Final Report: Detailed Analysis
F5. Housing assistance
A key function of national government is the prevention of capability deprivation — that is, the absence of fundamental capabilities that enable people to participate fully in society. Income support is a major mechanism for achieving this end. It provides people with resources to maintain an adequate standard of living and supports their participation in the community, including the workforce (see Section F1 Income support). There is a further need for specific housing assistance in recognition of the special role it plays in supporting wellbeing.
Access to adequate housing is necessary for both a decent standard of living at a point in time and for development of capability over the long term. Housing is a complex good that performs a range of valuable functions. As well as providing basic shelter, it is a key factor in health, child development and workforce participation, and a platform for broader social cohesion. Poorer households need to dedicate a greater proportion of their incomes to achieving an adequate standard of housing. In 2007–08, renters with household incomes in the bottom 20 per cent of the income distribution spent 36 per cent of their income on rent, compared to 19 per cent for renters in the middle 20 per cent. Poorer households also devote a large share of their income toward housing if they do not have the option of occupying social housing where rents are charged proportional to incomes. Their access to affordable housing is affected by a range of supply constraints, such as requirements for Australian housing to meet a minimum standard of quality, which are discussed in greater detail in Section E4 Housing affordability.
A further role of government assistance is to ensure access to adequate housing for people with high needs who would be unlikely to access it in the private market. The private market is likely to fail people with a range of needs — for example, people with mental or physical disabilities or substance-abuse problems — either through discrimination, lack of suitable housing or excessive premiums for risk. The key role of assistance for people with high needs is to enable their access to housing by funding social housing provided by State housing authorities (public housing) or non-government organisations (community housing). Housing assistance should also reflect the difficulty Indigenous Australians can face in accessing mainstream housing markets. In addition, the particular housing needs of Indigenous Australians in remote areas should be addressed through specific measures, such as the provision of capital for house building.
This focus on people with special needs and the broader role of social housing in the current Australian housing market means that some supply side measures are also a critical element of a comprehensive social housing system. Projected population growth will require that supply of social housing keeps pace to ensure that homelessness is prevented.
Housing assistance should be provided in a way that is equitable, does minimum harm to participation incentives and gives recipients choice in the housing they occupy.
Housing assistance for people with limited means is best provided as an integrated component of the income support system. The comprehensive assessment of income and assets undertaken through the income support system is the most effective way of targeting housing support to people with limited means. It also ensures that people of similar means receive the same level of support.
As a part of the income support system, housing assistance can be designed to minimise disincentives to work. With a person's total income support reflecting assistance for housing and other costs of living, the total amount of assistance can be reduced consistently as their means increase. This enables the impact of all taxes and transfer withdrawal to be considered together, with the total effective marginal tax rate set to minimise harm to participation while a person receives income support.
Housing assistance for people with high needs is most effective when targeted to their needs directly, rather than indirectly through providers. Recipients being able to direct the assistance to providers of their choice enables competition, which can help ensure the housing they receive meets their needs. Funding that is directed by recipients can also be scalable to enable successful housing providers to expand their provision.
The overall system of housing assistance and funding should support the viable provision of social housing for people with low incomes and high housing need. There is a particular need for the provision of capital funding in some circumstances, such as Indigenous Australians in remote areas. To ensure that housing assistance is effective, the roles and responsibilities of different levels of government in its provision should be made clear.
Housing assistance should be designed to enable recipients to access an adequate standard of housing. Further, housing assistance should be set with reference to base rates of assistance to ensure that income after housing costs is sufficient for consumption of an adequate standard of other goods and services.
As the cost of housing can fluctuate significantly with changing market conditions, housing assistance should be structured to remain adequate over time and not expose its recipients to undue risk posed by large increases in housing costs. As housing constitutes a large share of expenses for people with limited means, market fluctuations can affect them significantly.
Housing assistance should aim to treat people in the same circumstances in the same way. In general, a person's housing tenure is only a rough proxy for their means or needs and is therefore a poor mechanism for targeting assistance. Where possible, assistance should be based on means and needs because it allows people greater choice and is fairer. A system that is tenure-neutral — that is, it provides assistance independent of a particular form of tenancy — would allow recipients of housing assistance to move more easily between types of tenure. This would be most important for long-term recipients of income support.
A system that follows strictly the principle of tenure neutrality would take no account of how people spend assistance, including the amount or type of housing they consume. However, it is important that tenure neutrality be balanced by consideration of a person's housing costs, as this affects their need for assistance.
Information used to determine people's eligibility for housing assistance should include information about their housing costs so that those who face higher costs can receive higher levels of assistance. This approach differs from that used more generally in income support for several important reasons.
Housing costs are readily observable, which enables assistance to be better targeted. Tighter targeting of assistance means that for the same fiscal cost, greater assistance can be provided to people with high housing costs.
Further, high housing needs are likely to be associated with financial stress. People enter the income support system — perhaps because of loss of work or marriage breakdown — with differing levels of housing costs, reflecting earlier choices. Providing additional assistance to people with higher housing costs minimises the financial stress of moving in and out of income support.
To ensure it is effectively targeted, assistance for housing should be an integrated component of an income support system designed to alleviate poverty that:
- ensures people requiring assistance can access an adequate standard of housing;
- is based on a comprehensive assessment of individual means and the costs of housing; and
- minimises harm to workforce participation.
Additional assistance should be provided to ensure access to adequate housing for people whose high needs would otherwise make it unlikely they could find adequate housing in the private sector. This assistance would be most effective when it is based on recipients' needs and directed by them to providers of their choice.
The overall system of housing assistance and funding should also include funding for capital costs to support the viable provision of social housing for people with low incomes and high housing need.
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