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Saturday, March 25, 2023

Compelling case for provident fund for social housing

As more and more Australians are forced to rent private, including Australians who once owned homes or lived in social housing, more and more are living in poverty, financial suffering from stress and becoming homeless.

Social housing – where rents are typically capped at 25% of tenants’ income – has been used to make a big difference in the lives of many vulnerable Australians.

Infrastructure Victoria has found that it makes a big difference to homelessness. Only 7% of renters in social housing subsequently become homeless, compared to 20% of private renters.

But the stock of social housing – currently around 430,000 dwellings – has barely grown in 20 years, during a time Australia’s population grew by 33%.

Given that most social housing tenants stay for more than five years, the steady stock of such housing means there are few openings available for people whose lives take a turn for the worse.

Not only do we have fewer social homes per person, we also have fewer opportunities for anyone to see.

Fund will take advantage of cheap money

Social housing is expensive. The capital cost per unit that exceeds what is charged in rent is approximately $300,000.

A new Grattan Institute paper released Monday makes the case for a $20 billion federal government Social Housing Future Fund, which would give regular capital grants to state governments and community housing providers.

Future funds are not uncommon. The Guardian of the Future Fund Board, headed by former Commonwealth Treasurer Peter Costello, already manages $247.8 billion in assets across six funds, ranging from covering the retirement eligibility of federal public servants to drought to disability care to medical research. problems are solved till date.

Peter Costello is the chairman of the Future Fun Board of Guardians.
Dean Levins/You

Endowments for Social Housing Provident Fund can be set up by borrowing at today’s ultra-low interest rates. Some states, including Victoria, NSW and Queensland, already operate social housing investment funds, some financed by privatization, others financed by government borrowing.

The fund will be managed by the current Future Fund Board of Guardian, with returns above inflation only used to provide capital grants for housing, maintaining the fund’s true value over time.

The capital grant for the new social housing units will be allocated by the existing National Housing Finance and Investment Corporation after specifying the size, location and subsidy of housing for the tenants through competitive tenders.

As in the case of existing futures funds, the funding will be off budget, with only the profit or loss for each year affecting the budget balance.

The additional $20 billion in gross government debt would be smaller than the roughly $1 trillion currently issued, which supports about $500 billion per year in federal government revenue.

How much can a $20 billion fund support?

A $20 billion fund, which achieved post-inflation returns of 4-5%, could provide $900 million each year over time – assuming a capital grant of $300,000 per year, to 3,000 additional social housing units a year. Enough to deliver permanently.

Starting from 2022-23, the fund is expected to build 24,000 social housing housing by 2030 and 54,000 by 2040. Future governments would be free to top up funds to help expand the social housing portion of the national housing stock.

Compelling Case For Provident Fund For Social Housing
Indexed for inflation, assuming a capital grant of $300,000 per dwelling.
Source: Grattan Analysis

The Labor Party has proposed something similar, with the money being used for annual service payments to community housing providers instead of upfront capital grants.

The on-budget cost of our proposal will be modest: approximately $400 million annually, or less than 0.1% of federal government spending as interest costs.

Read more: Top economists boost jobseeker and social housing over tax cuts

Alternatively, part of the fund’s above-inflation returns each year could be used to cover these costs, leaving $500 to build with no hit to the budget for the construction of approximately 1,700 new social housing units per year. Millions are available.

The Commonwealth should expect state governments to equalize their contribution.

States can double the money

Any state that did not agree to provide matching contributions would be ineligible for capital grants for social housing that year, with the savings reinvested in the provident fund and distributed to all states in the following year.

If matched state funding were forthcoming, the fund could provide 6,000 social homes a year—enough to keep social housing from shrinking as part of the total housing stock.

This would double the construction of 48,000 new homes by 2030, and 108,000 by 2040, increasing the existing stock by a quarter.

Compelling Case For Provident Fund For Social Housing
Indexed for inflation, assuming a capital grant of $300,000 per dwelling.
Source: Grattan Analysis

In itself, a Social Housing Future Fund would not solve the housing crisis for low-income Australians. We will still need to do more to boost rent support for people on income support and boost housing supply to reduce rents.

But it will give much-needed help to some of our most vulnerable, and maintain the social housing out there for generations to come, they will need.

This article is republished from – The Conversation – Read the – original article.

World Nation News Desk
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