Last week we examined the current overall housing crisis in six diagrams. This week, six essential diagrams to explain the crisis in the neediest sector: social housing.

1.

We used to have only two kinds of occupiers, purchasers 70% and renters 30%. The state(s) provided a large part of the renters housing, and the remainder rented largely from relatively benign investors. It was a binary system.

Now, we have three kinds of households, in equal thirds, which we call ternary. Owners own one house outright, often another. Purchasers who have a mortgage with a bank. Renters, the last third, have no property investment.

2.

Two things changed the diagram dramatically. Boomers became the landlords to the vast majority of renters; and the states built less and less social housing.

3.

Let’s look at that part of the pie chart more closely.

Firstly, having paid off home loans, the banks gave boomers money to invest in more houses, perverting the housing market from shelter to property. They became avaricious landlords, taking over more and more of the rental market.

And secondly, the proportion of social housing built through Housing Commissions and the like dropped from 6-7% to the current proportion of 3%. This means long periods on the wait list for needy households.

4.

For renters, housing demand may vary. Ideally it is in three thirds.

10% of households will rent for lifestyle, and can pay the investors’ demands, even if negative gearing and capital gains tax were abolished.

The rental rates for the 10% with no other option but the commercial market could be improved in two ways: with rent controls, and the rise of ‘build to rent’ schemes. These are better administrated to meet those controls, and could be incentivised to build new schemes through targeted tax rebates.

The 10% who cannot currently afford to rent in the commercial market need social housing. This is the most difficult cohort to address.

5.

Looking at social housing in the pie chart more closely.

The 10% of households needing social housing are woefully under-serviced - only 3% can live in state supplied social housing. For the remaining 7% it is a fight to meet the market rent demands by going without other life necessities; or living in sub-standard (and usually over-priced) accommodation; or worse, becoming homeless. This is the extreme end of a very real housing crisis. It’s a life and death crisis.

6.

Ideally the state system supplies 10% of all households, but that is unrealistic, as that would require an investment that no government has, even though they own a huge supply of land. Australia struggles in providing social services generally, and housing in particular, because the federal government doesn’t raise sufficient funds through tax. It needs to raise the tax/GDP ratio to the OECD average of 35%.

Given that outcome is impossible politically, housing policy experts suggest that the next best source of social housing is from philanthropy. This scenario suggests that land ownership is the key issue, and the biggest owners of land, after the government, are churches. As they pivot from worship to mission, we can increasingly expect churches to play an expanded role in social housing.

This is what many think the pie chart will look like in order to house 10% of households in subsidised (i.e. socially progressive) housing.

Summary

Once you understand the crisis in social housing you can see that the required remedies are not happening quickly. To effect change in social housing all three levels of government need to act.

The federal government needs to raise more money by stopping negative gearing and discounts on capital gains tax, thereby adding to revenue. The additional funds could enable state government to build or buy to raise good social housing from 3% to say 6% of households.

The federal government needs to protect renters’ rights, by introducing model national legislation on rent control, and the states need to enact the legislation, which will relieve pressure on social housing overall.

State governments and local councils need to incentivise not-for-profit organisations to build social housing; and they need to restructure their approval processes to promote increased densities within existing suburbs, to reduce infrastructure costs and increase diversity.

As building costs spiral, and with a building industry in decline, it is increasingly expensive to build any form of housing, let alone the most needed social housing.

It’s bleak. It will take a strong will to turn that tide.

Title image: We have more houses than households. The current housing crisis is not a supply issue. But it’s a demand for occupancy issue. See last week’s ToT 225.

Next week: 6 diagrams that explain how we can solve social housing.

This is Tone on Tuesday #226, 27 August 2024. Researched and written by Tone Wheeler, architect / Adjunct Prof UNSW / President AAA. The views expressed are his. Past Tone on Tuesday columns can be found here. You can contact TW at toneontuesday@gmail.com.

Tone Wheeler

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