Transferring Public Housing

The headline direction of Queensland’s new Housing 2020 Strategy is the government’s plan to transfer the management of 90% of its social housing – almost 50,000 dwellings – to non-government organisations.  Why? What are they hoping to achieve through this strategy?

Reasons to TransferImage

There are three reasons for state and territory governments to transfer their housing to community organisations.  1) NGOs can attract more operating income than governments; 2) They may be able to facilitate redevelopment and renewal of housing; and 3) They may manage particular housing (or even all housing) better.  The Housing 2020 Strategy doesn’t explicitly discuss any of these reasons, but let’s look at how the strategy is (or isn’t) set up to address each of them.

Operating Income

Australian social housing providers (government and non-government) have to meet all their operating costs from rents, not counting the initial cost of construction.  Tenants are on low incomes and pay a proportion of their income in rent, which makes it hard for providers to make ends meet.

Tenants of community housing organisations get access to Commonwealth Rent Assistance (CRA) from Centrelink, while government tenants don’t.  CRA can be worth up to $60 per week for a single person and over $80 per week for a family, and  community housing providers can take 100% of whatever amount of CRA their tenants are paid.

If you apply that to the roughly 50,000 dwellings the Queensland Government wants to shift to community management it equates to an extra $150m per year.  On current costs this is enough to shift the operation from a loss-making venture to a break-even one.  With this sort of money on offer, it’s a wonder governments didn’t made the move long ago.

Redevelopment

On operating income, shifting to community management seems like a no-brainer.  Redevelopment and estate renewal is definitely needed with lots of housing built in the 1950s and 1960s needing replacement, but this is a trickier proposition.

Community housing organisations can be part of the solution.  Access to CRA gives them a little bit more financial flexibility and this is aided further by charitable tax breaks.  They are also not covered by government borrowing limits, so may be able to borrow money for redevelopment in a way the state government can’t.

However, the possibilities here are definitely limited.  Even in community hands social housing is far from a lucrative business and any borrowed money has to be paid back somehow.  Only a few community housing organisations have the capacity to act as developers in their own right and none do so on the scale needed to renew the public housing portfolio, so they would need to work with the private sector.  The private sector will only get involved if there’s money to be made.

All of this is made harder by the government’s plan to transfer the management of the housing but not the title.  This means that community housing organisations won’t be able to either sell housing to fund redevelopment or borrow against the value of the assets.  Something more than the transfer of management rights will be needed to facilitate redevelopment.

Improved management

There is often a perception in the community that public housing is poorly managed.  This perception is probably exaggerated.  New tenants tend to be glowing about how much better off they are than in private rental.  However, longer term tenants sometimes complain about aspects of State Government management like maintenance, responsiveness and communication.

Well run community housing organisations can improve on some of these management problems by delegating operational decisions to the local level, working with local organisations to address community problems in housing estates/complexes and developing purchasing systems that are less cumbersome than those in the public sector.  Theoretically state housing authorities can do the same, but the scale of the public sector makes reform more difficult.

Will the Queensland reforms achieve these results?  We’ll have to wait and see.  Managing outsourcing on this scale is new for both the State Government and community housing organisations.  Expect teething problems!

Watch this space

It’s early days yet.  Everything in this post could turn out to be wrong.  I can’t wait to see what happens next.

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