association Inc 247

CASA 284

Central Gippsland Regional Housing Council Inc 149

Central Queensland Joint Community Submission* 332

Central Queensland Regional Tenants Action Group* 298

Cerebral Palsy Association of Western Australia* 16, 278

Christian, A and V 288

City of Collingwood 197

City of Lake Macquarie 15

City of Melbourne 60

Coalition of Generalist Services* 125, 254

Coffs Harbour Detached Housing Office 62

INDUSTRY COMMISSION 3 5 1

PUBLIC HOUSING

Combined Pensioners and Superannuants Association of New South Wales Inc* 39, 266

Common Equity Housing Limited* 151

Commonwealth Office of Local Government* 126

Community Accommodation Support Service (SA) 24

Community and Institutional Parents Action on Intellectual Disability* 164, 236, 275

Community Housing Assistance Service of SA 303

Community Housing Associations Forum 325

Construction, Mining, Energy, Timberyards, Sawmills and Woodworkers’ Union of Australia (WA Branch) 55

Cooke, S J* 185,243

Copp, K 312

Cornwell, G* 99

Corporate Diagnostics* 73

Cotgrove, RDM* 128

Council of Single Mothers and their Children Inc 160

Council of Social Service New South Wales 360

Council on the Ageing (Australia)* 168

Denigan, C* 203

Deniliquin Advisory Committee 363

Department of Family Services and Aboriginal and Islander Affairs (Qld) 14

Department of Finance* 353

Department of Health, Housing, Local Government and Community Services* 213,331

Department of Housing, Local Government and Planning (Qld)* 135, 218, 345

Department of Immigration, Local Government and Ethnic Affairs 158

Department ofLands, Housing and Local Government (NT)* 17, 208, 261, 337

Department of Planning and Urban Development (WA)* 37, 192

Department of Social Security* 214, 331

3 5 2 INDUSTRY COMMISSION

O INQUIRY PROCESS

Department of Veterans’ Affairs* 100, 104

Derby West Kimberley Shire* 70

Diamond Valley Ratepayers Association 150

Disabled Peoples’ International (Australia) Ltd* 118

Downs Active Residents and South West Queensland Tenants Association* 242

East Gippsland Regional Housing Council 173, 320

Eastern Area Service for Youth 19

Ethnic Communities Council of WA 53

Ettinger House, Fairfield Family Resource Centre* 86

Evans, K A G 50

Family Support Service**

Fattah A, and Dearden, L 263

Federation of Housing Collectives Resource* 43, 273

Fitzroy Richmond and Collingwood Accommodation Service* 157, 251

Flemington Tenants’ Association* 141

Flinders University of South Australia 120

Flood, Dr J* 171

Forrer, H - Whitsunday Shire 46

Gateshead West Public Tenants’ Action Group 49

Good Shepherd Youth and Family Service* 148, 330

Goulbum Regional Housing Council Inc* 82, 245, 293

Gove, M 343

Graham, R J - University of Tasmania* 123

INDUSTRY COMMISSION 3 5 3

PUBLIC HOUSING

Habitat for Humanity Australia* 10

Hanover Welfare Services* 163, 295

Hassall, K* 89, 202

Hatton, The Hon J 9

Healthabitat**

Helping Out Maintenance Experts (HOME)* 29

Homeswest* 51, 72, 228

Housing and Social Planners Pty Ltd 199

Housing and Young Peoples Outreach* 133

Housing Assistance Service Inc* 233

Housing for the Aged Action Group Inc* 181, 238

Housing Industry Association - National Office* 92

Housing Industry Association - Western Australia 71

Human Environment Movement**

Human Wellbeing Group (Margate Embryo)* 95

Hunter, L 309

Hyslop, N 48

Ingemann, D and van Leeuwen, H 67

Inner Eastern Regional Housing Council 147

Inner Urban Regional Housing Council* 106, 259, 355

Institute for Science and Technology Policy (Monash University)* 41

Janz, G 212

Johns, R* 79

Joint Ministerial Advisory Committee on ARHP in Queensland* 346

Jones, J* 52

Jubow, L M* 282

3 5 4 INDUSTRY COMMISSION

O INQUIRY PROCESS

Kaidialt Aboriginal Corporation 364

Kaspar, N 18,292

Kimberley Development Commission* 35

Kununurra-Waringarri Aboriginal Corporation 7

L’Estrange, L 207

Leslie James Architects Pty Ltd* 105

Lidcombe Hospital’s Head Injury Unit and Wareemba Community Living 97

Liverpool Rental Housing Association and Bankstown Community Housing Association Ltd**

Local Government and Shires Association of NSW 326

Local Government of Queensland Inc 206

Logan City Tenant Group - ‘LOGAN’ * 119

Lovejoy, M A 3

MacDonald, E 315

MacFarlane, H**

Mackay Housing Interest Network* 26, 328

Mackay Tenants Group* 313

Manly Warringah Interagency Association 63

Master Builders’ Association of WA* 6

Master Builders’ Association of Tasmania* 112

Master Builders’ Australia* 94, 319

McNelis, S 194

Mental Health Branch, Queensland Department of Health 290

Milpara Housing Group 64

Missionaries of the Sacred Heart - Justice and Welfare Office Sydney 110

Mortgage Review Task Force* 184

Municipal Association of Tasmania* 13 7

INDUSTRY COMMISSION 355

PUBLIC HOUSING

Murray Darling Riverina Public Tenants’ Association* 77, 189

Murrundi Regional ATSIC Council**

National Committee on Violence Against Women* 98

National Council on Intellectual Disability 300

National Dissemination Program of the Hunter Caravan Project 209

National Shelter Inc* 115, 221, 224, 339

National Women’s Consultative Council* 93, 222, 351

National Youth Coalition for Housing* 131, 306

New South Wales Government* 354

Ngnunnawal Land Council**

North Brisbane Regional Tenant Group 327

North East Regional Housing Council (Inc) 338

North Melbourne Tenants’ Association Inc* 81, 244

North Queensland Regional Housing Forum 322

North Sydney Housing Interagency 177

North Western Regional Housing Council Inc 183

Northern Territory Aids Council Inc* 27

Office of the Status of Women 96, 349

Older Women’s Network NSW* 78

Partridge, M* 143, 264

Pensioners’ Action Group* 36

Pershouse, J 316

Perth Inner City Housing Association Inc* 267

Port Melbourne Public Housing Tenants’ Association* 170

Prahran Community Housing Inc* 179, 248, 350

Property Owners’ Association of Australia 187

Property Owners’ Association of NSW* 30

3 5 6 INDUSTRY COMMISSION

O INQUIRY PROCESS

Property Owners’ Association of Queensland* 144, 235

Property Owners’ Association of Victoria* 156, 260

Proserpine/Whitsunday Support Group 297

Public Tenants’ Union of Victoria* 180, 321

Queensland Association for Mental Health Inc* 127

Queensland Community Housing Coalition Ltd* 336

Queensland Council of Social Service Inc* 91,241

Queensland Disability Housing Coalition 121, 255

Queensland Health - Central Office 335

Queensland Independent Valuers (Withdrawn) 23

Queensland Shelter* 138, 307

Randolph, Dr B 216

Real Estate Institute of Australia* 103,358

Reeves, R J and N F 287

Residents Action Group of Zillmere* 61, 229

Rockhampton - Family Emergency Accommodation Program 33

Rooming House Tenants’ Association* 201

Ross, Dr H* 215

Royal Australian Planning Institute Inc - ACT Division* 139, 347

Sapphire Coast Tenancy Scheme Inc* 114

Schizophrenia Fellowship of South Queensland 113

School of Architecture (SOLARCH) 90

Sear, B M* 117

Seare, V E* 270

Shelter Darwin* 20, 210, 262

Shelter Housing Action Tasmania*

Shelter NSW* 305

INDUSTRY COMMISSION 3 5 7

PUBLIC HOUSING

Shelter SA* 54, 268

Shelter Victoria* 172, 253, 323

Shelter WA - Migrant Access Project* 28

Shelter WA* 47, 205, 271

Shire of Manjimup 1

Shire of Wongan - Ballidu 68

Singleton Equity Housing Ltd* 175, 249

Society of St Vincent de Paul - State Council of NSW 341

Softlaw Community Project Ltd* 130, 361

South Australian Co-operative Housing Authority**

South Australian Council of Social Service 291

South Australian Government* 356, 357, 365

South Australian Health Commission 366

South Australian Housing Trust* 367

South Australian Youth Housing Network Inc 195, 285

South East Queensland Youth Accommodation Coalition* 132, 265

South Sea Islander Community of Mackay* 289

South Sydney Community Aid Co-operative Ltd* 45, 188

South Western Community Care 280

Southern Forum 122

Spastic Centre of New South Wales 11

Springvale Community Aid and Advice Bureau 31

St James Court Tenants Group 239

St John of God CLASS Inc 286

Star Victorian Action on Intellectual Disability 166

Stilwell, F 57

Stretton, H 269

Styles - Architectural and Building Component Design 190

Sunshine Coast Regional Housing Council* 107, 302

3 5 8 INDUSTRY COMMISSION

O INQUIRY PROCESS

Sussex Street Community Law Service* 34, 272

Sydney City Mission 226

Tapper, A* 40

Tasmanian Co-operative Housing Development Society Ltd* 231

Tasmanian Council of Social Service Inc* 129, 234

Tasmanian Government* 217, 225, 342

Tenants’ Advice Service Inc 191, 334

Tenants’ Union of Queensland 155

The Salvation Army Crossroads Network* 165

The Salvation Army* 200, 252

The Union for Homeless Women and Children 279

Thompson, D J and S 310

Town of East Fremantle* 58

Trethowan, B 142

Troon, T E 145

Trott, A 317

Uniting Church - Synod of Western Australia 32

Uniting Church Youth Services Western Australia* 193

Victorian Consumer Forum for the Aged**

Victorian Council of Social Service* 8, 169, 246, 359

Victorian Department of Planning and Development 227

Victorian Government* 159, 223, 232

Wakely, John* 301

Welfare Rights and Legal Centre Ltd* 101

Wensing, E* 108, 178

Western Australian Consumer Forum for the Aged 87

INDUSTRY COMMISSION 3 5 9

PUBLIC HOUSING

Western Australian Council of Social Service* 44, 220, 277, 340

Western Australian Government 276

Western Australian Municipal Association* 38

Western Australian Treasury 369

Western Regional Housing Council Inc* 174

Western Sydney Housing Information and Research Network* 84, 274, 348

Westemport Regional Housing Council 153, 296

Whittlesea Family Services* 237

Wide Bay/Burnett Regional Tenants’ Group 294

Widjeri Co-operative Ltd* 88

Wilderness Society of Tasmania* 136

Wilsonton and Rockville Tenants Group* 111, 240

Wimmera Community Care and Wimmera Regional Housing Council 83

Windermere Child and Family Services Inc 74

Wollongong Youth Refuge Association Inc 4

Women in Supportive Housing* 146

Woodland, AH 12

Yates, Dr J 186

Young, N 281

Youth Accommodation Association (NSW) Ltd 65

Youth Accommodation Coalition of Victoria* 176, 299

Youth Accommodation Coalition of WA* 42, 283

Youth Housing Project - Albion Queensland* 5, 256

YWCA of Alice Springs 22

360 INDUSTRY COMMISSION

REFERENCES FOR VOLUME 2

ABS (Australian Bureau of Statistics) 1988, H o u sin g S urvey: H o u sin g C osts a n d O ccupancy, Cat. no. 4130.0, AGPS, Australia.

----- - 1990, H o u seh o ld E xp en d itu re Survey, A u stra lia : S ta tes a n d Territories, 1 9 8 8 -8 9 , Cat. no. 6533.0, AGPS, Australia.

------ 1992, 1991 C ensus o f P opu la tio n a n d H o u sin g : B a sic C o m m u n ity P rofile, Cat. no. 2722.1, Australia, Unpublished.

------ 1993 a, 1991 C ensus o f P opu la tio n a n d H o u sin g : B a sic C o m m u n ity

Profiles, A u stra lia , Cat. no. 2722.0, AGPS, Australia.

—— 1993b, PC Ausstats.

Adams, P.D., Chung, C-F. and Powell, A.A. 1988, A u stra lia n E stim a tes O f W o rk in g ’s M o d e l under A d d itiv e P references: R e v ise d E stim a tes o f a C o n su m er D e m a n d S ystem f o r use by C G E M o d e lle rs a n d O th er A p p lie d E conom ists, Impact Project Working Paper No. 0-61, Industries

Assistance Commission, Melbourne, August

AHL (Aboriginal Hostels Limited) 1992, A n n u a l R ep o rt 1 9 9 0 -9 1 , Canberra.

------ 1993, A n n u a l R eport 1 9 9 1 -9 2 , Canberra.

AN AO (Australian National Audit Office) 1993, R ep o rt on M in isteria l P ortfolios B u dget S ittings 1993, Volume 6: H ealth, H ousing, L ocal

G o vern m en t a n d C o m m u n ity Services P ortfolio; S o c ia l S ec u rity P ortfolio, Audit Report No. 1, AGPS, Canberra.

Appelbaum, R. 1986, ‘Swedish housing in the postwar period: some lessons for American housing policy’, in Bratt et al. (1986), pp. 535-57.

Arrow, K.J. 1971, ‘Models of job discrimination’, in Pascal (1971), Chapter 2.

Arrow, K.J. and Lind, R.C. 1970, ‘Uncertainty and the evaluation o f public investment decisions’, A m erica n E co n o m ic R eview , vol. 60, no. 3, pp. 364-78.

ATSIC (Aboriginal and Torres Strait Islander Commission) 1992a, A n n u a l R eport 1 9 90-91, AGPS, Canberra.

------ 1992b, Interim C o m m u n ity H o u sin g a n d In fra stru ctu re P o licy o f the

A b o rig in a l a n d Torres Stra it Isla n d er C om m ission.

------ 1993, B u ild in g a P artnership, Discussion Papers, The Indigenous Australian Shelter Conference, Brisbane, 1-3 November.

INDUSTRY COMMISSION 3 6 1

PUBLIC HOUSING

----- (forthcoming), N a tio n a l H o u sin g a n d C o m m u n ity In fra stru ctu re N eeds Survey, Report Stage 1, Canberra.

Auerbach, A. and Feldstein, M. (eds.) 1985, H a n d b o o k o f P u b lic E conom ics, North Holland.

Australia, House of Representatives 1981, D eb a tes, vol. 123, 26 M ay-10 June.

Australian Aboriginal Affairs Council 1992, ‘National Commitment to Improved Outcomes in the Delivery o f Programs and Services for Aboriginal Peoples and Torres Strait Islanders’, Endorsed by Council of Australian Governments, 7 December.

Badcock, B. and Browett, M. 1991, ‘The responsiveness of the private rental sector in Australia to changes in Commonwealth taxation policy’, H o u sin g Studies, vol. 5, no. 3, pp. 182-92, July.

Baer, W.C. 1986, ‘The shadow market in housing’, S cien tific A m erican, vol. 255, no. 5, pp. 27-33, November.

Bartlett, W. 1989, H o u sin g Sup p ly E la sticities: T heory a n d M ea su rem en t, Discussion Paper No. 2, Joseph Rowntree Memorial Trust, School of Advanced Urban Studies, University of Bristol, December.

Bewley, R.A. 1982, O n the functional form o f Engel curves: the Australian Household Expenditure Survey 1975-76’, E co n o m ic R eco rd , vol. 58, pp. 82-91.

Binstock, R. and George, L. (eds.) 1990, H a n d b o o k o f A g e in g a n d the S o cial Sciences, 3rd edn., Academic Press, San Diego.

Bisset, H., Blaskett, B. and Siemon, D. (forthcoming), H o u sin g A ffordability, H o using P o verty a n d H o u sin g A ssista n c e (working title), Brotherhood of St Lawrence.

Black, G. 1986, ‘Housing assistance: rental rebates versus a consolidated housing allowance’, Conference Papers from Income Support Seminar, Melbourne, 8-9 December, pp. 264-77.

Boadway, R. and Keen, M. 1993, ‘Public goods self-selection and optimal income taxation’, In ternational E co n o m ic R eview , vol. 34, no. 3, pp. 463-78.

Bradbury, K.L. and Downs, A. 1981, D o H o u sin g A llow ances Work?, The Brookings Institute, Washington, D.C.

Bratt, R., Hartman, C. and Meyerson, A. (eds.) 1986, C ritical P erspectives on H ousing, Temple University Press, Philadelphia.

Brennan, G. and Buchanan, J. 1980, The P o w er to Tax: A n a lytica l F oundations o f a F iscal C o n stitu tio n, Cambridge University Press.

362 INDUSTRY COMMISSION

REFERENCES

Brinkerhoff, R.O. and Dressier, D.E. 1990, P ro d u ctivity M ea su rem en t: A G uide f o r M a n a g ers a n d E valu a to rs, Sage Publications, USA.

Bullock, A., Stallybrass, O. and Trombley, S. 1988, The F o n ta n a D ictio n a ry o f M o d ern Thought, Fontana Press, London.

Burgess, R. and Skeltys, N. 1992, The F indings o f the H o u sin g a n d L oca tio n C hoice Survey: A n O verview , Background Paper No. 11, National Housing Strategy, AGPS, Canberra.

Bums, P. 1992, ‘Housing Asset Management — The Financial Imperatives’, Revised keynote address to a National Housing Authority Asset Management Conference, Surfers Paradise, Queensland, 28 May.

Campbell, R. and Walsh, C. (eds.) 1988, E q u ity in H o u sin g Support: Papers a n d P roceedings o f the S ec o n d H o u sin g F in a n ce W orkshop, Housing Industry Association, Canberra.

Carlson, D.B. and Heinberg, J.B. 1978, H ow H o u sin g A llo w a n ces Work: In teg ra ted F indings fr o m the E xperim ental H o u sin g A llo w a n ce P rogram , Urban Institute, Washington.

Carter, N., Klein, R. and Day, P. 1992, H ow O rg a n isa tio n s M e a su re Success: The Use o f P erform ance Indicators in G overnm ent, Routledge, UK.

Cass, B. 1991, The H o u sin g N eeds o f W om en a n d C hildren, Discussion Paper Prepared for the National Housing Strategy, AGPS, Canberra.

Coleman, A. 1990, U topia on Trial: Vision a n d R ea lity in P la n n ed H ousing, Hilary Shipman Ltd, London.

Community Law Reform Committee of the ACT 1992, R esid en tia l Tenancy L aw , Discussion Paper No. 1, ACT Government, April.

Coopers and Lybrand 1989, reported in DCSH (1989a), pp. 170-2.

Corlett, W. and Hague, D. 1953, ‘Complementarity and the excess burden of taxation’, R eview o f E conom ic Studies, vol. 21, no. 1, pp. 21-30.

DCSH (Department of Community Services and Health) 1988, H o u sin g A ssista n ce A ct 1984 A n n u a l R eport 1 9 86-87, AGPS, Canberra.

------ 1989a, H o u sin g A ssista n ce A c t 1984 A n n u a l R eport 1 9 8 7 -8 8 , AGPS,

Canberra.

------ 1989b, N ational H o u sin g P olicy Review: F in a l R eport, AGPS, Canberra.

—— 1990, H o u sin g A ssista n ce A c t 1984 A n n u a l R ep o rt 1 9 8 8 -8 9 , AGPS, Canberra.

de Leeuw, F. 1971, ‘The demand for housing — a review of the cross-section evidence’, R eview o f E conom ics a n d Statistics, vol. 53, no. 1, pp. 1-10.

INDUSTRY COMMISSION 3 6 3

PUBLIC HOUSING

Devereux, A. 1992, ‘Australia and the right to adequate housing’, F ederal Law R eview , vol. 20, no. 2, School of Law, ANU, pp. 223-39.

DHC (Department of Housing and Construction) 1987, H o u sin g A ssista n ce A c t 1984 A n n u a l R eport 1985-86, AGPS, Canberra.

DHHCS (Department of Health, Housing and Community Services) 1991a, H o u sin g A ssista n ce A c t 1989 A n n u a l R ep o rt 1 9 8 9 -9 0 , AGPS, Canberra.

------1991b, E xplanatory N otes 1 9 9 1 -9 2 , Budget Related Paper No. 8.4A, AGPS.

------ 1992a, P rogram P erform ance Statem en ts 1 9 9 2 -9 3 , Budget Related Paper No. 9.8A. AGPS, Canberra.

------ 1992b, H ousing: C hoices f o r a C h a n g in g N ation, Budget 1992-93.

------ 1992c, H o using A ssistance A c t 1989 A n n u a l R eport 1 9 9 0 -9 1 , AGPS,

Canberra.

------ 1992d, ‘Community Housing Program: Overview’, Prepared for National Discussions to establish the CHP, mimeo.

----- 1992e, Other Housing Options’, Consultation Paper No. 6, National SAAP Evaluation, mimeo, November.

------ 1992f, ‘The Relationship Between Support and the Accommodation Provided in SAAP’, Consultation Paper No. 4, National SAAP Evaluation, mimeo, December.

------ 1992g, ‘Linkages Between SAAP and Other Support Services’, Consultation Paper No. 5, National SAAP Evaluation, mimeo, December.

----- 1993, ‘Community Housing Program; Developing Community Housing Infrastructure, Appendix’, Discussion Paper, Prepared for National Discussions to establish the CHP, mimeo.

DHHLGCS (Department of Health, Housing, Local Government and Community Services) 1993a, Supp o rted A cco m m o d a tio n A ssista n ce P rogram : N ational C lient Census, H om e f o r a N ight, O ne-night C ensus 14 M a y

1992, AGPS, Canberra.

----- 1993b, P rogram P erform ance Statem ents 1993-94: H ealth, H ousing, L ocal G overnm ent a n d C om m unity Services Portfolio, Budget Related Paper no. 7.8A, AGPS, August.

Diewert, W.E. and Lawrence, D.A. 1993, ‘The Deadweight Costs of Taxation in New Zealand’, Paper presented to the 1993 Conference of the Economic Society of Australia: Perth, 27 to 29 September.

3 6 4 INDUSTRY COMMISSION

REFERENCES

DSS (Department of Social Security) 1992, B eh a v io u ra l R esp o n ses o f D S S A ssista n c e R ecipients to C h anges in the L e v e l o f the P aym ent, R ep o rt on S u rve y o f D S S R en t A ssista n c e R ecipients, Draft Report.

------ 1993, A G uide to S o cia l S ecu rity P aym ent, 1 J u ly 1993 to

19 S ep tem b er 1993.

Econsult (Australia) Pty Ltd 1989, H o u sin g A llo w a n c es in the A u stra lia n C ontext: M a rk et Im p a cts a n d C ost E ffectiven ess, National Housing Policy Review, Background Paper No. 1, Canberra.

Econsult (Australia) Pty Ltd and Neil, C. 1993, Other Government Programs and SAAP’, Draft of Final Report to SAAP National Evaluation Committee.

Econsult Planning and Development 1991, Im p a c t o f R en t A ssista n c e C hanges on R ents, Consultant’s Report, Department of Social Security, March.

Egan, R.J. & Associates Pty Ltd 1993, ‘The Development of Rental Housing Policies and Programs in Australia under the Commonwealth-State Housing Agreement’, Consultant’s Report to Industry Commission’s Public Housing Inquiry, mimeo.

Elton, B. & Associates Pty Ltd 1991, The S u p p ly-S id e o f the P riva te R en ta l M a rket, Consultancy Report for the National Housing Strategy, Background Paper No. 2, DHHCS, AGPS, Canberra.

EPAC (Economic Planning Advisory Council) 1988, In co m e S u p p o rt Policies, Taxation a n d Incentives, Council Paper No. 35, AGPS, Canberra.

Ernst & Young 1992, E va lu a tio n o f C E R C S ecto r P roject 3, April.

Feldman, A.M. 1980, W elfare E conom ics a n d S o cia l C hoice Theory, Kluwer Nijhoff Publishing, Boston.

Flood J. 1990 Optimal replacement strategies and taxation’, in B u ild in g A sset M anagem ent: Intern a tio n a l B uilding, vol. 3, CIB 90 Building Economics and Construction Management, International Council for Building Research, 14-21 March 1990.

------ 1993, ‘Housing Subsidies 1990-91’, Draft Report for the Industry Commission and Commonwealth Department of Health, Housing, Local Government and Community Services, mimeo.

Flood, J. and Yates, J. 1987, H o u sin g S u b sid ies Study, Project No. 160, Australian Housing Research Council, AGPS, Canberra.

Forsyth, P. 1991, ‘An accountability framework for government business enterprises’, Annual Research Lecture in Government Accounting, ANU and Australian Society of CPAs, Canberra, 7 November.

INDUSTRY COMMISSION 3 6 5

PUBLIC HOUSING

Giles, D.E.A. and Hampton, P. 1985, ‘An Engel Curve analysis of household expenditure in New Zealand’, E co n o m ic R ecord, vol. 61, no. 172, pp. 450-62.

Glazer, N. 1967, ‘Housing policy and the family’, J o u rn a l o f M a rria g e a n d the F am ily, vol. 29, no. 1, February.

Graham, B. and Xavier, P. 1987, ‘Financial targets and dividend requirements for Commonwealth government business enterprises’, Paper presented to the 16th Conference of Economists, Surfers Paradise, Queensland, 23-27 August.

Gratten, M., Morey, F., Dixon, J., Manning, K., Torzillo, P., Matters, R. and Erlich, J. 1993, ‘An Outbreak o f Serotype 1 ‘Streptococcus Pneumoniae” Infection in Central Australia’, M e d ic a l J o u rn a l o f A u stra lia , vol. 158, pp. 340-2, 1 March.

Hendrie, D. 1988, ‘Housing allowances — some empirical findings’, in Campbell and Walsh (1988), pp. 27-42.

Hills, J. 1991, U nravelling H o u sin g F inance: Subsidies, B en efits a n d Taxation, Clarendon Press, Oxford.

Hills, J., Berthould, R. and Kemp, P.A. 1989, The F u ture o f H o u sin g A llow ances, Policy Studies Institute, London.

Housing Review Group of Commonwealth and State Housing Representatives 1991, R eport on F unctional R eview o f H ou sin g , November.

HREOC (Human Rights and Equal Opportunity Commission) 1989, The Toom elah Review , March.

------ 1992, The C all f o r R ecognition: A R ep o rt on the Situ a tio n o f A ustralian

South Sea Islanders, AGPS, Canberra.

— — 1993, H um an R ights a n d M e n ta l Illness, Report o f the National Inquiry into Human Rights of People with Mental Illness, (B. Burdekin, Chairperson), vol. 1, AGPS, Canberra.

HRSC (House of Representatives Standing Committee on Aboriginal and Torres Strait Islander Affairs) 1992, M a in ly Urban: R ep o rt o f the In q u iry into the N eeds o f U rban D w ellin g A b o rig in a l a n d Torres S tra it Isla n d er

People, AGPS, Canberra.

IC (Industry Commission) 1991, Seminar: Measuring the Efficiency of Government Business Enterprises, Canberra, edited transcripts.

----- 1993 a, Taxation a n d F inancial P o licy Im pacts on U rban Settlem ent,

Report No. 30, 2 vols., AGPS, 7 April.

3 6 6 INDUSTRY COMMISSION

REFERENCES

------ 1993b, P rovisio n o f P ub lic H o u sin g in Sydney: S o m e E m p irica l E vid en ce, Research Memorandum MR-85, Industry Commission, Canberra, November.

------ 1993c, ‘A companion to the Swinburne Testing of the Industry Commission’s public housing rent setting model: presenting additional results’, mimeo.

------ 1993d, A n n u a l R ep o rt 1 9 9 2 -3 , AGPS, Canberra

Independent Commission to Review Public Sector Finances 1993, A g en d a f o r R eform : R ep o rt o f the In d ep en d en t C om m issio n to R eview P u b lic S ecto r F inances, vol. 2, (L.E. McCarrey, Chairperson), Western Australia, August.

Inquiry into British Housing 1985, R eport, National Federation of Housing Associations, London.

Johnston, E. 1991, N a tio n a l R eport, vol. 4, Royal Commission into Aboriginal Deaths in Custody, AGPS, Canberra.

Kemp, P.A. 1989, ‘Alternatives to housing benefits’, in Hills et al. (1989), pp. 56-71.

------ 1990, ‘Income-related assistance with housing costs’, U rban Studies, vol. 27, no. 6, pp. 795-808.

Kendig, H. 1990, ‘Comparative perspectives on housing, ageing and social structure’, in Binstock and George (1990), pp. 288-306.

Kent, C. & Associates 1990, H ouse Rules: D ecisio n M a k in g a n d A p p e a l Rights in State H o u sin g A uthorities, Report to the Department o f Community Services and Health, AGPS, Canberra, September.

Kirkby-Jones, W.J. 1990, ‘Management Accountability for Public Assets’, Royal Australian Institute of Public Administration Conference, 16 July, Canberra.

Layard, P.R.G. and Walters, A.A. 1978, M icro eco n o m ic Theory, McGraw-Hill, New York.

Lee, T.R. 1986, ‘Public sector contributions to home ownership — the role of the State housing authorities’, U rban P o licy a n d R esearch, vol. 4, no. 1, pp. 8-12, March.

Leigh, P. 1989, In vesto r A ctivity in H ousing, Occasional Paper No. 1, Housing Analysis Group, Ministry of Housing and Construction, Victoria, October.

Leonesio, M.V. 1988a, ‘In-kind transfers and work incentives’, Jo u rn a l o f L a b o r E conom ics, vol. 6, no. 4, pp. 515-29.

INDUSTRY COMMISSION 3 6 7

PUBLIC HOUSING

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McCarrey Report 1993. See Independent Commission to Review Public Sector Finances 1993.

McLoughlin, J.B. and Huxley, M. (eds.) 1986, U rban P o licy in A ustralia: Critical Readings, Melbourne, Longman Cheshire.

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Milligan, V., Shaw, A. and Riordan, T. 1991, R eview o f H o u sin g Policies, Q u eensland D epartm ent o f H o u sin g a n d L o ca l G overnm ent, Discussion Paper on Major Public Housing Policy Issues, February.

Mills, E.S. (ed.) 1987, H andbook o f R eg io n a l a n d U rban E conom ics: Volum e I I U rban E conom ics, North-Holland, Amsterdam.

Moffitt, R. 1992, ‘Incentive effects of the U.S. welfare system: a review’, Jo u rn a l o f E conom ic Literature, vol. XXX, pp. 1-61.

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National Housing Policy Review 1988, Final Report, (D. Persson, Director), mimeo, February.

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Neilson, G., Streatfield, R.W., West, M., Johnson, S., Glavin, W., and Baird, S. 1993, ‘Rheumatic fever and chronic rheumatic heart disease in Yarrabah Aboriginal Community, North Queensland’, M ed ic a l Jo u rn a l o f A ustra lia , vol. 158, 1 March.

New South Wales, Department of Housing 1991, R en ta l f o r Investm ent: A S tu d y o f L andlords in N ew South W ales, Research and Policy Paper No. 3, March, Sydney.

----- 1992, A n n u a l R ep o rt 1991-92.

368 INDUSTRY COMMISSION

REFERENCES

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NHS (National Housing Strategy) 1991, A b o rig in a l a n d Torres S tra it Isla n d er H o u sin g , Discussion Package, AGPS, Canberra.

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Canberra.

NHS (National Housing Strategy) and ABS (Australian Bureau of Statistics) 1992, H o u sin g C haracteristics a n d D ecisions: A C o m p a ra tive S tu d y o f Sydney, M elbourne, A d ela id e a n d C anberra 1991, Department o f Health Housing and Community Services, Canberra.

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INDUSTRY COMMISSION 3 6 9

PUBLIC HOUSING

Pascal, A H. (ed.) 1971, R acia l D iscrim in a tio n in E co n o m ic L ife, Lexington.

Patel, M., Merianos, A., Hanna, J.N., Vartto, K., Tait, P., Morey, F. and Jayathissa, S. 1993, ‘Epidemic meningococcal meningitis in central Australia, 1987-1991’, M ed ic a l J o u rn a l o f A u stra lia , vol. 158,

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Paterson, J., Yencken, D. and Gunn, G. 1976, A M a n sio n o r N o H ouse, Urban Development Institute of Australia, Melbourne.

Pender, H. and Ross, S. 1993, In co m e Tax a n d A sse t C hoice in A ustralia, Research Paper No. 3, F.PAC, AGPS, March.

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Fodder, N. 1971, ‘Patterns of household consumption expenditures in Australia’, E conom ic R ecord, vol. 47, pp. 379-98.

Pol insky, A.M., and Elwood, DM . 1979, ‘An empirical reconciliation of micro and grouped estimates of the demand for housing’, R eview o f E conom ics a n d Statistics, vol. 61, pp. 199-205.

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Queensland, Department of Housing, Local Government and Planning 1993, H o u sing P rogram P lan 1992-93.

REIA (Real Estate Institute of Australia) 1992a, M a rket Facts: D arw in/A lice Springs M arch M a y 1992, Curtin, ACT, 17 July.

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Rosen, H.S. 1985, ‘Housing subsidies: effects on housing decisions, efficiency, and equity’, in Auerbach and Feldstein (1985), Chapter 7.

3 7 0 INDUSTRY COMMISSION

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------ 1992a, S o cial Justice f o r Indigenous A u stra lia n s 1992-93, B u d g et R ela ted P a p er No. 7, Circulated by the Honourable Robert Tickner, M.P., Minister for Aboriginal Affairs and Minister Assisting the Prime Minister for Aboriginal Reconciliation, AGPS, Canberra.

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True, C. 1979, ‘The economic rationale for government intervention in housing’, S o cia l P olicy a n d A d m in istra tio n , vol. 13, no. 2, Summer.

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Victoria, Department of Planning and Housing 1991, D irec to ry o f S o cia l H o u sin g M odels, Victorian Housing and Residential Development Plan, Project 11, September.

------ 1992, The P rivate R ental M arket, Victorian Housing and Residential Development Plan Project 10.

Wheaton, W.C. 1993, ‘Land capitalisation, tiebout mobility, and the role of zoning regulations’, Jo u rn a l o f U rban E conom ics, vol. 34, pp. 102-17.

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Williams, P. 1992, ‘Sustainable housing policies and the role of public sector housing organisations’, Seminar Paper, Urban Research Program, ANU, Canberra, August 1992.

Wood, G.A. 1990, ‘Housing finance and subsidy systems in Australia’, U rban Studies, vol. 27, no. 6, pp. 847-76.

------ 1992, ‘How do Australian State and Local governments tax residential housing?’, A u stra lia n Tax F orum , vol. 9, no. 4, pp. 441-72.

World Bank 1992, H o u sin g Indicators Study: F in a l R eport, Washington.

Wulff, M., Pidgeon, J. and Burke, T. 1992, ‘Public housing and poverty traps: the impact of rent-setting systems’, Paper Presented at the Sixth National Conference, Australian Population Association, Sydney, 28-30 September.

Yates, J. 1989, S h a red O w nership, Background Paper No. 6, National Housing Policy Review, Department of Community Services and Health, Canberra.

3 7 2 INDUSTRY COMMISSION

GLOSSARY

Accessibility

Affordable benchmark rent

Affordable housing

Allocative efficiency

Appropriate housing

Accessibility refers to the ease with which households can change dwellings within the same tenure or between tenures. Barriers to change include search, transaction and relocation costs as well as

discrimination and other practices which limit housing options for certain groups. How much choice is available at the time of moving, or seeking to move, also affects accessibility.

A notional rent contribution set by the tenancy manager so that an individual or family’s payment towards housing costs is an affordable proportion of their income. When a tenant is given a choice of

accommodation, the actual rent contribution can vary from this affordable b en ch m a rk ren t to reflect

variations in amenity chosen.

Housing is affordable when rents or mortgage payments are low enough to leave households with sufficient income to meet the costs o f other basic

needs, for example food, clothing, transport, medical care and education.

An optimal allocation of scarce resources between end uses to produce a combination of goods and services that best accords with the pattern o f consumer demands.

A term used to describe housing which meets the needs of its residents. It can be described as a combination of the following attributes of housing: its quality; the way in which it is supplied and managed;

its location in relation to employment, transport and services; its impact on the environment in which it is located; its suitability for occupants stage of life,

household composition and cultural needs of its residents; its design and siting; and the degree of security and control it affords its occupants.

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Broad-banding

Community housing

Community service obligations

Corporatisation

Cost rents

Cost-effective

Deciles

Dwelling

Economies of density

Economies of scale

The aggregation of a number of similar government programs, usually to improve equity and the efficiency of delivery.

A form of social housing managed by non-profit organisations for social purposes — usually to accommodate households with limited means or

distinctive housing needs. Co-operative housing is a form of community housing.

Community service obligations (CSOs) arise when a government requires a public body to carry out activities that it would not do on a commercial basis or at the required price.

The process o f incorporating (usually) an existing legal entity, in some cases a government statutory authority, under its own legislation and possibly making it subject to corporations law.

Rents based on costs of production rather than rents based on currently prevailing market conditions.

The least cost approach o f achieving a particular goal.

Ten percent groupings o f an ordered population. Income deciles are determined by sorting all income units according to the amount of total weekly income. Income ranges are allocated to each ten percent ordered grouping of income units.

A structure or that part of a structure occupied by one household.

Factors such as those resulting from an increased level of demand within a particular locality or better utilisation of indivisible infrastructure which cause a reduction in the average cost of delivering goods or services.

Factors which cause the average cost of producing a commodity or service to fall as the firm produces more of it.

3 7 4 INDUSTRY COMMISSION

GLOSSARY

Economies of scope

Effective marginal tax rate (EMTR)

Efficient market operations

Elastic

Elasticity of demand

Elasticity of supply

Equity

Equivalence scales

Factors which make it cheaper to produce a range of related products together rather than to make each of the individual products on its own.

Attempts to take into account not only the statutory personal tax rate but also other aspects o f the tax system which determine how much tax is actually paid. For example, some on low incomes receive

fringe benefits (free medical treatment, cheap transport and deductions on payment for some services such as housing rents) and tax-free allowances (for example family allowances). They lose these as their gross

income rises.

A situation in a market where there is allocative and productive efficiency. That is goods and services are produced at least cost and allocated in a manner that best accords with consumer demands.

An elasticity that is greater than 1 in absolute value.

The percentage by which the quantity of a good demanded decreases in response to a 1 per cent increase in the price paid for the good while holding all other factors constant.

The percentage by which the quantity o f a good supplied increases in response to a 1 per cent increase in the price received for the good while holding all other factors constant.

The principles of fairness, impartiality7 and justice. See also Social Justice and horizontal, vertical and intergenerational equity.

An estimate of the relative expenditure or disposable income required by households of different compositions and in specific circumstances to be equally ‘as well o ff (equivalent) in terms of their

consumption. It is usually expressed as a set of numbers where the value corresponding to a single adult is set equal to unity and the values that

correspond with other types of households are expressed relative to this household type.

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Externalities

General income support

Grandfather clause

Headlease

Horizontal equity

Household

Housing co-operative

Housing stress

Housing vouchers

Imputed rent on owner-occupied houses

The impacts of activities that confer costs or benefits on a third party that are not fully reflected in prices. These effects may arise during production or consumption phases o f the activity and be o f an environmental, social or financial nature.

Cash assistance without restriction on how the recipient spends it.

A special condition applying to people (adversely) affected by a change in arrangements that allows them to remain under the arrangements applying prior to the change or adjust at an appropriate rate to the new arrangements in order to avoid hardship.

Where a property is leased with the intention to re-let to another.

The principle that those in similar circumstances ought to be treated similarly.

A household is defined as a group of people who live together as a single unit in the sense that they have common housekeeping arrangements; that is they have

some common provision for food and other essentials of living. Persons living in the same structure or dwelling, but having separate living arrangements constitute separate households.

An organisation that principally aims to acquire and manage housing for its members. Co-operative housing principles stress democratic decision-making, mutual aid, and limitation of individual financial gain.

Where individuals would have to pay too large a proportion of their income to obtain adequate accommodation.

Vouchers, given as a form of housing assistance, that may only be spent on accommodation.

It is the reasonable value of the services that an owner could be expected to derive from use o f the property.

376 INDUSTRY COMMISSION

GLOSSARY

Imputed rental income

In-kind assistance

Income units

Inelastic

Infrastructure

Intergenerational equity

Land banking

The notional income stream obtained within owner-occupied housing from its housing services.

Assistance effectively targeted toward increased consumption of a particular good or service. That is ‘effectively targeted toward increased consumption’ when compared to increased consumption resulting

from general income support.

Income units are:

(a) Married couple income units — husband, wife and dependent children (if any); defacto relationships are included;

(b) one parent income units — a parent and at least one dependent child; and

(c) one person income units — any person not included in (a) or (b) above. Non-dependent children living with their parents are classed as one person income units.

An elasticity that is less than 1 in absolute value.

A nation’s roads, railways, housing, hospitals, water supply and so on, accumulated from investment, often by governments. It includes intangible assets such as a trained and educated work force.

Consideration of principles of fairness within and between generations. In the ecologically sustainable development context, there is an emphasis on the obligation of the present generation to provide further

generations with at least as much ‘wealth’, including natural assets, as is available to the current generation.

Accumulation of title over land that is destined to be developed so that the release and price of developed land may be affected. Government authorities may do this with the aim of stabilising the price of developed land by reducing speculation.

INDUSTRY COMMISSION 3 7 7

PUBLIC HOUSING

Market rents

Merit goods

Moral hazard

Net expenditure subsidy

Normal rate of return

On-leasing

Operational objective

Out-of-turn allocation

Performance indicators

A rent that a rational rental property owner would offer a prospective tenant in a competitive market. This rent would take into account the following: rents being charged on comparable properties, specific

detail of the amenity being offered as well as current and expected economic conditions in the rental market. For an investor to remain in this market it could be expected that the market rent obtained in the long-run would provide the investor with a normal rate of return on the equity in their investment after allowing for operating costs and expected capital gains.

‘Special’ goods that proponents argue merit to be subsidised if the level of their consumption without subsidisation is ‘too’ low. Such goods are argued to have socially desirable properties. Often included are education, health services and housing.

A situation where incentive is given or opportunity provided to gain (unfairly) through others’ expense.

Includes any government money paid for a particular purpose to a consumer group net of any money received from that group.

A rate of return that is the same as the rate o f return accruing to other average or ‘normal’ assets within the economy.

Leasing a headleased property on to another.

An unambiguously defined objective with specific measurable outcomes.

Allocation by factors other than waiting time. For example, allocation by need.

Quantitative and qualitative measures used to assist in determining how successfully objectives are being achieved. They may be measures of, say, workload, efficiency or effectiveness.

378 INDUSTRY COMMISSION

GLOSSARY

Poverty trap

Productive efficiency

Property manager

Public goods

Public tenant

Quintiles

Rent assistance

Residual market

Resource costs

Scale economies

A situation where effective marginal tax rates reach such a high level that those on low incomes (seeking to increase their income) find themselves only a little better-off or even worse-off as a result of efforts to

secure additional private income.

Production of a given level of output o f a good at least cost.

The government organisation that manages public housing stock, on-leasing the services of that stock to the tenancy manager.

Goods which, because they cannot easily be witliheld from one individual without withholding them from all, are often supplied communally (for example national defence, street lighting).

For the puipose of this inquiry, an individual or household who rents a dwelling from a State housing authority.

An ordered distribution divided into five equal parts. The bottom 20 per cent is called the lowest quintile.

Commonwealth income support for low income households receiving pensions and allowances from the DSS or DVA to help meet their housing costs when renting in the private rental market.

A good might not be produced because there is a demand for it but may exist as a by-product of the production of some other good. For example, second­ hand goods and their markets are a residual from the

new goods market.

The real economic cost o f resource use. Financial costs may not always reflect the real cost of an activity.

See Economies of scale.

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Security of tenure

Service flow subsidy

Shared equity schemes

Social Justice

Sovereign risk

Standard market rent

Support payment

Targeted housing assistance

The extent to which an interest in or title to property is certain or guaranteed. More simply, for owners, purchasers and renters, it means conferring rights and obligations in respect to continued occupation of a home.

Includes direct transfers, net tax expenditures and other housing related assistance such as public housing subsidies and concessional home loans.

Schemes where ownership o f the assets is shared.

The right o f members of a society to an equitable distribution of economic resources; equality of civic, legal and industrial rights; fair and equal access to essential services, for example housing, health and education; and the opportunity for everyone within the

society to work towards personal development.

A risk to individuals and non-government bodies that changes to government policy will affect the financial outcomes of their investment decisions.

The typical sum of money per week in rent, set by the tenancy manager, that would need to be paid by an individual within a particular household category to enable access to adequate accommodation of appropriate standard and location through paying the market rent for that accommodation.

A payment for households in public and community housing, additional to rent assistance, made by the Commonwealth to a State government to facilitate

continued provision or expansion of public housing. Usually it would be paid conditional on State performance of some bilateral agreement.

Any assistance which is tied to housing including housing vouchers and allowances, public housing and headleasing.

380 INDUSTRY COMMISSION

GLOSSARY

Tax expenditures

Tenancy manager

Transaction costs

Vertical equity

Wait-turn allocation

Taxation rates may vary from some idealised system o f taxation. The ‘benefit’ o f this variation where a tax rate is lower than the ‘norm’, is referred to as a tax expenditure. It represents tax revenue ‘notionally

forgone’ by government. In this respect it is

considered an expenditure.

The government organisation that provides housing assistance for those eligible to be placed in appropriate and affordable housing. Appropriate housing would be obtained by headleasing from the property manager

and the private sector.

The costs associated with the process of buying and selling.

Principle of equity determining treatment of individuals where their circumstances are not similar. In regard to redistribution and welfare it is often the principle of assisting those worst-off, first.

Allocation in order of time spent on a list. Those longest on the list having priority.

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THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

PARLIAMENTARY PAPER No 7 of 1994 ORDERED TO BE PRINTED

ISSN 0727-4181

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