Federal relations – millstone or keystone in housing policy?

The Australian government is reshaping federal-state relations that govern many areas of social infrastructure funding and delivery, including public housing. But what type of transformation do we want and how can this best be achieved?

A Housing Commission high rise building in Collingwood. Image by Nick Carson at English Wikipedia via Wikimedia Commons/CC BY 3.0

Part of the answer will be driven by how core competencies in housing policy, program funding, service delivery and regulation are developed and fostered across Australia’s federal jurisdictions and the affordable housing industry.

It’s complicated, but important questions need to be answered such as:

  • What is the most appropriate and sustainable mechanism for transferring and tying resources to ensure that social housing systems are comprehensive, responsive, efficient and innovative?
  • How can the benefits of local innovation, competition and experimentation be shared to build and strengthen more productive social housing systems across the nation?
  • Under what conditions can stock transformation most effectively drive sector development and achieve social housing policy objectives?

With the aim of informing Australia’s own federal strategy, our AHURI funded research team (including Dr Crystal Legacy and Dr Sharon Parkinson) examined the pathways other federal states have taken in transforming public housing provision and their impact on housing supply, rent setting and allocation.

Aided by national experts in four federal states and informed by extensive literature review and stakeholder interviews we examined just how this process of public housing transformation has taken place in Canada, the United States, Austria and Germany. The results also informed an overarching study led by Professor Hal Pawson, which examined Australia’s own capacity for transformation.

Like Australia, many federal governments are undergoing a process of devolution; decentralising responsibilities for public housing to lower tiers of government. Their experience strongly suggests that the budgetary transfers from federal to regional governments are often poorly defined early on and quickly prove inadequate.

Consequently, lower levels of government are either forced to rely on their narrow local tax base or withdraw from direct provision, stalling investment and in the case of Germany prompting mass privatisations.

At the regional level, some governments have used their own resources and recycled future loan repayments to support demand driven supply programs as in Austria, where grants and long term loans are available to providers in order to maintain stable construction markets, improve quality and grow affordable rental housing in line with demand.

Yet when long established tied transfers are loosened, the majority of regional governments (outside Vienna) diverted once dedicated housing resources to more politically expedient ones (such as road upgrading), as in Canada and Germany.

To make up for shortfalls in public investment, some governments have designed better structures to attract private investment packaging and levering their housing assets, forming limited liability and joint stock companies to raise funds and protect public accounts (US and Austria). Social policy outcomes (allocations and rents) can be sustained where social contracts governing transferred stock are robust and ideally long term, as in the US and Austria, but this is resource intensive and difficult to enforce, as found in Germany.

However, it is at the national level that the big drivers of private investment are ultimately sustained and promoted most comprehensively. In the US and Austria, special purpose financial instruments such as Housing Construction Convertible Bonds and Low Income Housing Tax Credits successfully channel private finance towards affordable rental housing, including most recently to US public housing, yet only when transferred to the private rental sector and supported by deep demand assistance payments.

Public funding shortfalls have not only necessitated greater reliance on private investment but also shifted rents upwards from ‘social’ (related to low income) to ‘affordable’ (below market rent). Indeed, Austria has shifted most production towards cost rent limited profit affordable rental and also shared ownership housing.

This professional and well-regulated sector is now so successful that an increasing number of municipalities outsource their public housing management to the limited profit sector. Germany’s harsh experience of municipal housing privatisation underscores the importance of sustainable social contracts and effective regulation involving third sector players and partly re-asserted the value of municipal housing companies in direct public ownership and management.

The research suggests that the allocation of national level resources and the guiding institutions it establishes and supports in co-operation with regional governments, such as conditional public loans and grants, legislated models of provision, instruments to private channel investment and effective regulation, play a very influential role steering the development of the social housing sector and building the capacity of public housing systems.

Julie Lawson will be speaking at the Australasian Housing Researchers Conference 2017 (15th to 17th February) hosted by RMIT University, Melbourne. Early Bird registrations close on Friday 27 January. 


References

Lawson, J Crystal, L and Parkinson (2016) Transforming public housing in a federal context, Australian Housing and Urban Research Institute Final Report, RMIT Research Centre and Swinburne University of Technology. Available at: http://www.ahuri.edu.au/publications/projects/p53082

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